Archive for December, 2008

SUGGESTION NO. 8: KEEP GORDON GEKKO’S HANDS OFF SOLAR

Monday, December 22nd, 2008

“It is more blessed to give than to receive.” — -Jesus’ Sermon on the Mount.

“Greed, for want of a better term, is good.” — -Gordon Gekko’s speech to the shareholder’s meeting of Teldar Paper, Inc. (played by Michael Douglas in the movie, “Wall Street”).

These two statements define the polar bookends within which humanity has sought to advance from the campfires of the Stone Age to the skyscrapers of the Modern World.  Today, we stand beneath the victory arch of Capitalism, its competing rivals lying discarded along the road of history — -Communism, National Socialism, even the humble commune of the 1960’s.  But if you look closely, you will see that today, we are also standing in the rubble of Gekko Gone Wild — -we are being  treated to the spectacle of  a shattered world economy that has been brought to its knees by exploding greed.   The problem is that the infant seeds of renewable energy must hope not just to germinate in this rubble pile, but to take hold and prosper.  As a nation, as a planet, and as a species, we must ask ourselves the critical question:  Can we afford to place solar, and wind, and all of the other renewable seeds in Gordon Gekko’s hands?

The answer is:  “Not a good idea.”

I first began my involvement with solar energy in the spring of 1974.  I was part of a small group of dreamers (Solar Steam, Inc.) that thought we could solve much of the world’s ills by creating a cost-effective solar energy collector.  To that end, we built a 28 foot solar concentrating dish which was completed in 1979.

 (Note the 30 year-old version of yours truly, complete with brown hair and beard).

A second, larger 40 foot dish was completed in 1985.  The dish was highly innovative and effectively converted sunlight into high grade industrial process steam. 

(That’s high-grade, industrial quality steam pouring out the end of that hose — -a very marketable product for which millions of dollars are paid annually by American industry.)

We unveiled our marvelous invention to the world that same year and stood back, waiting to sign up the investors and customers.  No one came.  The investors were too busy making larger profits elsewhere, and the customers needed the cost savings of “economy of scale” production (which required investors to achieve).

In April, 1988 I created United Solar Technologies.  My goal was just what the name implies: an attempt to unite a number of competing solar companies into a single effort so that investors would recognize that somewhere within the company’s participants there was a true winner.  Our first project was to establish that solar energy could compete with any source of energy on the planet, whether it be coal, oil, or even natural gas.  To this end we went looking for a suitable site for our demonstration.

We settled upon Tehachapi Prison in California.  With laudable assistance from both the California Energy Commission and the California Department of Corrections, we were able to enter into a long-term (30 year) energy purchase agreement with the DOC.  Under its terms, we would be paid 95% of the money the state would have paid for the same energy from burning natural gas.  This point cannot be stressed enough:  Tehachapi has demonstrated that solar energy IS CHEEPER THAN BULK-RATE NATURAL GAS (THE CHEAPEST OF THE CHEAP)!

The entire purpose of the Tehachapi project was to demonstrate to the FINANCIAL COMMUNITY (the Gordon Gekkos of this world), that they could make a very respectable return on their investment by installing solar projects.  We were able to show that Tehachapi could return more money than an equal amount invested in the U.S. Treasury “long bond” (the 30-year bond — -then at 8.3%!) by competing directly with bulk rate natural gas (then at $4.30/MMBTU).  Right out of the starting gate we established ourselves as the world’s cheapest source of energy!

Once again we turned around to take the orders from the investing community.  Once again, no one was there.  As one high-roller explained to me later, “Why would I want to tie my money up for 30 years when I can get 20% a year or better right now?”  Remember those heady days of the mid-90’s?

We tried to do follow-on projects with the DOC, but the initiative eventually fell victim to bureaucratic red tape, and no further prisons were ever solarized.

Taking my cue from the Tehachapi experience, United Solar reloaded and dove into the creation of the ultimate solar collector, the PVT (photovoltaic/thermal concentrator).  The upshot of this unique collector is that it produces both electricity and industrial process heat simultaneously.

Again, with the help of the California Energy Commission, our first prototype was unveiled in the spring of 1995.  It held the clear promise of amortization in under 5 years (sooner, if the electricity is used to displace gasoline in an electric car like Sparky).  For a detailed examination of the PVT and the ECONOMIC thinking that went into it, see the final report to the California Energy Commission.

Once again we turned to the line-up of investors.  Gone — -off to lay their money on Dot.com, Inc.

All of this brings the focus to the impact of the investment community on the whole issue of renewable energy, and solar in particular.  Right now, you can hear the sound of a stampede heading our way as people are waking up to the realities of a world caught on the dual horns of a global climate crisis and a finite oil supply.  Let me share with you some of my concerns as the Gekkos approach:

1.  The price of the land:  Right now, the best solar land is virtually worthless — -it’s made up of hard-scrabble desert land that nobody wants and no one can use.  That is going to change once solar energy rises to its feet.  Gordon Gekko is going to see “gold in them thar hills”, and he will buy huge tracts of land at pennies an acre only to turn around and wring agregious profit from his far-sited investment.  My point here is simple: solar can rise to meet all of our planet’s needs if it is carefully and thoughtfully deployed.  DO NOT SADDLE SOLAR WITH THE BURDEN OF BUYING THE LAND IT SITS ON, especially at inflated Gekko prices.  In my mind, it is imperative that government act to acquire prime solar land (by eminent domain if need be).  It must be held for the common benefit of all of us.

2.   “Return on Investment”:  At the heart of Gekko’s world is the concept of “return on investment”.  It is this single concept that has hobbled solar energy from its very inception:  “Why should I invest in solar when I can make 20% on something else?”  Over the course of the last several blogs, I have tried to raise an awareness of the true power of solar energy as the path to energy freedom.  In “Suggestion No. 5: Try Solar Alchemy”, I pointed out that a solar device starts to produce real capital the very minute it is deployed — -dollar bills drop to the pavement the moment the sun rises.  But the problem is:  where  are the dollar bills going to go?  My personal experience from Solar Steam, through Tehachapi, and finally the PVT is that Gordon Gekko is going to want the first dollar…and the second…and the third.   In fact, Gekko is going to want assurances that he is going to have a guaranteed return on his investment BEFORE HE EVEN AGREES TO INVEST HIS MONEY.   It is this very fact that has prevented solar energy from rising to take its place as the primary energy source for the planet.  The real truth is that solar cannot effectively come to our rescue as a species if it has to do it by riding through the Valley of Gordon Gekko.  The greater the demands that you put on those infant solar collectors, the less able they are to rise to their feet.  When you ask a collector to pay off the land it sits on and then satisfy the demands of “greed is good” Gekko, you will find that, like the Solar Steam dish, the Tehachapi trough, and the PVT, it will never come into existence in the first place.

Yet there is another way.  Plug in the Sermon on the Mount.  To give, for want of a better word, is good.

I touched on this in my last blog, “Suggestion No. 7: Pennies from Heaven”.  If I were to buy a solar collector and place it in the desert, and just let go of it, those dollars that drop to the ground when the sun rises CAN GO TO CREATING MORE SOLAR COLLECTORS.  It is as simple as that.  Just imagine if every man, woman and child in this country were to GIVE a solar collector to the cause — -a mighty field of collectors would begin to rise up like a conquering army, producing more soldiers by the minute, each of which would go to work immediately producing more soldiers.  We would become awash in energy.  Eventually, there would be more energy produced than we could use, and all of those solar dollars would have to find a new purpose — -like cleaning up the earth of all of the petro-pollution that has taken place over the past century, or, perhaps, providing free health care.

And all of this because we choose to sit on the slopes of the Mount of Olives as opposed to the boardrooms of an island beside the Hudson.

Richard

SUGGESTION NO. 7: PENNIES FROM HEAVEN

Friday, December 19th, 2008

I don’t know about you, but I don’t stoop down to pick up pennies any more.  And judging from the increasing number of them gracing our sidewalks and parking lots, I’m not alone.  You can’t buy anything with them — -it takes a whole pocket-full to score a pack of gum at the checkout counter of a 7-11.  When I get home at night, I generally toss them on the nearest countertop where they accumulate until they’re transferred to a jar in the closet to await some undefined day in the future when I lug the jar off to a bank to confront a reluctant teller who doesn’t want anything to do with them.  In short, pennies are kind of a nuisance. 

But a penny here and a penny there, and after a while you’re talking about real money.

In my first suggestion blog to our new government (Suggestion No. 1: Put Solar Panels Where the Sun Shines) I proposed that the government open up solar farms where people could install their panels and maximize their investment — -ie. zones of maximum sunlight.  I would like to expand that solar field with this supplemental suggestion: start building a solar field paid for by gathering up all the pennies left over after every transaction in America.  If I buy a Big Mac and fries for $4.32 at my local golden arch, three pennies get shipped off to the PFHSP (Pennies From Heaven Solar Project).  If my rich neighbor buys another Jaguar XKE for $92,865.04, his left over penny joins my Big Mac three and together, they head for the California desert.  Eventually, you’re talking about a lot of solar collectors.

And here’s the really cool part: our Big Mac/Jaguar solar panel is pregnant.  The minute it is installed and points at the sun, it starts to have babies. Solar panels (and wind generators) start producing capital immediately upon activation (see Suggestion No. 3: Try Solar Alchemy).  A cardinal rule of the PFHSP is that ALL MONEY PRODUCED FROM THE PROJECT MUST BE REINVESTED IN CREATING MORE SOLAR PANELS.  Eventually our Big Mac/Jaguar panel will produce enough money to buy a Little Mac/VW.  And like the happy family that they are, Big Mac and Little Mac start immediately to work on Tiny Mac.  The time it took to buy Little Mac is now cut in half because both Big Mac and Little Mac are contributing.  Tiny Mac soon shows up in record time and immediately joins with the family in producing Micro Mac.
 
And so on.  And so on.

What you end up getting is a happy geometric progression.  And it all happens because I like hamburgers and my neighbor likes fancy cars.

Now, of course, there’s going to be chunk of bureaucratic hassle involved in setting up a collection system for all those pennies, but I have no doubt that it can be done.  People might even be willing to dump their loose pocket pennies into the mix (or their squirreled away closet jars).  But the point is this: it’s an easy way to jump start the global solar transition.  It can be done.  It should be done.  And it rids my pocket of that bothersome pile of change that’s always banging up against my leg.  Who knows, I might even stoop down and pick up a penny or two if I knew it was going to go to a good cause.

Richard

P.S.  A note to any government official who looks covetously at that river of pennies headed south toward the desert.  DON’T EVEN THINK ABOUT IT!  It’s the Rio del Sol and is not intended for any other purpose.   May the curse of a thousand Tibetan monks turn your Johnny Walker Black to elephant urine should you touch a penny of it!

SUGGESTION NO. 6: APPOINT A BUBBLE CZAR

Sunday, December 14th, 2008

I started out my last blog, “Fear, Damage, and Big Ben Rothlisberger”, with the intention of pointing out that the natural human reaction to a severe economic downturn is fear — -that the inclination is to pull our money out of the market and then run to the bank and turn our cyberspace dollars into real greenbacks.  I wanted to note that when one person acts like that, it’s called fear.  When everybody acts that way, it’s called a panic.  In pursuing that end, I did some mild research into the historic “Panics” that have reared their  ugly heads over the past century and a half.  I was quite stunned by what I found.

First and foremost, the panics seemed to come with regularity, like some sort of a viral financial flu.  1819, 1837, 1857, 1873, 1893, 1907, 1929….not exactly clockwork, but regular enough to recognize that they seem to be an unwelcome fact of life in a free-market reality.

But what struck me nearly speechless was the repeating pattern in the causes of the panics, and the extreme similarity to what is taking place in our present dilemma.  Every single one of them was brought about by undue speculation of one sort or another, most of them by speculation in real estate fed by a willing flow of capital to feed the frenzy.  Speculation lights an ember, excessive profit blows the ember into a flame, and eventually a stampede of greed whips the flame into a raging forest fire.  When the bubble finally bursts, houses are burned up in foreclosures and people are left to stand in unemployment lines and food kitchens.  Untolled damage is done.  But eventually people start to rebuild their lives until a new ember appears just beyond the conscious memory of those who lived through the last one.

As I reviewed the history of the panics, I kept asking myself why a supposedly intelligent species would allow such a thing to keep happening.  Do people get so blinded by the lure of profit that they can’t see a bubble when it’s staring them in the face?  I have to say that that is precisely the case.

Think back to our own experience over the past decade.  Remember the “Dot.com Bubble”?  There was a time when I probably could have created a company called Bubble.com and made a killing off it.  It was crazy!  Then, “Pop!”

Then came the real estate bubble.  I have to say that I was a participant in this one — -at least I was on the winning side of the equation.  While others were salting away their retirement cash in stocks, I was buying cheap rental units.  My plan was to fix them up, one at a time, and sell them off as needed to meet my needs in my “golden years”.  I started the fix-up stage just about the time the remnants of the dot.com cash started looking for another place to land — -and land was the place to land.  Infomercials began to extol the virtues of buying cheap houses, tossing on some paint and “flipping” them for massive profit. 

I recall clearly my first rental to be harvested:  I had paid $37,000 for it in the 80’s.  When I started the repair phase, I intended to put about $20,000 into it (plus a lot of free labor on my part).  I had visions of putting it out at $85,000.  That’s when the trash heap down the block sold for $110,000.  With a smile on my face, I began to think of a “For Sale” sign in front of my gem in the $125,000 range. While I labored diligently over a six month period, I saw houses exploding in value like popcorn all around the neighborhood.  I was only vaguely aware that the Federal Government was flooding the market with an ocean of cash that made it possible for anyone without a needle in his arm to buy a house.  All I knew was that my humble rental unit was taking off like a NASA shuttle.  I eventually sold it for $165,000.  I was ecstatic!  I couldn’t wait to get the other rental units going.

This went on for years!  I was able to pay off all my mortgages, tear up the credit cards,  buy a badly-needed dump truck for all my projects, and stash away a stack of bubble bills.  I even started looking for more of those dirt-cheap fixer-uppers.  And so was everyone else.  They didn’t exist any more.  The bubble popped some time in late spring of 2007, I think.  I was lucky — -I had a seat when the music stopped.

The rest is history.  We are all now standing in the middle of the bubble rubble.  And, of course, when the real estate bubble popped, the remnants of the money rushed over to the new gold rush: oil.  $60/barrel, $75/barrel, $100/barrel…$145!  “It’s gunna hit $250 by years end!”

Pop!

I ask again: Why can’t we see a bubble coming?  And I answer again: We get totally blinded by the profit of the moment.  There’s just something about having more money — -after all, we’re the species that puts melamine in baby formula. 

So this brings me (at last) to my simple point.  The new Administration and the new Congress are poised to appoint czars to govern everything from energy to the automotive industry.  I think what we really need is a Bubble Czar.  We should appoint some well-educated guy to the post and put him in an isolated room with a computer that feeds him information about where all the money’s going.  He can’t be allowed to buy anything himself — -just watch what’s going on.  A bubble can’t be that hard to spot.  I’m not saying that he should be ready to do anything about it — -that should be up to the policy makers.  His sole task should be a blow a whistle or sound an alarm or something.  Whatever it is, it should be an “Official Alarm”, requiring the policy people to do something — -like put a bubble tax on the transactions in the alarm zone. 

The point is that bubbles are bad for humanity.  Bubbles lead to bubble rubble.  It’s time we stop them before they grow.  I am particularly concerned about an “alternative energy” bubble laying waste to our very real need to accomplish a global transition in this critical arena.

Richard

FEAR, DAMAGE, AND BIG BEN ROTHLISBERGER

Wednesday, December 10th, 2008

 

 

When I get frustrated, things in my immediate vicinity are at risk of being broken.  That is why I don’t allow golf clubs or baseball bats in the computer room.  That %&#@! machine is a constant source not just of frustration, but outright rage at times.  For me, the equation can be written: frustration = broken things.

 

I bring up this personal failing because, right now, there’s another emotion out there preparing to unleash untold wreckage from one end of this globe to another: FEAR.  The Dow is tanking, unemployment is headed through the roof while property values go through the floor.  World governments are running around frantically throwing money they don’t have at every wobbly institution that’s big enough to wear the label “indispensible”.  Fear is in the air, and it holds the very real possibility of giving way to an escalated emotion: PANIC.

 

Historically, what’s happening today used to go by that very name: panics. 

 

The Panic of 1819:  This was the first of a succession of financial crises that shook the country from 1819 through the Great Depression of the 1930’s.   It was brought about by factors which may sound uncomfortably familiar:  a flood of easy credit  from the banking industry (and backed by the government) led to reckless land speculation and rapidly increasing real estate values.  A deluge of imported goods entered the country, outpacing exports, resulting in a precarious balance of trade that siphoned off massive capital from  the nation. http://mises.org/rothbard/panic1819.pdf   When the bubble finally burst, the result was a tidal wave of bankruptcies, mortgage foreclosures, bank failures, and massive unemployment. http://en.wikipedia.org/wiki/Panic_of_1819.

 

The Panic of 1837:  The 1819  pattern was repeated 20 years later.  Once again, rampant land speculation was spurred by reckless lending practices of the banking industry. http://en.wikipedia.org/wiki/Panic_of_1837.  The result was the same: bank failures, mortgage foreclosures and mass unemployment.

 

The Panic of 1857:  Once again, reckless land speculation fueled the crash of 1857.  The crisis was actually brought about by the failure of a large insurance company, Ohio Life Insurance and Trust Company (can you spell AIG?) http://blueandgraytrail.com/event/Panic_of_1857.  Foreclosures and unemployment followed until the outbreak of the Civil War brought an ocean of government spending to the rescue.

 

Is any of this starting to sound familiar?

 

The Panic of 1873:  This time, it wasn’t land speculation but railroad speculation.  The bubble popped on September 18, 1873 when a large banking establishment that was promoting stock in the Northern Pacific Railroad declared its insolvency.  http://thehistorybox.com/ny_city/panics/panics_article9a.htm  The same results followed.

 

The Panic of 1893:  Speculation again — -this time in industrial stocks.  Same results.  http://thehistorybox.com/ny_city/panics/panics_article10a.htm

 

The panic of 1901: More of the same, this time fed by pyramid stock schemes that created fortunes out of thin air.  http://thehistorybox.com/ny_city/panics/panics_article12a.htm

 

The Great Depression:  We all know about this one: stocks bought on margin, millionaires in every office — -th is bubble of bubbles spawned mass unemployment, home foreclosures and  bank failures.  All of it was so easy to foresee to anyone who had taken a look backward.

 

“Those who ignore history are doomed to repeat it.”

 

Isn’t that the phrase?  Well, it kind’a looks like we didn’t do much looking back either — -land speculation based on easy bank credit, stocks (even whole companies) bought on margin (we called it leverage this time), millionaires on every corner, a world awash in funny money.  And now our bubble has popped. 

 

It is not the intent of this blog article to point fingers or to go on ad nauseum about what has brought us to this unpleasant reality.  It is not the causes that concern me right now, it’s the effect.  It is the emotional reaction to this financial crisis and the potential for damage that is caused by that reaction.   Roosevelt’s oft-quoted phrase, “We have nothing to fear but fear itself,” has been told and retold so many times that we have forgotten what he was trying to say — -that it was fear that was doing all the damage in 1932-33.

 

We, too, stand poised to start breaking things.  And right now, the principal candidate for damage is the automobile industry.  Everyone seems ready to allow our nation’s ability to produce vehicles to go down the drain.  We must not allow this to happen.  We are going to desperately need an infrastructure capable of producing non-carbon burning cars.  Our future and the future of our children depends upon our ability to turn a corner on this critical issue.  If we trash the only industry we have that knows how to build cars (not to mention the tens of thousands of workers who actually do the work), we cripple our ability to create the very cars and trucks we will need to carry us out of a looming carbon holocaust. 

 

Enter Ben Rothlisberger. 

 

I’ve been watching the Congressional hearings on the “Big 3” automotive “bailout”.  And I’ve been reading the vitriolic emails that the general public has been sending to the networks:

 

          “Those (expletive deleted) C.E.O.’s were warned that they needed to build smaller cars, and they chose to go on building Hummers!” 

           “Let them go bankrupt!” 

           “Those %#@*&!!s deserve everything that’s happening to them!”

 

Well, Ben Rothlisberger, the quarterback of the ‘05 Super Bowl Champion Pittsburg Steelers, was nearly killed in a motorcycle accident in June of ’06.  He wasn’t wearing a helmet.  Is there any doubt that he had been repeatedly warned that about riding a motorcycle without a helmet?  Of course he knew.  And it’s equally clear that he chose to ignore the warnings.

 

My point is this:  if you had come across his mangled body at the intersection of the accident, would you have stood there and yelled, “You idiot!  You were told to wear a helmet!  You brought this on yourself!” If you had been there, would you have let him bleed to death?

 

The truth is that someone went ahead and put him back together, and he’s been a pretty good quarterback ever since.

 

Our auto industry hasn’t been wearing a helmet either.  Now we can all stand here and yell, “You idiots!”, and let the entire industry bleed to death from its self-inflicted wounds.  Or we can remember Ben Rothlisberger, and give the industry an I.V.  Maybe they won’t win any Super Bowls for a while, but they will be in the running.  And if they’re in the running, we’re all going to be winners.

 

It’s a bit scary out there right now. But let’s not let our fears turn to anger and panic.  It’s time to start the IV’s,  not kick the bleeding dummies.   

 

Richard