Oil at $132 a barrel. The cost of nuclear power plants doubling and tripling. Clean coal and CCS too pricey and unproven, while conventional coal faces stiff public opposition. Meanwhile, interest in electric and plug-in hybrid cars is growing, drawing more interest in electricity from renewables such as wind, solar, and perhaps more important over the coming years, geothermal.

The Northern California Power Agency has signed a 20-year contract with Vancouver-based geothermal developer Western Geopower, which will sell power from its 35-megawatt plant at the Geysers Geothermal Field for 9.8 cents a kilowatt-hour. This amounts to $520 million in revenues for Western Geopower over the term of the contract. This once seemed like a high price, but for emission-free baseload power it looks more and more like a deal. And California utilities know it. In February, Western Geopower terminated its PPA with Pacific Gas & Electric, probably because it knew such power was in high demand and could probably fetch a better price. The company also increased the planned output of the plant, which wasn’t covered in the original contract with PG&E.

It would be nice to see more of these projects and deals. Problem is, geothermal today is limited to location. What we need to see is some major investments and advancements in enhanced or “engineered” geothermal systems that allow for development closer to where the power is needed and to transmission infrastructure. AltaRock, Geothermex, Geodynamics and Ormat (see VentureBeat post) are among the companies exploring this next generation of geothermal, which could one day lead to the development of geothermal power plants in New York State, Ontario, and places never considered in the past.

One can only hope.

I remember three years ago sitting at a roundtable with Bill Gates and I asking him a question that was off topic and probably underappreciated by my fellow reporters at the table. I asked him what role he saw Microsoft playing in the development of the smart grid. Gates wasn’t dismissive, but he wasn’t that enthusiastic either. He acknowledged that utilities need systems that are reliable, redundant, and have the ability to react quickly to problems or commands. Microsoft, he said, won’t directly play in this market. “We’ll just enable other people to do it.”

Since then, I’ve seen a flood of traditional IT and telecom companies jumping on the smart grid bandwagon. Cisco wants to provide the secure network and wireless infrastucture. Telecom providers such as Bell Canada want to offer energy management services and provide the gateway in homes and businesses that connect appliances to the utility. Alcatel-Lucent is in there. IBM is there, and so is SAP. The list goes on: Motorola, NEC, and, yes, Microsoft. Most are participating through industry alliances, whether it’s the broader GridWise smart grid alliance or the more focused ZigBee Alliance, which is working to establish an open global standard for cheap, low-power wireless networks that enable energy management — monitoring and control. The latest to join is Certicom, a Canadian developer of high-grade mobile encryption technology used by the NSA and licensed by a who’s who of the high-tech sector. “As utility companies worldwide continue to embrace the application of smart meters, it is very important to ensure that the information being transferred along the network — as well as the network itself — are both properly secured from unauthorized intrusion or manipulation,” said Jim Alfred, director of product management at Certicom.

The IT opportunities presented by the smart grid are enormous. Sure, there will be some partnerships with the established giant, such as ABB and Siemens, but increasingly we’re seeing conventional IT and telecom companies playing a direct role. The difference, which didn’t exist just a few years ago, is that utilities are being forced to interact with end customers — households, business, industry — as the need for conservation and demand-management grows and as the addition of renewables adds complexity to the grid. Historically the utilities and power generators have been inward facing, and dependent on proprietary, in-house solutions or technologies developed from a small group of established industry giants. This was the telecom sector 20 years ago. As we move toward smart appliances, including plug-in hybrid and electric cars in need of vehicle-to-grid connections, we’ll come to rely more on the innovation and creativity that we’ve seen in the IT and telecom worlds.

The investment opportunities are unprecedented.

There continues to be much debate around the role that biofuels — specifically, corn-based ethanol — is playing in the global food crisis. Corn, but one of several grains that have seen x-fold increases in price, is too often equated with “grains” generally when talking about the biofuel effect. That said, there’s no doubting that some food crops that aren’t used to produce ethanol are being abandoned and replaced with corn, which would impact the supply and thus price of these other crops. But if that’s the case, one would think this would create more supply for corn and thus buffer price increases. Still, others say it’s not about food shortages as much as an oversupply of money in the market looking for a safe home, which would including a range of commodities including grains. This, they argue, has led to inflated grain prices despite generally stable global supply. And then there’s oil prices. We often seem to forget that agriculture relies heavily on oil for transportation, running farm equipment, fertilizers, etc… perhaps we’re not appreciating enough what $125 a barrel oil is doing to the price of grains.

Who knows — there are global complexities here that can’t be summarized in sound bites or pithy quotes. What most generally agree is that, despite this current crisis that appeared somewhat suddenly, using food crops for fuel production is not sustainable in the long term.

Still, there are groups that are using this current food crisis as an opportunity to put the kibosh on U.S. biofuel subsidies, incentives and — one would presume — production. Biofuels Digest reports today that the U.S. Grocery Manufacturers Association has launched a global PR campaign and recently put out a request for proposals to PR firms that can exploit the current window of opportunity to “change perceptions about the benefits of biofuels and the mandate.” (Hat tip to Rob Day for flagging this). In other words, they want to exploit the sound bites and pithy quotes that make it into mainstream newspapers and TV news reports. Tactics will include a viral marketing campaign calling for urgent action. The goal, according to the RFP, is to “build a groundswell in support of freezing or reversing some provisions of the 2007 Energy Bill and for the elimination/reform of ethanol subsidies and import restrictions.” Biofuels Digest calls the campaign an “anti-biofuels jihad” that is linked financially to John McCain and Republic senators who are against the U.S. ethanol mandate.

The same revolt is taking place in politicial circles in Canada, though there also appears to be a recognition that cellulosic ethanol is a solution that needs to be accelerated. Again, are we against ethanol or are we against a certain way of producing ethanol? The difference has to be emphasized in this debate before we make ethanol a scapegoat for a global food crisis it likely hasn’t caused, but certainly isn’t helping.

Note: Subsequent to this post the Ontario Power Authority sent me an e-mail to clarify some of the points I made below. I’m including them in the post where appropriate.

The Ontario Power Authority recently submitted an amendment of its 20-year system power plan to the province’s energy regulator. It includes a study completed by consulting firm Helimax Energy Inc. that looks at wind energy potenial on the Ontario side of the Great Lakes — presumably both offshore and nearshore opportunities. The study identified and ranked 64 offshore sites totalling nearly 35,000 megawatts. All sites were at water depths of between 5 metres and 30 metres, had average annual wind speeds of at least 8 metres a second, and were able to accommodate 100 MW or more each.

Helimax excluded any site that had physicial or environmental constraints. No sites on shipping lanes or located above underwater cables were considered. Likewise sites that were located around wetlands, conservation reserves and other protected areas were not included. Lake Huron had 27 promising sites, while Lake Erie had 25. Only nine sites were identifid for Lake Ontario and just three in Lake Superior. It bears repeating that these sites are only on the Ontario side — the U.S. side could have just as much or more. Characteristic of the better offshore wind regimes, Helimax calculated that the net capacity factor for all sites ranged from 34.7 per cent to 40.8 per cent, and it assumed the installation of 5-megawatt turbines. And as Helimax pointed out, “There are wind power projects that can be feasibly developed beyond the sites that are identified in the present study.”

What the study shows is that there is tremendous opportunity for offshore wind development in the Great Lakes, and it confirms capacity factors far superior than onshore sites. Though it is acknowledged that the cost of developing offshore farms will be higher, one must remember that they won’t be as high as the offshore projects being pursued in Europe, where rough, deep seas present greater technical challenges. And costs could drop depending on how serious Ontario — or Michigan or New York for that matter — want to develop this resource. In fact, jurisdictions like Ontario have an opportunity to become a centre of excellence for offshore wind development in North America.

But critics say the Ontario’s power authority continues to downplay the importance of the resource. For some reason its submission to the regulator has assumed a capacity factor for offshore projects of 25.3 per cent, compared to an assumed 20 per cent for onshore. Why it has ignored Helimax’s 34.7 to 40.8 per cent rating is perplexing? (OPA comment: The capacity factor of 34.7 per cent to 40.8 per cent to which Tyler refers represents the net annual output of offshore wind projects divided by the maximum output at rated capacity. It is a measure of the forecast energy contribution of offshore wind projects. Effective capacity of 25.3 per cent is OPA’s estimate of the amount of output from offshore windprojects that will be available with a high degree of confidence during the peak hour of the year… Effective capacity is a measure of the capacity contribution, and is quite different from the capacity factor. Unfortunately, the industry terminology has lead to confusion for many.)

The power authority also says it will not include any offshore projects in its 20-year plan because it claims the lowest-cost offshore project would still be more expensive than the highest-cost onshore project, “despite having a more favourable wind regime and higher energy production potential.” Interesting is that it includes the cost of transmission in the offshore projects, which doesn’t generally happen with other power projects. (OPA comment: Costs for connection, enabler lines and transmission upgrades were included in the all-inclusive Levelized Unit Energy Cost calculation for all wind and hydroelectric projects… To reiterate, transmission costs were included in the all-inclusive LUEC calculation for both onshore and offshore wind proejcts).

Given that the offshore market in North America is new and relatively wide open, one might think there’s added benefits to pursuing this resource as part of a much broader industrial strategy. Ontario’s manufacturing sector is struggling. Offshore wind could present one of several opportunities to create green-collar manufacturing jobs, proponents say. They’re hopeful that the Ontario government sees the larger opportunity and is more willing to pursue it.

Perhaps more frustrating for some is the context of all this. Two nuclear reactors in southwestern Ontario are 60 per cent complete and already $600 million over budget, but both the operator of these reactors and the power authority that approved the project seem to treat it more like a rounding error. Yet talk of spending hundreds of millions of dollars to support development of a new industry is dismissed because of higher costs and too much risk.

It’s fair to ask why?

How does this impact Altairnano?

That’s the first question that came to mind when Electrovaya Inc., the Mississauga, Ontario-based maker of Superpolymer lithium ion batteries, announced that it is “negotiating a purchase and supply agreement and has begun work on a battery pack design and production program with Phoenix Motorcars.” The company said it has already received advance payment for upfront engineering design services and hardware production.

Electrovaya’s program is to focus on production of an integrated battery system and intelligent battery management systems for Phoenix’s long-range electric SUVs and sport utility trucks. Phoenix Motorcars will manufacture the vehicles at its California facility.

Perhaps Phoenix, which says it plans to deliver its first vehicles to fleet customers sometime this year, is hedging its bets, like GM and Think Global have been doing. The company has had warranty claim issues with its previously announced battery supplier, Altairnano, but as recently as March the company re-stated its support for Altairnano’s technology. “We wholeheartedly support Altairnano’s technology and believe they provide the greatest product available on the market today,” said Daniel Elliott, Phoenix Motorcars’ CEO in a statement in March.

The key word being “today.” That was then, this is now. Perhaps there are more underlying problems with Altairnano’s battery. Discussion boards are abuzz. So far today Altairnano’s stock is down 4 per cent on the news, which I’m sure hasn’t sunk in yet.

Electrovaya, itself no stranger to bad news, is on a roll lately. In January it announced a joint venture with Malcolm Bricklin’s Visionary Vehicles to produce battery packs for his plug-in electric hybrid car. The same month it announced it will “soon” be launching a low-speed electric vehicle called Maya-300 that will have a 120-mile range but be limited to 35 mph speeds. And last October is revealed it is establishing a joint venture with Electrotherm, the leading manufacturer of electric vehicles in India, with plans to build a manufacturing plant capable of producing 10-megawatt-hours per month of battery storage. The only problem, and perhaps this will change soon, is that Electrovaya is a penny stock that isn’t exactly flush with cash. So I’m waiting to see if someone will soon step up to the plate and provide much-needed funding for this company and its battery technology — a dark horse maybe in the HEV, LSV and EV races.