Sunday, April 11, 2010

Energy Independence: Still a Long, Tough Slog

by John L. Watkins

Last week, I attended an event on bioenergy sponsored by the German American Chamber of Commerce. The featured speaker was Mr. Jörg Mayer, the Managing Director of the Renewable Energies Agency in Berlin, Germany.

By way of background, Germany is far ahead in the field of renewable energy, being a world leader in solar, bioenergy and other alternative energy technologies, as well as conservation. Electricity is three to four times more expensive in Germany than in the U.S. Gasoline and diesel are also much more expensive in Germany than here. Thus, Germany has plenty of reason to become a world leader in alternative energy. Germany has adopted many government policies designed to promote, if not force, the development of alternative energy technologies.

What struck me most about Mr. Mayer's remarks was his statement that Germany's policy goal is to have alternatives supply 20 percent of Germany's energy needs by 2020. Given the cost of energy in Germany and the German government's push for alternatives, this was a pretty sobering statistic: If Germany's goal is to achieve only 20 percent in the next 10 years, it says very little for the chances of advancement toward energy independence in the U.S.

Many of my clients are involved in various aspects supplying energy or developing alternative energy technologies. Dieffenbacher GmbH + Co.KG, for example, has recently developed machinery for turnkey wood pellet production plants. Wood pellets are used to fire very efficient stoves used for heating in Europe, and usage is increasing in the Northeastern United States. Georgia is a logical place to develop pellet production plants because it is heavily forested and has a well-developed forest products industry.

Other clients are developing solar technologies. Another client has developed a system for extracting and processing grease from restaurant grease traps so that it can be processed into biodiesel. All of these technologies have great promise.

The legal issues arising from the development and adoption of these new technologies are many. The U.S. has traditionally produced electricity in centralized power plants (coal, nuclear and natural gas) and then transmitted the power by long distance through transmission lines. Many of the alternative sources favor a more decentralized approach, where the energy is produced at or near where it is consumed. Simply put, our grid system as it exists is not particularly well-suited to the adoption of alternative technologies.

Other challenges include protective intellectual property rights while still allowing for widespread adoption. Our research universities, such as Georgia Tech, need to become more streamlined in working with industry, and in respecting the intellectual property of their industry "partners."

Our public policy toward energy independence remains, frankly, an uncoordinated disaster. I am old enough to remember (as a teenager) the 1970s oil embargo. The simple truth is that our politicians only pay attention to energy policy when prices rise to an uncomfortable level or there are supply disruptions. Thus, when gasoline climbed past $4.00 per gallon, we paid attention. When the recession took hold and demand and prices fell, energy once again became yesterday's news.

Even when our politicians pay attention, their chief response is to hold hearings -- the modern day equivalent of a show trial -- and to demonize oil companies and other traditional energy producers. For the almost 40 years since the oil embargo, politicians of both parties have occupied the White House or controlled Congress. The simple fact is that nothing meaningful has been done and all of our leaders -- past and especially present -- ought to be ashamed of themselves on this issue.

It seems clear based on the German experience that alternatives -- as valuable as they may prove to be -- will not supplant the need for traditional sources of energy. Demand will continue to increase. We need to support the reasonable development of all sources of energy, alternative and traditional, as well as conservation and wise energy usage. In some instances, this is going to require abandoning the "not in my backyard" mentality that has stifled a number of initiatives.

It is also clear that we need to take advantage of technologies that are available now. For example, clean diesel technology is now widely available for automobiles. We just drove my four door sedan with a clean turbo diesel engine to Jacksonville and back and averaged 35.5 miles per gallon. The list price of the car was only $1,000 more than the comparable gasoline model. Other models are available (mainly from the German manufacturers) in different price ranges. In Europe, a very high percentage of autos have diesel engines. Diesels have not been as popular in the U.S., perhaps because we remember smoky and sluggish diesel cars from years past. Modern turbo diesels do not smoke and have plenty of power.

Hybrids, such as the Toyota Prius, offer very high fuel efficiency. My Dad has a Prius. It is quite comparable to other smaller cars to drive.

Other available options include modern foam insulation for existing houses. We installed spray foam insulation (it is sprayed in between the roof joists in the attic) about two years ago. We have found the manufacturer's promise of a 30 to 40 percent energy savings to be quite accurate, and it should pay for itself in a very short while. We also replaced our tank water heater with a tankless models. The tankless models are very expensive (largely because of installation costs), and the payback analysis really is not there, but ours has performed well so far.

Other existing technologies would provide substantial energy savings. In many hotels in Europe, you insert your room key card in a slot near the entrance of your room to activate the electricity. When you go out, you remove the key, and the lights go out. As it is, we could simply remember to turn the lights out when leaving our offices. In any city in the U.S. at night, you can see lights left on at night in office buildings. It is just a huge waste of resources.

Whether you believe in global warming or not, most people would agree that energy independence from potentially hostile foreign sources would be a good thing. Most would also agree -- hopefully -- that wasting resources is a bad thing. The policy and legal issues have a long way to go, but there is a lot we could do now if we just paid attention.

Sunday, April 4, 2010

Cloud Computing: Still Foggy From a Legal Standpoint

By John L. Watkins

I have written previously about the "cloudy" nature of cloud computing from a legal standpoint. Last week, I attended a seminar on cloud computing that was attended by about fifty lawyers and some "techies" interested in technology and cloud computing. The consensus resulting from the seminar appears to be that, although the list of legal issues is becoming a bit more defined (and lengthy), there still are very few answers.

Why Cloud Computing? Cloud computing, which is often called "software as a service," involves providing software and storage remotely (in the "cloud," or at a server farm in a remote location), instead of maintaining the software and storage locally, either directly on a computer or on a server for a local area network. Although this definition is generally correct, you should be aware that there are many variants of cloud-based services and formats that are way beyond the scope of this post.

There are many theoretical advantages to cloud computing, at least from a technology standpoint. Because the software and and storage are maintained remotely, there is less hardware to buy and maintain and much less on-site maintenance. Software updates can be pushed out remotely and handled by the provider. Most services are available anywhere there is an Internet connection and a computer with a browser.

Most people probably already use cloud-based services, whether they know it or not. Facebook, LinkedIn, Plaxo and other social networking sites are cloud-based, with the services accessed through a browser and the information retained remotely. Services provided through Amazon.com and other vendors are cloud-based. Google services, such as the Blogger platform on which this post is being written, are cloud-based, as well as the suite of Google Apps (meant to compete with Microsoft Office). One of the most successful and well known cloud providers is Salesforce.com, which provides CRM (customer relationship management) software and services.

Cloud providers and proponents argue that the security of cloud-based services is probably at least as good as relying on a traditional local area network, if not far better. They also argue that the backup of cloud-based services is more automatic and reliable.

For many businesses, the most compelling reason to consider cloud-based technology is cost. Cloud-based services are typically competitively priced and substantially lessen, if not almost eliminate, expensive hardware and IT services.

The Legal Jungle. As compelling as the technical case for cloud computing services appears to be, the legal minefields are many. By way of full disclosure, I do not claim to be an expert on the many statutes that may apply to those considering cloud computing solutions. I know enough to say, however, that Congress (and some states) have adopted what is literally a crazy-quilt of statutes that potentially create substantial exposure and liabilities for users. Many of these statutes are designed to protect customers or clients from the disclosure or theft (for example, from hackers) of personal information.

Once again, good legislative intentions have created an uncoordinated nightmare of regulatory compliance. However, with the cloud, it does not stop at our border. Cloud providers may maintain server farms in other countries, potentially bringing international regulatory systems into issue. Questions are certain to arise over which country (or state) has jurisdiction over legal issues.

At the seminar, one of the techies in attendance commented that the legal issues could be largely resolved by the U.S. adopting European Union standards. I do not know enough about the EU standards to draw any conclusions, but it is virtually certain that the adoption of understandable international standards would simplify the issues and foster the adoption of cloud-based systems. Although this is a noble goal, it is frankly difficult to imagine that such a solution is viable in today's political environment.

One of the most troubling aspects of the legal jungle surrounding cloud computing is that the cloud providers are, as a general matter, unwilling to accept any contractual responsibility for loss of data or other potential nightmares associated with cloud computing. If cloud providers are really certain that their systems are robust, redundant and foolproof, then why do the legal terms and conditions disclaim responsibility at every turn?

Although it may well be true that the risks of data loss are greater with a traditional local area network, many businesspersons are somewhat understandably reluctant to "turn over the keys" to an off-site provider which may store critical data almost anywhere. And, as one prominent commentator has noted, if an IT department loses critical data, at least the business owner has the cathartic pleasure of calling in the IT director and giving him a pink slip.

At the seminar, the speaker commented that cloud providers are willing to negotiate terms for "large" customers, but are not going to do that "for someone who wants to spend $20,000 for services." This observation is probably dead on, but it provides little comfort for small or medium-sized business for which a $20,000 expenditure is significant. Ironically, many cloud providers target small and medium-sized businesses.

Any Way Out of the Legal Jungle? At the current time, I can offer no easy way out of the legal jungle for those considering cloud-based services. It is true that some aspects of the legal jungle affect any type of computer network. The adoption of cloud-based services, however, creates additional issues.

In a post on this blog last year, I commented that a provider willing to come forward and put its legal terms and conditions -- such as by guaranteeing compliance and against data loss -- where its technological mouth is could probably sell a lot of services, even at a premium price. If there is a provider out there willing to do this (and which has the financial muscle to back up any guarantee), please let me know, as I would love to hear about it.

On a related subject, I recently spoke to an insurance broker that is trying to put together an insurance product to protect companies against liability associated with data breach and other computer-related liabilities. If this product comes to market and appears promising, I will let you know about it in a future post.

Certainly, an insurance solution has some promise (assuming, of course, the insurer would actually perform, which is an absolute roll of the dice with many insurers). An insurer would have every incentive to develop and assist its insureds with risk management approaches that would boost compliance and minimize risk. Many small and medium-sized businesses simply do not have the expertise or resources to do this on their own.

Stay tuned.