Showing posts with label Coal. Show all posts
Showing posts with label Coal. Show all posts

Friday, February 22, 2013

OGPSS - Thoughts on the Precautionary Principle

As Michael Brander tells it, in his book on the Scottish Highland Regiments, the Scottish Highlands produced, between 1740 and 1815 men for some 86 Highland Regiments who travelled around the world to strengthen the British Empire. But, towards the end of that period sheep were introduced into Scotland and the great land clearances began that replaced the crofters on the estates with the occasional lone shepherd and his flocks. Thus, by the time of the Crimean War when the Duke of Sutherland tried to raise a regiment he got no volunteers. As an old man explained to him:
I am sorry for the response your Grace’s proposals are meeting here today, so near the spot where your maternal grand-mother, by giving some forty-eight hours notice, marshaled 1,500 men to pick out the 800 she required. But there is a cause for it, and a genuine cause, and, as your Grace demands to know it, I must tell you, as I see that none else is inclined in the assembly to do so. These lands are now devoted to rear dumb animals which your parents considered of far more value than men . . . . your parents, yourself and your Commissioners have desolated the glens and the straths of Sutherland where you should find hundreds, yea thousands of men to meet and respond to your call cheerfully had your parents kept faith with them. How could your Grace expect to find men where they are not?
The anecdote illustrates that are long-term consequences to policy decisions, often not fully recognized when the original decisions are made. I was reminded of the Scottish situation as I contemplate the great race to renewable energy and natural gas, and the rapid replacement being urged for coal-fired power stations and nuclear power plants. And there are some grounds for seeing an analogy to that earlier situation.

Coal and uranium are found underground and while there is a large surface mining component to mining, as these reserves are exhausted, or embargoed for environmental or other political reasons, the need, over time will move increasingly to the development of the deeper reserves. Mines, however do not spring up overnight. Just as you cannot get a baby in a month by making nine women pregnant, so the process of discovery, raising capital, permitting and development can mean that over a decade can pass before coal is produced in commercial quantitites. And that assumes that the Administration is somewhat favorable to the idea. As a candidate, now President Obama said "If someone wants to build a new coal-fired power plant they can, but it will bankrupt them because they will be charged a huge sum for all the greenhouse gas that's being emitted."

As President he appointed Dr. Stephen Chu to head the Department of Energy, an individual who has said “Coal is my worst nightmare.”. And to follow on his statement as a candidate, the President appointed Lisa Jackson to the EPA who issued a finding that greenhouse gases constitute a threat to public health and welfare, with a series of actions to reduce carbon pollution. In such a political climate it is unlikely that applications for new mines and plants will receive an accelerated resolution. (Just consider the case of decision on the Keystone Pipeline, which continues to drag on.) If there is a sudden discovered need for new coal and nuclear power plants they will not (as with the Highlanders) be there to answer that call, and nor can they be for over a decade after the call is made.

Now it is not my intention here to argue the logic of a current change to natural gas, as the large reserve within the United States becomes available and, at low cost, provides a source of energy that helps keep the nation’s industry competitive. But what I would like to do is to invoke the same Precautionary Principle that has been used as an initial basis for action on control of power plant emissions and other factors with environmental impact. (see for example principle fifteen).

The precautionary principle can be briefly stated as:
the theory that an action should be taken when a problem or threat occurs, not after harm has bee inflicted; an approach to decision-making in risk management which justifies preventive measures or policies despite scientific uncertainty about whether whether detrimental effects will occur.
There is a significant scientific question as to the long-term reliability of the production levels for oil and natural gas that is being produced from the shales of the United States, and it has been articulated well both by Art and Rune, among others at the Oil Drum.

And as China draws an increasing amount of fuel out of Turkmenistan, Iran and the Middle East, with the potential for an additional increase in the draw from Russia, there is some concern that as China buys for the long-term, that tightening supplies will begin to limit the availability of fuel for Western Europe and the United States.

With the occasional collapse of the odd wind turbine, and the difficulty in seeing how solar power can help in the blizzards and snow storms I have gone through in the last week, there is some concern over the size of the contribution that these technologies can make into the energy mix of the next decade.

In those circumstances, a wise application of the Precautionary Principle to future energy supplies, in both Europe and the United States, might suggest that sufficient legacy power systems be left in place to ensure that neither community is left short of energy in the years ahead. This is to guard against the proposed replacements being either inadequate or insufficient to meet the future need.

And yet, unfortunately this is not likely to occur. As with many arguments and tools used in political debate, once a position or an argument has been adopted it is extremely rare for it to be renounced. The consequences of current decision making rarely come back to haunt those politicians who make them, since they often occur past the current elective term and are thus of less interest to those who are more focused on the next election.

Yet longer-term events do eventually arrive, and time having passed, the day of reckoning is becoming visible. It is likely that the Bakken will peak before the end of the current Administration. Ofgem has already raised concerns over an over-reliance on imported natural gas into the UK, and warned of possible shortages by the end of 2015, and urged a diversification of supply types. The IEA recently issued a chart that shows their projections for the energy future to 2035.


Figure 1. Past and future distribution of energy demand for the different sectors of the world (IEA )

The writing is beginning to appear on the wall. And while the Precautionary Principle is aimed more at less obvious, high risk scenarios – the risks to the world of a failure in the global supply chain, or even a national one is of such a high impact that even with a lower probability of occurrence than is becoming evident, it would be wise to start looking for answers. It is likely already far too late, and the world remains replete with folk denying the existence of a problem (even as gas prices continue to rise) but it will be interesting to see how the new Secretary of Energy addresses the situation.

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Posted by Heading Out at 12:09 AM 0 comments
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Thursday, August 2, 2012

OGPSS - introduction to China

When I first began this review of future production from the different oil producing countries about fifteen months ago, I produced this list of the relative performance of the top 30 producers.


Figure 1. Top 30 oil producing countries (those increasing production over 2009 are shown in red). (Click on the table to enlarge it)

So, after covering the top three the question becomes which country should be covered next, given the changing ranking? The United States is now producing some 6.36 mbd of crude oil, and after a steady rise in production seems to have, transiently perhaps, reached a plateau. The number given in the table above includes ethanol and refinery gains, among others, and OPEC considers that the total average production this year will be 9.8 mbd. (MOMR)



Figure 2. US Crude oil production for the past year (EIA TWIP) OPEC consider that Russia will average 10.34 mbd this year, and is running just under that number this month, and Saudi Arabia is running at between 9.89 and 10.1 mbd at present. As one moves beyond this top three China has now moved into fourth place with a reported production of 4.22 mbd. (OPEC MOMR)
China’s supply is expected to average 4.22 mb/d in 2012, an increase of 80 tb/d over 2011 and steady from the previous month. China’s output in May averaged 4.19 mb/d, also steady from the previous month and the same month last year. However, cumulative production till May 2012 indicates a decline from the figure for the same period in 2011. This has been mainly due to the shutdown of the Penglai field, while healthy production from the Changqing field, which reached a record level in May after 40 years of operation, has partly offset the decline.
As the initial table above shows, China has been lagging Iran in production, but even as China has grown production, that in Iran has slipped. OPEC report that (again depending on who one believes) Iran is producing between 2.96 and 3.76 mbd. (The latter is the Iranian number). Iraq is still running either slightly ahead or behind at 2.98 mbd. Iran may therefore be moving from 4th to 6th in production rank.

Even as China’s production has crept up, and against an EIA estimate of 20 billion barrels of reserves, these numbers are being dwarfed by the rate at which demand is rising.


Figure 3. Comparison of Chinese crude oil production and consumption (Index Mundi)

The EIA notes that this ranks the country as second (to the USA) both in terms of overall consumption, and also of imports (running at around 5.5 mbd).

As the demand for fuel for China has increased over the past decade, the country has been assiduous in seeking resources abroad which can provide future supplies. Although at present some of these resources are selling to other markets their products can be “swopped” for that from other sources which can be diverted to China. (Nexen which CNOOC has just moved to acquire produces 213 kbd.) It is worth noting the comment that:
the acquisitions will help China "lower the risks when energy shortages become an urgent problem in the global market."
Also this week Sinopec bought into 8% of the production from the United Kingdom (1.8 boepd) as it purchased 49% of Talisman.

China still gets most of its energy from coal, (71% in 2008 according to the EIA review)

Figure 4. The sources of Chinese Energy (EIA)

At a time when India has just emerged from two days of blackout vulnerabilities outside of the availability of the fuel itself are ubiquitous and equally well hold true in China where both domestic and imported fuel must make its way through a crowded infrastructure to the point of use.

Oil and natural gas are more easily transported in pipelines, though the large distances and the mountainous terrain in regions of the country does not make that construction easy. China has, however, been willing to invest in such pipelines to gain access to, for example, natural gas supplies from Turkmenistan. Until the advent of the pipeline in 2009 the Turkmen were stuck with having to sell their natural gas through Russian pipelines into Europe, and had to take the price that they were allocated. With the opening of a second market, this was foreseen as a considerable boost to both countries. However there have since been some further negotiation of price, as the global market has changed. Those negotations are now complete and flows will increase to some 65 billion cubic meters/year (bcm/yr). It is anticipated that this will cut the need for China to import additional volumes of natural gas from Russia. To date some 20 bcm have been shipped from Turkmenistan through the 1,830 mile pipeline since it opened in 2009, and field development in Turkmenistan is proceeding to provide the volumes required by the new agreement.

In terms of their own resources China has a number of large oil fields, ownership of some of which (the offshore ones) is not always completely agreed.



Figure 5. Major oilfields in China (Rigzone via EIA ).

The development of natural gas resources from shale has yet to begin in China, but as the Polish experience has shown, it is too early yet to predict that this might achieve the success of that in the United States.

As with oil China has significant quantities of coal, but still imports large quantities from abroad to meet the distributed demand across the country. It is not used purely for electric power generation, in the far West houses are transforming from mud brick to baked brick, with all the local brick works fired by coal, in a region which otherwise gets its power from hydro-electric plants.


Figure 6. The coal fields of China (USGS )

There is, in short, a fair amount of complexity to the Chinese energy story, which will form the focus of the next few posts.

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Posted by Heading Out at 10:08 PM 1 comments
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Thursday, September 22, 2011

OGPSS - Can Alaskan coal be considered a reserve?

When I originally started to write about the Alaskan fuel sources I had intended to write only about the oil and gas reserves in the state, as I have done over the past few weeks. I was, however, since asked also about the coal in the state. And then, to reinforce the need to at least look at this fuel, there was this recent quote from the Chancellor of the University of Alaska-Fairbanks, Dr. Brian Rogers.
Rogers said he has heard objections to the construction of a coal-fired plant, but that it was the only cost-effective way to heat the campus in interior Alaska.
Until now, I have had only one chance to visit an Alaskan coal mine, the Usibelli mines near Fairbanks. Further honesty compels me to admit that I played hookey that day and took myself and my grad student off to have look at the Yukon River, the Dawson Highway and the Arctic Circle (certificates provided) instead. Not that the coal mining in Alaska is not important, and coal’s presence not also visually obvious, but I had seen a lot of strip mines in my time.

Coal outcrop Alaska (DNR)

The coal seams of the region are clearly rich, and thick, and near the surface, and so it is relatively easy to remove the overlying rock, mine out the coal, and reclaim the surface, after the mine has passed. I have written about the evolution of the mining shovels used to remove the coal and rock and the use of explosive to break the rock and coal in earlier posts, there are also, at the Usibelli Web site, video and animations to show how they mine the seams of coal shown in the outcrop above.

As the University Chancellor noted, coal provides a considerable power benefit to the state, though it also has created several bodies that are opposed to its growth, particularly the operation of a new mine at Wishbone Hill. This opposition comes in a region where, in the past, mining operations have removed some 7 million tons from some 18 different operations. But again, in this series I don’t want to argue the pro’s and con’s of individual sites. Usibelli currently mines more than 1.5 million tons of coal a year, with about 1 million tons being used domestically, and half-a-million tons is shipped to the Pacific Rim (mainly Korea). Usibelli make the point that one of the reasons that power costs in Alaska remain high is that coal plays a smaller part in power generation than it does in other states.

Relative electricity price in comparison with the coal mix in providing electrical energy (UCM )

If problems arise in bringing natural gas to more of the state, then coal’s fraction of the mix may well increase. Certainly the amount of coal within the state is vast. It has been suggested that there is as much as 5 trillion tons of coal in Alaska, some 40% more than in the lower 48 states combined. The coal is found in three provinces Northern Alaska-Slope, Central Alaska-Nenana, and Southern Alaska-Cook Inlet.

Coal regions of Alaska (USGS )

More recent estimates have had a tighter focus.
Previous coal resource assessments attempted to assess the total coal in the ground in the United States and Alaska, but those estimates tended to be high and included coal deposits that are either not available (contain coal beds that are too thin and (or) too deep to be economically mined using present mining technology) or that are not of sufficient quality to serve as a fuel for electrical power generation. Thus, a new assessment was required that focused on coal resources likely to be utilized in the next 30 years, which are for the most part coal beds currently being developed in existing mines or in areas that are currently leased in Alaska.
As a result the 5 trillion ton estimate from the 1977 study has been trimmed to consider just the 160 billion short tons which includes the coal defined in the quote.

However coal can only be considered a reserve if it is likely that it will be mined. At the moment it is the coal in the region around Fairbanks where the need is sufficient for coal to contribute to the state energy budget. But there has been exploratory activity in both other regions as well, and mines have existed in the past.

North of the Brooks Range, and lying over the National Petroleum Reserve, the Arctic Coal deposits hold the likely majority of the Alaskan coal. Unfortunately for those who would use it, it is not the easiest place in the world to reach, and operate in. And although there was coal mining in the region as far back as 1879 (when it was used to supply whaling ships) it is not active presently. BHP Billiton have been and looked, and while not abandoning the idea completely, do not currently seem active. On the other hand the state has been looking to approve prospecting permits in the Nanushuk region, which lies north of the Brooks Range, yet only just off the main haul road that runs up to Deadhorse and Prudhoe Bay. The request for a permit was approved by the state board, though there has been an objection from the Naqsragmuit Tribal Council (though I could not find a current web page for the Council).

However, in order for any coal to be mined above the Brooks Range, there has to be a viable method of transport. And though it has proved relatively straightforward to move coal by rail from the Powder River Basin in Wyoming, conditions are considerably different above the Arctic Circle, and the Brooks Range is a tad hillier than the Upper Great Plains. There is talk of moving the coal to the terminal where the Red Dog Mine ships out zinc concentrate, but that facility is only open from July to October - which might help China build up stocks in the summer, but does little for the global high winter demands for fuel. Further the haul road is not such that I can see it being able to handle heavy consistent loads of coal. (On the September day we went up that short distance a haul truck went off the road ahead of us on one of the many snow-covered bends that snaked up and down the mountains).

There is active consideration of a mine at Chuitna, which is just north of Cook Inlet, in the Southern of the three provinces. About 45 miles from Anchorage the project would mine up to 12 million tons of coal a year for an initial period of 25 years. At present it appears that the Division of Mining, Land and Water is awaiting an updated proposal before moving ahead to make a ruling, possibly in a preliminary form next year.

Put altogether, although there is a lot of coal in Alaska, in relative terms it is unlikely that any significant volumes of that resource will be brought to the market in the near future. As a consequence, unless and until the demand pattern changes, (and I think that it likely will) it is impractical to think that Alaskan coal will remain more than a resource. Further, given the need for a supporting infrastructure itseems unreasonable to expect that even after global demand starts to rise, that the coal could come to the market, and become a reserve in less than an additional 5 – 10 years.

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Friday, May 13, 2011

Coal - a new technology and another look at the TV series

Back in 2008 Robert Rapier wrote a post on using coal in the making of ethanol, in which he referred back to a post he had written in 2006 on the same subject. That earlier post said, in part:
The natural gas input into ethanol production is a serious long-term threat to economic viability. Since natural gas is a fossil fuel, and supplies are diminishing, it will put upward pressure on the price of ethanol over time. However, if the energy inputs could be produced from coal, ethanol prices would be insulated from escalating natural gas prices.

Using coal might also lessen the significance of the EROEI debate. If you take 1 BTU of (cheap) coal, and you get back 0.8 BTUs of (more valuable, liquid) ethanol, then EROEI doesn't have the same significance as when you use natural gas to produce ethanol. You converted the BTUs into a readily usable liquid form. This argument may be valid from an economic point of view, but it ignores the fact that coal is still an inherently dirty energy source. If coal remains abundant and cheap, coal economics will beat natural gas economics, but coal will increase the rate at which we put carbon dioxide into the atmosphere.

In those remarks Robert was writing about the use of coal as a power source for running the ethanol plant, as opposed to the use of natural gas. The feed stock would remain the corn that is fermented, and turned into the beer that is then distilled into the ethanol that can be used as a liquid fuel source. That process still raises the debate over fuel versus food.

In an alternative approach Celanese are now starting to build plants in China that will use coal as the feedstock, without the grain, and they claim that this technology, is a game changer.
The so-called TCX technology can convert coal, petroleum coke or natural gas to ethanol for 25 percent to 35 percent less than alternative processes, Celanese said today in presentation slides posted on its website. The cost of converting coal to ethanol is $1.50 a gallon, equal to making gasoline from crude oil costing $60 a barrel, the Dallas-based company said.

“Fuel with our ethanol technology represents a game- changer for the company,” Chief Executive Officer David Weidman said in a presentation to investors in New York.

Weidman said he is advancing a November plan to build two factories in China that will turn coal into ethanol for industrial uses. The company also may produce ethanol for fuel in China, India, Australia, Colombia and Egypt, he said.
The technology, which is still being held fairly close to the Celanese chest, appears to use some of Celanese technology for the manufacture of acetic acid and involves the gasification of the coal to syngas as an earlier step. That supply will be provided by Wilson.

The use of coal is apparently currently commercial with this technology, while using the same process with a cellulosic feedstock is apparently not as yet that far along.

The two plants will each have a capacity of 400,000 tons of ethanol (134 million gallons) and will produce industrial ethanol rather than, at this stage, the fuel for use in vehicles. In China this is a larger (at 3 million tons/year) market than the fuel market, at half that size. Both are growing at up to 10% pa and the plants are expected to help meet that growth. Fuel ethanol prices in China have been estimated at $950 per tonne.

The most recent announcement comes as China is moving to increase coal imports by perhaps as much as a million tons a week due to drought reducing the output from hydro-electric power plants. Normally the country imports around 10.8 million tons a month, although this is a steadily increasing number. Without the additional imports it is possible that the country may see significant power shortages this summer, since the drought may lower available power by as much as 30 GW.

Speaking of the loss in power I did, eventually start to watch the second episode of Coal. One of the issues in that episode was the drop-out of power that was supplied to the mine. It is one of the ways in which mines can be given a lower price for electricity, if they accept that they will be “shed” if the demand exceeds that which the power generator can supply. The episode showed how that unexpected drop out can affect the men underground. Other power problems arose at the mine because the continuous miner operator was not fully experienced and was running the machine in to take too large an amount of coal or roof rock at one time. This overloaded the switches and tripped power. The necessary methodical restart of the system slows production, since nothing can start producing coal until all the components of the system are back up and running. As they are showing producing coal is not that simple or necessarily pleasant a process.

And a small additional note. In my comment on the first episode I was not that impressed with the way that the miners were bringing down the loose overhead rock. It turns out that I wasn’t the only one unimpressed. MSHA Inspectors, who watched the show, have fined Cobalt coal – for the use of improper barring tools and procedures, as well as a number of other violations.

The series has a considerable value in showing how difficult it can be to run a small mine, and though most of my experience has been in much larger operations (both financially and in terms of seam height) there are a number of different lessons that the series shows on coal mine operation. The problems of ventilation, when the belt drive started smoking and could have caught fire, are illustrative of that, with the telling message two miners died in a not too dissimilar event not that far away.

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Wednesday, May 4, 2011

Power shortages in India and Pakistan

The recent publication of the EIA review of Shale Gas has caught the world’s attention, and led to the perception that the coming decades may well see natural gas become the dominant fuel. It suffers, however, a couple of disadvantages that, for some countries, make it not always the fuel of choice. India and Pakistan, have serious energy shortages as Tom Whipple recently pointed out.
In Pakistan the electricity is now turned off for 18-20 hours some days in many cities and 20 hours in rural villages. The onset of summer temperatures, shortages of fuel oil for thermal generation and falling water levels have increased the power shortfall to record levels. Without electricity to run the pumps urban water supplies quickly shut down. Without power to run the mills, exports are falling, leaving the country without money to import oil. In short we are seeing a classical downward spiral.
At the same time, in India, the domestic natural gas supply is falling, requiring increased, and more expensive imports that can only be achieved using LNG resources.

There have been discussions for years over the possibility of running gas pipelines from Turkmenistan and Iran down through Pakistan and into India to provide the natural gas needed to help. The TAPI pipeline from Turkmenistan is currently at a stage where it may be moving forward. Pakistan is ready to commit to purchasing gas by this July, but . . .

.
In the four nations’ ministerial meeting last week, both India and Pakistan had agreed to the broader aspects of the gas sales and purchase agreement (GSPA), but crucial things like the price of gas and transit fee are yet to be decided.
At present the Turkmen are expected to demand at least $7 to $7.50 per kcf, which is the price that they are getting from China. And transit fees to get the gas through Afghanistan and Pakistan to India will be added to that. (In context that is about the same price as LNG when it is currently delivered in India, and above the $4.94 to $6.42 price of domestically produced gas).

The current hope is that the pipeline will be started in 2013, with full flow to all three countries by 2016. The pipeline will have to run a thousand miles before it reaches India. And this highlights one of the problems with natural gas. It is harder to deliver than other fuels.

Oil can be put on rail cars, or tankers, as well as being piped, as can coal (though there are very few places that use pipelines to move coal). But natural gas either requires a direct pipeline, or it has to be condensed to liquid form for shipment. When large volumes are involved turning the NG into LNG requires construction of both a condensing plant at the supply end and a re-gasification unit at the customer end. Both require time to build. And one the gas is regenerated, the customer has only a limited capacity for storage, and depends on the flow coming through the delivery pipe to keep power being generated.

Coal at the other extreme used (in my youth) to be delivered to our house from the back of a horse-drawn cart. It was dumped in the street, and we shoveled it into the “coal bin” out of which we then hauled it, a bucket load at a time, into the house, and dumped it on the fire. Logistics were a lot simpler, and we kept at least a couple of weeks supply in reserve in the bin.

Times have changed somewhat, for although shovels may still dig out the coal, they now can load a hundred tons, rather than a few pounds. Rail cars can haul 120 tons apiece in unit trains of 100 cars, and power stations may use 10,000 tons of coal a day to generate 850 MW of baseload power. But the coal is often still dumped in heaps at the power station, to be used when needed. Stations will usually keep 60 to 90 days of supply on hand.

India is aware of these advantages, but has internal problems with developing enough domestic coal supplies for the power that it needs. Coal India has said that it can only deliver 100 million tons against the 330 million ton increase in demand that, over the next five years, that power stations now being built will need.
With domestic coal production floundering amid a sharp upsurge in power capacity addition, over 40,000 MW of new generation capacity could get stranded over years for want of fuel. This is close to 70 per cent of the power capacity slated to come up during the period, most of which is being set up by private developers.
With a current generation capacity of 173,626 MW, this threatens the generation of some 42,000 MW.

There is a catch with using imported coal to meet all the shortfall, because of the construction of the Indian boilers. They blend about 10% of the higher thermal content imported coal with domestic coal but there are technical problems with a higher concentration that limit how high it can be raised, as well as the additional cost factor. However new construction can be built to handle higher concentrations of imported coal, it just costs more – which is expected to be a problem in relatively poor parts of the country.

Seeing this as an opportunity, however, Adani Enterprises, an Indian coal company, has just bought the Abbot Point coal terminal in Australia, after buying coal properties in Queensland last year. Over the next five years they will bring the mines on line and be able to feed up to 50 million tons into the Indian subcontinent. It is not enough, in itself, to meet the shortfall, but it is evidence that firms in India are aware of the problem and are moving to find answers. They will do so, however, in the face of stiff competition from China. And this competition underlines the conclusions that I drew in an earlier post about the unrealistic projections of future coal use by folk such as Tad Patzek and Dave Rutledge.

Unfortunately also this does not solve the immediate problem that India faces with a current shortage of available fuel. Nor does it get Pakistan any closer to finding a short-term solution to power shortages in that country. There comes a certain point where, when warnings go unheeded, the consequences must be suffered, though sadly often not by those who weren’t paying enough attention.

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Posted by Heading Out at 9:34 PM 2 comments
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Tuesday, February 1, 2011

The ExxonMobil view of the future

A couple of weeks ago I reviewed the BP Energy Outlook to 2030, and noted, in passing, that there were a couple of assumptions that might be quite optimistic – though I did not get into the details of the forecast. ExxonMobil (EM) has also put out a forecast, and it could be informative to see what, comparatively, they anticipate for this same future period. I am going to try and follow the same steps that I did with the review of the BP plan, to make comparisons easier.

The first difference is in world population, which BP anticipates will grow by 1.4 billion by 2030, EM is a little more conservative, with growth closer to 1 billion for a total of 7.9 billion. (Current population is 6.9 billion. EM relies on the UN and the World Bank for its figure). In itself this changes the overall level of demand, since both expect that per capita consumption of energy will also rise. There is one oddity that I might initially mention (and yes I know the dollar base differs) but contrast these two graphs – the left is from BP and the right from EM.


While I did not get the scales exactly the same, you can see, to a first estimate, that the global GDP in 2030 for EM is roughly the same size as the Non-OECD GDP estimated by BP. (A quick check on Google says that the current GDP is at $58 trillion). This difference continues in the assumptions of the areas of greatest growth. While, as can be seen above, BP sees OECD growth as virtually flat and all the increment being from non-OECD, EM has OECD growing at 2% and non-OECD at 5%. But that will still only put the non-OECD at 40% of the global economy by 2030, which is the inverse of the BP projection.

Change in GDP does not however easily translate into changes in energy consumption, particularly given the much lower relative energy consumption of the non-OECD countries. EM sees energy use in the OECD staying relatively flat, the gain in GDP is accomplished with an increase in the efficiency of energy use. (Which agrees with the BP position). Thus by 2030 it is the non-OECD countries that will increase demand to the point that they will have an energy demand that is 75% higher than that of the OECD.

With that as background, where and how much energy does EM anticipate will be used in this future. To make the two forecasts simpler to follow I have had to convert since while BP works in millions of barrels of oil equivalent (mboe) throughout, EM uses Quadrillion Btu’s or Quads in places. (A barrel of oil is equivalent to 5.8 million Btu, or conversely 1 Quad is equivalent to 172 million boe). And then to make life a little more fun BP has used tons of oil equivalent, making the Quad equivalent to 24 million tons of oil equivalent. (Using 7.16 barrels to the ton to simplify future arithmetic). Having done that, and with a little Photoshop scaling, I can compare the two energy projections.

Comparison of BP and EM energy futures, (The vertical scale is in billions of tons of oil equivalent. )

One of the immediately obvious items is that the amount of coal use that EM is projecting is considerably less than that projected by BP, there is a little more use of oil, and about the same amount of NG.

BP had generated a graph that predicted that by 2030 oil’s share of the global market would continue to fall, while after an initial increase in percentage use, coal would fall on a parallel path with oil, so that, by 2030, both would share equally with natural gas at about 26% of the global energy market each. The remainder of the market, at about 7% each would be equally divided between Hydro, Nuclear and Renewables. Of these renewables (which include biofuels and biomass) would have the steepest increase.

Sources of Future Energy Supply (BP Energy Outlook)

EM on the other hand see the energy supply in 2030 being divided so that oil retains 32% of the overall; natural gas has risen to 26%, and coal has fallen to 21% of the overall. The non-fossil sources are divided 8% for nuclear, 3% for hydro and 11% for the renewables that include biofuels and waste (which is not separately identified by BP).

EM estimate of how fuel use will change over the next 20 years

The above plot shows percentage growth, rather than market share, so that while wind, solar and biofuel energy production grows strongly, by 2030 it is still providing only 3% of global energy.

Looking at the individual fossil fuels in turn – EM sees that India will provide the largest new market for coal, while Chinese demand will soon peak, and demand in the more industrialized nations declines in the face of increased concerns over carbon dioxide emissions.

Increased production from the Canadian oil sands will team with the growth of biofuels in a combined 5% contribution to global liquid fuels according to EM (this is a little less than that projected by BP, who has 2 mbd for oil sand and just over 4 mbd in biofuel growth). And, by 2030 EM expects that NGL supply will amount to about 10% of total hydrocarbon liquids, totaling around 11 mbd. This is quite a bit more than BP project (at about 4 mbd – though that is assigned only to the OPEC nations, and there could be more from other sources though that is not mentioned in the BP document).


EM’s answer to where all the additional oil is going to come from is Deepwater. It projects that by 2030 deepwater production will be at over 14 mbd. The more than doubling of production is anticipated to be almost across the globe, whether Africa, Europe, Latin America or North America.


Because of this emphasis on deepwater, and in order to provide reassurance against the likelihood of another major spill, EM discuss, within their document, the development of the Marine Well Containment System, which is designed to ensure against what happened this past year.

Natural Gas is the seen as the major growth fuel of the next 20 years, and EM anticipate that use of NG will rise to make it the second most popular fuel (bypassing coal but not oil) by 2030. Interestingly they see the supply of NG over the 2005 volumes as coming almost equally from conventional wells, from unconventional (gas shale) wells in the US and Canada, and from imports. (Though it doesn’t say where from). Unconventional supply is anticipated to grow five-fold.


In the end EM seems to be expecting more from natural gas than other fuels over the next twenty years, more so than BP. This seems to be a reasonable assumption, as I said when reviewing the BP projections, providing only that that there is that one new development (cheaper production and longer well life) that is needed for more viable shale gas production. This is particularly true when one looks at the primary sources of electric power generation, in the three main sectors of the world.


EM sees the United States and Europe being much more aggressive in reducing coal use, and expects a greater role to be played by nuclear power plants than BP.

In summary ExxonMobil has a much more positive view of the long term sustainability of oil as a fuel, with a much greater contribution from the deepwater than BP had projected. It sees the role of coal fading from the future energy field, while natural gas will continue to develop and gain market share.

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Friday, January 1, 2010

And welcome to 2010

Well I trust that New Year’s Night went well for you, and tht you are all set for a Prosperous New Year. But what of the future for energy in this coming year? It used to be the tradition in the part of the world where I come from that the first foot through the door after midnight brought a lump of coal, a piece of cake (or shortbread), salt and a small piece of money. This is a part of the Hogmanay celebration. They symbolized the coming of wealth, and a wish for enough heat for the year. The tradition was:
When presenting the lump of coal, the first-foot should say, 'Lang may yer lum reek', a traditional Scots good luck blessing for the long dark nights, literally translated as 'Long may your chimney smoke.'
Somehow I don’t see that going down too well in the halls of the current American Administration. But for the rest of the world, I would expect that the use of coal would continue to grow as it proves, as it has over the past centuries, to be the cheapest indigenous fuel for many countries, at a time when they need something to provide electricity.

Pakistan, for example, is seeing continued load shedding, although the current culprit is being identified as the need to de-silt the reservoirs that supply hydro-electric power to the nation. (There is some 6 hours of load shedding a day in the cities and 8 hours in rural regions). Additional gas pipelines into the country are significantly more than a year a way (if then). The US is promising to help.
Pakistan has developed virtually no new power-production capacity in nearly a decade, despite possessing significant hydroelectric and coal assets, U.S. officials said. Islamabad has also faced difficulties attracting foreign investors.

Pakistan suffers an estimated shortfall of about 2,500 megawatts of power. Mrs. Clinton said the U.S. experts will begin rehabilitating power stations along the Indus River. Washington will also help repair 11,000 agricultural irrigation pumps.
It will be interesting if this translates into coal-fired power. The lack of power is one of the problems that is considered to be contributing to the increased terrorism within the country. (No jobs, and thus encouragement to revolt against the government).

India has a somewhat similar problem, and is also looking at getting support from abroad to help out – the World Bank has, in the past, helped with funding new coal-fired power stations, and there are other plans for expansion. Putting these sorts of activities together leads me to concur that this will be a year that sees the international coal trade continue to grow. As the EIA projects in their reference case:

Source EIA

In regard to the second of the three traditional fossil fuels, namely crude oil, its price has regained significant territory over the past year and is now back to hovering around $80 a barrel. I anticipate that as China becomes more aggressive in the market that OPEC will be able to keep up with the increased demand over the next year but that, by the end of the year (failing any major economic disruption) the economies of the world will have continued to recover, and driving demand will rise with that recovery, to considerably shrink the OPEC surplus. Prices will therefore rise, and I would anticipate that sometime in the next year, whether transiently or more permanently, we will return to around $100 a barrel. That increase will get folks’ attention and may slow the recovery somewhat, but oil supply, while more constrained, will not be a major subject of concern this year. Those looking into the future, however, and that is what these pages will try to do, may see, by the end of the year some additional signs that 2011 will be a year where the balance between supply and demand becomes a lot tighter, and, as a result, small changes in conditions may have a more than usual impact on the market, and thus price.

Which brings us to the third and final of the three, namely natural gas. The situation there is going to get, I suspect, a little more complicated. The movement of increasing amounts of natural gas to China is going to tighten available markets a little, but with the additional liquefied natural gas (LNG) coming from Qatar and the Middle East, and the increasing amounts that will be available from the gas shales of the United States I don’t expect that there will be questions on supply, but instead more concerns that those producing the gas can make sufficient profit to stay in the game. That concern will be a little strengthened by the move in the United States to add increasing regulation to the practice of hydro-fracing the shale, without which the resource is not economic to produce. Depending on the relative astuteness of the different PR firms hired to conduct this battle, (and in the current doubts about climate change this may also provide a different field for the environmental warriors to brandish their credentials) this may or may not be a growing problem by the end of the year. With the general gay abandon with which politicians can shoot themselves in the foot, I would not be surprised to see this be a major debating ground in the political fields above the Marcellus shale. (The rest of the country will likely just be grateful to have a relatively inexpensive fuel source).

Renewable fuels will be a little more controversial this year, as new sites become a little more difficult to acquire and permit, and money for their development remains tight. I suspect that the problems will slowly develop more over the year, but that it won’t be made much of an issue until, again 2011, when, after the next set of U.S. elections are over, we will start to revisit some of these concerns with a little more panic in our voice. Until then the earlier uses of alcohol come to mind, and with that I lift my glass and the traditional dram of whiskey to wish you again, all the best!

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Sunday, September 13, 2009

Old and new thoughts on energy and transport in Poland

The first part of my travel is now complete, and I have reached a place with a slightly slower pace of life, and one that is a little cooler than Missouri.

Market Square in Krakowa with the carriage horses lined up (and being kept working if not really busy).

We arrived this morning and came down here for a gentle lunch, the horses’ hooves are now shod with a rubber pad to lower the sound as the clop around the square.

Polish carriage horses with pads on the horseshoes

For those with less time, or perhaps romance in their souls, the taxis that go on tours have been changed so that small electric carts that now can carry you around (very similar to golf carts) are available.

Tourist transport – Kracowa (Cracow)
For the general populace electric street cars are ubiquitous and of a variety of vintages – this is one of the more modern.

Polish street car

The busses seemed relatively full – even for a Sunday afternoon, and ran very regularly – however we are located where we can walk to all the places we need to be, which gives an excuse to enjoy local food a little more.

The availability of public transport on a widely available basis in the centers of the cities in Europe and the ease with which you can move around the countries on such transport contrasts with some experiences in the Midwest, where one of us had just travelled by Greyhound bus and had discovered the hard way that having a bus ticket does not guarantee that you will get a seat on the bus – or even on it – and even first come doesn’t always help get a seat, since luggage can be moved to push you back down the line.

It will be interesting to hear what the current attitudes to the coming shortage of oil is currently. Certainly in our short walk to the square the motor traffic on the streets seemed denser, and moved faster than it used to, and there did not appear to be a concern with energy availability.

Their current priorities are:
Improving energy efficiency, increasing security of supply and developing competitive markets for fuels and energy, introducing nuclear power, increasing the use of renewable sources and reducing the impact of energy on the environment.
This is a broad enough set of goals not to offend anyone, I would have thought, but there is perhaps controversy in the details.

There is a plan to provide “white certificates” with financial value, to those who save the most energy, in a country where the plan is to maintain zero energy growth.

The country will aggressively pursue high-efficiency co-generation of power and heat , and promote more energy efficient appliances.

Increasing energy security involves:
Poland's energy security will be based on domestic fuel and energy resources, especially hard coal and lignite. This will ensure independence from the production of electricity and, in large part, heat from external sources of supply.
In the area of oil, gas and liquid fuels the document assumes diversification, which now applies not only to supply sources, but also to production technologies. Support will be given to develop technologies whereby it will be possible to acquire liquid and gaseous fuels from domestic resources.

The current forecasts on the possibility of covering future demand for electricity in Poland indicate the need to increase capacity. Commitments for the reduction of greenhouse gas emissions force Poland to look for low-emission solutions in the production of electricity. All available technologies to produce energy from coal will be utilized, provided that they reduce air pollution (including a substantial cut in CO2 emissions).
The plans for nuclear power at the moment are more focused on putting the necessary resources in place to be able to reach this objective.

To meet the targets for renewable energy a target of 15% share of consumption by 2020, and 20% by 2030. By 2020 there should also be 10% of the liquid fuel provided by biodiesel.

A ceiling will be introduced to cap levels of emissions of gases such as carbon dioxide, with limits on the amount that different industries can generate, while encouraging the use of CO2 for enhanced oil recovery and for other industrial uses.
At the present time the government feels that the nation is energy secure .
Pawlak (the deputy prime minister) said that Poland’s energy security is based on domestic black coal deposits. ‘The structure of primary energy use consists in 48% of black coal, 12% brown coal, 23% oil, 12% gas and 5% renewable energy sources’.
To maintain such security, however, will need more research on clean coal technologies and on renewable energy sources.

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Monday, September 7, 2009

Natural Gas versus Coal - perhaps the UK experience revisited?

Back when North Sea oil and gas were discovered the British Coal Industry was a powerhouse in the land. Coal gas was used for domestic cooking, with the fuel generated by large gas works that dotted the landscape. Skip forward a little, and there was a massive campaign to convert the burners that had used coal gas over to a smaller size that allowed them to burn the natural gas becoming available from the North Sea. And with oil and natural gas coming ashore in increasing quantities the British coal industry rapidly faded from its peak to a fainter shadow of energy production, and coal gas became a historical item.

Coal gas is formed by the partial combustion of coal, natural gas (NG), on the other hand, occurs as a hazard in most coal mines. As the coal is mined the pressure comes off the coal, or it is fragmented, and the natural gas can escape. Once it reaches a certain concentration in the air it becomes explosive, and a heat source (a metal pick rubbing on sandstone for example) can ignite it, causing ignition of the gas, with a consequent disaster as those in the mine vicinity can be killed. Thus there are many precautions (which I will describe at another time) to stop that ignition, or to stop the flame from spreading very far.

But the natural gas can also be collected, and if it is collected in a purer form than that diluted by the ventilation currents of the working mine, it becomes a valuable resource, which the British miners now use to help power the mining process itself.
Sixteen generators are installed across 5 deep mine sites. These embedded generating sets are fuelled exclusively on mines gas. Some of the electricity generated is used at UK COAL sites representing a substantial energy cost saving.
However this harmonious use of the fuel projects a different attitude than that which existed as the National Coal Board died. And now that same struggle may be gearing up for a rematch in the United States, as the growing surplus of natural gas leads industry leaders to press Congress about forcing coal’s replacement with NG as part of the new Clean Energy Initiative. So far it hasn’t worked.
For all its pronouncements that gas could be used to replace aging, inefficient coal-fired power plants — and reduce greenhouse gas emissions in the process — lawmakers from coal-producing states appear committed to keeping coal as the nation’s primary producer of power.

However the folks at Chesapeake are now starting to face off against those of Peabody to try and influence the Senate version of Waxman-Markey. And the debate brings renewable energies into the picture, not necessarily to NG’s advantage. (Which is a little odd given that NG plants are generally considered the back-up power when the wind don’t blow or the sun don’t shine).
“By allowing free emission allowances to maintain coal production from existing coal plants, while providing mandates that there be more wind and solar, you squeeze gas out in the middle,” said William F. Whitsitt, an executive vice president at Devon Energy, a major natural gas producer.
This is not really something that it easily fixed in the marketplace, since the return on investment needed for the construction of a major power plant requires that there be a sustained market for the power produced, and concurrently a reliable cost-effective source of the fuel that will be required to generate the electricity for a significant portion of the plant lifetime.

Now the U.S. currently has a glut of natural gas. As a result futures have fallen to $2.508 per million Btu (give or take equal to 1 kcf). This has to start hurting some of the producers since, inter alia, Chesapeake has noted that it is costing them around $4.44 million to drill new wells in the Marcellus, a field in which they anticipate being the biggest player. The company is still very positive about that development – but notice the long-term price they are expecting to justify that optimism:
Based on drilling results by Chesapeake and others in the industry, the company has recently increased its targeted average EUR in the Marcellus from 3.75 bcfe per well to 4.2 bcfe per well. Assuming flat NYMEX natural gas prices of $7.00 per kcf (compared to a recent 10-year NYMEX strip price of approximately $7.02 per kcf), the company’s estimated pre-tax rate of return from a 4.2 bcfe horizontal Marcellus well drilled for $4.5 million is approximately 71% excluding the benefit of drilling carries and more than 1,000% including the benefit of drilling carries.
Back in March Chesapeake was reducing its production from the Haynesville shale however, back then they were also predicting that the drop in drilling activity would produce results before the end of the year.
During March 2009, most Mid-Continent natural gas prices at major interstate pipeline delivery points will average around $2.70 per thousand cubic feet, a price at which most natural gas production is unprofitable. We believe low wellhead prices combined with constrained capital availability will likely cause U.S. drilling activity to decline well beyond the 40% drop already seen since August 2008. As a result, U.S. natural gas production will begin to dramatically decline before the end of 2009 and consequently natural gas markets will regain better supply/demand balance by the end of 2009, if not sooner.
Given the continued excess in the marketplace, it would be nice if the NG industry could find a reliable market of greater size in power generation. They have already managed to corner around 25% of that market – but as yet have not managed to convince folk, such as the manager of our local power plant (which is already constructed to burn natural gas, but which blanked off the nozzles) to switch back.

Perhaps he, like so many others, realizes that as soon as the glut goes away, and the short-lived nature of the gas shale wells being what it is, that will likely happen within the year, then the price will go back up, and it will become less economic than the current coal contract.

Hence the desire of the natural gas companies to get a little more assistance from Congress in the struggle for the future.

It depends on how well they sell, and how well the coal companies manage to resist. All tied up with the debate about climate change, which seems to be less certain with recent publications (in New Scientist among other places) suggesting that the globe may cool for a while before reheating, this could be an interesting debate. And perhaps one with less certain an outcome than the British experience.

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Thursday, April 16, 2009

The Post and the Secretary - a comment on a discussion

One of the major planned bastions of the Obama Administration is intended to center about a change in the Energy Policy of the country. Given that the folk that are now in charge of a number of issues come from California Congressman Waxman (the 30th District which includes Beverley Hills and Malibu); Senator Boxer from California, and Secretary Chu of the Department of Energy; there is a predilection to call the new policy California-based, rather than the Texas-based orientation of the Bush Administration. And the experiences of the key players will likely color the thinking and planning that will take policy forward. (Recognizing as was noted in the EIA meeting last week, that given the need to get 60 votes out of the Senate, that such a process will dictate adopted policy). So it is interesting, with that filter in mind, to listen to the interview that Secretary Chu gave to the Washington Post today.

The interview begins (the Post listing is not in order, so this was the top bit) with a question on getting folk to use public transport, and conservation as a necessary early step in reducing the national energy demand. The question illustrates the difficulty between setting an overall goal, and the problems in trying to implement those goals in a time of financial exigency. Consider that while, in order to save money in tougher times folk recognize that they are better off taking public transport. The problem is that as that demand goes up, from Washington D.C to Florida, and all across the country, it bumps into the harsh reality that cuts in municipal income are forcing the services to become more restricted. As someone noted “it makes no sense to hire a construction worker, and fire a bus driver.” Unfortunately that part of the question was not fully addressed by the Secretary, though he did note that 60-70% of transportation fuel is used in the private sector, but then focused on the more fundamental theme, that he has expounded upon before, about conservation of energy. In this case he would replace the construction worker with someone that can weatherize your home. (Though still not helping the bus driver). But even here I think he has difficulty. Because to sell this message (that weatherizing your home can pay for itself in a year or eighteen months), requires that he get people to hire folk to work on their homes.


The difficulty with this when times are tougher, is that it is requiring individual members of the public to become involved and actually spend their own money in the process. (We had some small remodeling done over the winter, and according to the folks we hired, there is very little work out there at the moment). In tough times that is going to be a hard sell, high return or not. And while the sale that the Secretary talks about hinges on folk seeing the payback in lower energy bills after the investment, or getting a bank loan to make the improvements, which is a group that also needs to be persuaded.

In regard to the use of solar energy, and particularly photo-voltaics, the Secretary plays around with words. At the moment solar is much more expensive than conventional other fuels. But he notes that if you look instead at the energy supply for peak power then, instead of costing $0.10 per kwh, that currently costs $0.40 per kwh. So that instead of replacing other power sources if one instead makes the comparison with solar (at say $0.23 per kWh) then solar becomes a logical choice. The problem with that argument is that I suspect that solar is only considered as being at $0.23 if the investment can be paid off by continuous supply of power into the grid at the time that the sun is shining, in which case it is displacing existing, lower cost systems. If it is installed and then only run in times of high demand, then ROI would surely drive the costs over $0.23 and it would still not be economical.

Turning to oil dependence he tried to distinguish between folks reducing their driving habits purely because the price went up, over their decision to do so because of the dependence on foreign oil. He recognized that countries are now jockeying for guaranteed access to the increasingly limited supply, and this dependency is a “very scary proposition” particularly if it starts to define our geopolitical stance. He did suggest that people conserve in personal travel by driving more fuel efficient cars and car pooling, but when challenged as to whether folks would, he merely hoped so. And then he spoke up for the use of bio-waste as well as specifically grown crops to generate bio-energy.

In looking at the benchmark of 100-day accomplishments he is proud of getting the loan guarantee program to actually start making loans, whereas when he came in the likely start date had been projected as sometime next year.

For climate change, and carbon reduction he still holds to the target of reducing carbon emissions by 80% by 2050. He still sees energy conservation, in things like buildings, as the lowest hanging fruit. He thinks we can reduce building energy costs by 80%, with today’s technologies and without solar panels. He feels that the Department can design tools that will help people do this., and that the added investments to make them efficient will then pay for themselves in 10-years or less.

But as with cars, and the change to higher mileage vehicles with improved batteries, there is no recognition that this problem needs an immediate solution. Rather the Department is going to continue developing battery technology, with the hope that in time the cost differential for a hybrid will be small enough that it will become more attractive to the public. As it will continue to work on the design tools for buildings, but there is no sense of emergency in the talk, no sense that the time where we will need to have answers is in the relatively immediate future. Interestingly when he was selling the concepts of hybrids he argued that they were only $5,000 more expensive than conventional models, and yet when arguing the need for research on batteries he put the price of current batteries in hydrids as being on the order of $10,000. (Tsk!) But new batteries are at least 5 years away.

I must confess that I do find it a little odd that he would have us concerned over climate change, with a potential for that impact being towards the back end of this century, with much less concern over the more imminent arrival of fossil fuel shortages, which may well occur within the period of the current Administration.

And in that regard he talked of the differences between regulatory and legislative paths towards reducing carbon emissions. He anticipates that the EPA will move on the regulatory process, which may, in turn stimulate more legislative activity. And looking further into coal, the rate of advance of “clean”coal’ is going to depend on the costs and the technologies that show that they can work. These are pilot demonstration plans going forward that will initially be expensive, but will come down with use. And he thinks that as a result clean coal could happen. He thinks that the economic and social consequences of continuing to burn coal are becoming more evident and more pressing. (One wonders what he is thinking of in particular) But again this is quite generalized, and not focusing on the shorter term path forward, and, as I keep listening to the Secretary the more I worry that he does not see the time scale over which changes need to be made.
.

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Saturday, April 4, 2009

A quick look at some Russian numbers

This is the beginning of the new month and so time to have a quick check on how Russian production is getting along. It is somewhat inaccurate to base any real conclusion on a day’s snapshop and at the same time the season is (finally) starting to change, with only another two weeks when we might normally expect snow (only 30% in today’s forecast). Thus when this quick look at the statistics shows a drop in energy production in almost every sector from last month, both of those caveats have to be borne in mind.

Crude oil production is down by about 1% over last month, at 9.63 mbd, with Rosneft up 1% (at 2.28 mbd) and Lukoil down 4% at 1.8 mbd, but these are within the sort of daily fluctuation numbers that occur and don’t likely signify much. Rosneft has just announced that at $4.2 billion its profits dropped 12.8% last year. Some 4.27 mbd was processed internally.

The natural gas numbers are down significantly, but this is coming to the end of the season, and it is getting warmer in Europe, so the overall drop shown of some 14% over the last month is likely related to that, although the Gazprom drop at 17% is a little higher than the overall average.

Coal production is off at 701,000 tons by about 20%, and though the numbers vary quite a bit on a daily basis, this is below the normal average. This is reflected in the use numbers, since coal will go into thermal electrical energy production and that is down some 12% month on month.

Because just comparing day to day at month’s end is going to give these variations, I think I will try recording the weekly numbers and show this as a plot, starting next month, since otherwise the snapshots really aren’t telling us a whole lot.

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Sunday, March 29, 2009

P56. Pick Points

I see that Jerome is a little upset with the NYT story about coal and renewable energy costs. In the story the question is raised as to how much extra the average consumer is willing to pay to switch from coal to renewable fuels. There are several aspects to the story – the first is that the Administration can raise the relative cost of burning coal by imposing some additional cost for generating carbon dioxide (whether by tax directly or through cap and trade). The second is that, by regulation, it can make it so expensive to build a new coal powered station that the alternatives become more attractive. Or, by driving improved efficiency and conservation (especially in a time of recession) it can lower the need for additional power. However if costs are raised, then the utilities will pass these additional costs on to the consumer, and as I have noted before, running as the candidate who doubled electricity costs is not a sure election ticket. The article does, however, question the veracity of some of the estimates for coal-fired power
One big question is how much it currently costs companies to produce coal-fired energy, and the answers are often colored by ideology or self-interest. Companies that sell coal or rely on coal-fired electricity often pick a low number; environmentalists cite the indirect costs to society, like strip mining or spills of coal ash. And since the electricity industry became more competitive, the utilities, even municipal ones, have become more secretive about their costs.
Yet if the backup power to wind is natural gas (and most new power stations are planned to be fueled that way) and costs pick up around the end of they year, then the combined cost of new power generated that way will still argue for coal.


The debate between natural gas and coal continues in Mississippi where utilities with underutilized gas production are arguing against a new coal fired power station. At the same time there is a claim from Canada of a process that can burn any coal to generate electricity with a negative carbon dioxide balance. The Canadian Government is investing in ways to improve carbon capture

In the world of oil and gas pipelines there continues to be the sound of change, if not yet the certainty. The Nabucco pipeline (the one that will bring natural gas to Southern Europe without going through Russia) is getting some favorable publicity with the anticipation of an intergovernmental agreement in June to get the program running. However some of the gas is anticipated to come from Azerbaijan and the Shah Deniz field, and that production is being delayed. Stage 2 of the program is being delayed from 2013 to the 2014-15 time frame, though given the potential current glut in natural gas as more LNG tankers become available, this may be smart timing. It could also use another pipeline, the Turkey-Greece-Italy one, rather than Nabucco, since Azerbaijan is on the west side of the Caspian and thus does not have to go through Russia.

Nearer home there is a question as to whether the natural gas pipeline through the Mackenzie Valley might be built before the Alaskan natural gas version. ConocoPhilips thinks they are ahead. There is not, however, universal support for new pipelines north of the border. China, meanwhile has signed a deal, which gives it the natural gas production off-shore Burma, as well as a pipeline to deliver it.

It is a little hard to grow the feedstock for conventional corn ethanol in Alaska, but a more traditional fermentation near Governor Palin’s home has created “Permafrost” (which is a vodka). The Mt Redoubt volcano continues to rumble nearby, and snow was used to help Anchorage airport remove ash and get the place back running after the volcano had gone through a total of 18 eruptions (The snow helps hold the ash together, so that it can be moved by plow). There are some oil storage facilities in the area that might be threatened.

Kansas is coming out of a record year for oil and gas production with production valued at $6.58 billion. This was up 10% over 2007, with most of the gain coming from oil. Unfortunately thefts of power (electricity and natural gas) are also up. The story is unlikely to be repeated this year, as the national rig count drops below numbers last seen in 2003. The question becomes when this decline will be seen in a production drop, given the short lives of most wells these days. The article suggests before the end of the year. In Colorado, where much production drilling has occurred, the rules are being tightened to include the Colorado Division of Wildlife in those deciding on new oil and gas location assessments. At the same time two new gas-powered plants are moving forward in the region.

Looking at alternate energy New Jersey is moving ahead with solar generation that will develop 42 MW of solar power by 2012. Meanwhile India appears to be opening up as a market for the technology. This goes beyond just building PV cells in country, a new plant will increase one companies production from 12 – 42 MW, The new Solar Cities Initiative will ultimately affect 60 cities, but will soon start with 2, including Nagpur.

Wind Energy, however, to return to Jerome’s topic, is becoming more recognized as the renewable to beat. The report by the Royal Society for the Protection of Birds (RSPB) this week stated
The RSPB believes wind energy has an important role to play in tackling climate change. Consequently we only oppose those windfarms that pose a significant threat to wildlife.
The title “Positive Planning for Onshore Wind,” also suggests the bent of the report – available as a pdf of 57 pages.

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