Large windmills and solar panels are seen in Atlantic City in October 2008. (AP)
One year ago, gasoline prices were soaring toward four dollars a gallon and fuel-efficient hybrid cars were flying off the lots. Toyota dealers couldn’t keep a two-day stock of Prius hybrids on hand.
Today, with oil down and the economy bust, they have an 80-day stock, and hybrid sales have fallen off a cliff steeper than general car sales.
So, the question: Can green technology really save our broken economy? The Obama administration is betting big it will. We’ll ask two players with a big stake in the answer.
This hour, On Point: A gut-check on the green economy.
You can join the conversation. Is green tech our golden ticket out of this economic bust? Does saving the economy and environment at once sound too good to be true? Or just right?
The financial specialists that convert tax credits into capital to build new windmills and solar farms have all but disappeared
After years of fighting for stronger, more consistent state and federal support, the renewable-energy industry couldn’t have asked for a better 2008. Although supplying just a sliver—barely 3%—of the nation’s electricity, nonpolluting renewables such as wind, solar, and geothermal are the fastest-growing type of power being added to the grid. New installations of solar and wind power both hit record levels last year in the U.S.
In a year when the overall outlook for green businesses was mixed, renewables proved to be standout, says Joel Makower, executive editor of GreenBiz.com. Growth of renewable energy seems slow “because [of] the relative small size of the renewable energy sector, compared with the existing power generation industry,” Makower points out in GreenBiz.com’s just-released State of Green Business 2009 report. “But a closer look at the sub-sectors reveals impressive strides.”
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This year was shaping up to be even better. As part of the Emergency Economic Stabilization Act, signed into law last October, Washington granted unprecedented extensions of tax credits vital to the financing of solar and wind power projects. Then, in the first days of his Presidency, Barack Obama declared a goal to triple the share of the nation’s electricity from renewables, to roughly 10%, by 2012. What’s more, after years of production constraints keeping prices high, investments in new manufacturing capacity in both solar and wind have begun to produce more gear, lowering equipment prices.
THE MONEY DRIES UPJust when things were looking up for the green energy sector, there’s a new wrench in the works. The financial specialists that convert tax credits into capital that developers use to build new windmills and solar farms have all but disappeared—just when they’re most needed. “For all the good news, the lack of project finance and capital means there’s a real risk it won’t be possible to hit Obama’s goals,” says Christopher O’Brien, head of North American market development for Oerlikon, a Swiss supplier of solar technology.
Here’s the problem: To fund a renewable project, developers must convert tax credits into money they can use to pay for new photovoltaics and wind turbines. In recent years, a network of financiers has emerged to serve this market. Typically, small and midsize renewable project developers sell millions of dollars worth of tax credits to large, sophisticated financial entities that can use those tax credits to offset their own tax obligations or those of their clients.
As result of the capital crash, however, the pool of so-called “tax equity investors” has dwindled to around a half-dozen, from more than 20 in 2007. Key players such as Merrill Lynch and Lehman Brothers no longer exist. Others, including the likes of John Deere (DE) and Prudential (PRU), have backed out of the market, if only temporarily, according to research by Hudson Clean Energy, a private equity firm specializing in green energy. “This will be a constraining factor because the population of sophisticated buyers for these credits is too small,” says Oerlikon’s O’Brien.
While obscure, tax credits are a make-or-break ingredient for new renewable projects. They can comprise the bulk of the upfront funding used to build renewable energy projects. In a big wind development, for example, production tax credits can account for more than half of the capital structure. In a solar venture, tax equity accounts for 85% of the capital structure, according to Hudson Clean Energy data. Developer equity and debt typically make up the balance.
BUYERS NEEDEDTax credits are also important in the long term. Once renewable assets start generating income—from a combination of electricity sales, depreciation benefits, and tax benefits—the tax component can be the largest source of return for investors. For wind projects, the value of tax credits makes up about 21% of the long-term value of the project for investors. In solar farms, the value of the investment tax credit—at 30%—can be on par with the value of the electricity the panels will generate in their lifetime. Sophisticated investors like the tax credits because they typically trade at a slight discount to face value, and offer a cheaper way to pay down big tax bills.
The shortage of buyers couldn’t have come at a worse time. To hit Obama’s goals for new renewable energy, the industry will have to mobilize far more capital than it has had to before. This year, the tax equity market is expected to hit $11.1 billion and would have to rise to around $43 billion in 2012 to build all the capacity being called for. Yet in 2007, when the market had more than 20 buyers, investors bought up $5.4 billion in tax equity. Last year, just eight investors handled about $5.5 billion in 2008. “Between now and 2012, [tax equity] markets would have to grow four- or fivefold,” says Arno Harris, CEO of Recurrent Energy, a renewables developer in San Francisco.
The industry has a solution, but it’s not clear if the Senate and House will find common ground to make it work. Renewables players are lobbying for a change in rules that would temporarily convert tax credits directly into cash payments from the federal government. The bill would also temporarily extend the credits’ lifespan. Today, credits are good only for the year they’re granted. The new bill calls for them potentially to be used against past and future profits.
With the Senate now negotiating its version of the stimulus bill behind closed doors, it’s impossible to predict how renewables will be treated. The starting version of the Senate bill lacked any funding to cash out renewable tax credits. According to Environment & Energy Daily, Senator Jeff Bingaman (D-N.M.) was open to the program but wanted assurance that taxpayers would be reimbursed from the gains of any successful projects. If Washington can’t come up with a fix, the go-go growth of renewable energy could black out.
Aston is Energy & Environment editor for BusinessWeek in New York.
Builders find the savings from cheap power is making solar homes more attractive
As global financial markets melted down in October, Congress handed a gift to America’s green energy industry: It renewed and broadened a set of tax credits for wind and solar power, geothermal, tidal energy, and more. The move did little to prop up eco-energy stocks, which have followed oil prices down. But the news did send a positive jolt to one of the economy’s darkest sectors: homebuilding. Or, more specifically, solar-powered homes. Consumers recognize that green homes “save money month in, month out,” says Rick Andreen, president of Shea Homes Active Lifestyles Communities in Scottsdale, Ariz.
Most of the sweeteners Congress conjured up will go to big projects such as wind farms. But aspiring buyers of green homes will benefit, too. The revised 30% one-time investment credit for solar means that a buyer who installs a typical $25,000 solar panel system on his roof will get $7,500 in income tax credits, up from $2,000 under the old standard. How long that investment takes to pay off will depend on local rules and utility rates. In markets with the most costly power, such as California, Connecticut, and New Jersey, the pretax compound rate of return on a typical home solar system will be better than 15% per year, says Andy Black, chief executive of OnGrid Solar, an industry research firm.
The fresh credits may mark a turning point for solar-powered homes. During the housing boom, when mortgages and energy were both cheap, green power was not a hot option; typical home buyers preferred granite countertops to solar panels. But even before the subprime crash, builders began to see rising interest in sun-powered dwellings. Ryness Co., which compiles sales data for homebuilders, found in a recent survey that homes with solar systems were outselling others by as much as 2:1 in 13 California communities.
Today there are about 40,000 solar homes in the U.S., but that number is set to spike. Shea is adding solar to communities planned for Arizona, California, Florida, and Washington State. And, responding to a shift in buyers’ attitudes, big builders such as Centex (CTX), Lennar (LEN), Pulte Homes (PHM), and Woodside Homes are following suit. Consider Whitney Ranch, a development south of Sacramento. Sales there softened in the housing downturn, says Kathryn Boyce, an executive at Hanley Wood Market Intelligence. But when Standard Pacific Homes (SPF) put solar systems on a group of new models in the development, they sold out. The builder then decided to install panels on all 304 of the homes.
The appeal of solar homes could grow as the economic outlook worsens. The more utility bills cut into household reserves, “the more consumers recognize the value of efficiency,” says Robert W. Hammon, principal of ConSol, a green building consulting firm. And there’s growing consumer awareness that solar homes appreciate faster than ordinary dwellings. They also resell for a premium of up to 5%.
According to Ben Hoen, a researcher at Lawrence Berkeley National Laboratory who studies the effects of eco-features on real estate values, more homeowners now see solar panels as a long-term asset. Mortgage lenders, however, have been slow to make that link. The loan processes at Fannie Mae (FNM) and Freddie Mac (FRE) don’t give special treatment to buyers who make improvements to lower utility bills, says Shea’s Andreen. Builders wish lenders would start to take stock of eco-features. “Solar panels free up household cash flow,” Andreen says. “Lenders should recognize that.”
Aston is Energy & Environment editor for BusinessWeek in New York.
Enlisting Father Profit to Save Mother Nature — Tom Friedman makes a gripping political, environmental, and economic case for green innovation
Hot, Flat, and Crowded: Why We Need a Green Revolution— and How It Can Renew America. By Thomas L. Friedman. Farrar, Straus & Giroux; 438 pp; $27.95
When the U.S. Marines, General Electric (GE), and even China—an energy-poor, environmentally challenged industrial giant—are betting on green innovation to gain a competitive edge, you’d think U.S. policymakers would pay attention. Not yet, though, says Thomas L. Friedman in Hot, Flat, and Crowded: Why We Need a Green Revolution—And How It Can Renew America. It is urgent, he says in this cri de coeur, that we unleash U.S. creativity—and capitalism—on the challenges of energy and climate change. “There is only one thing bigger than Mother Nature and that is Father Profit, and we have not even begun to enlist him in this struggle,” he writes.
Expanding his horizons beyond globalization, the subject of The World Is Flat (2005), the three-time Pulitzer Prize winner argues that a trio of powerful dynamics is shaping our future. The “hot” of the title refers to global warming, or “global weirding,” as he calls it, referring to the bizarre climate effects we are encountering. “Flat” refers to globalization, enhanced here with a look at how trade growth fuels energy use and hurts the environment. “Crowded” refers to humanity’s relentless expansion and its perilous effects on biodiversity and the planet’s finite resources. The only solution to these ills, he forcefully asserts: innovation in the form of a green revolution.
Of course, these topics have been addressed by others: If Fareed Zakaria and Al Gore met and co-authored a long-winded book, this would be it. Many sections were first explored in Friedman’s New York Times column, and with over 400 anecdote-chocked pages, Friedman asks a lot of the reader.
Stay with him, though. Surprising material is scattered throughout, and the final sections may be the book’s most rewarding. Its very sprawl emphasizes the scale of these problems and allows the author to make a strong case for the possibility and necessity of addressing them. With a tone of urgent hopefulness—or “sober optimism,” as he says—he beseeches voters, executives, and politicians to get on with it.
SUCCESS STORIES
Friedman hops across the globe to document the intimate interplay of the three trends. In the jungles of Sumatra, he visits a conservation activist who worked with an energy developer and with villagers to create an economy that fosters rather than destroys the rainforest. Then Friedman is on to Iraq, where a U.S. general on the front lines installs solar panels to reduce the need to transport diesel to fuel electric generators. Cut to Connecticut, where CEO Jeffrey R. Immelt (a recurring character) talks up how tougher environmental standards have made GE’s high-efficiency locomotives best-sellers and a leading export to China.
Innovation, whether the result of policy or entrepreneurialism, is the key to these success stories. Unfortunately, America remains caught up in what Friedman calls a “dumb as we wanna be” mindset, where “drill, baby, drill” is an easier sell than long-term, comprehensive energy policy.
This has security implications. There’s a simple, negative correlation, says the author, between oil and democracy: As oil prices rise, petrodictators grow rich and democracies weaken. Conversely, as oil prices fall, petro-dictators grow weaker and democracies flourish. Think of the reforms of Russia and Iran in the 1990s, when oil prices were low, compared with the countries’ troublemaking in the era of $100-per-barrel oil.
What’s more, he notes, petro-states tend to undereducate their youth, fueling unemployment and creating a breeding ground for terrorism. How to reverse this pattern? Radically cut energy demand and invent fantastic substitutes.
Which brings us to China’s green ambitions—and the U.S.’s failure. If you read only part of this book, let it be the final chapters, in which Friedman explores how China could emerge as a green prodigy. Sure, Chinese leaders unleashed two decades of environmental turmoil by replacing communism with “GDPism.” But increasingly, Friedman says, those leaders are recognizing that environmental harm threatens not only the land, water, and air but also their political future.
So they’re acting. China’s voluntary goal of decreasing carbon emissions, for example, would result in five times more greenhouse-gas savings than the targets set by Europe under the Kyoto Protocol. China also has higher national targets for renewable energy than the U.S. (where there are none) and tougher mileage rules for its burgeoning fleet of vehicles.
If China’s leaders see the necessity of this approach, Friedman wonders, why can’t ours? Despite the scale of the challenge, he is optimistic that the political, technical, and economic means are at hand to spark a U.S. economic revolution. From windmills to advanced batteries, the results could mean new exports and jobs.
When Friedman completed this book in July, he may have been encouraged by the green leanings of the men who eventually became Presidential contenders. If so, he has good reason to worry now. John McCain, the author of some of the Senate’s most progressive climate proposals, is now promoting offshore drilling as a fix. And Barack Obama, having argued the potential of green innovation to jump-start economic growth, has become less vocal.
Yet, Friedman is certain the public can tackle the challenge. He criticizes articles that offer “205 easy ways to save the earth.” Such pandering implies that the revolution will be painless. It will not be: It will demand ugly political battles, the fall of dirty industries, and the rise of new, clean ones. “I am convinced,” he writes, “that the public is ready; they’re ahead of the politicians.” For now, though, the petro-dictators are surely the only ones smiling.
Cape Wind’s Gordon may soon get the O.K. to build turbines Stephan Savoia/AP photo
It’s no longer if, but when, where, and how many wind farms will go up along the U.S. coast
Wind farms are springing up in Midwestern fields, along Appalachian ridgelines, and even in Texas backyards. They’re everywhere, it seems, except in the windy coastal waters that lap at some of America’s largest, most power-hungry cities. That’s partly because the first large-scale effort to harness sea breezes in the U.S. hit resistance from an army led by the rich and famous, waging a not-on-my-beach campaign. For almost eight years the critics have stalled the project, called Cape Wind, which aims to place 130 turbines in Nantucket Sound about five miles south of Cape Cod. Yet surprisingly, Cape Wind has largely defeated the big guns. In a few months it may get authorization to begin construction. Meanwhile, a string of other offshore wind projects is starting up on the Eastern Seaboard, in the Gulf of Mexico, and in the Great Lakes.
Much of the credit—or blame—for this activity goes to Jim Gordon, the man who launched Cape Wind in 2000. His goal is to provide up to 75% of the electric power on Cape Cod, Nantucket, and Martha’s Vineyard by tapping the region’s primary renewable resource: strong and steady offshore breezes. He has methodically responded to every objection from Cape Cod property owners and sometime-vacationers, ranging from heiress Bunny Mellon and billionaire Bill Koch to former Massachusetts Governor Mitt Romney and Senator Edward M. Kennedy (D-Mass.). “This is like trying to put a wind farm in Yellowstone National Park, as far as we’re concerned,” says Glenn Wattley, CEO of the Alliance to Protect Nantucket Sound, the opposition’s lobbying arm.
Click here for a full size map: http://goo.gl/DPyMH
Since 2000, Cape Wind’s Gordon has burned through $30million of his own wealth, much of it to pay for studies of the site. The result is a four-foot-high stack of environmental reports, including three federal applications looking at the wind farm’s potential impact on birds, sea mammals, local fishermen, tourism, and more. “We’ve gone through a more rigorous evaluation process than any prior energy project in New England,” says Gordon, who built natural-gas-fired power plants before starting Cape Wind.
Victory is by no means certain. Cape Wind could yet bog down in litigation or be nixed by the feds, Gordon concedes. Even if Washington O.K.’s the project, he must find a way to finance it. Expected costs have more than doubled in the last eight years, to over $1.5billion, by some estimates. And assuming the funding comes through, engineering and construction could drag on for three or more years.
Regardless of how this all plays out, Gordon has secured his spot as one of U.S. wind power’s pioneers. When it comes to building natural gas and oil rigs in federal waters, energy companies must follow clear government rules. But until Cape Wind floated its first proposal, Washington had never spelled out how to develop an offshore wind farm. Gordon’s plan prodded the Minerals Management Service, the federal agency that oversees energy extraction from public lands, to take action. The regulators hope to release detailed rules for utilizing wind, wave, and tidal power by yearend, at which point the path will be cleared for applications from a dozen or so wind projects in federal waters, with nearly as many under way in state areas. “We’ll see an incredible flurry of proposals to tap ocean resources for clean and renewable energy,” says Maureen A. Bornholdt, program manager at the MMS’s Office of Alternative Energy Programs.
It’s easy to understand why entrepreneurs are rushing in. Winds at sea blow stronger and more steadily than on land, where they are slowed by forests, hills, and tall buildings. Unlike terrestrial winds, sea breezes also tend to keep blowing during the hottest times of the day, when the most power is needed. Within a few miles of much of the U.S. coastline, in almost any direction, wind resources are more abundant and dependable than anywhere outside the Great Plains. Exploiting this resource could supply about 5% of all U.S. electricity by 2030, says the National Renewable Energy Laboratory.
Putting turbines in open water is not a cheap proposition. It costs up to twice as much as in rural expanses. But the economics still work well in the Northeast, where open land is scarce, electricity is pricey, and demand for power keeps surging as populations swell. The Northeast is heavily dependent on electricity from natural gas, which has doubled in price in the past year. What’s more, most state governments in this region have passed laws dictating that a growing share of power must come from renewable resources. These states “have to build offshore,” says Bruce Bailey, president and CEO of AWS Truewind, which assesses wind resources. “They won’t be able to meet their [renewables goals] if not.”
In Hull, Mass., a faded Victorian-era beach town just across the bay from Boston, there’s already a windmill spinning above the local high school and another over the dump. Four more turbines are planned for the waters just a mile and a half from one of Greater Boston’s busiest public beaches. Thanks to the two functioning windmills, power rates in the town haven’t risen in seven years, although they’ve doubled statewide. With four more, Hull could meet all of its needs with homegrown energy, says town manager Phil Lemnios.
Throughout New England, shrunken shipbuilding and fishing towns have begun to view offshore wind power as a source of investment and jobs. In Rhode Island, a consortium of fishermen is vying with Bluewater Wind, a unit of wind-farm developers Babcock & Brown (BNB), to put turbines in state waters near Block Island. Across the region, planners hope to reanimate shipyards by building not just turbines and foundations but also the specialized ships needed to transport and erect supersized towers and blades. In Delaware, Bluewater Wind has a project in development that could produce as much as 600 megawatts 12 miles from Rehoboth Beach; it scored an industry first in late June, when it inked a long-term contract to supply electricity to Delmarva Power. Bluewater’s project may well become the first functioning offshore wind farm in North America.
The shores of the Great Lakes, with their strong winds and shallow waters, are also luring developers. Cleveland is among a handful of cities planning wind farms. With offshore wind as a driver, the Rust Belt city wants to remake its waning industrial base into a launchpad for green energy projects.
Down in the Gulf of Mexico, a consortium of oil-and-gas-industry veterans has leased tracts stretching from Galveston, Tex., to the Mississippi Delta to develop offshore wind. Their startup, Wind Energy Systems Technology, plans to adapt retired oil rigs to cut the cost of building offshore plants to a fraction of current prices, says CEO Herman J. Schellstede. The rigs also let them site the turbines farther out at sea. Today’s offshore windmills are built on gigantic steel tubes bored into the seabed. It’s a proven approach, but it demands a lot of costly steel and can’t go too deep. Moving farther offshore on rigs allows developers to tap stronger winds—and the turbines are out of sight.
Europe is some 15 years ahead of the U.S. in exploiting offshore wind. Hundreds of giant windmills already dot the North Sea, with more than 1,000 megawatts of generating capacity. This head start provides an edge to equipment suppliers such as Denmark’s Vestas Wind Systems and Germany’s Siemens, the only two companies building offshore turbines in large volumes today. By 2020, Europe hopes to generate a quarter of all its electricity offshore.
As wind farms are moved into deeper water, they can take advantage of the oil sector’s offshore drilling knowhow, says John Westwood, CEO of Douglas-Westwood, a London-based market analyst that focuses on offshore energy. The U.S. has decades of expertise in this area, he adds. Schellstede’s company, for example, is looking at a new design that adapts multilegged platforms from the oil business. These rigs could be stable enough to withstand a hurricane and would use less steel than the current generation of coastal wind farms.
Back in Cape Cod, the talk is all about deep water, too. In June, real estate agents, marina managers, and property owners met at a Chamber of Commerce breakfast to discuss the latest proposal. BlueH Technologies of the Netherlands has dreamed up a project roughly the size of Cape Wind but over 30 miles out to sea, in depths of 160 feet. BlueH is testing a design with novel two-bladed turbines that uses floating windmills chained to huge anchors. The company faces years of costly development. Still, the region’s die-hard opponents of Cape Wind have embraced the plan as a better solution for Cape Cod. In a decade or so, those foes may find themselves enjoying ample supplies of green power from not one, but four or more offshore farms.
Aston is Energy & Environment editor for BusinessWeek in New York .
With today’s focus on “green” buildings, it’s no wonder that so many of the new towers scraping the Chicago sky are heralded for their benign impact on the environment. But what about the thousands of other high-rises and humbler structures already here?
Improving the energy profile of older buildings is a much harder feat. Before virtuous materials and systems can be installed, the old stuff has to be ripped out and hauled off. Managers of existing buildings also have to keep operations humming so as not to disrupt rent-paying tenants.
“It can be like performing surgery while the patient is still awake,” says Mark Bettin. Bettin has never performed in an operating room. But as engineering vice-president at Merchandise Mart Properties, he has just finished a three-year, multimillion-dollar odyssey to cut the massive structure’s consumption of energy, water, and materials.
The effort required overhauling decades-old practices and technology, from replacing most of the Mart’s 4,000-plus windows and upgrading rusty motors deep in its sub-basements to taking better care of dust mops.
The reward: At 78 years of age, the Merchandise Mart is now the biggest green building in the world.
It’s hard to overstate the scale of this undertaking. Straddling two full blocks and reaching up 24 stories, the complex contains 4.2 million square feet—about 400,000 more rentable space than the Sears Tower—and enough to qualify for its own Zip Code (60654).
Behind its limestone exterior are 380 miles of electrical wiring and 40 miles of piping and ductwork. The Mart requires 400 employees just to keep the place functioning. With more than 700 tenants, the building’s daytime population numbers 15,000 to 20,000. Every year, 3 million visitors stop in for trade shows and conferences.
The new and improved Mart may inspire other building owners to retrofit their properties, in Chicago and elsewhere. Fast-multiplying local and national goals to lower greenhouse gas emissions and energy use are putting existing buildings under greater scrutiny. Commercial buildings consume about 40% of the nation’s energy and generate about the same share of the gases blamed for global warming.
Yet new structures, where almost all green construction is happening today, add less than 2% to the total building stock each year. Thus, the only way to hurry along savings is to update the nation’s 4.9 million older commercial structures.
The rush to go green isn’t only due to government mandates. If owners of pre-21st century structures want to draw tenants who’ll pay top dollar, their properties must be as inviting as new places. That means installing not only the latest technology, but also green features, such as healthier workspaces stocked with nontoxic furnishings, carpets, and cleaning agents, plus plenty of natural light and ready access to public transportation.
Still, upfront expenses — and inertia — often hold landlords back. “Big existing buildings are a great opportunity, but they’re harder to get to,” notes Sadhu A. Johnston, the City of Chicago’s chief environmental officer. “They rarely go through major retrofits, and they’re not coming in for permits, so there just aren’t as many openings for us to point out how to do things differently. They have to go out of their way to go green.”
To remake the Mart, Bettin turned to the U.S. Green Building Council in 2005. A nonprofit standards-setting body, the council provides the imprimatur for green real estate, thanks to its Leadership in Engineering & Environmental Design (LEED) designation for new structures and LEED-EB certificate for existing buildings.
Think of an application for approval as a multiyear beauty pageant — but instead of points for swimsuits and talent, building managers get points for operational excellence, ranging from how much water they save to how clean they keep the air…
Save The Planet: Disappear — Weisman presents a curiously refreshing vision of the apocalypse
THE WORLD WITHOUT US By Alan Weisman. Thomas Dunne Books/St. Martin’s Press — 324pp — $24.95
The extinction of humankind is a grim topic. Yet in The World Without Us, journalist Alan Weisman invokes this ancient specter as the jumping-off point for a refreshing, and oddly hopeful, look at the fate of the environment. His central question: What would earth be like if humanity just vanished? Weisman’s answer is as fascinating as it is surprising. It turns out, from towering bridges to sprawling cities–not to mention delicate books or masterly artworks–precious few of man’s creations would last long. The author richly documents the damage done by industrial civilization, providing further momentum for business to go green. But his explanation of just how all of our methodically built cities, factories, and temples would implode under the slow assault of rot, rain, plants, and critters is the most compelling aspect of the book. The winners in Weisman’s tour de décomposition are the very flora and fauna that today are under pitiless assault from humanity…
If you walk the halls of Westinghouse or GE Nuclear, the top U.S. builders of atomic power plants, you’ll notice a buzz in the air–the first stirring of excitement since the 1970s. With many experts endorsing nuclear power as a clean replacement for coal-burning plants linked with climate change, nuclear players are gearing up to build more than 20 reactors, the first new facilities on U.S. soil in decade.
But roaming the same hallways, something else seems odd: There are practically no young people. After years lying dormant, the industry faces a dire labor shortage, and it will get worse during the next 5 to 10 years as thousands of aging workers drift off to golf courses and retirement homes. So plant builders and utilities are frantically searching for fresh talent. If the industry is to have any future, “young workers are the key,” says Howard J. Bruschi, a retired chief technology officer at Westinghouse Electric Co. who helped design the company’s newest reactor, a model that has been selected for 10 projects in the U.S.
The dilemma dates from the late 1970s, when skyrocketing costs began to chill investor enthusiasm for new plants. In 1979 a partial meltdown at Pennsylvania’s Three Mile Island doomed the industry’s optimistic vision of 1,000 atomic plants. Hiring stalled, and nuclear engineering programs at universities stopped churning out graduates. In short, a whole generation of nuclear workers went missing.
Today, the average age in the nuclear power sector is 48–one of the oldest of any U.S. industry. By 2010 about 27% of these workers will be eligible to retire–some 15,600 men and women. A further 7,600 or so are expected to exit the industry through turnover. That entire head count will need to be replaced to keep today’s fleet of 104 reactors humming.
Factor in projected growth, and the situation is even more serious. A substantially larger workforce will be needed by 2010, when the first of two dozen proposed reactors enters the long design and construction process. Overseas, 27 plants are under way, 62 are on order or planned, and an additional 130 have been proposed.
Even if only a fraction of those plants are built, the industry faces a “severe shortage of qualified workers,” according to the American Nuclear Society. “We’re probably getting 80% to 90% of what we need,” says Andy White, president and CEO of GE Nuclear Energy Inc. (GE ), whose reactors have already been selected for seven new U.S. projects.
NO EMISSIONS
It’s easy to see why some industry executives have started to fret. It can take years for new hires to master the industry’s complex procedures and absorb its safety-obsessed culture. “Five years ago, we didn’t dream we’d be building on this scale again,” says Amir Shahkarami, senior vice-president for engineering and technical services at Exelon Corp. (EXC ), the nation’s largest nuclear utility. Exelon operates 17 reactors today and is considering one new facility. “The aging workforce will result in a substantial loss of experience,” Shahkarami says.
Just how quickly colleges can crank out such highly specialized engineers remains a question. Some 34 nuclear engineering departments have closed since 1980, leaving just 29 today. By the late 1990s, the number of undergraduate students enrolled in such programs had fallen to fewer than 500 a year. Yet in the past several years, enrollment has again begun to rise. In 2007, total nuclear engineering majors in the U.S. will approach 2,000, predicts John Gutteridge, director of university programs at the Energy Dept.
Several factors account for renewed interest on campuses. Starting salaries in nuclear power jumped 6.6% last year, to about $54,600. In addition, today’s students are far more worried about global warming than the risks of a nuclear meltdown or the problems of waste disposal. Coming of age long after the disasters at Three Mile Island and Chernobyl, new hires in the power sector tend to regard atomic energy as a plausible solution to America’s energy woes–as did the engineers who built the first generation of nukes. The fact that plants emit no greenhouse gases is a huge plus. “I want to be sure my kids can plug in their iPods someday, too,” says Michelle Yun, a recent grad who joined Exelon as a licensing engineer last year.
DeLeah Lockridge, a senior engineer in Westinghouse’s services unit, is thrilled by the prospect of new plant construction. When she entered the company in 1999–one of the first new hires following a long freeze–Lockridge worried that nuclear energy might be a dying industry. “I didn’t expect to have the opportunity my instructors had,” she says. “Now, I want to build a plant.”
No nuclear power plants have been built in the US since the Three Mile Island accident in 1979. But interest in nuclear energy has been growing in the past year, as the country looks for alternatives to coal and natural gas. In this week’s Underreported, Adam Aston of Business Week and Scott Cullen, the Nuclear Security Project Director for the GRACE Policy Institute, discuss the pros and cons of investing in new nuclear power plants.
What’s driving Chicago to pour $3 billion into a 109-mile network of tunnels and reservoirs hacked out of the limestone underlying the Windy City? It’s the same fetid force that spurred Los Angeles voters to O.K. a $500 million bond last November. Construction titans and big-box retailers are getting more serious about it, too. It’s causing thousands of other U.S. cities and companies to yank up manhole covers and storm grates and take a closer look at the witches’ brew of garbage, hydrocarbons, and bacteria that flows down curbside drains and eventually into local waters. Under foot and out of sight, those conduits are a growing problem. They empty untreated stormwater into rivers and lakes. This water can, at its worse, “kill fish and wildlife, close beaches, and threaten human health,” explains Steve Fleischli, executive director of Waterkeeper Alliance, a nonprofit watchdog group based in Irvington, N.Y.
2008 DEADLINE. That’s why the U.S. Environmental Protection Agency has made cleaning up stormwater a must-do for the nation’s municipalities. The EPA Web site describes storm runoff as “one of the most significant sources of water pollution in the nation, comparable to contamination from industrial and sewage sources.”By the end of 2008, EPA rules say that cities with population of more than 10,000 must have a plan in place to stem the flow of debris and contaminants from curbside into local waterways. The rule has unleashed a wave of spending on everything from megascale engineering projects like Chicago’s Deep Tunnel to innovative drain drop-ins that cleanse the water that passes through it.
Stormwater can pollute, sicken, and even kill. First, it’s highly polluted from the get-go. While rain water may fall from the sky clean, it becomes foul the instant it hits the street. The contaminants include an estimated 1 million gallons of dissolved hydrocarbons — oil and gas dripping from the nation’s 200 million-plus vehicles — per year, as a toxic stew of animal and human fecal bacteria, rubbish, and traces of heavy metals, pesticides, and herbicides, particularly in suburban and rural areas.
What’s more, many storm systems flow directly to waterways and lakes. Tom Leary, stormwater program officer at the City of Long Beach’s Public Works Dept., explains that when it rains in the Los Angeles/Long Beach area, anything within the 875-square-mile Los Angeles River drainage area “is flushed into the sewers and eventually into the river.” Last year that included some 12,000 tons of rubbish that washed up on city beaches.
BAD BEACH DAYS. Sewage spills pose a related, more complicated problem. Many cities linked their storm drains to sewage pipes — in part or in whole — because of the hazard posed by untreated stormwater. The idea: By passing storm runoff through sewage treatment plants, rainwater can be cleared of garbage and toxins. And this works when the pipes can handle the flow.
Yet in cases when a heavy rain fills up both pipe networks, they can back up and flood city streets with sewage-tainted water, as used to happen in Chicago. The contaminated water is then forced into nearby rivers or lakes. Sewage spills can spike bacterial (fecal coliform) counts for days, exposing bathers to cholera and other diseases. Along California’s coast, for example, “Closed Beach” days have been common in recent years because of health risks posed by sewage plumes.
Big companies are in the firing line, too. Construction projects and multi-acre parking lots are particularly serious sources of what the EPA describes as “non-point pollution” flowing into sewers. The agency has lately been turning up the heat on big-box retailers and large property developers, says Fleischli. Together with the U.S. Justice Dept. and a number of states, the EPA reached a settlement with Wal-Mart Stores (WMT ) in 2004 for violating the Clean Water Act during store construction. The retailer agreed to pay a $3.1 million civil penalty and to reduce tainted runoff from its sites.
RESURRECTED RIVER. Chicago’s approach has been to build what amounts to a very big holding tank for its sewage and rain water. Formally known as the Tunnel and Reservoir Project, the EPA-funded network was begun in 1974 and is made up of subterranean tunnels, many the width of a locomotive, connected to a series of concrete caverns. By storing wastewater until it can be processed by sewage treatment plants, the largely completed system is already helping to make Chicago area waters cleaner.
Once infamous for its lifeless, inky, and occasionally even flammable water quality, the Chicago River has been resurrected with the return of some 50 species of fish, along with canoeists and riverside cafés, if not swimmers quite yet. You can see the progress at this slide show.
Compared to Chicago’s big dig, Norwalk (Conn.) has taken a micro approach. Rather than tear up its streets, the city turned to privately-held AbTech Industries Inc. to buy a high-tech filter that can be dropped into the existing stormwater drains. AbTech’s Ultra Urban Filter (UUF) liners are made of a patented polymer that lets water pass through, but bonds permanently with oil, PCBs, and other toxins, while also catching more common trash. When treated with a proprietary anti-bacterial, nontoxic coating, the sponges can also zap harmful bacteria as water passes through the popcorn-like material. In addition to routing debris removal, typically done with storm sewers, the UUF’s anti-bacterial and oil-trapping capacity lasts about two years.
LIGHT TREATMENT. Other cities and companies are following suit. Long Beach, for example, is using a “treatment train” combining UUFs, garbage nets, and a handful of mechanical separators that spin wastewater to separate debris. Alternatives include more costly chlorination, ozonation, and/or power-hungry devices that use ultraviolet light to sanitize water as it passes through.
Yet, none combine antibacterial properties with the ability to drop them into existing storm drains, with a minimum of costly construction, explains Glenn Rink, president and chief executive of AbTech. At about $1,000 per drain, UUFs can help a city clean up its waterways, for thousands or millions of dollars, rather than billions. With over 275 UUFs in key areas around Norwalk paid for by a $500,000 EPA grant, the filters are proving to remove, on average, 75% of harmful bacteria, and up to 99.9%.
With the EPA’s deadline drawing nigh, pressure to clean up stormwater runoff is just beginning to rise. Nationwide, the number of roadside catch basins — in cities and rural areas — is estimated to be over 5 million. Cleaning them all is a Olympian task, but you can do your own small part: Rather than toss that cigarette butt or dog poop down a sewer grate, look for a trash can instead.
