Integrated technologies for sustainable stationary and mobile energy infrastructures

Available online at www.sciencedirect.com

Utilities Policy 16 (2008) 130e140 www.elsevier.com/locate/jup

Integrated technologies for sustainable stationary and mobile energy infrastructures Woodrow W. Clark II a,*, Henrik Lund b a

Anderson Business School, University of California, 900 University Avenue, Riverside, CA 92521-0203, USA Department of Development and Planning, Aalborg University, Fibigerstraede 13, 9220 Aalborg, Denmark

b

Received 27 January 2008; accepted 28 January 2008

Abstract Sustainable infrastructures need technologies that do not cause climate or environmental degradation. The only long-term sustainable solution to global warming in terms of both environmental and economic mitigation is renewable energy generation for stationary and transportation infrastructures. The papers in this special issue review some of the major technology and economic approaches to sustainable infrastructures. They specifically address the issue of sustainable energy and transportation systems, i.e. energy generation for vehicles and the relation to the stationary supply of electricity and heating. In order for communities, regions, nations and international communities to become sustainable, they must make energy into integrated infrastructures that use hybrid technologies. This chapter reviews and summarizes many of the points made in the volume to that end: sustainable infrastructures for power generation and transportation. The key is to consider the true costs for energy in terms of well to wheels and how the developing technologies for renewable energy power generation can be leveraged or made into hybrid systems that are cost-effective and sustainable. The series of articles begin to get into such as an approach for sustainable energy systems. Ó 2008 Elsevier Ltd. All rights reserved. Keywords: Integrated hybrid technologies; Sustainable energy; Transportation infrastructure

1. Background: the political economics of energy The California energy crisis during 2000e2003 in many ways highlighted the problems of sustainable development being caused by human beings and its impact on society. Hence, the Crisis was a challenge but even more so, an opportunity (Clark, 2001; Clark and Bradshaw, 2004) because it changed how both public and private sectors considered the environmental, climate and energy problems. While the causes of the Crisis may still be debated until all the legal cases are settled, the opportunities and creative solutions from the crisis will continue for generations. Conventional economics labeled the energy sector as a ‘‘flawed’’ or even

* Corresponding author: Tel.: þ1 310 858 6886; fax: þ1 310 858 6681. E-mail address: [email protected] (W.W. Clark II). 0957-1787/$ - see front matter Ó 2008 Elsevier Ltd. All rights reserved. doi:10.1016/j.jup.2008.01.004

‘‘dysfunctional’’ market due to not being structured properly (Economist, 2001a,b). Most economists, and then politicians taking their lead, referred to the California Energy Crisis as ‘‘The Perfect Storm’’. This miss-conception is based on flawed hypotheses and economics. A ‘‘storm’’ comes from nature, although today, human beings have definitely been a major cause of natural storms. Economists and politicians, however, were calling the ‘‘storm’’ a convergence of different uncontrollable factors. However, perhaps like global warming, the California energy crisis was caused by people. Greed on the part of companies and their influence through lobbyists on political leaders was the cause of the California (and other) energy crisis. Economic experts and Nobel Laureates even wrote an Energy Manifesto in early 2001 that called for California to let market forces do their work and all would be well (NL, 2001). Prestigious institutions for energy research proclaimed

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California’s energy market problems were the result of politicians and decision-makers interfering with ‘‘market forces’’ (Borenstein et al., 2001). In the end, most economists refer to the energy crisis as the convergence of a ‘‘perfect storm’’. That popular concept, borrowed by from a Hollywood dramatic film of the same name however, is significantly inaccurate. The crisis was not a result of ‘‘natural’’ forces, but instead the result ‘‘market forces’’ as increasing legal evidence documents. International groups claimed that the market was never created in California to ‘‘properly allow energy supply and demand’’ to take place. The Congressional Budget Office declared that California was an anomaly (CBO, 2001). The market was simply done wrong. President Bush and his appointees to the Federal Energy Regulatory Commission sounded the same theme. Until, as Skelton (2002) wrote in the spring of 2002, the ‘‘smoking gun’’ was found, California was subject to energy shortages that were aggregated by market manipulation. Evidence gathered since by the California Attorney General’s Office and the California Public Utility Commission appear to substantiate the allegations. When comparisons are made with other countries and states (Bachrach, 2001), it is clear that variations exist in each energy sector according to governmental policies. The common denominator over the last decade, however, has been de-regulation. Herein is the fundamental flawdenergy is a public good and delegated to the public sector to oversee for every citizen, much like water, waste, and the environment. While California was pursuing legal remedies even three years later (2005), after a Governor was recalled, and with a populist Governor to secure its energy supply, the energy challenge has meant that the State must create a new energy sector. Indeed, as California Governor Davis and Governor Schwarzenegger re-affirmed in his first year said, the state needs to achieve ‘‘energy independence’’ (Governor Davis, 2001; Governor Arnold Schwarzenegger, 2004a,b) so that such market manipulation does not occur again. More importantly, the State needs to diversify its energy supply and expand into clean renewable energy sources. These public good initiatives take resources that promote intermittent resources and provide cost competitive energy.

2. Energy challenges become new opportunities The challenges to climate change and global warming did not just start in the 21st Century. As the awarding of the Nobel Peace Prize indicated, work by dedicated scientists and policy makers on issues of global warming and climate change are not new (Clark, 1997; Clark and Chung, 2000). Nor have they stopped today (Clark, 2007, among others). Energy, while an historical challenge, is also part of the basic solutions to climate change. While the UN Conference in Bali (December 2007) yielded some changes, it was only new to the USA. Other nations and organizations (Clark, 2007) have continued to seek and demonstrate viable solutions to global warming.

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Mathiesen and Lund (submitted for publication), for example, report on how power can be supplied to all consumers from renewable energy sources. When renewable energy is used to provide electricity to buses and trains, then a community, region, nation-state reduces its use of carbon-based fuels and the impact on the environment. Today renewable energy generation can be supplied to both on-site power systems and from a central grid. Wind when combined with solar, geothermal, biomass and storage devises provides constant base load for both power demand and transportation system needs. This viable option becomes significant in the context of economic and security issues as well as reducing global warming. As Hoyer points out, the history of the US Auto Industry clearly demonstrates with substantial documentation on how vehicle manufactures eliminated non gasoline or fossil fuel transportation from the entire energy grid. Instead their strategy was to sell individual cars and get the consumer to use highways as well as oil and gas products. The strategy worked well in the US where over a century ago, electric cars and mass transportation were not only commonplace but economically viable and climate friendly. A recent film on ‘‘Who Killed the Electric Car’’ traces the most current strategy by the US automakers to get electric cars off the road after many years of successful public demonstration tests during the 1990s. As Mathiesen and Lund (submitted for publication) put it in the context of climate change and global warming, ‘‘a 100 per cent renewable energy transport system is possible but is connected to significant challenges in the path towards it. Biomass is a limited resource and it is important to avoid affecting the production of food. The integration of the transport with the energy system is crucial as is a multi-pronged strategy.’’ Moreover, in many countries around the world, there is a need to convert energy systems into sustainable ones which in many cases involve combined heat and power (CHP) with renewable energy generation. Furthermore, in terms of public policy, for example, the European Communities decided on a 2020 target program that involved both 20% renewable energy and a 20% cut in CO2 emission. Such policies involve not only energy efficiency improvements but also expansion of CHP. In this regard, the Danish energy system as reported by several authors in this issue, currently has a 20% share of its energy from wind power today! Not in 2020 (Hvelplund, 2006). And the CHP in Denmark today is at 50%. Hence such goals for the entire EU are achievable. Denmark and other Nordic countries continue to lead the world in achieving sustainable communities through such energy systems. In 2000, research began in which Clark and Lund (2001) published the first of several articles on renewable energy papers in the context of nation-state power systems labeled ‘‘Civic Markets’’, Lund and Clark (2002), Clark (2003a,b), Lund (2005) and Lund and Munster (2006a,b). Civic markets are the combination of public oversight with private sector companies providing goods and services under contracts, procurement and bond financing mechanisms. In some cases,

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these companies might form new firms that include government appointed officials on their boards (Clark and Jensen, 2001). The key is that government needs to be involved in the creation and decision-making of companies that impact public sectors like energy (Clark and Morris, 2002). Energy, like water, waste and the environment (including atmosphere) is a public good. As such, public oversight must be applied to these sectors. California has the evidence to demonstrate why ‘‘public monopolies can not give way to private ones’’. Instead, any government must exist to protect and promote the public good. This perspective is very different from prior California republican administrations as noted by past CPUC President and current Commissioner Loretta Lynch in late 2002: ‘‘In December 1982, Governor-elect George Deukmejian inherited the finest energy policy and regulatory agencies in the nation. By December 1998, Gov.- elect Gray Davis was left with a California that had dismantled its energy policy and hobbled its regulators in reckless pursuit of deregulation. The Wilson administration had stripped California of its ability to supply its citizens’ energy needs and protect its economy from energy predators. In so doing, deregulation ideologues gave energy marketeers a golden opportunity to loot our economydand that’s exactly what they did.’’ (Lynch, 2002) Governor Davis (2001) said in his State of the State address in January 2001 that, ‘‘a dysfunctional energy market, driven by out-of-state energy companies and brokers, is threatening to disrupt people’s lives and damage our economy.’’ Since then, the facts, documents and court records concur with the Governor’s analysis. Energy is a ‘‘common good’’ or public trust that can not be left to the devices of ‘‘market forces.’’ The Governor had stated, and growing choruses of citizens concur that ‘‘skyrocketing prices, pricegouging and an unreliable supply of electricity’’ must be part of the responsibility of government. Since then, Governor Schwarzenegger has expressed the same concerns, but taken more immediate action on them (Governor Arnold Schwarzenegger, 2004a,b,c). Subsequently, emergency sessions and measures in the California from 2000 through 2002 under Governor Davis until his recall in 2003 are in large part due to the energy crisis and then from Governor Schwarzenegger in 2004 into 2007 all yielded many bills that included formation of the California Power Authority (CPA) which by 2003 was defunct, to be charged with the mission of providing reliable ‘‘clean’’ energy to the State (CPA, 2002) along with conservation/efficiency programs (CAA, 2001a) and emergency services (CAA, 2001b). By the summer of 2002, California Governor Davis signed a ‘‘greenhouse gas’’ bill and soon thereafter a ‘‘Renewable Portfolio Standard’’ of 20% by the year 2017 (Governor Davis OPR, 2002). Even perhaps more significant, based on the Commission for the 21st Century (Governor Davis OPR, 2002), the State enacted a law for an Environmental Goals

Policy Report (EGPR) which would for the first time in over 25 years, require the State to work with local communities in planning for the future (Governor Davis OPR, 2002). Given the Energy policy goal of the EU, there is a need for a considerable increase in the supply of renewable energy and especially wind power. The change from a situation in which renewable energy is a minor niche production in a fossil fuel-based energy system to a system with initially between 20% and 50% renewable energy-based electricity production provides special challenges. An infrastructure must be established which can balance production with consumption. In May 2007, the EU passed Rule #116 in which it stated that: ‘‘Make the power grids smart, distributed and independent by 2025 so that regions, cities, SMEs, and citizens can produce and share energy with the same open access as the internet.’’ (EU, 2007) Such challenges have been dealt with in the EU project Dissemination strategy on Electricity balancing for large-Scale Integration of Renewable Energy (DESIRE 2007). The DESIRE project shows that these balancing challenges cannot be met in an economic way by just increasing grid interconnections and transborder electricity trading. Furthermore, it shows that there is a need for establishing a new flexible balancing infrastructure which systematically secures a coordination of renewable energy production with consumption. The first technical step of this flexible infrastructure includes units for cogeneration of heat and electricity, CHP units, in combination with heat pumps and heat storage systems. The exact configuration of these technical solutions will vary from one region to another. The DESIRE project has demonstrated how local CHP plants can help achieving a balance between supply and demand in a system with fluctuating wind power productions. The analogy to the internet for the local and on-site power systems has gained considerable attention (Economist, 2004). A combination of these energy systems has been labeled as ‘‘agile’’ (Clark and Bradshaw, 2004) because regions and communities can have both kinds of renewable energy systems. These plants are equipped with a CHP capacity equal to the maximum heat demand in the winter and thermal stores equal to the heat demand of a summer weekend. The relevant software and other tools have been used in case studies in Denmark, Germany, and the UK. Quarterly financial returns or ‘‘short-termism’’ for private companies will not achieve societal goals (Demirag, 1998). Energy systems must be far more dispersed, distributed and regional (Isherwood et al., 2000) especially if energy is to be both ‘‘clean’’ and primarily renewable and reliable or guaranteed to all citizens. Research in other nations, such as China (Clark and Isherwood, 2006, 2008), indicate the same pattern and demands especially given concerns over global warming and the impact of power generation on the environment. California had always assumed the latter role and with the energy challenge in 2000-2002, took upon itself to advance and set renewable energy goals.

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3. The context of de-regulation, privatization or liberalization vs. regulationdlessons learned From a September 23, 1996 Press Release, then Republican Governor Pete Wilson called energy de-regulation ‘‘landmark legislation’’ and said it was ‘‘A major step in our efforts to guarantee lower rates, provide customer choice and offer reliable service, so no one is literally left in the dark’’ (Governor Wilson, 1996). As noted above none of that happened. Instead California, like many other states, saw a few companies control energy supply and generation. Hence, market manipulation could be done by simply controlling the electrons flowing into the state (Clark, 2002). The ‘‘market power’’ that most academics, politicians and some businesses expected to gain from deregulation turned into market monopoly for the generators that were selling electricity to California. Benson reports in late 2002 that utilitiesdcentral grid operatorsdsee local communities and cities ‘‘unplugging’’ from the energy system. Deregulation has been rolled back with increasing numbers of communities now passing ballot measures for funds to underwrite their own independent energy systems (Benson, 2002). Yet politically, in a related matter in San Francisco, California’s disastrous experiment with energy deregulation ended quietly in a brief order issued by state (CPUC) utility regulators (Rose, 2003). As economic commentator Robert Kuttner (2002) labels de-regulation in a Business Week article, ‘‘Enron (is) a powerful blow to market fundamentalists’’. In other words, says Kuttner, for decades academics have taught what is referred to as ‘‘neo-classical’’ economics to ‘‘gullible undergraduates and journalists, (saying) that there is no such thing as the public interest.’’ The Enron collapse proved to Californians, and now the nation, how wrong and how dangerous such an economic ideology was. Kuttner adds that, while the de-regulated energy sector had just taken root in California, the ‘‘de-regulated’’ transportation industry had been acting in its own best interests and against the public interests for over a decade by reducing costs, cutting corners, services and security. He makes a compelling argument that certain sectors (energy, environment, waste, transportation among them) are in the public good and need to be public and private partnerships under what can called ‘‘civic markets. Clark and Morris (2002) note how this process worked in California when the State government sought to lead a collaboration between industry and the California Independent System Operators (CAISO, 2002) for scheduling intermittent resources into the grid. Many reasonable observers now argue that while energy de-regulation was a failure in California the sector should not be re-regulated either. Nor should the energy sector be subjected again to the so-called ‘‘market forces’’ or business ‘‘power’’ advocated by most free market economists. The past few years in California saw enormous financial advantage taken by out-of-state energy suppliers, Enron among them. The issue of energy generators reaping

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exorbitant profits from the public can not be tolerated again under any political administration. Closer scrutiny is being taken on the federal level and internationally in Asia and Europe. What is proving to be of strong interest now is the more recent California push to exploit its new public policy about goals to exceed the Kyoto Accords. Governor Schwarzenegger signed into law what is identified generically as the ‘‘cap and trade’’ approach to mitigating climate change. In short, the idea is to award credits or certificates that acknowledge the amount of carbon that a company, community or other measurable unit saves in energy conservation, efficiency or use of renewable energy generation systems. The Climate Action Registry was established in 1999 under Governor Davis and then expanded under Governor Schwarzenegger. The State now has the California Air Resources Board working rules that will govern the financial and trading mechanisms by 2009. Several ‘‘Exchanges’’ have been set up such that those in the US are classified as ‘‘voluntary’’ while those in Europe are ‘‘mandatory’’ due to EU laws and regulations. A number of problems exist. One is the basic lack of any financial mechanism and overall reporting structures. Even more concerning is the similarity of the ‘‘cap and trade’’ policies and programs to those of de-regulation, at least by companies that used ‘‘trading’’ to manipulate and control supply and demand of energy (Clark and Demirag, 2002 and 2005). The same ‘‘market’’ mechanisms appear to be under discussion and serious consideration now. What is even more disturbing is that many of the same decision-makers and their prote´ge´s are now in charge of these ‘‘new market forces’’ called credits, certificates or accounts. As Mathiesen and Lund (submitted for publication) argue, ‘‘market forces’’ are not what drives sustainable economic development. A far better approach can be seen in the programs that Germany and Spain have instituted such as ‘‘Feed-In Laws’’ whereby the energy supplied from a power company for stationary or mobile purposes is funded or supported financially for the customer (Hvelplund, 2006). This approach means that the consumer gets to pay competitive prices, which the government supports (Lund and Salgi, submitted for publication). A growing concern for feed-in laws as an alternative to cap and trade has started in Canada and now in California. As former CPUC Commissioner Lynch put it: ‘‘We cannot cede the protection of our economy to the federal government or ‘the market’. Regulation is essential to guard critical services that can be monopolized by a few to the detriment of our families and businesses. The California Constitution recognizes this realitydit requires energy-market regulation to prevent exploitation.’’ (Lynch, 2002). The same issue may be confronting California, USA, EU and other nations with the concern for creating ‘‘carbon markets’’ called ‘‘cap and trade’’. In other words using renewable energy credits (RECs) in order to monetize and then trade certificates in which companies and communities can earn credits for saving energy or using renewable power generation to trade to others who are

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polluting and causing global warming. While there are serious issues about this policy there are even more serious problems about its economics: cap and trade programs remind political economists of the results from de-regulation, privatization and liberalization whereby public oversight and monopolies were replaced with private ones. The result is market manipulation, crises and corruption. ˚ hman note in their article about RAFF, As Nielsen and A there are three technology platforms: ‘‘Three technology platforms that strategically address climate and supply security concerns were explored: the electric drive-train, biochemical conversion, and thermochemical conversion.’’ What makes their conclusion even more interesting is that the RApid Future vehicles and Fuels scenario (RAFF) for the EU will most likely focus on both transitional technologies (like bio-fuels), but move toward hybrid integrated technologies through the use of the process of ‘‘civic markets’’. ˚ hman conclude: Thus, Nielsen and A ‘‘Each platform has its own characteristics and exhibits its own path dependencies, which are relevant to consider with the aim of accelerating their development and application. The electric drivetrain will benefit from fuel efficiency policies as well as more directed policies aimed at supporting the market uptake of HEV, PHEV, FCEV and EV specifically.’’ 4. Transitional economics to commercialized advanced technologies: opportunities for climate change through renewable energy The research labs have been investigating hybrid technologies for many years. One of the stimuli for it was in the Bush Senior Administration during the early-1990s for the implementation of the Bayh-Doyle Act which called for the transfer of technologies from federal funded research to the private sector for commercialization. However, after Clinton was elected, the effort gained considerable momentum since Bush had left Clinton a $1.3 billion ‘‘peace dividend’’. Clinton created several mechanisms that matched these federal funds with local, state and private sector investments for commercialization of technologies. For the most part the program was successful and one of the key underlying economic and technological basis for the business growth in America. Aside from the many problems with the various matching funding programs, there were successes that have enormous repercussions for today. One was the development of hybrid technologies. As noted in Isherwood et al. (2000) above, this effort usually started with modeling and computer simulations. However, various technologies were also developed by scientists that later fit into the models or changed them. Hybrid technologies that are now integrated are becoming common and popular at commercial mass market prices today in the USA were part of that effort. The

Toyota Prius that features an operating schematic on its GPS screen, for example, features a diagram of how an integrated hybrid system works. That diagram features the battery, engine and re-generative braking. In the mid1990s, that specific diagram was part of on-going research at Lawrence Livermore National Laboratory along with other technological development such as fuel cells and hydrogen. Jorgensen made this point in his paper for this special issue. Technologies need to be combined and leveraged into more sustainable and environmentally friendly solutions to climate change. Clark (Clark and Chung, 2000) conducted the first study for the UN Framework Convention on Climate Change (FCCC) specifically in the area of the transfer of environmentally sound technologies from developed to developing countries. Mathiesen, Lund and Norgaard make the same point in their article in this issue that shows how renewable energy generation for stationary and transportation infrastructures are far more economic, efficient and sustainable. Thus, integrated hybrid energy systems or a combination of two or more technologies was an important positive outcome of the California energy crisis and indicator for energy systems in other countries and regions. For example, hybrid technologies are wind combined with pumped storage or solar with fuel cells. In both cases, these are renewable energy sources that are linked with storage devices. Such hybrid technologies can be seen as the future for solving the issue of intermittent resources both as firm energy source and qualifying the energy produced as ‘‘base load.’’ Northern Power Systems (NPS, 2002) has implemented such systems with good numbers in terms of costs and results. A number of companies are beginning to explore the possible links and hence hybrid technology systems for their operations. Hybrid systems offer substantial benefits for both ‘‘green grid power’’ and renewable-only systems, which are often not the most reliable or economic approaches. Some benefits of hybrid systems come from Northern Power System (2002), located in the eastern part of the US but also with offices in California. NPS argues that may include: Cost savings:  Reduced fuel costs, including storage, handling, and maintenance e Reduced utility power consumption, especially during expensive peak hours e Buy-downs, tax credits, other incentives reduce installation cost and shorten payback period  Reduced impact of utility rate hikes Environmental benefits:    

Reduced greenhouse gas emissions Improved efficiency Reduced fuel consumption Less potential for leakage and spills

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High reliability:  Uninterrupted power supply  Reduced risk of financial losses due to power outages  Reduced downtime Energy independence:  Lower vulnerability to power outages  Own your own power supply  Incorporate multiple energy sources Also consider what has been going on in the EU. As part of the afore mentioned DESIRE project, for six regions in Denmark, Germany, the UK, Poland, Spain and Estonia, models of the electricity supply have been made and the magnitude of CHP regulation systems has been evaluated against other relevant measures including the expansion of inter-connectors. Interregional and international transmission lines play an important role in the balancing of fluctuating and partly unpredictable electricity productions and consumptions, in particular when they connect areas with fundamentally different systems of electricity production units. Another example of this is the balancing of wind power and hydro power with reservoirs between Denmark and Norway. An interesting and related example of integrated technologies took place in Norway. Because the Norwegians get most of their stationary energy from hydropower, they are very energy independent despite having large oil and gas reserves. Nonetheless, the fossil fuel reserves are running low and expected to peak (thus decline) by 2015e2020. The result is that Norway has aggressively sought alternative fuels and uses for its renewable energy supplies. Hydrogen is a fairly easy conversion from hydropower. In Norway, the development of electrolyzers over the last 50 years has meant that the application of this technology to hydrogen has become a significant integrated technology for their stationary power and now hydrogen highway energy supply that the Norwegian Parliament enacted in 2006. Scenario calculations for 2020 for the six DESIRE regions have shown that new interregional transmission lines usually do not form the most profitable and sustainable solution to the balancing problem caused by an increase of fluctuation in the electricity production. A range of technologies which can be applied to increase the internal balancing capacity has been analyzed and described:  CHP with heat stores (maybe with heat pumps)  Flexible demands and Demand Side Management.  Hydro power with reservoirs (maybe with reverse pumping).  Electric cars (battery, hybrid or fuel cell) Consider a short discussion on each area as examples from the papers in the special issue: CHP with heat stores: Except from the case of Denmark, CHP is typically used today as base load or heat demand-

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oriented production. However, by use of heat stores, CHP may serve as a balancing instrument for peak load production, spot markets, manual reserve and possiblydas long as they are operatingdeven primary reserve. The operation hours may decrease, but such operation will allow for a better integration of wind power. Heat pumps can be added and allow for improvements of both efficiencies and even further improvements of the integration of wind power. Flexible demand and demand side management can be used for avoiding the peaks of excess wind power production. This involves e.g. heat stores in individual houses for demand response purposes. Hot water and space heat demands can partly be covered by heat stores with integrated electric heaters or, at best, be equipped with energy-efficient heat pumps. Hydro power with reservoirs including reverse pumping can ideally be used for delivering positive and negative balancing power. Capacity can be retrieved from the storage when energy is needed and the electricity is typically available within minutes or even within one minute. The use of hydro power for European balancing will mainly apply to short-term and fast-responding power balancing requirements on small scale. Electric cars: The integration of the electricity supply system and the transport system has been investigated as a long-term solution for the balancing of wind power. Positive socio-economic results have been found in the 2020 calculations in cases where the price difference between an ordinary car and a comparable battery car is reduced to 50% of today’s level. This is due to the combined advantages of (A) the balancing potential of the large combined capacity of the batteries, and (B) the substitution of the expensive and CO2-emitting fuel, petrol. The long-term objective of the Danish Government and Parliament is to convert to a 100 per cent renewable energy supply and the first step to increase wind power even more has already been decided and is being implemented. Such aim has raised the question of how to design the system in order to integrate even very high shares of wind power. In other countries, we also see efforts are being made to increase the share of wind and CHP. Various studies on different technologies have been done including better regulation of distributed CHP plants (Andersen and Lund, 2007; Lund, 2003; Lund and Andersen, 2005; Lund and Munster, 2006a) and the utilization of waste (Mu¨nster, 2007), electric boilers, heat pumps, fuel cells, hydrogen storage (Blarke and Lund, 2007; Mathiesen and Lund, submitted for publication) and Compressed Air Energy Storage (CAES) (Lund and Salgi, submitted for publication, Salgi and Lund, 2008). Moreover, the integration of transportation (Lund and Munster, 2006b; Mathiesen and Lund, submitted for publication) and the design of the electric grid have been analyzed (Alberg Ostergaard, 2003; Lund, 2005). Such new technologies are important in order to integrate fluctuating renewable energy sources. However, they do make the identification of environmental impacts of marginal changes in electricity demands even more complex. What is obvious is that the energy cost numbers begin to ‘‘add’’ correctly and the power supplied is cost competitive.

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These systems were under development in Japan with strong government support for many years (Clark and Chung, 2000). Today they show that with systems over 1e3 MW the costs are extremely competitive. In fact, Sharp corporation has even demonstrated (late 2002) that it can provide and guarantee solar power for $035/kW which is competitive with natural gas costs today (Wiser et al., 2001). As Jørgensen (2008) argues in his paper, electric vehicles are far more cost effective now with the costs becoming even more competitive given the projected higher costs geopolitical instability of fossil fuels. 5. Long-term strategies for diversified hybrid energy portfolios Two basic ways to achieve sustainable energy systems: one is for on-site power generation; and the other is for regional systems (Bollman et al., 2002) that are fundamentally more like the internet (Rifkin, 2003) than the present central grid configuration. By the late fall of 2002 and looking toward the future, California has begun to rebuild its infrastructures. Governor Davis (2002) has called for a ‘‘Building California’’ program that focuses on its infrastructures as well as developing its workforce and advanced technologies. With a large budget deficit in large part created by the energy de-regulation, the State now needs to look to its historical creative and entrepreneurial spirit for rebuilding. The tools, including financial resources and workforce development, are localeregional. The California voters, for example in 2006, have passed over $40 billion in bond measures while the university system continues to lead the world in research and development. Jobs are created and business developed from a variety of emerging technologies, including the energy and environmental sectors. Also there is now a shift in the roles in the California Public Utilities Commission (CPUC) and the California Energy Commission (CEC) as seen in Governor Schwarzenegger appointments to these Commissions (2004e2006). Now there will not only be an oversight function for the Commissions, but a specific economic development role. The Governor signed into law the ‘‘Million Solar Roofs’’ program (2005) and then in early 2006, the CPUC with new appointees (in fact one on the day of the vote) passed a rate increase for energy utilities that would allow a Solar Rebate program of over $3 billion to be implemented over 10 years. In other words, California has provided large contracts, funds and government projects for energy programs in the State. Now it wants the companies to be both located and grown in the State. In other words, California may be the first US state to define and practice ‘‘sustainable development’’din both the scientific and economic context. Such technological and financial leverage as Jørgensen argues makes the electric vehicles and hybrids of them far more cost-effective. Mathiesen and Lund provide the documented data on how viable and sustainable these integrated technologies are already in Denmark and throughout the EU. The second area concerns on-site power generation. Here, typical accounting ‘‘cost benefit analysis’’ is the norm but

fail to focus on real costs of energy (e.g. fuel source, historical technological development, health costs, and future needs of society). Thus while it may be cheaper and ‘‘cleaner’’ (than coal or oil) to have natural gas as a fuel source, the financial analyses fail to consider the original costs for exploration, discovery, and distilling the fuel as well as the health impact of particulates. What is particularly interesting is the lack of data on historical economic costs for any fuel infrastructure, such as natural gas. Aside from its dramatic increased use in energy fuel supply, natural gas is increasingly used for vehicles and fleets. However, what were the original research and development costs for natural gasdand more importantly who paid for them? Much of the research and development was subsidized in the USA by the federal government; and in other countries by various government entities. Critical to the costs of natural gas or other energy supplies are the transmission or pipe lines. Again, consider the costs for these systems when they were originally proposed? And what might be the costs today for new systems that use renewable energy? The comparison is even more compelling when the costs for transmission are seen as being underwritten or financially supported by national governments. Many of the papers in this special issue (Stadler, Clark and Mathiesen and Lund) all argue that the ‘‘stranded capital costs’’ for fossil fuels in energy and transportation infrastructures place a significant long-term burden on future generations to finance and support let alone their negative impact on the environment and international risks of conflicts and instability. The future of sustainable energy systems might be advanced far more aggressively, if, as in with historical energy power systems (generation and transmission) that government support and financing played a key role. When governments on the local and regional level are involved, as is increasingly occurring today in California, the solutions to bringing on-line more clean intermittent energy is more than just probable. It becomes, with strong state support, financially viable and eminent. That is why California can see a Hydrogen Economy futuredsooner than later (Rambach, 1999). Related to both grid and on-site energy generation is distributed energy generation (DG) or as referred to in Europe, combined heat and power generation (Mu¨nster, 2001) or CHP. The concern for distributed energy systems is not new. In Europe and especially in most of the northern countries, DG or CHP has been fundamental to basic energy needs for decades. Most of the systems, however, are very dependent upon fossil energy of some sort. Natural gas within the last decade has been the most pronounced due to its availability, reliability and low costs. However, wind and biomass are both strong competitors and increasing in use (Bolinger and Wiser, 2002a,b). In the USA, a growing concern for DG can be seen to follow the European pathway with natural gas dominated systems leading the way. Public entities in California (CPA, 2002) all argue for the need for DG but few integrate intermittent

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resources, as they are considered too costly and unreliable. New analyses and programs (Morris, 2003) are needed to direct this important concern for regional energy systems that incorporate renewable energy technologies (Clark, 2003a,b) and focus on the future energy infrastructure needs such as hydrogen (Rifkin, 2003). Mathiesen and Lund argue in this special issue how the success of the Danish CPH and wind generation systems has made the entire country far more energy independent and carbon neutral. Some projections even predict that by 2020, the entire nation of Denmark will be energy independent. 6. Green sustainable energy plans: economics and competitive costs of intermittent resources In this special issue, Stadler argues for example that traditional or ‘‘neo-classical economics’’ (Clark and Fast, 2008) do not apply to the energy balance between supply and demand, especially when applied to intermittent energy sources such as solar and wind (Clark and Morris, 2002). For example, excess wind or solar energy production can be stored in car batteries or homes for use. New integrated technologies (wind and storage) allow the viable and sustainable economic combination of environmentally sound technologies (Clark and Chung, 2000). California has begun comprehensive legislation for California’s future energy needs. However, the State still lacks an Energy Plan or coordinated public policy in energy. The State needs to build new plants, but not be at the mercy of market forces, who deign to build only at exorbitant prices. Instead, the PUC is working on supply plans that integrate our need for modern, environmentally sound power plants with our vision for using more solar, wind, geothermal and biomass energy sources. And California’s energy plan must incorporate energy efficiency and conservation into our daily lives. The financial and economic roads ahead for energy and transportation systems are difficult. For example, in California, state retirement funds (CAL PERS and STRTS) are the first and third latest pension funds respectively in the world. Both have made commitments of over $1 billion for financing ‘‘clean technologies’’ (note earlier the problem with the different meanings between ‘‘clean’’ and ‘‘green’’). Public bonds funds supply large sums of money as well for special purposes. California bond measures totally over $60 billion have been passed in 2006 for new buildings and infrastructures. A number of government financial mechanisms are available. Procurement is critical especially for state and public buildings. As the California Consumer Affairs Agency noted in its ‘‘Blue Print for Sustainable State Buildings’’ (CAA, 2001a,b), the driving force for clean energy and lower costs should be the state buildings. Along with cost accounting based on life cycle analyses (California IGAWG, 2002), the competitive costs for renewable on-site energy technologies can be competitive. However, ‘‘competitive aggregation’’ can be another government-initiated tool for the purchase of goods and services.

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The California Power Authority along with the California Stationary Fuel Cell Collaborative did just that for fuel cell in the fall of 2001 and also for solar PV systems. While the Request for Bids list still exists, the actual funds for purchasing were not available. The competitive bid list may become a significant item with the billions in bond funds passed by the voters. A good example exists now for on-site generation with the Los Angeles Community College District. In 2001, the community passed a bond measure for $1.3 billion to renovate and rebuild the 30þ year old campus. Half of the funds were to be used for renewable technologies. In the spring of 2002, the Board of Directors approved the contractors and building for ‘‘Silver Level LEEDS’’ standards at some for the campus buildings. Voters in the fall of 2002 then approved another $2þ billion in bonds for the entire ‘‘greening’’ of the 9 campuses within the System. Similar measures passed 17 or the 19 Community College Districts in 2002, leaving the System with the potential to competitively aggregate goods and services bidders. Hybrid or linked technologies are new approaches for the energy industry to combine various technologies to accomplish the purpose of shaping the flow of power from an intermittent renewable resource into becoming firm or base load energy generation. Such a strategy provides energy generators with far more operational flexibility and diversity of fuel supply (Bernstein, 2001). This approach can increase the value of the product to the end user, and also make it easier for the CAISO to manage by making the power plant look more like a gas-fired turbine in its operational characteristics, creating reliable clean energy at low competitive prices. Salgi, Donslund and Østergaard argue in this special issue that cost-effective hydrogen storage can be used in near-term future scenarios that provide both transportation and power generation. Clark argues also that the near term is more likely and already begun in California with major automakers supplying demonstration hydrogen fuel cell cars to Southern California in 2008. However, other nation-states have already addressed the basic issues needed for integrated energy and transportation systems using renewable power generation. For example, western Denmark may be a far more practical and measurable application according to Salgi, Donslund and Østergaard. And Norway has in place much of the renewable power and fuel infrastructures already to electrolyze water into hydrogen along its newly created ‘‘Hydrogen Highway’’. Integrated hybrid systems can therefore improve an energy portfolio by minimizing both financial and energy risk. These systems increase versatility and create a seamless energy supply that mixes clean renewable and conventional fuels with traditional grid power. Integrated resource management needs not be modeled on a bell shaped curve that is dependent on conventional fossil fuel resources, but be geared toward what some scholars are calling ‘‘flexible or agile resource management’’ (Clark and Bradshaw, 2004). Such hybrid systems exist today and have been documented and evaluated for years (Isherwood et al., 2000).

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Toke and Lauber (2007) describe how it was during the 1980s when significant programs emerged in support of the commercial deployment of renewable energy sources such as wind power, small hydro schemes, solar power and biofuels including the so-called Californian ‘‘wind-rush’’ in the early 1980s. In UK, renewable electricity certificate trading systems that have been established to promote renewable energy. However, Toke and Lauber (2007) argue that ‘‘Renewable Energy Feed-in Tariff’’ (REFIT) systems which involve the fixing of tariffs for renewable energy by governmental intervention, are regarded as producing more efficient outcomes. The use of the REFIT system in Germany is associated with an institutional tradition that places emphasis on giving competitive opportunities to new market entrants in order to break up concentrations of market power by incumbents. Hvelplund (2006) describes the two most common RE governance systems as: (a) the ‘‘feed-in model’’, which has politically set prices for RE electricity and in which the produced quantity of RE electricity is determined by the market. Such model is designated as a Political Price/Amount Market model (PPAM model). And (b) the ‘‘Certificate market model’’, which has a politically set quota and price for pollution-free electricity determined on a market for green certificates in combination with the electricity price on the Scandinavian Nordpool spot market. Such model is designated as a Political Amount/Certificate Market model (PACM model) in order to emphasize the fact that this model has a politically decided quota, which is a clear non-market element. Hvelplund (2006) argues that the ‘‘PPAM model’’ (‘‘feed-in model’’) is most efficient when considering equipment market, investor market, variation of the natural resource base and market power questions. Furthermore, the question of local and political acceptance was best pursued by means of the ‘‘PPAM model’’. According to Hvelplund (2006), the following RE reforms are proposed: A ‘‘PPAM model’’ (feed-in) of a design similar to that of the present German system; a governance system giving investment priority to neighbor/local investors to secure that these groups always have the right to achieve ownership shares; a flexible market ensuring that local and regional technologies are included in the supply system; and a system of transparency in the early phases of the public regulation decision process. 7. Conclusions: toward sustainability with hybrid energy technologies Intermittent resources can become firm base load energy when combined with other energy technologies and developed into agile systems. Such integrated hybrid technologies exist today. While more research and analysis need to be done on the economics of these systems, it is clear that they in nature are both regional and public sector supported. Wind, for example, is already cost competitive with natural gas. Combing it with storage devices makes wind base load and financially profitable in the marketplace. However,

if wind competes with coal governance systems, the regulation of wind power must be secured as long as coal does not pay the full external costs. Among such systems the feed-in tariff provides the most effective and lowest-cost solution. The EU has led the way in defining sustainable development. California appears to be the first ‘‘nation-state’’ to define and implement ‘‘sustainable development’’. The Governor, State leaders and citizens are ready and willing to meet the challenge. As the Economist noted about the energy crisis, the ‘‘world is watching for California to take the lead again’’ (Economist, 2001a). Then the Economist, in May 2004, published an article comparing the conventional energy infrastructure to the future, more flexible one that is distributed and modeled after the ‘‘internet’’. This is major theme in Clark and Bradshaw (2004) whose analysis of the California energy crisis lead to rethinking how energy is distributed and financed into more ‘‘agile systems’’ which are combinations (or hybrids) of central grid and local energy generation depending on the demand and region. That process began in 2000, when the current energy crisis struck hard at all Californians. It was brought to its potential with policies from 2001e2005, where California led the world in greenhouse mitigation legislation and set renewable energy standards unmatched in the USA. And now Californians in the middle of a severe economic budget deficit will seek to implement these policies by 2010 and beyond. True to the spirit and history of California, the public good for all its citizens will prevail. Integrated hybrid technologies is the pathway to do just that: combine government initiatives through ‘‘civic market’’ or demand processes which assist industry while being certain that the public interests are protected in both economic and environmental terms. To do this means government must lead with its own public sustainable buildings. Moreover, it can lead, for example, with the leverage of land and technological resources for implementing sustainable infrastructures in energy and transportation. References Alberg Ostergaard, P., 2003. Transmission-grid requirements with scattered and fluctuating renewable electricity-sources. Applied Energy 76 (1e3), 247e255. Andersen, A.N., Lund, H., 2007. New CHP partnerships offering balancing of fluctuating renewable electricity productions. Journal of Cleaner Production 15 (3), 288e293. Bachrach, D., 2001. Comparison of Electric Industry Restructuring Across USA. UC Berkeley and California Energy Commission, Governor Davis, Building for the 21st Century Infrastructure Commission, Sacramento, CA, August 2001, and in Appendix. Bay Area Economic Forum, California at a Crossroads: Options for the Long-term reform of the Power Sector. McKinsey & Co., San Francisco, CA, 1e56. Benson, M., 2002. As problems mount for utilities, cities pull plug on deregulation: ballot measures across US attempt rollback of electricity deregulation. Wall Street Journal. [email protected]. Bernstein, M., 2001. California Energy Market Report. Winter 2000e2001. Rand Corporation, Santa Monica, CA.

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