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Switchgrass – reputed to be an energy positive and carbon negative biofuel

The biofuel boom has changed the game for agricultural commodities

The Terrapin Biofuels Finance and Investment World conference held in London in November of 2006 provided an excellent forum to come to grips with how the biofuels value chain is shaping up.

This article seeks to extract some of the insights delivered at the conference, and all figures are based on input from the various presenters, the comments and interpretations thereof are however the authors. Of course none of these figures, particularly the projections can be cast in stone, but it certainly offers some ideas of where the biofuels market is heading and where it will end up.

Product Definition and Subsidies

There appears to different but highly interrelated schools of thought on viable business models. Predominantly, this is driven by a first versus developing world perspective of investors and companies. At the root of these schools of thought, lies the issue of product definition.

In the post-industrial world, energy security and green energy are strong drivers, and government policies typically by way of incentives are the main drivers to this focus. This leads to a distinguishable product definition. If you define renewable fuel as “biofuel,” then ultimately one of the main customers is a government. This is because you are dependent on government subsidies as a material revenue stream to the biofuel business you engage in, whichever component(s) of the value chain you participate in. If you define your product as fuel, then your main customer is the end consumer of the fuel. The varying product definitions lead to different approaches and different points of participation in the value chain. I believe it is for this reason that we see a significant growth in both bioethanol and biodiesel refining capacity internationally and in particular in the first (post industrial, developed) world.

First World refineries are often driven by factors such as logistics and location, investment and plant cost, trying to optimize the refining capacity and quality, and feedstock supplies.

EXTENT OF BIOFUEL SUBSIDIES

- European subsidies are 3 times higher than US

- Export tariffs need to be lifted in Europe to assist meeting target consumptions of 2010 and 2020

- In 2020 with current targets, European biofuel subsidies might represent 23 times the European transport credits or 6 times those to research; Subsidies could represent 50% of agricultural budget or 20% of total EU budget.

- Put another way, subsidies might represent 70% of farmer’s revenue

TERMS OF BIOFUEL SUBSIDIES

A peculiar issue regarding investment in a subsidized market is that different investment return time horizons are applicable to various participants in the subsidized environment

- Farmers need a steady annual income

- Governments typically commit to a 3 to 5 year subsidy structure

- Investors require returns over a 5 to 7 year time horizon

- Industry requires 10 years plus period to write off assets

There is thus a mismatch between the time horizon requirements from the various participants and particularly from and investment perspective, which mainly drives the process, thus does cause uncertainty in terms of cash flow as a main revenue stream is subsidy income and thus changes therein will impact on investment.

ACTUAL MARKET COSTS FOR ETHANOL & BIODIESEL

From a numerical perspective it is interesting to note some of the following figures put forward:

- On a strict energy-equivalent basis ethanol is competitive without subsidies at approximately US$ 60 per barrel in the US, US$ 35 per barrel in Brazil, and US$ 115 in Europe

- The EU Commission estimates that biodiesel is competitive without subsidies at US$ 65 per barrel

THE LIMITATIONS TO SUBSIDIES

In general, subsidies have a curious nature. On the one hand they certainly can play a key role in society. So for example, public works spending during recessions can stimulate economies and literally pull them out of such dire periods. In the case of biofuels, subsidies can certainly pave the way for much quicker industry development. However, what is important to note is that long term subsidies are simply not sustainable and place a direct drain on the economy. To use a very simple example, if you walk up to someone in the street and ask him/her to give you US$ 100 because you can’t sell your baked cookies to Wal-Mart without this assistance, you certainly have a very slim chance of getting the money. If however you walked into government offices and asked for the same amount (and with a bit of lobbying) you’d have a rather high chance of success for getting the money. However, the government ultimately collects its monies from the citizens of the country, so in the end it is the same as having asked someone on the street for the 100 US$ in the first place!

Sustained subsidies lead to frictions such as experienced through the World Trade Organization regarding agriculture. So, although the involvement of government through subsidies plays a key role in many countries for the development of biofuels, it is vital to ensure that there is a much clearer long term policy that explicitly articulates long term involvement of government in the industry and what the exit plan is once the industry is established. If the plan is simply to continue subsidizing the industry then all that is happening is that you as the tax-payer will be burdened, indirectly making your fuel more expensive versus the price at the fuel pump.

Product Definition – A Change?

A topic that briefly surfaced was that of co-products. Of course when you import crude oil, or ethanol there is not much scope for the co-production as you are utilizing a processed product and thus earlier in the value chain the co- or by-products have hopefully been extracted and utilized. However from the total biofuel value chain perspective, these co-products can a) play a significant revenue enhancing role to the value chain and the cost of the product, and b) the co-products need to be dealt with as efficiently as possible because if you increase the value of the co-product you are decreasing your production cost per acre/hectare and thus you should be able to sell your primary product (fuel) at a lower price.

To do this it is necessary to redefine your product or business model (assuming you have some form of participative control of the value chain). So, for example, sugar co-products can produce electricity and thus you can move to a “bioenergy” product definition. Admittedly, a detriment to such a product definition has always been that the technology required to efficiently process the co-products have been lacking. Having said this, significant technological advances have been made over the past few years. From an energy perspective particularly in terms of cellulosic biomass, Combined Heat and Power (CHP) technology and gasification technology (both bio and thermal) as well as pyrolysis which has been around for some time. Therefore, if you expand your product definition to include some of these technologies in your processing of your harvest the ultimate IRR in the value chain can significantly improve. Being only a refiner of biofuel limits your ability to benefit in these co-product revenue stream enhancements.

Biofuel from prairie grass is reputed to be “carbon negative,” unlike many biofuels.

Feedstocks and Food Security

Some very pertinent figures where raised during the conference, for example:

- The US Biodiesel industry is expanding based on subsidies of US$1 per gallon or US$ 300 per ton;

- EU subsidies of US$ 450 allow Rapeseed to breakeven at per US$ 300 per ton;

- By 2007 world biodiesel consumption is expected to outstrip soybean production;

- By 2007 US corn for ethanol consumption will again outstrip US corn exports;

- Reflecting on world demand for vegetables oils and impact of biodiesel, Soft Seed oils (Sunflower and Rapeseed) production which usually responds to price and demand factors with a year to two years time lag, and are seen as the balancers for vegetable oil prices are currently producing at record highs. It follows that Soft Seed demand will significantly increase in the next few years due to increased demand caused by greater biodiesel refining and refineries;

- Similarly with US corn, there is a significant gap between USDA projections for corn supply vs. the amount of corn required for ethanol production (indicatively requiring a further 15 million acres to be planted by 2010 to negate this gap);

- Margin compression in biodiesel of feedstock cost versus net margin – in Germany margins are dramatically decreasing. Ethanol margin also compressing but not as significantly as biodiesel yet&

- The global grain market reserves have fallen from 120 days in 2000 to an estimated reserve of only 40 days by 2008, with corn reserves projected at falling to even lower levels of 20 days reserves.

In short it therefore seems that due to government subsidies aimed it bolstering refining capacity, a huge number of biofuel refineries have gone up in the last few years, this in turn has caused (and will continue to cause) a significant increase in demand for feedstock supplies. Currently a high percentage of the feedstocks are food based, and therefore there is now a new competing market for the feedstocks, which will price place pressures on feedstocks, more so, as the amount of land under cultivation for feedstocks is not keeping up with the demand.

Biofuel can spell disaster to forests and yet pose a challenge to deserts – where to plant is crucial.

So what then does the Developing World have to say about this?

If we take a step back and look at world energy demand, most projections seem to indicate that demand will double by 2030, the main growth driver being from the large emerging economies. But, the Developing world and in particular that part of the world between the Tropics of Cancer and Capricorn also has the most farmland available and generally the best climates to produce economically viable high yield biofuels (for example Brazil’s ethanol production or South East Asia’s Palm Oil production) . If that is the case, how are they viewing this surge in demand?

First, the emerging markets face significant pollution pressures. China, for example, is estimated to lose 8 to 12% of Gross Domestic Product due to pollution. The main drivers thereto are acid rain, diseases, disaster relief costs, and agricultural costs (loss of crops due to pollution, etc). Second, because the developing countries are the drivers for increased energy demand, energy security certainly places a key role for their government’s strategies. It can actually be argued that due to sub-optimal energy production and delivery in these countries, economic development can in some cases be retarded. Bearing these two factors in mind, simply out of an economic perspective it is difficult to see any clear motivation for a developing country to export biofuel or the raw products until its own energy demands are catered for as far as possible by renewable energy. This is a matter of concern for all the refineries going up in the first world, in as they look to lock in reliable supplies of feedstock.

And Corporate Governance? How does that fit into the picture?

Without going into too much detail on the topic, a simplistic model for some aspects of corporate governance is the Triple Bottom Line perspective “People, Planet, Profits” (http://en.wikipedia.org/wiki/Triple_bottom_line) – although there are arguments that the full concept is somewhat libertarian and idealistic, it does not detract from the fact that companies are responsible to all stakeholders (including society and the environment) in their business activities. Further, due to various legislations in Europe, UK, and the US companies are increasingly becoming responsible for their actions both locally and abroad. What relevance does this hold for biofuel projects? Whether you own your own crops, broker the commodities (crude vegetable oil or ethanol), or refine and produce the end biofuel, you are responsible to make sure that the crop and/or plantation is done in a socially and environmentally acceptable manner. This means that you cannot for example buy Crude Palm Oil from a plantation in a developing country where 100,000 hectares of rainforest has been burnt down to produce the crop. Neither can you buy such a product where the social impact of the crop or plantation has been to society’s detriment. Such actions will impede the success of your enterprise even if you are simply refining the commodity as you are ultimately contributing to destructive practices and will surely at some point face stakeholder and/or legal action.

Summary

Biofuel is one of the most global industries that mankind has undertaken, it affects everybody from the small-scale farmer in the developing world, to the corporation in the first world, to fuel consumers in every country. Admittedly Biofuel’s impact in statistical terms is still relatively small, but with the increase in biofuel production this impact will increase. The value chain is vast and stretches from a seedling to a consumer driving his car. It is a global matter and a strong case can be made for a more international involvement as the different points are affected at different times in the value chain as this industry develops. Even if your business model is only refining fuel, your business exposure is also agricultural and subsequent commodities.

Investors therefore need to accept that they will face both agricultural risks as well as refining and market risks – not that these cannot be managed; it is just that they will be exposed to them. Biofuels is not just a “green” industry with “green” money backing it, the market dictates the reality and viability of any venture and when the industry moves to market economics it certainly will provide a different value chain in the long run.

As a closing comment, someone at the conference jokingly said that in the next few years there should be a rather good business in brokering second-hand refineries if the excess production of capacity continues. In reality, this will probably not be the case, but a relook at the value chain and impact all the various parties are having on it will certainly change the biofuel industry of tomorrow.

About the Author: Louis Strydom is an expert in new venture creation and project finance with wide experience on projects in the developing world. One of Louis’ main projects for the last year has been conducting a pre-feasibility study and promotion of a 230,000 acre site for a Jatropha plantation and biodiesel refinery in Kenya. Previously he was Senior Vice President of Project Finance at Decillion – a company listed on the Johannesburg Stock Exchange. Other positions included Senior Economist managing the Credit Policy and Risk Management division of the Export Credit Insurance Corporation of South Africa. Prior to that he was a Director with Triumvirate responsible for Marketing and Consulting on Crisis Management. Louis also has extensive experience in short term insurance with American International Group on fire/casualty risks, niche products and political risks in Africa, Europe, the Middle East, UK and USA.

Al Gore’s book on “The planetary emergency of global warming and what can be done about it,” purports to be a non-partisan, non-ideological exposition of climate science and moral common sense. In reality, An Inconvenient Truth is a colorfully illustrated lawyer’s brief for global warming alarmism and energy rationing.

It is a J’Accuse hurled at fossil fuel energy-based civilization, especially the United States, and above all the Bush Administration and its purported allies in the U.S. oil and auto industries.

We do not expect lawyers to argue both for and against their clients, nor do we expect “balance” from political party leaders. However, although Gore reminds us – in the film version of An Inconvenient Truth – that he “used to be the next President of the United States,” and concludes both the book and the movie with a call for “political action,” he presents AIT as the work of a long-time student of climate science, a product of meditation on “what matters.” He asks his audience to expect more from him than the mere cleverness that can sway juries or win elections.

What we get instead is sophistry. In AIT, the only facts and studies considered are those convenient to Gore’s scare-them-green agenda – and in many instances, Gore distorts the evidence he presents.

Nearly every significant statement Gore makes regarding climate science and climate policy is either one sided, misleading, exaggerated, speculative, or just plain wrong. The present OnPoint summarizes my findings. An Inconvenient Truth does the following:

More Cows

ONE-SIDED

Never acknowledges the indispensable role of fossil fuels in alleviating hunger and poverty, extending human life spans, and democratizing consumer goods, literacy, leisure, and personal mobility.

Never acknowledges the environmental, health, and economic benefits of climatic warmth and the ongoing rise in the air’s carbon dioxide (CO2) content.

Never acknowledges the major role of natural variability in shrinking the snows of Kilimanjaro and other mountain glaciers.

Never mentions the 1976 regime shift in the Pacific Decadal Oscillation, a natural ocean cycle, which is a major cause of recent climate change in Alaska.

Presents a graph tracking CO2 levels and global temperatures during the past 650,000 years, but never mentions the most significant point: Global temperatures were warmer than the present during each of the past four interglacial periods, even though CO2 levels were lower.

Never confronts a key implication of its assumption that climate is highly sensitive to CO2 emissions – that absent said emissions, global climate would be rapidly deteriorating into another ice age.

Neglects to mention that, due to the growth of urban heat islands, U.S. cities and towns will continually break temperature records, with or without help from global warming.

Neglects to mention that global warming could reduce the severity of winter storms – also called frontal storms because their energy comes from colliding air masses (fronts) – by decreasing the temperature differential between colliding air masses.

Highlights London’s construction of the Thames River flood barrier as evidence of global warming-induced sea-level rise, but does not mention that London is sinking two to six times faster than global sea levels are rising.

Ignores the large role of natural variability in Arctic climate, never mentioning either that Arctic temperatures during the 1930s equaled or exceeded those of the late 20th century, or that the Arctic during the early- to mid-Holocene was significantly warmer than it is today.

Cites a study that found that the number of recorded wildfires in North America has increased in recent decades, but not the same study’s finding that the total area burned decreased by 90 percent since the 1930s.

Fosters the impression that global warming can only be good for bad things
(algae, ticks) and bad for good things (polar bears, migratory birds) – depicting nature as a morality play.

Cites a study by Isabella Velicogna and John Wahr, of the University of Colorado, that found an overall loss in Antarctic ice mass during 2002-2005, but ignores a study by University of Missouri professor Curt Davis and colleagues that found an overall ice mass gain during 1992-2003. Three years worth of data is too short to tell anything about a trend in a system as vast and complex as Antarctica.

Cites a recent study by John Turner of the British Antarctic Survey that found a 0.5° Celsius (C) to 0.7°C per decade wintertime warming trend in the mid-troposphere above Antarctica, as measured by weather balloons, but fails to mention that the same study found much less warming – about 0.15°C per decade – at the Antarctic surface, or that NASA satellites, which also measure troposphere temperatures, show an Antarctic cooling trend of 0.12°C per decade since November 1978.

Misanthropically sees “success” not in the fossil fuel energy-based civilization that has enabled mankind to increase its numbers more than six-fold since the dawn of the industrial revolution, but in the recent reduction of global population growth rates.

Compares Haiti – which suffers from deforestation – unfavorably with neighboring Dominican Republic – which enjoys lush forest cover – to illustrate the impact of politics on the environment, but ignores another key implication of the comparison: Poverty is the environment’s number one enemy.

Notes that “much forest destruction” and “almost 30%” of annual CO2 emissions come from “the burning of brushland for subsistence agriculture and wood fires used for cooking,” but never considers whether fossil fuel energy restrictions would set back developing countries both economically and environmentally, by leading to more such burning.

Neglects to mention the circumstances that make it reasonable rather than blameworthy for America to be the biggest CO2 emitter: the world’s largest economy, high per capita incomes, abundant energy resources, markets integrated across continental distances, and the world’s most mobile population.

Impugns the motives of so-called global warming skeptics but never acknowledges the special-interest motivations of those whose research grants, direct-mail income, industrial policy privileges, regulatory power, prosecutorial plunder, or political careers depend on keeping the public in a state of fear about global warming.

Castigates former White House official Phil Cooney for editing U.S. government climate change policy documents, without ever considering the scientific merit of Cooney’s decisions to delete certain passages as “speculative.”

Waxes enthusiastic about cellulosic ethanol, a product with no commercial application despite 30 years of government-funded research, and neglects to mention that corn-based ethanol, a product in commercial use for a century, is still more costly than regular gasoline despite oil prices exceeding $70 a barrel.

Misrepresents the major auto companies’ position in their lawsuit to overturn California’s CO2 emissions law by neglecting to mention that CO2 standards are de facto fuel economy standards and that federal law prohibits states from regulating fuel economy.

Blames Detroit’s financial troubles on the Big Three’s high-volume production of sport utility vehicles, even though U.S. automakers probably would not exist today had they been “ahead of their time” and pushed hybrids during the 1990s, contrary to consumer demand. AIT says nothing about the biggest cause of Detroit’s falling capitalization – unaffordable payments for employee benefit packages negotiated decades ago.

Touts Denmark’s wind farms without mentioning any of the well-known drawbacks of wind power: cost, intermittency, avian mortality, site depletion, and scenic degradation.

Never addresses the obvious criticism that the Kyoto Protocol is all pain for no gain and that any policies far-reaching enough to noticeably slow warming would be a “cure” worse than the alleged disease.

Claims a study by Robert Socolow and Stephen Pacala of Princeton University shows that “affordable” technologies could reduce U.S. carbon emissions below 1970 levels even though the authors specifically note that their study does not estimate costs. AIT also neglects to mention that Socolow and Pacala’s study is a response to a 2002 study by Martin Hoffert of New York University and 17 other energy experts who concluded that, “CO2 is a combustion product vital to how civilization is powered; it cannot be regulated away.”

Coal Plant

MISLEADING

Implies that a two-page photograph of Perito Moreno Glacier in Argentina shows that the glacier is melting away, even though the glacier’s terminal boundary has not changed in 90 years.

Implies that, during the past 650,000 years, changes in carbon dioxide levels preceded and largely caused changes in global temperature, whereas the causality mostly runs the other way, with CO2 changes trailing global temperature changes by hundreds to thousands of years.

Belittles as ideologically motivated the painstaking and now widely-accepted methodological critiques by Ross McKitrick of the University of Guelph in Ontario and Steve McIntyre of the Hockey Stick reconstruction of Northern Hemisphere climate history.

Cites increases in insurance payments to victims of hurricanes, floods, drought, tornadoes, wildfires, and other natural disasters as evidence of a global warming-ravaged planet, even though the increases are chiefly due to socioeconomic factors such as population growth and development in high-risk coastal areas and cities.

Distracts readers from the main hurricane problem facing the United States: the ever-growing concentration of population and wealth in vulnerable coastal regions, which is partly a consequence of federal flood insurance and other political subsidies.

Ignores the societal factors – such as poverty – that typically overwhelm climatic factors in determining people’s risk of damage or death from hurricanes, floods, drought, tornadoes, wildfires, and disease.

Implies that the 2006 tropical cyclone season in Australia was unusually active and, thus, symptomatic of global warming. In contrast, the National Oceanic and Atmospheric Administration (NOAA) describes the season as “near average.”

Re-labels as “major floods,” a category defined by physical magnitude, a chart of “damaging floods,” a category defined by socioeconomic and political criteria.

Re-labels as “major wildfires,” a category defined by physical magnitude, a chart of “recorded wildfires,” a category reflecting changes in data collection and reporting, such as increases in the frequency and scope of satellite monitoring.

Conflates the Thermohaline Circulation (THC), a convective system primarily driven by differences in salinity and sea temperatures, with the Gulf Stream, a wind-driven system energized primarily by the Earth’s spin and the lunar tides, exaggerating the risk of a big chill in Europe from a weakening of the THC.

Presents a graph showing the number of annual closings of the Thames River tidal barriers from 1930 to the present, even though the modern barrier system was completed in 1982 and became operational in 1984. This apples-to-oranges comparison conveys the false impression that London faced no serious flood risk until recent decades.

Blames global warming for the decline “since the 1960s” of the emperor penguin population in Antarctica, implying that the penguins are in peril, their numbers dwindling as the world warms. In fact, the population declined in the 1970s and has been stable since the late 1980s.

Implies that a study finding that none of 928 science articles – actually abstracts – denied a CO2-global warming link, shows that Gore’s apocalyptic view of global warming is the “consensus” view among scientists.

Reports that 48 Nobel Prize-winning scientists accused President Bush of distorting science, without mentioning that the scientists acted as members of a “527″ political advocacy group set up to promote John Kerry’s 2004 campaign for president.

Implies that the United States is an environmental laggard because China has adopted more stringent fuel economy standards, glossing over China’s horrendous air quality problems.

Northern Ice 2005 (blue area)

EXAGGERATED

Exaggerates the certainty and hypes the importance of the alleged link between global warming and the frequency and severity of tropical storms.

Hypes the importance of NOAA running out of names (21 per year) for Atlantic hurricanes in 2005, and the fact that some storms continued into December. The practice of naming storms only goes back to 1953, and hurricane detection capabilities have improved dramatically since the 1950s, so the “record” number of named storms in 2005 may be an artifact of the resulting data. Also, Atlantic hurricanes continued into December in several previous years including 1878, 1887, and 1888.

Never explains why anyone should be alarmed about the current Arctic warming, considering that our stone-age ancestors survived – and likely benefited from – the much stronger and longer Arctic warming known as the Holocene Climate Optimum.

Portrays the cracking of the Ward Hunt ice shelf in 2002 as a portent of doom, even though the shelf was merely a remnant of a much larger Arctic ice formation that had already lost 90 percent of its area during 1906-1982.

Claims that polar bears “have been drowning in significant numbers,” but this is based on a single report that found four drowned polar bears in one month in one year, following an abrupt storm.

Claims that global warming is creating “ecological niches” for “invasive alien species,” never mentioning other, more important factors such as increases in trade, tourism, and urban heat islands. For example, due to population growth, Berlin warmed twice as much during 1886-1898 as the United Nations Intergovernmental Panel on Climate Change (IPCC) estimates the entire world warmed during the 20th century.

Blames global warming for pine beetle infestations that likely have more to do with increased forest density and plain old mismanagement.

Presents a graph suggesting that China’s new fuel economy standards are almost 30 percent more stringent than the current U.S. standards. In fact, the Chinese standards are only about 5 percent more stringent.

Northern Ice 2030 (blue area)

SPECULATIVE

Warns of impending water shortages in Asia due to global warming but does not check whether there is any correlation between global warming and Eurasian snow cover (there isn’t). If Tibetan glaciers were to melt, that should increase water availability in the coming decades.

Claims that CO2 concentrations in the Holocene never rose above 300 parts per million (ppm) in pre-industrial times, and that the current level – 380 ppm – is “way above” the range of natural variability. Proxy data (leaf stoma frequency) indicate that, in the early Holocene, CO2 levels exceeded 330 ppm for centuries and reached 348 ppm.

Claims that a Scripps Oceanography Institute study shows that ocean temperatures during the past 40 years are “way above the range of natural variability.” Proxy data indicate that the Atlantic Ocean off the West Coast of Africa was warmer than present during the Medieval Warm Period.

Blames global warming for the record number of typhoons hitting Japan in 2004. Local meteorological conditions, not average global temperatures, determine the trajectory of particular storms, and data going back to 1950 show no correlation between North Pacific storm activity and global temperatures.

Blames global warming for the record-breaking 37-inch downpour in Mumbai, India on July 26, 2005, even though there has been no trend in Mumbai rainfall for the month of July in 45 years.

Blames global warming for recent floods in China’s Sichuan and Shandong provinces, even though far more damaging floods struck those areas in the 19th and early 20th centuries.

Blames global warming for the disappearance of Lake Chad, a phenomenon more likely stemming from a combination of regional climate variability and societal factors like population increase and overgrazing.

Claims that global warming is drying out soils all over the world, whereas pan evaporation studies (which measure the rate of evaporation from open pans of water) indicate that, in general, the Earth’s surface is becoming wetter.

Presents one climate model’s projection of increased U.S. drought as authoritative even though another leading model forecasts increased wetness. Climate model hydrology forecasts on regional scales are notoriously unreliable. Most of the United States, outside the Southwest, became wetter during 1925-2003.

Blames global warming for the severe drought that hit the Amazon in 2005. However, RealClimate.Org, a web site set up to debunk global warming “skeptics,” concluded that it is not possible to link the drought to global warming.

Warns of a positive feedback whereby carbon-induced warming melts tundra, releasing more CO2 locked up in frozen soils. An alternative scenario is also plausible: The range of carbon-storing vegetation expands as tundra thaws.

Claims that global warming endangers polar bears even though polar bear populations are increasing in Arctic areas where it is warming and declining in Arctic areas where it is cooling.

Blames global warming for Alaska’s “drunken trees” – trees rooted in previously frozen tundra, which sway in all directions as the ice melts – ignoring the possibly large role of the 1976 PDO shift.

Blames rising CO2 levels for recent declines in Arctic sea ice, ignoring the potentially large role of natural variability. AIT never mentions that wind pattern shifts may account for much of the observed changes in sea ice, or that the Canadian Arctic Archipelago had considerably less sea ice during the early Holocene.

Warns that meltwater from Greenland could disrupt the Atlantic thermohaline circulation based on research indicating that a major disruption occurred 8,200 years ago when a giant ice dam burst in North America, allowing two lakes to drain rapidly into the sea. AIT does not mention that the lakes injected more than 100,000 cubic kilometers of freshwater into the sea, whereas Greenland ice melt contributes only a few hundred cubic kilometers a year.

Warns that global warming is destroying coral reefs, even though today’s main reef builders evolved and thrived during periods substantially warmer than the present.

Warns that a doubling of pre-industrial CO2 levels to 560 ppm will so acidify seawater that all optimal areas for coral reef construction will disappear by 2050. This is not plausible. Coral calcification rates have increased as ocean temperatures and CO2 levels have risen, and today’s main reef builders evolved and thrived during the Mesozoic Period, when atmospheric CO2 levels hovered above 1,000 ppm for 150 million years and exceeded 2,000 ppm for several million years.

Links global warming to toxic algae bloom outbreaks in the Baltic Sea that can be entirely explained by record-high phosphorus levels, record-low nitrogen-to-phosphorus levels, and local meteorological conditions.

Asserts without evidence that global warming is causing more tick-borne disease (TBD). A 2004 study by Oxford University professor Sarah Randolph found no relationship between climate change and TBD in Europe.

Blames global warming for the resurgence of malaria in Kenya, even though several studies have found no climate link and attribute the problem to decreased spraying of homes with DDT, anti-malarial drug resistance, and incompetent public health programs.

Insinuates that global warming is a factor in the emergence of some 30 “new” diseases over the last three decades, but cites no supporting research or evidence.

Blames global warming for the decline “since the 1960s” of the emperor penguin population in Antarctica based on a speculative assessment by two researchers that warm sea temperatures in the 1970s reduced the birds’ main food source. An equally plausible explanation is that Antarctic ecotourism, which became popular in the 1970s, disturbed the rookeries.

Warns of “significant and alarming structural changes” in the submarine base of West Antarctic Ice Sheet (WAIS), but does not tell us what those changes are or why they are “significant and alarming.” The melting and retreat of the WAIS “grounding line” has been going on since the early Holocene. At the rate of retreat observed in the late 1990s, the WAIS should disappear in about 7,000 years.

Warns that vertical water tunnels (“moulins”) are lubricating the Greenland Ice Sheet, increasing the risk that it will “slide” into the sea. Summertime glacier flow acceleration associated with moulins is tiny. Moulins in numbers equal to or surpassing those observed today probably occurred in the first half of the 20th century, when Greenland was as warm as or warmer than the past decade, with no major loss of grounded ice.

Presents 10 pages of before-and-after “photographs” showing what 20 feet of sea level rise would do to the world’s major coastal communities. There is no credible evidence of an impending collapse of the great ice sheets. We do have fairly good data on ice mass balance changes and their effects on sea level. NASA scientist Jay Zwally and colleagues found a combined Greenland/Antarctica ice-loss-sea-level-rise equivalent of 0.05 mm per year during 1992-2002. At that rate, it would take a full millennium to raise sea level by just 5 cm.

Forecasts an increase in U.S. renewable energy production during 1990-2030 more than twice that projected by the U.S. Energy Information Administration.

Northern Ice 2095 (none left)

WRONG

Claims that glaciologist Lonnie Thompson’s reconstruction of climate history proves the Medieval Warm Period was “tiny” compared to the warming observed in recent decades. It doesn’t. Four of Thompson’s six ice cores indicate the Medieval Warm Period was as warm as or warmer than any recent decade.

Calls carbon dioxide the “most important greenhouse gas.” Water vapor is the leading contributor to the greenhouse effect.

Claims that Venus is too hot and Mars too cold to support life due to differences in atmospheric CO2 concentrations (they are nearly identical), rather than differences in atmospheric densities and distances from the Sun (both huge).

Claims that scientists have validated the “hockey stick” reconstruction of Northern Hemisphere temperature history, according to which the 1990s were likely the warmest decade of the past millennium and 1998 the warmest year. It is now widely acknowledged that the hockey stick was built on a flawed methodology and inappropriate data. Scientists continue to debate whether the Medieval Warm period was warmer than recent decades.

Assumes that CO2 levels are increasing at roughly 1 percent annually. The actual rate is half that.

Assumes a linear relationship between CO2 levels and global temperatures, whereas the actual CO2-warming effect is logarithmic, meaning that the next 100-ppm increase in CO2 levels adds only half as much heat as the previous 100-ppm increase.

Claims that the rate of global warming is accelerating, whereas the rate has been constant for the past 30 years – roughly 0.17°C per decade.

Blames global warming for Europe’s killer heat wave of 2003 – an event caused by an atmospheric circulation anomaly.

Blames global warming for Hurricane Catarina, the first South Atlantic hurricane on record, which struck Brazil in 2004. Catarina formed not because the South Atlantic was unusually warm (sea temperatures were cooler than normal), but because the air was so much colder it produced the same kind of heat flux from the ocean that fuels hurricanes in warmer waters.

Claims that 2004 set an all-time record for the number of tornadoes in the United States. Tornado frequency has not increased; rather, the detection of smaller tornadoes has increased. If we consider the tornadoes that have been detectable for many decades (category F-3 or greater), there actually has been a downward trend since 1950.

Blames global warming for a “mass extinction crisis” that is not, in fact, occurring.

Blames global warming for the rapid coast-to-coast spread of the West Nile virus. North America contains nearly all the climate types in the world – from hot, dry deserts to boreal forests to frigid tundra – a range that dwarfs any small alteration in temperature or precipitation that may be related to atmospheric CO2 levels. The virus could not have spread so far so fast if it were climate-sensitive.

Cites Tuvalu, Polynesia, as a place where rising sea levels force residents to evacuate their homes. In reality, sea levels at Tuvalu fell during the latter half of the 20th century and even during the 1990s, allegedly the warmest decade of the millennium.

Claims that sea level rise could be many times larger and more rapid “depending on the choices we make or do not make now” concerning global warming. Not so. The most aggressive choice America could make now would be to join Europe in implementing the Kyoto Protocol. Assuming the science underpinning Kyoto is correct, the treaty would avert only 1 cm of sea level rise by 2050 and 2.5 cm by 2100.

Accuses ExxonMobil of running a “disinformation campaign” designed to “reposition global warming as theory, rather than fact,” even though two clicks of the mouse reveal that ExxonMobil acknowledges global warming as a fact.

Claims that President Bush hired Phil Cooney to “be in charge” of White House environmental policy. This must be a surprise to White House Council on Environmental Quality (CEQ) Chairman James Connaughton, who hired Cooney and was his boss at the CEQ.

Claims that the European Union’s emission trading system (ETS) is working “effectively.” In fact, the ETS is not reducing emissions, will transfer an estimated £1.5 billion from British firms to competitors in countries with weaker controls, has enabled oil companies to profit at the expense of hospitals and schools, and has been an administrative nightmare for small firms.

Claims U.S. firms won’t be able to sell American-made cars in China because Chinese fuel-economy standards are stricter, even though many U.S.-made cars meet the Chinese standards.

Conclusion: Vice President Gore calls global warming a “moral issue,” but for him it is a moralizing issue – a license to castigate political adversaries and blame America first for everything from hurricanes to floods to wildfires to tick-borne disease. Somehow Gore sees nothing immoral in the attempt to make fossil energy scarcer and more costly in a world where 1.6 billion people still have no access to electricity and billions more are too poor to own a car.

Nearly every significant statement that Vice President Gore makes regarding climate science and climate policy is either one sided, misleading, exaggerated, speculative, or wrong. In light of these numerous distortions, “An Inconvenient Truth” is ill-suited to serve as a guide to climate science and climate policy for the American people.

About the Author: Marlo Lewis, Jr. is a Senior Fellow at the Competitive Enterprise Institute, where he writes on global warming, energy policy, and other public policy issues. Originally published by the Competitive Enterprise Institute on September 28, 2006, this is a brief overview of author Lewis’s critique of An Inconvenient Truth. Republished with permission. For further documentation, please read the Lewis’s upcoming full-length monograph, “A Skeptic’s Guide to An Inconvenient Truth.”

Assume global warming is real, caused by humans, and can be averted through immediate collective action on the part of all humanity. How then might we analyse what to do about global warming, based on everything we know?

The return on investment, in terms of time required, cost to implement, and immediate impact to cool the planet, is very good when invested in increasing (nontoxic) aerosol emissions, reforesting the tropics, or cooling the urban heat islands with billions of canopy trees. The return on investment in reducing carbon emissions, even if completely successful, is more problematic.

Why not emit non-toxic aerosols over the Arctic? Photo: NASA

More aerosols in the atmosphere would be a good way to quickly combat global warming, potentially saving Antarctic ice and immediately ending crippling droughts. In the book “The Weather Makers” by Tim Flannery, the author cites Mt. Pinatubo’s 1991 eruption as having immediately cooled the planet by 0.3 degrees centigrade (0.5 farenheit). The same book references an unprecedented increase in temperature in the U.S. during the three-day grounding of commercial aviation after Sept. 11th, 2001. If we are serious about stopping global warming now, clearly there is a role for aerosols – we just have to invent less toxic aerosols.

Compared to the cost of sequestering CO2 and replacing CO2 emitting sources of fuel, reforesting the tropics and greening the urban heat islands, are less expensive, more feasible, and will yield greater immediate results. Along with cooling global surface temperatures and increasing land-based CO2 uptake, reforesting and urban forestry will attract rainfall therefore moderating global weather streams more evenly and improving global water supplies. Cooling the world means giving her back her tropical lungs, to move the monsoons. Cooling the world means trees transforming mega-cities from heat islands burning like rocks in the sun into shaded streams. Invest in tropical reforesting. Invest in urban forests.

To focus exclusively on curtailing CO2 emissions is to ration burning and invest trillions in CO2 sequestration schemes – yet fossil fuels are something the world economy is utterly dependent on. The reason you don’t see pie charts depicting renewable energy sources as a slice of total energy production is because there is only one small slice, hydroelectric, with solar and wind not registering as more than thin lines in the circle. As of late 2006, most citizens of the world have only begun to live in industrialized societies. If we focus too much on curtailing CO2 emissions, we will deny aspiring nations their only practical fuel, coal.

Feasible cuts to CO2 emissions may be too little, too late. Clearly other measures to combat global warming must be considered. In America, Africa and Asia the tropical forests should expand again, and urban trees should help cool the mega-cities. In the last 150 years the 56 million square miles of land on earth has seen its forests shrink from 25 to 18 million square miles, deserts expand from 5 to 8 million square miles, and well over a million square miles of urban heat islands sprout across the planet – usually along the rivers where the rain used to fall. And isn’t it feasible to seed the Arctic from March through September with non-toxic aerosols to save the Polar Bear along with the gulf stream?

If photovoltaics show promise to totally replace coal as a clean source of electricity, how would they perform to provide fresh water from seawater?

Photo: water-technology.net

Desalinating seawater is not cheap. Based on costs for a state of the art desalinization facility in Ashkelon, Israel, as reported in WaterTechnology.net, it costs about US $2.0 billion to build a plant with capacity to desalinate 1.0 cubic kilometer per year of seawater. In reality, that size plant has not yet been built. The one in Ashelon is the largest of its kind on earth, and its output at 320,000 cubic meters per day, only equates to about .117 cubic kilometers of fresh water per year.

But the costs are what is most interesting. The Ashekelon plant cost 250 million US dollars, and assuming a larger plant would produce desalinated water at least as efficiently as this plant, this means a plant that can desalinate one cubic kilometer of seawater per year would cost about 2.0 billion US dollars to build. If the plant only lasts 50 years – 100 years is a more reasonable expectation – that means the cost of the capital investment, amortized over the life of the plant, is only 4.3 cents per cubic meter of fresh water.

The math gets even more fun if one considers the costs to power this plant using photovoltaic cells, which have an ever improving energy payback (lifetime energy produced divided by energy required to manufacture) that now stands over 20x.

It takes 2.0 kilowatt-hours of electricity, powering a reverse-osmosis system, to desalinate one cubic meter of seawater. According to a study by Uri Lachish “Optimizing the Efficiency of Reverse Osmosis Seawater Desalinization,” this power consumption efficiency could be more than doubled.

If, in a reasonably developed country, the average per capita water usage for all requirements – residential, industrial and agricultural – is about 2,000 meters per year, then at 10.0 cents per kilowatt-hour and 2.0 kilowatt-hours per meter, desalinated seawater would cost $400 per person per year. Add to that around $100 per year for the lifetime amortized installation costs of the plant, and at this point desalinated water is not very expensive – maybe double those costs for operating and maintenance costs, and desalinated water costs maybe $.50 per cubic meter. Desalinization appears to be an idea whose time has come.

Returning to photovoltaic power as an energy source for desalinization, at 10.0 cents per kilowatt hour, assuming a yield of one-third (eight hours of sun), and a 25 year life, the installed cost of the photovoltaics would have to be about $7.00 per watt, a price they are well on track to achieve.

Costa Rica’s famed Mt. Arenal Volcano Even lava flows are not as destructive as anthropogenic deforestation

The verdant pastureland of Costa Rica Although pretty, this is deforestation because the land use has changed.

To solve the problem of deforestation, we have to plant forests, not just trees.

The definition of deforestation is not the loss of trees, but the change of land use from forested to some other use. If trees are lost even through clear cutting, if the land is left alone, the trees will come back eventually.

In order to reforest, we have to permanently return land to forest use. If you go out and plant trees anywhere you want – perhaps farmers will let you plant on their property, for example – you haven’t yet reforested. This is because eventually someone can cut down those trees because of the value represented there. Very often, someone protects a section of their property and never cuts the trees, but after they die, the property is sold and their protected forest is cleared and turned to another use.

This is also a problem that governments don’t seem to handle very well. As seen in the USA, what one administration protects, another administration harvests. As pressure grows on governments because of the debt they all seem to build, the forest is being liquidated – just like those who own properties often sell their trees to help pay off debt or for money to live.

Almost anyone would eventually cut down their trees if economic pressures were severe enough. If you own your own home, where it stands was probably a forest at one time. Would you willingly abandon your home (and the money it represents) in order to let the forest come back? Most likely not, because the money lost to you would be very significant, and you probably could not afford it.

Voluntary preservation of the forest is not enough. This is why it is so difficult to stop deforestation in the tropics – a well-grown tree represents a lot of money. In Costa Rica and in most tropical regions, a farm worker could buy a home with the money from a single mature tree.

Replacing deforestation with reforestation must meet the following three requirements:

The trees must be able to fund land preservation.

The trees must be able to diversify.

The trees must be able to fund more acquisition of more land.

The Trees Must Be Able to Fund Land Preservation

Finca Leola

Trees have to have a way to pay for their own protection. Even though the Costa Rican government has put aside more than 25 percent of its land as permanent parks, the government doesn’t have the money to adequately protect those parks. Because of that, some of the bigger national parks are at risk because of tree poaching. Remember that an old growth tree (which is only 100 years old here) could potentially buy a home in Costa Rica.

Thinking a forest will survive without protection is like thinking you could protect your money by leaving it by the side of the road. Sure, there would be many people who would either pass it by or try to give it back to you – but it only takes one person who would consider it “finders keepers” for you to lose your unprotected money. Most Costa Ricans respect the need to preserve the forest, but it only takes a few to undo all the time spent growing trees. We know of a group involved in reforesting who will not accept donations of forested lands because they don’t have the resources to protect the lands after they receive them.

It isn’t as simple as just planting trees on land set aside for the purpose – or even passing laws saying areas are protected. Without active protection, the trees will eventually be gone, just like your money by the side of the road.

The Costa Rican Rainforest

The Trees Must Be Able to Diversify

We need forests rather than continuous monocrop plantations of trees all of the same age. Also, monocropping is risky: Many monocrop plantations in the USA are being lost to pests and diseases that spread easily when all the trees in an area are to their liking. If you have a single tree of a particular type, there generally isn’t much of an issue, but plant thousands of hectares of the same species and you are just asking for problems. They may survive, but only because of constant vigilance and perhaps constant application of pesticides.

There is no way to create a permanent forest out of only one species of tree. Usually, forests start with pioneer species, and these do tend to be clumps of all the same trees. This works well, because the purpose of these trees is to create the shade required for the trees of the climax forest to grow. It also works well because these trees tend to be relatively short lived. However, after the pioneer species, you have to move toward diversity; otherwise you don’t have a forest, you have a crop – and in truth, a crop that will be in danger of failure due to insects or disease. We must remember as well that one of the reasons to want to reclaim forestland is to be able to prevent the extinction of many plants and animals that depend on a real forest.

The Trees Must Be Able to Fund Acquisition of More Land

In many parts of the world, it is critical that we plant a lot of trees and return a lot of land to forest. The loss of the forest contributes to loss of habitat for animals, a reduction in available drinkable water, loss of soil and even landslides that destroy towns and villages. We also need to increase the number of trees to absorb the excess gases that cause global warming. Moreover, there is a direct link between deforestation and drought, which has become a severe and worsening problem – totally reversible through reforestation – throughout the tropics.

Most reforestation efforts are being spent on plantations, not on genuine new forests. We use the term “reforestation” a lot, but in reality, unless the lands are permanently returned to forest, you are not reforesting, you are raising a crop of trees. Tree plantations can reduce commercial pressure on remaining forests, but they are not themselves new forests. Just like a loss of trees is not deforestation unless the land usage permanently changes, it isn’t reforestation unless the end result is a forest.

Let the Trees Work for a Living

It would be wonderful if the trees, from their own “work,” could buy more space for more trees! What is the work of trees? Well, they grow. Look around your home and see the wood in it. A logger brought trees out of a forest, cut them down, and hauled them to a sawyer, who cut them into boards. A carpenter or a craftsman created something out of them for your use and enjoyment. They all got paid for that wood – but the trees never did. You cannot continue to expect the forest to work for nothing – it starves just like we would. In fact, if the forest received money for its “work,” it would not only survive, but fund its own preservation and expansion.

From the mill in the forest to the trailhead Costa Rican lumber makes its way to market

There is a way to pay the trees. We call it the Tree Avalanche. The Tree Avalanche works by using donated trees to create a pioneer forest of valuable wood. Among these trees are also planted the succession trees that will make up the more mature rainforest. Most tropical succession trees require shade to grow; that’s why planting pioneer species speeds up the creation of the new forest.

When the pioneer trees are removed to leave the succession trees to form the new forest, the money realized will be used to purchase more land and plant more pioneer and succession trees. Since the money gained from the pioneer trees is more than the money it costs to plant, care for, and harvest them, the amount going into reforestation keeps multiplying. This is an avalanche that leaves in its wake a swath of new forest instead a path of destruction.

But will we really be able to create an “avalanche” of trees? This simple story explains why we will. There once was a man who did something that a king wanted to reward. The king asked the man, “What do you want as a reward?” The man replied, “I don’t want much, just the following: On the first day, place a grain of rice on the first square of a chessboard and then give it to me, then, on the second day, place two grains on the second square and give them to me, and then on the third day, double that and place four grains on the third square and give them to me. Keep doubling the grains in this way until you use up all the squares.” The king almost agreed, until a person better at math pointed out that before the end of the 64 days, the man would own the kingdom! This is called a geometric progression, or compounding.

THE TREE AVALANCHE

As a cash crop, the natural increase in growth of 100 trees would, within 100 years, result in a forest of 12 million trees – triple the growth if left to nature.

Instead of one grain of rice, let’s start with 100 trees planted in Costa Rica.

The first year there are 100 trees, and they cover about 0.17 hectare, or 0.42 acre.

In the tropics, within 6 to 8 years, some of these trees have to be harvested as thinnings to leave space for the other trees to keep growing. These trees will have about 100 board feet each in them at thinning, and between 33 and 45 percent of the trees are harvested in the first thinning. Rare tropical woods return good money. The forest’s profit on the trees goes to buy 80 more seedlings and land to plant them. So now there are 180 trees, covering 0.31 hectare.

About every 4 years, some trees have to be thinned out and are sold. Because the trees are getting bigger, the percentage of valuable wood grows too. Also, the wider the plank, the more expensive it is per board foot.

Every time we have to thin, more trees are bought with the proceeds. Around year 17, an interesting thing starts to happen. The trees that were bought with the proceeds from the first thinning now have their own first thinning, which is used to buy more trees.

By year 17, the original 100 trees have increased to more than 450 trees covering about 0.80 hectares.

By year 25, there are more than 1,600 trees covering more than 2.7 hectares.

By year 58, the 100 trees have increased to being more than a square kilometer (100 hectares).

By year 100, the original 100 trees will have taken over 0.38 percent of the land mass of Costa Rica or nearly 20,000 hectares.

Portable sawmills can operate in remote areas, reducing need for new roads, and bringing more value to local communities

How the Tree Avalanche Handles the Problems of Deforestation

The key to how the Tree Avalanche enables the forest to protect itself and diversify is the succession forest. When you plant 110 pioneer trees, you can expect 5 or 10 to fail for reasons of genetic problems or damage by wildlife or nature.

Instead of replanting the same tree, we do what nature would do: We introduce another kind of tree. Since there is usually some shade by this point, we can introduce the slower growing, shade-loving trees that will make up the permanent forest.

Over the next 25 years, all the pioneer trees will be removed, leaving at the end the succession trees. These trees will be at the point of bearing seeds and will quickly fill in any remaining holes – just like in a natural forest. This means that behind the Tree Avalanche is left not a monocrop plantation, but a true forest. And it comes about a lot faster than occurs in nature. We still have to protect the forest, though, so we aren’t done yet. After the pioneer trees have all been removed, we have to pay taxes and pay people to care for and guard the forest. Thankfully, the forest is able to provide for that. By only removing boards from selectively harvested trees every year, more than enough money will be generated to pay taxes and to pay the “tree shepherds,” as we like to call them.

The decision to remove a tree will never be made based on the profit it can bring, since the forest owns the trees, and a forest doesn’t care about fancy cars or worry about retirement. The decision to remove a tree will be based on whether it improves the forest. This will include removing trees that have fallen and replanting with other trees, introducing a different variety when there are too many of one type for proper diversity, and removing diseased trees that threaten the rest of the forest. The wood itself will be carefully extracted using portable sawing techniques that cause very little (if any) damage to the forest and leave all the limbs, bark, and waste wood in the forest to go back to the soil. Only the sellable part of the trees will be removed.

Even though we have been talking about the needs of the forest, the forest, as a good neighbor, will be generating by its work jobs for those in the surrounding areas: jobs for those who watch the forest, those who harvest the boards, and those who produce forest products to sell. This is very important – it causes the people living around the forest to value it and to provide protection as well.

Pioneer trees between forested areas getting started putting the forest back

How Do We Know We Can Do This?

Finca Leola S.A. grows trees in Costa Rica for people around the world. People buy trees from us that we take care of for 25 years. They receive the value of their wood at every thinning and at the final harvest, but we plant a succession forest of slower growing trees in between the trees we grow for people. We are placing all the land that we are planting, whether owned by us or by someone else, under an ecological easement that will protect the resultant perpetual forest forever. The ecological easement is crafted to make sure that the entity that is served is the forest. The easement rides in perpetuity with title to the land, and as the trees will always keep producing money, they will always be able to pay to enforce the easement and pay for the guardians of the forest.

The idea for the Tree Avalanche started when someone asked if they could buy trees to help with reforestation, but they didn’t want the money back from the wood harvest. We were excited when we realized that we could use the money that came out of the trees to plant more trees. When we did a simulation of the impact of that, we were astonished, and the concept of the Tree Avalanche was born.

So as you can see, for us to produce a Tree Avalanche, we just have to keep doing our job. We already have people contributing to it, but we would like to invite you to help push the Tree Avalanche faster.

Look around your home and see all the wood that is in it. Some you cannot see, because it is within the walls, but it is still there. Everyone got paid for that wood – except the forest itself. Please help the forest (and ultimately ourselves as well) by donating to accelerate an avalanche of trees.

We will all breathe easier because of your help.

To learn more about Finca Leola S.A. and reforestation go to www.fincaleola.com.

We have attempted to estimate the contribution of photovoltaics to global energy production. Currently the installed base of photovoltaics worldwide has an output of about 5.0 gigawatts. Since the sun doesn’t shine 24 hours per day, the actual yield is probably about one-third that amount, call it 2.0 gigawatt-years in 2005. While this installed base is probably set to double every two years, and this amazing pace may be a conservative estimate, it is accurate to say photovoltaics do not currently contribute to global energy production in any meaningful way.

We are moving to an electricity future – and since 33 gigawatt-years equals one quadrillion BTUs, and since global energy production in 2005 was about 400 quadrillion BTUs, today we are only getting about one-6,000th, or 1.7 hundredths of one percent of our energy from photovoltaics.

What about wind power? According to the Global Wind Energy Council, the installed base of windmills in the world today have a cumulative output of 59.1 gigawatts. Since the wind doesn’t blow 24 hours per day, the actual yield, again, is probably a bit more than one-third that amount, call this 24 gigawatt-years in 2005.

So wind power is currently producing nearly 12 times more power than photovoltaics, which brings their share of global energy production up to a measurable but still paltry one-500th, or 20 hundredths of one percent.

Which of these eminently clean sources of energy are increasing faster? In 2005, 11.5 gigawatts of windmill generators were manufactured. In the same year, about 1.5 gigawatts of photovoltaics were manufactured. But the costs of windmills are not likely to drop in the future as much as photovoltaics. We predict that by 2010 global production of photovoltaics will outstrip that of windmills, and that will just be the start.

It is reasonable to assume wind power has the potential to increase output by an order of magnitude, to perhaps 1.0% of global energy production. This is based on the assumption that mega wind farms such as those just announced in the Thames Estuary, will continue to get built. Should decentralized, silent, ducted wind-generators be developed and widely adopted for use in commercial buildings and urban high-rises, perhaps wind energy could even reach 2.0% of total global energy production within a generation, perhaps much more. But there is an upper bound to how many places are truly suitable for windmills; there are problems with aesthetics; there are problems with birds; there aren’t windy regions everywhere; there are clean energy alternatives.

Because the price of photovoltaics continues to drop – thin film costs are already approaching the magic $1.00 per watt level – combined with lower maintenance costs compared to windmills, our money is on photovoltaics. There appears to be no limit to how much energy will eventually be produced by photovoltaics, and production of photovoltaics is poised to experience sustained exponential growth.

We’ve been trying for some time to find a good prediction of how quickly worldwide photovoltaic manufacturing is going to increase. We know in 2005 the entire world production of photovoltaic cells was about 1.6 gigawatts. How much will we add in 2006? Where will we be by 2010?

Photo: Sandia National Labs

Because of the revolution in thin film photovoltaic technology, along with the predicted end to the bottleneck in polysilicon production which has limited manufacturing of crystaline photovoltaics, exponential growth in production is possible, if not likely.

Huge figures are being kicked around. Just some of the high profile thin-film photovoltaic manufacturers, Miasole, Nanosolar, First Solar, Daystar Technologies, and Unisolar, will themselves be adding another gigawatt to the world’s production within a few years. With the polysilicon shortage easing, leaders in crystaline manufacturing, such as SunPower, will probably also double their output in the next few years.

Add to this the rest of the world, China in particular. China has 3.5x the population of the USA, yet consumes only half as much energy. On a per capita basis, the Chinese use only 1/8th as much power as the Americans. For this reason, the Chinese are developing every source of energy they can, including photovoltaics.

An excellent website that tracks developments in photovoltaics is SolarPlaza.com, which has just published an article entitled “Solar Cells ‘Made in China’ Coming Our Way.” In this article, Zhang Cheng, as spokesperson for a consortium of Chinese photovoltaic manufacturers, makes an astonishing claim: In 2005, 12 manufacturers in China produced 150 megawatts of photovoltaic cells. In 2006, an estimated 30 manufacturers will produce 1,450 megawatts. This is just the beginning, and this is happening all over the world.

Based on these figures, it is likely worldwide photovoltaic production in 2006 will easily be twice what it was in 2005, and 2007 could show another doubling in capacity. According to the S-1 released last month by First Solar, manufacturing costs on their thin-film line have now dropped to $1.30 per watt. This is very nearly competitive with conventional energy; in fact this cost is already cheaper than conventional energy in several regional applications around the world.

Because the manufacturing costs have dropped so much, photovoltaics are now a ‘capacity constrained’ market, which drives prices artificially high. This means anyone who wishes to enter this market will enjoy high margins and they will sell their product as fast as they can make it. And that is going to continue to happen for a long, long time. Compared to photovoltaics, there is probably nothing else on earth with more potential to change the global energy paradigm.

In our previous post, “Earthly Heating,” we noted that because we want to limit CO2 emissions, carbon neutral biofuel plantations crowd out food crops, and in the inner recesses of mega-cities of earth’s equatorial regions, food costs more, and the poor starve. This is an over-simplification.

It is true that biofuel crops may raise the price of food, since at a commodity level, whenever a biofuel crop replaces a food crop, there is a lesser supply of food and this will increase the price of food. But increasing the price of food may allow small landowners to profitably grow food again to make a decent living, and biofuel as a cash crop will bring currency and wealth into equatorial countries.

Biofuel has the potential to disperse somewhat the currencies that flow today only to nations with oil. Biofuel can enrich economies throughout the tropics, and elsewhere, and this rising wealth can make it easier for nations to buy food. After all, it is impossible for biofuel to turn food into a global commodity, that happened long ago. So if biofuel crowds out food crops and increases the price of food, more indigenous food producers will arise.

Biofuel, more than anything, must be certified to have no negative impacts on forests, especially tropical forests. In tropical regions, or in any forested area, an appropriate mitigation for growing biofuel or biofuel harvesting might be to reforest twice the area of any new biofuel zone. In arid regions, where the land is completely denuded, biofuel plantations probably don’t require mitigation, they are more likely to be a good unto themselves.

The more we reforest deforested areas, and only grow biofuel where there once were deserts, the more the rains will return, climate will be moderated, and droughts will disappear. These thoughts should inform biofuel certification.

Got your attention? Probably not. Earthly heating is an unlikely search phrase. Actually, of course, this post regards global warming. And to-date, for the most part, we have posted information about specific aspects of global warming, or in-depth treatments of the subject, always including links galore to help the reader. But as a topic on the internet, Global Warming has got more posts and more links than we can count. Choose among the many on EcoWorld, or go to Google. Have fun.

Might anyone note that the major international oil companies abandoned their objections to global warming theories rather early, back in 2002 or even before that? Maybe there’s no downside to agreeing with global warming theories, and no upside to being a skeptic! After all, the number of global warming skeptics left in the world today is limited to a handful of libertarian think tanks, and an even smaller handful of renowned climate scientists. Why be a global warming skeptic?

The reasons are many, but foremost is because there is a downside to simply embracing global warming theories, without also displaying follow-up vigilance. The downside is it doesn’t end there. How we combat global warming will have a huge effect on whether or not we mitigate global warming, should it actually be happening exactly as feared.

Because we are trying to limit CO2 emissions, we are deforesting the Amazon, the Congo, the rainforests of Indonesia, and countless other forests, so we can grow “carbon neutral” biofuel.

Because we are trying to limit CO2 emissions, our biofuel plantations take land used to grow food out of production, and instead they produce this cash crop. In the inner recesses of the mega-cities of equatorial earth, food costs more, and the poor starve.

Because we are trying to limit CO2 emissions, we do nothing about deforestation, which is the primary cause of drought in earth’s equatorial regions. We don’t reverse deforestation – it isn’t a priority. As a result, drought is parching the land and the livelyhoods of millions, and glaciers on Kilimanjaro lose their annual replenishment snow.

Because we are trying to limit CO2 emissions, we don’t emphasize planting urban forests, and green building developments that have less heat island effect. We even fail to require lower emissions of genuine pollutants (sulphur dioxide, nitrogen dioxide, carbon monoxide, ozone, particulates, and lead), when we write noble and breakthrough global warming laws that require lower emissions of CO2.

Global warming skeptic is too narrow a description of what we advocate. Climate uncertainty remains, even if we agree the earth is warming. Critical analysis and rampant skepticism regarding any and all solutions to global warming are mandatory, if we are to ever hope to successfully combat global warming.

We may stand guilty of downplaying the future of crystaline photovoltaics. After all, exponential growth is necessary for alternative energy to take over the world, and after all, it is no simple matter to manufacture crystaline photovoltaics. But as amply documented in our post “The Coming Boom in Photovoltaics,” the only thing thing that stops crystaline photovoltaics from experiencing exponential growth is the supply of polysilicon. And the only raw material inputs required to manufacture polysilicon is silicon, one of the most abundant materials on earth, and electricity, which photovoltaics produce in abundance.

Photo: SunPower

Along with crystaline photovoltaic cells, which are made from slices of crystal silicon ingots, there are two relative newcomers; “thin-film” cells that use far less silicon, and concentrators, that use less photovoltaic material (not necessary silicon) but use mirrors, magnifiers, and solar tracking systems to multiply the amount of light, or “suns,” hitting the photovoltaics. There are many ways to evaluate the relative merits of these three fairly distinct technologies that all promise to deliver a product that is commercially competitive to conventional energy.

How much do the systems cost per photovoltaic array – i.e., what are the dollar costs per watt just for the photovoltaic panels? How much do the systems cost per watt once they are installed – including the “balance of plant” such as the inverter, the wiring, the mounting racks, and of course, the costs to have all of this put in place by skilled technicians? In terms of cost per watt, thin film photovoltaics have achieved manufacturing costs as low as $1.30 per watt (First Solar S-1 Statement 2006). In terms of installed costs, systems with high efficiency have advantages, but then again, there are low efficiency thin film systems that can be unrolled onto a roof like a tarp. In such a scenario, installation is cheap.

How much space do the systems take up – what is their efficiency? Concentrator manufacturers claim their prototypes yield up to 40% efficiency, or about 40 watts per square foot (400 watts per square meter). By contrast thin-film efficiencies range between 5% and somewhat higher than 10%. Crystaline photovoltaics can put out a reliable 15% and some of them can do much more.

When longevity of photovoltaics are taken into account, as well as proven reliability, crystaline photovoltaics are the best photovoltaic technology to-date, and possibly forever. There are crystaline systems that are over 20 years old and still have output at over 80% of their original efficiency. Early thin-film designs have not shown similar durability, although that may have changed. Concentrators are not yet installed in sufficient numbers for meaningful data to have emerged on their longevity.

It appears that thin-film photovoltaics may have the best potential to quickly ramp up manufacturing and make photovoltaic energy a significant contributer to global electricity production. After all, thin-film companies like Nanosolar claim to have a 400 megawatt factory under construction, and Miasole has a 25 megawatt line getting fired up right now, with three more on the way. First Solar’s 40 megawatt plant in Ohio has been operational for over a year now, and they are also on track to vastly increase their capacity.

Meanwhile, crystaline photovoltic technology in 2005 was still responsible for 94% of worldwide photovoltaic production, which was 1.5 gigawatts in that year. So why would we write-off the potential of the crystaline photovoltaic industry to explode? After all, worldwide photovoltaic output only five years earlier was only 300 megawatts, all of it crystaline ingots. Quintupling every five years is not bad growth. SunPower, a premier manufacturer of photovoltaics who have prototype cells that achieve well over 20% efficiency, and who claim they can get the price for crystaline photovoltaics under $1.00 per watt, intend to have their manufacturing capacity over 400 megawatts per year by 2008. Don’t write off crystaline photovoltaic technology just yet.

The photovoltaic industry has been capacity constrained at least since 2001, and will remain capacity constrained well into the foreseeable future. They don’t have to be commercially competitive with conventional energy for this industry to increase in output by at least one order of magnitude, if not more. After all, the five gigawatts of installed photovoltaics in the world represents well under 1% of the world’s supply of electricity. For this reason, no matter how you manage to manufacture photovoltaics, if you can do it you will enjoy high gross profits. Crystalline photovoltaics, with a theoretical maximum efficiency of over 40%, and with a demonstrated history of durability and longevity, are not going to go away.