Saturday, June 26, 2010

Electricity Without Subsidies?

Increasingly, the question must be asked whether or not electricity generation can occur without direct or indirect government subsidies and loans. If the answer is no, then to what extent should the government be involved in the process and should it be allowed to 'play favourites' when it comes to supporting groups pursuing electricity generation.

There needs to be a clear difference made between industries that require govenment 'subsidies' and industries that require 'loans'. A subsidy is the equivalent of the government giving money to a company either through guaranteed electricity pricing or tax exemptions. A loan on the other hand involves the government giving a company money with the expectation that the money will be returned with interest.

On principle, I have no problem with the government providing loans to companies that it feels will be faithful in fulfilling their end of the deal by repaying the loan with interest. If the government doesn't believe that the company will repay the loan, then higher interest rates can be charged (in proportion to the financial risk) or the government can refuse to loan the money. The key part of this policy involves the government making the loan decision based on a financial assessment as to the risk involved with providing the loan, not political considerations as to if providing the loan will help the government politically.

The other consideration to be given is the scale of the loan required. Companies desiring to build nuclear power plants require government loans because of the scale of the loan required. Building a nuclear power plant costs billions of dollars, an amount that many private banks would be unable to provide.

Subsidies on the other hand, is the equivalent of throwing money out the window never expecting to see it back and can create a situation where a company that would typically fail, can survive because of government largesse. From the point of view of the government, there can be reasons to do this if financial considerations are not the only prevailing interest. For example, promoting a local mining company that produces rare earth metals may be a strategic interest for a government to retain a reliable domestic supply of rare earth metals.

There is a third and not completely distinct issue to be considered beyond loans and subsidies and that is the regulatory environment that a government establishes. Jurisdictions can introduce legal barriers to certain industries that make it difficult or impossible to operate successfully within that jurisdiction. Alternatively, the government can relax regulations to allow a specific industry to operate successfully where it otherwise might not.

In the Ontario electricity market, an example would be the status afforded to nuclear power plants as base generating sources, practically guaranteeing that their electricity is sold. Similarly, wind and solar plants are guaranteed that their electricity will be sold. Is such non-financial intervention better or worse than government subsidies? And to what extent should the government be able to regulate the electricity market in that way?

Wednesday, June 23, 2010

Australian PM Steps Down

Kim Campell, err... I mean Julia Gillard has been appointed Prime Minister after Brian Mulron... I mean, Kevin Rudd stepped down.

The reason seems to surround the climate change policies that Rudd advocated, and then back-tracked on, but as all things, is likely a combination of a large number of things. In any case, it will be interesting to see if Gillard's term is short lived.

Tuesday, June 22, 2010

Helium-3 Supplies Running Low

Who cares?

Most people reading the title probably thought exactly that.

Helium? And what's that three mean? And so what if we're running out of it? Bear with me and I'll try to change your mind.

Helium-3 is an uncommon isotope of Helium that has two protons and a single neutron. It occurs naturally and can be produced through the beta decay of tritium, an isotope of hydrogen with three protons. Helium-3 is not radioactive and shares similar properties to the more common Helium-4, but at low temperatures (~2 K) does not undergo a phase transition, making it ideal to be used in cryogenics. As opposed to Helium-4, Helium-3 also very readily absorbs neutrons, having what is called a high 'absorption cross section' for neutrons.

This gives Helium-3 a broad range of applications, not only in the pure research, but also in things like magnetic resonance imaging of the lungs, missile guidance systems and nuclear detection technology used by the IAEA and the US Department of Homeland Security. Right now, all of that is in jeopardy as the US Department of Energy has rationed Helium-3 supplies, the Russians have ceased exporting it altogether and the US has canceled more shipments of the isotope to the IAEA. The price of Helium-3 has soared from $100 per litre to over $2000 per litre. [1]

Now, some of you still might be thinking "who cares?". But the capitalists out there are probably rubbing their hands with glee thinking "how can I get my hands on this Helium-3?".

You might remember that I told you it occurred naturally, and as a bi-product of tritium decay. Tritium is routinely produced in CANDU nuclear power plants, and OPG separates it out and stores it until it decays, treating it as 'waste'. The US estimates that over the next 10 years, these stockpiles could produce 130 000 litres of Helium-3 [1]. Even if we assume a price of only $1000/litre, that's still $130 million.

Imagine that, something that Canada has thought of as 'waste' could actually be worth hundreds of millions of dollars and could generate tens of millions of dollars a year in revenue. Now all we have to do is figure out how to safely get it out from where it is stockpiled, separated from the tritium and packaged off to market.

Like my father used to say, "Don't throw that away! That could be worth something someday!".

[1] "DOE begins rationing helium-3" Physics Today, June 2010

Wednesday, June 16, 2010

The Art of Deflection

So, Obama is seeking some big deal on alternative energies as a result of the oil spill in the Gulf of Mexico. Trying to link the two issues is akin to proposing to repair the roof when your basement is flooding. Sure, maybe your roof needs fixing, but shouldn't one focus on the leak in your basement?

The US' problem is that their oil dependence is forcing them to ally with less than reliable nations (ie Saudi Arabia) and explore more dangerous sources of oil (ie offshore drilling). Reducing their dependence requires a fundamentally honest assessment of where that oil is going, which Obama either doesn't want to provide, or doesn't know.

Petroleum has many applications but only a tiny fraction (7%) of it is used in electricity generation, almost all of it goes to the transportation (71%) and industrial (23%) sectors according to the EIA [1]. So trying to change the electricity generation system to renewable energy sources may have many benefits but reducing oil consumption will not be one of them. In fact, it may exacerbate the problem of America's oil dependence.

America depends on petroleum for gasoline and the only real alternative (ethanol as it stands is not a true alternative since it can never be produced in large enough quantities) is to use electric cars. But if you spend all your time switching from cheap electricity sources (coal) to expensive ones (wind, solar), you'll make electric cars even less competitive compared to gasoline.

There are plenty of things that require fixing in the US electricity generating system, but not one of those corrections will reduce oil consumption significantly. So what Obama is doing is either incompetent decision-making by an ignorant leader, or a political trick to try to defect attention and appear that he is tackling the problem but really push a totally different agenda through. Pardon my skepticism, but after all, his chief advisor was the one who said 'never let a crisis go to waste'.

[1] "Annual Energy Review 2008", Energy Information Administration [link]

Tuesday, June 15, 2010

Media Goes Nuclear

One thing that never ceases to amaze me is the endless fear mongering about nuclear power plants. In some sense, its understandable that in the aftermath of the oil spill disaster in the gulf, people are more and more skeptical of safety claims of so-called 'experts' and people who work for certain industries.

But sometimes, the media blows minor issues far out of proportion.

Reading the Japanese and Hong Kong news, I noticed that there was a fair bit of attention being given to a nuclear 'leak' near Hong Kong. Reading some of the early reports it sounded like it was a serious breach of containment and that radiation had contaminated local waters, a real disaster. In reality, what actually had happened was a relatively routine occurrence.

Uranium fuel inside a nuclear reactor is contained within fuel elements which act to keep the radioactive uranium and fission bi-products from entering the water that is used to transport heat from the reactor to the boilers. The water is inside a completely contained cycle and under normal circumstances won't leave the system.

Sometimes, fuel elements are defective and 'leak' into the water. Radioactive iodine levels in the water are measured and trended to detect when these fuel defects occur, and if too many fuel defects occur, the reactor is shut down to remove the defective fuel. (In a CANDU reactor, with on-line refueling available, the reactor doesn't need to be shut down and the defective fuel can be removed without turning the reactor off.) Since shutting down a reactor is costly and finding a single defective fuel element among many can be time-consuming, there are international standards that are established that judge how high radioactive iodine levels can be before shut down is recommended.

What happened in the Daya reactor was a single minor fuel defect that left iodine levels slightly elevated but likely below the internationally accepted unsafe levels. I say likely because I can't find any specific information on how elevated actually is, but none of the journalists writing these stories seem to have asked either. None of them probably knew to ask.

No injuries, no radiation exposure, no elevated radiation levels at all. But remember that the media thrives on sensationalism, they make money when they can rile you up. So maybe I shouldn't be surprised at the endless fearmongering...

Saturday, June 12, 2010

The Real Costs of Electricity Rates

If your electricity rates were to double, the effect it would have on your monthly bills wouldn't mean more than a few hundred dollars a year most likely. To be sure, that might crush those living beneath the poverty line and those living paycheque to paycheque, but for the middle and upper class, just a mild inconvenience.

But rising electricity rates don't just affect your monthly electricity bills, they can have serious repercussions on businesses and industries. Reading the news today I came across a significant example of how cheap electricity can fuel an entire industry and undermine the industries of other jurisdictions.

The electricity costs per day for that NPI are huge, and yet, the overall costs for electricity from a coal fired power plant only 3-4cents / kWh. Suppose that over the long term, the primary expense for NPI is not the raw material costs, which they get cheap, or the manpower costs, which are practically nothing in China, but the electricity costs. If you were to only double the costs of electricity in that context, NPI would stop being a viable alternative to Sudbury's nickel.

If electricity costs were only half the total costs for each kg of NPI then quadrupling the electricity costs to 12-16 cents / kWh would have the same effect.

So cheap electricity has a huge impact on the effectiveness of an industry to compete on the international marketplace and overcome challenges from new industries.

Something to think about the next time you hear talk about how great it is that wind mills (12 cents / kWh) or solar panels (44 cents / kWh) are being built by McGuinty's government.