Whether or not electric cars are going to hit the roads in volume anytime soon is more uncertain than ever, with the market for new vehicle purchases off nearly 50% compared to just one year ago, and the price of a barrel of oil back under US $40. But while the near term prospects for the automotive industry are daunting, the future is brighter than ever, and the many credible contenders to deliver EVs continue to grow. The latest EV we’ve found is here as a spinoff from Electrovaya, a Canadian based maker of lithium ion batteries for laptops and medical devices.

About one year ago, Electrovaya announced the Maya-300, an all-electric vehicle with a top speed of 35 MPH and a range of 120 miles. Since then they have announced a series of contracts to supply batteries to the Norwegian manufacturer Miljobil after that company had built five EV prototypes using Electrovaya’s batteries. Also in 2008, Electrovaya announced an agreement to supply New York based Visionary Vehicles with their batteries. They also made a recent announcement to supply batteries to California’s Phoenix Motorcars - and what happened to Phoenix’s other battery supplier, Altair Nano?

Moving from west to east, Electrovaya in November 2008 announced three memorandums of understanding with Chinese manufacturers Chana International Corp. to produce 30 electric cars over the next few quarters, with GuangZhou Lange Electric Equipment Co. Ltd. for battery equipment, and Shandong Shifeng Group Co. Ltd. for zero-emission electric vehicles for the North American and global specialty truck market.
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The Maya-300, Electrovaya’s new entrant in the EV sweepstakes. (Photo: Maya Mobility)

It is impossible to say how far Electrovaya will advance in the next generation car sweepstakes, but the stakes are huge. The car is being reinvented, and the car of the future will be cradle-to-cradle recyclable, run on renewable clean energy, it will be smart, safe, and there will be billions of them. Like ZENN, Electrovaya has launched a low speed vehicle (with impressive range), unlike ZENN, they are still only at the prototype stage with their Maya-300. Also unlike ZENN, they have their own battery technology which appears to be genuine enough to have attracted the attention of a lot of partners around the world. Another low speed vehicle manufacturer who has quietly logged fleet sales now approaching 3,000 units is Miles EV, based in Los Angeles and selling to fleet buyers on military bases and college campuses. Late in 2008 Miles had announced plans for freeway capable vehicles available for sale in early 2010.

The current leader in electric vehicles, at least in terms of freeway capable cars on the road, is Tesla Motors. In a post on Tesla’s website last month, Chairman Elon Musk claimed the $40M financing they secured in late 2008 is more than enough to bring the company to profitability. With showrooms in Menlo Park and Los Angeles, and over 200 all-electric cars on the road, they are still the company to beat - but in terms of units shipped, it is a long, long way from 200 to 200,000. Fisker Automotive, with their equally sporty Karma prototype, claim this series hybrid (also known as an extended range EV, or “EREV,” where the drivetrain is all-electric, but an onboard combustion-engined electric generator supplements the battery power) will be in showrooms across North America and Europe by late 2009. The futuristic Aptera Typ-1 is reported to already be in crash testing, although they have delayed the roll-out of a series hybrid version in favor of an all electric model. Tesla, Fisker, and Aptera are pretty hard acts to follow.

The big automakers are not standing still, however. A few weeks ago we checked with our contacts at General Motors to verify that the Chevy Volt was still on track. As an extended range electric vehicle with an electric-only range of 40 miles and a gas/electric range of over 400 miles, and an all-electric drivetrain, the Chevy Volt is one of the most advanced vehicles ever built. At this time GM has dozens of Volt prototypes undergoing extensive testing, and sources at the company stated unequivocably that the Volt remains on schedule for a 2010 delivery to showrooms. The Volt, of course, will be priced to sell in volumes that will start in the tens of thousands. Assuming GM will survive - and they probably will - our money is still on the Volt to set the standard for EVs the day it debuts.

The emergence of next generation cars will be a saga of many auspicious beginnings and many barely noticed epitaphs, as is the case whenever disruptive technology overturns entire industries. Even in these tumultuous times, watching these aspiring companies move from concept to product is a fascinating, inspiring experience.

About a year ago I participated for a few months with an industry group that was attempting to insert some rationality into what is probably the most irrational, extremist, dangerous, job-killing, regressive laws in the modern history of the United States, AB32, California’s Global Warming Act. Unlike renewable portfolio standards, which can at least be justified by virtue of their potential to improve the U.S. balance of trade and promote energy independence, California’s global warming act is based on uncertain science and propelled by political opportunism. It is an utterly futile gesture, and even if it weren’t, most of the regulations being solidified regulate land use and manufacturing - because that’s where the money is from fees - even though the projected potential greenhouse gas reductions in those areas are relatively trivial compared to simply improving vehicle efficiency. If California’s AB32 isn’t repealed, it will be an unmitigated disaster.

While interacting with these lobbyists and public relations professionals, I ventured a theory that was met initially with skepticism, and later with growing acceptance. I suggested that the biggest source of looming government deficits was the underfunded pensions for public employees, and since public employees, through their unions, control our state and local governments, of course they will welcome any law that allows “fees” to be imposed to mitigate global warming, since the scale of these “fees” is estimated to be in the hundreds of billions of dollars, and nothing else can hope to eliminate deficits and make their pension funds solvent.
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Are we ideological vultures, or just good Americans who are tired of two Americas, unwilling to submit to green shackles on this blue planet? (Photo: EcoWorld)

This is the reason we discuss the issue of public sector reform in this green publication. Global warming payments that flow from the private sector into the public sector - via taxes, fees, and sale of emissions allowances, are the biggest way public sector entities may avoid bankruptcies and drastic roll-backs of their benefit packages, which now exceed that of average private sector workers by a factor of 2-4x. Could this be why everyone in the public sector, including the teachers who are diligently giving our children diluvian nightmares, have completely embraced the global warming panic? Could it be they’re just trying to protect their retirements?

Today on our favorite Pension Reform website Pension Tsunami, there were links to two articles that bear analysis. One, “Hidden Pension Fiasco May Foment Another $1 Trillion Bailout” by David Evans, published on Bloomberg, accurately summarizes how public employee pension funds, for years, have overestimated the returns they can earn, underestimated the amount that needed to be contributed each year to the funds, and have underestimated the benefits these funds would eventually have to pay. This has gotten worse in recent years, as public sector employee unions have consolidated their power in state and local governments by controlling elections, and using as a pretext the phony prosperity of the internet bubble followed by the housing bubble, demanded unsustainable increases to the benefit packages of their members - often retroactively - from politicians whose survival depended on their obedience.

Here is one of the key points Evans made today on Bloomberg - he was referencing CALPERS, one of the nation’s largest public employee pension funds, but similar figures apply to most all public employee pension funds:  “The nation’s largest public pension fund, California Public Employees’ Retirement System, has been reporting an expected rate of return of 7.75 percent for the past eight years, and 8 percent before that… Its annual return during the decade from Dec. 31, 1998, to Dec. 31, 2008, has been 3.32 percent, and last year, when markets tanked, it lost 27 percent.”

In response to this article, a spokesperson for CALPERS emailed a comment to Jon Ortiz’s “State Worker” blog, in a post entitled “CalPERS, other pensions, overstate return estimates and understate costs,” published by the Sacramento Bee: 

“Beware of the anti-pension ideologues who come out of the woodwork during market downturns. Like vultures, they prey on the highly charged and negative investment environment, looking for ways to convince you a temporary performance downturn will be typical for all time!

They know — but don’t tell you so — that we set our rates based on a fiscal year investment return. They don’t tell you that our assumed rate of return is made based on advice from a range of experts within CalPERS and within the industry and that it is regularly evaluated every two to three years in public session. They don’t tell you what you would learn from a textbook on pension management: that some years investment returns are as expected; other years, they will be more than expected and yes, some years they will be less than expected.

They don’t tell you that over the last 24 years, we have exceed our assumed rate of return 17 times, and eight of those years were more than double the 7 3/4 percent assumed rate of return.

(And here’s an interesting fact: For five years after the Great Depression, there were multiple double digit return years.)

We will withstand the market swings, with our goal in mind: to achieve our assumed rate of return averaged over many, many decades. That’s what we are designed to do. That’s the math that matters.”

Our position on sustainable investment returns, as we document in “Humanity’s Prosperous Destiny” is that it is impossible for a fund as big as CALPERS to earn a sustainable rate of return beyond the real growth rate of the economy in which they invest - and that is about 3.5% per year. Surprise! That’s what CALPERS has earned over the past ten years.

The “math that matters” is indeed how much a large pension fund can earn over the long term, and it is interesting that nowhere in the CALPERS response is a solid rebuttal offered to Evans’ statement they have only earned 3.32% over the past ten years. How high would the preceding 10-20 years of returns have to be, for CALPERS to actually have earned an average rate of return of 7.34%?

To answer this, assume a 30 year timeline, and a fund earning 7.34% on average over these 30 years. Let’s further assume this fund earned 3.32% over the last 10 of those 30 years. An investment that earns 7.34% interest for 30 years will increase in value by a factor of 837%. That is, $100 invested with a return of 7.34% interest per year at the end of 30 years will be worth $837. If in the final 10 years of this period, the rate of return is only 3.32%, then in the first 20 years of the period, the investment would have to earn 9.41% per year. Did CALPERS earn nearly 10% per year on average between 1978 and 1998? Unlikely. Adjusting for inflation - impossible.

Two key factors have converged to make CALPERS and nearly every other public employee pension fund in the United States grossly underfunded if not insolvent, and the recent financial meltdown has only made us confront this reality sooner:

(1) They overestimated their real rates of return. With cost of living adjustments built into public employee pension plans, these funds have to calculate their funding requirements based on a real rate of return. Maybe CALPERS did average 9.41% on their investments between 1978 and 1998 - I doubt it - but the rate of inflation during many of those years was often in double digits. Was their real rate of return, meaning the percentage amount their investments earned each year, less the annual rate of inflation, sufficient to keep pace with future benefit payments? That is far less likely.

(2) They failed to appreciate the impact of retroactive pension benefit increases and pension “spiking.” When union controlled politicians granted increases to public employee pensions of 50% or more, they didn’t require this new benefit to only apply to the years these employees would work from then on, but applied it backwards, to all the years they’d ever worked. This grossly increased the amounts required to be in these funds. And instead of forthrightly stating such a benefit increase would require dramatically increased annual contributions for the funds to remain solvent, these fund managers pretended the recent debt fueled phony growth in the value of equities and real estate would go on forever.

As we explain in “Calculating Employee Compensation,” it isn’t what an employee takes home in gross salary that accurately measures their compensation. It is their total annual cost to the organization during the years they work, their salary and all their present benefits (including vacation and the many other paid days off enjoyed by public sector workers), plus the annual funding requirements for their retirement benefits - health care and pension. And by this measure, public sector workers make about twice what the rest of us make who pay the taxes to support them.

The solution: Unions in the public sector must be strictly regulated. They must be banned from participating in political activity, for starters. And from now on, public sector employees can get social security and medicare just like the American citizens they supposedly serve. If not completely liquidated, public employee pension funds should be phased out, existing only to fulfill some realistically scaled back obligation to existing public sector retirees or those nearing retirement.

The alternative to public sector reform is phony rationing in the name of saving the earth from climate change.  Instead of investing in infrastructure - power plants, freeways, bridges, desalination plants, aquaducts, reservoirs, those things that enable prosperity and abundance, and the wealth to address genuine environmental problems - we will screw in expensive toxic mercury lamps to save a few electrons, live like sardines in overpriced cluster homes behind “urban service boundaries,” and cash our carbon chips to BBQ an occasional steak, while public sector nomenklatura will collect the proceeds of the emission auctions, taxes and fees attendant to this “mitigation,” and retire 10-20 years before the rest of us.

While regulating CO2 emissions occupies an ever increasing share of policymaker and environmentalist priorities, which translates into countless new businesses and technologies to address this new challenge, there are still all those other air pollution emissions that we used to worry about exclusively, and almost, but not quite eliminated.

While impressive results in air pollution have been logged ever since the introduction of the catalytic converter and unleaded gasoline, microscopic particulates are still not being captured by conventional systems. The problem with these microscopic particles is that even though they are invisible, they actually pose greater potential health threats because they are so small the lungs are not able to expel them. Finding a product that improves automotive fuel efficiency - which translates into lower CO2 emissions - but also helps eliminate whatever other emissions we haven’t yet tackled is a rare treat.

A new aftermarket tailpipe filter that works on virtually all automobiles is now available from Sabertec, a three year old company based in Austin, Texas. Called the “Blade,” this filter can eliminate another 70% of microscopic particulate emissions, greatly improving air quality. Because this filter also alters the volumetric efficiency of the engine and accelerates the speed at which the catalytic converter reaches its optimal operating temperature, engine efficiency is improved up to 12% or more.
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Sabertec claims that BLADE is the only automotive afterproduct that both reduces emissions and increases fuel efficiency. (Photo: Sabertec LLC)

These achievements are apparently well documented. After acquiring the Blade technology in 2005, Sabertec went to CARB in California to ask them who they would recommend to test the unit for emissions reduction. They were referred to ATDS in Ontario, California, where most all major automakers test their vehicles. The standard they wanted to measure the performance of their unit against was the EPA protocol 511 - a test created by the United States Environmental Protection Agency (EPA) to evaluate aftermarket retrofit devices that claim to reduce automobile exhaust emissions and/or improve fuel economy.

The results were encouraging. The blade unit, which costs $200 and requires a new $20 filter about every 10,000 miles, improved fuel economy by 6% in a four cylinder Honda Civic, by 12% in a six cylinder Hyundai Sonata, and by 5% in an eight cylinder Ford E-250.

Sabertec began when their CEO, William O’Brien, learned of an inventor in Brazil who had been developing this unit since 2000. O’Brien acquired the technology and hired the scientists who were working on it - since 2005 they have been working for Sabertec. They began installing devices on a fleet of test cars in August 2007 and at that time they also began testing the device with ATDS. The results from ATDS were released in December, 2008, and since then these devices have been available at select retailers as well as on the internet. If you include the many fleets who have already purchasing these products - including early adopters - Sabertech has already equipped over a thousand vehicles.

Modern urban centers from Manhattan to Hong Kong now boast neighborhoods that house well over 100,000 people per square mile, while providing their inhabitants an excellent quality of life. As world civilization voluntarily and inexorably urbanizes, new megacities will be built everywhere. It is estimated that within the next few decades the number of megacities on earth - defined as an urbanized area with over 10 million inhabitants - will increase from around 20 today to over 400. So what innovations being pioneered today will enable cities like this to provide a high quality of life, and how will cities of such size and density reduce their vulnerability to economic or physical disruptions?

In a way, a megacity is antithetical to the notion of being “off-grid,” yet in important ways it is the megacity that needs to be as self sufficient as possible, since having 100,000 people per square mile (20,000 per square kilometer) means that any resource that needs to be imported, stored or removed is going to have to be handled in very high volumes. Therefore energy efficiency, waste management, as well as energy and water harvesting and treatment are technologies that are extremely important to the megacity - along with smart systems to interconnect all of them. So along with energy and water efficiency, harvesting and reuse, how else can a megacity exist relatively off-grid? Equally important is the closely related question of how can a megacity experience a postive balance of payments - supporting itself economically?

Cities could become food exporters. (Image: VerticalFarm.com)

To explore this question beyond the usual suspects there are two evolving technologies (both are evolving, not emerging, because both have illustrious histories) that promise to transform megacities in important and very positive ways, one is high-rise agriculture, and the other is massive tunnelling systems.

It is common for the smart growth crowd to say “build up, not out,” but this misses two key points. First, of course, the smart growth advocates tend to forget that the smartest growth is unplanned. Centrally planned growth tends to actually promote sprawl, because those of us who don’t want to live in towers simply buy land and build homes on the far side of whatever “greenbelt” they manage to decree. But more on point, building up instead of out ignores building downwards as well. Some of the greatest urban gridlock ever seen has been ameliorated by tunnelling - anyone who tries to get to Logan Airport from downtown Boston during rush hour will have nothing but good things to say about the much maligned “big dig.” It’s too bad we don’t have more big digs - in the heart of urban centers we could put freeways and rail underground, and our cities could reach for the sky, and there would never be a traffic jam.

Tunnelling on a grand scale can seem mundane until you learn more about it - then you realize it is a fascinating field that is advancing at breakneck speed, incorporating new technology across multiple disciplines as fast as it becomes available. From GPS systems that allow a tunnelling machine to always know precisely where it is beneath the earth, to better cutting bits, to debris removal conveyers, to conveyers to bring forward shoring material, to worker shelter and control rooms, modern tunnelling machines can exceed a mile in length and cost billions to acquire and operate. The global leader in tunnelling systems is Herrenknecht AG. A good website that covers the world of tunnelling is tunnelmachines.com. 

As the megacities of the future are built, tunnelling machines will play an integral part in endowing these cities with efficient transportation systems. Tunnelling underground to create utility conduits to transport water and energy will also be necessary in cities of ultra-high density. Using the volume of underground space to host much of the physical plant of megacities will make the surface areas far less congested, and far more pleasant for people. The underground systems of megacities can include large-scale water cisterns, or even enhanced geothermal power stations to extract power from the heat in the earth’s crust.

The imperative to build upwards is already a part of the new urban vision, but what about high-rise agriculture? The technology to grow food at extremely high volume indoors is already well understood - the Netherlands, for example, is a net food exporter in spite of being the most densely populated nation in Europe. But what the Dutch do using advanced hydroponics and lighting, in greenhouses that glow for miles across the reclaimed polders all year long, might instead take place on the stacked stories of a skyscraper.

One of the pioneers of high rise agriculture is Dickson Despommier, a professor at Columbia University and the founder of Vertical Farms LLC. Most of the technology to operate a vertical farm is already here, as well as much of the infrastructure. A properly designed vertical farm imports grey water (plenty of that in a mega-city) and pumps it to the top of the building, then allowing it to trickle downwards through hydroponic media on floor after floor. With mirrors and energy efficient lighting, along with daylight, a high-rise farm would probably consume, overall, less energy and water per calories grown than a greenhouse, since heating would be far more efficient in a multi-story structure. Despommier estimates a high rise farm on one city block (30 stories, 100,000 square feet per floor) could produce enough food to meet the needs of at least 10,000 people (possible much more, read “The Vertical Farm” .pdf, 2004). Every type of produce except for grains is potentially cost competitive to land-intensive traditional agriculture.

The implications of building upwards and downwards, employing novel technologies ranging from enhanced geothermal to high-rise farming, hold forth not only the oft-wished for promise of attracting humanity’s billions off the land and into densely populated megacities, but also the promise of cities that live nearly off the grid, cities that may, despite their magnitude, require very little from the rest of the world. Cities that might actually export power and food.

Still absent from much of the discussion regarding state and local government budget deficits is an attempt to properly assess rates of worker compensation. But if one performs this exercise, normalizing for all present and future benefits, it immediately becomes clear that the true compensation of public employees is significantly higher than is being commonly reported, and this fact should be taken into account when arguing what may be the most effective and equitable way to eliminate deficits and avoid public sector bankruptcies.

It is common when considering how much one is paid by their employer to reference the annual gross income as the primary measurement - the number that appears on the IRS W-2 form, for example. But in reality this is a very misleading indicator. How much an employee makes should be calibrated according to how much it costs the employer each year in total direct expenditures for the employee not only for wages, but all present and future benefits. This grossed-up amount, in-turn, must be applied to the number of hours the employee actually works each year. This adjusted hourly rate can then be normalized, for example by multiplying by 2,080 (52 weeks at 40 hours per week) to create a rate of annual compensation.

The reason this is important is because rates of compensation, as opposed to base wages, are far more reliable indicators as to whether or not a workforce is relatively overpaid or underpaid compared to their counterparts. For example, a landscaper’s assistant working for a private non-union labor contractor may earn minimum wage, $8.25 per hour. Added to that is the employer’s contribution to social security and medicare, and a handful of other assessments such as workman’s compensation - all of which theoretically will come back to this worker at some point as a future benefit. These minimal assessments will add about 10% to this person’s compensation, meaning they are actually earning just over $9.00 per hour. Since they get no vacation or sick time at this entry level, their annual compensation is not $17,160 per year ($8.25 per hour times 2,080 hours per year), but actually $18,876 per year ($8.25 per hour times 110% times 2,080 hours per year).

In the private sector, this “overhead” that is actually compensation that directly benefits the employee can vary, with the 10% figure representing the low end of the spectrum. At the higher end, a private sector worker who makes, for example, $65,000 per year, may also have several benefits that increase their actual compensation. They will earn the employer’s payments on their behalf, which amounts to an additional 10% for social security and medicare. They will also potentially have their health insurance paid for, adding as much as another $12,000 per year or more. Sometimes there is an employer’s matching contribution to a 401K plan, possibly adding up to another 5%. If you add this all up, these lucky employees actually earn not $65,000 per year, but  $86,750 per year ($65K times 115% plus $12K). In addition, the private sector employee may not work 2,080 hours per year - they may have 10 paid holidays and 10 vacation days, meaning they only work 1,920 hours per year. If you normalize this for a full year that totals 2,080 working hours ($87K divided by 1,920 times 2,080), you get a real annual compensation of  $93,979 per year, or an “overhead” of 45%.

This range, between 10% and 45%, is pretty much representative of non-union, private sector overhead, and is a useful way of assessing how much employees are really making in compensation. The reality, with employer contributions to 401K plans becoming quite rare, along with contributory health care plans, is the private sector worker’s overhead compensation probably averages around 30%, if not lower.

Schwarzenegger attempted to reform government to reduce deficits, but was crushed by special interests.

In the public sector, compensation packages typically trend towards the higher end of this range - but what really gets them over the top is the value of their pensions and retirement health benefits. To begin this analysis, it is useful to compare how pensions are measured in the public sector, then compare that to the defined benefit that private sector workers get, i.e., social security.

Public sector pension benefits are calculated by multiplying a negotiated percentage amount by the number of years the employee works. This total percentage is then applied to the final annual salary of the worker. For example, it is common for city and county workers in California to get 2.7% per year towards their retirement, meaning if they work 30 years and retire at age 55, to calculate their retirement you would multiply 2.7% by 30, and apply that percentage to their final salary. For example, if they work for 30 years and are making $65K when they retire, they will earn 2.7% times 30 times $65K when they retire, or $52,650 per year in retirement pension benefits.

California state workers on average earn somewhat less than this; they will get 2.0% per year typically towards this retirement calculation - do the math and you will see that a California state worker who completes their employment after 30 years at a final annual working salary of $65K will get an annual retirement benefit beginning around age 55 of $39,000 per year.

To compare this to social security, you have to work backwards. If you reference the “Social Security Estimator” webpage, you will see that a person who pays into social security, retiring at age 65 (ten years later, working 40 years instead of 30 years) with an ending salary of $65K, will earn $19,308 per year in social security payments. This annual amount, earned after 40 years instead of 30 years, is only 49% of what state workers will typically get, and only 36% of what city and county workers will get. If you use their terminology, it equates to 0.7% per year, versus 2.0% or 2.7% per year for government workers.

Returning to how this applies to total compensation, the way retirement pensions and health benefits affect real compensation in the public sector, normalized for all benefits, is quite dramatic. During the years public sector employees work, the funding requirements of their future benefits need to be paid. While ongoing funding allows interest to be earned, the real return of these funds is not likely to exceed 5% per year, if that. Despite a run of excellent returns in recent years, fueled by unsustainable debt fueled economic “growth,” in general funds large enough to service pensions for millions of workers cannot experience real growth greater than the rate of overall economic growth for the economy at large. A good global fund should not be expected to grow faster than the sustainable rate of global economic growth, which has never exceeded 4% historically (ref. Humanity’s Prosperous Destiny); this is a realistic if not optimistic real rate of return, adjusted for inflation. Let’s also assume a public employee works for 30 years, retires at age 55, lives to be 75, and started their career earning a salary paying one-half as much as what they earned by the end of their career, with the increases spread evenly through their 30 year working life. Assume these are merit increases since we are dealing with real dollars, and similarly, since we are using real dollars, assume no cost of living adjustments during retirement. All of these assumptions, please note, will lower the amount of funding required each year. Assume they are state workers, meaning they “only” get 2.0% per year applied to their retirement calculation.

The math is somewhat complex, but here is the result: At a return of 4% per year, a state worker will have to have an additional 19% of their salary contributed to their pension fund each year they work in order for the fund to accumulate enough to pay them their defined pension until they reach the age of 75. During the years they work, they will also have to have annual contributions made for their future health benefits - to say these amounts would be at least 2.0% more of their salary, which is about what medicare requires, would be a generous understatement, since public employees often receive supplemental health coverage for the period prior to age 62 when medicare eligibility begins, and they often receive coverage to supplement medicare as part of their retirement. For a state employee making $65K per year, this 21% of salary set-aside for their future health care and pension must be paid each year, and this is part of their compensation. Just as an aside, a city or county worker who gets a 2.7% per year pension plan, earning $65K per year at retirement, with a fund earning a realistic 4% per year, would require 27% (including the understated 2% for future health benefits) on top of their salary put into a retirement fund each year. Those in public safety who earn a 3.0% pension package, under these assumptions, would require 31% of their salary to be paid each year to adequately fund their retirement benefits.

It doesn’t end there. Public employees don’t work as many hours each year. Instead of 10 holidays, usually they get at least 15. Instead of 10 days of vacation, over their career, on average, if you include “personal days” as well as vacation time, public employees get at least 30 paid days off annually, 50% more than private sector workers. This is not to mention the “9/80″ program where they get to work 9 days every two weeks instead of the normal 10 days, so long as they work an extra hour per day - hmmm, lunch at the desk and a few minutes early to arrive and a few minutes late to leave - sounds like a typical salaried job in the private sector, but never mind - and what about teachers who get summers off?

Where does this put us? If an executive in the private sector making $65K per year is going to actually make, best case, $94K per year, with an overhead of 45%, what is the overhead, and true compensation for a public employee?

Using the state worker as an example, you will take $65K, add 21% for funding future retirement benefits, add $12K for health benefits (apples and apples here - in reality health benefits are on average much better for public sector workers), normalize for 30 paid days off per year instead of 20, and you get an adjusted compensation of $102K per year, or an overhead of 58%.

It is important to note that a private sector workers overhead component of their total direct compensation of 45% is the absolute high end, whereas the overhead for a state worker in this example of 58% is the low end. For example, if you do the same analysis for a city/county worker on the 2.7% per year plan, you get a normalized annual compensation of $108K, with an overhead rate of 67%. If you account for the impact of additional benefits such as the “9/80″ programs that amount to 26 more paid holidays a year, a city/county worker making $65K per year really makes $122K per year; an overhead rate of 89%.

There’s more. In previous decades, workers in the public sector exchanged lower salaries for better benefits. That is, they would get overhead benefits of, say, 60% vs. 30% in the private sector because a job that paid $65K in the private sector would only pay $50K in the public sector. Those realities - aside from the oft-cited “overpaid private sector executives” (probably less than 1% of the private sector workforce and hence totally irrelevant) - have now been flipped. Public sector workers now make more in base salary than private sector workers doing jobs requiring comparable skills and comparable risks. Obviously some public sector jobs should pay a premium - but the question is how much of a premium is too much.

The reality today is this - a mid level bureaucrat in the public sector probably will make about $65K per year, which with benefits of 58% (on the low side) will normalize to $102K per year. A white collar worker or skilled technician in the private sector, doing work requiring equivalent skills will probably earn $50K per year if they’re lucky, with an overhead benefit of 30%, which equates to $65K per year. Public employees now make about twice as much as private sector employees make.

When one does an in-depth analysis of the real rates of employee compensation in the public sector vs. the private sector, the solution to government deficits is clear. The solution is not “furloughs” or even layoffs. The solution is to cut their pay and their benefits to levels equivalent to what people make in the private sector. This step would not only restore equity to the workforce, but would immediately eliminate the structural deficits endured by state and local governments.

The trend towards infrastructure decentralization is well understood with respect to energy production. Since humanity’s collective energy requirements will double in the next generation - even with extraordinary improvements in energy efficiency - thousands of new utility scale energy developments will compete with, for example, millions of solar arrays deployed on rooftops.

Another example of infrastructure decentralization is in the many waste-to-energy technologies under development. These solutions have utility scale applications, but also onsite applications, as reported in our recent post “Onsite Waste-to-Energy.” In both of these areas, energy production, and disposal of municipal solid waste, there is a great deal of overlap where centralized solutions vs. decentralized solutions display remarkable parity when considering overall costs to implement.

Treating wastewater, however, is not only another area where decentralized solutions are rapidly evolving, but appears to offer a broader range of situations where decentralized wastewater solutions are already clearly more more cost effective than utility scale solutions. In recent years these decentralized sewage treatment applications have become not only much cheaper to implement, but deliver better solutions for aquifer health and overall watershed management.

According to the American Society of Civil Engineers, in the United States there are 16,000 major wastewater treatment facilities. All of these large plants collect sewage from urbanized areas through large, usually gravity fed pipes, discharging the treated water well downstream from the source. Because these plants are so big, and the collection pipes so old, and because maintenance on many of these thousands of systems has been deferred for years if not decades, it is often no longer cost-effective to tap into these legacy systems to accomodate new construction.

Meanwhile, small-scale wastewater treatment systems that have traditionally been installed are not representative of technologies available today. Many communities rely on wells for drinking water and ideally wish to recycle this water back into the aquifers onsite. Their onsite water treatment systems are inadequate to meet today’s water standards, however, so while they are properly replenishing their aquifers with localized systems, often the percolating wastewater is not sufficiently cleaned and is degrading the overall quality of the aquifer. But the cost of upgrading these systems and deploying modern decentralized systems to accomodate new construction in rural areas and outlying suburbs is far cheaper than the cost to extend sewers upstream to service every remote home or community.

AquaTech’s patented trickling filter uses gravity to increase efficiency (Diagram: AquaTech Systems)          Â

One company addressing this burgeoning market for cost effective onsite wastewater treatment is AquaTech Systems, based in Fayetteville, Arkansas, with installed systems all over the world. The array of solutions they offer provide a compelling illustration of just how much money a developer or a municipality can save by going off-grid with their waste water treatment infrastructure.

For example, the cost to extend “big pipe” gravity fed sewers into small communities can cost as much as $40 per linear foot, even without rock excavation. A typical bill to an individual homesite - whether they are upgrading or for new construction - can be over $20,000 per connection. By using smaller diameter pressure sewer pipe, the cost can be reduced to under $5.00 per linear foot. In turn, these collection pipes can feed into small scale treatment plants located within the local community, reducing the diameter and length of total pipe required by orders of magnitude.

Similarly, the cost per household to finance a small scale wastewater treatment plant can be significantly lower than tying into a large urban water treatment plant. These small scale facilities now can treat wastewater to standards comparable to the larger facilities, while releasing the treated water into the aquifers onsite upstream, instead of conveying raw sewage through often leaking pipes to be treated at a central facility well downstream.

Some of the technologies that have made cost effective quality onsite water treatment a reality include fixed film treatment processes that have been systematically improved over the past 20 years. AquaTech Systems offers the ”BioTank” treatment reactor, a container-sized module utilizing microorganisms that adhere to a high surface area media submerged in the wastewater. Much of this process borrows from large scale water treatment plants, but now that the microbial process is better understood, and with advances in materials such as high surface area media, today it is possible to offer high quality wastewater treatment at the scale of a neighborhood or small community.

Aquatech Systems offers a number of innovative solutions, such as a “trickling filter” that recirculates effluent through a tower shaped bioreactor. This configuration allows the treatment process to be accelerated by taking advantage of gravity to move the effluent through the microbial digesters. All of AquaTech System’s solutions are modular and can be scaled to address the needs of anywhere from 10 to 10,000 households.
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The container-sized AquaTech bioreactor is available in modules and can accomodate from 10 to 10,000 households. (Diagram: AquaTech Systems)               Â

The promise of off-grid solutions is not only of immense value to developed nations such as the United States, where the crippling cost of inefficient public sector bureaucracies nearly precludes necessary infrastructure upgrades, but equally throughout the world. In nations without legacy investments in grids for communications, energy, and treatment of solid waste and wastewater, advanced decentralized solutions will offer emerging nations dramatically more cost effective opportunities to build a 21st century infrastructure.

While decentralized sources of power, such as harnessing solar and wind energy to generate electricity, are well understood opportunities, there are additional fundamental areas where we are moving inexorably towards an infrastructure where being on the grid is an option, not a necessity. A recently announced new waste-to-energy system that turns trash into clean energy from IST Energy is an exciting example of this trend.

There are several credible companies developing ways to convert municipal solid waste (MSW) into energy, such as Ze-Gen, Plasco Energy Group, Rentech, Bluefire Ethanol, Coskata, Enerkem, and many others. But unlike these companies, which are developing technologies for centralized plants to convert thousands or, even more likely, millions of tons of MSW feedstock into electricity or fuel each year, IST Energy has developed a system that operates at an onsite scale.

If IST Energy’s technology moves out of the pilot phase - they are currently demonstrating a prototype unit for potential customers - the implications are huge. Instead of paying for expensive trash pickup and removal services, so waste can end up in a landfill, campuses, military bases, hospitals, and other institutions or commercial complexes can install a waste-to-energy solution from IST Energy, available in modules so it can be scaled to whatever waste processing requirement may apply.

During an interview last week with Stu Haber, CEO of IST Energy, he said the unit they are developing is 30′ by 8.5′ by 8′ high, able to fit in a standard shipping container for intermodal delivery anywhere. Into this volume, the system IST Energy has designed includes space for 3 tons of MSW storage at the front end (so it only has to be fed once per day), with a shredder, dryer, pelletizer, zero-emission gasifier, and internal combustion engine electricity generator that runs on the syngas extracted from the MSW.
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A cutaway view of IST Energy’s onsite waste-to-energy system. (Image: IST Energy)

How much energy comes out of this system? A typical waste stream has somewhere between 8,500 and 12,000 BTUs of embodied energy per pound. With a gasifier that can extract up to 90% of this energy and convert it into syngas, and an internal combustion engine generator that converts the mechanical energy of the engine into electricity at about 27% efficiency, about 25% of every pound of waste input comes out the other end as electricity. Put another way, somewhere between 1-2 pounds of waste equals one kilowatt-hour, depending on the specific composition of the waste input. Additional energy is extracted in the form of heat, improving overall efficiency, and making these units miniature combined heat and power plants.

IST Energy intends to sell these units for about $850,000 each, meaning for that price you could process about 1,100 tons of waste each year, generating about 1.3 million kilowatt-hours, along with co-gen heat. At $.15 per kilowatt-hour, you would recover $200K per year just in electricity, plus you would harvest the heat, and presumably, save money on garbage collection fees (only about 5% of the volume of the waste material input remains as ash). If IST Energy can deliver this unit in large quantities according to these specifications, they have a very disruptive technology.