Friday, October 13, 2006

The Trigger

Why the change? Why do this? I've heard the questions many times from neighbors, family and friends, and the people installing or working on our house, although there seems to be less of that as time goes on, and most of the response has been considerably positive.

The main presumption is that the effort to go green is motivated by environmental concerns. This is probably part of it, for I am a contributor to The Nature Conservancy, but that only puts me in the same camp as our Treasury Secretary. A good part of most environmental organizations seems to be self-promotion, and I've tried to put some money, and not very much of it that is for sure, to effective use. No, the environment isn't the main reason, its just a benefactor.

For the past 10 years, I've been and analyst and trader in energy and energy-related futures. For the bulk of the time, I've concentrated on energy demand and not worried too much about supply, except perhaps for the occasional storm in the Gulf of Mexico. There is generally a presumption that the oil and natural gas will come from somewhere, and the more pressing matters are the matching of supply to demand, not the overall long-term supply.

I've been familiar with the Peak-Oil issue and have been since 2001 when I read Ken Deffeyes' interesting book Hubbert's Peak shortly after it came out. It had been recommended to me by a grain trader who was looking for other opinions on the book, and curiously, the energy traders at the time generally discounted it. My opinion then, and less so now, was that yes, there is an issue, but there is a good chance it will work itself out. I'm still an optimist in this regard and suspect we will get through the upcoming major energy transition, but I'm not at all sure of the timing, and I'm beginning to doubt the smoothness of the transition. So, the global Peak Oil issue isn't the primary motivation either, but, along with the environment, the problem lies in the back of the head and gets a consideration.

The trigger came January, 2006. Mid month, we had a power outage here during a typical nor'easter. As usual, the outage was caused by a tree falling on a power line, and unfortunately, there was more than one tree down during this storm. We were living in a rental home as our main home was undergoing extensive renovation. My wife was out of town on family business, and I woke up to a house that was 50 degrees F and falling. Our youngest, who had just turned one, had a cold, and there was no way we could tough out a prolonged outage. I started a fire in the fireplace, but it wasn't enough to stop the house temperature from dropping, so I packed up the kids and went to a hotel for a day and night. Power was restored about 36 hours after it had been dropped, and we were the luckier ones. According to the receptionist, the hotel went from 25% vacancy to full in the course of a couple of hours, so we were lucky there too.

The outage solidified my thinking that we wanted backup power in our house. We have experienced a power outage typically once a year at our location, and all of them have been local outages; storms knock down the older trees, causing an unending run of power disruptions. The one exception was the August 14, 2003 blackout that left 50 million without power in the North and Eastern USA and parts of Canada.

These outages were getting to me. Their continuing occurrence reveals a flaw in the concept of centralized power generation. That the rate of outages is small is not necessarily relevant if it means you lose your perishable goods and if you are not comfortable with the uncertainty of when power is to be restored, let alone if you face life and death issues. This is not to say the the people working on the grid are incompetent. In fact, the ones I've met are highly professional and very hard workers, but when the large storms come, there is an enormous amount of work for them, and the users must suffer through it if there isn't at least local backup generation.

If 2005 hadn't been such an unusual year for energy, I'm sure I would have gone straight to the diesel generator without blinking, but the other events got me thinking hard about the security of energy supply. Yes, there are issues of long term supply, but the bigger issue of severe short-term disruptions is the primary motivator. What do we do if Al Qaida is successful in disrupting supply? What if Saudi Arabia destabilizes? What about the next Katrina in the gulf? How long until that occurs? Then how about Iran or Chavez in Venezuela? The list continues, and the bottom line is that a major disruption is not out of the question, more so now than at any time since the 1970s.

The conclusion I've come to (and will explore in later posts) is that the only way to secure our energy needs is to move to more local generation, and this almost certainly means solar. It also means moving off of oil and perhaps also natural gas. Going green for me is really an attempt to insure energy security in these uncertain times. It means a reduction of energy sourcing from the regional and global scale, and that is the prime motivator.


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