Dear Reader

Business Development is a complex topic. In such case the questions raised are more important than potential answers. Therefore, this blog will focus on presenting questions. There will be answers, full or partial, to be supplamented by links presented when relevant. The answers from my experience will be clearer once the questions are clearer.

While this is not a discussion forum, readers are invited to comment, and the comments will help determine the topics and current issues to be explained in the future.


Thursday, June 9, 2011

Renewable energies and other myths

While there is an on-going debate about climate change, there is one fact that faces no argument – that fossil fuel is limited by quantity and that we are nearing the end of the reservoirs. Coal will still be available probably up to the end of the century, but it cannot supply all the demand, so if only for this reason, there is a place for renewable energies.
However there are some myths that seem to be a bit misleading and that we should avoid them, when making decisions. Please have a look at the hypothetical example below (if you think that you have seen this somewhere in the world – think again).
A company introduces a novel idea into the market, an electric car, with a special business model. Instead of charging the batteries, the driver will enter a refueling station and replace the batteries when they run down. The station will recharge them at leisure and sell them to the next customer that comes in. The company claims that this will reduce air pollution and especially the carbon emissions. The company sets on a huge public campaign claiming environmental protection as its main purpose, and manages to convince public bodies and ministries to endorse it. Seems like a good idea no?
Not so fast. Where does the charging electricity come from?
It comes from the grid. That is the key point for understanding the relevance of the scheme to the environment. If the electricity produced in the example country is mostly clean and low on carbon emission such as: hydro-power, geothermal-power or even nuclear (is that really environmentally friendly?) powered, than it would seem that the move from fossil fuel driven cars to electricity cars is smart. Since these technologies for power production are also relatively cheap (on the fuel side at least) it will also help keep the electricity cost down, it will reduce the fossil fuel import, and probably have in addition to the environment, a positive impact on the economy.
But what if the power produced is from renewable sources? If that is so, than it will probably reduce the emissions and the fuel import, but as the power production from renewable sources (solar, wind) is more expansive, it may drive the price of electricity to the general public up, and this may complicate the economic impact analysis.
There is one more problematic possibility, that the power supplied to the grid is almost entirely based on fossil fuel (including coal). Here we probably get a negative impact of the project. Due to efficiency issues it is more efficient (less fuel consumed per Km) to burn the fuel in the car than burn it to produce electricity (one set of efficiency losses) and then convert the electricity into movement (second set of efficiency losses). In fact, in such a situation we may be burning MORE fuel than originally – MORE pollution, MORE emissions.
There is little data about the situation in the sample above, but the fact that the company has not claimed in its publications, adds and other media that there will be a reduction in fuel import, one could tend to believe that we are dealing with the third case.