Energy Policy

New York REV Initiative Challenges

  1. Acquiring a decision process that recognizes the big picture –many stake holders/perspectives, complex issues and interrelationships and unpredictable developments
  2. Achieving flexible goals in an industry accustomed to deterministic planning
  3. Promoting innovation while maintaining reliability
  4. Facilitating cultural change:
    • Utility companies: committing capital & compliance → capital efficiency & creating markets/serving third party providers
    • Consumers: passive & distrustful → engaged & entrepreneurial
    • Third parties: technology focus & utility is enemy → solution focus & utility is partner
    • Government: funding specific products & static ideas → funding system wide benefits & dynamic/flexible/anticipatory ideas
  5. Offering subsidies/assistance that lead to commercially-viable products
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Attended NY REV Initiative Meeting – Moving from Pilots to Deployment

Quotes from Richard Kauffman, Chairman of Energy & Finance for New York (Office of Governor Andrew M. Cuomo)
Chair of the NYSERDA Board:

“We’re moving from pilots to deployment.”

“The objective of the REV Initiative is to build a network hybrid system that gives customers more choice, a system which is more valuable and cleaner.”

“If we want systemic change we need to look at the whole…cultural issues, role of third parties, data, retail market deployment and how customers feel.  Customers should be first. ”

“Electricity has turned out to be more than lighting…today third parties may offer appliances as a service, entertainment services, electric vehicle transportation or home healthcare.”

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Bringing Carbon Capture and Storage (CCS) To Scale Cost Effectively With a Complex Systems Approach


Carbon Capture Storage (CCS) is a process in which CO2 emitted from power plants and industrial sources are separated from other components and transported (if necessary) to geologic storage locations or industrial sites where the CO2 can be utilized for concrete production and steel making.

The purpose of CCS is to reduce emissions and stabilize greenhouse gas levels in the atmosphere. CCS does not have the intermittency issues associated with renewable generation sources; however, the underground storage of CO2 may create long-term liability issues, environmental concerns, and public policy challenges.

Early concepts of CCS were made in the 1970s, initial research and first projects began in the 1990s and in 1996 the Norwegian oil company, Statoil, began operation of the first large-scale commercial CCS project at its offshore Sleipner gas field. ;

In the early 2000s more resources were devoted to promoting CCS and in 2005 a report by the Intergovernmental Panel on Climate Change (IPCC)[1] estimated that worldwide there were 7,887 industrial facilities, including 4,942 power plants that were potential candidates for CCS.

In 2010 president Obama asked his CCS task force to develop a cost effective plan for the deployment of five to ten commercial demonstration projects online by 2016. Despite over $6 billion in federal funds available to develop and demonstrate CCS since 2008 in the United States, only two industrial CCS projects are in operation: one commercial scale coal CCS project in advanced construction, four coal CCS projects, and one industrial CCS project under development.


There are multiple factors influencing the deployment of CCS projects, including economic, political, regulatory, legal and transport infrastructure requirements. Economic factors include not only the current high cost to build and operate CCS equipment but also other factors such as the low cost of natural gas. The politics of climate change, local job growth, and technological preferences such as renewables over nuclear can lead to less than optimal economic decisions. Regulators must decide when preapproval is appropriate and how to incentivize investment while protecting consumers by enforcing cost estimates. Uncertainties regarding long term liability of stored carbon are a factor and additional infrastructure must be constructed to transport the CO 2 to a geologic storage location or industrial site.

If the engineering planning methods being used by most CCS projects are leading to unnecessary excessive costs, CCS may never reach broad utilization regardless of legislative support, public education, or the implementation of innovative financial incentives[2].  

Southern Energy Co.’s Kemper county IGCC[3] project in Mississippi was initially estimated to cost $2.4 billion with a construction deadline of May 2014. As of July 2014, the plant is estimated to cost $5.5 billion and scheduled to start operations in May 2015. On May 19, 2014, an MIT publication reported:

The cause of these cost increases and time delays are due to a number of causes, including miscalculating pipe thickness, length, quantity and metallurgy. After these changes to the pipes were made, additional changes needed to be done to the support structures.[4]

The characteristics of the Kemper County IGCC project may be too complex for the planning methods employed. Professor Yaneer Bar-Yam, President of the New England Complex Systems Institute (NECSI), explains in his book Making Things Work, that the Manhattan project and the U.S. space program were successful with a “systems engineering paradigm” [5] that included a planning stage, specification stage, design stage, and an implementation stage. However, this paradigm was ineffective for the FAA causing them to abandon their air traffic control system upgrade project after spending over $3 billion between 1982 and 1994. Hopefully future CCS projects will not be added to the long list of other tragic large scale engineering failures.  


An evaluation of the engineering processes employed in CCS project construction may lead to the discovery of opportunities for improvement using a complex systems approach including an “evolutionary process” which according to Bar-Yam, involves creating an agreement to cooperate and defines rules for competition among teams, and promotes innovation in the process itself. The Federal Aviation Administration (FAA) may have been successful in implementing their multibillion dollar air traffic control system had they used a dual system to test new options for air traffic control stations during a transitional period. There may be an opportunity to save billions of dollars on future CCS projects.

Please contact us if you would like to discuss an opportunity to receive an independent evaluation of the engineering processes for CCS projects and a recommendation regarding the application of complex systems concepts.

[1] Special Report on Carbon Dioxide Capture and Storage

[2] For example: carbon tax, state feed-in tariffs, and long-term purchase power agreements (PPAs)

[3] Integrated Coal-Gasification Combined Cycle


[5] Several Assumptions: (1) New technology will be used (2) New technology is based on understanding of basic principles (E=MC2 , F=ma…)  (3) Goals can and will be understood (4) Design will be created essentially from scratch and then implemented (Bar-Yam 2005)

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An Analysis of the Brookings Institution’s “Beyond Boom & Bust: Putting Clean Tech on a Path to Subsidy Independence.”

“Beyond Boom & Bust” argues that the lack of proper US energy policy will cause domestic alternative/renewable energy companies to falter and possibly fail. The paper addresses the history and evolution of the clean-energy technology business sector from its early “tech-boom” to its current heavily subsidized state. Also discussed are the influences of different energy sectors on the modern domestic economy. The authors argue that current US energy policies will not drive down costs for consumers and do not promote technological and business innovation in the clean-energy sector. Reforms promoting policy, economic, and technological advancement are proposed and the importance of innovation is stressed.

The paper addresses and describes how many of the current problems in the renewable energy sector arose, and suggests how to treat and cure the problems. It uses statistics, research data, mathematical analysis, economic/policy analysis, and studies actual industry cases/situations. It also provides much of the data used in those analyses. The article states:

“Many of today’s existing subsidies and clean energy programs, after all, are poorly optimized, characterized by a boom and bust cycle of aid and withdrawal, or in need of thorough revision thanks to either recent progress in the price and performance of subsidized technologies or the mounting fiscal burden imposed by some programs.”

Key recommendations regarding new energy policies include: establishing a competitive market; encouraging cost reductions and performance improvements; and provision of sufficient business certainty. Deployment policies should develop market opportunities for advanced clean energy technologies while fostering competition between technology firms and should also create market incentives and structures that demand and reward continual improvement in technological performance and cost-efficiency. While deployment incentives should be temporary, they must still provide sufficient reliability and endurance to adequately support private firms and investors in the short run.

The authors of this paper come from the Brookings Institution, the Breakthrough Institute, and World Resources Institute; three internationally recognized public-policy research organizations. The authors are established individuals within their respective field and their backgrounds and current occupations keep them directly informed and involved within the modern clean-tech industry. If the paper has any bias, it is towards driving energy policy reformation to advance the current economic, technological, and scientific states of the industry (ultimately bolstering America’s market power, technological prestige, national security, and domestic economy). The authors are interested in doing what is necessary to ensure that the clean-tech sector grows and expands sustainably. Though they are very intelligent and understand the importance of other economic sectors, they are likely to promote benefits and improvements for alternative energy policy and business at the potential expense of other industries and sectors. The arguments posed are very valid, but it could be noted that the jobs created by and the resources allocated to the development of alternative energies would have to be procured by harming and potentially crippling other sectors; supporting alternative energies could cannibalize older, established forms of energy (which could then be counter-argued as a positive step away from environmental harm, reliance on foreign energy resources, and potentially outdated technologies).

At Rothschild Financial, we are researching the procurement tools and contract characteristics that will best provide the certainty investors need to stimulate innovation, drive down their capital costs as well as costs for consumers, and how these tools and mechanisms can be properly implemented.

The study, “Beyond Boom & Bust” can be read at the Brookings Institution’s website and can be downloaded in PDF format.

Check our website frequently or follow Rothschild Financial on Twitter here for updates on progress and descriptions of our findings.

Jenkins, Jesse, et al. “Beyond Boom & Bust: Putting Clean Tech on a Path to Subsidy Independence.” Brookings Institute. Brookings Institute, 18 April 2012. Web. 16 July 2012.

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