I left off a couple weeks ago talking about breaking our dependence on fossil fuels. While some of this is accomplished by finding other energy sources, much more of it is accomplished by reducing overall energy demand. This post will discuss one way to do this: enabling consumers to shop via mass transit.

There's several parts to this. One is for mass transit providers to provide routes that go to, or at least through, shopping centers, so that people can shop without having to drive to the shopping mall. For example, in Chicagoland, that would mean extending the north end of the Blue Line to Woodfield in Schaumburg, and extending the south end of the Blue Line to Oak Brook Terrace, or even all the way through Lombard. As both Schaumburg and Oak Brook/Oak Brook Terrace are already home to several large employers this would also help with moving people to their employment. Another idea is to extend the Yellow Line to Old Orchard.

I recently heard that Skokie is offering deals to try to get people into its "downtown" area. Here's what I find interesting. Skokie has several shopping districts: the aforementioned Old Orchard is an upscale boutique mall that seems to be doing quite well despite the present economic depradations. There's also a modest but apparently doing-pretty-well shopping area on Dempster near the north terminus of the Yellow Line. However, that's not the "downtown" that Skokie is talking about. They're talking about the area around the intersection of Oakton and Lincoln -- which is almost deserted these days. Why? It's hard to get to. There's not a lot of parking, the roads in that area are congested and hard to use, and there's no good mass transit options. Ironic, when you consider that the Yellow Line crosses Oakton about a thousand yards away... it just doesn't stop there. Adding a stop on the Yellow Line near Oakton would do wonders for Skokie's downtown, but despite the CTA and others talking about doing this for years it hasn't yet happened. So not only would this help reduce energy usage by having people use the Yellow Line to get to Skokie's shopping district instead of their cars, but it would boost Skokie's overall economy, to boot. If there's a downside here, other than the expense of building and maintaining the station and the extra five minutes it'll take for the trains to pass through because they have to stop at the station, I don't see it.

On the radio today there was a short blurb about the CTA contemplating building grocery stores inside CTA stations; this has also been covered in the Chicago Tribune. This is a great idea for enabling consumers to do daily commerce without additional transit expenditures, although, of course, there's the difficulty of getting the groceries home afterwards. And that's actually one of the main obstacles to pedestrian shopping: getting your loot home.

There's a solution to this, of course, and it's not a new one. It wasn't that many years ago that you'd go to the store, pick out what you want, and the shopkeeper would bundle it up and have his son (or some other employee) drop it off at your house later that day. Of course, this was before everyone had a car. Well, we need to go back to this model, or one like it. Go to the mall, buy all the stuff you want, then when you're done, if you have more stuff than you can carry home on the train, you go by the delivery services center and, for a moderate fee, they'll dispatch it to your home on whatever timetable fits your schedule and your budget. Yes, you will pay a bit more for it, but on the other hand if such services were pervasive, you might be able to get by without even owning a car. The IRS now allows a deduction of 58.5 cents per mile for business use of a car; that suggests that owning a car costs about $7000 a year, or $19 a day (assuming a relatively typical 12,000 miles per year). That leaves quite a bit to pay for delivery services, even after mass transit fares. And the delivery service can achieve economies of scale as well as logistical advantages that you can't. We could even eventually build a robotic delivery service that can take packages and deliver them to our houses for us, depositing them in a secure receptacle so that even if we're not home nobody will be stealing our stuff.

So today I got dinged from I think three different people about a Congressional effort to compromise our privacy by requiring eBay, Amazon, and all other online retailers to report our purchases to the government as part of Chris Dodd's proposed mortgage bailout bill. Now, this didn't seem like a Chris Dodd sort of thing to do, so I set to reading a bit. Let's start here, with a press release from some entity called "FreedomWorks". They make it sound as if this provision is going to affect "nearly every credit card transaction in America" and that it's horribly intrusive.

It's not. Quite simply, they are lying. Here's what the provision (S.AMDT. 4983 to H.R. 3221; see pages S5902 et seq of the Congressional Record) actually requires:

Each payment settlement entity shall make a return for each calendar year setting forth--
(1) the name, address, and TIN of each participating payee to whom one or more payments in settlement of reportable transactions are made, and
(2) the gross amount of the reportable transactions with respect to each such participating payee.

In other words, what this does is require "payment settlement entities" (basically, credit card processors and alternative payment processors such as PayPal) to report, for each person who receives funds as a result of processing transactions on behalf of that person, a report to the IRS of the total amount of funds received (over the year) as a result of such processing. It does not require any reporting of information about payors or about individual transactions. Nor does it require any online merchant to report anything except insofar as such an entity might also provide payment clearing services. Payees who receive less than $10,000 in any year and participate in fewer than 200 transactions are excluded from mandatory reporting.

Anyone who has worked as an independent contractor, or has operated a business, is probably familiar with Form 1099. Any business who hires another business to provide services for an amount greater than a certain threshold (which used to be $400 but I believe has gone up in recent years) has to file a Form 1099 with the IRS attesting to the gross amount paid to that other business for those services. The purpose of this provision is to make it harder for self-employed individuals to conceal revenue from taxation. What Chris Dodd is proposing is the same thing, for professional eBay sellers. And he's doing it to raise the money required to pay for the mortgage bailout he's proposing. Since this represents taxes that are legally due and payable but not being paid because the people who are supposed to be paying them are not reporting the income, I consider this perfectly fair and reasonable.

And that's why the eBay sellers are up in arms over this. This doesn't invade anybody's privacy. What it does do is make it far harder to collect money via PayPal or other alternative payment handling methods and have that income be undocumented. Right now, if you're selling stuff on eBay to the tune of $25,000 a year, it's entirely possible that you can conceal most or all of that from the IRS because it's undocumented. Dodd's proposal documents it: PayPal will be required, at the end of the year, to send a note to the IRS that says "Joe Ebay Shark received, via our service, a total of $25,126 in gross payments". And if you don't file a return that reflects that, the IRS will start sending you increasingly nasty little letters asking for their share of that $25,126.

If all you ever do is buy stuff, you won't ever have to deal with it. If you only sell things once in a while, again, you won't have to deal with it (unless you sell really expensive stuff). The only people this affects are people who make more than $10,000 a year selling stuff on eBay, and a handful of companies like PayPal. And, obviously, the people who need a mortgage bailout, to be paid for by collecting taxes already due and payable on tax-evading eBay sellers.

I gotta hand it to FreedomWorks. They took a perfectly ordinary income-reporting provision, and one that is not even all that invasive, and turned it into a vile invasion of online privacy. Too bad they had to lie to do it. I suppose we can't really blame them; the CRO is estimating that this reporting provision will generate $9.8 billion in government revenue over ten years. That's a lot of unreported income.

Please, call Congress at 1-866-928-3035 and tell them that you support requiring professional eBay sellers to pay income tax.

Oh, and go thank Slashdot for uncritically picking up the story and running with it as if were actually true.

I wrote a lengthy article yesterday on the oil crunch. A couple of people pointed out the Tesla Roadster as an electric vehicle option and felt that I unfairly glossed over it. The Roadster is a really neat car, no question about it. However, it is extremely pricy, $109,000, and I still have doubts about its lithium-ion batteries. Also, it requires a 70A charging circuit, which is more than I have available in my house (we only have 100A service here, and putting 70% of that into charging my car would leave insufficient reserve to run the rest of the house). I think the Roadster is a great proof-of-concept vehicle, as is the equally impressive Aptera, but neither of these cars is quite "ready for prime time" and I left them out of my discussion because of that.

Another person asked me about solar power, specifically photovoltaic power. While I think PV power is going to be useful as a spot source, and to provide daytime surge power, there are serious issues that prevent it from being the backbone of our power grid. Last year (2007), the total electrical generation in the United States was approximately 14433 petajoules (see below). One square meter of solar cell, at 40% efficiency (which is about the best anyone has made so far), will yield, under average insolation conditions, about 5.66 megajoules a day, or 2065 megajoules a year. That means we'd need about 6.99 billion square meters of land completely carpeted with photovoltaic cells to generate that 14433 petajoules. That's 2698 square miles. Under more realistic efficiency values (around 8%) we'd need five times that, or nearly 14,000 square miles. We can do that (this is about 15% of the land area of Nevada, most of which we're not really using for anything anyway), but there are several other catches here.

First, photovoltaic power is only available when the sun is visible in the sky. This isn't the case at night. We'd have to find some way to store excess power generated during the day for use at night. There are a number of ways to do this (batteries, pumped hydroelectric, supercapacitors), but none of them is terribly efficient. So that reflects significant losses, which mean even more Nevada desert gets covered by refined silicon. Also, it turns out that the areas in the country that use the most power tend not to be those that have the best insolation. This means that we'd have to generate the power being generated in sunny, empty areas like Arizona and Nevada and transmit it to the areas that use it, like New York and Boston. Long transmission lines have high losses, as much as 50% for applications like this. This is why we typically generate power near where it will be used, and it's why electrical power is so much more expensive in the Northeast. If we tried to power the entire United States using a solar farm in Nevada, we'd probably have to cover most of the state with refined silicon.

Also, photovoltaic cells are expensive to make. The materials required to make a PV cell have to be very pure and must be constructed using very carefully controlled methods that require a good deal of energy. Right now solar cells cost something like $120 per kilowatt of generating capacity to make. At that rate, it'll cost around 500 billion dollars to make the solar cells required, and I'm not even accounting for losses due to inefficiency in storage and distribution. That also represents about two million tons of semiconductor-grade silicon - a couple orders of magnitude times the amount currently available or predicted to be available in the next several years. Maybe I've made a mistake in my math somewhere, but these numbers just lead me to believe that chasing photovoltaic as a prime source of electrical power is a mistake. I think PV as a "boost" source, and especially for microgeneration at the point of consumption, is potentially a good idea, but it's not the solution by itself.

Photothermal power is actually more appealing. The direct efficiency is about the same as photovoltaic, but there are several major advantages. First, the use of salt as a circulating fluid offers a relatively simple way to store energy for the nighttime hours; there's no need for batteries or pumped hydroelectric storage. Second, the design does not call for any significantly expensive materials; no need for millions of tons of semiconductor grade silicon, just ordinary concrete/metal construction and other technologies we've already mastered in existing power plant technologies. It appears to me that photothermal power systems can generate as much (or possibly even more) power than photovoltaic power for the same land footprint, at a fraction of the cost. So in response to the individual who asked me about photovoltaic power, I'd say that you should look at photothermal instead. We still need to carpet Nevada, but this time it's with plain glass mirrors with a thin layer of aluminum, not with refined silicon. A lot cheaper to make, and to fix.

However, allow me make another point about power generation: The main substitute for oil in the American economy is clearly going to be electricity, which we currently generate by coal (7212 petajoules per year), natural gas (2932 PJ/y), nuclear fission (2905 PJ/y), and hydroelectric (886 PJ/y), with a total generated electricity of 14433 petajoules in 2007 (all numbers derived from 2007 government reports). Our total fuel consumption for consumer motor vehicle transport in 2001 was 14876 petajoules, or slightly more than our total electricity production in 2007. That doesn't count fuel usage by commercial vehicles, mass transit, airplanes, or trains. We're just talking about consumer use here. The obvious conclusion from these numbers is that if we're going to replace our current fleet of gasoline-powered cars by plug-in electrical vehicles, it's clearly obvious that we're going to also have to, at a minimum, double our generation capacity, and probably closer to triple it to deal with losses. Yet another reason to restructure our lifestyles to reduce the distance we travel on a daily basis.

This post is long enough, so I'll wait for a subsequent one to talk about where hydrogen fits into the picture.

Oil, and the price, supply, and demand thereof, is all in the news today, thanks mainly to Bush's declaration that the US should lift its moratorium on outer shelf drilling. This has led to a groundswell of talk about oil and gasoline prices, American dependence on foreign oil (note polling methodology used), alternative fuels, and all sorts of other things.

The problem is that virtually all of this talk is rearranging deck chairs on the Titanic. Unless you're one of those crazy people who believes in the abiogenic theory of oil origin (which asserts that the Earth contains secret, unlimited supplies of hydrocarbons if you just drill deep enough; while it may be the case that some subcrustal hydrocarbons are of nonbiological origin, that fact will not somehow make their supply limitless), there's no way of escaping the fact that the amount of available oil on the planet is either fixed or increasing very slowly, and that we're drawing down that finite supply at an alarming rate. A 2007 report puts world reserves of crude oil at between 1119 and 1317 billion barrels. Meanwhile, the world consumption of oil (per OPEC in 2006) was 78.3 million barrels a day, or 28.6 billion barrels a year. That means we have between 39 and 46 years of oil left at our current consumption rate, after which we will be out.

Now, many people, especially in the oil industry (and government people friendly to these people) seem willing to hang their hats on the idea that we'll find more oil before we run out in 2054. But even the most optimistic estimates for finding new sources of oil only push the sunset back a few decades more, or rely on the discovery of techniques that seem thermodynamically infeasible today, such as extracting oil from oil sands, which currently cannot be meaningfully done because it takes the equivalent energy of two barrels of oil to get one barrel of oil out, which is something we'd only do if we wanted the oil for nonenergy uses.

And there are certainly nonenergy uses for oil. We make all sorts of things out of crude oil. Plastics, pharmaceuticals, dyes, even food. Many of these will be hard to do without, which might happen if we squander all of our oil for energy. Some of the feedstock demand for these substances can be met from oil sands or from biological sources, but at higher costs (both in terms of dollars and, more importantly, in terms of energy). As we draw down our finite supply of oil, we will find that the price of "cheap" plastic will suddenly not be so cheap, as energy uses increasingly compete with industrial feedstocks for the declining supply of petrochemicals. Wood furniture is looking better every day, isn't it?

So, we need to reduce our consumption of oil as an energy source, and do it fast, before we run out entirely. There are two ways to do this: find alternative sources of energy that can substitute for oil and its derivatives, and reduce our demand for oil and its derivatives by changing how we live. It's clear that we must do both. By far our largest use of oil-derived energy in the United States is to support our extensive transportation system. The problem with transportation systems is that they need a means to store energy in a portable manner, typically as a combustible chemical (fuel), as electrochemical potential (battery), or as electrostatic charge (supercapacitor). The main restriction is that the entire energy source for a given trip has to be mobile with the transport vehicle; that is, no tethers. (Some forms of mass transit use centrally-generated electricity, and are exempt from this issue.) This imposes pretty rigorous energy density requirements, for which there are relatively few options. We currently use gasoline because it's just about the densest available option that isn't dangerously explosive or hazardously toxic. Let's first explore the options for substitute forms of energy storage, then talk about how we can cut demand.

Biological sources of combustible fuel such as ethanol are of no value here; it takes 1.29 barrels of oil to make one barrel-equivalent of ethanol from corn. Switchgrass is worse: 1.50 barrels per barrel-equivalent. Those of you using E85 in your "alternative fuel vehicles" are actually using more oil every time you fill up than if you just put plain old gas in the car. There are advantages to ethanol-fortified gasoline fuels, but they have nothing to do with controlling oil demand. So, we must reluctantly reject biofuels as a solution to this problem. However, as a lot of the energy consumed in farming goes into the production of fertilizer and in the operation of mechanized farm equipment, it remains possible that we might be able to develop farming methods that do not consume more energy than they produce. We must continue research in this area (not only because it will benefit the potential for viable energy production, but also because it will reduce the energy costs of food production), but it seems unlikely to me that this will reap sufficient reward in a timeframe short enough to avoid the impending doom. Similar analysis also deepsixes most form of biodiesel. The one positive of biofuels is that they are theoretically carbon-neutral; that is, they take as much carbon out of the atmosphere as they add to it.

What about hydrogen, George W. Bush's pet solution? Sorry, no. There's two main ways to produce hydrogen in bulk. One of them is from petrochemical stock, which just inserts another step in the chain; the second law of thermodynamics means this is a net loss overall. The other is by electrolysis from water. Since the cracking process is thermodynamically the exact reverse of the reaction involved in burning hydrogen, the energy required to do it is not less than the energy that will be yielded by burning it; another net loss overall. Basically all we're doing by producing hydrogen is storing energy from another source as hydrogen. The problem with this is that hydrogen is not a particularly good medium for storing energy; hydrogen is an explosive gas with a very low boiling point and with a very low density at standard temperature and pressure, requiring complex, expensive, and heavy containment systems to be safely used in a vehicle. There may be niche applications where hydrogen combustion is useful, and hydrogen fueled vehicles do have other benefits (such as theoretical carbon neutrality), but again (as with ethanol) these benefits have nothing to do with controlling oil demand. Hydrogen will eventually become very important, but that day is quite some time off.

Virtually all other available combustible fluids are similarly derived from petrochemicals. The main exceptions are liquified natural gas (LNG) and gasified coal. We have about ten times as much available energy in coal reserves as we do in oil reserves. Of course, coal will run out eventually too, but that date (even if we switched all our oil consumption to coal) is somewhere between 2200 and 2500. There are several problems with coal. A lot of effort (and therefore energy) has to be spent to make it not dirty, and to put it into a form that we can use in cars. There's been ongoing research in coal gasification for years, but the process has not yet been made cheap enough to displace the production of hydrocarbon fuel from crude oil. Eventually the economics of spiraling oil prices will make coal gasification an economically viable alternative even without market tweaking, but it would be a good idea to further incent this behavior now. Also, both LNG and coal are not carbon neutral, and their use will contribute to global warming (assuming you believe in global warming). In any case, increased use of coal will almost certainly be a major part of our middle-term plan as we move to a combination of renewable and fusion power in the future, simply because it's unlikely that we will develop efficient fusion power before the oil runs out.

An examination of the capabilities of the various electric cars on the market today demonstrates why we're not using electric cars. Simply put, the energy storage capabilities of a battery aren't even close to being on a par with what is offered by chemical fuels. The best all-electric car you can find today has a range of perhaps 50 miles at speeds far below what we have come to expect in a car. Electric cars are not today, and quite likely will not in any short time become, a drop-and-go replacement for gasoline-powered cars. Hybrids help some here, in that they use less fuel than nonhybrids, but even doubling the fuel efficiency of the entire vehicle fleet only pushes back the sunset a few decades at most. Plug-in electrics at least allow us to use central power generation, which is an area where we can use renewable sources.

Fundamentally, what has to happen to avoid the oil doom is to rethink our transportation system. And that means more dependence on centrally-powered mass transit, but even more so it means eliminating the need to travel long distances on a regular basis. We can get some gain by making it easier for people to commute to work by light rail or overhead-powered buses, but we get even more if we make it possible for people to walk to work, or to use small electric-powered personal vehicles that can be easily recharged while at the office.

The problem is that our cities have grown up around the car, and around the highway. We have structured our urban environments and our culture on cheap gas. It's a real pain now that gas isn't cheap, and it's going to get even more expensive. (Plaintive cries to the government to do something about the price of gas are about as realistic as asking Congress to lower the gravitational constant. Gas is expensive because we're running out. The government cannot make a naturally limited resource become unlimited.) We can either see the writing on the wall and make deliberate plans to change our way of life gradually, or we can ignore the obvious and let the Titanic slam headlong into the iceberg. Your choice, America.

The Royal Bank of Scotland has issued a global stock and credit crash alert, predicting that the S&P 500 will dive to 1050 as panic overtakes corporate debt markets and national banks get squeezed between recession and inflation. Bob Janjuah, the RBS's strategist, believes this will not be confined to American markets.

Oh, and NPR says there's a commodities bubble about to pop, too. Looks to be another case where overly leveraged derivatives destabilized the market. Derivatives always do that. Derivatives have much the same effect as levees on a river: most of the time, they prevent any flooding, but when they fail, they fail big. You can never eliminate all the risk, and in those situations where you manage to neutralize most of it, what remains is magnified many times over.

From the sounds of it, the only safe place to be is cash... and by that I don't think they mean dollars, either.