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Below the fold is the 3rd in a series of follow up posts providing analysis on the difficulties of maintaining our current energy paradigm with renewable energy (generally, 'the fake fire brigade'). The main authors are Hannes Kunz, President of Institute for Integrated Economic Research (IIER) and Stephen Balogh, a PhD student at SUNY-ESF and Senior Research Associate at IIER. IIER is a non-profit organization that integrates research from the financial/economic system, energy and natural resources, and human behavior with an objective of developing/initiating strategies that result in more benign trajectories after global growth ends. The authors have written an extensive follow-up to the questions raised in the original posting and I've broken into 5 pieces for readability - the 3nd installment, with a focus on electricity generation in an energy transition, is below the fold. This installment has been delayed a few weeks due to Hannes taking time off to get married....

The Biggest Part of Business As Usual - Electricity

In this third installment in this series, we want to put some emphasis on one of the most important enablers of human civilization of the 20th century: electricity. Its ubiquitous availability from every power plug is something we take for granted, despite the fact that stable electricity production is probably one of the most complex continuous endeavors of mankind, and one where many poorer countries fail.

In this post we would like to provide an overview of some of the properties of electricity, describe its nature (as a flow based system), and explain what challenges it faces in the future – especially those related to maintaining current delivery patterns once we have to increasingly rely on inputs no longer coming from fossil fuels that can be stored and burned mostly at our discretion, but from increasingly stochastic, largely uncorrelated flows such as solar or wind.

Electricity is a core topic of IIER’s research, because for us, maintaining anything that more or less resembles our current advanced economies is synonymous with uninterrupted, reliable electricity which mostly comes as a discretionary service to the user. Users, in this case, aren’t just private consumers, but also industrial and commercial applications, which are part of any advanced society.

Electric power is also the area of greatest debate, greatest hope and greatest investment, and the area where IIER thinks that societies face challenges with all their current attempts. Presently, OECD countries are targeting electricity generation as a means to meet carbon emission reduction goals, while simultaneously encouraging the development of non-fossil fuel based transportation (e.g. electric vehicles) and other moves away from coal and oil in industrial applications. They do this – so we think – without a robust plan as to how to maintain today’s delivery security. All plans aim at combining wind, solar, geothermal, and nuclear, super- and smart grids into one new robust delivery system, and there seems to be general agreement that this will actually work. But after thorough and unbiased research of the characteristics of electricity delivery systems, the parameters of those new technologies and the discrepancies between assumptions and reality, we are now skeptical as to whether societies will be able to provide stable electricity at acceptable prices going forward. We realize that this statement is almost considered a sacrilege.

Below, we will try to explain our concerns step by step, and why we fear that investing hundreds of billions in an electricity system that is far more complex and far less reliable will lead us in the wrong direction, given the details of our current situation. Once again, a clarification: we are not arguing the fact that we slowly have to move away from fossil fuels and start using more renewable sources to provide our energy needs. However, we disagree with the common notion that societies can make this renewable energy transition and still receive the same services as today: stable and affordable electricity not just for private consumption, but for all uses that are part of an advanced industrialized society.

IIER’s Electricity Availability Index

In our first post, we introduced IIER’s Electricity Availability Index. It measures the availability of electricity in a country based on penetration (% of population with electricity) and reliability (outages and duration of outages per average customer).





Figure 1 – IIER Electricity availability index

Some commenters questioned the relationship between electricity and wealth (measured in purchasing-power adjusted GDP per capita). Such was the first hypothesis we tested when developing the EAI metric. The chicken-and-egg question can - as we think - be resolved quite easily, by testing in which directions we find the outliers. In case the assumption of “wealth is possible without stable electricity” is correct, there should be countries with low electricity availability that still are quite rich (measured in GDP per capita). However, these do not exist, the “richest” outlier is resource-rich Botswana (diamonds, copper, nickel) with close to $14’000 per capita and an EAI of only 21.9%. On the other hand, we do find rather poor countries with almost 90% electricity availability (such as The Philippines and Mongolia, with a per capita GDP of around $3’500), which leads to the conclusion that the correlation is unidirectional, or in other words: You don't have to be rich to have stable electricity, but your country needs stable electricity to become (or stay) rich.

The benefits of electricity

There are two discrete aspects of electricity’s importance to society: the benefit of its ubiquitous on-demand availability, and the severe side-effects of power interruptions. Let’s look at a simple illustration. Few companies in OECD countries install backup power for desktop computers, despite the risk of data loss during a power outage. The reason is economic – outages are so rare that the possible the cost for buying, maintaining and operating the backup equipment outweighs the risk of outage, which is why only servers and data centers are deemed worthy investments into power backup solutions. In emerging or developing countries, backup systems are commonplace, but only if businesses can afford them. But most local businesses cannot, which makes it primarily an option for international corporations, while local companies are at a disadvantage.

Other applications, particularly of industrial nature, can’t even operate with backups; they simply need a power guarantee. The pots of an aluminum smelter require uninterrupted power 24/7, 365 days a year. If the power is lost for more than a few hours, not only does the process stop, but after a short while the aluminum begins to congeal, with the consequence that the entire pot has to be scrapped, incurring costs of millions of dollars. Or think of a shopping mall that suddenly goes dark. No lights except for emergency lighting, no access to transaction services to process a credit or debit card, no elevators or escalators, and ultimately no sales. There are multiple studies on the cost of “reliability events” in power grids, each reporting very significant losses (a lot of research has been done at Berkeley Lab, documents can be found at: http://certs.lbl.gov/CERTS_P_Reliability.html). So while – as many people correctly say - power outages are just a nuisance to private households as long as they don’t exceed the time a fridge or freezer can hold its temperature, they are a threat to all more complex industrial and commercial activities that make our societies “advanced” and require the humming of electricity-driven machinery almost around the clock.

This now ties back to the Electricity Availability Index – many things are either impossible or economically not feasible in environments where grid stability becomes an issue. And even for applications where it is theoretically possible to ramp them up and down without efficiency or material losses based on energy availability, there are significant social costs associated with unpredictability. If there is no power, should we send all the workers home for a week, and call them again at 1am on the Sunday when supply comes back? We can certainly do this, but in reality we would probably rather cease many of those activities, because the opportunity cost of underutilized equipment and labor becomes so big that the final objective no longer makes economic sense.

What is electricity and how is it delivered

There are two ways that electricity is supplied. In smaller, poorer, or more remote areas, electrical production is achieved by a standalone solution that provides comfort or capabilities to those able to afford it. Often this is provided by diesel generators which can produce electricity as required, or by standalone hydro, coal or natural gas power plants which serve a local area or industrial activity. Increasingly, solar panels combined with batteries provide this service, or wind turbines in conjunction with oil based generators. The key characteristic of this type of delivery system usually is very high cost per delivered kWh.

In richer economies or even in urban areas almost all around the world, electricity is delivered via a centrally managed grid, which balances inputs and outputs effectively to ensure that demand is always met. In poorer countries, this often does not work out, with the consequence of regular grid breakdowns. In OECD countries, however, we are so used to the grid’s reliability that even small power outages regularly make the news headlines. Below, we will mostly focus on grid based systems, as only those are capable of delivering the basic industrial and commercial services for societies we are used to receiving.

What we get from our power sockets as “electricity” is the product of an electric current that is converted into useful work by an appliance. To make sure that those appliances work, particularly more fragile ones involving electronics, voltage and frequency must be standardized across entire regions (for example 120V/60Hz in Northern America or 230V/50Hz in Europe).

An electricity delivery system can be compared to a complex set of water pipes where water (electricity) enters at multiple points and is withdrawn at hundreds of thousands of faucets. Contrary to a water delivery systems, these electrical ‘pipes and faucets’ are so fragile that they almost immediately burst or collapse when too much or too little water is in the system. Or in other words – electricity is a fully flow based system, where inputs and outputs have to be matched at any point in time with deviations of less than 0.5% between supply and demand (see ENTSO-E manuals for more detail: https://www.entsoe.eu/index.php?id=57, particularly the one on “Emergency Procedures”) .





Figure 2: Grid based system (Source)

Currently, this system is fully supply-controlled (i.e. production is following expected and actual demand), which is why it has become so beneficial to society. It delivers seemingly unlimited and unrestricted amounts of energy to each room in our homes, offices and factories, and except for heavy loads in an industry or computing (server farms), there is no user-level planning required before flipping a switch, plugging in a heater, turning on a computer. Electricity just flows according to one’s needs. Later, we will examine demand side flexibility, but first, we want to focus on the supply side, which is where electricity systems are controlled today.





Figure 3 – schematic delivery system (current status)

To meet demand, which follows the cycles of human ecosystem patterns (days, nights, work/non-work days, heat, cold) is today matched by a combination of power sources that together form a highly flexible supply system, which also includes reserves to match unexpected demand spikes or sudden supply-side failures, for example when a power plant experiences an emergency shutdown. We will dive into the different load patterns and reserve provisions a little further down, but the key characteristic of a vast majority of inputs today is that they are fully predictable and mostly controllable. This is because inputs come from steady flows (like a running river), but by a large majority from stock based resources that can be consumed whenever there is a need, such as coal, natural gas, stored water or nuclear power (the latter could, for reasons to be discussed further down, also be seen as a steady flow). So in essence, what we have built is a highly complex system that converts steady flows and stocks into a well-managed, demand driven flow of electric current.





Figure 4 – types of inputs into electricity grids

What most OECD countries plan to do is to replace some of those steady flows or stocks on the supply side by adding more and more renewables with erratic flows. Currently, those stochastic, non-controllable flows from solar and wind power account for a maximum of 5% of total power production in each interconnected grid systems we are aware of [see Table 1 for the U.S. (combining Western and Eastern interconnection for lack of data) and for the European interconnected grid system – ENTSO-E], but by 2030, most countries in the Western world plan for 20 or 30% of electricity to be delivered from those two sources alone, accompanied by other new technologies.





Table 1: wind and solar power share in 2009/10 for major grid systems (EIA 2010, ENTSOE 2010)

In Europe, the almost 5 % of solar and wind are very irregularly distributed, with some countries totaling close to 0%, and others already experiencing up to 20% (Denmark) of those renewable sources. All those countries with high shares manage their problems with the significant help of their neighbors. Very small Denmark for example uses the comparably huge water power systems in Norway and Sweden to buffer its heavily variable wind outputs.

This grand plan – to maintain something that already now is highly complex by adding multiple layers of complexity – is something we are very concerned about. The overlying challenge is to keep a flow-based demand system working while stochastic, non-controllable flows gain a significant share of supply, and to do so without jeopardizing grid stability, and at a price which is still affordable. We believe that most people underestimate this challenge and that it actually may be insurmountable. Important: “affordable” in this case doesn’t mean it can be paid by individual households for their relatively small amount of required electricity, as they may be able to bear 20 or 25 cents for a kWh, but instead for an entire industrialized society with the need to provide all the goods and services that make it what is considered “advanced”.





Figure 5 – shift to larger amounts of stochastic flows

What is an acceptable price for electricity?

What a high cost of oil does to societies has been well researched and documented in a number of papers (see: http://www.iiasa.ac.at/Research/ECS/IEW2005/docs/ppt/IEW2005_Maeda.ppt) . High oil prices seem to be a clear inhibitor of economic growth and early indicators of coming recessions. The reason behind this is the fact that the higher the cost for energy is, the less of our efforts can go towards discretionary spending (Hall, Powers and Schoenberg 2008). It is an inherent property of EROI: the energy and money we spend to procure and extract energy, is unavailable to spend on discretionary and non-discretionary investment and consumption.

There is no reason why the situation should be different for energy inputs other than oil, as higher energy costs always leads to this diversion away from consumption and investment. However, creating a benchmark is not easy, as electricity rates have been relatively steady during the times when oil prices fluctuated heavily, which gives us no past reference.

Using oil, where a relatively solid research base exists, we wanted to create a benchmark for “tolerable” electricity prices. Some papers suggest that oil prices that grow from 25 to 35 dollars have a negative impact of 0.3-0.5% on GDP in various countries (http://www.iea.org/papers/2004/high_oil_prices.pdf). We currently are at around $80/barrel, and are still in the middle of a bad crisis, which just looks less bad because governments have started to run up deficits at a breathtaking pace. At $150/barrel, in 2008, the current recession began with a vengeance, and many researchers suggest that high oil prices had their fair share in pricking the problem.

So based on experiences from 2008, we can probably assume that oil prices around $150 per barrel choke many economic activities, as the marginal cost becomes unbearable for many private and commercial consumers alike. Even at the current price of approximately $80/bbl, transportation and other energy-intensive sectors are under heavy pressure, and oil prices push commodity prices up. As a reminder: During the past 50 years, the median price for oil stood at about $25/bbl (inflation adjusted to current dollars). If we look at energy content in a barrel of oil (6.1 GJ or 1700 kWh), a price of $150 translates to a cost per kWh of 8.8 cents, $25 translates to 1.5 cents per kWh in oil.

The difficulty now comes in finding a meaningful comparison between oil and electricity. Oil is a high quality and high density raw energy source with excellent properties with respect to transportation, storage and processing, while electricity provides a distributed service at a comparably high quality. We assume that the same energy content in electricity is of higher value to society when compared to oil, which thus can bear a higher cost for the same amount of energy (this was also part of the Divisia index developed by Cleveland et.al.: http://www.eoearth.org/article/Net_energy_analysis).

One method of comparison would be to compare the ability to convert a specific source to heat (http://www.eia.doe.gov/cneaf/electricity/epa/epat5p4.html). To produce the same amount of useful heat, about three times as much oil is required when compared to electricity. So while the lower limit would ask for a direct 1:1 comparison, a “bonus” factor of three for electricity sets the upper limit. However heat – today – is no longer the key use of oil; heat may be produced with natural gas or coal at much lower cost (at less than a third of that of oil). In the predominant applications for crude oil today, transportation fuels and chemicals, electricity is at a clear disadvantage. We therefore decided to assume a bonus for electricity in the middle of the two possible values at 200%, i.e. we attribute twice as much value to a kWh in electricity when compared to crude oil, and equally, set the threshold for economic trouble at twice that of oil.





Table 2: relative prices of electricity and oil

Under such an assumption, we see in Table 2 that electricity prices become critical at around 9 cents per kWh, equivalent to about $70/barrel of oil, and then unbearable at 15-18 cents (equivalent to 130-150$ oil). This is an average value for an entire industrial society, as wealthy private consumers can tolerate rates even higher than 20 cents per kWh.

But unfortunately, a society doesn’t just consist of consumers; it also needs to produce goods and services, and there, a cost of 15-18 cents will definitely be unacceptable. Given that Chinese manufacturers often operate with final electricity cost between 4-5 cents per kWh, even the 2008 average price paid for industrial electricity of 6.83 cents puts domestic U.S. companies at a significant disadvantage. At today’s electricity levels, highly energy-intensive applications are no longer competitive, which is already visible in industrial trends – it is not only labor-intensive work that is going abroad, energy-intensive industries such as aluminum smelting and steel manufacturing are leaving areas with high electricity cost.

Another method available to create a metric for “acceptable” electricity prices is to use the ratio of electricity cost to total GDP. At the average rate of 9.74 cents per kWh of delivered electricity, all electricity consumption costs the United States about 2.6% of U.S. GDP. If we separate out the industrial portion of GDP (2,737bn US$ in 2008), a similar portion (2.5%) is spent on electricity, at the average price of 6.83 cents. Should this price – for example – triple to 20 cents, suddenly 7.4% of total industrial cost would go towards electricity. This is far more than the profit margins of most energy-intensive industries.

For the U.S., where a large portion of heavy industry has been cut back already due to the relatively high cost of labor and energy compared to other places, such an increase may seem bearable. But what if China would operate under the same regime, replacing current low-cost electricity from coal with expensive new sources? In China, electricity alone totals to approximately 3.5% of GDP at an average cost of 5 cents/kWh, quadrupling the cost per kWh to the same 20 cents would demand that the country diverts 13.8% of its GDP to electricity. This is not feasible, as it – together with oil, coal and natural gas, would divert more than 25% of total GDP towards energy alone – representing a society-level EROI of 4:1. One of the reason why China fares so badly here is because the country provides a lot of the cheap energy Western societies no longer have, and then import it embedded in goods.





Table 3 – electricity price sensitivity U.S. and China

If we want to run a complete industrial society, looked at on a global scale, energy prices above certain levels are not sustainable, as they reduce available surpluses for consumption and investment. And unfortunately, those cost levels of 15-20 cents per kWh on average are exactly where societies are headed with the planned changes. We will cover those aspects in more detail further below, when looking at individual technologies.

Meeting demand – in more detail

In order to understand what we need and what we receive from multiple technologies, it seems important to split out the various types of load grid operators have to deal with.

Base load – defined as the long-term minimum demand expected in a region – is usually provided by technologies with relatively low cost, high reliability and limited ability to modulate output. This includes nuclear power plants, lignite coal plants and hydroelectric water mills in rivers. Those plants typically have to operate continuously at relatively stable loads, as otherwise their efficiency is reduced significantly, leading to higher cost per unit of output. Also, re-starting those power plants is relatively time-consuming and inefficient. In most countries, base load capacity is capable of covering approximately 100% of low demand (during nights and weekends).

Intermediate or cyclical load – the foreseeable portion of variety in loads over a day is provided by load-following sources that can modulate to higher or lower output levels – or almost entirely be turned off and on within a relatively short time. However, these sources usually require some lead time to grow or reduce output, for example some coal power plants. Today, natural gas is used for a significant portion of cyclical load.

Peak load – usually required within very short periods of time for a few hours a day – can be provided only from sources that can be turned on and off within minutes, this typically includes gas and small oil power plants as well as stored hydropower (dams or pumped hydro). Peak capacity can be provided by spinning reserve plants (e.g. running plants that can increase capacity quickly) or by non-spinning sources, which can be turned on within minutes.

Beyond technology limitations that make it difficult or uneconomic to ramp capacity up or down quickly, the key factor in the eligibility of a technology for the use in peak, cyclical and base load mode is the cost share between capital investment and fuel cost. The higher the fuel cost share, the more suitable a technology becomes to support peak power; the higher the investment share, the more operational hours are required to arrive at an acceptable average price per kWh. We will look at this issue further below, but this for example is the main reason why nuclear power is such a bad load-following or peak source.

Demand flexibility has a (high) cost

Another point has to do with the flexibility of electricity use, i.e. the possibility of turning something on when supply is abundant, and turning it off when power is scarce. The problem lies with the nature of most uses: many applications are simply inflexible, like those that require something to run for 24 hours a day - data centers are among them, and so are some key industrial processes. Lighting is not flexible, nor is access to heavy uses of electricity in households, such as cooking, using electronics or most kitchen appliances. We also want hot water and cool air when we need it, and usually we don’t want to schedule our laundry because someone tells us to do so, even though this is probably the easiest part. Now some applications, particularly heating (air and water) and cooling (air and goods), indeed have certain flexibility potential. We can run a freezer or air conditioner that produces ice to bridge supply gaps, or we can build a water heater which produces enough hot water to get us through the day, a very common application today in Switzerland, where night energy rates are often half of daytime rates even for households. However, such a time shift comes with tradeoffs: any application that uses storage instead of directly converting electricity into the desired quality output (heat or cold here), ultimately adds cost, for several reasons.

Making equipment flexible comes at a cost, either the cost of information transfer (for price-regulated markets) or the cost of storing the required energy for later use. France has been quite active at experimenting with contracts allowing them to regulate energy according to supply, where customers pay less for power that can be cut off at any point in time. This is especially important in France because of the inflexible nature of their generation technology mix with almost 70% coming from nuclear power. Yet the flexibility French grid operators were able to evoke from that market mechanism, despite the heavy incentives, was around 2-3% of total peak demand (according to RTE, the French grid operator). Most users obviously prefer the inconvenience of higher prices versus the inconvenience of service interruptions, even for things that are not mission-critical. This fact leaves us with approaches that actively shift energy consumption without affecting the end-user. Mostly, this translates to some kind of storage, which has a number of disadvantages.

Every piece of equipment that includes a storage mechanism is significantly more complex than one that operates without, and because of that complexity becomes more expensive, more energy-intensive in its manufacturing, and more exposed to failure. Additionally, each storage process incurs losses. If we produce hot water at night that should last through the entire day, some of the heat dissipates, dependent on how well insulated the storage tank is (again this is dependent on cost and effort, as well as space). The same is true for air-conditioners or freezers that use ice produced at night as buffer – they are less energy efficient overall. Both applications can still be economical for the end user and society as a whole if they use cheap base-load power at night and avoid using peak electricity during the day. Ice-based air-conditioning systems are quite common in office buildings in some parts of the U.S., where utilities charge different rates between night and day. But there is a caveat: all those approaches are geared at balancing two almost steady systems with fully predictable 24 hour cycles, nightly base load production and daily usage patterns with a peak or two. Thus, the maximum storage time required is 10-15 hours, which reduces system complexity as well as conversion and storage losses to acceptable levels. Now with renewable energy supplies, we are suddenly confronted with irregular patterns that can include days to weeks of over- and undersupply. In those cases, storage and conversion losses beyond a few days become almost insurmountable hurdles, as cumulative losses grow quickly over time.

So in a nutshell – there are technical solutions for many of these problems, but often the outcome no longer makes economic sense – neither for the individual user nor for a society.

Moore’s law and receding horizons

A key assumption of many forward projections for renewable energy production is that the technology will become cheaper and cheaper over time. Unfortunately, this isn’t true for many technologies, especially as fossil fuel inputs become more expensive.

One of the often cited rules in energy discussions is Moore’s law, which describes the fast advancement of capacity improvements (and price decreases) in computing power. It says that the density of calculation power can double every two years, and has been relatively consistently achieved since 1970. This has led to the fact that a smartphone today has more capacity than large mainframe computers in the early Seventies.

However, outside electronics, Moore’s law does not apply and has never applied for anything. A physical structure remains a physical structure, and does not have the multiplication potential that comes from miniaturization. We may be able to raise the efficiency for a photovoltaic panel from 18 to 20%, but not double it every two years no matter what we do, given the physical limits. The same is true for the materials used for its manufacturing; we might reduce them, but often by 10-20% and sometimes at the cost of more complex tools and purer materials (which also require energy). And erecting a modern wind turbine always requires steel, concrete and many advanced materials, which won’t change, no matter how much we optimize it.

For normal industrial goods, price curves often show an asymptotic form. When a technology is new, neither its production nor its outputs are focused on efficiency; production facilities are small and processes involve a lot of manual labor. Also, new technologies often get produced in advanced economies with higher labor and energy cost. With maturing manufacturing technologies, more efficient and scaled up factories, and the inclusion of lower cost labor and energy from – for example – China, production becomes cheaper and prices fall. Eventually, when labor and production costs become optimized, the decline in price of the product slows, until it reaches a stable retail price more dependent on the raw materials and energy required to produce and transport the good.

In many cases, the picture for raw materials and raw-material-driven products begins to look like the dotted line, despite rapidly growing output:





Figure 6 - Marginal cost curve for supply-constrained resources

During the past few years, we have seen this important reversal in this key underlying trend, which briefly visited our economies in 2008 when - with rising resource prices – everything from food to fuels became suddenly more expensive. Thanks to the economic crisis and reduced demand, this phenomenon has partially disappeared, but for some key commodities (such as copper, iron ore, coking coal and some others), we are already back to pre-crisis levels or higher. This is the “glass-half-full” trend, which applies to almost all natural resources, but first and foremost energy. Even if we – as many people correctly state – have enough of something in the ground, getting it out becomes more difficult, has to happen further away and in geopolitically riskier places etc..

This is confirmed by the cost for new power plants, where cost estimates have recently gone up based on higher input cost (for almost everything ranging from nuclear to coal to wind towers), and even for solar panels, the permanent reductions experienced in the past haven’t continued between 2003 and 2008, despite rapidly growing production. The last important cost reduction happened since around 2006, when Chinese manufacturers entered the market, bringing low-cost production energy (mostly coal-based) into the game. Not truly a sustainable model. And, in 2009, due to overcapacity and massively reduced raw material prices, costs came down again, and there might even be more room for some reductions, but this story has an end once input prices go up.





Figure 7 - Cost of solar panels ((Pdf warning)

If that core trend of higher energy cost, particularly at the historically lowest-priced end, cannot be reversed, which we doubt it can, this has implications for everything that uses those inputs, as it raises the price with the cost of the raw materials and the energy that go into them. This effect might, in turn, effectively end the trend of lower and lower prices for everything, including energy generation technology, no matter what it is.





Figure 8 - The “old” trend ............. Figure 9 - The “new” trend

Base load power – a real problem

Except for solar and wind, most of the technologies currently seen as potential future output providers deliver base load power. This is true for biomass, for geothermal, for nuclear, and to a certain extent for coal. All those generation approaches have only limited load following capabilities, for very different reasons.

Now, stochastic renewable sources (mostly wind) coming into play, often with a “right of passage”, i.e. no limits in selling into the grid at a preferred price. Whoever comes next only gets to sell when there is still demand, and – in a free electricity market like we have it in most OECD countries – that means that prices for coal, nuclear and other base load outputs without a preferred status (biomass mostly has that status), drop sharply. Some analysts have even considered this a positive phenomenon, but actually it is not. What it really does: due to the preference of wind, it pushes marginal price (but not cost) of those steady sources down and thus makes base load generation economically unattractive, because less steady demand at lower prices simply translates to an unacceptable risk for investors. Spot markets are among the key reasons why no more nuclear and hardly any coal power plants were built in Western economies during the past decade.

In a future electricity system, we will see an increasing disparity between a growing pool of inflexible (for cost or technology reasons) base load power, a mission-critical pool of peak and cyclical load capacity, and that new, unpredictable pool of sources that deliver whenever they deliver, irrespective of demand.

A new electricity mix

If we use some currently available numbers for various electricity generation techniques, we might come up with the following for generation capacity in the United States, without any subsidies:





Table 4 – cost and suitability of various generation technologies

We are aware of the fact that the above numbers are being disputed, which is why we have included broad ranges. This is not the point we are trying to make – the point is incremental replacement of fossil fuel-based plants, especially cheap coal with more expensive technologies has the potential to lead to large increases in the price of electricity.

Now on top of the generation cost shown in Table 4, we have to bear the cost for maintaining and operating the electricity grid, which delivers the power to homes, offices and factories. For a standard grid today, which does not have to do much more than transmit electricity generated according to demand, this might add about 2-3 cents per kWh. When looking at the cost ranges above, it becomes quite obvious that even the lowest cost sources already bring the total price of electricity dangerously close to what industrial users can afford.

Now on top of the generation cost shown in Table 4, we have to bear the cost for maintaining and operating the electricity grid, of metering, and some profit margins for the utility companies which delivers the power to homes, offices and factories. For the U.S. today, where the grid does not have to do much more than transmit electricity generated according to demand, this adds between 2 and 7 cents per kWh.





Table 5 – approximate share of final electricity cost (multiple sources, IIER calculations)

When looking at the cost ranges, it becomes quite obvious that even the new lowest cost sources already bring the total price of electricity dangerously close to what industrial users can afford.

What really matters is “useful energy”

And now comes the challenge: Only power that meets someone’s demand has a positive price. If I am asleep and someone offers me free power to light my entire house like a Christmas tree, I don’t care. On the other hand, when the food in my freezer starts to thaw, I would probably be ready to pay a very high price for the few kWh it needs to keep that device going. The same is true in aggregate. Spot electricity prices go as low as 0-3 cents during the night (or even negative, http://www.scribd.com/doc/27816762/Negative-Prices-in-Electricity-Market), and up to 12, 15, sometimes even 50 cents at peak times during the day.

Now what we need to measure in order to understand the entire delivery system is not so much about the prices paid for one kWh of electricity produced, but instead the cost of electricity delivered according to demand. We want to determine how much it costs to provide a kWh from a particular source to supply our human energy demand patterns, and if that doesn’t work in a straightforward manner, we have to estimate the extra cost required to either shift it to the right time, or to shift demand to the time of production. Only once that has been factored in, do we know how expensive a kWh of electricity from a particular source really is.

Sources with little flexibility, such as coal and nuclear or run-of-river hydro plants, mostly produce around the clock. Given their low average cost, the average prices received are profitable, despite the fact that during the night they sell below full cost, but usually above marginal (fuel) cost. The rest (power plant investments, non-flexible operations cost) are incurred irrespective of plant outputs. Thus, adjusting output to more closely meet demand would incur even higher cost (or efficiency losses, or both), put stress on the equipment and require higher operations and maintenance efforts.

If we had to run our grids with just those base load sources, electricity would be more expensive, either from those efficiency losses, from lost overproduction during the night (to still meet peak demand), or from additional measures to shift demand, such as incentives and storage (either in the network or in end-user appliances, as described above). This would add to the basic generation cost. After including these extra efforts, electricity generated in coal or nuclear plants (see section below) would have to sell at a higher price than just the generation plus distribution cost.

Other sources, mostly dammed hydro, oil, and natural gas, are generally able to deliver exactly on time. (hydro only to a limited extent, as certain minimum flows need to be maintained in order to keep ecosystems in rivers below the dam intact). In general, we can turn them up when demand rises, and cut production back as soon as less power is needed. Those sources do not require extra cost on top of their generation cost and the basic effort to operate a grid. A kWh of electricity produced from natural gas thus usually costs approximately 6-10 cents (obviously as long as natural gas prices don’t change).

For sources that don’t have the characteristics described above, things become trickier. We wouldn’t be talking about smart grids, high voltage DC lines, storage in ELVs, and more, if it wasn’t for the fact that most of the sources we want to add to our grid are unpredictable beyond the reach of our weather forecasts. For sources that are capable of producing everything between 0% and 100% of total nameplate capacity at any given time, irrespective of demand, we need to have very different approaches to make them work, and none come cheaply.

So overall, as with all energy sources, we have limits in electricity cost to make it bearable for people. And not for us rich people who plan future energy systems, but also for everybody, and for those industries that manufacture the stuff we all use.

To be continued...

Next week, we will go through a list of all the currently available technologies for generation, transmission and storage, and review total feasibility and cost for each including transmission and grid management, and show certain trends for the future, and, ultimately, provide our assessment as to whether these technologies will be able to deliver what we need to keep grids going.

***************************

Previously in this series:

The Fake Fire Brigade - How We Cheat Ourselves about our Energy Future

Revisiting the Fake Fire Brigade - Part 1

Revisiting the Fake Fire Brigade - Part 2 - Biomass - A Panacea?

http://feedproxy.google.com/~r/theoildrum/~3/wC9sMGs08nM/6915

Once again I am indebted to MoonofA, who is giving a more detailed hour by hour report, of some of the incidents that I miss. Fairly rapidly on Thursday afternoon, the team of ROVs and surface vessels moved forward with the removal of the existing infrastructure over the Deepwater Horizon well, with the intent of replacing it all with a functioning blowout preventer from the 2nd relief well (which now looks to be no longer necessary at all). One of the first steps was to move the methanol feed (used to dissolve and remove hydrates from the internal structures of the stack) down from the rams of the top stack to feed into the original BOP. This was used to ensure that the different parts of the stack, such as the rams, were able to function, when needed. And now, I presume, the hope is that it will similarly ensure that the BOP rams can function if needed.

Removing the line from the stack

Replacing line on the BOP

Once the feed line had been moved, then the Enterprise came in and lowered the latching device that has been floating just above the stack for the past few days. It did not take long (and by doing so did not convey the difficulty) to drop the cap over the top end of the stack, and not long thereafter the stack was released and lifted away from the underlying transition and the original BOP.

Approaching the stack

The more interesting part of the exercise will come when they start to lift the original BOP and the transition spool. There are a number of different scenarios that have been proposed, depending on what happens, and why, as the first lift begins. If they can lift the BOP with the underlying drill pipe (DP) still attached, then they appear ready to grab hold of the DP after the BOP has risen a short distance, and cut it off. This will make it easier to get the BOP to the surface, and means that a more conventional fishing tool can be used to capture, and bring up the remaining length of the DP. Toolpush, for example, mentions some of the options available.

Sliding into place

The capping stack was released at about 4:30 pm Central, whereupon Admiral Allen issued the following statement:

"Under the direction of the federal science team and U.S. government engineers, BP has completed the capping stack removal procedure – an important step in the process to remove and preserve the damaged BOP. This procedure was undertaken in accordance with specific conditions I set forth in a directive authorizing the capping stack removal and BOP replacement last week. BP will continue to follow these required conditions for the BOP removal procedure, which is expected to commence this evening. I will continue to provide updates as necessary."

One of the problems with the feeds from the Q4000 is that they are not time-stamped, so that it is hard to know if the latest glance at the feed below the moon pool, which shows that the pipe hasn’t moved since I last looked, is current or not.

Another Incident: Mariner Energy Platform Fire

The other significant news today was of the fire on the Mariner Energy platform in the Vermillion block of the Gulf of Mexico. The fire now appears out and there was apparently no leakage from the wells that were connected to the platform. The platform is in 340 ft of water, and was fed by 7 wells collectively supplying 1,400 bd of oil and 9.2 mcf of natural gas, that is now shut in.

I note that they were apparently water-blasting the rig and repainting it. One of the things to be careful of in those cases is the static electric charge that can build up in water vapor around the operation. From the Coast Guard report:

However, at this time, that is just conjecture, and we will have to see what the investigation reveals.

http://feedproxy.google.com/~r/theoildrum/~3/tm3QyUOjMnU/6917

We need a better understanding of the 'environmentalist's paradox'

We hear lots of concerned chatter these days – not least, here on this site - about peak oil, peak water, deforestation, resource depletion and the like, but a popular riposte offered by those doubting such concerns is something commonly referred to as the "Environmentalist's Paradox".

The argument goes thus: "Why, despite resource depletion and the degradation of ecosystems, is average human well-being improving globally?"

People such as Matt Ridley, author of the Rational Optimist, argue that environmentalists are needlessly downbeat about humanity's prospects. After all, we are a resourceful, adaptable, highly intelligent species more than capable of riding out any current concerns (if only we would de-shackle ourselves from free-market constraints).

As a counterpoint, we have the likes of Jared Diamond, author of Collapse, arguing that we should heed the lessons provided by failed civilisations of the past who extinguished themselves by over-exploiting their available natural resources.

The latest edition of the journal BioScience includes a fascinating paper which examines just this paradox.

Crude Oil Heads for Weekly Decline on Forecast for U.S. Jobless Increase

Oil declined, headed for a weekly drop, on forecasts that a U.S. government report will show the jobless rate rose in August for the first time in four months, threatening the recovery in fuel demand.

Futures are down 1 percent this week. Analysts surveyed by Bloomberg estimate the August payrolls report from the Labor Department will show the U.S. economy lost 105,000 jobs. Crude gained yesterday after an fire on a Gulf of Mexico oil and natural-gas platform prompted speculation that tighter regulations will cut production.

`Bear Flag' Signals a Decline in Oil Price to Near $60

Crude oil is set for a drop to near $60 a barrel, extending a descent started in May, according to a technical analysis by independent analyst Jim Stellakis.

“Last month’s breakdown in crude oil is continuing the longer-term bearish pattern which was started by the May decline,” Stellakis said. The bear flag pattern is signaled after a break occurs below a rising trading range.

Record Russian Oil Premium Vanishes on Refinery Run Cuts

Russian crude’s unprecedented premium to North Sea Brent is vanishing as European refiners switch to higher-value blends and scale back purchases to protect their profits.

Oil May Fall as U.S. Refineries Conduct Seasonal Maintenance, Survey Shows

Crude oil may fall next week as U.S. refineries perform seasonal maintenance, reducing demand, a Bloomberg News survey showed.

Fourteen of 34 analysts, or 41 percent, forecast crude oil will decline through Sept. 10. Ten respondents, or 29 percent, predicted that futures will rise, and 10 projected prices will be little changed. Last week, 41 percent of analysts forecast an increase.

Crude warning for policymakers

South Africa imports around two-thirds of its liquid fuels.

The government's strategy regarding security of liquid fuel supply assumes that sufficient crude oil imports will be both available and affordable in the foreseeable future. The emphasis has been on ensuring that adequate quantities of refined products are available to meet rising demand, especially in the economic heartland of Gauteng.

Russia to double gas imports from Azerbaijan in a fresh blow to EU-touted pipeline project

MOSCOW (AP) — Russia's Gazprom on Friday clinched a deal to double supplies from Azerbaijan in a bid to expand its control over gas produced by former Soviet republics.

...The European Union was planning to use Azerbaijan's vast energy resources as a key source of gas for a major pipeline project, Nabucco, to bring Caspian and Central Asian gas to Europe, bypassing Russia.

Ukraine May Give Russia Joint Control of Pipe to Cut Gas Prices

(Bloomberg) -- Ukraine is willing to give Russia joint control of a pipeline to southeastern Europe in exchange for access to natural gas supplies, Prime Minister Mykola Azarov said as the country’s negotiate a gas venture.

The governments are seeking to create the venture between NAK Naftogaz Ukrainy and OAO Gazprom, both of which were once part of the Soviet gas monopoly, by year-end, Azarov said in an interview in his Kiev office yesterday. The agreement would reduce the price Ukraine pays for Russian gas, he said.

No sign of oil after Gulf platform fire: Coast Guard

NEW ORLEANS (Reuters) – An oil and gas platform operated by Mariner Energy burst into flames in the Gulf of Mexico on Thursday, but the crew of 13 escaped and there were no signs of an oil spill, the Coast Guard said.

U.S. Probes Mariner Fire in Gulf of Mexico That Sparked BP Spill Deja Vu

The fire started on or near upper-deck living quarters and was not caused by an explosion, Patrick Cassidy, a spokesman for Mariner Energy, said in an e-mail. The company said oil and gas production from the wells controlled by the platform, known as Vermilion 380, has been shut down.

Mariner may be facing BP-style crisis

NEW YORK — Just a few months ago Mariner Energy was celebrating its imminent marriage to Apache Corp.

On Thursday, Mariner found itself in the middle of a potential BP-style crisis, with a rig off the coast of Louisiana that exploded and perhaps was leaking oil into the Gulf of Mexico.

Mariner shares dropped on the news, shedding more than 2 percent. Shares of Apache also fell.

Blaze Shakes Oil Industry

HOUMA, La.—The fire that engulfed an oil and gas platform Thursday in the Gulf of Mexico heightened pressure on the energy industry, which is battling greater regulation and a deep-water drilling ban.

U.S. offshore oil fire may delay lift of drill ban

WASHINGTON (Reuters) – The Obama Administration is likely to stay focused on toughening regulatory oversight of the U.S. offshore oil industry and may push back lifting a ban on deepwater drilling after the latest accident in the Gulf of Mexico, analysts said on Thursday.

The fire on a Mariner Energy oil and gas platform in shallow waters of the U.S. Gulf on Thursday was a major setback for companies hoping for an early end to the government's drilling moratorium and raised more questions about the safety of offshore drilling.

BP Says Limits on Drilling Imperil Oil Spill Payouts

BP is warning Congress that if lawmakers pass legislation that bars the company from getting new offshore drilling permits, it may not have the money to pay for all the damages caused by its oil spill in the Gulf of Mexico.

The company says a ban would also imperil the ambitious Gulf Coast restoration efforts that officials want the company to voluntarily support.

BP oil spill costs surge to $8bln

LONDON (AFP) – British oil giant BP revealed Friday that the devastating Gulf of Mexico oil spill disaster has cost it eight billion dollars so far -- with a sharp rise in payments in the last month.

Factbox: U.S. Energy Disasters in 2010

HOUSTON (Reuters) – Energy production and distribution in the United States can be a dangerous pursuit, in spite of strict safety regulations for oil, gas and coal producers and processors.

Following is a look at energy-related disasters that have rocked the United States in the course of 2010, including the deadly and environmentally destructive oil spill at BP's Macondo prospect in the Gulf of Mexico, which began in April.

Dreams of ships pass in the night

Fazel Fazelbhoy is a man with a vision. With the age of easy oil passing, the chief executive of Topaz is casting further afield, and that means deep offshore. In the wake of the BP spill, such projects are fraught with risk, but this dreamer’s reveries include Brazil.

Russia Transneft not to increase 2011 oil fee

(Reuters) - Russia's oil pipeline monopoly Transneft will not increase oil shipping fees in 2011, Interfax news agency quoted the company's head as saying on Friday.

"We are not going to raise the tariff at all," Nikolai Tokarev said.

Petrobras May Raise Up to $75 Billion in Sale of Shares

Petroleo Brasileiro SA, Latin America’s largest company by market value, will sell as much as 129 billion reais ($75 billion) of new voting and preferred shares to investors and the government.

Wheat Rises on Russian Export Ban; Mozambique Riots

Wheat rose in Chicago after Russia, the world’s third-largest grower, extended a ban on grain exports into next year, raising the prospect of higher food prices that already have sparked riots in Mozambique.

...Residents of Mozambique’s capital, Maputo, were on strike for a second day yesterday in a protest over higher food and utility prices. At least seven people have died in clashes with police and another 280 injured, Cabinet spokesman Alberto Nkutumula said yesterday.

Scramble for food companies a warning of crisis to come

The corporate activity is a storm warning of how food shortages and famine will reshape the world and corporate strategies.

The Economist notes that by 2050 world grain output will have to rise by half and meat production will need to double to meet demand at a time when growth in grain yields is flattening out, there is little extra farmland and renewable water is running short.

Similarly, rising food prices are a poke in the eye that the world needs to remind us of how fragile the food production chain has become. The drought and bushfires in Russia, combined with limits on grain exports, have resulted in a 70 per cent price spike in wheat futures, which has caused prices for soy and barley to go up by 10 per cent.

Police say attacks on Pakistani minorities kill 23

QUETTA, Pakistan – Suicide bombings targeting religious minorities killed at least 23 people in Pakistan on Friday, driving up the toll of sectarian assaults in a country already battered by massive flooding.

The EPA's new gas-mileage labels are good but not perfect

THE ENVIRONMENTAL Protection Agency is asking for comments on its proposed new gas mileage stickers for automobiles -- so here's ours.

Rating the new fuel economy labels

The EPA's proposed fuel economy labels range from baffling to genuinely useful.

From Detroit, a fix for smog-belching motorcycles

DETROIT (CNNMoney.com) -- When Americans debate the impact of fuel emissions on the environment, they usually talk about cars and trucks. But what about smaller vehicles like motorcycles, scooters, lawnmowers and ATVs?

Riding a lawn tractor for just an hour spits out as much pollution you'd get from driving a car for hundreds of miles, according to former Ford Motor Co. engineer Kyle Schwulst.

Report Says Heat, Not Smart Meters, Hiked Bills

After Pacific Gas & Electric, the giant California utility, began installing smart meters in the state’s Central Valley, the company was swamped with complaints from residents that their utility bills had increased.

But an independent review of the smart meters released Thursday found that the devices were functioning properly and attributed the high charges to a heat wave last year that coincided with their installation as well as poor customer service by P.G.&.E.

Reactor design poses dilemma

The nuclear industry’s federal regulator will face its first big decision early next year when it evaluates the design of a Korean reactor that conforms to most nations’ safety standards, but was rejected by a regulator in Europe.

The debate centres on a device known as a “core-catcher” that is built under the steel vessel containing the reactor core and serves as a last line of defence in a worst-case meltdown scenario.

Disasters data are our only guide

Nuclear industry regulators have only two sets of real-world data – Three Mile Island and Chernobyl – to draw on when weighing the merits of safety systems to prevent a catastrophe at nuclear power plants.

Mass Extinction Threat: Earth on Verge of Huge Reset Button?

Mass extinctions have served as huge reset buttons that dramatically changed the diversity of species found in oceans all over the world, according to a comprehensive study of fossil records. The findings suggest humans will live in a very different future if they drive animals to extinction, because the loss of each species can alter entire ecosystems.

Some scientists have speculated that effects of humans - from hunting to climate change - are fueling another great mass extinction. A few go so far as to say we are entering a new geologic epoch, leaving the 10,000-year-old Holocene Epoch behind and entering the Anthropocene Epoch, marked by major changes to global temperatures and ocean chemistry, increased sediment erosion, and changes in biology that range from altered flowering times to shifts in migration patterns of birds and mammals and potential die-offs of tiny organisms that support the entire marine food chain.

EPA to issue more rules in climate fight

The U.S. Environmental Protection Agency will roll out more regulations on greenhouse gases and other pollution to help fight climate change, but they will not be as strong as action by Congress, a senior administration official said.

Climate Risks That Every Executive Should Know About

We often think that climate change is something for the government to worry about -- the news is packed full of debate around government response to global warming, whether it’s the climate bill, or how China is outpacing us yet again in carbon markets.

But there’s a more immediate risk to companies in the U.S., something that is much closer to home and independent of whatever the public sentiment happens to be on climate change. For the first time in history, executives and their companies are being held liable for activities that contribute to global warming. It’s not a debate, it’s already happening.

New website to track climate aid, key to UN talks

GENEVA (Reuters) - A website launched on Friday will help track whether rich countries are keeping a pledge to come up with $30 billion in climate aid for the poor, seen by the U.N. as a "golden key" to progress in talks on global warming.

India needs to shift from coal to other sources of energy: IEA

India will need investment of $4.5 trillion in the energy sector to cut carbon emissions as part of a global initiative to reduce global warming by 2050, the International Energy Agency Executive Director, Nobuo Tanaka, said here Friday.

The United Nations Inter-governmental Panel on Climate Change has said global emissions of carbon dioxide have to come down by 50 percent to limit the increase in average temperate to between 2 to 2.4 degrees centigrade.

Ministry sets up task force to study North Pole policies

TOKYO — The Foreign Ministry said Thursday it has set up a task force to examine Japan’s policies concerning the North Pole, as melting ice due to global warming opens the door to increased ship navigation and chances for resource development in the Arctic sea. The panel comprises deputy directors general of various bureaus at the ministry as the matter concerns such sectors as economy, security, environment and international law, a ministry official said.

World cannot afford worsening disasters, warns UN climate change chief

The world cannot afford escalating disasters of the kind recently witnessed in Pakistan and Russia, the top United Nations climate change official said today, underscoring the need for governments to take swift action to lead the world towards a low-carbon future.

Tibetan nomads struggle as grasslands disappear from the roof of the world

Like generations of Tibetan nomads before him, Phuntsok Dorje makes a living raising yaks and other livestock on the vast alpine grasslands that provide a thatch on the roof of the world.

But in recent years the vegetation around his home, the Tibetan plateau, has been destroyed by rising temperatures, excess livestock and plagues of insects and rodents.

The high-altitude meadows are rarely mentioned in discussions of global warming, but the changes to this ground have a profound impact on Tibetan politics and the world's ecological security.

http://feedproxy.google.com/~r/EcoGeek/~3/x0lTuW23e1k/3285-port-of-

After debuting the world's first hybrid tugboat in 2009, the Port of Long Beach is partnering again with Foss Maritime Company to retrofit an existing tugboat with hybrid technology.

The ship called the Campbell Foss is a conventional dolphin tugboat assisting ships in the San Pedro Bay. It will be fitted with motor generators, batteries and control systems by Foss at one of their shipyards.  The retrofit should cut 1,340 tons of CO2 emissions and save 100,000 gallons of fuel per year.  Foss and the Port plan to introduce more hybrid tugs over the coming years and see more retrofits in the future.

The Port of Long Beach received a $1 million grant from the California Air Resources Board for the retrofit project.

via Press Release

http://feedproxy.google.com/~r/theoildrum/~3/QCGRw200ipQ/6912

This week a study on peak oil by a German military think tank was leaked on the Internet. The document shows that the German government is closely studying the issue of peak oil, and is aware of the potential for serious consequences as oil production declines. The study is reminiscent of the Hirsch Report, commissioned by the U.S. Department of Energy, that warned of the risks posed by peak oil.

The document warns of the potential for regional shortages, market failures, and a shift in political power toward those capable of exporting oil. This report describes potential outcomes that require planning and preparation. The scenarios outlined in the paper are exactly the kinds of drivers that lead me to advocate for greater regional energy self-sufficiency. The report clearly lays out just how vulnerable Europe will be because of its continuing dependence upon Russia for both oil and gas, and notes that Russia will be in a very strong political bargaining position as a result.

The report can be accessed from the popular German paper Der Spiegel in this story: Bundeswehr-Studie warnt vor dramatischer Ölkrise. The report is so far only available in German, and while Ich spreche ein wenig Deutsch (I speak a little German), I am not fluent enough to capture the essence of the report. (Der Spiegel has summarized the report in English now: Military Study Warns of a Potentially Drastic Oil Crisis).

However, I have a friend who is both fluent in German (his native tongue) and passionate about peak oil outreach. Given a week, I could probably translate the report. My friend (who didn't want to be identified) did it overnight. Below is his translation of the major points in the report.

Peak Oil

Implications Of Resource Scarcity On (National) Security

Center for German Army Transformation, Group for “Future Studies”

July 2010

1. Introduction

The focus of the document is on the topic of finite resources, using Peak Oil as an example. The report is part of a series of publications focused on the long term (30 years) with the intent to enable the Ministry of Defense to take action early.

In the past, resources have always triggered conflicts, mostly of regional nature. For the future, the authors expect this to become a global problem, as scarcity (mainly of crude oil) will affect everybody.

The authors confirm multiple views on Peak Oil timing and concede that there will be Peak Oil eventually. The study isn’t about positioning the problem on a timeline, but instead about the consequences of a peak. They expect major consequences with a delay of 15-30 years after the peak has hit.

The report refers to the uncertainty of reserve statements mainly in OPEC countries based on the quota allocation method within OPEC but also refers to the possibility of better extraction technologies.

They suggest that it has become urgent to understand those consequences of an eventual peak now in order to have enough time to adapt.

2. The Importance of Oil

2.1 Oil as a driver of globalization

95% of all industrial outputs is dependent on oil as a fuel and/or as a chemical base for polymer production etc. Oil has become a key driver of modern lifestyle and globalization.

Substantial oil price increases poses a systemic risk, not just for obvious things like transportation, but equally for other subsystems.

Thus, internationally, but equally nationally, there is a vital interest in securing access to oil, which is currently possible on world spot markets, with OPEC being cooperative due to a mutual dependency between key actors (and a massive presence of the U.S military in the Gulf region).

Yet, on the other hand, regional conflicts can always at least partially be attributed to resources, such as in the Caucasus region, the Middle East or in Nigeria. They may also fuel conflicts due to the wealth they create (such as in Africa).

The report sees – within a timeframe until the year 2040 – a changed international security layout based on new risks (including transport risks for fuels) and new roles of actors in a possible conflict around the distribution of increasingly scarce resources.

2.2 German energy security.

The term is defined narrowly as “reliable energy supply”, and then extended to include environmental objectives, technology transformation of societies, planning for energy demand and the long-term planning of a national strategy, tied in with international organizations.

This expansion of the view is seen as required based on the globalization of energy markets. However, the report then narrows in scope again to the possible risk from a supply shock, focusing on the key suppliers of oil: Russia, Norway and the U.K. It is noted that both European partners are already past their peak and that Germany is increasingly dependent on Russia, which currently is reliable but not necessarily so in the long term. Given the expected decline in German energy consumption, the Russian share will likely be 40% by 2025, with the Middle East, Africa and sources around the Caspian Sea making up for the increasing gap from declining European production.

3. Possible Scenarios After Global Peak Oil

This chapter looks at gradual changes (3.1.) and the risk of disruptive changes (3.2) past a certain tipping point.

3.1 General interdependencies driven by Peak Oil

3.1.1 Oil as a deciding factor in international relationships

With increasing scarcity, producers are increasingly in an advantageous position, both from high revenues and access to cheaper oil when compared to spot market prices. This partly reverses the trend to free oil markets which took place after the '70s shocks, and gives those countries more control over the supply chain, with a risk of monopolies and nationalizations, and of “political pricing.”

Further, oil producers use increasing amounts of their production internally at lower prices, which increases domestic consumption and inefficiencies, accelerating the problem. [The authors miss out on the fact that high oil prices also bring more wealth to the country which AGAIN increases resource consumption].

The report then looks at increasing “strategic” moves by key actors including the Chinese CNPC (China National Petroleum Corporation), which tries to grab the sources that are still available (particularly in Asia and Africa), but often at relatively unattractive conditions.

Overall, the authors expect a reduction of “free market” mechanisms in oil trade, and a rise in more protectionism, exchange deals, and political alliances between suppliers and customers, which could lead to significant geopolitical shifts. Equally, the authors expect this interdependency to shape foreign affairs of oil importers, making them more tolerant towards rogue behavior of suppliers out of sheer need.

Overall, higher volatility and loss of trust are seen as possible outcomes in a world where oil supplies are limited, increasing the need for “oil related diplomacy” and thus increasing the risk of moral hazard among all actors, which in turn decreases overall global supply security.

The report then refers to already existing actions of the German government to tie close economic relationships with energy suppliers, and to the tendency of consuming countries to reduce oil dependency, trying to steer clear of risks of future supply shocks.

The Middle East is identified as a very dangerous region with high external involvement from many players and thus a very unstable overall situation.

Overall, the report expects a reduction of the importance of “Western values” related to democracy, and human rights in the context of politically motivated alliances, which increasingly are driven by emerging economies such as China – likely leading to double standards. Emerging economies are equally expected to receive higher recognition in international organizations, particularly those with strength in resources (such as Russia).

3.1.2 New security risks based on additional/alternative energy resources

New conflicts are potentially arising from oil exploration in international or disputed ocean waters, where multiple issues arise, particularly around the Arctic Circle, with further geopolitical risks for conflict.

Also, the shift to natural gas is reviewed as an extension of the “oil age”, because it might be able to replace crude oil as a bridging source until new solutions are found. The risks for problems from transporting gas (pipelines) and the related issues (as seen between Russia and its neighbors during the past years) are highlighted.

Equally, nuclear power as a potential source is highlighted – emphasizing the risk for safety and the proliferation of nuclear technology. This would also require an increasing shift towards electricity.

Equally, the competition between biofuel and food production is highlighted, showing the limits of biofuel outputs to compensate for reductions in oil availability, and also showing risks for water supply and soil degradation from excessive use.

Overall, the authors see a trend to increase the energy autonomy of entire regions from external supplies, both in the ability to generate alternative fuels (from biofuels and coal), but particularly in electricity generation.

3.1.3 A shift in roles between private and public actors

Based on the increasing importance of oil, governments are becoming more relevant in securing the benefits of oil, both on the supply and on the demand side. This puts a higher emphasis on political negotiations and deals, and increases the risks for nationalizations of resources and key exploration activities.

Exploration licenses are seen as a key area where bidding wars (including non-financial commitments) might emerge. Equally, increasing pressure to renegotiate or revoke already existing licenses might emerge. Ultimately, each country will try to secure sufficient oil to maintain its standard of living.

On the other hand, private enterprises are seen on the rise in protecting infrastructure and ensuring production and transportation security in less developed regions, particularly if weaker countries become unable to keep their own services up.

The dependency on oil-related infrastructure (pipelines, refineries, harbors, key pathways on oceans) will increase, and thus the risk. Damaging infrastructure through hostile acts (sabotage, war) might become an attractive target for groups or countries with a tendency to use violence. The same is expected for electricity and natural gas-related infrastructure – they all might require higher protection.

Generally, the focus of risks is expected in the region which the authors consider the “strategic ellipse” (a term used for the region East of Europe reaching from Saudi Arabia in the South to Russia and former Soviet Union countries in the North), because a majority of oil reserves are located in this area.

3.1.4 Economic and political crises as a consequence of the transition to “post-fossil” societies

A number of risks of higher oil prices are seen for modern economies, particularly in transportation. Security risks are seen in resulting systemic crises.

A first direct consequence of higher oil prices and lower availability of fossil fuels is a possible reduction in transportation capacity, equally in individual transportation and in freight forwarding. This might lead to another “mobility crisis” for societies that heavily depend on cars and trucks.

Higher cost in commercial transportation markets might severely affect current supply chains, and no alternatives are in sight (electric trucks don’t exist yet). Food particularly might become a critical issue for countries that are a) highly dependent on imports and b) are susceptible to price-increases of food products, particularly affecting Africa, parts of Asia and Latin America, and the Middle East.

High oil prices would further affect almost all aspects of society, as it will also influence the cost of chemicals and all products derived from them, which might substantially alter the nature of value chains and make certain things uneconomical – ultimately leading to higher unemployment during a transformational phase away from an oil based economy. This might particularly affect the German car industry.

Limits in availability might also strengthen regulatory efforts, encourage the allocation of energy (oil) by rationing schemes and possible other actions limiting free markets.

Additionally, the changes and likely reduction in standard of living might render societies less stable and make them more attracted to extremist political positions and even trigger changes in government systems, as trust into key actors in politics will diminish. This might be a particular risk for the relatively young democratic countries in Eastern Europe.

3.1.5 More selective intervention – key actors overwhelmed

Overall, more expensive transportation and increasing problems “at home” might reduce the ability of larger countries to intervene internationally (politically and/or with military action), and also lower the readiness to provide help to poorer countries. The focus will be more on a country's (energy) interest for itself and not so much on an ideal of transferring Western values. The gap will likely not be filled by NGOs, as they will be affected by similar limits.

Overall, international institutions will be weakened, as they will have less resources to provide help and support, and it becomes equally possible that help will be attached to direct (energy) needs of the donors.

3.2 Systemic risks after reaching a “tipping point”

In addition to the gradual risks, there might be risks of non-linear events, where a reduction of economic output based on Peak Oil might affect market-driven economies in a way that they stop functioning altogether, leaving the possibility of a relatively steady downward trajectory.

Such a scenario could develop through an initially slow decline of trade and economic activity, combined with higher stress on government budgets from lower tax income, higher social cost and growing investment into alternative technologies.

Investment will decline and debt service will be challenged, leading to a crash in financial markets, accompanied by a loss of trust in currencies and a break-up of value and supply chains – because trade is no longer possible. This would in turn lead to the collapse of economies, mass unemployment, government defaults and infrastructure breakdowns, ultimately followed by famines and total system collapse.

4. Challenges for Germany

4.1 Risk of new dependencies for Germany

Oil as a new factor of global power would create significant dependencies for Germany, and in order to avoid supply issues, strong ties with suppliers are a must, but equally a diversification of supply relationships, taking into account that a supplier might intentionally reduce capacity to accomplish political objectives.

Among the key supplier countries is Russia (supplying 35% of German oil imports), where reliability risks are prevalent, given past experience. Natural gas, as a possible temporary substitute, bears the same risk (37% comes from Russia). Thus, a diversification becomes essential.

4.2 Focus of politics on supply relationships

Germany needs strong and reliable ties to Russia and other Caspian Sea countries. This might create some challenges in international relations, particularly with smaller Eastern European countries [like Poland]. Thus, intensifying relationships to the Middle East might be equally relevant. However, all those relationships have an inherent risk of being instruments in conflicts, which puts a certain limit on treating all foreign partners the same.

4.3 More pragmatic foreign policy

The need to mitigate supply risks might require some compromises on foreign affairs topics (such as human rights). Equally, more active diplomatic efforts will be required with a focus of energy security in mind. This is more difficult given Germany’s reluctance to engage in political power play due to its history, but needs to be tackled in order to deal with the challenges ahead. The authors don’t want to encourage military solutions, but suggest a strong preventive development of political and diplomatic initiatives to tackle the problem.

4.4 Importance and freedom of industrial nations reduced

All industrial nations that depend on energy imports will become more dependent on new partners, both in emerging economies and supplier countries. This requires a new focus in foreign affairs, sometimes giving up standards in negotiations with countries that have different cultures and political systems.

4.5 Help in stabilizing supplier countries at risk

Some supplier countries (and surrounding regions) might be destabilized by the force of higher resource prices. This is an area where Germany needs to help by providing support for nation building and conflict resolution on the national and international level. This is in conflict with the lower economic power likely to result from Peak Oil, which might make interventions less likely and requires new approaches of “stabilization with lower effort.”

4.6 Growing conflict potential concerning the Arctic Circle

Germany might have to take positions in case of an upcoming conflict regarding resources in the Arctic Circle, where multiple countries (including Russia) have open claims for accessing oil and gas fields. This requires further research.

4.7 Nuclear technology proliferation

The risk for nuclear technology proliferation and thus more countries with the potential for nuclear weapons (and the risk for terrorists having access to nuclear material) is growing due to the proliferation of nuclear technology for energy generation. Equally, risks for terrorist attacks and accidents on German soil are rising. Both scenarios require more surveillance, intelligence and preventive action.

4.8 Higher conflict potential regarding critical infrastructure

Energy delivery infrastructure for all sources including electricity will have a higher importance in an oil constrained world, thus, securing its reliability, security and availability becomes mission-critical. International cooperation is needed to secure large international supply paths (pipelines, sea routes).

4.9 Larger “energy regions” change international alliances

The expectation of stronger connections between suppliers and consumers across continents creates different settings for current international alliances and security risks. DESERTEC (a large power production system in Northern Africa based on CSP) would require different settings even for military strategies.

4.10 Peak Oil for armed forces

Armed forces would also be significantly affected by fossil fuel limits, as they are very dependent on oil products. Significant investments in alternative energy procurement technologies (biofuels, coal-to-liquids - Fischer-Tropsch) and applications (electric and hybrid vehicles) would be required, with long transition times. Further, local energy-independence of stationary troop infrastructure (like military bases) using more renewable sources would be beneficial. The long term objective would be to fully convert Germany’s armed forces to only use renewable energy sources by 2100.

4.11 Crude Oil as a systemic risk

For scenarios which end with a complete destabilization of societies, Germany is at a significant risk given its strong participation in a globalized economy. Being still able to act requires a number of basic infrastructures to keep functioning, both for the country and its armed forces. Work is required to look into redundancy, high-resilience of infrastructure and local self-organization approaches.

5. Summary

The report sees significant risks arising from an unavoidable peak in oil production, which go beyond gradual shifts in energy systems and economies. This will likely lead to economic change and new geopolitical risks that affect much more than just what we can anticipate. The overall ability to describe exact outcomes is very limited, as many scenarios are possible, and further research is required.

Overall, more emphasis needs to be put on understanding and shaping international relationships with respect to energy security, anticipating and integrating the ongoing shift to different players in a resource-constrained world.

In any case, Germany has to identify and implement alternatives to the current transportation technologies that require oil, and put a similar emphasis on avoiding other dependencies, for example concerning rare earths.

For armed forces, Peak Oil creates significant risks, both from a mobility standpoint as well as from dependencies on other societal services. Understanding those risks requires further analysis and likely a very different approach in the future.

In general, more preparation is required for society and the army to make sure that problems are recognized and solutions are actively implemented.

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Update, 6:00pm Thursday: The cap was removed from the well late Thursday afternoon. The next step will be removing the blow-out preventer, which is considered forensic evidence.

The annotations to the ROV feeds from BP are becoming a little more descriptive, particularly with those related to the Q4000, which will be playing a significant part in the replacement of the blowout preventer (BOP) on the Deepwater Horizon well. However, at 9 pm on the 1st, with the waves still a little higher than desired, the activity has yet to start.

One of the new camera feeds that is being displayed is a weight indicator on the deck of the Q4000. This is not yet on line, but Admiral Allen pointed out on Wednesday the loads that will come onto the vessel.

We anticipate removing the blowout preventer with the latching mechanism that will be attached to a drill pipe string that will be suspended from the Q4000. . . . . . .

The combined weight of the drill string, the latching mechanism and the blowout preventer itself is approximately a million pounds. When they released that blowout preventer from the well it will be suspended at about 5000 feet below the surface.

There are two things we’re concerned about when this occurs, number one is the wave height. You can imagine the Q4000 riding up and down on the waves. When they ride up it exerts more dynamic loading on that pipe system. So we’re concerned about the weight and the ability of the pipe system to handle that.

Before the BOP itself is removed, the capping stack has to be taken off. The latching mechanism to attach to that is already down underwater, and is being monitored by the Enterpise, through ROV2. The stack will come off first, and it is that activity which is now expected to start at noon on Thursday.

Once the Q4000 latches onto the original BOP, it is going to raise it up, through the platform of the vessel, and then set it back down on that deck. There are two additional static cameras on the Q4000 which are monitoring the moon pool, and which are presumably going to be carrying all this activity starting Thursday and running perhaps 36 hours, depending on the weather and how easily the BOP assembly breaks away from the well.

As soon as the Q4000 has the BOP on board, it has to move out of the way (and trans-ship the parts of the BOP, once separated to smaller ships to be sent ashore) so that the new BOP can be put in place.

This is the task for Development Driller 2, but before the job is finished the BOP has to be thoroughly tested to ensure that everything is now functional, the BOP will then be ready for the final stages. At this point it will be possible to restart the relief well to complete the bottom kill. That is still not anticipated to start until after Labor Day.

I am going to insert the quote on what the Admiral said on hydrates it its entirety, since I am not sure exactly what his point was.

Hello, Admiral. Can you tell me how the current BOP is attached to the well head and if there’s any concern about hydrates or other (inaudible) that might make it difficult to latch?

Thad Allen: Well, the current BOP is attached to the wellhead with the same connector they would use for any similar drilling well. To the extent that hydrates are there, we don’t expect that to be a problem right now. Had we continued to try and fish and get the pipe out of there, there was some concerns that hydrates would be blocking our ability to use a camera and actually operate down there. So I’m not sure that’s an issue. If there’s an issue at all, it’s probably the issue of the condition of the wellhead itself. When the Deepwater Horizon exploded and sank it bent the riser pipe over and ultimately the riser pipe was severed from the drill rig. At that point, if you can imagine, as massive as the blowout preventer was and that wellhead was, it probably bent over to some extent and then when the riser pipe separated from the rig it popped back up. It did not pop straight back up and there’s been some attempt to level that, to make sure we could get that as close to vertical as we can. I believe the current estimate right now, it is about two degrees off center line. So as we go in to pull the blow out preventer out, I would say hydrates are not a real big concern. I think the alignment to the true vertical about two degrees off would impact somehow to a very small degree the pull on the BOP as you’re trying to free it. We are aware of it. The engineers have taken that into account. We don’t think it will be a prohibiting condition, but it is something we are aware of.


In the other story that I have been watching, that of the miners in Chile, the equipment has started, and the preliminary drilling of the central shaft is now down more that 20 m. At the same time the rescuers are considering ways of reaming one of the smaller drill holes that have already reached the area. This might take a greater number of stages to get the hole out to the required size, but could, in total, be faster than the two-stage operation that is currently in progress. In either case, moving the muck from the bottom of the excavation with wheelbarrows, and ensuring that none of it gets stuck as it falls from the machine, are both concerns that will have to be addressed as the work moves forward.

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John Michael Greer - Green Wizardry: A response to Rob Hopkins

Rob Hopkins is a smart guy, and even though he’s garbled a fair number of the details, his post raises useful points regarding some of the core issues I’ve tried to bring up in the Green Wizards posts.

The first of those is that one of the motivations behind the Green Wizards project is a recognition of the limitations of the Transition Towns project. I’ve discussed my concerns about that movement on several occasions on this blog, and don’t see any need to repeat those comments just now. The crucial point, though, is one that Hopkins himself cheerfully admits: that neither he nor anyone else in the movement can be sure that it will accomplish what it’s trying to accomplish.

That’s a bold statement, and one that’s worthy of respect. Still, it has implications I’m not sure Hopkins has followed as far as they deserve. If the difficult future ahead of us can’t be known well enough to tell in advance what strategies will best deal with it, in particular, it seems to me that it’s a serious mistake to put all our eggs in one basket, whether it’s the one labeled "Transition" or any other.

Peak Oil Modelling

Oil is clearly a finite resource. It would follow then, that the key issue surrounding discussions of peak production is not whether we will reach a point of maximum global production followed by steady declines, but rather the timing of the peak and the rate of post peak decline. The research carries with a wide range of answers to these questions.

‘Green’ cannot be America’s only goal

Future-Dated Jan. 1, 2072.

The downfall of the U.S. can be traced to a crippling shortage of available energy supplies.

There were other factors: Uncontrolled government spending, and more people living off the government than those paying to support it. And sudden, frenzied worship of the environment, right up to the day we deprived ourselves of the ability to wrest a living from it.

The nation ground to a halt when her cars, trucks, buses, trains, planes, boats and power plants all ran out of fuel. Without transport the nation's massive urban centers had no food. The stench of uncollected garbage and unburied bodies filled the air and mixed with the smoke of uncontrolled fires. Without fire engines the firemen couldn't reach the fires and without fuel the pumps were useless.

Analysis: Global Jackup Report Card

Industry consensus among offshore drillers points to stability in the jackup market over the remainder of 2010. Eight months into the year, global jackup utilization of 80% is exactly where we started the year. Utilization has been helped by the strong demand for high-spec jackups as lesser capable rigs have faced their share of headwinds.

Deepwater Drilling Moratorium Hits Louisiana Hard

Both Republicans and Democrats in Louisiana say the federal moratorium on deepwater drilling in the Gulf of Mexico -- put in place after the BP oil spill -- is now that state's biggest problem. US federal government officials and many environmental activists say the temporary ban on drilling is necessary to prevent further accidents. But people in the Gulf region are worried that many of the well-paying jobs provided by the energy industry might leave and never come back.

Landowners Shout `Bingo' as West Australia's Mining Towns Boom

The housing shortage in a region that’s one of the world’s biggest suppliers of iron ore and natural gas is driving up costs for companies such as Chevron Corp. and BHP Billiton Ltd. as they mine raw materials to feed China’s industrialization. Chevron, the second-largest U.S. oil company, was forced to lease seven-year-old cruise liner MS Finnmarken to house 350 workers at its A$43 billion Gorgon gas project.

How China Could Avert a Water Crisis Without Uprooting 330,000 People

Water needs in the North have forced hundreds of thousands out of their homes as dams expand, but an innovative desalinization solution could spare them.

Saudi Aramco extends bids for Wasit gas plant

KHOBAR, Saudi Arabia (Reuters) - State oil giant Saudi Aramco has extended the closing date for bids to build the kingdom's largest gas plant, industry sources said on Thursday.

The due date to submit bids for the onshore packages has been pushed to Oct. 24 from a September deadline, sources said.

The Politics of Power Cuts in Egypt

Are Mubarak's Gas Sales to Israel Partly to Blame?

Power to the people

Technology and development: A growing number of initiatives are promoting bottom-up ways to deliver energy to the world’s poor.

Electric car upswing would crash grid: Toronto Hydro chief

“If you connect about 10 per cent of the homes on any given street with an electric car, the electricity system fails,” Haines told an audience at Ryerson University Wednesday. “It basically can’t handle that load.”

What to do? That’s part of the reason why Toronto Hydro, Hydro One and the Ontario Power Authority have pledged a total of $7 million over the next five years to kick-start Ryerson’s new Centre for Urban Energy.

Americans in the dark about energy use

NEW YORK (CNNMoney.com) -- Americans aren't known for their energy-thrift ways. Maybe that's because they have little idea as to how much energy things use.

While people are generally able to rank items according to energy use - i.e. the dryer uses more than the toaster - they are way off the mark when it comes to gauging by just how much, according to a recent study from researchers at Columbia University and elsewhere.

Example: Most people knew that a laptop computer uses less energy than a desktop. But few knew the lap used one-third the amount.

Eco-author baffled by a violent fan

The "Ishmael" books are aimed at encouraging radical social change — but their author says hostage-taking is definitely not the change he had in mind.

Canada thirsty for new water ethic

In a single generation, Canada has evolved from a from a nation that took great pride in its citizens' ability to drink from almost any river, stream or lake in the country, to one seriously concerned about water quality and availability now and in the future.

Growing Community Food Systems

Food systems can be a very powerful tool for resilience. In a revolutionary way, you can completely trasform things without people realizing what's happening--they are aware, but it just makes intuitive sense this way. It's also not about just going out and fighting the proverbial "man," or continuing an academic dialogue about what could happen or should happen; you don't have time for this because you've got a lot to do.

So instead of having people just being oppositional and trying to get someone else to make the changes, you have people who are assets to their community, who are making the transformation happen themselves (but being oppositional when they need to be).

The miracle of the cerrado

Brazil has revolutionised its own farms. Can it do the same for others?

Transition group plans community dinner

HONESDALE, PA — A newly formed group in Honesdale is holding a “Creating Community” potluck dinner on Saturday, September 11 at the Parish House of Grace Episcopal Church at 9th and Church Street in Honesdale from 6 to 8 p.m.

“Everyone’s invited,” said Barbara Lewis, who is helping to spearhead this new local initiative.

The group, which calls itself Transition Honesdale, is inviting individuals and groups who wish to be a part of efforts to raise awareness of sustainable living and the need to build local ecological resilience. It encourages the community to seek out methods of reducing energy usage and dependence on fossil fuels and avoid purchasing products that are shipped over thousands of miles. In many communities, for example, the Transition Towns movement has led to the establishment of community gardens to produce local food and to the development of canning skills.

Post Carbon Exchange #3: Richard Gilbert & David Bragdon

RICHARD GILBERT and DAVID BRAGDON discuss the future of transportation systems as we near the end of cheap oil. What are the solutions? How will we get there? Are we facing the end of the internal combustion engine?

Judge rules against U.S. government on oil drilling

HOUSTON (Reuters) – A federal judge on Wednesday rejected the U.S. government's request to dismiss an industry lawsuit challenging its deepwater oil and gas drilling moratorium, dealing another blow to the Obama administration.

Hornbeck Offshore Services Inc and other drilling companies sued the administration on June 7 after it first ordered a halt to deepwater drilling in the Gulf of Mexico following BP Plc's well rupture that killed 11 workers and caused the world's worst offshore oil spill.

As a result of Louisiana-based Hornbeck's lawsuit, U.S. District Court Judge Martin Feldman in New Orleans blocked implementation of the drilling ban on June 22.

Oil Trades Below $74 After Falling on Bigger-Than-Forecast Supply Increase

Oil declined as equity indexes slipped and traders waited for signs whether the European Central Bank will extend emergency lending.

ECB President Jean-Claude Trichet may signal at a rate meeting today that policy makers will keep offering unlimited cash to financial institutions through the end of the year. A U.S. government report yesterday showed crude stockpiles increased almost three times more than analysts forecast.

“There are still fears about a double-dip recession in the U.S,” said Roland Stenzel, a crude and carbon trader at E&T Energie Handelsgesellschaft mbH, said from Vienna.

DOE Update: U.S. Crude Oil Production Hits 6-Year High

U.S. crude oil production increased 1.7% from last week. Year-to-date oil output is up 3.8% from the year ago period. Production is now at the highest level since April 2004.

Russia output eases back

Oil output in Russia fell by 0.8% in August from an all-time high reached in July, to hit a seven-month low, the Energy Ministry said today.

Qatari Oil Rises on Japan's Record Low Kerosene Supplies

Qatar Marine crude is trading at the highest level in four weeks versus its official selling price as Japanese refiners replenish supplies of kerosene for heating and Saudi Arabia cuts shipments of similar grades.

Qatar Marine for loading in October jumped on Aug. 23 to a premium of 5 cents a barrel relative to the benchmark producer prices, compared with a discount of 8 cents the previous week, according to data compiled by Bloomberg. The kerosene-rich blend has traded at an average of 9 cents below its official selling price during the past year.

Cuban offshore oil plans gain momentum

Havana, Cuba (CNN) -- While the Gulf of Mexico oil spill has sparked debate in America on the merits of deepwater drilling, 90 miles away Cuba's offshore plans are quietly taking shape.

The country aims to drill seven exploration wells in its share of the Gulf of Mexico by 2014, according to American oil experts who recently met with Cuba's state oil monopoly Cupet and regulatory officials.

Norway offshore on course for record spend

Statistics Norway said today that oil and gas investments - the core driver of Norway's economic growth - were on track to set a new record high next year.

Petrobras to Buy Oil From Brazil for $42.5 Billion in Stock

Petroleo Brasileiro SA, Latin America’s largest company by market value, agreed to pay the Brazilian government $42.5 billion in new stock for the right to develop 5 billion barrels of offshore oil reserves.

Petrobras, as the state-run company is known, will pay an average of $8.51 a barrel for the oil after almost two weeks of negotiations with the government, according to a regulatory filing yesterday. More than half the oil will come from the Franco field in the offshore Santos Basin, the company said.

Russia to supply 70% of oil to JV in China

Russia will supply about 70 percent of oil at market prices for a proposed joint refinery between Rosneft and China National Petroleum Corp (CNPC), Reuters said Thursday, citing a Russian news agency.

Gazprom rides high

Russian gas giant Gazprom saw its profit for the first quarter of the year more than triple on the back of a foreign exchange gain, adding it had cut its net debt by more than 30%.

Statoil CEO Says Canadian Oil Sands `Attractive' at Current Crude Prices

Statoil ASA, Norway’s biggest energy company, said oil sands are attractive at current crude price levels and the company is working on bringing costs down to proceed with its investments in Canada.

“We’ve had a market lately that has made that type of oil attractive,” Chief Executive Helge Lund said today in an Oslo interview. “Of course the problem two, three years ago with Canada was the costs.”

Weak Laws Bother Iraq Investors More Than Violence as U.S. Goes

Ahmed Jamal says it isn’t primarily Iraq’s violence that deters his company from investing in the country. It is its weak business laws.

“We don’t have factories or warehouses or anything like that,” said Jamal, regional sales manager for Istanbul-based beverage distributor Hayat Su, which brings bottled water to Iraq in trucks and works through a local representative. “The investment laws are not suitable.”

BP to remove equipment at Gulf well by Sunday

HOUSTON (Reuters) – BP Plc expects to remove a failed blowout preventer atop its ruptured Gulf of Mexico oil well by Saturday or Sunday and later plug the leak for good, the top U.S. official overseeing the spill response said on Wednesday.

"We believe in the next 24 to 36 hours, we will enter a weather window that will allow us to proceed," retired Coast Guard Admiral Thad Allen said at a briefing in Houston.

BP Tripled Ad Spending After Spill

It will come as little surprise to newspaper readers and television watchers, but BP significantly increased its spending on advertising after the April 20 Deepwater Horizon explosion and oil spill. BP spent $93.4 million on newspaper, magazine, television and Internet advertising in the three months after the disaster, three times what it spent in the comparable period in 2009, the company reported to Congress.

War of the wells

But like many communities in Montana, we may soon share our backyard with a new set of neighbors, and the changes these folks bring will not be so benign. Until recently, the oil and gas industry has been the source of horror stories from Wyoming, Colorado and New Mexico: the names of towns like Pinedale, Rifle and Farmington have become shorthand for cautionary tales told with a "thank-God-it's-not-us" undertone.

Australian leader acquires Aboriginal land

The leader of Australia's resources-rich western province has been accused of 'another invasion' by forcibly acquiring coastal land slated for return to native tribes to build a gas plant.

Colin Barnett, premier of Western Australia state, today said he had started formal proceedings to take the land for Woodside's Browse liquefied natural gas precinct at James Price Point.

Cairn Greenland ops resume after Greenpeace protest

LONDON (AFP) – Scottish oil exploration group Cairn Energy said Thursday it had resumed operations on a rig off the coast of Greenland after Greenpeace ended a protest.

What a misanthropic bunch of stunts

Figures published by the US Geological Survey in 2008 estimated that there are 90 billion barrels of oil in the Arctic as a whole, enough to provide for the entire world’s current oil consumption for about a year. Of this, about 50 billion barrels may be found around Greenland. Given that Greenland is the biggest island in the world (assuming Australia is a continent), yet has a population of just 56,000, this could be an enormous windfall both for the local communities and for Denmark, which has formal control over the territory.

No wonder that Greenland’s prime minister, Kuupik Kleist, is less than impressed by Greenpeace’s protest: ‘Greenpeace has once again succeeded in impeding Greenland’s opportunities to secure the economic foundation for its people’s condition of life. The Greenland government regards the Greenpeace action as being a very grave and illegal attack on Greenland’s constitutional rights. It is highly disturbing that Greenpeace, in its chase on media attention, breaks the safety regulations put in place to protect people and the environment.’

Will we ever get off oil?

There's been a lot of talk about oil this summer. Most of it bad. Devastating, record-setting leaks in the Gulf of Mexico and in Michigan's Kalamazoo River underscored, once again, the danger of our dependence on crude. Seductively efficient and still relatively cheap, oil provides nearly 40 percent of America's power. But it's also a finite resource that presents a very real threat to our environment, economy, security, and health. Given the growing risks and the shrinking reserves, there must be loads of people out there -- experts from government, corporations, academia, and the like -- hatching plans for a cleaner, safer, post-oil world, right? We asked our expert panel to explain where we are in oil's troubled lifespan, and whether and how we'll ever wean the world off its current fossil fuel of choice.

Peak Oil And The German Government - Military Study Warns Of Potentially Drastic Oil Crisis

A study by a German military think tank has analyzed how "peak oil" might change the global economy. The internal draft document - leaked on the Internet - shows for the first time how carefully the German government has considered a potential energy crisis.

The dirty topic of peak oil: get ready to reduce your reliance

Wouldn’t it be funny if we spent so long arguing about what to do about climate change that we ran out of cheap oil first? No, it wouldn’t really, it would be catastrophic.

But given the government’s delay in producing an Energy White Paper and the steady backsliding on the need to actually reduce our greenhouse gas emissions in Australia, it is not beyond the realms of possibility. Even the usually optimistic International Energy Agency (IEA) is starting to sound a little nervous.

How Malthus drove the Discovery Channel gunman crazy: The greatest pessimist in economic history has been wrong for 200 years, but he's still freaking people out

Among the demands of James Lee, the deranged gunman who rampaged through the headquarters of the Discovery Channel in Washington, D.C., before being shot and killed late Wednesday afternoon, was a request that the TV network "develop shows that mention the Malthusian sciences about how food production leads to the overpopulation of the Human race."

Insane, but perhaps not quite as kooky as it might initially seem. Because when choosing crazy-making prophets of doom and destruction as your inspiration, you could do a lot worse than the late 18th-century economist Rev. Thomas Robert Malthus.

New report shows state highways in good shape

A new report on the condition of the USA's state highways finds that they are in the best shape they have been in nearly 20 years.

The annual study by the Reason Foundation, a Los Angeles-based, libertarian, non-profit think tank, credits road improvement progress man by states and decreased wear and tear as commuters and commercial truckers drove less during the recession.

Canada's Renewable-Fuel Regulations Completed, to Take Effect on Dec. 15

Canada said it completed regulations that will require an average renewable-fuel content of 5 percent in gasoline as part of an effort to reduce greenhouse-gas emissions.

The rules will take effect Dec. 15, the government said in an e-mailed announcement today.

GM moves to trademark 'Range anxiety'

NEW YORK (CNNMoney.com) -- If you're thinking about buying an electric car but you're worried about getting stuck someplace when the battery runs out, General Motors has a two words for that.

"Range anxiety."

The automaker has filed for a trademark on the term. Range anxiety is a major reason car shoppers say they would avoid buying an electric car.

Chevy Volt, Electric Revolution? Or Outta Gas?

The first thing I noticed driving the Chevrolet Volt is that it’s a real car. GM did not kick out the kind of street-legal version of a golf cart like we have seen with previous attempts at making an electric car. The Volt is sturdy and it has horsepower. I had it up to 80 MPH on the test track and given how quiet gasoline powered cars are today, I was hard pressed to notice a difference between the Volt and my last airport rental.

Desertec solar hopes cloud over as support starts to waver

It has been one step forward, two steps back this year for the Desertec solar project, which aims to source 15 per cent of Europe’s electricity supply from the MENA region’s deserts by 2050.

A significant piece of good news for the ambitious €400 billion (Dh1.87 trillion) scheme came in April, when one of its members, Germany’s Solar Millennium, said its 150 megawatt Kuraymat project in Egypt was nearing completion and could serve as a template for other north African solar farms.

Then came the bad news with Algeria’s decision last month not to participate in the Desertec Industrial Initiative, which was formally launched last year by a group of 12 European companies, mostly from Germany. On Monday, Paul van Son, the director of the group, said he was now also concerned about declining German government support for the project.

Fresh Air for Sale, in Hong Kong

HONG KONG — ‘‘Do your feeble breathing skills let you down? Does standing up tire you out?’’ The answer: Buy a breath or two of ‘‘Fresh Air’’ — the ‘‘revolutionary new product’’ that lets you experience breathing ‘‘like the rest of the world does.’’

...‘‘Fresh Air’’ is the new campaign tool of Hong Kong’s Clean Air Network, a nongovernmental group that promotes awareness of, you guessed it, the wretched air quality in this city of seven million.

Green roofs offer antidote to urban heat island effect, say researchers

Researchers at Columbia University have demonstrated that a layer of plants and earth can cut the rate of heat absorption through the roof of a building in summer by 84%.

Welsh biochar facility opens up carbon possibilities for farmers

WALES is set to benefit from a new £180,000 biochar facility which may transform the way the country tackles climate change.

Aberystwyth University is installing a biomass waste recycling unit designed to produce biochar – a charcoal-like substance – that can be used to improve soil fertility and raise agricultural productivity.

How bad are the next few years going to suck?

The hot question in green circles these days is, "what next?" For the last decade, strategy has been built around getting a federal climate bill that would place a cap on carbon emissions. That attempt was supposed to culminate in success this year, but it didn't, so ... what next?

There will be much to say along those lines in coming months. I hope to share words of inspiration and uplift, to stir minds with insight and hearts with passion. To tell great tales of green pastures to come and the heroes who will sail the fleet of righteousness to the golden shores of, uh, the pastures. Just real quick, though, I need to be depressed as hell for a minute.

Prince Charles urges people to wear old clothes

Prince Charles, the heir to the British throne, has urged people to wear more old and recycled clothes, and natural fabrics like him so as to help reduce the world's carbon footprint and halt climate change. In an article for this month's 'Vogue' magazine, he wrote about his passion for reusing and repairing things. "On the whole, the older some things are, the more comfortable and familiar they become; they can even be adapted to look new in a different context."

Climate funds shouldn't divert poverty aid, UN says

The U.N.’s climate chief says poor countries are right to expect that any funding they receive to combat global warming be kept separate from development aid or poverty relief.

Climate change 'driving a new industrial revolution'

Climate change is driving a new industrial revolution that will reward creative thinking and early investment in green technologies, British economist Nicholas Stern says.

The former World Bank president warned high-emitting countries that fell behind in this global ''green race'' to transition to a low-carbon economy could face future trade barriers.

6 global warming skeptics who changed their minds

With 2010 shaping up as the warmest year on record and unprecedented heat waves gripping the planet, global warming skeptics have suffered another blow with the defection of the "most high-profile" member of their camp, author Bjorn Lomborg. But Lomborg isn't the first doubter to accept the scientific consensus that human carbon emissions are warming the planet and need to be curtailed. Here, a review of several prominent cases:

Report: Climate change threatens historic Jamestown, Va.

Human-caused climate change threatens to flood Jamestown, the first permanent European settlement in what became the American colonies and the United States, says a report Wednesday by environmental groups.

Jamestown Island, the site of the original 1607 settlement, is low enough to be inundated by rising seas and tidal waters -- even if the waters do not rise as much by 2100 as scientists predict, according to the report by Natural Resources Defense Council (NRDC) and the Colorado-based Rocky Mountain Climate Organization.

Al Gore announces appointing experts to study Pakistan floods

ISLAMABAD (APP): President Asif Ali Zardari and Former US vice president Al Gore held a telephonic conversation on Thursday to discuss the situation of recent floods in Pakistan and its possible linkage with the climate change.President Zardari while discussing the causes of floods indicated that the factor of climate change and its impact should also be examined in this regard. He said the international community must take this environmental subject seriously so that solutions could be found out for the overall betterment of the world.

Climate change puts China harvests at risk

PARIS (AFP) – Climate change could reduce key harvests in China by a fifth if the gloomiest scenarios prove true, according to a study on Wednesday.

Publishing in the journal Nature, a team of Chinese scientists say China's climate "has clearly warmed" over the past half century, gaining 1.2 degrees Celsius (2.2 degrees Fahrenheit) since 1960.

http://feedproxy.google.com/~r/EcoGeek/~3/-rP9dMvmq0M/3284-wheres-m

It sounds like a good idea: Use electricity to compress air, stuff it in a tank and use the power expelled by the air's release to power a vehicle. Seems like a good idea, certainly a lot easier to understand than nano-constructed cathodes on a lithium ion cell. And several companies have been actively attempting to build cars powered by conpressed air for quite some time. We at EcoGeek have been excited about them. The two biggest of these companies are MDI, a French company and Tata Motors, India's largest car company.

But I have bad news. Today, here at EcoGeek, we are declaring the air car dead. It's a question of physics, every conversion from one type of energy to another decreases efficiency. With battery electric vehicles, energy is converted into electricity and electricity is converted to motion. With air cars, energy is converted into electricity, electricity into compressed air and then compressed air into motion. Because of this, compressed air cars will always be less efficient than electric vehicles.

Even more problematic, no air car has ever been developed that can reach highway speeds and no air car has even been demonstrated to have a range of more than 10 kilometers. Promises were made, and with the entrance of Tata Motors to the fray, we thought there might be some truth to the claims.

But Tata's goal of a 2008 release of an air car has, obviously, not been met. In 2009, Tata stated that the short range of the cars and issues with keeping them from freezing up (when compressed air is decompressed, temperatures drop dramatically) were proving them impractical.

So, I'm sorry my friends, we're all going to have to be happy with the much more technologically confusing (though also much more efficient) battery electric vehicles. The good news is, with the Leaf and the Volt already hitting the road, that's one technology that definitely isn't vaporware.

More on the disadvantages of air cars.

http://feedproxy.google.com/~r/EcoGeek/~3/skl8VZ2WJew/3283-color-fi

Researchers at the University of Michigan have created a color filter that could boost the efficiency of LCDs, the power hog of all your gadgets, by more than 400 percent, and no, I didn't add an extra zero there.

The researchers made an optical film that colors and polarizes the light that passes through an LCD, taking the place of the several layers of optical devices that typically serve the same function in an LCD.  Those multiple layers give rise to inefficiencies:  the best LCDs out today only emit eight percent of the light their backlights produce. The researchers found that the film allowed 36 percent of the light to make it through - a huge increase.

The color filter is made up of three ultra-thin layers -- two layers of aluminum enclosing a layer of insulating material -- and it only measures 200 nanometers thick.  The filter is etched with slits that produce different colors when illuminated by the backlight.  The slits are matched in scale to the wavelength of visible light and their length and distance apart determine the color produced.

This grating pattern is where the efficiency boost comes in.  In current LCDs, a polarizing filter absorbs half the light (the part with the wrong polarization).  The grating on the new filter doesn't absorb the light with the wrong polarization, it instead reflects it back towards a mirror that flips some of its polarization, letting more light pass through the filter.

Researchers are trying to improve the efficiency further and are coming up with ways to mass produce the filters, like with roll-to-roll printers.

via MIT Tech Review

http://feedproxy.google.com/~r/EcoGeek/~3/cg68K60T-_Q/3282-lithium-

It looks like supply and demand is working out in the consumers' favor when it comes to lithium-ion batteries.  Production has been ramping up for the batteries as more electric cars go into production and that has led to an oversupply that may just keep piling up.  Analysts are predicting a price drop of between 19 and 25 percent by the end of the year -- a slash that could also spell cheaper electric cars in the very near future.

Battery makers in Japan and Korea, like Samsung and Panasonic, account for 75 percent of the world's production, and they've been competing to get the largest share of a market that could triple over the next six years.  This production and pricing war has created a glut of batteries and, luckily for consumers, a falling price.

Many first generation electric vehicles are going on sale in the coming months.  I won't be surprised if the second generations, much like we've seen with later generation hybrids, include a cheaper price tag.

via Treehugger

image via GM