Energy Security

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Originally Posted by Firn

Ulenspiegel and I discussed the issue of coal vs NG before. To some extent the European LNG terminals are already there as simple container ports which handle coal.

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Container ports don't handle coal, they handle containers. Coal would move through a bulk cargo terminal, which uses very different equipment. Coal ports are typically specialized and associated with specific power plants.

The days when a port was a port are long gone... the basic need to bring ship into proximity with shore remains, but the infrastructure for handling different cargo is very different. A good example is the US and its gas terminals. The US has a number of regasifacation terminals, which are designed to receive LNG, convert it back to gas, and feed it into a distribution grid. As the US no longer imports gas, these facilities are largely useless. The US cannot export gas at this time because despite a surplus of gas, none of the terminals are equipped with the infrastructure needed to liquify gas and load it onto ships. They can take it off, but they can't put it on. The industrial plant required for liquification is completely different from that used for regasification.

Gas import or export facilities are single-purpose dedicated installations that require large investments of time and money to build. They cannot be flipped from one purpose to another, something which is occasionally overlooked in discussions.

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Originally Posted by Dayuhan

Container ports don't handle coal, they handle containers. Coal would move through a bulk cargo terminal, which uses very different equipment. Coal ports are typically specialized and associated with specific power plants.

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Gas import or export facilities are single-purpose dedicated installations that require large investments of time and money to build. They cannot be flipped from one purpose to another, something which is occasionally overlooked in discussions.

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Thanks for catching that error, what was I thinking? As I stated before coal imports can substitute natural gas imports and indeed they do to some degree. Obviously in the short-term is limited by the existing infrastructure along along chain, but it is very important to state the obvious, as I often do. Things get more elastic with time of course...



Demand:

http://lsigroup.org/wp-content/uploa...1/08/coal2.png



Supply:


http://www.pnoytrader.com/wp-content...rters-Coal.png

http://www.eia.gov/todayinenergy/ima...oalExports.png



Of course part of those coal imports are, especially in the eastern European countries, from the same sources as the NG and oil....


http://www.eea.europa.eu/data-and-ma...image_original

Today Ron Patterson posted some highlights from the latest energy outlook which is conducted annually by a team of Russian analysts.

In one scenario they forecast a peak in coal production prior to 2040. In all scenarios they see abundant oil supply. Many of these projections seem quite unrealistic (Canada at over 7 mbpd in 20 years time?).

Ron has warned for some time that Russian oil production is peaking. He feels that this new outlook confirms that view, which is the real story here:
http://peakoilbarrel.com/russias-take/#more-4111

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Originally Posted by Rick M

Ron has warned for some time that Russian oil production is peaking.

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What does he mean by "peaking"? It is certainly true that without substantial investment Russian production is likely to start dropping soon, but there's no reason to see that as a "peak" imposed by geologic constraints ("running out of oil"). It's a constraint imposed by policy, and reversible by policy.

I'm reluctant to speak for Ron, but I have followed his research for many years and am confident that I am accurately representing his views.

Both Ron and I see little reason to quibble over the cause of a peak in production. The cause could be geological, geopolitical, lack of investment, price uncertainties, etc or any combination thereof.

Both of us see little value in attempting to predict the timing of the global peak. Also, we both see this peak as being fairly imminent and having a severe impact, mostly because we are so unprepared for it.

When Russian experts confirm what was previously hinted at (ie. that Russian oil production is close to reaching its maximum), this is important info because Russia is a leading oil exporter.

Neither of us views the projections for Russian oil as being constrained by policy nor reversible by policy.

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Originally Posted by Rick M

Both of us see little value in attempting to predict the timing of the global peak. Also, we both see this peak as being fairly imminent and having a severe impact, mostly because we are so unprepared for it.

When Russian experts confirm what was previously hinted at (ie. that Russian oil production is close to reaching its maximum), this is important info because Russia is a leading oil exporter.

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I dislike the term "peak" because it's associated with all manner of emotional baggage. The impact of a decline in Russian production will depend on the extent and duration of the decline. "Maximum" is also a loaded word: does it mean "the maximum possible production from Russia" or "the maximum that Russia can produce with currently existing infrastructure"?

I agree that the term, "Peak Oil" has acquired various associations and so has the word "peak" which has become fashionable to apply to all sort of things (peak democracy, peak coffee, etc).
The PO concept is also widely misunderstood, usually by people who equate it with "running out" when it fact it refers to maximum production, not minimum.

In my opinion the most comprehensive, credible analyses of PO are those of UKERC (over 200 pgs) and Bundeswehr (100 pgs), both of which are thoroughly sourced.

Here is Ron's previous post re. Russian oil (last month):
http://peakoilbarrel.com/opec-update...russia-peaked/

Given the central importance of Russian oil and Saudi oil to the global export market, any constraint on their ability to produce and export (regardless of cause) could have serious implications.

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Originally Posted by Firn

As I stated before coal imports can substitute natural gas imports and indeed they do to some degree. Obviously in the short-term is limited by the existing infrastructure along along chain, but it is very important to state the obvious, as I often do. Things get more elastic with time of course...

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The impact of infrastructure and transition cost on elasticity and substitution is often underrated, as when we hear facile solutions like "Europe can replace Russian gas with US gas" proposed. There are also common misunderstandings on the US gas glut... even if gas is very cheap in the US, consumption will rise slowly because transitioning from oil to gas doesn't happen overnight. LNG and CNG are perfectly viable vehicle fuels, but nobody wants to buy the vehicles unless the fueling infrastructure is in place and nobody wants to install the fueling infrastructure until the vehicles are out there. A utility with oil fired power plants is not going to just shut them down and build gas plants. The transition will happen if the gas price stays low, but as you say, it will take time, likely decades

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Originally Posted by Rick M

Given the central importance of Russian oil and Saudi oil to the global export market, any constraint on their ability to produce and export (regardless of cause) could have serious implications.

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True, but understanding the nature of the constraint is critical to formulating policy. Even the term "maximum" raises questions: absolute maximum or maximum possible with existing levels of infrastructure and investment?

All good points, Steve.

We have at least two major problems. First, we will never know what the ultimate recoverable reserve (URR) is or 'ought to be' because there are so many complex factors & interactions including geology, technology, investment, infra, market forces, royalties and other gov't policies, etc. Consequently, we have a very good understanding of past production but present production is dynamic and future production is a bit of a crap-shoot.

Second, energy (and oil supply in particular) is so fundamental to modern life that a significant constraint in supply (regardless of cause) would probably cause such turmoil that effective policy responses would be next to impossible. This was the point stressed by both Hirsch and by Bundeswehr, though in different ways. Hirsch argued that we need to plan and implement mitigation strategies at least one decade before peak (ie. our best guess as to when peak may occur, but that's very difficult to predict as we are seeing).

Bundeswehr warned that economies function within a narrow band of relative stability: although economies can sustain their principal functions despite cyclical fluctuations and the occasional shock, there is the potential for an economic tipping point to be breached. Over-stressed economic systems could suddenly find themselves beyond that band of stability, at which point the entire system could react chaotically. Given the multitude of interconnections within our modern economy, one can readily imagine chain reactions which could destabilize the entire global economic system.

James Hamilton has done excellent analyses of the interactions between high oil prices (which are now required to maintain fracked LTO and bitumen production) and recessions. I think we've underestimated the role of high oil prices in both creating the 2008 financial mess and in perpetuating the ongoing recession. I also think we are wasting precious time between the peak in conventional oil production (which virtually everyone agrees has occurred) and the impending peak and decline of US LTO.

As for policy responses to oil shocks, it's worth noting that both Canada and USA seem to have backed away from formal planning for fuel emergencies. The planned government response now seems to be one of non-response: the term that's used is "full price pass-through." This strategy strikes me as doomed to fail (primarily because of its effects on vital food supply chains) and therefore irresponsible. But I also appreciate the near-impossibility of attempting to ration/allocate, pick & choose, subsidize, etc.

I will let Bundeswehr have the final word:
We are unable to think about the consequences of Peak Oil via our everyday experiences, and can only draw partial historical parallels. It is accordingly difficult to imagine what kind of impact a gradual withdrawal of one of the most important sources of energy would have on our civilization. Psychological barriers account for the suppression of irrefutable facts and lead to an almost instinctive rejection of in-depth discussion of this difficult issue.
The occurrence of Peak Oil is, however, unavoidable.

Elon Musk - The Future of Energy and Transport is a long, quite interesting interview and Q&A with one of the most acclaimed innovators of the last years. Personally I'm always quite sceptical when somebody gets showered with so much praise, however so far the achievments are indeed great and he certainly has a very sharp intellect. His approach to the question about biofuel shows a part of his approach to things, which is of course surprisingly basic and almost painfully obvious. Other scientists came to the same conclusion and have been quoted. That basic insight gets of course supported by an amazing effort in many areas.

The oil crisis has certainly shown the world how painful an energy supply shock can be for the global economy. In normal times our global markets are doing a mostly great job at solving the market problems. Given how much damage a lack of supply can do the importance of energy security rightly demands answers on how to avoid such big or even bigger shocks in the future.

Personally I think that in the long run the key is both a moderation and shift in consumption as well as far higher share of renewable energy production on home and friendly soil. The importance of fossil fuels in the Western energy mix should decrease considerably while ideally getting supplied by larger numbers of entities. It's energy competitors must get increasingly cheaper and more efficient in production, transport and storage. Thankfully technological progress makes the renewable approach ever more attractive and in some cases it is already the cheaper option.

Arguably deposits like those now getting depleted in the USA should ideally be regarded more as national treasure and reserves for difficult times rather then cheap but weak short-term boosts for the economy.

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Originally Posted by Firn

The oil crisis has certainly shown the world how painful an energy supply shock can be for the global economy. In normal times our global markets are doing a mostly great job at solving the market problems. Given how much damage a lack of supply can do the importance of energy security rightly demands answers on how to avoid such big or even bigger shocks in the future.

Personally I think that in the long run the key is both a moderation and shift in consumption as well as far higher share of renewable energy production on home and friendly soil. The importance of fossil fuels in the Western energy mix should decrease considerably while ideally getting supplied by larger numbers of entities. It's energy competitors must get increasingly cheaper and more efficient in production, transport and storage. Thankfully technological progress makes the renewable approach ever more attractive and in some cases it is already the cheaper option.

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Oil shocks to date have, for the west at least, been less a matter of lack of supply than of very high prices: the oil has always been there, it's just been expensive. If supply does get really tight, the largest impact will be in oil-importing developing countries, who will find themselves priced out of the consumption picture, likely with serious unrest as a consequence.

To me the key to making a transition away from fossil fuels happen is maintaining a high price for fossil fuels. It sounds self-destructive and it would certainly be unpopular, but as a question of energy policy I think the US should be committed to keeping oil prices in the $100/bbl range. Of course that also means subsidizing a number of unpleasant regimes, but those regimes are less dangerous than the potential consequences of cheap oil.

Thanks for the Musk video, Firn. I was not aware of it. Also for your observations, Steve.

I note that early in his presentation Musk said, "Sustainable energy... I mean the ability to produce and consume energy in a sustainable manner is the probably biggest challenge of the 21st century" (or words to that effect).
Personally, I would have voted for population/population control but energy is certainly top-three.

Musk comes across as a sensible, strategic guy... attentive to details, a visionary who remains realistic. His observations on energy production (35th min) make perfect sense (emphasis on solar). He is confident in his existing lithium-ion batteries and expects further improvements re. both energy density and price.

The implications for Peak Oil are obvious: such improvements could really take the sting out of future constraints of oil supply, which are bound to come eventually.

He certainly has a cautionary note re. deep shale hydrocarbons (52nd min) re. climate change and not much good to say about land-based biofuels (1:17), for very good reasons.

I agree that we need a 'floor price' for oil. So does Robert Hirsch. I'll bet that Musk would argue the same: a sudden return to cheap oil could undo much that he and others have achieved. The current price of roughly $100 is a bit of a sweet spot: low enough to not cripple the economy (though it certainly limits recovery/growth) but high enough to stabilize production of bitumen and LTO and support investment in alt-energy. Yes, there is a self-destructive aspect to it but there will be much more pain further down the line if we fail to make necessary changes.

Personally, I think a somewhat higher price ($115 - $120?) would be beneficial. As long as we regularly see people idling their vehicles in mall parking lots just to run the a/c, we know that oil is still too cheap and that many people can indeed absorb an even higher price (despite their ongoing complaints about "pain at the pump").

But it's a delicate balance, as the Bundeswehr team warns. If energy prices are unaffordable and the ripple effects cause unemployment, a collapse in suburban property values, mortgage default & unpaid taxes, unaffordable food prices, etc then things could destabilize fairly quickly.

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Originally Posted by Dayuhan

Oil shocks to date have, for the west at least, been less a matter of lack of supply than of very high prices: the oil has always been there, it's just been expensive. If supply does get really tight, the largest impact will be in oil-importing developing countries, who will find themselves priced out of the consumption picture, likely with serious unrest as a consequence.

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My point as well.

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To me the key to making a transition away from fossil fuels happen is maintaining a high price for fossil fuels. It sounds self-destructive and it would certainly be unpopular, but as a question of energy policy I think the US should be committed to keeping oil prices in the $100/bbl range. Of course that also means subsidizing a number of unpleasant regimes, but those regimes are less dangerous than the potential consequences of cheap oil.

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Well ideally from an energy security point the world market prices should be lower with the state slapping a higher tax on it. In that case you give your citziens the right incentives and collect quite a bit of revenue for your budget to be used for energy alternatives. Of course we know that increasing those taxes is highly unpopular. Low international prices would of course inflict further harm on the globe by pushing climate change.

"world market prices should be lower with the state slapping a higher tax on it."

I agree with your second point but lowering market prices seems to be an impossibility apart from the usual vacillations.
Global production of conventional oil has been on a plateau for almost a decade. Indeed, some analysts believe that the decline may have begun. In any case, global supply has been buoyed by increased LTO and bitumen production, both of which are already expensive and about to get worse.

Here in Canada the Globe & Mail has had several recent articles about the high costs of bitumen production.
http://www.theglobeandmail.com/repor...oard/follows/?

This recent article gives an interesting perspective on Bakken production and provides an update on global supply:
http://peakoilbarrel.com/bakken-production-data-june/

I was going to agree with you earlier, but run out of time. Obviously the policies of countries even as important as the USA and China can influence the oil price to a limited degree. The global supply depends of course partly on that it and price expectation of the market (which are obviously tied). Both are known to flactuate to a very considerable degree which result in those boom and bust cycles in investments into the respective sectors.

From a global point of view there is no doubt fossil fuels will face increasingly high production costs. It takes increasingly more investment to bring a given energy unit to market. Renewable energy has on the other hand overall been trending downwards, sometimes very rapidly. Now in some cases like on-shore wind the quality of the locations tends to drop but overall there is still much scope left. Storage technology like batteries benefited from the rise in energy density somewhere around 7-10% in the last decade while the costs per watt decreased even more. Nobody knows how quickly progress will be but there will be some.


http://handlemanpost.files.wordpress...ulative-pv.jpg

The biggest challenge for the political leaders is to support an efficient transition, limiting misallocation and short-term disruption. The macroeconomic benefits for diverting those investment euros and dollars from fossil fuel exporters into the local economy might get overstated in some cases but they do exist. Without arguing about details, just one example:

Better Racking Drives Down Solar’s Soft Costs

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“The current generation and the next generation of integrated racking are now being standardized,” Cinnamon said. “Zep did that so well that SolarCity* bought them.”

“Racking and mounting, at $0.16 per watt, is one of the single largest cost categories for benchmarked rooftop residential installations in the U.S.,” the study reports, and “can have at least a $0.12 per watt impact on the total installed cost.”

Zep competitors that do versions of integrated racking are emerging, like Lumos, Solon, SunPower, Andalay Solar, VeriSol and Cinnamon’s Spice Solar startup. And competing strategies like prefabricated and plug-and-play products are being put in place by companies like PanelClaw, SunLink, and Renusol.

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I'm pretty sure there is still much scope in the installation side of that vastly increased business.

*Musk is it's CEO.

Batteries for Electric Cars is a short overview by the BCG.

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Current Costs and Forecasting Methodology.

Most sources estimate the current cost of an automotive lithium-ion battery pack, as sold to OEMs, at between $1,000 and $1,200 per kWh. Citing the current cost of consumer batteries (about $250 to $400 per kWh), they further predict that this price tag will decline to between $250 and $500 per kWh at scaled production. However, consumer batteries are simpler than automotive batteries and must meet significantly less demanding requirements, especially regarding safety and life span. Nonetheless, $250 per kWh persists as the cost goal for an automotive battery pack. Given current technology options, we see substantial challenges to achieving this goal by 2020.

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I think after this it becomes clearer why Elon Musk is pushing hard for the 'gigafactory'. I have no idea if it will work, but it is clear that he sees considerable scope for economies of scale in the production of batteries specifically designed for EV. Needless to add that the underlining trends are in my humble opinion strongly in the electric vehciles favour.

I think we have an excellent recent example of tradeoffs between short and high energy prices: Ukraine.

We discussed it earlier, and it shows how low energy prices for many consumers due to (very) high subventions and some external discounts can make a country highly vulnerable once much higher prices get charged. It is of course a special case with the energy prices rising by at least a factor 2 for some.

Being a typical English summer day, with a host of very news worthy items in the foreground, it is a good time to announce this:

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National Grid announced on Tuesday that it would begin recruiting idle or mothballed power plants, which would be paid to ensure they could fire up if needed as a "last resort".

The Grid had said in June that the emergency plan to boost power supplies would not be needed this year. However, it has resorted to using it because five of the power plants it had expected to be running this winter are now shut down or are in doubt.

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Link:http://www.telegraph.co.uk/finance/n...h-worsens.html


This is nothing to do with any Russian dependency, rather mishaps with a number of generating plants in the UK.

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Both demand and supply emergency measures were already due to be used in winter 2015-16 when Britain's spare capacity margin was already expected to fall to as low as 2pc.

The measures will be funded by consumers and are estimated to add £1 a year to household energy bills.

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The additional margin of safety doesn't seem likely to destroy the British economy. Said that it seems that:

i) It was a great deal of bad luck that so many plants have at the same times problems

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Two nuclear power plants have been temporarily shut down amid safety fears, two coal-fired power plant units have been partially shut after fires, and one gas-fired power plant unit is being shut because it is unprofitable.

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ii) A decreasing pool of flexible plants like that gas-fired one which has been priced out of the market makes the energy security more susceptible to such streaks of bad luck.

The energy sector is overall in a transistion phase which pace depends on a number of factors differing between regions and countries. Careful management with enough ressources is certainly needed.

The most recent forecast from the EIA in consistent with previous reports in expecting light tight oil (LTO) to peak prior to 2020.
The International Energy Outlook (IEO) was released a couple of days ago and although EIA formerly predicted LTO to peak in 2019, then in the 2017 - 2020 time frame, this time EIA predicts 2017, followed by a brief plateau, with decline beginning in 2020.

Here is the link:
http://www.eia.gov/forecasts/ieo/more_overview.cfm

The box on the right of EIA's page contains six Data Tables. There is a slight discrepancy between Table 4 (all liquids) which shows peak in 2017 @ 14.3 while Table 5 (C&C) shows peak in 2018 @ 9.9.

Both Tables show US decline starting in 2020 which is probably the most relevant issue here.

After the oil rout in the last months it might be useful to return to this topic. The oil market has of course known far more dramatic movement and swings, and I have no idea what the oil price will be in a couple of months or years. Sounds obvious, but it is good to remind others and oneself of it. :wry:

Extraction costs from the Business insider are handy to put the current prices into perspective. Handle as always with care...

http://static1.businessinsider.com/i...56.27%20pm.png

Another table by the (American) EIA.

http://cdn.static-economist.com/site...018_gdc875.png

The higher oil prices of this year mean that for most countries the budgets should be fine on that side. Things will be of course different if it prices stay so low for a longer period. There are of course the well-know feedback loops with investment which kick in but with so many variables it is impossible to say what impact it will have when.

What is Fiscal Breakeven for Oil States? is a blog entry which contains many links looking into the problem. I have actually posted quite a few of the same graphics over the months...

As stated before, ideally not-so-badly performing countries like the USA would use this opportunity to somewhat increase taxes on fossil energy consumption to curb global warming and increase it's longer term energy security. Some semi-flexible indexing might work. Won't happen of course...

Thanks for your post, Firn.

We've seen posts all week heralding a return to cheaper oil, mocking peak oil concerns, etc. But many people seem unaware of the fact that conventional oil has peaked and that the increased production that we've enjoyed for the last 8 years has come almost entirely from two North American sources: US tight oil and Canadian bitumen.
Both sources are very expensive, as your graph illustrates, and will be scaled back if they face sustained unprofitable prices.

Yesterday Ron Patterson posted an examination of ND oil production by county. The degree to which ND's production depends on the sweet spots in two counties is quite remarkable: McKenzie and Mountrail produce about 60% (around 666,000 bpd) of ND's oil:
http://peakoilbarrel.com/bakken-oil-production-county/

Meanwhile, EIA continues to forecast a peak in US tight oil (and therefore US overall production) within the next few years.

This thread has been running for over 5 years, during which time we've seen several ups and downs re. oil & gas. Five years from now I expect that the prevailing view will be that concerns over long-term global oil supply (and climate change, the flip side of the energy coin) were well-founded.

I broadly agree with you and history shows indeed that oil prices swing indeed a great deal. The low prices of today have often been an important factor in the high prices in the next future.

I think it is always important to keep the basics firmly in mind. Among them is the simple fact that never before was so much oil consumed:

https://s3-eu-west-1.amazonaws.com/r...ergy-Jul14.png

From the Climate Insider.

http://www.energytrendsinsider.com/w...BPD.png?00cfb7

Puts the economic rise of Asia in an energy perspective. The European decline, yes to a (small) degree through increased efficiency, is almost as stunning. The last graphs are from Energy Trend Insider

http://www.energytrendsinsider.com/w...ion.png?00cfb7


Seemingly ever increasing demand for finite ressources will make sure that at some stage we will run out even if technology and capital allocated due to high-enough prices will push the bounderies of 'finite'.

As I don't think that technology can keep the costs of crude at the current levels in the long run, putting also in the long run something similar to a floor under it's price, it will continue to get substituted. Arguably the pace should increase with far stronger competition from alternatives, some of which seem able to continue to benefit from technological progress. Of course how it plays out depends on a lot of variables and the specific dynamics of the demand and supply. Those soft restraints and competition should play a bigger role in the near future than the hard limits, at least in my humble opinion.

http://epp.eurostat.ec.europa.eu/sta...on%29_YB14.png

The upwards trend of coal is quite interesting after it's consistent fall over more then a decade. Crude is also down, but far less so in percentage terms. NG has been clearly replacing the two other fossil fuels to a good degree. The rise of renewables is indeed very large.

David Hughes is a veteran geoscientist, now retired from the Geological Survey of Canada. He is also a meticulous researcher who carefully sources the data upon which his conclusions are made.

This morning his latest analysis of US shale/tight oil and shale gas supply was released. "Drlling Deeper" is a massive document (315 pgs, 25 MB). Here is the Abstract (my emphasis in italics):

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Drilling Deeper reviews the twelve shale plays that account for 82% of the tight oil production and 88% of the shale gas production in the U.S. Department of Energy’s Energy Information Administration (EIA) reference case forecasts through 2040. It utilizes all available production data for the plays analyzed, and assesses historical production, well- and field-decline rates, available drilling locations, and well-quality trends for each play, as well as counties within plays. Projections of future production rates are then made based on forecast drilling rates (and, by implication, capital expenditures). Tight oil (shale oil) and shale gas production is found to be unsustainable in the medium- and longer-term at the rates forecast by the EIA, which are extremely optimistic.

This report finds that tight oil production from major plays will peak before 2020. Barring major new discoveries on the scale of the Bakken or Eagle Ford, production will be far below the EIA’s forecast by 2040. Tight oil production from the two top plays, the Bakken and Eagle Ford, will underperform the EIA’s reference case oil recovery by 28% from 2013 to 2040, and more of this production will be front-loaded than the EIA estimates. By 2040, production rates from the Bakken and Eagle Ford will be less than a tenth of that projected by the EIA. Tight oil production forecast by the EIA from plays other than the Bakken and Eagle Ford is in most cases highly optimistic and unlikely to be realized at the medium- and long-term rates projected.

Shale gas production from the top seven plays will also likely peak before 2020. Barring major new discoveries on the scale of the Marcellus, production will be far below the EIA’s forecast by 2040. Shale gas production from the top seven plays will underperform the EIA’s reference case forecast by 39% from 2014 to 2040, and more of this production will be front-loaded than the EIA estimates. By 2040, production rates from these plays will be about one-third that of the EIA forecast. Production from shale gas plays other than the top seven will need to be four times that estimated by the EIA in order to meet its reference case forecast.

Over the short term, U.S. production of both shale gas and tight oil is projected to be robust—but a thorough review of production data from the major plays indicates that this will not be sustainable in the long term.
These findings have clear implications for medium and long term supply, and hence current domestic and foreign policy discussions, which generally assume decades of U.S. oil and gas abundance.

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North Korea dispatched covert commando teams to the United States in the 1990s to attack nuclear power plants and major cities in a conflict, according to a declassified Defense Intelligence Agency report.

The DIA report, dated Sept. 13, 2004, reveals that five units of covert commandos were trained for the attacks inside the country.

According to the report, the “Reconnaissance Bureau, North Korea, had agents in place to attack American nuclear power plants.”

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http://freebeacon.com/national-secur...uclear-plants/

Seven Reasons Cheap Oil Can't Stop Renewables Now

I like graphs so I had to go with that one:

http://media.gotraffic.net/images/iQ.../v16/-1x-1.jpg

As we discussed before the often large tax burden does of course reduce the upside for the consumer. As Italian it is especially easy to note that. :wry:

http://media.gotraffic.net/images/ih.../v17/-1x-1.png

On a worldwide scale the following might be surprise some:

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Fossil-fuel subsidies outpace renewable-energy subsidies by a factor of 6 to 1. Reducing the subsidy gap is one of the cheapest ways to increase fuel efficiency and speed up the switch to cleaner energy. Expect similar moves as the rising toll of climate change pushes governments to take action.

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However it is important to keep in mind the difference in energetic output, with the renewables still being a small slice of the worldwide consumption. Still subsidies for oil are a terribly bad idea for many developing countries or producers. Perhaps the best example of the worst policy (among many others) in that regard is Venezuela.

The good news are that PV is a generator for which global installation doubles in less than four years, from 1% to 32% takes only 5 doubling steps, i.e. 20 years. And there are no real bottlenecks for required materials.

Installation and O&M are more or less low tech for PV, so no real problem for a wider distribution.

Wind power is more tricky as installation and O&M is sometimes more on the high tech side, however, with huge potential in developed countries and some of the developing countries I see a real impact in PV and wind power.

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Originally Posted by Ulenspiegel

The good news are that PV is a generator for which global installation doubles in less than four years, from 1% to 32% takes only 5 doubling steps, i.e. 20 years. And there are no real bottlenecks for required materials.

Installation and O&M are more or less low tech for PV, so no real problem for a wider distribution.

Wind power is more tricky as installation and O&M is sometimes more on the high tech side, however, with huge potential in developed countries and some of the developing countries I see a real impact in PV and wind power.

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I fully agree with you and the basic logic is hard to deny. PV is booming for very good reasons, having become ever more cost-efficient per watt surprisingly quickly.


http://media.gotraffic.net/images/iL...v1/1200x-1.png

From Bloomberg's article: California Just Had a Stunning Increase in Solar and good chunk comes from mighty Berkshire. In addition to the utility numbers 'In small-scale solar, capacity for another 2.3 gigawatts has been installed'. Not bad at all...


http://media.gotraffic.net/images/ij...8/v1/-1x-1.png

An interesting article about oil storage in the US gets filled up at a rapid pace.

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Traders’ attempts to use every cubic inch of storage underscores how desperate the market has become to stow oil. Supplies at Cushing reached a record 56.3 million barrels as of March 20, Energy Information Administration data show. Nationwide, stockpiles at 466.7 million are the highest since 1930

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Who saw that coming even one year ago?

X-rays Reveal Secret Life of Batteries offers amazing pictures and graphs on some processes inside experimental batteries. It is a public lecture and thus explained in a simplistic but cohesive and clear manner.

China’s Fuel Demand to Peak Sooner Than Oil Giants Expect makes for interesting reading. China dominated demand growth across pretty much all the commodities so a different path will be felt around the world.

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Sinopec has offered a view of the country that should serve as a reality check to any oil bull. For diesel, the fuel that most closely tracks economic growth, the peak in China’s demand is just two years away, in 2017, according to Sinopec Chairman Fu Chengyu, who gave his outlook on a little reported March 23 conference call. The high point in gasoline sales is likely to come in about a decade, he said, and the company is already preparing for the day when selling fuel is what he called a “non-core” activity.

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It seems a little to bullish (or bearish depending on your perspective) but it is well worth to think about it.

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Originally Posted by Firn

China’s Fuel Demand to Peak Sooner Than Oil Giants Expect makes for interesting reading. China dominated demand growth across pretty much all the commodities so a different path will be felt around the world.



It seems a little to bullish (or bearish depending on your perspective) but it is well worth to think about it.

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I wonder if this analysis is based on China's slowing economic growth, or the growing efficiency of alternative fuels?

Good questions which are usually not in short supply regarding China...

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Sinopec has offered a view of the country that should serve as a reality check to any oil bull. For diesel, the fuel that most closely tracks economic growth, the peak in China’s demand is just two years away, in 2017, according to Sinopec Chairman Fu Chengyu, who gave his outlook on a little reported March 23 conference call. The high point in gasoline sales is likely to come in about a decade, he said, and the company is already preparing for the day when selling fuel is what he called a “non-core” activity.

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Peak diesel demand just two years ago is a very bold prediction. A quick look at the commercial vehicle sales have roughly doubled within 10 years on a 3Y basis. I don't know about the longevity of Chinese trucks and the typical turnover but the overall fleet size should be still increasing greatly even if annual sales are down. Alternatives to diesel play only a minor role so, all things equal, we would have to see a large drop in miles per vehicle (or/and a lot of vehicle exports to Africa ) if demand should peak in 2017

http://www.eia.gov/countries/analysi...onsumption.png

The current trend of diesel and ex-diesel oil consumption...

The China Commercial Vehicle Outlook is dated but gives plenty of details on the market (among them the officially proposed vehicle duration)A recent global overview provides some background. There might have been some overinvestment due to a too bullish projection of the economy, some impact by Euro IV, more efficient fleet management. lots of other factors and so forth but personally it seems unlikey that we will see no increase in consumption over 2017 unless there is a might Chinese crash.

China invests massively in renewables but China is massive and the energy sector has typically a huge momentum. I will have to take a closer look at the non-diesel part later, starting most likey here.

http://www.eia.gov/countries/analysi...ation_fuel.png

Yes I love graphs!

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A massive power failure that crippled life in Turkey for almost 10 hours on Tuesday highlights the threats facing electricity grids worldwide.

Turkey’s most extensive power failure in 15 years, which left people stranded in elevators and traffic snarled, wasn’t the result of a lack of electricity. The prime minister said all possible causes -- including a cyber-attack -- were being investigated.

While the source of the problem is still unknown, recent revelations that a 2008 oil pipeline explosion in Turkey was orchestrated via computer and the high-profile hacking last year on Sony Pictures Entertainment demonstrate the increasing ability to penetrate systems. For power grids, technology being added to make them more reliable and productive is also giving attackers an entry point into vital infrastructure.

“Every country, including the U.S., will be looking at it to see what the vulnerabilities were and learn some lessons about protection,” said Kit Konolige, a New York-based utility analyst for Bloomberg. “An electric grid is a complex system and it’s hard to ensure that it’s defended everywhere.”

Several foreign governments have hacked into U.S. energy, water and fuel distribution systems and might damage essential services, the National Security Agency said in November. A report by California-based cybersecurity company SentinelOne predicts that such attacks will disrupt U.S. electricity in 2015.

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http://www.bloomberg.com/news/articl...s-under-threat

The move towards a 'smarter grid with much complex physical and digital interactions should indeed naturally greatly increase the ability to input cyber attacks.

Water consumption outstripping water supply in the last decades has in California both impacts the energy security both directly and indirectly.

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California's drought caused a state of emergency to be declared in January 2014. Since then, the drought has worsened, and, as of April 7, 2015, 44% of the state is now classified as experiencing exceptional drought, the most intense drought category. The drought has limited the state's ability to generate electricity from its hydropower plants. For instance, the California Department of Water Resources reports that 2013-14 precipitation in the Northern Sierra, where some of California's largest hydropower plants are located, was 37% below the historical average. Precipitation in 2015 continues to be exceptionally low.

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http://www.eia.gov/todayinenergy/ima....09/chart3.png

Desalination has become an important source of water in some dry countries and areas of the world, for example Israel*, but it requires large amounts of capital to built as well as energy to operate. The latter obviously increases energy consumption per capita, making 'energy security' harder to achieve.

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A huge amount of energy is required to create enough pressure to shove the water through the membranes. But clever engineering has cut energy use of the plants in half in 20 years, as well as improving their reliability.

Future desalination plants also have the potential to blend well with the rising percentage of renewable power on the electric grids in California and Texas. Since treated water can be stored, the plants could be dialed up at times when electricity from wind or solar power is plentiful, and later dialed down.

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All in all so far almost everything I gathered seems to support this view:

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“Our position is that seawater desalination should be the option of last resort,” said Sean Bothwell, an attorney with the California Coastkeeper Alliance, an environmental coalition that has battled California’s turn toward the technology. “We need to fully use all the sustainable supplies that we have available to us first.”

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A sensible legal framework and much better markets are among other efforts key to price water properly, especially for farming, which consumes 80% with a high ratio of especially water-thirsty crops while creating only a (very) small poportion of California's economic output.

*Israel is arguably one of the country for which such plants make most political and economic sense for obvious reasons despite far more conservation efforts then we see in Californian agriculture. It is no surprise that a considerable amount of technological progress seems to have come from there.

A nice Bloomberg piece about some of the trends I have been writing about in this thread.

http://assets.bwbx.io/images/iFvRgH5HKEZk/v1/-1x-1.jpg


Long term the rapid rise of renewables is of course the far bigger story.

U.A.E. Removes Fuel Subsidy a long, long overdue move as we discussed many pages ago with terrible knock-on effects.

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Gasoline is now subsidized in the U.A.E., the second-biggest Arab economy and home to about 6 percent of the world’s oil reserves. Unleaded gasoline 98 octane in the U.A.E. sells for 1.83 dirhams (50 cents) a liter, according to prices on the ministry’s website. The U.S. price of premium unleaded gasoline is $3.18 a gallon, or 84 cents a liter, according to AAA, the biggest U.S. auto group. That compares with 16 cents in Saudi Arabia, the largest OPEC producer.

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It will be wise the review it in a couple of months..

A The Context of Fossil-Fuel Subsidies in the GCC Region and Their Impact on Renewable Energy Development offers a great deal of, well, context to the economic folly.

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By now it has been recognized that the low pricing of fossil fuels has led to a number of adverse impacts. While GCC countries have among the highest GDPs per capita in the world, the opportunity cost of selling fuels domestically at prices below international market rates and the volatility in world oil prices have started putting fiscal pressure on GCC governments. Low fuel pricing has resulted in domestic over-consumption of hydrocarbons and the absence of incentives to achieve energy efficiency in the economy. At the same time, renewable energy uptake has been impeded by a lack of competitiveness.

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i) A neat graphic about the Electric Car market:

http://i1.wp.com/gas2.org/wp-content...zoom=1.5&w=900

ii) Germany's wholesale electricity prices keep falling . Maybe something for Ulenspiegel :):

http://assets.bwbx.io/images/iNYmzy9ZYbhk/v2/-1x-1.png

iii) Nominal oil prices agains real ones:

http://d37lpsgnac8i9z.cloudfront.net...961e53dfb1.jpg

@Firn

as far I understand the situation, the wholesale price of electricity is quite irrelevant for the consumers: a lower wholesale price leads to higher RE tax. Electricity will very likely cost almost the same in the next 15 years, maybe slightly more around 2023 due to more (expensive) offshore wind until 2020. Around 2030 we as consumers can expect a sharp drop of the RE payments as a lot of expensive PV falls out of the FIT.

For energy intensive industry the situation is quite good as these guys do not pay any RE tax, i.e. the Germany energy intensive industry will improve its relative competitiveness on the global market in the years to come.

For utilities this means that NO new conventional power plant is able to make money in a energy only market. You have to privide other services or switch to REs.

As German and Austrian utilities have excess capacity only until 2019, I expect a higher wholesale price then. Or from a different POV: The Austrian Verbund assumes that their mothballed NG power plants are able to make money in 2019 again.

On the other hand, the German Net Agency and some other people expect an increasing NET export of German electricity even after 2019, therefore, I may miss something. (I would expect lower net exports as more electricty is then generated from expensive NG, which not longer has the advantages coal has today.)

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Originally Posted by Ulenspiegel

@Firn

as far I understand the situation, the wholesale price of electricity is quite irrelevant for the consumers: a lower wholesale price leads to higher RE tax. Electricity will very likely cost almost the same in the next 15 years, maybe slightly more around 2023 due to more (expensive) offshore wind until 2020. Around 2030 we as consumers can expect a sharp drop of the RE payments as a lot of expensive PV falls out of the FIT.

For energy intensive industry the situation is quite good as these guys do not pay any RE tax, i.e. the Germany energy intensive industry will improve its relative competitiveness on the global market in the years to come.

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This matches my perhaps more limited understanding of the current German situation. In short the German citziens pay more, stimulating overall energy supply, so that the energy intensive industries can pay less... :wry:

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For utilities this means that NO new conventional power plant is able to make money in a energy only market. You have to privide other services or switch to REs.

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It must be quite depressing to be in the convential part of the business and you feel for those guys if you read the reports of RWE or E.ON. With so little return, if any, it is no surprise that capital flows into other areas even with investments overall being curtailed. Some Services will be quite competitive as they seem to be on of the few places to make money which will make making money more difficult.

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As German and Austrian utilities have excess capacity only until 2019, I expect a higher wholesale price then. Or from a different POV: The Austrian Verbund assumes that their mothballed NG power plants are able to make money in 2019 again.

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Interestingly the Verbund did mouthballed it's coal plant Duernroh, see the intermin report, despite the lower costs thanks to the Co2 certificate issues and the supply glut of it's fuel. Only in 2009 a teleheating pipeline to the Laender capital, more capital down the drain...

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Generation from thermal power plants increased by 54.4%. The main reason for the rise was the increased use of coal in order to reduce inventories at the Duernrohr power plant prior to its closure and greater use of bottleneck management during the first quarter.

On the other hand, the German Net Agency and some other people expect an increasing NET export of German electricity even after 2019, therefore, I may miss something. (I would expect lower net exports as more electricty is then generated from expensive NG, which not longer has the advantages coal has today.)

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I think it is impossible to predict what we will see in 2019, although you make good points. So much depends on fossil fuel prices, renewable energy growth and their cost structure, grid investment and politics. Some
prices spikes are rather likely to happen and it won't be easy for the utilities to chose what to do with their plants.

The German trends will have obviously on a big impact on the Austrian market. My personal guess is that increasing net export growth is quite likey due to current incentive structure in the German market. In that case it's citiziens will also help others industries to pay less.

BTW there is justly much talk about the relative unpredicitable nature of renewable power generation however little, maybe because it is seen as given, on the unpredictable nature of power generation costs of conventional fossil fuel plants. I think the last years, especially in regard to NG, are a good reminder of that.

Firn,

found today this on the Agora Energiewende site:

http://www.agora-energiewende.de/fil...ergiewende.pdf

It explains nicely the issues with wholesale price and RE tax and their projections until 2035. I was quite correct with my assumptions.


Common electricity market comprising Germany and Austria may end (for a few years) in 2019, if the "war games" of the German Net Agency come true.

IMHO it is only a shot across the bow of the Austrians, who admitted that they are greatly benefitting from the market without costs. The Austrians understood this, too, and suggest constructive alternatives.

http://diepresse.com/home/wirtschaft....intern.portal

I completely missed your response, thanks for the links. I may come back later to the first one but I will comment on the second.

1) A great influx of cheap wind energy does pose a challenge to the grid as it can, as pointed out, currently not matched to demand due to a lack of grid integration and storage. Cheap German energy exports means of course overall cheaper electric prices for the Polish market however less profit and more challengers for the Polish utilities and it's providers.

Poland gets powered by coal which is also mined by a fairly large amount of people.

Coal plants tend to compete with wind as base load so suffer often especially if cheap wind pushes the (upper) rest of the supply/cost curve towards the right. So there is certainly a lot of specific political interest to keep cheap energy out.

2) The Verbund will also suffer from the wind competition with it's plants along the Danube for example, however I guess that they hope for more business for their investment into the grid and their pump storage plants. They also divested fossil fuel lately as it was mostly not competitive under current condidtions.

Of course the Austrian consumer should be happy - just like the Polish one - about German electricity lowering his bill.

SAN JOSE, Calif. — Security researcher Brian Wallace was on the trail of hackers who had snatched a California university’s housing files when he stumbled onto a larger nightmare: Cyberattackers had opened a pathway into networks running the United States power grid.

Digital clues pointed to Iranian hackers. And Wallace found that they had already taken passwords, as well as engineering drawings of dozens of power plants, at least one with the title ‘‘Mission Critical.’’



The drawings were so detailed that experts say skilled attackers could have used them, along with other tools and malicious code, to knock out electricity flowing to millions of homes. The breach involved Calpine Corp., a power producer with 82 plants operating in 18 states and Canada.


http://www.bostonglobe.com/news/nati...ed_ArticleText

Power generation is already slowly becoming more and more decentralized. If, and a big if at that, battery prices continue come down storage should also become increasing so. Such a structure is obviously far harder to physically knock out.

Smart grid, large scale grid integration in general and long range UHV ultra high voltage transmission could make the grid on the other hand more vulnerable to physical and cyberattacks.

I'm curious how this plays out in the long run, although with adequate investments even the direct energy security the ups outhweigh the downs in my humble guess.

Quote:

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Originally Posted by Firn

....
Poland gets powered by coal which is also mined by a fairly large amount of people.

Coal plants tend to compete with wind as base load so suffer often especially if cheap wind pushes the (upper) rest of the supply/cost curve towards the right. So there is certainly a lot of specific political interest to keep cheap energy out.

2) The Verbund will also suffer from the wind competition with it's plants along the Danube for example, however I guess that they hope for more business for their investment into the grid and their pump storage plants. They also divested fossil fuel lately as it was mostly not competitive under current condidtions.

Of course the Austrian consumer should be happy - just like the Polish one - about German electricity lowering his bill.

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I think the issue is that German utilities have often spare coal capacity at peak demand times due to the REs, hence, they can export when there is demand in neighbour countries and kill NG and (older) coal capacity there. France and Poland do not have these cheap excess peak capacities, i.e. they buy more expensive than they export.

Yes, the Austrian Verbund will suffer a little bit, however, some of their problems are unsound investments in fossil energy (Italy) in the past. IMHO they are in a much better position than their German counterparts due to the high RE share, which is to a large extend written off, their German competitors have nothing.

IIRC the Verbund hopes to bring on-line their (open turbine) NG power plants, these are peakers, when the excess fossil capacity is reduced in Germany, this will be around 2018/19.

Quote:

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Originally Posted by Firn

Power generation is already slowly becoming more and more decentralized. If, and a big if at that, battery prices continue come down storage should also become increasing so. Such a structure is obviously far harder to physically knock out.

Smart grid, large scale grid integration in general and long range UHV ultra high voltage transmission could make the grid on the other hand more vulnerable to physical and cyberattacks.

I'm curious how this plays out in the long run, although with adequate investments even the direct energy security the ups outhweigh the downs in my humble guess.

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From a purly economic and physical POV better transmission grid integration is the most useful solution. Wind power is, when we talk in European scale, not correlated, this means you can get a base-load like situation on most days simply by more transmission capacity, therefore, no huge amount of short term storage is needed.

Long-term storage needs could be covered by Norway/Sweden, again, more transmission is needed. A wind heavy scenario in northern Europe plus PV in the south would my path to go.

The basics are nicly described in the dissertation of Gregor Czisch.

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An Iranian hactivist group has claimed responsibility for a cyberattack that gave it access to the control system for a dam in the suburbs of New York — and intrusion that one official said may be "just the tip of the iceberg."

The group, SOBH Cyber Jihad, sent a message through another Iran-linked hacker outfit, Parastoo, promising that it would release the technical information that proves it was behind the 2013 breach, according to Flashpoint Intelligence.

The hackers claimed they kept quiet about the attack for two years because of a "state-level" warning not to go public with it "for the greater good."

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http://www.nbcnews.com/news/us-news/...rk-dam-n484611

After a short delay in Morocco:

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The Noor I power plant is located near the town of Ouarzazate, on the edge of the Sahara. It's capable of generating up to 160 megawatts of power and covers thousands of acres of desert, making the first stage alone one of the world's biggest solar thermal power plants.

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Link:http://www.npr.org/sections/thetwo-way/2016/02/04/465568055/morocco-unveils-a-massive-solar-power-plant-in-the-sahara?

Interesting that this is funded by the World Bank, to reduce Morocco's dependence on external sources of power.

A recent IISS event on these issues 'Threat multipliers: the changing energy landscape, climate change, and water stress' with a recording (63 mins); the introduction:

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Over the last decade an advisory group of retired admirals and generals has come together to examine the intersection of national security, the changing energy landscape and climate change. In this panel discussion members of the CNA Military Advisory Board addressed changing energy and water security as potential threat multipliers for fragile regions of the world.

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Link:http://www.iiss.org/en/events/arunde...te-change-af78

There are other threads on climate change and water supply.