Energy Security

[Rick M]

This project is supposed to add 30% to UK gas storage capacity:
http://www.gatewaystorage.co.uk/

Meanwhile, this article points to the root of the problem. If the UK hadn't been in such a hurry to sell off its new-found O&G during the Thatcher years, etc, they'd probably still have secure supplies from their own gas-fields.
http://www.platts.com/RSSFeedDetaile...ed/Oil/8187240

It has been argued that the UK economy was in such a shambles that they had little choice, but one would think that a more sustainable, long-term approach might have been developed.

Bad enough to sell off a finite resource within a few decades. To realize that one's nation has done so at rock-bottom prices (at least through the 80s and 90s) must be downright painful (literally painful to those who can't afford heat, of which the UK seems to have a great number).

[davidbfpo]

Rick,

You raise a number of points about the UK's decisions on economic policy, way beyond energy security:

If the UK hadn't been in such a hurry to sell off its new-found O&G during the Thatcher years, etc, they'd probably still have secure supplies from their own gas-fields.

I suspect there was an assumption that additional O&G would be found that could be exploited, to date - from my little knowledge - that has not happened. There remains a political reluctance to publicly acknowledge the North Sea "bonanza" is over. Today Alec Salmond, Scotland's First Minister and aspiring to independence, when interviewed referred to massive private investments still being made in the North Sea, not a word about declining production.

In fact the North Sea oil was what was being sold, including at one point to Canada IIRC! The natural gas all came ashore here.

It has been argued that the UK economy was in such a shambles that they had little choice, but one would think that a more sustainable, long-term approach might have been developed.

Yes, alas those who made the decisions did not think long-term. A few have asked what happened to the "bonanza". Even today our energy policy depends on our national ability to earn enough to import supplies. Security of supply is on the agenda, but is out of sight from nearly all.

The UK economy outside the City of London and the wider south east is not far off being a shambles.

Try this taster from The Guardian:

...the finding from Manchester University's Centre for Research on Socio-Cultural Change that in the Midlands, the north, Wales and Scotland between 1998 and 2007 the private sector created almost no net new jobs. North of the Watford Gap, it was left to the state to provide employment, and effectively cover up for the inertia of businesses.

Link:http://www.guardian.co.uk/commentisf...cal?CMP=twt_gu

The cited report:http://www.cresc.ac.uk/sites/default/files/wp%2075.pdf

What did the UK spend the "bonanza" on? Personal consumption yes and the public or state sector, which absorbed more and more often without giving the outcomes.

[Dayuhan]

I think it is now incredibly difficult to get the predictions right, but is save to say that:

a) It looks like a boom.

b) It will end.

Also safe enough to say that the scenario that eventually plays out will be neither as dire as the prophets of doom would suggest nor as lavish as the prophets of boom would suggest. It's always wise, when assessing such assessments, to apply the Olympic Diving method and discard the lowest and highest scores from the start.

The boom will surely end, though that does not mean production will cease. It will simply cease to be seen as a "boom" and become the norm, at whatever level it ultimately finds.

Green energy yes but not in my backyard...

Oddly, somebody now wants to build a 15MW wind farm in my backyard. Perhaps predictably, neither I nor the community are entirely enchanted with the idea...

[Rick M]

"that does not mean production will cease"

You are correct, Steve.
UK is still top-15 (maybe still top-10) in global O&G production.
But that's the scary part: if we have top-10 producers which are clearly post-peak and struggling, where do we think that the next decade's (the 2020s') supply is going to come from?
We can't all be importers....

As for importers, David is correct: Canada used to receive one-third of its oil imports from UK and another third from Norway. Now the two struggle to provide us with one-third of our imports between them, and our #1 supplier has been Algeria (hardly a bastion of stability and itself possibly post-peak since 09).

[Dayuhan]

"that does not mean production will cease"

You are correct, Steve.
UK is still top-15 (maybe still top-10) in global O&G production.

The "boom" referred to was the US "tight oil/tight gas" boom"

But that's the scary part: if we have top-10 producers which are clearly post-peak and struggling, where do we think that the next decade's (the 2020s') supply is going to come from?
We can't all be importers....

As I've said before, in most cases the "peak" issue is less a problem of geological constraint than one of political constraints on investment and exploration.

As far as where it will come from, IEA says the US can produce 11.2 mbpd by 2020, and this article:

http://www.cbc.ca/news/business/stor...-forecast.html

says Canada could push 6.2 mbpd by 2020. What's going on in the US and Canada is an example of how investment can respond to high prices if it's not arbitrarily constrained. The same could happen in a fair number of other places if investment and exploration were as open, but of course they are not.

As for importers, David is correct: Canada used to receive one-third of its oil imports from UK and another third from Norway. Now the two struggle to provide us with one-third of our imports between them, and our #1 supplier has been Algeria (hardly a bastion of stability and itself possibly post-peak since 09).

If things get really strange you may have to buy from... Canada!

[Firn]

An interesting USB paper, maybe somebody with more expertise could step in.

I have recently bought ENEL* and I own E.ON stock (see the EUCOM economy thread) which actually is doing fine in the last weeks being just slightly in the red so something like that always gets my attention...

*The last annual report and outlook are rather interesting, the amount of energy produced by coal relative to it's installed capacity and other sources was quite remarkable...

[Ulenspiegel]

An interesting USB paper, maybe somebody with more expertise could step in.

I have recently bought ENEL* and I own E.ON stock (see the EUCOM economy thread) which actually is doing fine in the last weeks being just slightly in the red so something like that always gets my attention...

*The last annual report and outlook are rather interesting, the amount of energy produced by coal relative to it's installed capacity and other sources was quite remarkable...

A nice chunk of the coal capacity was replaced with cheaper NG capacity after 2000 in Germany. For data see AG Energiebilanzen: http://www.ag-energiebilanzen.de/viewpage.php?idpage=1 (Frontpage, Tabelle zur Stromerzeugung nach Energietrgern 1990-2012).

Because NG prices soared coal capacity replaces NG capacity in Germany and Netherlands. The pendulum is simply swinging back. This happends despite a high penetration with reneables.
The sum of coal+NG is quite constant for more than one decade, see the table of AG EB.

In Germany renewables will mainly replace nuclear power until 2022, then coal will be replaced. With this background, I would not buy shares of the large German utilities, because they have only nuclear and coal as main cash cows, cows that are dying. Their market share of renewables is small due to strategic mistakes in the past.

For me the Austrian Verbund is much more interesting, they produce more than 80% of their electricity by running water power plants, which are of course written of for many years and were profitable at much lower electricity prices. :-)

Austria can sell without any problems electricity to her larger neighbours Italy and Germany (no transmission bottle neck) and has a lot of storage capacity, i.e. it is future proof in a green energy landscape.

[Firn]

I had you certainly in mind when I wrote that..

There is that ENEL plan. While ENEL can not rival the Austrian Verbund, hydropower is at least quarter of it's group production mix. See page 44 and a couple of the following ones.

A good deal of that might form part of a future 'Alpine battery' which is not quite as potent as the Norvegian one, but is located in the heart of Europes industrial heartland...

In any case ENEL seemed greatly undervalued, even if the interest rate on it's (large) debt is shockingly high compared to German utilities in general. I might look at the Verbund, it is always nice to have a couple of good investments lined up.

[Ulenspiegel]

Firn,

a few weeks ago I attended a lecture of Prof. Max Otte, who is an successful investor and fan of Warren Buffett. He talked about investment strategies with clear focus on German and Austria, because in this countries there are a lot of undervalued companies.

He came to the same result for Verbund, however, he still invested/hold investments in RWE, he gave no explanation for this decision. So maybe, I miss something.

Other interesting candidate for him is the airport Vienna, price of all shares around 900 million EUR, real estaste value 1,4 billion.

Another field for me would be solid industrial bonds, here some small Austrian utilities from Burgenland and Niederösasterreich with clear focus on wind power look attractive, they pay 4-5% per year.

[Firn]

Ulenspiegel,

Maybe he bought RWE high and doesn't want to realize his loss. Who knows?. I got RWE at around ~30 € and right now it is pretty much there. Keep in mind that the big dividend day is approaching and the current yield is pretty high indeed so the stock will tend to rise quite a bit.

Yesterday late evening I took a very quick look at the Verbund, and I like the way how the presented their power plants on the map. ENEL, RWE and EON could learn from that. I was a bit surprised by the relative low number of big hydro plants in the Alps, most of the hydro plants are small and along the rivers...

So not so much battery potential.

I tend to agree that over the last decade German and Austrian companies have been rather undervalued compared to other companies around the globe. I'm pretty sure nobody knows why but that is not the most important question an investor should ask. If and how much sound better.

A bit later I also found a paper called Wind in power: European statistics 2012 which I found highly interesting. The percentage by renewables of the newly installed European capacity has been very high over the last years and the trend is strong.

Good and clear graphics, well done to the authors.

[Ulenspiegel]

Firn,

the Verbund has almost only runninng water power plants, so no surprise that they have no storage, Tirol is where to look. :-)

Austrian power plants are well documented in wikipedia:

http://de.wikipedia.org/wiki/Liste_%...her_Kraftwerke

Here you get owner and homepages. Interesting for me as German is the high capacity factor of the Austrain wind farms, they started late but did a very good job, we Germans can learn a lot from them.

[Firn]

Firn,

the Verbund has almost only runninng water power plants, so no surprise that they have no storage, Tirol is where to look. :-)

Austrian power plants are well documented in wikipedia:

http://de.wikipedia.org/wiki/Liste_%...her_Kraftwerke

Here you get owner and homepages. Interesting for me as German is the high capacity factor of the Austrain wind farms, they started late but did a very good job, we Germans can learn a lot from them.

Maybe the Austrians 'just' started later and are able to used the knowledge gained from their pioneering neighbour and profit from putting new technology on the best spots. Think about the law of diminishing returns, with place being a key factor of wind energy output. With new technology and bigger/higher wind farms the Austrian curve should naturally be above the German one .

Good call about Verbund, I took also a quick look at Tirol. Seems like some recent pump storage projects were canceled due to understandable 'not in my backyard' opposition.

[Ulenspiegel]

Firn,

yes the high capacity factor of the Austrian wind farms is a direct result of starting later, no discussion.

On the other hand they make money under conditions under which some Germans bitch, so the different owner structure leads to more efficient constructs in Austria. Maybe, small utilities can manage the connection of the wind generators with the net much better than the farmer in Frisia. :-)

[Firn]

The last point is quite interesting. Austria is not exactly the biggest country and has a couple of small utilities. In Germanys case a lot of of the windpower is strongly localized, just like in Austria. However thereit seems to fit rather well into the (Austrian) population density clusters. So one of the biggest problems for our Frisian Farmers, the lack of north-south connections should not bother those Austrian utlities, which are also located pretty centrally in Europe.





The West of the country has obviously a lot of hydro power and is well suited for pump storage.

[davidbfpo]

The actual headline in the Daily Telegraph is 'Fridges could be switched off without owner's consent to reduce strain on power stations', a strange report on a proposal by EU power generators to the EU Commission:http://www.telegraph.co.uk/earth/ene...-stations.html

Needless to say the power companies don't include paying compensation if private household or others appliances are remotely switched off.

[Firn]

Obvioulsy and understandably the article is rather polemic, it is in the end the Telegraph writing about an EU paper. The fridge is possibly the worst example and thus it ends up in it's headline.

Viktor Sundberg, energy strategy manager at Electrolux, warned: “This is Big Brother technology on a grand scale. The device inside the fridge or freezer will automatically change the way the appliance operates in response to the output of the grid.

“This method of shutting down household appliances could to be carried out almost instantly, saving the energy companies millions because they won't have to start up the turbines or pay huge industrial companies to cut production.

“Consumers are not benefiting at all and will be left paying more when they buy the appliances, as well as having their private goods controlled by outside forces.”

Things like hot water storage seem the most usuable appliances. You could store supply spikes and can switch it off on demand peaks. Overall the topic is highly interesting and is a part of the evolution of the internet of things. If the markets work under the set of new circumstances energy prices should come actually down relative terms. I would love to see an button/option to allow the dishwater to start at will within some timeframe, provided the bill gets cheaper. We sometimes let the machine wash at night so that we can hang things up in the morning and switch the dishwasher on in the evening. Even simple programming helps a lot. The marginal returns get of course in general slimmer the more technology you employ.

Needless to say that I won't tolerate any tampering when I'm let us say cooking. That would be evil.

BTW: I just read the Wiki article to get the English terminology concerning the subject of water heating and found that bit interesting.

Densely-populated urban areas of some countries provide district heating of hot water. This is especially the case in Scandinavia and Finland. District heating systems supply energy for water heating and space heating from waste heat from industries, power plants, incinerators, geothermal heating, and central solar heating. Actual heating of tap water is performed in heat exchangers at the consumers' premises. Generally the consumer has no in-building backup system, due to the expected high availability of district heating systems.

In those quasi soviet states high up in the cold north the costumers rely even for warm water on their suppliers and that without in-building backup system. Obviously it seems like to be a very efficient solution which should also be reflected on the (low) price they have to pay. Markets and technological evolution at work in mostly quite decently working societies.

[Fuchs]

The West of the country has obviously a lot of hydro power and is well suited for pump storage.

Spoken like a hydroengineer.

Too bad the Austrians would gain nothing by building lots of dams. Their tourism sector would suffer terribly. They're already losing their glaciers and will fight to keep horrible dams away from the picturesque sights of the Alps.

[Firn]

One of the many uncles is actually one, it seems to have some effect on me

I think we need to take a hard look for political and economic reasons at the existing plants for new pump storage. Hydropower output has remaind pretty flat over the last fifty years in Italy. Obviously the factor 'location' is the limiting one, as there are just so many good & usable spots.



The monthly energy mix, idro = hydro. Eolica = windpower.



I think the future of that sector will be rather interesting. In the South we have a lot of potential for solar. The water is of course in shorter supply then in the North but ENEL could certainly have more then one big pump storage plant there.

[Ulenspiegel]

Spoken like a hydroengineer.

Too bad the Austrians would gain nothing by building lots of dams. Their tourism sector would suffer terribly. They're already losing their glaciers and will fight to keep horrible dams away from the picturesque sights of the Alps.

Austria + Switzerland (30 TWh), Sweden (35 TWh) and Norway (80 Twh) have a lot of big natural reservoirs without or with underused pump capacity, they can simply increase the capacity factor of the pumps as first step and upgrade them as second step.

OTOH Austria is actually building one pump storage with 1 GW power, this is per capita much more more than Germany has or will have in the next decade.

With at least 6 GW corsss border transmission capacity to Germany Austria has a good chance to cover up to 30% of the German long term storage demand and also deliver peak power.

[Firn]

I just wanted to point out how 'ragged' the overall energy mix percentages have become even compared to 2008 over a single year. Hydro always tended towards this but now we also have other renewables, especially solar. Quite a challenge.