No Hot Air

IEA on gas again:

Two countries, two views:

Apart from the FT, we couldn't find much in the UK press where the International Energy Agency talks about the gas glut, so we have to find out their views from the German press:

Unconventional gas is unquestionably a game-changer in North America with potentially significant implications for the rest of the world,” said Mr. Tanaka. The share of unconventional gas in total US gas output jumped from 44% in 2005 to around 50% in 2008 and, in the Reference Scenario, is projected to rise to almost 60% in 2030. The boom in North American unconventional gas production, together with the recession’s impact on demand, is expected to prolong the glut of gas supply for the next few years. The analysis of WEO-2009 shows that the annual under-utilisation of inter-regional pipeline and LNG capacity could rise from around 60 billion cubic metres in 2007 to 200 bcm by 2015. This glut could have far-reaching consequences for the structure of gas markets, with suppliers to Europe and Asia-Pacific coming under pressure to modify pricing terms under long-term contracts, to de-link gas prices from oil prices, sell more gas on a spot basis and to cut prices to stimulate demand.

But The Times doesn't want to hear from someone like the head of the IEA, when they can give a forum to the cheerleader in chief for nuclear, CCS, gas storage and everything with a government subsidy attached, Dieter Helm.  Mr Helm is an Oxford man, but he hasn't heard of gas:

How did we get to this state? Partly because energy policy has never been taken seriously. Without a crisis, it is always someone else’s problem — and one for the future. Most solutions require customers (and voters) to pay more now — and that is something politicians are loath to admit. But bad news on bills — and an energy crisis — is coming unless radical action is taken soon.

But what about un-radical action, like gas for example?  It's a strange world where the right is seeking radical action and old lefties like myself are promoting free market solutions.

Gas is barely mentioned on Planet Dieter and it's the same old story.

North Sea gas reserves have been running out

So?  Big deal in a gas glut.

He said something that since we know that Ireland generated just under 40% of it's power from wind recently, we got a bit suspicious about:

We not only pay among the highest bills for wind, but in Europe only Cyprus and Malta generate a lower proportion of their electricity from it

What is he trying to say?  That we generate too much wind or not enough?  Is he saying that our pitiful contribution to wind power is among the best in Europe?  If that is the case we didn't have to look far. Same newspaper, same day:

High winds across Spain on Sunday meant that for over five hours, over 53 per cent of the country’s power came from wind energy. The towering white wind turbines which loom over Castilla-La Mancha — home to Cervantes’s hero Don Quixote — and which dominate other parts of Spain, set a new record in wind energy production.

Red Electrica said this year wind power is expected to produce 13 per cent of all electricity, hydroelectric power 10 per cent and solar power 2.5 per cent. Spain’s solar industry is one of the fastest growing in the world.

Gas as back-up to renewables and bridge to the future.

Natural gas can buy us time and be the bridge fuel to a no carbon future based on a energy mix every bit as diverse as the current coal, gas, nuclear, renewable mix. A no/ultra low carbon future might arise from any one or many sources: wind, tidal, stored solar, oilgae, solar batteries, hydrogen or fusion for example.

Robert F Kennedy Jr of the US environmental organisation Waterkeeper's Alliance is a supporter of gas as an alternative to coal.  He recently proposed using gas as back up to solar:

The solar power sector and the natural gas industry need to build an alliance to get more government support and take over the energy sector from incumbents like Big Oil and King Coal, Robert F. Kennedy, Jr. said on Wednesday....

The alliance is just forming,” Kennedy told reporters after his remarks. He added that the natural gas industry has been “hiding under oil and they think Big Oil is going to take care of them. But they’re realizing Big Oil is never going to let them make a profit” and that companies like Chesapeake are realizing “that their future is with the environmental community and the renewable community.”

He said the team-up also makes sense because power from natural gas can help balance out solar and wind-generated electricity on the grid, eliminating the problem of inconsistency on sunny days, for instance.

What about UK environmentalists?  Where do they stand on the new world of abundant natural gas?

Many of them are as unaware of the game changing events in natural gas everyone else, simply due to the (diminishing) silence in the UK MSM.  But some greens are starting to educate themselves, and will be popping up in unexpected places shortly.

Why electric cars will impact your natural gas bill

We always have thought that a key paradigm shift in energy is how we are using less of it.  But what would be the impact of electric vehicles on gas and power use?

The answer is that we don't yet know, but we should at least start asking the question. One more transformation over the next few years looks like being EVs.

After years of hope and hype, electron-powered driving finally appears to be on the verge of reality.

In the next three years, at least a dozen pure electric or plug-in hybrid cars are slated to hit the market in the U.S. Electricity-driven vehicles from giants such as General Motors Co. and Nissan Motor Co., as well as start-ups like Fisker Automotive Inc. in Irvine, will provide consumers with a wide variety of choices. ..

Battery makers and automakers alike are tooling up factories to produce big volumes of electric vehicles. Meanwhile, power utilities and regulators are scrambling to figure out just how big the market will be...

"This is happening and it's happening soon," said Mark Duvall, director of electric transportation at the Electric Power Research Institute, an independent, nonprofit research group. "By the end of 2011, consumers will have more choices in vehicles they can plug in than they currently do for hybrids."...

But in the last couple of years, huge improvements and new battery chemistries "opened the opportunity" for ambitious product plans, she said. Gioia predicts that as many as a quarter of new vehicles sold by 2020 will be electrics, plug-in hybrids or traditional hybrids.

It's too early to say at this point how much electricity, and gas to generate that, will be needed to power EVs.  But it's not too early to say that abundant natural gas and distributed generation is the way to supply those needs whatever they end up being.

Water everywhere

Or at least in the news today:

Here is an inconvenient truth about renewable energy: It can sometimes demand a huge amount of water. Many of the proposed solutions to the nation’s energy problems, from certain types of solar farms to biofuel refineries to cleaner coal plants, could consume billions of gallons of water every year.

“When push comes to shove, water could become the real throttle on renewable energy,” said Michael E. Webber, an assistant professor at the University of Texas in Austin who studies the relationship between energy and water.

Don't even ask about water and nuclear by the way:  Every summer we see stories about French and German nukes unable to produce power due to low river levels.  Energy and water seem to go together, as do some objections about shale gas.

On water, as in carbon, with friends like the Robert F. Kennedy's Waterkeeper Alliance and the Sierra Club on shale's side, at least some people realise that there is never a perfect solution. And we can't afford to wait for one.

Converting rapidly from coal-generated energy to gas is President Barack Obama’s most obvious first step towards saving our planet and jump-starting our economy. A revolution in natural gas production over the past two years has left America awash with natural gas and has made it possible to eliminate most of our dependence on deadly, destructive coal practically overnight – and without the expense of building new power plants.

America’s cornucopia of renewables and the recent maturation of solar, geothermal and wind technologies will allow us to meet most of our energy needs with clean, cheap, green power. In the short term, natural gas is an obvious bridge fuel to the “new” energy economy.

Since 2007, the discovery of vast supplies of deep shale gas in the US, along with advanced extraction methods, have created stable supply and predictably low prices for most of the next century. Of the 1,000 gigawatts of generating capacity currently needed to meet national energy demand, 336 are coal-fired. Surprisingly, America has more gas generation capacity – 450 gigawatts – than it does for coal.

However, public regulators generally require utilities to dispatch coal-generated power in preference to gas. For that reason, high-efficiency gas plants are in operation only 36 per cent of the time. By changing the dispatch rule nationally to require that whenever coal and gas plants are competing head-to-head, gas generation must be utilised first, we could quickly reduce coal generation and achieve massive emissions reductions.

In an instant, this simple change could eliminate three-quarters of America’s coal-burning generators and save a fortune in energy costs. Around 920 US coal plants – 78 per cent of the total – are small (generating less than half a gigawatt), antiquated and horrendously inefficient. Their average age is 45 years, with many over 75. They tend to be located amidst dense populations and in poor neighbourhoods to lethal effect.

New strategy needed for gas

We were at the Energy Event in Birmingham this week, and the gulf between those who know about shale gas and those who don't could be described as those who sell know, and those who don't buy. Or in other words, producers know all about shale, but end-users don't. And if you sold gas would you tell them?

Producer linked retailers know this is the last of the  happy times, made happier for them by the sheer number of customers out there who want to believe in shortages and light out scenarios - those who are far more reward averse than risk takers.

Of all the many publications we monitor worldwide, the most sensible on gas by far is the Calgary Herald, from the heart of the Canadian oil and (up to now)  gas patch. We thanked Peter Tertzakian recently, but he's far from the only one at the paper who speaks sense. Grown up adult, and very well informed discussions - something we can only dream of in the UK.

The Herald is so far ahead of UK thinking on gas that they look past the present and into  the future of energy, while here in the UK the press just loves those " Will the lights stay on?/ Let's go back to  the seventies" stories.

...when it comes to the step change in the North American natural gas industry, the strategy to deal with the low prices as a result of the current glut appears to be biased toward the adage that "nothing cures low gas prices like low gas prices" instead of what's really needed: a comprehensive game plan that sees the inherent value of the resource realized. Hoping for a nasty hurricane season or a frigid winter to boost North American natural gas prices is not a viable strategy.

We like this already. There is a surfeit of money, and a lack of sense in understanding energy prices from the point of fact, not anecdote.That's far worse in the UK, but is also pretty bad anywhere from all the short term traders in commodities who look at all the 20 year averages without figuring out that the world changed forever in 2007. What happened in the past is for the most part irrelevant. The smart people know what parts are still relevant, and the stupid people will lose a lot of money.

The Herald reports what the new CEO of Shell thinks, interesting how we don't hear this over here:

According to Royal Dutch Shell chief executive Peter Voser--this year's keynote speaker at the 19th annual Spruce Meadows Round Table that took place Friday--the world needs a revolutionary shift in how it uses energy and an evolutionary shift in terms of what comprises the energy mix of the future.

Voser--who is an economist by training--was clear that the opportunity cost of not shipping natural gas offshore to markets in Europe and Asia is too high.

Calling it a missed opportunity, Voser made the point that Europe is occupied with decreasing its dependence on Russia for its natural gas needs, while Asia remains on the hunt for new sources of both natural gas and oil.

If Alberta--or any government whose fortunes are tied to that of the resource cycle--truly wants to break from being hostage to a boom and bust economy, it must come up with a plan that sees both oil and natural gas exported offshore. The worry that once existed--that there wouldn't be enough natural gas to meet domestic needs--has been eliminated as a result of the shale gas revolution.

Lets repeat, highlight, and underline this for UK readers. And leaders:

The worry that once existed--that there wouldn't be enough natural gas to meet domestic needs--has been eliminated as a result of the shale gas revolution.

Back to Alberta. With all this gas, where does the solution lie?  Geographically it's to the south, but in evolutionary terms the answer is the same here as it is there:

The evolutionary piece with regard to energy consumption is to have natural gas comprise a greater portion of the fuel mix in everything from electricity generation to transportation.

It is nothing short of puzzling that the focus of greenhouse gas emissions continues to be on the evils of the oilsands when coal-fired electricity, which accounts for half of all electricity generated in the United States, and is a far bigger offender in the greenhouse gas emission sweepstakes, continues to escape the wrath of the environmental lobby.

While there are those who don't want to pit one energy source against the other, it has to be fairly clear by now that switching electricity generation to natural gas would go a long way to addressing climate change in the United States, not to mention provide a solid base for demand of the fuel.

As Voser suggested, the energy world is poised for change that will prove to be both evolutionary and revolutionary. Both aspects are needed from economic, political and environmental perspectives

And the end of the story is this:

At issue now is which companies, countries and governments have the courage to make the changes that result in achieving the sought-after balance between energy security and environmental responsibility

Shale gas in Europe, can effectively solve the 2020 emissions debate several years early. Replacement of coal with natural gas is a quicker, easier and far cheaper win than nuclear.  Enhancement of wind with gas as backup is a further step to a low carbon future.

Interesting figures on renewable v nuclear

From that radical green (as in greenbacks) publication, Business Week, news that renewable energy electricity generation is exceeding nuclear in the US:

Backers of green power had something to crow about with the release of the latest data on eco-energy production in this U.S. Electricity made from renewable sources supplied 11.6% of all the electricity consumed in the U.S. in May (the most recent data available). This marks the second month in a row that renewables (mostly hydropower, but also wind, solar, biofuel, biomass and geothermal) cranked out more juice than the nation’s roughly 102 commercial nuclear reactors. The analysis of the August release of the Energy Information Administration’s “Monthly Energy Review”* was done by the SUN DAY Campaign.

Structures, not cycles

On the energy supply side we have the revolution in gas production combining with the game changer of oil/gas decoupling and globalisation to create all good news in energy supply. 

Energy bulls at wholesale and energy risk merchants at retail clutch at straws and search for energy tea leaves by saying that recovering demand will cause prices to rise. Quite apart from how difficult it would be to counteract a doubling, tripling or nine fold increase in supply with a demand rise, the big problem to that theory is: demand is not rising.  Energy has been cyclical up to now. From now on it will be structural, much more interesting, much less volatile and  far cheaper in the cost per unit.

The bull/risk story depends a lot on oil and gas prices acting as they have in the past:  A boom and bust cycle in prices has similar impacts in the demand cycle. But on the demand side, we have certainly passed the peak in developed economies and see a precipitous decline in the rate of growth of developing economies. Why?

Those seeking simple answers, please look away. But the simple overall answer is that people are no longer energy obese. And just like losing a few kilos of weight, losing the fat surrounding energy isn't the same as cutting off ten pounds of ugly fat (your head as any ten year old can tell you), but a whole suite of little things that end up adding up to if not a lot, at least to a trend significant enough to start having an impact on markets.

This time will be different for a variety of reasons. Energy markets can blame themselves a lot by pushing up prices so far last year. Energy producers thought that as in the past demand is inelastic and that all levels of customer simply pony up however outrageous prices became. But this time, price sticker shock combined with efficiency gains,conservation measures and the rising number of alternatives to carbon fuels to cause a drop in demand across all industries and sectors.  Sure we see collapsing industrial demand (Iron and Steel 30% down year on year), but even assuming a big if of a rising economy,  structural changes are replacing cyclical ones. One of our favourite stats is how UK domestic gas use fell by 4% in January 2009 despite weather 40% colder than Jan 2008. 

Price had a lot to do  with that, but it's not  all of it.  Perhaps people lagged their attics, or put on a cardie.  But a more prosaic explanation is that one can reasonably expect 5% of gas central heating boilers to be replaced naturally every year. And any GCH boiler today is going to be at anywhere from 25 to 60% more efficient than the one it replaced. 

Similar savings come from anything else: A consumer may be of the  opinion that  carbon change is one big con, but however much they try, it is impossible for them to buy a light bulb that uses more energy than the one it replaced. They would have to replace one 60 watt bulb with four CFL bulbs and would  still be using less energy.

We've been meaning to  thank, as we have before, Peter Tertzakian of the Calgary Herald.  Energy books are not generally delivered in a clear, witty and understandable way as in The End Of Energy Obesity, a book we commend, or is that channel, to everyone. The best energy book of the year for sure.

Green Green Energy

Some in the UK dismiss wind as being intermittent, expensive and generally not as workable as spending £4 billion (each!)on a nuke plant.

It's well known that first Denmark, and then Spain and Portugal, followed by  that country with the long coastline, Germany have had some success in not only installing wind capacity but creating an industry on top of it. Actually when measured as percentage of energy, famous maritime power Luxembourg has more wind installed and contributing to the grid than the UK does.

It just won't work in Britain nay sayers say. But how about next door, where Ireland set a record of 999 megawatts recently.

Up to 39 percent of Ireland’s demand for electricity was met from wind at certain times on July 31, added Mr. Kelly, who noted that Ireland has a target of getting 40 percent of its energy from renewable sources in 2020. In 2008, the amount of power generated from renewable sources in Ireland was about 11 percent.

Interesting here is that Ireland may potentially have too much power and will have to limit production unless an inter-connector is built to supply the UK with all the excess.

Mr. Kelly of Eirgrid said that development of a 500-megawatt interconnector between Ireland and Wales was at an advanced stage, and it would enable power from Ireland to be exported at times. He said that the new interconnector was due for completion at the end of 2012 and would cost about 600 million euros ($850 million).

“It is expected that the majority of output from wind generation in the Republic of Ireland will be used by consumers in the Republic because of our renewable targets,” Mr. Kelly said. “But obviously there is an opportunity for excess (at times of low demand or high wind output) to be exported.”

Lots of green energy for a quarter of the cost of a nuclear power station. Maybe we can start accusing the Irish of stealing our power.

Wind Power Potential Is Much Higher Than Estimated

One big paradox we've noticed from day one is that although end-users get hammered with a constant drumbeat of rising energy scares, the actual supply of the stuff, be it oil, gas, electricity or solar is growing more and more and prices are reacting as one would expect in a supply and demand situation.

One of the things that the anti-green brigade consistently pull out is the alleged unreliablity of wind, something we've shared a few doubtful stories about.  News here that wind is actually far more reliable than thought.  Maybe they'r wrong, but on a debate between Harvard and Jeremy Clarkson we know who is entertainment and who is reliable fact:

Global wind energy potential is considerably higher than previous estimates by both wind industry groups and government agencies, according to ..Harvard University

Using data from thousands of meteorological stations, the Harvard team estimated the world wind power potential to be 40 times greater than total current power consumption. A previous study cited in the paper put that multiple at about 7 times.

The Harvard study pointed out that there are real gains to be made in high-emission nations, especially China, which has been rapidly constructing coal plants. “Large-scale development of wind power in China could allow for an 18-fold increase in electricity supply relative to consumption reported for 2005,”

The authors based their calculations on the deployment of 2.5- to 3-megawatt wind turbines situated either in accessible rural areas that are neither frozen nor forested, or relatively shallow offshore locations. They also used a conservative 20 percent estimate for capacity factor, a measure of how much energy a given turbine actually produces.

In an example of how renewable energy potential can be a moving target, Mr. Goggin explained that the growth in the forecasts can be attributed to the increasingly common use of very large turbines that rise to almost 100 meters.

Wind speeds are greater at higher elevations. Previous wind studies were based on the deployment of 50- to 80-meter turbines.

Yet another good news story that will get buried if publshed at all in the UK Mainstream Media.

Growing Energy

No, this isn't about growing energy demand. Any reader knows that we stress that the impact of declining demand and increasing supply brings on the paradox of falling energy prices at the time that conventional wisdom merchants tell us prices are up.

What we're talking about here is growing energy.  Dubbed oilgae, this is better energy production through biotech.  This is a long way from coventional biofuels, of which there is considerable doubt over both cost and efficiency. 

There are any number of off the wall sounding schemes to produce energy, but this one is different.  Look who is taking this seriously and who is investing serious money:

On Tuesday, Exxon plans to announce an investment of $600 million in producing liquid transportation fuels from algae — organisms in water that range from pond scum to seaweed. The biofuel effort involves a partnership with Synthetic Genomics, a biotechnology company founded by the genomics pioneer J. Craig Venter

Venter is the guy who did what they said couldn't be done:  He replicated the human genome (it just happened to be his) in two years instead of thirty. The combination of Venter with Exxon is very, very big. Perhaps it will be a big failure. Or it would have a huge payoff.  Exxon looks at things in thirty year views, and they can afford to, but  $600 million is still a fair piece of change even by their standards but this partnership between one of the most conservative energy companies and a true scientific visionary could be massive. 

Exxon’s partnership with Synthetic Genomics is also a vote of confidence in the work of Dr. Venter, a maverick scientist best known for decoding the human genome in the 1990s. In recent years, he has focused his attention on a search for micro-organisms that could be turned into fuel.

“Algae is the ultimate biological system using sunlight to capture and convert carbon dioxide into fuel,” Dr. Venter said.

Algal biofuel, sometimes nicknamed oilgae by environmentalists, is a promising technology. Fuels derived from algae have molecular structures that are similar to petroleum products, including gasoline, diesel and jet fuel, and would be compatible with the existing transportation infrastructure, according to Exxon

 Venter told the New Scientist in 2007:

Over the next 20 years, synthetic genomics is going to become the standard for making anything. The chemical industry will depend on it. Hopefully, a large part of the energy industry will depend on it. We really need to find an alternative to taking carbon out of the ground, burning it, and putting it into the atmosphere. That is the single biggest contribution I could make.