Yesterday I asked what role the government should have in fostering alternative energy breakthroughs. The people who think the government can help a lot with this sort of thing often cite two examples:

1. Kennedy's race to the moon

2. The Manhattan Project to build a nuclear bomb

What do those two efforts have in common? Answer: no profit.

That's entirely different from the energy situation. Whoever figures out a way to cheaply turn seawater into fuel is going to be very rich. I would be surprised if there are any good ideas in the energy field going unfunded at the moment. My guess is that the energy investment environment has already become like the Dotcom era where venture capitalists were (figuratively) randomly knocking on dorm rooms and asking if anyone had any Internet ideas.

Someone said government can help remove red tape, or twist the arms of big companies where that needs to happen. But isn't that the reverse of how our system works? It seems to me that big companies are twisting the arms of government. So while we might wish it were the other way, reality is stubborn. And realistically, can we expect government to remove red tape?

Every now and then I have hunches about the future that feel both real and inevitable. My current hunch is that individual homes will become their own energy sources. This won't require any help from the government. All you need are three components that seem like they are creeping up on us:

1. More efficient solar cells (breakthroughs are coming daily)

2. Energy storage technology for the home, perhaps based on this:


3. Financing for solar cell installations

If you finance your installation of solar cells with a loan that costs you $300 a month, and save $400 a month in energy costs, you are cash positive on day one. At that point it also makes sense to have an electric car. There won't be much red tape to worry about in this model because every house is an island, and private companies can manufacture all of the parts.

I don't see the government having much of a role in creating that new world.

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Sep 10, 2008
I see that others have mentioned that wildly successful government project, The Internet, so I'll just note, yet again, the irony of someone using the internet to bash big government projects.

I would also note I've been hearing that solar energy breakthroughs are coming daily for almost _forty_ _years_ now. As this rate of advance these things must be producing 10-12 times more electrical energy than they receive in solar energy.
Sep 6, 2008
Social Security is a blunder in Cuba too (http://www.cubanews.ain.cu/2008/0901leyseguridadsocial.htm)

In order for Social Security to work, the birth rate has to equal or be greater than the death rate. If people are living longer and having less births, then the social security tax either needs to be raised on the workers or the retirement age needs to be raised.

Hmmm, I’ll have to think about the diffy equations for the other non-steady state scenarios, however, suffice it to say that there are other factors involved with a higher birthrate scenario having to do with rations and using up resources, and then being limited by expansion on the Cuban Island. A higher birthrate might, possibly, cause competition and destroy Communism…. geeze, there are a lot of aspects to this differential equation that the Commies may never have thought of that are of importance in the gameplan of the “No Free Lunch” McCain campaign…. I think Communism might actually be an ideological spin off of that perpetual motion ecconomics ideal or ponzi scheme of Christianity, or some manner of economic parallel thereof (mostly stated in the book of Acts).

I hypothesize that Christian Socialism and Communism can only thrive in time of expansion, whereas Secular Humanism and Capitalism are strong in times of both, expansion or in times of decline.

Anyhow, the reason that all of this may be relevant is that as long as oil reserves are huge, Russia can remain stable with a booming success buffer. .... er, I'm still working on this mental simulation for all of the different factors involved in this in my mind though.
Sep 6, 2008
Independent, decentralization production of renewable energy is already here. I cashed out a $30,000 CD that was only paying 2% interest and invested in a solar system. I live in California and at 12 cents a KW for base rate I am earning currently about 17% return on my $30 grand with a payback in about 7 years (shorter if utility rates go up). Sure, not everyone has the money to do this but what is sad is that people that do have the money, don't. They would rather buy a new SUV.
Sep 5, 2008
Because oil prices are so high and the oil companies are rolling in such huge profits, they have less of an incentive to invest in and promote alternative energy sources. As long as they are making money hand over fist, there is no reason for them to do anything that might slow that down (remember, a public company's responsibility is to its shareholders, who are a short-sighted bunch and wouldn't appreciate long-term R&D if it cut profits now).

Private investment from outside sources is all we have to go on for now. That succeeded brilliantly for the tech boom, but the difference here is that small private energy R&D companies are going against massive corporations that are entrenched in the market and do not intend to be pushed out without a fight. Back in the 90s the internet was brand new and there were no existing dinosaurs that had to be pushed out of the way before a little company could succeed.

Private funding will still be key to get alternative energy ideas off the ground, but it will have to be in addition to public funding -- along with a public mandate to succeed along the lines of Kennedy's "man on the moon by the end of this decade" vision.
Sep 5, 2008

In fact, I've been working on a business model which could potentially jump-start the solarization of private homes in my part of the country (suburban Virginia). If the model works, it would be easy to replicate all over the US. It's essentially a (very legitimate) variation on the "carbon offset" idea, with a nod to that old Bailey Brothers Building & Loan. As it is a for-profit model, I won't detail it here, but if you're serious about making this happen, your support (or even involvement) could be very helpful. Please feel free to contact me.

Sep 5, 2008
I mean to touch more on how the quality movement impacts the environment. It has a huge impact.
Sep 5, 2008
I remember when all the Federal Reserve had to do was manipulate the interest rates to stimulate the economy, something Greenspan always had reservations about, but did anyway. Now with inflation, gas prices, etc., the Fed can't step in anymore and simply change interest rates, because it will cause more inflation. Now we will have to make the hard choice between capitalism and socialism again, and socialism has a good chance of winning out. Ironically this will cause more failures in business, like Freddie Mac and Fannie Mae, which will lead to more socialism. To counter the backlash, we can use the educational system and the media to raise the threshold of revenue people are willing to give, by telling them that socialism is "progressive", though those are two totally different movements. The "progressive" movement evolved into the Six Sigma and quality movement today, as well as regulatory agencies like the EPA. In contrast, socialism evolved into communism and back into socialism when people fought back. Socialist governments can use the social security issue (or whatever it is called abroad) and public schools to hold our children and aging parents for ransom, and if that doesn't work we can try class warfare.
Sep 5, 2008
I believe economy is just about bying and selling, you get monney providing an advantage. Macro is just the same, countries buy credit or trade agreement just as John Smith owns a credit and a loyalty card. The manahtan project created technology that set the bar very high and allowed major US companies to lead the energy world for decades. The Moon's step provided the same opportunities to the technology, computing and aeronautic industries, plus selling dream to US and western folks it brings back financial support from tax payers and international admiration, The race between Russia and the US was a better hit than Lost and other tv series could ever be today.
Today a big project in the green, true green area could boost the industry when it has to meet the challenge and the dead lines of the governement, being overwatched by the media and judged by the people-consumers.
Sep 4, 2008
You do make a good point, private industry could solve this issue by itself because of the motivation ($$$). There isn't much money to be had (Ethically, at least) in having nuclear weaponry all to yourself.

That being said, most of these major advances that need to take place, well the research is being done at government funded schools. Sadly, those have been loosing funding for years now, and an astonishing number of scientists are unemployed. In my book at least, a good scientist trumps a good economist.
Sep 4, 2008
Investors today won't put any money into anything that involves scientific research or product development. They will only invest in something that's already on the market. So, Scott, you are totally wrong in thinking they're beating down the doors trying to find new sources of energy.

How do I know this? Personal experience. Email me if you want details.

Gore is a good example of this kind of "investor." He calls for eliminating carbon emissions within 10 years. He is worth hundreds of millions of dollars, yet he refuses to invest a penny in trying to find alternatives to fossil fuels.

Pickens is another hypocrite. He says he doesn't need any more money. But, he pushes natural gas. If we go for the huge sources of natural gas in hydrates off the coast of the Carolinas, we risk global warming of a scale millions of times worse even than Gore warns of.

Today's investors are the reason why the society will repudiate capitalism, assuming there is anyone left after the next great die-off.
Sep 4, 2008
Solar cells for powering a house are fine in a lot of regions like The South, but even on the equator you will never drive on solar power.

Useful motorized transportation is simply too power-hungry. Your typical car engine and belch out well over a hundred kilowatts if it needs to. Even with a 100% efficient storage medium - which is fantasy anyway - this is impractical.

There's a reason the Mars Exploration Rovers drive about ten inches an hour.
Sep 4, 2008
It woould seem from the link in Scott's on the solar batteries that goverment indeed have a role:

"The success of the Nocera lab shows the impact of a mixture of funding sources - governments, philanthropy, and industry."
Sep 4, 2008
Ah, you give hope to all of us, Scott.

So once humanity jumps this hurdle and we have a near-perfect way to utilize the sun's energy, then eventually our parasitic species will reach its next limit: sun real-estate. As we keep breeding, we'll have greater demand for energy, until the whole globe is covered in solar panels (I assume at this point that ALL of our food will be grown hydroponically with UV lights, etc).

I guess the One Issue for the elections that year (between the first reptilian candidate for presidency, who beat out the first tri-sexual candidate in the same party, and the oldest white human to run for office, John McCain) will be how we can build a giant solar energy farm external to the Earth. That or planet colonization.

Go Obamasaurus!
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Sep 4, 2008
I am not good at history, but didn't FDR make the Hoover Dam and Panana Canal happen? One was a huge project that probably generates energy for the government to keep costs down and the rest goes public to generate extra revenue (unless the government sold it) and the other allowed us to take over the middle of another country for 50 to 100 years. At the time there weren't really any companies that wanted to pay the high costs to construct them, take the inherent risks, and then have to wait so many years for a profit.

The government could make another Hoover Dam happen (look at China's Three Gorges Dam) but I'm not sure where we should flood as a tradeoff. Maybe Israel or Korea, then we can borrow the center part of the country for a century and tell each group to stay on one side and we'll provide free energy to both, and neighboring countries for a profit.
Sep 4, 2008
1) The high price of oil is the reason alternatives are seeing increased funding since it makes it more likely they will be cost effective.

2) Uncertainty equals risk, which results in an investment requiring a higher expected return. Do a google search on "risk premium" if you aren't familiar with this.

3) The US Government will continue to exist and to collect taxes.

4) That which is taxed is discouraged.

Take the four points above, add a little thought, and it should be obvious (if not, add more thought) that the best role for the government would be to alter the tax system to keep the price of oil high and reduce taxes elsewhere. That would result in:

1) Alternatives being more likely to be cost effective.

2) Uncertainty would be reduced and therefore the cost of funding for alternative energy projects would be reduced.

3) This won't be affected, fortunately or unfortunately based on your POV.

4) Taxes could be reduced on the drivers of economic growth, such as small businesses, while discouraging the use of oil, which is carbon heavy and transfers wealth to foreign countries.
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Sep 4, 2008
I actually just wrote an article about <a href="http://contests.about.com/od/winningcontests/a/historiccontest.htm">10 Contests that Changed the World</a>, where competing for prize money (sometimes, though not always, sponsored by the government) resulted in big breakthroughs in technology.

Government-sponsored contests were responsible for canned food, margarine (for better or for worse!), and road-worthy steam-powered tractors, all of which had significant potential for turning a profit after they were released. It was the government-sponsored cash that gave the inventors the push they needed to actually develop the designs, though.

I think that contests to create new energy sources would be a smart move on the part of our government for a couple of reasons:

1. They wouldn't have to pay if no one meets the criteria, so there's no real risk.
2. Sometimes it's the big companies that come up with the bright ideas. But sometimes it's the idiot who doesn't know better than to try something new. It's the innovation from the second type of people that contests influence really well. Although Deep Blue was the result of a contest entry from IBM, so contests influence big businesses, too.
3. People have great ideas all the time, but they don't always recognize and develop them. Contests give them a low-cost way to build on these ideas.

I say that contests are a great way for the government to spur innovation in the areas where we need it the most.
Sep 4, 2008
> I don't see the government having much of a role in creating that new world.
Scott, I always thought you were smart. How can you be so naive? Have you forgotten that the government are a bunch of theiving tax hungry bastards (well the current British government is anyway).

Taking your scenario...
If you finance your installation of solar cells with a loan that costs you $300 a month, and save $400 a month in energy costs, you are cash positive on day one.

N years prior to this the loan cost will be $500, but the cost of energy will be $300 a month, meaning early adopters would be $200 out of pocket each month. At the point the government will start raising energy taxes to make the solar panels more attractive.

On a different note I very much doubt that we'll ever get loans for solar panels, the energy companies will lease them to us instead.
Sep 4, 2008
Scott's expected solution to the enrgy crisis: Solar Power.

Scott, do you live in California, by any chance...?

Simon (London)
Sep 4, 2008
Hi, Just wanted to share this story of a place where they do generate electricity as they exercise:


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Sep 4, 2008
Love how many people can start a comment with "I think most of you are missing the point. "
I believe thanks to this blog you've found an entire gold mine of people who'll try to put up a fight against a whole range of people they have no clue about, even if these turn out to be absolutely brilliant on the question.

I'm pretty sure you can select those, and manage to find out how to get some energy from them. I believe I could get my uncle to heat up tea for me, if I could just figure out how!
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