Monthly Archives: February 2008

Solar Cities Congress 2008

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Adelaide, the city where I live, hosts the Solar Cities Congress this year.

The goal of this congress is:

The objectives of the International Solar Cities Initiative are to support UN energy and climate policies by stimulating the interest of cities into becoming benchmark cities that commit to ambitious emission reduction goals; help cities systematically integrate renewable energy and energy efficient technologies and industries into environmental, economic and city planning; and provide scientific support for the validation and design of effective measures and policies for Solar Cities.

I did check out the possibility of attending this however, it costs about $1200 which was a bit dear and then I had to take leave for atleast 3 days which was tough.

Anyway, today I walked into the Adelaide Convention Center where the sessions where conducted. Today is the business day sessions including Keynote address by Robert F. Kennedy Jr in the afternoon. The convention center is located right beside our office building. Most of the sessions were in progress and I picked up some pamphlets and brochures which were freely available.

There were people from all over the world. I saw a large number of young people which was very encouraging. As expected there were carbon offsets advertisements for $5 per attendee. There was strict security and I could not spend anymore time.

As I wrote yesterday, there is a growing interest from consumers to move towards solar electricity is growing. This congress may bring about more business offerings in this area. For those interested, I found an interesting presentation on Geothermal Energy by petratherm.

Pilot BeGreen Office Audit in Australia

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 Things are improving but need to go further:

The annual Pilot BeGreen Office Audit, to be released today, says 70% of Australian businesses use continuous air-conditioning while 10% leave office lights on at night.

More than a third of office workers said they left their computers on at night and 86% said they unnecessarily printed documents instead of reading them on screen.

Economic incentives for Solar Systems in Australia

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Economic incentives are strong motivations to change the behaviour of consumers. One such incentive is being rolled out in South Australia.

The SA government has passed the Feed-in-tariff bill in both the houses and this has led to an opportunity to increase the solar power installation in households across the state.

What is the feed-in-tariff. According to Wikipedia:

A Feed-in Tariff (FiT, FiL, Feed-in Law or solar premium[1] is an incentive structure that boosts the adoption of renewable energy through government legislation. The regional or national electricity utilities are obligated to buy renewable electricity (electricity generated from renewable sources such as solar photovoltaics, wind power, biomass, and geothermal power) at above market rates.

This difference in price covers the cost disadvantages of adopting renewable energy sources, and the rate differs between the different forms of power generation.

In SA’s case, the legislation covers for solar systems installed by small customers (this includes households and small businesses). The legislation ends on 30 June 2028 giving a period of 20 years from this June to recover the cost.

The legislation mandates energy retailers to pay these customers a charge of $0.44 per KwH compared to the current cost of $ 0.18 per KwH for energy in South Australia for energy usage in excess of consumption. In European schemes and other countries, the charge is mandated for all energy created by the solar systems.

In addition to this there is the  Photovoltaic Rebate Program (PVRP) by the Federal government which provides $8/W of installed capacity upto a maximum of $8,000 or 1KW of installed capacity.

This can be enhanced by the Renewable Energy Certificate (RECs) which provides you with a “carbon credit” for the renewable energy used. REC is created for each megawatt-hour of eligible renewable electricity generated or deemed to have generated. The price of RECs change on a daily basis. These can be used for Solar, wind or small hydro electric. They can also be used for Solar hot water systems. You can find the registered list here.

Various government rebate information can be found at the Solar Shop.

In the end, what is the payback for solar systems?

A sample solar power payback calculated by Eenrgy matters which show a simple payback period of 13.69 years without the feed-in-tariff. A more detailed and better analysis is conducted by Mike Bassett-Smith and Shane Robinson of Powersmart NZ. This was conducted for NZ which take into account one-on-one price provided by the utility (no feed-in tariff), no federal government rebate, no RECs but consider the reduction in electricity costs and increased value of property. The result: a payback in 10 years. Mike worked in the investment banking industry before founding Power Smart and he basis his product (grid connected solar systems) as an investment with comparable returns to a government bond and other investments.

It will be really interesting to see the real pay back in South Australia for a similar analysis.

Atanu Dey on Social Responsibility of Corporations

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Atanu Dey, a development economist, a good friend and my previous boss at Deeshaa pens an article for The Mint, a Indian business newspaper on the social responsibility of corporations.
Most successful corporations around the world do have objectives other than just being financially profitable. But profits have to be there for the continued existence of the corporation.
HP, for instance, says on its website that profit is its second objective, after customer loyalty: “To achieve sufficient profit to finance our company growth, create value for our shareholders and provide the resources we need to achieve our other corporate objectives.” Further down the list, its objective of being a “good citizen” is predicated on making profits.
But, even the mere pursuit of profit can indirectly lead to great social benefits. The Silicon Valley in California is responsible for generating trillions of dollars of wealth and commensurate amount of social welfare around the world. All this wealth, and its benefits, can be plausibly traced to the establishment of Stanford University by Leland Stanford from the profits of his companies. The biggest names in high technology today — HP, Sun, Yahoo, and Google — in some sense owe their existence to Stanford.
[...]
The social responsibility of corporations is to make a profit while following the rules. They have a comparative advantage in doing that, just as the government has a comparative advantage in making rules and solving social problems. Insisting that companies solve social problems is like expecting the dentist to fix a broken computer. Yes, he can possibly fix the computer if I lean on him hard enough and he spends a lot of time learning hardware maintenance, but that will be at the cost of a lot of untreated toothaches.
It is easy to see why it takes all sorts to make a world. We differ, and therefore have comparative advantage in different areas, which makes division of labour possible and which, in turn, makes us all more effective and efficient. We neglect these simple truths at our own peril.

Bank of America prices Carbon

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In a significant new development, Bank of America has decided to come open with its cost of carbon for evaluating coal powered plants.

Bank of America says it has decided to start factoring a cost of carbon-dioxide emissions into its decisions about whether to underwrite debt for new coal-fired plants. Specifically, the bank says it anticipates a federal cap that would require a utility to pay between $20 and $40 for every ton of CO2 its power plants emit. Today in Europe, which already has imposed caps, a permit to emit a ton of CO2 is trading at about $29.

Petrol Price Protest – Feb 22nd (well sort of!)

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Today I received this e-mail in my Inbox about a planned petrol price protest on the Feb 22nd in Australia. Real funny e-mail. Irrespective of the claims of the protest and its possibility lets look at the lack of economic thinking which has led to the creation of this mail.

The mail starts with this:

IT HAS BEEN CALCULATED THAT IF EVERYONE IN AUSTRALIA DID NOT PURCHASE A DROP OF PETROL FOR ONE DAY AND ALL AT THE SAME TIME, THE OIL COMPANIES WOULD CHOKE ON THEIR STOCKPILES.

Well, in fact it will tougher if there is more demand than supply than the other way round. They got this one wrong.

AT THE SAME TIME IT WOULD HIT THE ENTIRE INDUSTRY WITH A NET LOSS OVER 4.6 BILLION DOLLARS WHICH AFFECTS THE BOTTOM LINES OF THE OIL COMPANIES.

It’s beyond me how you can go from low demand to a net loss and that for one day. The pent up demand will come back the next day. In fact, the most hit may be the distribution companies. Anyways, Australia is too small a player to make any difference. In fact, South Australia gets its oil from a refinery in Singapore. That low in demand!

THEREFORE FRIDAYFEBRUARY 22nd HAS BEEN FORMALLY
DECLARED STICK IT UP THEIR ASS’ DAY AND THE PEOPLE OF THIS NATION SHOULD NOT BUY A SINGLE DROP OF PETROL THAT DAY. THE ONLY WAY THIS CAN BE DONE IS IF YOU FORWARD THIS E-MAIL TO AS MANY PEOPLE AS YOU CAN AND AS QUICKLY AS YOU CAN TO GET THE WORD OUT.

Try your luck…

WAITING FOR THE GOVERNMENT TO STEP IN AND CONTROL THE PRICES? IT IS NOT GOING TO HAPPEN. WHAT HAPPENED TO THE REDUCTION AND CONTROL IN PRICES THE ARAB NATIONS PROMISEDLONG AGO?

THE PRICES JUST KEEP GOING UP AND WE NEED TO STOP IT

PETROL PRICES ARE CAUSING OTHER EFFECTS; AIRLINES ARE FORCED TO RAISE THEIR PRICES, AS ARE TRUCKING COMPANIES . THIS INCREASES PRICES ON EVERYTHING THAT IS SHIPPED. THINGS LIKE FOOD, CLOTHING, BUILDING SUPPLIES MEDICAL SUPPLIES ETC. WHO PAYS IN THE END? WE DO! WE CAN MAKE A DIFFERENCE. IF THEY DON’T GET THE MESSAGE AFTER ONE DAY,WE WILL DO IT AGAIN AND AGAIN. SO DO YOUR PART AND SPREAD THE WORD. FORWARD THIS EMAIL TO EVERYONE YOU KNOW. MARK YOUR CALENDARS AND MAKE FEBRUARY22nd THE DAY CITIZENS OF AUSTRALIA SAY ‘ENOUGH IS ENOUGH’

Well, the connection of petrol prices to food and clothing is right. However, if we look at this from a carbon point of view in fact, we need to increase the price of petrol in order to curb its demand. Simple economics, price goes up and the demand should go down. This week’s BRW magazine (no online linking possible) has an article on how Australia has least expensive petrol after the US and China. That doesn’t help.

The interesting thing is that people do not understand simple economics and try to solve the big problems of the world.

The Value Added iPod

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Hal Varian in his last Economic Sense article for the Ny Times last year, wrote about how the research into the production of the iPod and how much each country was making out of it.

S o how can one distribute the costs of the iPod components across the countries where they are manufactured in a meaningful way?

To answer this question, let us look at the production process as a sequence of steps, each possibly performed by a different company operating in a different country. At each step, inputs like computer chips and a bare circuit board are converted into outputs like an assembled circuit board. The difference between the cost of the inputs and the value of the outputs is the “value added” at that step, which can then be attributed to the country where that value was added.

[...]

Ultimately, there is no simple answer to who makes the iPod or where it is made. The iPod, like many other products, is made in several countries by dozens of companies, with each stage of production contributing a different amount to the final value.

The real value of the iPod doesn’t lie in its parts or even in putting those parts together. The bulk of the iPod’s value is in the conception and design of the iPod. That is why Apple gets $80 for each of these video iPods it sells, which is by far the largest piece of value added in the entire supply chain.

Those clever folks at Apple figured out how to combine 451 mostly generic parts into a valuable product. They may not make the iPod, but they created it. In the end, that’s what really matters.

There is a real business lesson for all companies here. Value addition is what brings about profits. Be it an iPod or sustainability.

Biofuels and Unintended Consequences

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Bio fuels were considered the panacea in the short term for reducing green house gases. In the past, I have written about bio fuels and the issues of food production.

However, now two new studies have shown that biofuels can generate more CO2 in their entire life cycle than conventional fuels.

From Freakonomics:

The first study, led by Princeton University environment and economics researcher Timothy Searchinger, found that replacing fossil fuels with corn-based ethanol could actually double greenhouse gas emissions for the next thirty years.
[...]
The second study, led by Joseph Fargione, a scientist at the Nature Conservancy, found that by switching to biofuels, we could essentially be worsening climate change for the next 93 years, in that “[t]he clearance of grassland releases 93 times the amount of greenhouse gas that would be saved by the fuel made annually on that land,”.

Considering the targets of EU and the US and the resulting investments and land clearance in Asia Pacific to supply bio fuels, these new studies are a bombshell and a real sign that we need to think through a lot more and take actions than trying to solve the problem of climate change which may have other negative unintended consequences.

Sustainable Living Festival 2008

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The Sustainable Living Foundation is conducting the Sustainable living festival in Melbourne on Feb 15th, 16th and 17th this week.

The Festival draws together diverse approaches that focus on social and ecological sustainability. Staged at Federation Square, this unique event fuses interactive displays, demonstrations, artworks, exhibits, designs, films, multimedia and live performances.

The festival’s goal is to make sustainability a living idea that consists of education, business, art, film and play.

I would love to be there but cannot attend due to previous commitments in Adelaide and also the India-Australia cricket match this Sunday. It is at times like these that I start to question the reason for living in Adelaide and moving to a lively city like Melbourne.

Australian Startups Carnival 2008

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Vishal Sharma, a friend from Melbourne, informs me that he is running a Australian Startups Carnival 2008 online.  This is what he says about the carnival.

This is to inform and give some heads up on Australian Startups Carnival 2008 starting on March 3-17 2,008.

Registration is open – Feb 11 -24, 2008

Australian Startups Carnival 2008 is an initiative by VS Consulting Group. This online (web based) carnival is all about learning new ventures started/surfaced in IT, Telecoms, Green Tech, Media in the last couple of years. Vishal covered the sate of web2.0 startups in 2006 for Readwriteweb. But since then lot of water has gone under. We are now expanding our coverage, as some great ideas are being put together and executed. We intend to discover people behind these startups, their motivations, how future looks from their perspective, what technologies are being used, what market segments they are targeting, their mistakes, their advise and more.

Details are available on site as well – http://startups.sharmavishal.com/2008/02/registration-february-11-24-2008.html

If you are running a start-up or you know anybody, do check out the link.