Jeff Koplow

1)  Solar parity and my cousin Jeff.  Congrats to Jeff Koplow, an energy researcher at Sandia National Labs, for being named the inaugural recipient of the Innovator in Residence Fellowship awarded by DOE's SunShot Initiative.  He'll lead a multi-disciplinary team in attacking key limits in current PV systems.  

Jeff's been working on energy innovation for a very long time, and some of his earlier inventions offer large benefits to the US energy sector.  These include the Sandia Cooler, a much more efficient way to cool heat exchangers and CPUs; and Twistact (winner of an Outstanding Technology Development Award), a new way to connect turbines to the gear box without a sliding contact, electrical arcing, or the need for rare earth metals.  

2)  Fossil fuel subsidy reform update from COP21 (and nukes too). "The Beginning of the End of Fossil Fuel Subsidies," a blog update from Paris by staff of the Global Subsidies Initiate, summarizes some of the interesting and promising developments on fossil fuel subsidies at COP21.  Read their take here; there is real progress.

Here's one of the (albeit non-scientific) benchmarks I use to gauge progress on subsidy reform:

• 25 years ago, almost nobody outside of NGOs would talk about energy subsidies.  (I once had a potential faculty advisor for my update on US energy subsidies ask why I didn't want to work on something "useful").
• 15 years ago, heads of environmental and public health ministries would willingly talk about energy subsidies.
• As of about 7 years ago, heads of financial ministries would willingly talk about energy subsidies.
• Today, even many heads of state willingly talk about energy subsidies -- at least fossil fuel subsidies.  Conversations about subsidies to the nuclear fuel cycle will have to wait another few years, I suppose.

For a report on the push for massive new subsidies to nuclear at COP21, here's a summary from Michael Mariotte of NIRs.

3)  Addressing tax exemptions to fuel used in international shipping.  Subsidies that almost nobody sees or thinks about can be particularly distortionary.  In darkness, the biggest mushrooms grow -- or something like that.  Wholesale exemptions of fuels used in international ship, air, and rail transport from taxation is one example of issue (the subsidy even made my top 10 most distortionary energy subsidies list).

Particularly for activities that cut across multiple countries, the options available to correct the problem can be heavily constrained by pre-existing international agreements.  Those agreements were often developed to with trade or sovereignty issues in mind; transparent pricing of natural resources was generally not a factor.

One possible solution to this conundrum is put forth in a recent working paper ("Drying up tax havens-A mechanism to unilaterally tax maritime emissions while satisfying extraterritoriality, tax competition and political constraints") by Dirk Heine, Susanne Gäde, Goran Dominioni, Beatriz Martínez Romera, and Arne Pieters.  As the title implies, there are a fair number of hurdles any solution needs to meet.  The authors focus on using cargo as the tax base rather than the fuel itself; and structuring the tax levy formula such that higher efficiency vessels end up with a lower tax.  To avoid distorting port-use decisions, transhipped cargo would not incur the tax.  There is contact information for the authors in case any of you have additional suggestions or ideas.  There is also a summary description of their plan here, which provides a quick overview of the approach.

4)  Limiting export credit support for coal plants.  Export credit subsidies have been an area much talked about, but too often ignored when subsidy reform plans are put forth.  The subsidies are often tough to value, but can be quite large and tip high risk projects in environmentally-sensitive regions of the world from "no-go" to actionable.  The subsidies generally work by offering direct loans or guarantees at below the market rates that firm or industry would normally be able to receive.  The support may also generate an incremental subsidy by enabling high risk enterprises to utilize higher debt-to-equity ratios than would otherwise be possible, reducing the project's weighted average cost of capital.

Against this backdrop, an agreement among OECD nations to significantly reduce their ability to finance the export of low-efficiency coal-fired power plants and equipment is a very positive step.  Read the agreement here.

5)  Charles Koch, one of the Koch brothers, argues for subsidy elimination.  It's hard to imagine the whipsawing that must have been ripping through Charles Koch as, year-after-year, his push for small government, free market libertarianism ran smack into his affinity for the array of special government subsidies that have benefited his oil, gas, and now paper operations for generations.  Maybe his latest book, Good Profit: How Creating Value for Others Built One of the World's Most Successful Companies, is his effort to finally reach an internal cease fire.

To his credit, Koch does acknowledge he's been a subsidy beneficiary.  And, I do agree with a core premise of his criticism:  that our convoluted and complex system of subsidies tends to favor the well-connected and the wealthy, replacing economic viability with political connections in the selection of markplace winners.  Lower income quintiles clearly need the support more than the rich.  Similarly, on the corporate site, the new companies that will create the jobs and industries of our future are generally too small to have lobbying arms.

How big are subsidies to Koch-related firms?  This article pegs the figure at about $200 million since 1990, based on data from DC NGO Good Jobs First.  I consider this a low estimate, probably really low.  The Good Jobs First data sources don't always pick up subsidies through credit or insurance markets.  Non-standard ones, such as the "black liquor" tax break that many of the paper companies tapped into by stretching a pre-existing rule targeted as new fuels, are also often missing.  Data on privately-owned Koch subsidiary Georgia Pacific are hard to come by, but given its scale, this tax break alone could have exceeded $200m.  In fact, this analysis estimated black liquor subsidies to Georgia Pacific just in 2009 at $1 billion.  Finally, the private nature of Koch means commonly-available tax breaks to oil and gas may not show up in the $200m figure either.

The point here isn't to attack Koch for saying corporate welfare should be eliminated.  The subsidy trough is a crowded one, so the limiting the push for reform only to those who are "pure" enough not to have been subsidized would be foolhardy.  If Charles is serious about finally reforming subsidies, this is a good thing.  Properly done, the changes would improve the economic vitality of the country going forward. 

But one should not take the input of Koch or other current beneficiaries blindly.  It is vital for anybody working on subsidy reform to read the small print on any proposal to be sure there are no surprise gaps.  Varying definitions (or more perjoratively, a definitional sleight-of-hand) can coincidently eliminate the subsidies to competitors while keeping their own.

A couple of stories related to energy innovation at the Massachusetts Institute of Technology have crossed my desk today, highlighting very different aspects of the school's role in trying to solve energy problems.  The first relates to a what many of us normally associate with MIT:  interesting, sometimes high risk, technology innovation.  This specific story involves a potential breakthrough in an area I've long thought of as a game changer for distributed power generation:  see-through solar.  Salvatore Salamone describes the technology in an article for RenewablesBiz:  thin film technology that can be added to existing glass surfaces at the time of window fabrication, but that allows much more of the visible light to pass through the pane than previous designs.  The approach is expected to dramatically reduce the manufacturing costs of the panels, as some of the highest cost elements are piggy-backed onto the manufacturing process already in place for conventional windows.  The main remaining problem is efficiency:  1.7% versus 12% for standard panels, though the researchers are confident that they can reach the 12%. 

The other story falls onto the darker side of innovation:  unauthorized use of intellectual property in a the prestigious MIT clean-energy prize contest, a violation that was a significant contributor in enabling the entrant to win a large cash prize.  Some weeks back, I wrote a blog post on the exciting invention by my cousin Jeff Koplow at Sandia National Laboratories.  The innovation, which he refers to as the "Sandia Cooler," allows for much more efficient cooling of industrial and commercial equipment than current cooling fan designs.  The winning team in MIT's clean energy prize contest this past May, CoolChip Technologies, is based on commercializing the new technology.  The only problem?  They didn't have a license for the technology -- though didn't make this clear in their presentation to contest judges and even included images of the Sandia innovation in their presentation without attribution.  They were awarded $200,000 in prize money, a victory that enabled them to enter into another contest to win an additional $100,000. 

The Chronicle of Higher Education has a more in-depth write-up of the issue.  What is surprising to me is that MIT officials have been downplaying the violations as a misunderstanding of the rules, and pretty much ignoring the ethical problems with the way the winning team presented the innovation.  From a straight commercial standpoint, this position is curious since MIT holds many, many patents and will lose out if they are not properly licensed. 

The commercial patent enforcement issue seems secondary to the ethical issues though.  Whether or not there has been a technical violation of the law or of the contest rules will be something battled out by MIT's lawyers and those at Sandia National Labs.  But starting new businesses, and particularly the way our premiere universities teach entrepreneurship, should always have ethical behavior at the core.  In that regard, MIT seems to be falling woefully short.

Update, September 19, 2011.  The controversy over the MIT clean energy contest finally reached the MIT school newspaper, The Tech, on September 16th.  In addition to providing a general overview of the issues, the article includes some rather pointed commentary from students, and in the comments section.  This framing seemed on-target:

Members of the community who have read the Chronicle article have drawn analogies between the Sandia-CoolChip situation and regular term papers at MIT. Term papers are also considered “academic exercises,” and any plagiarism in that context would, according to the MIT academic integrity website, lead to “failing the assignment, failing the course, and/or being suspended from the Institute or expelled.”

Each time the DOE plops down another loan guarantee in the hundreds of millions or billions of dollars for this type of generation or that, it is easy to forget that power is actually fungible.  Small improvements in how we use power can be equally or more important to addressing energy security and climate change concerns as how we make power.  Further, these improvements are multiplied across millions of devices and millions of users into material reductions in demand.  The aggregate impact can often be well in excess of the new supply being created with more expensive and often politically-directed subsidies to generation.

In this regard, I was quite happy to see the work my cousin Jeff has been doing at Sandia National Lab on trying to radically improve the cooling efficiency of fans finally get some mainstream attention last week.  "Fanfare for a New Way to Fan Computer Chips," by Don Clark of the Wall Street Journal, provides a good overview.  Computer chips are an initial obvious use for the device, but lots of larger equipment also requires cooling.  Upgrading all cooling fans in the US has the potential to reduce total US power demand by 7%.  A technical paper describing the approach can be accessed here. 

While there are undoubtedly roadblocks to work through towards commercialization, the attributes of innovations such as this seem far more likely to achieve market success than some of the very large scale generating technologies (think nuclear reactors) that have been the focus of so much subsidy and effusive industry promises over the years.  Unlike new reactor designs, the lot size for a new cooling fan measures not in the tens or scores, but in the millions.  This opens up real economies of scale.  In addition, the devices using the new fans turn over frequently, allowing consistent and repeat demand over which to deploy new ideas and incremental improvements.  The variety of devices also enables early-stage designs to enter less cost-sensitive market niches first and to expand over time as designs and production efficiencies improve.