Energy Security

[Firn]

After a good bike tour I googled a bit around as the topic is highly interesting and geographically rather close as there quite a bit of hydro plants around.

Projekt Obervermuntwerk II gives you a nice overview of another pump storage project in the Alps. In this case it is located in Vorarlberg, in the westernmost part of Austria, in some sense a rather Swiss place.

The video is of course in German. I already posted the video link about the impressive Kopswerk II pump storage project.

The direct impact on the alpine landscape seems to be very low indeed and it is exactly the project I had in mind when I wrote about increasing the efficiency of already existing infrastructure. Two quite big lakes 300m of altitude get linked together giving the utility 21% more installed 'turbine' capacity and even 36% more 'pump' capacity. (Kopswerk II was another big pump storage project)

I think there should be an considerably bigger growth in net generated & storaged energy as more and more renewables get connected to the grid. From a business point of view such companies seem to have a wide competitive moat around them as such places and plants are scare and in high demand with a limited supply. Maybe I will take a look at their numbers, we will see.

ENEL, which stock price has done decently well since I bought it* only a month or two ago has short blog entry about the pump-storage plants in Italy, but seems to have forgot to add some...

P.S: Wiki to the rescue: 'Die Vorarlberger Illwerke AG ist ein sterreichisches Energieunternehmen mit Sitz in Bregenz. Mehrheitseigentmer ist mit einem Aktienanteil von 95,5 % das Land Vorarlberg.' So practically no real way to invest into it.

I got them at 2.75 now they are around 3. Mind you they could fall a lot. Nobody knows. But compared to their value, especially the asset part they seem still priced very low. But to repeat it again, nobody knows for sure.

[Rick M]

This may be of interest (with link to original MoD report):
http://www.guardian.co.uk/environmen...stern-life-mod

[davidbfpo]

Thanks Rick for that post, I only occasionally check The Guardian. A "lurker" responded:

An American academic thinks it is all exaggerated deliberately to ‘securitize’ the world’s issues and justify military actions and expenditures. He studies global energy and finds a disconnect with the material produced by militaries or think tanks.

[Firn]

Funny how things develop sometimes..

A couple of private investors (not including myself ) did present yesterday their small pump-storage project to the public of my home village. Basically they want to use the very steep 700m drop between the valley floor and our plateau to get a highly efficient storage. The upper basin is planned to be underground! It should be placed in a relative isolated pine forest with little humus on the edge of said plateau.

Sadly I could visit it due to a meeting, in any case I will get more detail soon and talked to our major* beforehand about it, mostly about the revenue side. As far as I know it looks good from the credit side for the investors.

All in all I hope it will be a win-win-win situation for all involved. But I need to take a closer look. Another potential, very small step for energy security.

*His big farm has a very considerable number of solar modules on the roof, and it is pretty much the perfect spot being on a sunny ridge at roughly 1400m with the proper roof angles.

[davidbfpo]

It's Thursday, so it must energy stories day for the Daily Telegraph.

Risk of UK power blackouts has tripled in a year, Ofgem warns or:

the margin of electricity supply capacity over demand could narrow to between 2pc and 5pc by 2015 and 2016.

Link:http://www.telegraph.co.uk/finance/n...gem-warns.html

Shale gas in northern England could meet Britain's gas needs for 40 years:http://www.telegraph.co.uk/finance/n...-40-years.html

Wind farms get generous subsidies for another six years:http://www.telegraph.co.uk/earth/ene...six-years.html

[Dayuhan]

http://www.constructionweekonline.co.../#.UfXO66zYjAE

Iraq plans to invest $173bn in its energy infrastructure over the next five years in order to dramatically ramp up crude output, Oil Minister Abdelkarim al-Luaybi has said.

The investment in upstream activities, refineries and to increase natural gas production will boost oil production to nine million barrels of oil per day and bring in revenues of $600bn

Will be very interesting to see if they can get to 9mbpd, or even close.

[davidbfpo]

IIRC Iran exports crude oil for refining across the Gulf and then imports the products, presumably at a premium. It will be interesting to see if new refineries are added.

[Rick M]

Chatham House has come out with another excellent examination of energy consumption within Persian Gulf countries.

"The six GCC countries - Saudi Arabia, Qatar, Kuwait, Oman, the UAE and Bahrain - now consume more primary energy than the whole of Africa. Yet they have just one twentieth of that continent’s population. Energy intensity in the region is high and rising....

Almost 100% of energy in the region is produced from oil and gas without carbon dioxide abatement, and water security is increasingly dependent on energy-driven desalination. If the region’s fuel demand were to continue rising as it has over the last decade, it would double by 2024. This is a deeply undesirable prospect for both the national security of each state and the global environment."

http://www.chathamhouse.org/publicat...rs/view/193884

[Rick M]

In February USDA released a major analysis, "Climate Change and Agriculture in the United States: Effects and Adaptation" (193 pgs) but I only discovered it now.
http://www.usda.gov/oce/climate_chan...griculture.htm

Here in southeastern Ontario the weather has been relatively normal so far this year (unlike last year with its super-warm March which caused premature budding of fruit trees, then a summer drought followed by Sandy's spin-off).

It sounds like the Arctic has seen a return to more normal ice retreat as well:
http://nsidc.org/arcticseaicenews/

[Rick M]

Chatham House released a rather detailed (85 pgs) examination of oil theft in Nigeria, which has now reached industrial proportions (at least 100,000 bpd):
http://www.chathamhouse.org/publicat...rs/view/194254

The short video (3 min) is worth watching: the analyst (Christina Katsouris?) provides a thoughtful summary.

[Rick M]

Ron Patterson started his own website prior to the closing of The Oil Drum, where Ron was one of the mainstay contributors. His postings were detailed and always sourced from EIA, BP, IEA, etc.

Dave Hughes is a veteran geoscientist, now retired from the Geological Survey of Canada where he was a leading analyst re. coal and unconventional gas. He is also a meticulous researcher who is careful in his assertions.

In yesterday's posting, Ron uses Dave's forecast re. US light tight oil (LTO) to conclude that the global peak in oil production will occur "no later than 2015." Ron is not prone to making predictions (he usually simply posts the data and offers his analysis) so I'm not sure what prompted him to do so this time.

In any event, Ron's prediction is quite in line with what the Joint Operating Environment said in 2008 (and again in 2010).

http://peakoilbarrel.com/world-oil-production-peak/

[Bill Moore]

Ron Patterson started his own website prior to the closing of The Oil Drum, where Ron was one of the mainstay contributors. His postings were detailed and always sourced from EIA, BP, IEA, etc.

Dave Hughes is a veteran geoscientist, now retired from the Geological Survey of Canada where he was a leading analyst re. coal and unconventional gas. He is also a meticulous researcher who is careful in his assertions.

In yesterday's posting, Ron uses Dave's forecast re. US light tight oil (LTO) to conclude that the global peak in oil production will occur "no later than 2015." Ron is not prone to making predictions (he usually simply posts the data and offers his analysis) so I'm not sure what prompted him to do so this time.

In any event, Ron's prediction is quite in line with what the Joint Operating Environment said in 2008 (and again in 2010).

http://peakoilbarrel.com/world-oil-production-peak/

Rick,

The JOE's source for their information was the IEA report, this is what IEA is saying now.

http://www.iea.org/aboutus/faqs/oil/

What is peak oil?

Peak oil can mean different things to different people. Some see it as the potential result of economies maturing and deploying more energy-efficient and diverse fuel technologies, meaning that year-on-year growth in world oil demand may level off. Others see it as the maximum possible annual rate of extraction of conventional crude oil, due either to physical resource constraints or above-ground political, economic or logistical factors. While others insist that since the definition of what constitutes conventional oil is constantly changing, total producible liquid fuels is what should be looked at.

Where does the IEA stand in the peak oil argument?

Our analysis suggests there are ample physical oil and liquid fuel resources for the foreseeable future. However, the rate at which new supplies can be developed and the break-even prices for those new supplies are changing. Global oil production levels are also dependent on the production policy of OPEC, which holds between one and six million barrels per day of spare capacity in reserve. Declining oil production in any given year can occur for one of several reasons unrelated to peak production, including OPEC production decisions, unplanned field stoppages and the impact of earlier investment decisions by the oil industry. A combination of sustained high prices and energy policies aimed at greater end-use efficiency and diversification in energy supplies might actually mean that peak oil demand occurs in the future before the resource base is anything like exhausted.

Bold highlights are mine

To me it seems the analysis is constantly adjusted based on new technologies and new oil field discoveries. None the less energy security will remain a principle security concern for most, if not all countries.

[Rick M]

Thanks for your reply, Bill.

What the IEA says is sometimes inconsistent, even contradictory. Some of the strongest warning about PO and future oil supply have been oral statement by Fatih Birol, but usually they are not repeated/supported in formal IEA memos or documents.

In any even, a few lines of this year's WEO are quite striking and certainly warrant further analysis:
[The IEA sees] "oil output (excluding NGLs) dropping from 74 mb/d in 2012 to less than 13 mb/d in 2035, half of which would be from large onshore fields in the Middle East where decline rate are lowest."

Conventional, pump-able petroleum has been the mainstay of mankind's liquid fuel supply for over 150 years. To learn that even the IEA (which is traditionally overly optimistic in its prognoses) sees conventional oil supply shrinking to a mere 13 mbpd in 22 years' time ought to have alarm bells ringing.....

[davidbfpo]

In recent weeks energy security has been an issue in the public arena in the UK, the catalyst being steep rises in the cost of electricity and for some the underlying, increasing costs of 'green energy and taxation.

For a couple of days the reduction in UK electricity generation capacity, under EU 'green' policies and being beyond planned operating limits was discussed. This was partly due to the announcement of the first new nuclear power station construction, for over twenty years, by a Sino-French consortium and with an agreed price double today's. See:http://www.bbc.co.uk/news/business-24604218

[Rick M]

The British Society has recently published a special edition on The Future of Oil.
Most of the articles are behind a paywall but a few are free, including the excellent introductory paper by Steve Sorrell (UKERC) and Richard Miller.

This morning's Guardian includes this article (which provides links to the British Society journal and other links:
http://www.theguardian.com/environme...nomy-recession

[davidbfpo]

Yesterday I listened to a BBC radio report on pollution in Beijing with mild interest which changed when a local academic commented (not exact words):

Yes atmospheric pollution is an issue here, especially when using international standard measurements. There is now public pressure for change and as much of the pollution comes from coal-powered electricity generation we are changing to gas-fired generation.

I am not aware of China's domestic gas production or extent of imports, but it struck me that this public pressure could have a significant impact. Beijing's pollution is shared by other cities, such as Shanghai.

Anyone able to comment?

[Fuchs]

A better investment would probably be to use non-coal electricity for output growth and upgrade the existing coal-firing power plants with (better) emissions filters (or simply maintain existing ones properly).

Their many cars and motorcycles as well as the lack of green inner city areas, distance of Beijing from the sea, weather and geography all play their roles as well.
The rise of electrical scooters and more public buses may help the Chinese megacities' air quality a lot.

I'm sure in the event of a blockade or war the Chinese government could simply switch off power supply to residential areas or impose other forms of rationing.

[Firn]

Public transport is certainly a key element towards Energy security for China and to curb further rises in pollution. The Chinese push towards nuclear powerplants to cover the rising energy consumpition is another one and fits with the support for rail.

It is of course impossible for us to get a good idea about the quality of the investment and it's long term return on investment for the country. The Keynesian multiplier can be rather large and I think that the policy of urban rail is sound for the bigger denser cities with the opportunity costs looking not too bad. In smaller cities the calculation will be of course different. The financing ist obviously putting additional pressure on the state banks.

Does the fact that new Chinese metro systems require operational subsidies pose a problem? It depends on your perspective. From a fiscal point of view, long-term operational aid will impose heavy burdens on local taxpayers, just as is true in U.S. and European cities. This is especially a problem because Chinese cities have intentionally set fares at very low levels (just 2 yuan a ride in Beijing), making it impossible to cover costs. Should China, with relatively low labor costs,* be in this situation?

Another take on it from the Economist with some critical views:

Zhao Jian of Beijing Jiaotong University reckons that metros in fewer than 20 of the 38 designated cities make sense. He says that perhaps ten of those could be replaced with cheaper light rail, which runs above ground. The minimum core urban population that can qualify a city for an underground system is 3m people, but even a place that big may find the operating costs crippling. Mr Zhao says the systems in Harbin and Kunming are unnecessary.

Shi Nan of the Academy of Urban Planning and Design in Beijing says it is obvious that “we cannot count on private cars” to get around the big cities. But the metro projects mostly rely on government subsidies, and operating them will be a “bottomless pit”, says Mr Zhao. He says city officials tend to pursue grand projects that may not even make money because they will not be around to bear the burden. The performance of local officials is evaluated on how much they increase local GDP, not on whether projects they build are needed. Today’s leaders get credit for spending money. Tomorrow’s must foot the bill.

I'm well aware of the bad state incentives, the already huge investment drive and the troubles with financing, but I think it is wise to take note of some of the opinions in the comments. What I know for sure is that the Chinese urbanisation level is still very low compared to Japan in the 80ies and will very likely rise considerably. The picture on the operating costs may well look more positive in years to come and in any case it is hard to imagine an alternative for Chinas larger cities urban transport problem.

P.S: At least Line 13 in Bejing is not that empty. Longer trains should help.

[Fuchs]

It's not possible to determine the externalities in a metro/no metro comparison. The results of such comparisons are either subjective or based on an incomplete comparison.

A well-designed metro system can make sense in a European 0.5M city, especially if the train only goes underground in the most densely built-up centre of the city.

Brazilian bus lanes are a successful alternative, but you can only build them if you have enough space for another lane. The same applies to surface rail (I know rail lines running on streets, and they're both death traps for motorcyclists and just generally dangerous).

[Rick M]

A few days ago information was posted about the Transatlantic Energy Security Dialogue which was held last month.

This video-linked event was organized by Jeremy Leggett in London and by Lt. Col. Danny Davis (US Army) in Washington and involved several analysts with military/security backgrounds. There were 21 participants in London and 28 in Washington.

The agenda was in two main parts:
1. Data of Concern (with important info from Mark Lewis and David Hughes):
- Lewis focused on decline rates, soaring upstream capital costs and stalling/falling oil exports.
- Hughes focused on shale (shale gas and tight oil).
2. Implications of Concern (including a presentation on "Implications for Militaries" by Paul Sullivan at NDU).

Notes (20 pgs) are available for Part One and are worth reading carefully.
I'll let you know as soon as notes for Part 2 are available.

Here is Leggett's synopsis with links re. Part 1:
http://www.resilience.org/stories/20...urity-dialogue