Archive for the ‘Energy’ Category

Electrical Innovation

Posted: June 1, 2014 in Energy

Think about some of the most important innovations that have occurred over the past two centuries. Without a doubt, there are many examples that would come to mind, but one that should be high on the list is the electrical grid. The grid has become vital to the modern day life, at least in the more developed economies, and are important in the growth of the developing economies trying to increase the availability of electricity to the people. In this post, I want to share what I find to be an interesting story about the development of the grid into what we have today. In telling the story, I want to focus on the figures that brought this development along, the “fathers of the grid”, something I came across from Philip Schewe. Schewe’s book, The Grid, is a great read and goes into the entire history of the grid in great detail with an interesting prose.

The point of sharing this is two part: 1) It presents an informational and interesting look into the history of this system, and 2) To provide a lesson that allows us to view the process of innovation that can take place for a variety of technologies. Often, the development of an innovation comes over time, where different steps of the process are led by various people. Sometimes the initial discovery of an improvement (system or product or technology, etc) takes time before the real innovation takes place, where implementation occurs. It is the connection of these phases that is crucial to adoption.

Thomas Edison is the first of these figures. Edison was the inventor of the grid, who was responsible for the first phase of application, and had created the system for the grid to be possible. After showing some of the potential, he was able to empower the idea through his ability to maneuver through the political and financial waters to convince people of the potential.

Following Edison, came Nicola Tesla and George Westinghouse who together powered the next stage of the grid’s development. Tesla and Westinghouse led the charge on utilizing AC currents, rather than the DC current of Edison. The AC systems allowed for a more dispersed grid, which gave the ability to connect a greater area of space to receive the power from the grid. In doing this, Tesla was responsible for developing the motor that allowed for AC to work and Westinghouse facilitated the wide-scale adoption of Tesla’s systems.

The last “father” I want to mention was Samuel Insull, who often is regarded with some distaste in the history books, but played a crucial role in developing the grid. Insull sought monopoly of the market, and in doing so, facilitated the large scale adoption of the grid, along with an increase in the demand for electricity. By doing so, he helped to create the economies of scale that allowed for a huge expansion of the network, which gave power to a vast amount of area and helped lead to the ability of all people to reach power, in the US.

These four figures together were largely responsible for the administration of electricity to millions of people, that has allowed a greater role of growth and independence in the modern society. This post is a just a slight insight to this story, and if you are interested in more I strongly recommend Schewe’s book, which again provides an interesting look into this history. The connection of these figures allowed the adoption, where the ability of each to link their insight into the previous is what led to the grid we have today.

 

Interest Groups: Alternative Energy

Posted: April 26, 2014 in Energy

So how does the power of alternative energy compare to that of the oil and gas industry that we looked at last week? Intuition would probably hold a couple of things: 1) the ability to have impact (give $) is significantly less than the oil and gas and 2) that democrats receive more of the money than do the republicans. In general these things do hold true, but are not completely accurate. 

In the past 20 or so years, the alternative energy industry has given 4.6 million dollars to candidates or parties, which was drastically less than that of the oil and gas industry. Important to specify, there is a difference between just donating money to a candidate or a party and lobbying for production or services, as I do not think I made that clear in my last post. Alternative energy has increased significantly the amount of money spent on lobbying in the past several years, and the strong focus on lobbying for government policy is a significant portion of that. By the way, yes this is the post that was interrupted by my Heavyweights connection. 

The total amount of lobbying spending for this industry has amounted to just under 22 million dollars, with 139 clients and 334 lobbyists withing this industry. Again, this pales in comparison to the oil and gas industry, but is what we expected to see. What I find most interesting about this is how the composition of donations has shifted politically. As mentioned earlier, one intuition would be that democrats would get a significantly greater amount of the money due to the wider support they give to alternative energy in DC. While it has been the case that typically they receive a majority of the funding, it does not always hold true and even when it does there is not a drastic domination in most cases. In fact, there are been periods when republicans received the majority of the money. Now I am not exactly sure the reason, but I am going to say that I think the bio-fuels play a large part. Republicans often have support of farming and look to tend to middle america’s farmers and subsidies for bio-fuels and ethanol would certainly be something to benefit some of those folks. This seems to be supported by the fact that Poet LLC is the largest contributor of this funding, and they focus on bio-fuels and about 61% of their funding goes to republicans.

There has been some flip-flopping from election to election in which party gets the majority of the money, and I think that would tend to be due, at least in part, to the current situation in policy. Sometimes we see republicans take initiative on alternative energy subsidies, and other times it is democrats. This industry is smart enough to understand that they do not need to focus on only one party, and that continuous “help” from government is needed to assure adequate development of the market. Again, it is similar to the boys at fat camp that are looking for any avenue to get that dance. Follow me on Twitter @devinxcombs and stay tuned for further posts.

So I began writing a post on the alternative energy interest group power, and in the middle of writing it, I got an epiphany. So I will post the interest group one another time, and instead wanted to share the following. It is a lighter post than typical, but I think it has some interesting parallels to the energy regulatory markets. Even if you don’t find it interesting to make a connection, you should at least enjoy the process of trying to do so.

Recall the movie Heavyweights, with Ben Stiller and the fat camp for young boys? One scene in the movie is where a dance is held at the fat camp, where “Tony” (Ben Stiller) invites a camp of girls to attend. These girls are not the fat camp kind of girls, and would traditionally not have anything to do with the fat boys at a typical school dance. However, since the fat kids were the only boys, those boys had the ability to dance with these girls, something that would have most likely never happened in the traditional setting. Of course the movie has it play out that both the fat kids and the popular girls had a lot of fun and it went well.

How about we take a leap and try to make a connection to energy. I know, this is a bit of a stretch but stay with me through the end before you judge. The popular girls are those that provide the large scale energy, so it would be those that are impacted by government policy. These entities would typically not choose to utilize alternative energy sources, for all the reasons we have discussed before. Of course, this means the fat boys are the alternative energy sources. The dance itself, being that the only two groups there are the popular girls and the fat boys, is the regulation. This regulation mandated that one of two things happens: either you don’t dance (utilize energy) or you dance with a new kind of partner (incorporate alternative energy).

While the fat boys at the camp were first apprehensive to the idea of the dance, due to embarrassment, they were also very excited about the opportunity to get to dance with these girls. The alternative energy industry is similar to this, as they want to have more of these “dances” where regulation requires more of the popular girls to dance with the fat boys. I want to mention, this does not fit perfectly because in the movie “Tony” wanted the boys to get embarrassed and was not happy that it worked out well and they had a blast. I do not think government regulation is trying to make the alternative industry fall on its face with these regulations, but give me a break, I am connecting Heavyweights to energy markets and regulation. In the end, this regulation made for a great way to connect these two groups and it worked out for both parties. I hope that we will see this play out similar in the energy markets, where policy helps to unite these two parties and find a great relationship that works well for both parties and therefore society.

If you have never seen the movie, please stop everything are go find a way to watch it, as it is an all-time great. But at least go watch this scene and while you enjoy the entertainment, just think about how you would connect different characters in the scene to potential participants to our energy regulatory markets. There is plenty of room for our own interpretation and I have some of my own that I think are fitting, so watch and share your connections with me in the comment section.