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Powercosm: George Gilder Brings a New Paradigm to Power

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Here’s some “big picture” stuff. George Gilder, who’s staked himself a huge role as prophet of the internet, is now tackling energy as well, with the help of two longtime energy industry figures. There are some challenging ideas here for all of us.

If you have the patience,
Part 1 of this Note, gives a flavor of how his influence and view of the internet.
Part 2 is the announcement of a new conference “Powercosm”.
Part 3 is a beginning guide to the basic thrust of the argument that “power,” i.e. electrical energy, will be networked much like data is today.

” . . . the single most powerful new technology investment opportunity for the next five years… Electricity in the digital age of silicon powerchips.”

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Part 1. Excerpts from an article in the current (March 25) issue of the Economist, page 73:

” . . . Mr Gilder reflects on the revolution in progress today. And while he thinks, America waits with baited breath.

It is known as the “Gilder effect.” Sometime in the first half of each month, an e-mail emerges announcing the imminent arrival of the next utterance. At the appointed hour, tens of thousands mob his website. Those who get through to the server speed-read eight pages of technology, then scan a list of firms. Having noted an addition here, an omission there, it is off to the day-trader races. In the past year, Novell, Qualcomm, JDS Uniphase, Terayon Communication, TeraBeam and others have seen their reputations soar within minutes of publication of the Gilder Technology Report.
. . .
Mr Gilder is America’s foremost technology prophet, a reputation he earned with “Microcosm”, published in 1989, a book on the implications of the semiconductor revolution. Yet it is still odd that his words have such immediate impact.
. . .
The market-moving is relatively recent, dating back only a year or so. His influence on the technology industry goes back much farther. It stems from Mr Gilder’s chief insight about technology, which itself stemmed from his experience as one of the architects of Ronald Reagan’s supply-side economic views. (One of Mr Gilder’s many incarnations: others include political speechwriter and controversial author on such topics as sex and race.)
. . .
It is all, inevitably, about supply and demand. Mr Gilder’s insight was to spot the transition from the age of computing to that of networks. What was scarcest in the computer era (bandwidth, or network capacity) would soon become cheap and abundant. And what was once abundant (big computing’s power, transistors and space) would become relatively scarce, in an increasingly mobile world of small, rather simple devices connected to others using a ubiquitous network.

Moore’s law predicted that, for any given price, computer-processing power would double every 18 months. Its lesson, says Mr Gilder, was “waste transistors”. That meant building software and businesses on the assumption that computing power would be virtually free; the transistors we “waste” to play PC solitaire exceed what NASA could muster when it launched its Apollo missions. Gilder’s law says that communications capacity will triple every 12 months. And his corollary is “waste bandwidth”. As communications become cheap, work will shift from smart devices to a swarm of interconnected, dumber ones that are tiny and cheap.
. . .
What distinguishes him from other wired pundits is his understanding of the technology, from the atomic level of semiconductors to the economics of wire-laying. He does his homework, seeking out engineers sooner than company bosses, and grilling them in excruciating detail.
. . .
He credits his insights to the advice of his academic mentor, the semiconductor pioneer Carver Mead: “listen to the technology”. But with the world’s markets echoing to the sound of his own voice, that gets harder all the time.”

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Part 2. Powercosm

The conference was first announced to Gilder’s “Telecosm” 60,000 subscribers, and is modelled after the conference by that name that he’s held annually for 3 years. Unfortunately for the rest of us, Powercosm sold out in the first two days, and wasn’t promoted in other circles.

I’m told the conference operates very differently from most we’ve all been to. It’s limited to 250 registered attendees. The speakers are the CEO’s and movers and shakers in companies that are leading the changes that are the conference theme. There is a lot of discussion, debate and participation.

http://www.powercosm.com/conference.htm ————————————-
From the desk of: George Gilder

Thank you for your interest in my upcoming conference, Powercosm™: Powering the Telecosm, to be held at the Coronado Island Marriott Resort in San Diego, CA, June 14-16.

Just as I did 3 years ago with my Telecosm Paradigm, I have decided to launch and devote an entire conference to a new paradigm, the Powercosm™. It may just be the most important event for technology investors this year. (And that’s saying a lot. It’s going to be a great year!)

The real purpose of this conference is to get my subscribers in EARLY–no Yahooers need apply–on what I consider the single most powerful new technology investment opportunity for the next five years… Electricity in the digital age of silicon powerchips.

The Telecosm and the Internet Economy will make the broad electric technology sector one of the most dynamic investment sectors in the economy (reaching below and beyond the realm of traditional electric utilities). We stand at the threshold of technology-driven changes in power as deep and profound as those that began the telecom revolution two decades ago. And that’s the reason why you have to come to San Diego!

I’m creating the Powercosm™ conference in partnership with my good friend, Peter Huber, and his colleague, another brilliant technologist, Mark Mills. Together, they edit the newly launched Digital Power Report, a monthly investment strategy report published by Gilder Publishing. (If you haven’t already seen the premier issue, download a free copy here.)

Peter and Mark are today’s premier authorities on “powering the information age.” Their prescient and groundbreaking analysis, delivered monthly in the Digital Power Report, will help you uncover emerging investment opportunities in an industry poised for unprecedented growth in the next few years.

And the Powercosm™ conference will be the kick-off event for this new paradigmatic investment opportunity. Limited to only 200 top investors and business leaders, the conference will feature an overview of the paradigm itself, followed by specific presentations on Powerchip Fabricators, Powerchip Integrators, Network Technologies, the “High-Nine” Power Technologies, and Overall Technology Integrators. I have no doubt that in the coming decade of the Powercosm™, there will emerge companies that are the technological analogs of Intel, Oracle, AMD, AOL and Qualcomm.

We will feature Peter Huber and Mark Mills (as well as your humble servant) as speakers and panelists, of course. But equally important for you, we will highlight discussions by and with the leading players within the new, wide open Powercosm™, including top business leaders from the new and emerging market leaders such as American Power Conversion, Silicon Power, Emerson Electric, American Superconductor, Surepower, Capstone, Calpine, CREE, and many others-many of which you may not have heard of before.

George Gilder

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Part 3. A Beginning Guide

On the Powercosm homepage ( http://www.powercosm.com/ ) there is also an invitation to subscribe to a new monthly newsletter “The Digital Power Report”, by Peter Huber and Mark Mills. (Mark will be familiar to many of you from his long involvement with electrotechnologies.) The free Inaugural issue, available for download from the website, is titled “The PowerChip Paradigm.” Under “articles” there are also a number of columns the authors did for Forbes Magazine, and other work including Congressional testimony.

Drastically oversimplifying, the ideas are:

1. The devices that make up the internet (the boxes) use a lot of electric power, as much as 8% of the entire US consumption. There are other complicated effects, e.g. economic growth, efficiencies, wealth effects, reduced reliance on oil, etc. Mill’s Congressional testimony in particular presents one side of quite heated (sorry for the pun) arguments. The opposing view would have it that the internet doesn’t result in an increase in energy use at all, and thus is a great friend to the environment.

2. The internet infrastructure requires a far higher quality of power than we’re accustomed to — many 9’s of reliability — and this demand is much better supplied with “short wire” devices, that is, distributed resources providing generation and storage close to the load.

3. This is the big conceptual blockbuster. Most of us think of “bits” as being “virtual.” They do, however, have a physical reality. Electrons (or photons) must move in order for the bits to go from one place to another.

The basic physics of moving small numbers of electrons is not fundamentally different from moving large numbers of electrons. And in fact, the silicon devices to switch, control and move large amounts of power are evolving rapidly.

PowerChips will soon make it possible to handle enable power in much the same way as bits
are today, so power will be managed in packets sent along a switched network “grid”.

The conventional view is that the transmission grid is more like the gas pipeline system — a big, physical structure. This analogy is wrong. Gas pipelines move stuff — molecules. Electrons, in small or large batches, are different.

Is DG like the PC?

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This article by our friend Mark Mills appeared in World Climate Report, and again (modified) in the June 1 issue of Public Utility Fortnightly. A good reality check on the rhetoric of distributed generation. I especially like the point that there’s no “Moore’s Law” for electric power generation.

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http://www.nhes.com/back_issues/Vol4/v4n12/fueling.html

Distributed Generation is to Electricity as PCs are to…?

By Mark P. Mills

Distributed generation is the latest “killer application” at energy conferences and seminars. Global apocalysts say DG is to electricity what the PC has been to the computer industry. Just as PCs supposedly took down mainframes and the likes of IBM, so too will DG erase central, fossil-fueled power plants and big utilities.

Even otherwise serious vendors of DG technology have found themselves seduced into playing the climate change card in the hopes of benefiting from imminent federal largess.

DG enthusiasts believe the day will soon come when consumers can head over to Home Depot and buy a little “appliance” to take home, plug in, and supply all the power needed, grid-free. Prototypes already exist for a refrigerator-size generator that works like the “auxiliary power units” airplanes use to make electricity while sitting at the gate (don’t they make life comfortable?). The trade press is filled with DG hype. Independence (from those “evil” utility giants who’ve provided us with cheap power for 75 years) looms near.

Eco-hype

Energy tech forecasters and global climate change scaremongers share an ally. The anti fossil-fuel lobby has for 25 years been predicting the imminent demise of fossil fuels, the planet’s primary energy sources, and the imperative to shift to something else. The climate change threat only increases the urgency of making an ostensibly inevitable transition to a post?fossil-fuel world.

What’s more, DG kills two birds with one technology: Fossil fuels and utilities, both of which apocalysts reflexively dislike. DG, they believe, will set us free of central coal-fired power plants. After all, coal supplies 55 percent of what goes into the power grid. And that percentage is unlikely to diminish.

Exciting things are happening on the DG front. But they will not have the transformative effect their advocates would have you believe they will. In fact, DG will not replace coal plants, but will complement them and almost certainly increase the use of fossil fuels and likely pit oil (not favored by apocalysts) against natural gas (reluctantly favored by apocalysts).

PC-mania

The PC analogy, while seductive, completely fails. Regardless of the astronomical growth in PC use, the venerable mother of computing’s “heavy iron,” IBM, is far from out of the picture as a major corporation, as its stellar stock performance this decade attests. IBM and its ilk are benefiting from, not being eviscerated by, the information revolution in all its forms.

The data traffic that PCs and the Internet create, and the data appetites expanding applications for computing create, are driving the market toward so-called “super servers”—the 21st-century version of “mainframes.”

But those using the DG: PC analogy usually mean to imply that DG stands on the threshold of rapid cost reductions, emulating the collapsing price and rising performance of PCs over the past 10 years. You hear them warning utilities that central station power plants will follow the fate of slide rules.

The PC price/performance trend arose from advances in the technology used to fabricate integrated circuits. Declining scale and increasing speed equal lower costs. It’s “Moore’s Law.” Still, though today’s desktop is more powerful than yesterday’s mainframe (and today’s mainframes are awesome), Moore’s Law just doesn’t apply to DG and electricity. Sorry.

Power plants have the distinct disadvantage of being constrained by a much longer-standing law, from the realm of physics—the Carnot limit for thermo-dynamic systems, which is the same for all power plants, big and small. Translation: The temperature of combustion sets the limit for the energy efficiency of burning a fuel. Size doesn’t matter; and small actually may be worse. Technologies to tweak efficiency are not only applicable to all sizes, but many of the tweaks are easier and more cost-effective for big iron. This basic tenet holds true for all of the DG technologies based on burning fuels, which are the most likely near-term DG systems.

PCs Ain’t PVs

But what of solar, wind, and fuel cells, the apocalysts’ true DG darlings? After all photovoltaics (PVs) are made from the same basic stuff as microprocessors. Sorry, the analogy still fails.

Sure, PVs are made from silicon (or similar materials) just like microprocessors. Here the similarity ends. To gain greater PC power, engineers make ever-smaller components of increasing density, thus expanding the total number of microscopic electronic devices per square inch.

But you just can’t make a smaller, more efficient PV. Rather, you need more (lots more) square inches—nay, square acres—of silicon devices to gather the fuel, which is in this case the sun’s energy. True the sun is limitless, but it’s just too darn far away to produce high-density power, hence the need for lots of acreage to gather the dilute power. (Not so of course on Mercury, where ponds would be molten metal, not water).

Wind power suffers from the same problem. Greater economy and power don’t come by making windmills smaller—you need bigger ones and more of them, lots more, to power a nation.

Then what of fuel cells, those intriguing devices that use electrochemical magic to make electricity without combustion? In brief: Too expensive and they still need fuel. The materials that make the electrochemical magic happen are expensive. Lower costs face basic, almost intractable (but probably eventually solvable) materials issues.

Fuel cells run on fuel, ideally hydrogen. Virtually all of the solar system’s hydrogen is in the sun: inconvenient. So we can make hydrogen here (expensive and energy-intensive) or use the hydrogen inherent in conventional fuels such as methanol and even gasoline, also a costly exercise. We will, to be sure, eventually see real advances in fuel cells, but they’re no threat today to the gigawatts of conventional generation.

Oil-fired DG

Which brings us to the last category for DG: microturbines and diesel engines. Most of the current market hype surrounds microturbines, which are really just very small jet engines tied to an electric generator. They do work, but they need fuel—usually natural gas, but oil works too. They still cost too much, and despite the hype, you still can’t buy one. Worse yet for efficiency mavens, they are less thermally efficient than central power plants.

That said, it is clear that practical and useful microturbines will emerge soon, and almost certainly in advance of any other new form of DG. The most likely near-term applications for microturbines will be in three areas: where reliability supercedes cost; where power is very expensive, capital scarce, and incremental power needs modest (Costa Rica, for example); and in meeting costly peak demands.

Remember last summer’s astronomical price spike for peak power during the heat wave? Just a few of those go a long way toward covering the higher costs for DG peaking. In all likelihood, the folks installing microturbines to shave peaks will be the same as those operating or selling coal-fired baseload power to create a seamless, blended reliable and economical power source.

Ironically, the only immediately cost-effective DG technology is the venerable diesel engine. So-called diesel-gen sets already exist by the tens of thousands, powering oil fields, small villages, and military bases. Recent advances in materials and controls have made diesels even cheaper and more efficient (better than microturbines), and exceptionally reliable. And you can buy them right now.

Power experts are already forecasting that deregulation will generate a boom in use. They can burn either oil or natural gas, and in most applications use the former. This is clearly not what apocalysts intend deregulation of utilities to effect.

Off-peak coal: a real “killer app”

Perhaps the worst nightmare for coal-haters is the potential of new technologies to achieve cheap off-peak kWh storage—distributed storage. Small, high-tech flywheels look promising (just park them outside beside your central AC unit). You spin them up at night with an electric motor powered by otherwise “wasted” and ultra-economical (maybe 1.5¢/kWh) off-peak power. The motor works as a generator in the daytime, drawing the kinetic energy off the flywheel. Easy, reliable, no new fuels, one moving part. Slick. Uses the cheapest off-peak power too; hydro (and nuclear) in a few places, coal everywhere else.

The capital costs for diesel gen-sets are already a lot lower than for central power plants. Given that, and the low cost of fuel, why isn’t every business making its own power already? Few end-users want the operational and maintenance hassles. Electricity coming off the grid is awfully low-maintenance. The collective cost of tending to millions of distributed (quirky) products remains the showstopper.

We’re all winners

Nonetheless, significant and viable niche markets for DG are inevitable, probably up to 10 percent of total U.S. demand. Once momentum starts building, and reliability grows, emerging technologies can make a noticeable dent in new supply. A critical leap for fuel-based DG will be cost-effective, network-based remote maintenance and monitoring of distributed equipment through advanced sensors, information technology, and neural networks.

Bottom line: DG is coming. The computer analogy does work in one way. Just as PCs are driving demand for mainframes, so too will DG drive demand for larger, more efficient and low-cost central power sources.

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Physicist Mark P. Mills is a technology strategist and energy consultant and president of the research-consulting firm Mills McCarthy & Associates Inc.

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World Climate Report is the nation’s leading publication covering the breaking news concerning the science and political science of global climate change. Available online at — http://www.nhes.com/home.html