Energy Security

[Ulenspiegel]

Originally Posted by Fuchs

This doesn't seem to fit.
You seem to forget to include opportunity costs into how much they lose.

1 barrel of oil contains around 1600 kWh energy, of which -let's be a little bit optimistic- 50% can be converted into electricity (= 800 kWh).

One kw(p) of PV gives you 1800 kWh per year electicity in SA, it costs 1500 USD, its life span is at least 20 years, with 10% annual costs (credit repayment and interest, insurance, replacements of inverters) you pay 150 USD per year for 1800 kWh or around 8.5 USDcent per kWh, hence, the production of 800 kWh electricity with PV in SA cost you 66 USD.

So burning one barrel oil costs in SA at least 34 USD more than selling the oil for 100 USD per barrel and buying PV.

Burning oil means you have to buy and maintain a thermal engine + generator (additional costs), each price increase of crude makes the situation worse and after 20 years you have written off PV that gives you almost free energy for additional 10 years at least.

Therefore, PV perfectly makes sense in countries with high percentage of electricity from oil (Arabia, India, Pakistan) and a high electricity demand during daytime for running ACs.

[Rick M]

Russia's Economy Minister predicts flat production and increasing internal consumption:
http://www.reuters.com/article/2012/...8L25MX20121002

[Firn]

Originally Posted by Ulenspiegel

1 barrel of oil contains around 1600 kWh energy, of which -let's be a little bit optimistic- 50% can be converted into electricity (= 800 kWh).

One kw(p) of PV gives you 1800 kWh per year electicity in SA, it costs 1500 USD, its life span is at least 20 years, with 10% annual costs (credit repayment and interest, insurance, replacements of inverters) you pay 150 USD per year for 1800 kWh or around 8.5 USDcent per kWh, hence, the production of 800 kWh electricity with PV in SA cost you 66 USD.

So burning one barrel oil costs in SA at least 34 USD more than selling the oil for 100 USD per barrel and buying PV.

Burning oil means you have to buy and maintain a thermal engine + generator (additional costs), each price increase of crude makes the situation worse and after 20 years you have written off PV that gives you almost free energy for additional 10 years at least.

Therefore, PV perfectly makes sense in countries with high percentage of electricity from oil (Arabia, India, Pakistan) and a high electricity demand during daytime for running ACs.

An interesting calculation and there is no doubt in my mind that PV can be a key element among many to increase the energy security of the world. Still in this particular case there are opportunity costs for the potential Saudi investor, in the sense that he might get a better return on his capital elsewhere.

Personally I do however agree that it could be a sensible investment, especially in this part of the world with an almost ideal endowment in terms of solar power and energy usuage enviroment. In short great potential energy yield seems even to match the peak of energy usage.

[Ulenspiegel]

Originally Posted by Firn

An interesting calculation and there is no doubt in my mind that PV can be a key element among many to increase the energy security of the world. Still in this particular case there are opportunity costs for the potential Saudi investor, in the sense that he might get a better return on his capital elsewhere.

Personally I do however agree that it could be a sensible investment, especially in this part of the world with an almost ideal endowment in terms of solar power and energy usuage enviroment. In short great potential energy yield seems even to match the peak of energy usage.

Sorry, here I do not see your point :-) For 66 USD investment you get for twenty years p.a. (!) 34 USD, what is a better alternative? Keep in mind energy in form of electricity is a very sexy product. :-)

This solution works now very well because the PV has become quite cheap in the last three years and at the same time crude price increased.

BTW: If you check the plans published last year in respect to future electricity production in SA, you will find that they plan to install many GW PV and nuclear. Here my bet is they will shift more to PV in future. :-)

[Firn]

Originally Posted by Ulenspiegel

Sorry, here I do not see your point :-) For 66 USD investment you get for twenty years p.a. (!) 34 USD, what is a better alternative? Keep in mind energy in form of electricity is a very sexy product. :-)

This solution works now very well because the PV has become quite cheap in the last three years and at the same time crude price increased.

BTW: If you check the plans published last year in respect to future electricity production in SA, you will find that they plan to install many GW PV and nuclear. Here my bet is they will shift more to PV in future. :-)

Sorry if I did not make my point clear enough. From a micro perspective, a potenial Saudi investor has a different set of opportunity costs. In this case, if the sources I found are to believed a gallon cost less then 1$ at the local gas station. This means that a barrel of it can cost at most roughly 33$ compared to a world market price of 100$.

This should also explain why PV, despite the glaring advantages and almost perfect match for the Saudi energy problem are not yet widespread. So in a sense your argument makes sense from a macro perspective but not on a micro one, at least if there are no massive subventions for PV.

All in all it shows us once again the power of a (distorted) market, in this case setting from multiple points of view terrible incentives. I serioulsy doubt the ability of the Saudis to create sensible longterm growth Nauru is a stark reminder of an extreme dependency on fossil ressources.

[Ulenspiegel]

Originally Posted by Firn

Sorry if I did not make my point clear enough. From a micro perspective, a potenial Saudi investor has a different set of opportunity costs. In this case, if the sources I found are to believed a gallon cost less then 1$ at the local gas station. This means that a barrel of it can cost at most roughly 33$ compared to a world market price of 100$.

This should also explain why PV, despite the glaring advantages and almost perfect match for the Saudi energy problem are not yet widespread. So in a sense your argument makes sense from a macro perspective but not on a micro one, at least if there are no massive subventions for PV.

All in all it shows us once again the power of a (distorted) market, in this case setting from multiple points of view terrible incentives. I serioulsy doubt the ability of the Saudis to create sensible longterm growth Nauru is a stark reminder of an extreme dependency on fossil ressources.

Sorry, you lost me. SA has to provide electricity for her citizens, at the moment oil is burnt, that could be sold on the world market for 100 USD, in order to provide electricity that can be produced in SA for 66 USD with PV.

That the oil costs only 33 USD /barrel in SA only means for me that the citizens of SA do not pay the world market price. Or to make my point, the rulers ARE ABLE to distort the market by implementing from the marco POV stupid construct, which is only politically useful. Hence, it should be easy for them to implement a PV program, too. They have money and they control the oil, for the citizens it does not make any difference how the electricity is produced.

[Firn]

Originally Posted by Ulenspiegel

Sorry, you lost me. SA has to provide electricity for her citizens, at the moment oil is burnt, that could be sold on the world market for 100 USD, in order to provide electricity that can be produced in SA for 66 USD with PV.

That the oil costs only 33 USD /barrel in SA only means for me that the citizens of SA do not pay the world market price. Or to make my point, the rulers ARE ABLE to distort the market by implementing from the marco POV stupid construct, which is only politically useful. Hence, it should be easy for them to implement a PV program, too. They have money and they control the oil, for the citizens it does not make any difference how the electricity is produced.

Indeed, this is from the state or macro view true and should result in a different set of policies in Saudi Arabia.

My point is that a potential Saudi homeowner has the following choices.

a) If the government delivers him cheap electricity thanks to burning oil at those low, 33$ a barrel, prices he will take that glady. (And consume a great deal with great inefficiency).

b) If the government delivers him expensive electricity by pricing the oil at a current world price of 100$ he has an incentive to produce his own energy. He has two options:

- A generator powered by oil. If he gets oil that cheap on the local market he can save a great deal, let us say 50$ per year after his expenses.

- A PV. He can save around 30$. Not as much as with generator.

Yes, changes in the Energy policy and the world price have a big influence on the calculation.


What interests me in this regard is the failure of the Saudi government to set up the proper framework for market which sets up the correct incentives for the common good of the state. In fact the massive subsidies to keep the oil price so much below the level of the world market cause massive distortions and are almost textbook like examples of how you create incentives which will likely bite the Saudis into the butt.

[Fuchs]

The Iranians do the same, as do actually many major oil exporters.

The reasons are multiple, I blame two the most:
* incompetence; people even in government don't understand opportunity costs properly
* Bread and circuses; subsidizing goods of everyday consumption is a simple and popular (albeit usually economically inefficient) way of maintaining loyalty

The Saudis have a state that already achieves the latter through their version of trickle down economics (= including institutionalised corruption at higher levels and lots of official subsidies at lower levels), so to subsidize energy is an unnecessary duplicity.
Many people in such countries cannot stand the idea that oil ought to be as expensive in a oil-rich exporting country as everywhere else.
That's not unique; remember how "drill drill drill" is propagandised as if it leads to lower gas prices in the U.S.?

[Ulenspiegel]

Originally Posted by Firn

Indeed, this is from the state or macro view true and should result in a different set of policies in Saudi Arabia.

My point is that a potential Saudi homeowner has the following choices.

a) If the government delivers him cheap electricity thanks to burning oil at those low, 33$ a barrel, prices he will take that glady. (And consume a great deal with great inefficiency).

b) If the government delivers him expensive electricity by pricing the oil at a current world price of 100$ he has an incentive to produce his own energy. He has two options:

- A generator powered by oil. If he gets oil that cheap on the local market he can save a great deal, let us say 50$ per year after his expenses.

- A PV. He can save around 30$. Not as much as with generator.

Yes, changes in the Energy policy and the world price have a big influence on the calculation.


What interests me in this regard is the failure of the Saudi government to set up the proper framework for market which sets up the correct incentives for the common good of the state. In fact the massive subsidies to keep the oil price so much below the level of the world market cause massive distortions and are almost textbook like examples of how you create incentives which will likely bite the Saudis into the butt.

I see our "problem": I suggest that PV in SA is mainly installed by state owned utilities - the same companies which run most of the larger generators. At the same time an increase of fuel prices is essential to motivate a more efficient use of energy and to decrease the useage of small generator in homes. Here a promotion of PV for the homeowner could also work, if I pay subsidies anyway why not for PV? If energy becomes the modern bread in panem et circenses then please in a sustainable form, i.e. from fuel that does not deplete.

[Rick M]

Two weeks ago DECC released its Statistical Press Release for the second quarter of 2012.
It states (pg. 6):
• Total indigenous UK production of crude oil and NGLs in the second quarter of 2012 fell by 12.2 per cent when compared with the second quarter of 2011. Oil production over the last eighteen months has been impacted by maintenance and other production issues over and above the general decline in North Sea production.
• The UK was a net importer of oil and petroleum products in the second quarter of 2012 by 5.5 million tonnes. In the same period of 2011 the UK was a net importer by 3.4 million tonnes.

UK gas production fell even further.
http://www.decc.gov.uk/assets/decc/1...ergy-stats.pdf

This historical graph (1965 to date) is rather sobering:
http://mazamascience.com/OilExport/o...ONE_auto_M.pdf

A decade ago, UK supplied Canada with a full one-third of its imported oil, with Norway supplying another third.

[davidbfpo]

This article's sub-title promises much:

Politicians and environmentalists alike are obsessed with a narrow set of old technologies. It’s time for 21st-century ideas

Link:http://www.spectator.co.uk/features/...aths-to-power/

[davidbfpo]

A nice play on words, but in fact fracking is one component of this blog article on UK energy and security:http://www.thinkdefence.co.uk/2012/1...ft-of-power-2/

Back to fracking for a moment:

There are two issues to consider with shale gas, what happens if the UK can develop its own shale gas resources and what will happen if and when everyone else does.......(Later)...Whether UK shale gas can compete with cheap US LNG, Russian, Norwegian or Qatari LNG is yet to be seen but I think we should be pushing hard to find out.

Lots of links to follow, but I enjoyed the PPT on the Qatar supplied LNG terminal in Wales and the maps of pipelines.

[Ulenspiegel]

Originally Posted by davidbfpo

This article's sub-title promises much:

Link:http://www.spectator.co.uk/features/...aths-to-power/

Sorry, the author of the spectator paper is an idiot :-)

If you want to make a useful contribution you should at least get the simple facts right:

1) Germany does not build more coal power plants, some of the old ones are replaced,however, there is no net gain in coal power. More energy output comes from higher efficiency of the new plants.

2) His understanding of renewables is not up to date: Wether a wind turbine has only 5 MW is not relevant, we have enough space to install them and onshore turbines are already competitive in most European countries -only lignite is more competitive. Gas is for most European countries not the solution, wind is. As economist he should be able to check prices.

3) The last shale gas projects in Poland were a disaster, too much nitrogen, too much SH2 and an large error when calculating the reserves. To extrapolate from US to Europe is stupid.

4) The author should at least admit that there are plenty of scientific studies that contradict him, very likely he has not read them. To ignore good stuff from Fraunhofer et al. is not the way to go.

[Rick M]

On Thursday a report was issued by a team of reputable UK actuaries, along with a 3-hour public presentation:
http://www.actuaries.org.uk/events/o...tuarial-advice

Yesterday the Guardian posted this article which explains their concerns:
http://www.guardian.co.uk/sustainabl...ies?intcmp=122

I've examined the report, which is concise (26 pgs) & very readable.

[Rick M]

Almost six years ago, Danny Davis (then a Major in the US Army) wrote a concise, well-researched paper on Peak Oil ("On the Precipice," 37 pgs). Davis was one of the first military officers (anywhere) to publicly address PO.

Yesterday HuffPo ran Davis' call for prudence/realism when considering our future oil supply:
http://www.huffingtonpost.com/daniel...ment_228713126

[Rick M]

Arctic ice shrinks to its annual minimum in (early) September and usually maxes out in April.
This graph uses one colour for each month, then graphs the monthly averages by year (based on PIOMAS data). The resulting image makes it look as if we're painting ourselves into a corner/bulls-eye.

Original posting is here:
http://neven1.typepad.com/blog/2013/...loss.html#more

[bourbon]

Originally Posted by Rick M

Arctic ice shrinks to its annual minimum in (early) September and usually maxes out in April.
This graph uses one colour for each month, then graphs the monthly averages by year (based on PIOMAS data). The resulting image makes it look as if we're painting ourselves into a corner/bulls-eye.

FSB Border Guard is looking to stand up 20 posts in the arctic. All I know is that they will be the most degenerate outposts in Russia – which is saying something.

Upgrades to the Northern Fleet seem to be mechanism to (further) enrich Vladimir Vladimirovich's Peterersburg cronies more than anything else.

Rosneft signed another arctic agreement with Exxon this week.

[Firn]

Personally I think that sometimes the reports of the big corporations are quite interesting and well done. RWE had a good summary of the financial impact of the German EEF. Of course they and others tend to paint the picture the way they want...

[Rick M]

The latest item from US military researchers is a devastating critique of biofuels.
The biofuels industry has had over a month to respond/conduct damage control, but so far appears to have done nothing to refute Capt. Kiefer's data or his conclusions.

A review of this study was posted this morning:
http://www.resilience.org/stories/20...ogram-i-review

[Ulenspiegel]

Originally Posted by Rick M

The latest item from US military researchers is a devastating critique of biofuels.
The biofuels industry has had over a month to respond/conduct damage control, but so far appears to have done nothing to refute Capt. Kiefer's data or his conclusions.

A review of this study was posted this morning:
http://www.resilience.org/stories/20...ogram-i-review

The basic problem of biofuels, low energy yield, was known for many years, see for example Pro. Tad Patzeks blog "life itself".

PV produces two order of magnitude more energy per square metre than plants and does not require land that could be used for food production.

The combination of biofules with combustion engines is stupid as stupid can be, no discussion here.