Loch Ness monsters of energy storage

I came across one or two proposals over the last few weeks for mega sized pumped storage facilities in Scotland to back up intermittent renewables (such as wind), which I thought it would be worth commenting on.

Figure 1: Further energy storage will be needed to backup renewables in future, although how much storage is a matter of some debate

Figure 1: Further energy storage will be needed to backup renewables in future, although how much storage is a matter of some debate

The first proposal involves taking Loch Morar, a freshwater loch 300m deep, but one just a few hundred metres from the shores of Loch Nevis (salt water). The plan would be to build a dam 280m high across a narrow pass to the North, which would allow an upper reservoir to be created 300m high. Water could then be pumped in either direction to create 600m of head and provide up to 1800 GWh’s of energy storage. Further options to build another dam to the south and pump water in and out of Loch Nevis would also exist.

Figure 2: The Loch Morar proposal [Credit: Julian-Hunt, 2013 http://theenergycollective.com/julian-hunt/199896/energy-storage-solution-uk-large-scale-pumped-storage-site ]

Figure 2: The Loch Morar proposal [Souce: Julian-Hunt, 2013]

By comparison, the UK’s current storage capacity is about 30 GWh’s. The UK’s dams produce a further 5,700 GWh’s annually, so if we assume say 45 days of storage on average that implies a further 700 GWh’s of unreplenishible storage.

And if this proposal seems a little oversized, there’s what is appropriately billed as “the loch Ness monster of energy storage”. This proposal is to build a dam 300m high to impound Strath Dearn, a glen in the Monadhliath mountains in the North Highlands, about 400m above sea level. Water would then be pumped along a canal from the Firth of Forth (given the obvious complications with pumping so much seawater such a long distance, I’d argue it would be easier to pump water up from nearby Loch Ness instead).

Figure 3: The Monster of Monadhlaith Mountain [Source: Scottish Scientist, 2014 https://scottishscientist.wordpress.com/2015/04/15/worlds-biggest-ever-pumped-storage-hydro-scheme-for-scotland/ ]

Figure 3: The Monster of Monadhlaith Mountain [Source: Scottish Scientist, 2014]

Either way the resulting reservoir would be capable of holding 4.4 billion m3 of water at a height of as much as 650m above sea level, representing a pumped storage capacity of 6,800 GWh’s. Enough to not only back up the whole of the UK’s renewables, but most of Europe’s!

Certainly there are some obvious criticisms of these projects. For example, at peak output the Strath Dearn facility would be capable of delivering +255 GW’s to the grid (the UK currently averages about 30 GW’s with a peak of perhaps 50 GW’s in winter), which raises the small issue of how to transport that much power South or North (when sending it for storage). You’d be covering most of the Grampian’s in powerlines!

Figure 4: Sea water pumped storage is not a new idea, this facility in Japan has been operating since 1999 [Agency of Natural Resources and Energy Japan]

Figure 4: Sea water pumped storage is not a new idea, this facility in Japan has been operating since 1999 [Source: Agency of Natural Resources and Energy Japan]

There’s also the matter of pumping large amounts of sea water inland and the environmental effects of any leaks and spills. I would note that Sea water pumped storage is not a new idea, the Japanese have just such a plant operating on Okinawa, one they hoped eventually to become a string of such facilities to help their nuclear industry expand (nuclear reactors have essentially the oppose problem of renewables, they want to be on all the time, but grid demand fluctuates, meaning they need something to provide peaking power or some form of energy storage). While only 30 MW’s this facility has successfully operated for several years and many of the technical issues relating to leaks of sea water have been addressed.

I would also chuck in the need for another reservoir at the base of the dam, as a sudden swap from pump to power out (or visa versa) could cause problems, hence why relying on water pumped in from Loch Ness rather than sea water would probably be a better idea.

Certainly these proposals do get around one of the major myths you’ll hear put out about renewables – that we can’t store the energy and thus renewables can’t be relied upon. Of course this was always a myth put forward by those who don’t understand how renewables worked, nor indeed that all energy sources need some level of “backup”, nor that a number of renewable sources (Tidal, biomas, hydro, geothermal, solar CSP) aren’t intermittent and others such as solar and wind power tend to be complementary (i.e. if its not windy, its usually sunny, if its cloudy, its usually blowing a gale). In short, such issues are simply not going to be a problem for a future low carbon grid, assuming it has a good mix of different renewables, suitably spread out across the continent with good interconnection and use of “smart grid” technology.

Indeed my main criticism is just that these proposals are too darn big, we’ll simply never need that much storage capacity. And it won’t seem sensible to me to put all our energy eggs in one or two baskets. I suspect a series of storage facilities spread out across the UK and the rest of Europe would be a better idea. Indeed there are a number of proposals floating around for new energy storage facilities across Europe (although none on this scale admittedly).

For example a proposed 6.8 GWh sea water pumped storage facility on Glinsk mountain in Mayo, Ireland. There’s also proposals to identify a number of coastal valleys around the Irish coast and flood them in a similar manner to the above Loch Morar scheme, gaining 100-200 GWh’s of storage at a time. And this report from the European commission indicates how the EU’s PHS capacity could be increased significantly. In Turkey alone (hardly a country known for its heavy rain!) 3,800 GWh’s could be added.

Figure 5: Two potential pumped storage facilities with a capacity in excess of 1.8 GW's are evident in this picture, with another few potential sites the other side of the valley []

Figure 5: Two potential pumped storage facilities with a capacity in excess of 1.8 GW’s are evident in this picture, with another few potential sites the other side of the valley

While it is often said that there are no suitable sites for new hydroelectric plants in the highlands, this is not true of pumped storage or micro-hydro. Take a look at any map of Scotland and you’ll quickly identify several obvious sites in a matter of minutes. And some of these sites are being seriously investigated. SSE is for example pursuing a planned facility in Coire Glas (just over the hill from an existing pumped storage facility at Ben Cruachan), with consent for the facility granted in 2013. In Wales a proposed facility Glyn Rhonwy is also being taken forward.

So my suspicion is that lots of little facilities tucked away here and there, along with the conversion of existing hydro dams to pumped storage (such as Ben Lawers and Loch Sloy as both have quite a large head of water), would probably be a better idea than one mega storage facility. This study by Strathclydes ESRU suggests that 514 GWh’s could be added by converting existing high head reservoirs to pumped storage.

But how much pumped storage would be needed? Well keep in mind that electricity is only a small fraction of overall energy consumption (about 20%). A future energy grid will be devoting quite a sizeable proportion of its output towards things like heating (36%) and transport fuels (at least 30%). The heat load in particular will likely be obtained from a combination of boilers and CHP plants of various sizes, initially running on a combination of biofuels and natural gas (with presumably CCS) and later on hydrogen. This means that there will be a sizeable capacity of generating plant still available to back up wind or solar, at least over the winter months.

Storage of hydrogen underground is not a new idea, a facility in the US has stored large quantities of it underground in a salt cavern since the 80’s without any particular difficulties. Technical reviews by Bossell (2006, Does a Hydrogen Economy Make Sense?), Eric Wolf (2015, Large-Scale Hydrogen Energy Storage) and Camparani et al (2009, Journal of Power Sources Vol. 186, focuses mainly on cars, but it considers the full life cycle of H2 production, transport and storage) suggest hydrogen could be sourced via renewables, stored and transported to end users with an overall efficiency of 55-70%. Okay, not as good as pumped storage (64-74% once we account for an average UK grid efficiency of 92%), but when you consider that H2 would directly integrate with much of the existing gas network, it makes it a better choice of storage for winter heating fuel. Either way, this cuts down the proportion of winter backup needed by a considerable margin.

Figure 6: Underground Storage of Hydrogen is one future energy option [KBB]

Figure 6: Underground Storage of Hydrogen is one future energy option [Credit: KBB]

Let’s suppose that with the upgrading of existing hydro-electric facilities and the addition of some extra capacity, including one or two new reservoirs, give us 1.5 times the level of that 514 GWh’s figure mentioned before, that’s 514 x 1.5 = 771 GWh’s, plus existing capacity of 30 GWh’s gives about 800 GWh’s without breaking too much sweat.

Tidal lagoons (such as the scheme proposed in Wales) can also provide energy storage, Mc Kay (not one of my favourite people, he has a habit of getting his sums wrong), proposes arrays of these around the UK coast which could provide 20 GWh’s of storage a go, along with 400-650 MW of installed capacity. So 10 such facilities would provide 200 GWh’s of storage.

Figure 7: Energy storage technologies compared [Source: Sandia National Laboratories, 2013]

Figure 7: Energy storage technologies compared [Source: Sandia National Laboratories, 2013]

Its safe to assume that more cars in the future will be electric, keeping in mind that even hybrid cars will have a battery with at least 10-20 kWh’s each of capacity and +40 kWh’s each for fully electric cars. This means that a modest fleet of say 6 million such vehicles (out of an existing UK fleet of 29 million cars), assuming we only use the first 10-20 kWh’s of the battery capacity, would be able to supply between 60 – 120 GWh’s of storage.

Figure 8: Energy storage options by density [Credit: IIG Freiburg, 2008 via Siemens http://www.siemens.com/innovation/apps/pof_microsite/_pof-fall-2009/_html_en/trapping-the-wind-2.html ]

Figure 8: Energy storage options by density [Source: IIG Freiburg, 2008 via Siemens]

There are several new energy storage technologies in development. Large battery arrays to back up renewables is one option. Elon Musk, amongst others, is seriously investigating these as a viable energy option, although it is early days. Another is the idea of CAES (compressed air energy storage) or the recent innovation of LAES (liquid air energy storage). LAES is an interesting idea, because it can be easily added to existing thermal power infrastructure, something as noted we’ll have no shortage of, without too much additional cost. Its storage energy density of 100-200 kWh’s per m3 makes for pretty compact storage.

Figure 9: LAES is a new yet “low tech” energy storage option [Credit: The Engineer.co.uk, 2011]

Figure 9: LAES is a new yet “low tech” energy storage option [Credit: The Engineer.co.uk, 2011]

Of course these are all emerging technologies, some won’t work out and its hard to tell which will succeed (another days article). But let’s suppose we can get the same output from them as we can from the cars. So all together that gives us at least 1,000 – 1,200 GWh’s worth of storage across the UK, without trying very hard. We also have the capacity of existing hydroelectric reservoirs of approximately 200 GWh’s (once we account for those reservoirs converted to PHS), although remember this is a one shot source than will take weeks to replenish. So all in we’ve got up to 1,400 GWh’s of storage to play with.

Would this be enough? Another study by the ESRU  suggests that even with a grid drawing on 60% of its power from variable renewables, 550 GWh’s would provide adequate backup for at least seven days. This would seem to imply that the level of storage I’m proposing would provide at least twice the amount actually needed. Although I would note that this study probably doesn’t account for GW’s needed (i.e. sudden draws on the grid at inconvenient times) or extended periods of low renewable output.

As a result some would say no, the UK’s average daily draw of electricity is about 900 GWh’s, so this would seem to imply the above would provide just a day and a half worth of storage (a bit more than half a day if we believe Strathclyde Uni!). However, its worth remembering that this implies an “all stop” scenario with no power being generated and everything turned on. i.e. No sunshine, no wind, no waves, no tides (which is going to be difficult without the moon disappearing!), all the thermal plants down, whatever is left of the UK’s nuclear fleet out to lunch (then again, they have been knocked offline by storms or heatwaves). And of course we’re looking at the UK in isolation. One assumes a future grid will be connected, to the continent, Ireland and possibly even to Norway (and its dams). So we’re imagining a scenario where all of these sources are also unavailable. And we’re ignoring existing policies which calls for “load shedding”, whereby major industrial users of power de-rate or go offline to help ease the pressure on the grid at certain times. Also there are other means of energy storage in the UK we’re not accounting for above. For example, a report by the ERP mentions the nation’s hot water tanks hold at least 65 GWh’s.

Figure 9: Given that the bulk of energy demand is for heat, largely in homes, perhaps that's the source of energy we should be storing? [Source: Underground Energy Storage, 2009 http://www.underground-energy.com/BTES-Winter_Condition.jpg]

Figure 9: Given that the bulk of energy demand is for heat, largely in homes, perhaps that’s the source of energy we should be storing? [Source: Underground Energy Storage, 2009]

The idea that all of these sources could all go down at the same time as all of the loads are on is a pretty unlikely scenario and it’s highly improbable to last any more than 24 hrs. Keep in mind that if the existing grid faced the sort of scenario listed above, we’d be in trouble pretty quickly. Much of the UK’s electricity and heat energy is drawn from the gas reserves of the North Sea. An interruption to pipelines coming off the North sea, given that the UK has very little gas stored onshore, would leave the country with just a few days supply at winter withdrawal rates. If France developed some issue with its nuclear reactors (a safety scare of some sort) and was forced to shut many of them down, they would have problems straight away. As would parts of southern England who depend on French nuclear for electricity.

In short, we’re placing design requirements on a future grid that exceed those of our existing grid. And indeed one could argue the existing UK grid is itself overdesigned. As someone from the national grid once put it to me, how much it would cost to adequately back up the grid for intermittent renewables to become the majority source of electricity is like asking how long is a piece of string. It boils down to the question, how reliable do you want the grid to be? 100% reliable all of the time? or 95% reliable most of the time, but for half the price?

Keep in mind that in other parts of the world brown outs or blackouts are far more common. In the US for example, while its not often the power goes off, it does happen from time to time (heatwaves, forest fires, ice storms, tornadoes, price gouging utilities, etc.). Sufficiently often that anyone who needs power 24/7 generally has a standby generator on-site. Now the Americans could easily add enough spare capacity into their grid, put the cables underground, etc. and have a grid that works all of the time. But would people be willing to pay for that? Probably not.

Consequently about the only situation where I could see such mega storage systems being built is part of some sort of strategic energy reserve (at which point any sensible analysis based on economics and actual requirements goes out the window as we’re talking in terms of national security). Or if there was a failure to deliver on hydrogen as a substitute for natural gas and instead rely on electricity. This would then require a large reserve of electricity to meet winter heating needs. In this scenario the withdrawal rates would of course be much lower, probably in the order of ten’s of GW’s (i.e. capacity of the Three Gorges Dam), well within the limits of a few HVDC lines to support.

Either way, what these proposals do show is that necessity is likely to be the mother of invention. Even if we did need the sort of vast storage levels the naysayers suggest (and we won’t) it would still be technically possible to provide such levels of storage with existing technology, nevermind the potential storage capacity provided by future advances in technology.

That said, any level of storage, regardless of the technology used, is going to take time to develop plan and build. The major problem with that is, if you listen to the IPCC, time isn’t exactly an asset we’re in an abundant supply of.

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Energy Report card – An update

About a year ago I wrote an article about the current state of play as to the performance of renewables. How they were doing in real terms, compared to what levels of growth are needed to offset dangerous climate change and peak oil. Well as we’ve just finished teaching for the year and marking season starts again for lecturers I thought it would be useful to repeat the exercise.

Figure 1: Renewables now accounts for 22% of global electricity use and 19% of TFC [Source: IEA, 2014]

Figure 1: Renewables now accounts for 22% of global electricity use and 19% of TFC [Source: IEA, 2014]

Old Renewables v’s New Renewables

I’ve used the same methodology as last time. I’ve included the figures for both GW’s installed, separating electrical, thermal and fuels out (where possible) and then including the resulting TWh’s that such growth in capacity would yield. If I managed to get a reliable TWh, PJ or mtoe figure then its included (centre justified to make it clear that its an actual not an estimated figure). Any figure in the TWh rows that is in italics and right justified represents an estimate based on known capacity factors. The bulk of the data presented comes from the most recent, or past, REN 21 reports. Where information is lacking, I’ve used figures provided by the IEA reports.

Table 1: Renewable energy performance since 2008

Table 1: Renewable energy performance since 2008 [Sources: IEA KWES (2009-2014) & REN (2010-2014)] Note the issues relating to Geothermal are discussed within the text

I’ve included several calculations in table 1. The amount of growth in the last reported year (2013), the five year average growth and the percentage growth for each type of renewable. Also I’ve included what amount of last years growth relates to each renewable. In all cases I’ve focused on the TWh/yr figure as this is a fairer way of comparing different renewable types to one another, or indeed different sources of energy. Finally we come up with the two figures for the total overall growth in TWh/yr capacity added, both in 2013 year and the five year average.

Look at the figures, in particular comparing the five year average to the performance last year, several trends are evident. Most notably there has been a distinct slow down in hydroelectricity. Only 10 GW’s of hydro was added last year against a five year average of 17 GW’s. While Hydro has previously been one of the largest sources of renewables growth, it was only 11% of 2013 growth. In 2013 it was outperformed by wind power, solar PV and solar thermal. Similarly biomass growth has been strong in some areas, but sluggish in others.

This of course suggests a trend, whereby the older renewables sources are starting to top out, but the gap is being filled by strong growth in the newer renewables. This incidentally solves a question I’ve heard asked for sometime. The logic was that as hydroelectricity was “all used up” once it stopped growing, renewables output would cool. However this isn’t what’s happened. In fact 2013 was a better than average year with just under 500 TWh/yr added.

Figure 2: While Hydro appears to be topping out, who would have known that we could get 1,000 GW's from a few rivers! [Source: BBC, 2012]

Figure 2: While Hydro appears to be topping out, who would have known that we could get 1,000 GW’s from a few rivers! [Source: BBC, 2012]

Furthermore, this “all used up” argument regarding hydroelectricity. Its something I’ve been hearing for over ten years, yet the hydro figure still keeps on creeping up. At least as far as large scale hydro I reckon we’re starting to scrape the bottom of the barrel, with 1,000 GW’s of install capacity. However there is still quite a lot of potential when it comes to pumped storage and micro-hydro schemes. So don’t be surprised if this number continues to creep up. Although its less of a concern if it doesn’t as the output from the newer renewables is eliminating its importance.

Of the new renewables, solar is growing particularly strongly. PV grew by 39%, CSP by 36% and solar thermal by a little shy of 28%. Much of this growth, in particular solar thermal, occurred in developing nations. So again another important development is that developing countries are avoiding some of the lockin that has plagued efforts to get the West off its fossil fuel addiction. The growth in solar thermal is quite important in this regard, as the primary means of energy consumption in most homes is heating. And on a TWh basis solar thermal is now becoming the most important of the solar energy sources.

Figure 3: Are Solar and wind power competitors or do they compliment one another? [Source: Cleantechnica, 2013 http://cleantechnica.com/2013/10/01/cost-solar-getting-competitive-wind/ ]

Figure 3: Are Solar and wind power competitors or do they compliment one another? [Source: Cleantechnica, 2013]

Wind power grew by 35 GW’s, slightly down on 2012, which was closer to 45 GW’s. Also the dominance of wind is being threatened by the strong growth in solar, in particular PV. As PV matures it could well be the main source of future growth in renewables. Even so wind power still represented the largest source of growth, some 17.7% of all growth in renewables. So any thought of wind energy slowing down are probably premature.

A hot topic

You may notice that my figures for geothermal energy are a little muddled. This is because the REN 21 report seems to be accepting the issues regarding Heat pumps. That is to say that unless you can guarantee a COP of greater than 3 (ideally in excess of 4) from these, then operating them on a fossil fuel heavy grid makes it somewhat dubious to call them a form of renewable energy (the latest report even has a side bar explaining this), something I’ve discussed myself in a prior post. So for this reason I’ve separated out the direct geothermal heat use and heat pumps. Due to this statistical change we can’t get a reliable figure for the GW’s installed in 2013, but we can easily estimate the TWh‘s.

Figure 4: Ground, air and more recently water source heat pumps (such as this scheme in Norway) have their uses, but its important to differentiate them from Geothermal energy [BBC, 2015 http://www.bbc.co.uk/news/business-31506073 http://www.scottishenergynews.com/wp-content/uploads/2015/04/Norways-Drammen-Water-District-Heat-Pump-Building1.jpg ]

Figure 4: Ground, air and more recently water source heat pumps (such as this scheme in Norway) have their uses, but its important to differentiate them from Geothermal energy [Source: BBC, 2015]

Doing better, but must try harder

Of course, before we start pulling out the victory cigars, I recall estimating that in order to phase out fossil fuels at a reasonable rate we’d need to add close to 1,000 – 1,500 TWh/yr. Exactly how much depends on the amount of growth in energy demand year on year and the fact that only about 18% of TFC (Total Final energy Consumption) is electricity, the rest being heat, transportation fuels and feedstock to industry. Cycle efficiencies and the need to bunker fuel will require further capacity added to counter the inherent inefficiencies in such processes. Needless to say, all the PV panels and wind farms in the world aren’t going to do much good without the right infrastructure to plug into, as I discussed in a more recent post.

Figure 5: Renewables as a share of overall total final energy consumption, 2012 [REN21, 2014 report]

Figure 5: Renewables as a share of overall total final energy consumption, 2012 [Source: REN21, 2014]

So the message would seem to be that while renewables are doing well and the industry is maturing, we’re still only adding about half to a third the capacity needed. So its still a case of doing well, but could do better. This is why I’m particularly worried by suggestions that subsidies to renewables will be cut, as I don’t think we’re at the stage yet where that can be done. Certainly not when fossil fuel prices are low and we have the defacto subsidy of them in the form of no carbon tax.

Part of the solution or part of the problem?

Of course the response of some when faced with the fact that renewables aren’t performing strongly enough, is to say that this is why we need nuclear power. However that’s part of the issue here. Nuclear is increasingly becoming less a part of the solution and more part of the problem.

Table 2: Nuclear power Indicators 2008 to 2014

Table 2: Nuclear power Indicators 2008 to 2014

The data in table 2 come mostly from the IEA KWES reports, But as far as the 2013 and 2014 GW‘s figures, as well as the 2014 TWh figure (2013 TWh‘s coming from the IEA), I’ve used the World Nuclear Industry Status Report. Part of the problem in recent years has been its become increasingly difficult to get reliable data about nuclear energy, as this article discusses. For example, the IAEA still records the presence of the Japanese reactors shut down since Fukushima in terms of total installed capacity, even though most haven’t generated any electricity for several years now. In the fantasy limbo world of the IAEA Japan’s reactors are still all up and running! For this reason I’ve included a line above where I’ve added back in the 274 TWh‘s we’d expect to get from Japan’s nuclear reactors (for the benefit of those who’ve drunk their share of the Nuclear kool aid!).

Figure 6: Nuclear energy, total TWh's and share of global electricity production [Source: WNISR, 2014]

Figure 6: Nuclear energy, total TWh’s and share of global electricity production [Source: WNISR, 2014]

Even so, which ever way you look at it, nuclear is now on something of a downward trend, losing an average of 3% of installed GW’s per year, with an overall drop of 16% in TWh‘s since 2010, which might well represent the point of “peak nuclear”. Overall nuclear is producing only 28% of the TFC energy we’re harvesting from renewables (8,474 TWh‘s from renewables v’s 2,359 TWh‘s from nuclear) and this is a gap that’s very likely to grow rather than shrink.

I would expect this current downward trend to reverse itself in the next year or two, as I’m aware that there are many large scale nuclear building projects that are due to be completed in the next few years, notably in China and India. So expect the IAEA to make a big deal about this in a few years time, conveniently ignoring the current downward trend. However it will probably be only a temporary reprieve as any growth in developing nations is likely to be outweighted by nuclear shutdowns in the West.

Are you suggesting that reactors migrate?

In the UK for example by 2026, the earliest possible date at which Hinkley C could start operating (and even that’s looking increasingly unlikely), 19 of the UK’s 20 reactors will have shut down and suffice to say 2 reactors to replace 19 isn’t favourable odds. In the US just 5 reactors are under active construction against a total of 100 reactors of an average age of 30 years (28.5 years average age worldwide) that need to be replaced. Assuming a maximum 45-50 year operating live (there are no reactors greater than 46 years of age still operating) this means that unless there is a dramatic change in US national energy policy in the next decade or so then its very likely that nuclear power use will undergo a dramatic decline in America.

Figure 7: Average of world nuclear reactors [Source: WNISR, 2014]

Figure 7: Average of world nuclear reactors [Source: WNISR, 2014]

And even in France there is bad news. As WNISR 2014 points out all French reactors are only licensed to operate for 30 years. In theory if they don’t get a life extension (and its likely a number of those built in the same era as TMI and Fukushima won’t) then its possible that some (perhaps a large number of them) will shut down over the next couple of years. Currently France has but 1 reactor under construction…very slow construction!

Meanwhile the Finish Olkiluoto 3 project has gone from the bad to the farcical. The current estimate is that Olkiluoto 3 will commence operations in 2018-2020, nine years late and at an estimated cost of 8.5 Billion euro’s (original budget was 2.7 billion euro’s!). So frustrated are the Finn’s that they’ve basically kicked out all the Western contractors from bidding for any other nuclear projects. They seem to plan on giving the contract to the Russians (you know you’re desperate when you rely on Russians to build anything with the “nuclear” word in it!).

Figure 8: A sobering vision of the future for nuclear, a long slow slide to ruin [Source: WNISR, 2014]

Figure 8: A sobering vision of the future for nuclear, a long slow slide to ruin [Source: WNISR, 2014]

So in essence what’s happening is that we’re seeing the world’s nuclear capacity migrate from Western countries to developing nations. However its very probable that we’ll still end up with an overall decline and a generally downward trend in global nuclear energy output. Keep in mind that to reverse the current trend would require adding 6-15 GW/yr of nuclear just to stand still. Any sort of growth, such as the IAEA’s target of 6.65 GW/yr. I pointed to in a prior article, would thus require a build rate of closer to 12-20 GW/yr, which is well above current built rates of closer to 4 GW/yr (or roughly 27 TWh/yr, about 5% of the construction rate of renewables!).

And keep in mind that the historical maximum build rate for nuclear of 30 GW/yr back in the 1970’s (assuming a capacity factor of 90%) amounts to about 225 TWh/yr, roughly half the rate at which renewables are currently being installed. The fact is that no matter what way’s you twist the figures there is no way nuclear is going to make any kind of a dent in the sort of energy needs we’ll need to add over the coming decades. Even the most demented tinfoil hat wearing LFTR cheerleader has to accept this fact.

In short the report card for nuclear, if it were a student of mine, would be instructions to come and talk to me as we need to have a long hard chat about whether the student wants to remain on the course or not. As current performance, a lack of engagement nor can-do attitude, and a failure to set realistic targets (and then meet them) is likely to lead to them being thrown out of uni.

And there will be great rejoicing?

However the death of the nuclear renaissance creates a problem for renewables. For it would suggest I should take the 494.6 TWh/yr figure above and deduct 99.3 TWh/yr away from it. Quite a lot of the renewables we’ve been installing recently, particularly in the west, has been replacing nuclear capacity and not fossil fuel capacity. Or indeed increased electricity demand from growing economies. So in reality low carbon energy installation needs to increase by a factor of between three and five.

I’m not trying to construct a pro-nuclear or an anti-nuclear argument by pointing this out. I’m merely pointing out that we are where we are. And as a result, replacing nuclear at the same time as phasing out fossil fuels does make that slope of the mountain that little bit steeper.

This is of course why I’ve long banged the drum about energy conservation. I’m not suggesting everyone needs to give up their car or become a vegan (although it certainly wouldn’t hurt if people did!) or run off and join a hippy commune. But clearly if there’s going to be gap between what can be added by renewables and the amounts of energy the world demands, then this means we have to cut consumption to compensate. Certainly the idea that we should effectively subsidise fossil fuel consumption or wasteful habits is something that needs to change.

Posted in Biomass, CHP, clean energy, climate change, energy, Fukushima, nuclear, peak oil, renewables, sustainability | Tagged , , , , , , , , , , , , , , , | Leave a comment

Reserves v’s Resources

In amongst the election news there’s been a lot of news on the oil and gas front that’s had my spider senses tingling….as in I sense the distinct consistency of grade A Bull$hit!

Consider the story of what was described as the world’s largest oil field” under Gatwick in South Eastern England, with talk of “up to 100 billion barrels of oil”. This comes on the back of media reports over the last few years highlighting the scale of the UK’s shale gas and shale oil resources. Consider for example this typically Cornocopian piece from a libertarian.

Shale-map1

Figure 1: The UK’s shale Gas reserves have been the source of much recent speculation [Credit: BGS, 2011]

A clue to the truth behind all this can be gained by actually bothering to read the report from the BGS that sparked all of this speculation. And in particular skipping to the bottom and checking out the references. You will immediately note how quite a few of them are not new, some go back many years to as early as the 1960’s. This is not really surprising because its long been known by geologists that this formation of shale existed for quite some time. What the BGS has been attempting to clarify recently is how big this hunk of rock is and what level of gas and oil is concentrated within in it, i.e. how big are the resources of gas and oil within the formation.

There is a world of a difference between saying there’s 100 billion in resources (i.e. gas/oil that is we know is located in a certain area, but may not be economic or technically possible to extract) under our feet and 100 billion in reserves (oil and gas which we know can be accessed and drilled economically).

Incidentally, anyone who wants to know more about the process of oil discovery and drilling, I’d advise taking a look at this webseries of video’s  by an Oil and Gas professor (Dr Lau), who does a good overview of the topic.

Figure 2: Global Energy Reserves, Production and Resources [Credit: BGR, 2011]

Figure 2: Global Energy Reserves, Production and Resources [Credit: BGR, 2011]

A quick look at figure 2 above will help illustrate the point I’m making. As you can see only about 7% of the world’s fossil fuel resources are classified as reserves. The rest is certainly there, it exists, but the problem is that much if it isn’t necessarily in a form that’s easily extractable. It could be too deep to drill into, it could be under a mile of ocean, the rock between us and it may present problems, there could be a large underground aquifer between us and the oil (a significant problem for much of the UK’s shale resources in fact), the oil/gas might be in lots of little fields that are too far apart to be economic to drill, or it might be in waters claimed by another country. Or more often than not, a combination of factors may apply.

And a big part of the problem here is that its often far from clear, when a company starts drilling, what the situation is. Many people have this image of an oil well as being like a tank of oil under the ground. Actually a more accurate view is that of a lair of sand, soil, gravel or “source rock” trapped between two impermeable barriers. So less a tank and more a sponge….but a sponge buried under several miles of earth and rock! While the oil immediately close to our drill might well flow up naturally under pressure, or it can be pumped out, stuff further way is harder to access. We have to drill more holes…at a couple of million a pop. Or even start pumping stuff down there to force the oil out. Fracking may be called for to stimulate flow.

Figure 3: Oil and Gas reserve types

Figure 3: Oil and Gas reserve types

At some point, and we won’t necessarily know when, we’ll no longer be getting enough oil or gas out of our well to make it economically sensible to keep production going. So the well is capped. And keep in mind the industry average for oil well recovery ratios (what comes out v’s what stay’s in the ground) is about 40%, with a range of about 10-55% for conventional production. That is to say that on average 60% of the oil in a typical field is left in the ground. And recovery ratio’s tend to be poorer in new oil fields (particularly with unconventional oil and gas), largely because the drillers are still feeling they’re way around the underground elephant.

So if for example in this Gatwick field we were to identify a reservoir of oil with say 1 million barrels in place and let’s assume we can recover that for a cost of $10 million, would it be worth our while to drill? The media or the cornucopian’s types will probably say, well of course, but let’s think about that.

At current oil prices (let’s assume $60/bbl) and assuming average rates of recovery (so 400,000 bbl actually recovered), we’ll make $24 million, which doesn’t sound bad. But what if we end up only getting 10% out? Or because of unexpected complications (e.g. a load of FoE protesters occupies the rig for several months, we hit several gas pockets, we end up drilling a dry hole and need to start again, etc.) our costs jump to £30 million. Or perhaps several of these things happen, what then? Well, in this case we’re loosing our shirts is what happens, even if the oil price goes up to $120!

And this is the reason why a lot of oil finds worldwide will turn out to be minnow’s that the oil majors simply chuck back in the sea and ignore, hence the massive difference between global reserves and resources.

To draw an analogy, if we were to assume you could book all resources and treat them as reserves, then nobody by the sea, such as a ship wreck survivor, could ever die of thirst, as after all he’s surrounded by water. However if we consider the amount of trouble its going to be to separate out the water from its salt content, we realise he’s going to be struggling to extract enough to survive. And only then if he can build some sort of solar still. Listen to the cornucopian’s and they’ll have you believe he’ll have a swimming pool with a jacuzzi up and running by his first week! By contrast, someone by a small mountain pond, is in a substantially better position. While his water resource is smaller, its in an easily accessible form. So long as he doesn’t over-produce and drain the pond dry, he’s always going to have at least some water available.

Figure 4: Onshore oil is nothing new in the UK [Credit:

Figure 4: Onshore oil is nothing new in the UK [Credit: Stainton Oil Pumping Station – geograph.org.uk by Kate Jewell]

Hence why talk in the UK  comparing the Gatwick find to Ghawar field in Saudi Arabia is laughable. Is it being seriously suggested that the UK holds more oil than the rest of Europe (including Russia and central Asia) combined? Ghawar field, represents a proven reserve of oil that has been producing for 50 years, while only relatively small quantities of oil have been produced in Southern England. Again to give you a comparison, Ghawar’s peak production is in the order of 5 million barrels a day (out of a Saudi total close to 10 million bbl/day), oil fields in Southern England output about 20,000 bbl/day.

Similarly any suggestion that the US holds “100 years of shale gas” is simply not accurate. This analysis assumes that 100% of Shale resources could be recovered (they can’t!), with a recovery factor of 100% (shale formations tend to have recovery factors well below the 40% mention earlier). A more reasoned analysis suggests 11 to 21 years of supply. The EIA estimates that Shale Gas has increased US resources by 27% and worldwide by 32%. A lot of gas yes, but not quite the massive game changer that is often suggested.

This brings us to the final point in figure 2, production v’s reserves. Again you will notice that annually only about 1.2% of world energy reserves are produced per year, or if we focus on oil alone, about 8% comes out per year. The fact is we can’t simply extract oil or gas at any arbitrary rate of our choosing. A higher production rate often means more drilling, more pumps, more costs and again beyond a certain tipping point, its not going to be economic nor technically feasible to up production. Too high a rate of production also risks causing technical problems, which will in the long term limit the amount of oil we ultimately extract from our reservoir. So large reserves, nevermind large resources don’t automatically mean a high rate of production.

And of the world’s oil resources (conventional and unconventional) annual oil production is but 0.8% of these resources. So you understand how laughable stupid the ravings of some cornocupians, like our libertarian fantasist earlier, sound when they imagine being able to drain the UK’s shale resources away (with a recovery ratio of 100%!) in just 50 years! To draw another analogy if we we’re to send a load of cornocupians to the sides of a large lake and get them to extract water using just spoons and sponges, while I took a small pond and a foot pump, who do you think would achieve a higher rate of production?

So you may enquire given everything I’ve said why are the companies behind these finds spreading such falsehoods. Well for the very same reason why the oil and gas companies are laying off staff. With the recent drops in oil price, nobody wants to invest in finding more oil, which is really bad news if your head of a oil exploration firm. Of course the best way to attract some suckers investors to fill the company coffers is some good oil fashioned snake oil salesmanship, which the media have been more than happy to promote free of charge. Keep in mind that one of the key promoters of this story also just happens to be a city firm who specialises in oil and gas investment.

Similarly the shale gas promoters have been selling the myth that shale is some new magically energy source developed by professor Dumbledore at Hogwarts. In truth, the first fracking of oil wells dates back to 1949. Certainly the fracking technology used today is very different, the scale is larger, the depth and pressures are different. But the basic idea that we could use it to extract the oil and gas from the shale resources we’ve long known existed is not a new idea.

Anyone who doubts me, go to your universities library some evening and go through the oil and gas journals of a few decades back (say 60’s to 80’s, whatever’s on microfilm was my rationale) and you will see the odd paper or journal pop up relating to “hydraulic fracturing”. I found several going all the way back to the 1960’s….including one crazy one which thought of using fracking to dispose of nuclear waste! (they went a bit nuts in the 60’s, all those drugs!).

Figure 5: Unconventional Fossil fuels have a much heavier carbon footprint [Credit: Pershing & Kelly, University of Utah (2011)]

Figure 5: Unconventional Fossil fuels have a much heavier carbon footprint [Credit: Pershing & Kelly, University of Utah (2011)]

Again, the oil and gas industry has been attempting to suggest otherwise, as they have a very specific agenda. Which is basically that the existing reserves of oil they hold are rapidly depleting. There reserves are also uncompetitive compared to those held by Middle East producers. And the “let’s steal the Arab’s oil” gambit appears to have failed rather dramatically. So plan B is to con the rest of us into paying over the odds for domestic oil and gas, while ignoring the urgent matter of climate change and the fact that unconventional oil and gas production often comes with a much higher rate of pollution and a higher carbon footprint.

So given these factors, yes you can go with the dodgy “cowboy” fracker, whose offering a “too good too be true” deal. Or do you go with the science, which says we need to engage in a long term strategy to get off oil. Nothing spectacular, but a long term commitment towards energy conservation, renewables and generally living within our means.

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Longannet – The good news and the bad

Figure 1: Scottish wind energy has been growing steadily in recent years and is not the country's largest source of electricity.....

Figure 1: Scottish wind energy has been growing steadily in recent years and is not the country’s largest source of electricity…..

One of the major news stories in Scottish energy policy in recent weeks was the announcement that the 2.4 GW coal fired power station at Longannet would be shutdown next year. Longannet is Scotland’s largest thermal power station and thus largest source of carbon emissions, so on the one hand this is good news. It may be stating the obvious, but if we want to cut carbon emissions that means shutting down fossil fuel plants, particularly those still running on coal. And obviously it is another indicator of the growing strength of renewables in Scotland, with 49.5% of Scottish electricity now coming from renewables. However, as I will discuss it also reveals a number of worrying factors and a lack of joined up thinking.

Figure 2: So do we really need these?

Figure 2: …..So do we really need these?

Obviously one of the issues with renewables such as wind and solar is that they are variable and aren’t necessarily on all the time. Admittedly opponents of renewables can use this as something of a red herring. Largely because they seem to assume that wind and solar power advocates are some sort of sun worshipping hippies, praying before stone circles in the hope of good winds and light cloud. They seem to be unfamiliar with this thing called “weather forecasts” which can tell you days (if not weeks) in advance whether or not it will be windy or sunny, allowing measures to be taken to ensure there’s enough power on the grid.

Take the recent solar eclipse in Scotland which led to much silliness about “how will renewables like solar cope?”…hmmm perhaps because we can predict an eclipse like a couple of decades (if not centuries!) in advance? The only people for whom this is actually an issue are those who don’t trust this thing called “science”, although admittedly this is part of the problem.

Figure 3: Small scale wind to hydrogen projects are being developed in Scotland, with plans afoot to power ferries using hydrogen http://m.tourism-review.com/travel-tourism-magazine-carbon-neutral-plans-for-the-first-hydrogen-powered-ferry--article2003 [ James Morrison, 2013]

Figure 3: Small scale wind to hydrogen projects are being developed in Scotland, with plans afoot to power ferries using hydrogen [ James Morrison, 2013]

But suffice to say, you need something in place to back up such energy sources when the wind drops, particularly in winter. Longer term there are various ideas, such as upgrading Scotland’s dams to perform more pumped storage. Portugal recently demonstrated that it was capable of producing 70% of its electricity from a combination of wind, hydro and pumped storage. Development of more advanced forms of energy storage (hydrogen from wind, advanced battery storage, Liquid Air Energy Storage) would also help. As would the increased use of biomass and CHP systems (as I’ll discuss in a minute) and a host of other ideas.

Its also worth remembering that not all renewable energy systems are as variable as wind. Tidal energy, hydro, CSP (Concentrating Solar Power) or blue sky ideas such as airborne wind turbines all offer much greater capacity factors and reliability. But certainly in the short to medium term, some fossil fuel based power capacity needs to be kept on the grid to provide the necessary load capacity, until these other options are fully developed. The problem has been however that many of these alternatives haven’t really materialised.

Figure 4: Tidal energy, such as this proposes scheme in the Pentland Firth http://www.bbc.co.uk/news/uk-scotland-north-east-orkney-shetland-25800448 , produces energy that is regular and predictable [Credit: ScottishPower Renewables , 2011 ]

Figure 4: Tidal energy, such as this proposed scheme in the Pentland Firth, produces energy that is regular and predictable [Credit: ScottishPower Renewables , 2011]

Because its not as if there haven’t been efforts to keep Longannet open. One short term quick fix that gets banded around is carbon capture and storage (CCS). Longannet was originally selected as the likely site for the first of these projects in the UK. However this fell through, largely for practical and economic reasons. In order for CCS to work you need to either separate the oxygen from the air and burn fuel in pure oxygen, or separate the hydrogen and hydrocarbon content from the rest of the fuel. Failure to do this will result in large quantities of other combustion products, mostly composed of nitrogen, which will greatly increase the volume of gas you need to get rid of.

The problem is that such separation policy is difficult to implement with a plant as old as Longannet, unless you’re prepared to spend a lot of money upgrading it, which wasn’t the case. Furthermore, since we’re discussing back up of renewables, I’d also throw in the point that an ageing coal plant designed for baseload power is not the best type of energy plant to be doing this sort of job. Tying it up to a CCS system would only make the problem worse. In truth, this CCS plan was only ever going to work if the knocked the Longannet down and built a new power station on the same site.

Alternatively, there’s been the idea of burning biomass instead and operating large thermal plants on a dual fuel load. However, this again requires a high level of system efficiency. And one has to be careful where the biomass is sourced. Otherwise you could well find you’re simply moving emissions from the chimney to the production and transport of the biomass. Plus if trees aren’t regrown quicker than they are consumed, then it ain’t really a renewable source.

Combustion of waste is another idea. About 2.5 millions of tons of household waste is generated in the central belt of Scotland each year, of which only 42% is recycled. Thus large quantities still find their way into landfill. Burning it for fuel is certainly preferable to burial, particularly from a carbon footprinting point of view (otherwise it rots and produces methane).

But again, if one wishes to control emissions, then the plant in question needs to meet the appropriate standards (i.e. expensive upgrade, if not a brand new power station). Furthermore there is a lot of opposition to incinerators, everyone seems to think they are a good idea if built in someone else’s back garden. However, if say 50% of the 55% of waste in Scotland that is currently sent to landfill were instead burnt at an average calorific value of 11-16 MJ/kg, this would imply that you could meet about a third of Longannet’s fuel needs for a year (assuming a capacity factor of 40%, which would be normal for a peak load power station).

So the real reason why Longannet is closing is more because these various policies have failed than because of any deliberate attempt to cut back on carbon emissions. Faced with an ageing plant that seems to have no real purpose, Scottish power seem to have finally decided enough is enough, its time to turn off the life support. Which is somewhat more worrying.

And again, its not as if we’re short of options to replace Longannet and other large thermal power stations. To return to the issue of CHP. Scotland is an ideal location for CHP, given that we have a relatively long heating season (my boilers been on some sort of a cycle since October and only got turned off that cycle a few days ago). In many other Northern European countries CHP can represent +70% of heat generation and +40% of all electricity generating capacity, yet the figure in Scotland its under 5% of electrical capacity and only 4.1% of heat is coming from renewable sources (CHP, biomass, GSHP’s and solar thermal).

Figure 5: There has been some use of CHP in Scotland, for example in this Whiskey Distillery, but more is need [Inhabitat.com, 2009 http://inhabitat.com/whisky-power-by-rothes-distillers-and-helius/ ]

Figure 5: There has been some use of CHP in Scotland, for example in this Whiskey Distillery, but more is needed [Inhabitat.com, 2009]

Such schemes could be applied to large facilities (such as Longannet). Or better still lots of medium to micro-scale CHP units could be used to eliminate the need for large thermal power stations. The fact that the time the UK grid is most vulnerable to shortages (in winter) happens to be the very time the CHP units will be running, makes for a useful match between CHP heat generation and electrical needs.

However CHP requires careful long term planning to implement, as the capital costs are high, even thought the long term fuel and energy savings can pay for themselves over the lifetime of the plant. But, as it was pointed out to me once by someone in the industry the vast majority of boiler replacements are “distressed purchases”, i.e. its winter, the boiler has broken down, you need a new one pronto and don’t have time for long term planning. Hence, without sufficient support for CHP from government (a situation not helped by energy related decisions being taken down south rather than in Scotland) such schemes haven’t been pursued with the vigor and urgency needed.

And before anyone brings up nuclear, by the time Hinkley C comes online (or perhaps I should say if) in the mid 2020’s (if we’re lucky!), the UK will have shut down all but 1 of its historical fleet of 19 reactors. Replacing 18 reactors with 2, neither of which will be in Scotland, (which will be nuclear free from about 2023 at current estimates), is hardly favourable. Indeed it means that most of the growth in renewable capacity in the UK in recent years has been devoted to replacing lost nuclear capacity, rather than reducing the number of fossil fuel plants.

But it is the nature of the half assed measures proposed to replace Longannet, despite the fact that there are plenty of other sensible options (as discussed), that has me worried. At one point there was talk of using temporary power barges  moored in the Firth of Forth instead of a fixed power station. Obviously such measures are only taken if you’re desperate for power, as its not a long term solution and works out as both inefficient and expensive.

However, a lack of joined up thinking means nobody is willing to put up the money to build any permanent power stations in the UK. This is largely due to failures in the privatisation of the UK energy industry which has seen several defacto monopolies created, with no real incentive for them to build power stations, as they have nothing to loose if capacity levels fall and electricity prices rise…..indeed they have a perverse financial incentive to create an artificial shortage (anyone remember ENRON’s in California?).

Figure 6: The legacy of privatisation, filthy overcrowded trains on an antiquated system little changed from the original Victorian system [Credit: Sunday Times, 2011 ]

Figure 6: The legacy of privatisation, filthy overcrowded trains on an antiquated system little changed from the original Victorian system [Credit: Sunday Times, 2011]

The situation is starting to resemble the mess otherwise known as the British railways. Privatisation of these has resulted in a situation where the UK government now spends five times more subsidising the UK railways than it did under a nationally owned system, despite a massive inflation in ticket prices, which have nearly tripled. This is largely because the UK private train companies have been granted a defacto monopoly in their area, they have lots of commuters who depend on the train to get to work and the train companies know they can charge the most ridiculous fees and commuters will pay them, with some now paying over £5,000 a year just to get into and home from work.

With no incentive to compete, nor to build new infrastructure, they’ve been literally running the UK’s railway network into the ground. The UK railway system is now so antiquated that many lines still use manual signal boxes, with someone having to manually switch train signals (most European lines have been electronically operated for some time). Consequently the UK government, realising that the rail companies aren’t going to do anything, have been forced to step and commit an estimated £40 billion to build a new high speed line to relieve capacity on the overstretched West Coast line.

Similarly the energy companies are basically running down the UK’s energy infrastructure into the ground, no doubt confident that the government will have no choice but to bail them out when the inevitable happens and there’s power cuts. About the only capacity they are growing is renewables, in part due to subsidies, but mostly due to the fact that they see them as a hedge against future spikes in gas prices.

Certainly, there has been significant growth in the renewables, particularly wind. And the message seems to be that older coal plants can’t compete with wind in Scotland, which is certainly good news. However we still face a lack of joined up thinking, something that needs to be resolved. This isn’t to say we’ve too much wind on the grid, its how the wind power is being used that’s important. Its also important that we recognise the failure of the Thatcher era policy of privatisation.

Posted in Biomass, CHP, clean energy, climate change, economics, efficiency, energy, fossil fuels, peak oil, politics, power, renewables, subsidy, sustainability, sustainable, Uncategorized | 6 Comments

The Bittter Lake

This is a reprint of a post I put up recently on my personal blog:

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Figure 1: The Bitter lake [Credit: BBC, 2015]

If you’ve not already seen it, the BBC have a film out on i-player by the always excellent Adam Curtis, called Bitter Lake. In this film Curtis discusses the effects of the West’s Middle Eastern policy, often in pursuit of oil. The film highlights how such policy has frequently become unstuck due to politicians sticking to simplistic explanations, of what are often very complex internal issues within these states. The film in particular focuses on Afghanistan and the various western interventions in this country.

The film is not for the feint hearted and includes many shocking scenes, the sort that the BBC never broadcast and hence why I doubt this film will ever be broadcast on television. For example the aftermath of an assassination “attempt” on Karzai’s convoy (about 25min’s in, which does seem to imply it was just his trigger happy security guards being jumpy rather than anything else). Indeed the film has provoked much controversy, being both praised as brilliant and on the other hand condemned by the very sorts who you’d think it would appeal too.

Meeting at Bitter Lake … President Franklin Roosevelt (right) meets King Abdulaziz. Photograph: Cour

Figure 2: The Bitter Lake Accord, Suez Canal Zone, 1945.

The film gets its name from the Bitter Lake agreement, where in the twilight weeks of World War II, in one of his last major policy decisions, President Roosevelt met with the Saudi king and they struck a deal through which the US would gain access to Saudi oil and in return the Saudi’s would get a guarantee of security. However, this deal threatened in the long term to undermine everything that Roosevelt had worked towards, and directly led to the events of 9/11.

The religion of Saudi Arabia has, since the 1800’s been not Islam but Wahhabism, an often puritanical, xenophobic and technophobic offshoot of mainstream Sunni Islam. Wahhabism itself grew as a counter to Western Imperialism (notably the Ottoman Empire) and it was both one of the Saudi Kingdom’s key strengths…but also its greatest internal threat. Indeed from time to time the Royal family has literally been forced to turn on the Wahhabists and buried more than a few in holes in the desert.

Mecca-Clock-Tower-03

Figure 3: One can think of no greater example of Saudi excess, corruption and megalomania than this enormous monstrosity overshadowing Islam’s most holy site.

One solution that the Saudi’s developed was the idea that the best way of dealing with the more troublesome extremists, was to give them a pile of money, which thanks to the oil revenues they now weren’t short off, bundle them off to somewhere like Pakistan to set up a Madrasa and spread the good Wahhabi word. Its a bit like the old Irish policy, in some families, of sending the smart brother to college so he could become an engineer or a doctor, letting the middle ones take up a trade and become plumbers or joiners, while the idiot brother gets bundled off to a seminary. Similarly, in Saudi families, the runt of the litter, the kid who was too dumb to pass high school…and spent his spare time torturing small animals, gets bundled off to some foreign Madrasa where he’s out of sight and out of mind and not making waves for people back home.

And for a time this tactic worked, however the end result has been to create a number of very serious long term problems, notably in that these Wahhabi preachers have now indoctrinated a substantial portion of the Muslim populations in certain countries with teachings that actually contradict traditional Muslim teachings in those countries. There is for example very little tradition in many Muslim countries of women wearing full face veils. Yet many Muslim women in some countries now do so, despite the obvious practical problems it creates, as they are still expected to do the jobs and chore’s they’d long performed without wearing the veil or Burka.

This growth in Wahhabism, was fuelled by Western policies. For example, the man who actually inspired the 9/11 hijackers, was an Egyptian by the name of Sayyid Qutb. This simple school inspector had been radicalised in part thanks to his treatment by the Nasser regime, with whom the US was at the time co-operating on security matters. Nasser represented the opposing force in Islam, of Muslim secularism which sought to exploit the west and copy some of its methods, notably Western technology and industrialisation. However in the process, the Pan-Arabians succeeded in alienating many more conservative Muslims as well as trampling on the traditional systems of tribal loyalties that had held such societies together for Millennia.

For example, in the 1950’s the US helped build a dam in Helmand province of Afghanistan as part of a programme to modernise the country. However the dam forced many off their land. Also for the dam to function, it relied on a system of canals to provide water to farms, which soon became clogged due to lack of maintenance. This causes significant disruption to local tribal life as well as making it difficult for local tribes to farm, as the dam had also raised the salt levels within the water table….until the locals realised that instead they could grow Opium poppies! For decades after, this Opium crop would be a major problem for the West, both due to the drug problems that resulted in the West, but also the funds it would funnel to terrorist groups.

opium-poppy-field-a_681574c

Figure 4: Taliban heroin poppies…brought to you by Morrison Knudsen!

Recently on US TV there was a controversial debate between Bill Maher, Ben Affleck (of all people) and American author Sam Harris. The crux of this debate was a simplistic spinning of the conflicts within the Arab world into a fight between “good” Muslims versus “bad” Muslims, when in fact a more accurate analysis would be Muslims and the rest of the civilised world against Wahhabi extremists. For increasingly, during the 1980’s the Wahhabist’s “exported” from countries like Saudi Arabia were being utilised as a counter to the Pan-Arabism of Nasser, Saddam or the Asad’s, which both the Saudi’s and the US now considered as their enemies and allies of the soviets.

When a pan-Arabian regime took root in Afghanistan, the Americans tried all they could to destabilise it, eventually leading to a Russian invasion. The Saudi’s and the US (under Reagan), then persuaded many Muslim extremists to go off to fight a Jihad against the Russians in the hope that the US could get one back on the sov’s for Vietnam. They even convinced a number of Arab countries to effectively empty their prisons of many violent Jihadi’s, who had been rotting (often on death row) for various attempted rebellion’s, and send them to Afghanistan to fight to soviets….and probably in the very real hope that they’d be killed, thus solving two problems at once. Of those who went to Afghanistan included Al-Qaeda’s number 1 and 2, Bin Laden and Al-Zawahiri, a follower of the aforementioned Sayyid Qutb. It seemed like a good plan…until a number of those Jihadi’s put their CIA training to good use over the skies of New York….15 of the 19 of them being Saudi’s.

And again, it was the simplistic analysis of the problem in both Moscow and Washington that was the problem. Neither understood the complex system of tribal loyalties and long running cultural rivalries. Reagan had an almost megalomaniac obsession with the conflict, even dedicating the inaugural launch of the space shuttle to the Afghan fighters…or comparing the Mujahideen to the founding fathers of the US.

Reagan_sitting_with_people_from_the_Afghanistan-Pakistan_region_in_February_1983

Figure 5: The Taliban who came too tea….a picture I doubt you’ll find in the Reagan Presidential library!

Similarly the Soviet leadership did not initially understand that the reason for the revolt was due to the land reforms that had been imposed on the country and the tribal feuds this had set off. Much of the reason why local tribes fought the soviets had little to do with politics, or religion for that matter, but in defence of tribal claims. And indeed they often used one side or another against one another. For the surest way of getting you’re rival killed was to go to the Soviets and tell them such and such a person was Mujahideen, or visa versa. And many tribal elders would happily switch sides at the drop of a hat if the winds of change suited.

And when the Americans and British came into Helmand province in the 2000’s the locals played the same game, using the coalition forces to settle long standing tribal scores. In part, this was because that the West failed to understand the consequences of putting the likes of Karzai in charge of the country, who presided over a regime that was institutionally corrupt and widely despised. The end result was that both the soviet occupation of the country and the Western one did not have any appropriated outcome. And similarly in Iraq, the West backed a president who alienated the Sunni’s, who promptly threw in their lot with ISIS, who took over half the country, leaving the Americans playing catch up very quickly.

The result is to make something of a mockery of fifty years of western diplomacy and some will take this as a clear sign as to why the West should stay out of Middle East affairs. However one valid criticism would be to accuse Adam Curtis of making the very same mistake that he accuses Western governments of, he relies too much on simplistic explanations and a fairly narrow interpretation of the facts, and quite a lot of hyperbole.

For example, he goes so far as to claim that much of the global trade on stock markets is ultimately a massive ponzi scheme fuelled by Saudi oil money. This is going perhaps a little far. Certainly, a point I would make (as an expert on energy) is that much of the supposed wealth of the West is somewhat imaginary, as its dependant on the availability of cheap fossil fuels which won’t always be available, hence unless we come up with some alternatives there’s going to be some sort of major economic correction. However it would be incorrect to conclude that the stock markets only exist because of petro-dollars (he is aware that they existed long before oil came along?).

oil-wars

Figure 6: Are we in the middle of the 3rd Iraq war (picture from the 1991 war) or will future historians call this the 5th Oil war?

Also, one has to be careful in this narrative of blaming the West for everything. After all, nobody made the Taliban become Taliban. The US certainly scored an own goal by helping to train and equip them, but it wouldn’t be fair to blame the West without pointing the finger at other factors closer to home, the Wahhabists, corrupt and oppressive local regimes, ignorance and greed on the part of locals?

Take this Jihadi John character. Certain apologists for ISIS, such as professional moron Russell Brand, have been trying to argue its all the West fault he decided to go to Syria and take to beheading aid workers and journalists, ignoring the fact that clearly he was radicalised long before the security services got near him. Its not as if MI5 put a plane ticket in his hand and a machete in the other? And are we going to blame MI5 for those 3 girls who were groomed online and when missing last month?

But either way this film does raise awkward questions, such as what to do about ISIS. Nobody can doubt that ISIS are a murderous and dangerous perversion. Tales from within ISIS held territories speak of such horrors as mass executions, crucifixions and a regime, run by sex-mad slave drivers, that literally collects not just outrageous taxes, but even taxes paid in blood (and you thought taxes in the UK were tough!). The city of Raqqa (ISIS capital) has seen its population drop by more than half since they took over. Veils for women indeed simply aren’t enough, as in almost monty python-esque style they’ve introduced double veil’s with gloves.

In short its difficult to argue how anything could be better than leaving the likes of ISIS in charge. And the argument that we should just let the Kurds and Shia’s sort out ISIS ignores the likely consequences of that. For example, the Kurds have taken much land and territory in both Syria and neighbouring provinces of Iraq, as have the Shia’s, who are currently advancing on Tikirit….possibly with the assistance of the Iranian Revolutionary guard.

A convoy of Kurdish peshmerga fighters drive through Arbil after leaving a base in northern Iraq

Figure 7: The Kurdish Peshmerga, who are happy to include women within their ranks, have made many recent gains and are on the verge of linking up with Shia/Iranian militia advancing from the South.

But will these groups give up the land afterwards? The land captured is majority Sunni areas but with large Shia or Kurdish minorities. And it contains in many cases large oil reserves. Suppose they hold onto the land, or indeed start fighting each other over this land? It could mean that the war against ISIS is replaced with a wider internal conflict inside Iraq, or possibly a war between Iraq and Syria with Turkey and Iran backing one side or another.

But of course Western boots on the ground, won’t necessarily work out any better. After all if the plan is to repeat past Western mistakes, it would be merely a case of the West demonstrating one of the proof’s of madness (doing the same thing over and over and expecting a different result). Its all well and good, throwing rocks at Western policy, but its possible that a lack of intervention could be as bad, if not worse, than further intervention.

Hence why I’d argue a more effective strategy is to break our addiction to oil. No petro-dollars, no Saudi money to Madrasa’s and ISIS. It also means being careful whose side we pick. Another flash point is the West’s unyielding support for Israel, ignoring Israel ethnic cleansing in the West Bank and its production of WMD’s. Obviously, doing as Netanyahu suggests, would be dangerous, without first tackling Israeli nuclear weapons. To argue that Iran can’t have Nukes, but we’ll let Israel have them is clearly hypocritical.

In short there needs to be an end to Western double standards, backing up one heavily armed oppressive regime (such as the Gulf States), then bombing or isolating another one (such as Saddam’s Iraq or Iran) and ignoring totally the crimes of others (such as Israel). Equally thought the West needs to wake up to the fact that we’re in the mess due to attempts to secure oil reserves. So a programme of reducing the Western addiction to oil is certainly essential.

Posted in Uncategorized | 2 Comments

The oil price dilemma

Figure 1: Recent trend in global oil production [Source: Gail Tverberg, Our Finite World, 2012 http://ourfiniteworld.com/2012/04/09/what-the-new-2011-eia-oil-supply-data-shows/ ]

Figure 1: Recent trend in global oil production [Source: Gail Tverberg, Our Finite World, 2012]

A recent drop in world oil prices, has seen prices descending past the symbolic point of $50 a barrel. This is likely to prove a double edged sword, as I think we’ll all be learning soon enough. However, it has also led to yet more fuel to the self perpetuating myths regarding unconventional fossil fuels, with many in the media crediting Shale gas and shale oil with causing this price drop. Peak oil apparently is now dead.

Figure 2: Brent Crude Oil Prices since 2007 [Source: Shortsideoflong.com, 2015 http://shortsideoflong.com/ ]

Figure 2: Brent Crude Oil Prices since 2007 [Source: Shortsideoflong.com, 2015]

Part of the problem here is that many forget that the price of any commodity merely reflects the current state of supply and demand for that commodity. Let us suppose for example, that you were to wander into a butcher’s shop on Christmas eve looking for a Turkey. Well assuming the butcher didn’t just laugh his ass off at you (all his regular customers put in orders months earlier!), you would be paying through the nose for a bird. Not because we’d hit “peak Turkey” but because demand was outstripping supply.

Similarly, if you went into the same shop on the 26th of December, you’d likely see the bargain bins overflowing with Turkey, now on sale at a knock down price. This drop isn’t due to any new supplies of Turkey (in fact its very likely Turkey production is winding down), but because retailers know that most people have stuffed themselves full of Turkey over the holidays probably won’t touch it again for many months, so they are anxious to clean out the freezers.

Obviously if the price goes a certain direction and stays on that course for several years, then this would be something we could be a little more certain on. So its important to put the current price drop in the right perspective. And that said, it has to be remembered that the price of oil has generally been trading at around $100 since 2006, excluding a few brief price drops here and there notably after the start of the economic crash. And this is despite the fact that the global economy has been going through one of the worst recessions in recent economic history, the sort of thing that would normally be expected to produce low oil prices.

Figure 3: Sources of non-conventional oil [Source: Miller and Sorell, 2013 http://rsta.royalsocietypublishing.org/content/372/2006/20130179 ]

Figure 3: Sources of non-conventional oil [Source: Miller and Sorell, 2013]

But returning to Shale oil and the Tar sands, could they be behind this drop in price? Well, no, they still represent a fairly small share of the overall oil market. Globally, just over 80% of all oil production is what we’d call conventional oil, of the remaining 20% the bulk of this is Natural Gas liquids (NGL’s, the liquid portion of gas recovered from natural gas operations) with tar sands and Shale oil representing about 5% and the balance comes from Refinery Gains or minor sources such as biofuels. There is,, I would note, some controversy as to whether we should include NGL’s. Some authors argue that as you can’t put it in you’re car (its mostly stuff like Ethane and Propane) its fiddling the books to include it with oil. Others argue, that production of NGL’s is sufficiently mature that it should not be considered an “unconventional” source.

Either way, what most people would generally associate with the term “unconventional oil” (Tar sands from Canada, American Shale oil, Venezuelan heavy oil) is a tiny part of global oil production and clearly cannot drive the price to the extend suggested.

Furthermore, of the actual growth in oil production added since 2005, 47% of that growth has been either process gains at refineries and new or expanding field production in conventional oil fields. A further 31% has come from NGL’s, leaving growth in “unconventional oil” a mere 22% of recent growth in production.

I’m not denying that shale oil has led to a boom in parts of the US and a lot of money was made by some as a consequence. Its just the production from these sources are a tiny fraction of global output and is unlikely to have had any serious effect on prices. In much the same way that one hot dog stand at a football match is going to have a pretty profitable day, but that doesn’t means he’s going to feed tens of thousands of people with one small burger van!

Figure 4: Gains in production since 2005 [Source: econbrowser.com, 2013 http://econbrowser.com/archives/2013/09/the_peak_in_wor_1 based on EIA data http://www.eia.gov/cfapps/ipdbproject/IEDIndex3.cfm ]

Figure 4: Gains in production since 2005 [Source: econbrowser.com, 2013 based on EIA data]

So what else could be causing this drop in price? Well on the supply side, as noted, there have been some gains from conventional oil fields, in particular in the field of Enhanced Oil Recovery from mature oil fields. Also Libya seemed to be bouncing back, at least until a few weeks ago. And the terrible events in Northern Iraq don’t seem to have dented oil production much….yet!

Meanwhile on the demand side, the EU is again looking jittery, which has likely sent many speculators running for cover. Russia was entering recession even before the drop in oil prices and even China is looking a bit worse for wear. Also advances in technology, such the latest hybrid and electric cars have resulted in vehicles becoming much more fuel efficient, reducing the demand for fuel.

So there’s lots of things going on that would be serving to reduce demand at a time when supplies have been increasing. It is a trend we’ve seen many times before in the oil industry, notably back in the 1970’s and then the 1990’s. Demand reaches stellar levels until its finally choked off by a lack of oil, generally followed by a recession. With the price of oil high, the Oil Majors and OPEC bet the farm on a series of expensive mega oil projects to cash in. With oil prices high, these net bumper profits, encouraging them to up their bets. Only for the oil market to become flooded, leading to a glut, leading to low oil prices, which usually sparks another economic boom….followed by a bust and the whole cycle repeats!

So its just business as usual play out, right? Well no. This drop in price is very different from past events. The one consequence of all of this fracking, as well as activity such as deep water drilling, enhanced oil recovery, etc. has been to greatly increase the operating costs for the major oil companies. As the graphs below illustrate the CAPEX (the money that oil companies spend on R&D as well as finding and developing new oil fields), has soared. Yet at the same time, the profit margins of the major oil firms has fallen. In short they are having to run faster to stand still.

Figure 5: CAPEX expenditure by oil companies by year [Source: Douglas-Westwood & Barclay's capital, 2014, via This finite world http://gailtheactuary.files.wordpress.com/2014/02/kopits-41-upstream-spend-continues-strong.png]

Figure 5: CAPEX expenditure by oil companies by year [Source: Douglas-Westwood, 2014, via This finite world]

Figure 6: Profit margin of the Oil and gas sector [Source: Citigroup Research, 2014 http://www.stocksinvalue.com.au/worleyparsons-bides-time/ ]

Figure 6: Profit margin of the Oil and gas sector [Source: Citigroup Research, 2014]

Furthermore, drilling and production costs, the money it costs to keep things ticking over on these new oil developments (be they unconventional or otherwise) is now much higher than has traditionally been the case. Certainly a lot higher than the present price of $50 a barrel. Hence there’s only so long that the oil companies can sustain production from these fields.

Figure 7: The global cost of oil drilling per well [Source: Smart planet.com (2012) http://www.smartplanet.com/blog/the-energy-futurist/the-cost-of-new-oil-supply/ using EIA data]

Figure 7: The global cost of oil drilling per well [Source: Smart planet.com (2012) using EIA data]

And my spies tell me, that there’s already been dissent within the ranks. Even before the recent drops in prices, shareholders in many oil and gas companies were getting very worried about about this huge escalation in expenditure. Needless to say, we can assume they are even more worried now. Probably any time the business news comes on, more than a few start rolling on the floor and chewing the carpet. If I was to hear news of a group of angry persons approaching Kock Industries or Chevron HQ carrying several large crosses and a bag of nails, it would be safe to assume that they aren’t Greenpeace, nor some Christian group of re-enactors, but angry shareholders who’ve finally had enough!

Figure 8: Rates of CAPEX and R&D expenditure, by sector for S&P listed companies [Source: Goldman Sachs (2014), via BusinessInsider.com http://uk.businessinsider.com/energy-capex-and-rd-2014-11?r=US ]

Figure 8: Rates of CAPEX and R&D expenditure, by sector for S&P listed companies [Source: Goldman Sachs (2014), via BusinessInsider.com]

And this explosion in expenditure in the oil industry has also been sucking in capital from other parts of the financial system. As another graph from Citigroup shows (figure 8) the energy industry has gone from 11% of the S&P market’s CAPEX to 24% of it. And indeed when we look at just the shale gas/oil industry alone, its profitability v’s expenditure looks even worse that the rest of the industry. And most of that is financed by lots of dough from the financial services industry, who needless to say are panicking as we speak, over fears they might be left with a trillion dollars worth of Zombie assets.

And these fears of a “Zombie Apocalypse” also explains another difference between recent events and past oil price drops. In the past, during any supply glut, the Oil Majors assumed that they could rely on OPEC to cut production and stabilise prices. Given how dependant OPEC nations are on the price of oil (as oil exports are a large part of government revenue), it has generally been in their best interest to do so. However, at a recent meeting OPEC effectively said no to calls for a production cut.

Why OPEC did this is easily explained by putting yourself in their shoes. Why should they sacrifice market share just to keep the shale oil producers in business? In previous times, OPEC relied on the assumption that if they cut production nobody would be able to respond and fill in the resulting gap, guaranteeing that prices would rise. However, all of that fracking propaganda (which OPEC oil minsters have also been bombarded with) has left OPEC less certain of this. And ultimately they are gambling that the oil majors, with their much higher production costs, will blink first. After all, in any situation where there’s a price war, its usually the smaller company, with its higher operating costs, living on credit, who goes to the wall first.

Figure 9: Break even costs of oil production by various methods [Source: IHS-CERA (2006), via the Royal Society (UK) http://rsta.royalsocietypublishing.org/content/372/2006/20130179 ]

Figure 9: Break even costs of oil production by various methods [Source: IHS-CERA (2006), via the Royal Society (UK)]

The inevitable end game is likely therefore to involve several of the oil major’s loosing their shirts, Middle East countries having to cut back their budgets and a complete halt or go slow on all new oil projects, along with an aggressive cost cutting program, resulting in numerous job losses. This could well render such debates as those over the Keystone pipeline, drilling in the ANWR or shale gas drilling in the UK all somewhat moot, as nobody will want to invest in these projects.

Of course this is also bad news for renewables, as cheaper fossil fuels makes it harder for them to compete. Quite apart from the danger that nervous investors worried about the risk of large losses in the fossil fuel side of the energy business might be reluctant to commit to large scale capital projects. Justifying energy efficiency measures also becomes harder. Although in the UK at least the unwillingness of energy companies to respond to these events by ending their monopolistic price gouging cutting utility bills does still make such measures worthwhile.

However perhaps long term, the real losers will perhaps rather ironically be the cornucopians. They will often point to the large reserves of unconventional resources and claim that “the magic of the market” will see those resources extracted. However this analysis ignores the realities of geology (only a fraction of these resources are actually recoverable) as well as the rules of market capitalism. Prices fluctuate as a result of supply and demand factors. And during the periods of low prices much of this unconventional fossil fuel will be rendered uneconomic. Hence much of the world’s oil and gas resources will probably always remain in the ground.

As the late Matt Simmons once pointed out, the best thing that could ever happen to the oil industry would be for prices to go to some extraordinary high value (say $200 a barrel) and stay there. Of course, whether we’d be prepared to pay that much and whether oil demand would remain at its current levels at such prices seems doubtful. Also the timeline between renewables becoming competitive against fossil fuels would drop, again rendering most of the fossil fuel reserves uneconomic.

However, any gains in production since 2005 does tend to undermine the suspicion that conventional oil peaked in 2006. That said, if you look at the data, its obvious the rate of production growth is definitely slowing. While there was an increase in global oil production of 12.7% between 1997 and 2005, between 2005 and 2013, despite all that money thrown at shale oil, the tar sands, EOR and numerous conventional oil projects, the result was only a 4.1% increase in production. Like I said, running faster to stand still.

Hence when this spurt in new production runs its course, and that’s not likely to take more than a few years, its very difficult to see how unconventional resources (which again are only 5% of production, and unlikely to ever exceed 20% of the total) replacing Middle Eastern oil. Once the major oil fields in the Middle East peak, its very difficult to envisage anything that’s going to replace them.

So rumours of peak oil’s death are perhaps greatly exaggerated.

Posted in economics, energy, fossil fuels, peak oil, politics, power, Shale Gas, Shale oil, Tar Sands | 1 Comment

Renewable Subsidy Myths

One of the claims you will often hear from the anti-renewables brigade is that the only reason why power companies build wind farms or erect solar panels is because they are chasing subsidy money…. that our taxes pay for! This is of course one of the founding myths of the political right and their justification for a near pathological hatred of renewable energy. I think it would be useful to pick apart this myth.

Figure 1: Solar and wind power subsidies are a likely battle ground topic in the next 2015 UK general election [Credit: Good Energy, 2014 http://www.goodenergy.co.uk/press/releases/2014/05/13/good-energy-ceo-responds-to-government-solar-subsidy-review ]

Figure 1: Solar and wind power subsidies are a likely battle ground topic in the next 2015 UK general election [Credit: Good Energy, 2014]

Firstly it should be remembered that not all countries subsidise renewable electricity generation. Some have no formal subsidy system, others merely provide tax breaks (in particular capital gains tax as the upfront costs of renewables can be high while fossil fuel companies get to write off fuel taxes as tax deductible). Even then in most countries where there is a subsidy, those subsidies come not from the exchequer but usually from some sort of tariff on wholesale electricity production. In the UK for example, about 6% of the average bill pays for, amongst other things, subsidising renewable power generation.

Figure 1: Breakdown of an average Bill [Source: BBC (2012) http://www.bbc.co.uk/news/business-15352599 based on Ofgem data]

Figure 2: Breakdown of an average Bill [Source: BBC (2012) based on Ofgem data]

In the UK, under the present subsidy regime, a power company receives about £30.7 per MWh for wind power installations above 50 MW’s, for a period of 10 years. For solar power the subsidy rate is £63.88 per MWh over 20 years. More generous subsidies are available for smaller installations of both, however as we’re looking at the major energy utilities, they would generally be drawing on these subsidy rates.

While this might sound like I lot of money, its worth remembering that the going rate for the overnight cost of a wind farm is estimated at about £93/MWh according to Ofgem (as I’ll discuss later, other sources suggest the true cost of wind power is lower, but to compare like with like, I’m sticking with the Ofgem subsidy rate and cost figures).

Figure 3: The growth of UK renewables http://commons.wikimedia.org/wiki/File:UK_renewables_installed_capacity.PN

Figure 3: The growth of UK renewables

This effectively means that of the £93 price tag for wind energy, only 33% is initally subsidized. Indeed, given that the subsidy disappears after 10 years, so the adjusted subsidy level is only 13.2%, the remaining 86.8% of the costs is met by the power company and its financial backers. It is dubious at best to suggest that power companies would spend 86.8% of the capital, just so they could claw back the 13.2% via a subsidy….that they end up paying anyway whenever they generate electricity using a fossil fuel power station! What school of finance did this lot study in? Hogwarts!

Figure 4: The price breakdown for a wind turbine (onshore) [Source: RESCO.org.uk, 2013 http://www.resco.org.uk/wind-and-marine-power/ ]

Figure 4: The price breakdown for a wind turbine (onshore) [Source: RESCO.org.uk, 2013]

So why do the power companies build wind farms? Well the raw costs of building a wind farm is between £55-25 per MWh (depending on how you do you’re sums), i.e. generally below the wholesale current wholesale costs for electricity (about £45-55/MWh at present). The remaining part of the bill for wind power (and again, its worth remembering the industry tends to quote much lower estimated costs than Ofgem) is generally fixed one off costs (wiring the wind farm up to the grid or installing support infrastructure), financing costs, maintenance and the costs of backup. This last one is a bit of a grey area as wind power often gets lumped with a disproportionate share of the bill even thought all energy sources need backing up to deal with an unexpected problem. Either way, this is of course the whole point of the subsidy, as it helps to even up the odds.

Figure 5: Breakdown of the levelised costs of wind energy compared to CCGT [Source: Wind-power-program.org, 2011 http://www.wind-power-program.com/intermittency2.htm ]

Figure 5: Breakdown of the levelised costs of wind energy v’s CCGT [Source: Wind-power-program.org, 2011]

Furthermore, during periods of strong electricity demand and high winds (quite common in winter) the wholesale price of electricity can rise well above the £93/MWh figure mentioned above. Hence, from the power companies point of view, wind power is a useful defence against high gas and coal prices….or Putin turning off the gas! Its very probable that in the absence of subsidies some wind farm would continue, although probably not on the scale we currently see.

Figure 6: The falling price of PV....and how success seems to be “rewarded” by the Tories! [Source: smarthomeenergy.co.uk, 2012 http://smarthomeenergy.co.uk/rise-and-fall-uk-solar-pv-subsidies-infographic ]

Figure 6: The falling price of PV….and how success seems to be “rewarded” by the Tories! [Source: smarthomeenergy uk, 2012]

Similarly for solar energy, given Ofgem’s estimated cost of £145/MWh for solar electricity, this means the subsidy rate over the 35 year life of a PV panel will be at most 25% of the overall costs. The remaining 75% will, again, come from private capital.

To put these figures in comparison it might be useful to compare this with the subsidy system for nuclear power. They are set to receive a fixed price of £92.5/MW inflation adjusted at 2012 prices. This appears to be smaller than the fixed price for wind, however considering the current wholesale price of £55/MWh (and that’s at the upper limit of recent prices), this amounts to a subsidy rate of 68.8%, about five times the subsidy rate for wind power and 2.7 times the rate for solar.

This should demonstrate the hypocrisy of the UK Tory parties plans to limit renewable energy subsidies to £200 million per year. If such a cap were applied to Hinkley C it, given the annual subsidy costs to this plant in the order of £700-800 million per year, it would have to shut down after just a few months having blown the lid off its subsidy cap.

Figure 7: US Federal expenditure on various energy sources (note this only covers direct federal spending and does not account for other subsidy routes, such as tax breaks, etc.) [Source: DBL Investor Capital, based on DoE data, via Cleantechica.org (2011) http://cleantechnica.com/2011/09/27/early-fossil-fuel-nuclear-energy-subsidies-crush-early-renewable-energy-subsidies/ ]

Figure 7: US historical Federal expenditure on various energy sources [Source: DBL Investor Capital, based on DoE data, via Cleantechica.org, 2011]

The only situation where Hinkley C starts to make sense is if the wholesale price of electricity rises substantially…but of course only a modest rise would put renewables into the black (i.e. renewables would be profitable without any subsidy). In short no matter which we we look at it, renewables, notably wind energy give us more bangs for our subsidy bucks than nuclear.

This is of course one of the main arguments behind Angela Merkel’s conservative government’s decision to pull the plug on Germany’s nuclear programme. The amount of subsidy needed to keep nuclear on government funded life support was much larger per MWh than that for renewables, even the then immature sources such as solar power. And given how much solar power prices have fallen since then, this is a decision that appears to have been justified.

Figure 8: Subsidy rates for different low carbon options [Source: Craig Morris, Renewable Energy World, via Cleantechica.com (2013) http://cleantechnica.com/2013/11/05/nuclear-prices-market-graph/ ]

Figure 8: Subsidy rates for different low carbon options [Source: Craig Morris, REG, via Cleantechica, 2013]

And similarly, its worth remembering that fossil fuels are not subsidy free. As I discuss in a prior post, both within the UK and worldwide, the vast bulk of energy subsidies are spent propping up fossil fuel consumption. The IEA has estimated that only 16% of global energy subsidies go to renewables, the vast majority of the remainder is spent subsidizing fossil fuel consumption.

Figure 3, Energy subsidies world wide (excluding nuclear) [credit: The Guardian based on IEA data]

Figure 9, Energy subsidies world wide (excluding nuclear) [credit: The Guardian (2012), IEA data]

And ironically, many of these subsidies DO come directly out of our taxes. As this link here discusses, the vast bulk of energy subsidies directly from the US tax payers has historically gone to the fossil fuel and nuclear industry, not renewables.

Figure 10: An expansion of figure 7, breaking down in 2010 billions the amount of federal subsidy received by each energy source in the US [Source: DBL Investor Capital, based on DoE data, via Cleantechica.org (2011) http://cleantechnica.com/2011/09/27/early-fossil-fuel-nuclear-energy-subsidies-crush-early-renewable-energy-subsidies/ ]

Figure 10: An expansion of figure 7, breaking down in 2010 billions the amount of historical federal subsidy received by each energy source in the US [Source: DBL Investor Capital, based on DoE data, via Cleantechica, 2011]

And within the UK too, fossil fuels receive many generous subsidy’s ranging from tax breaks and other sweat heart deals to encourage oil/gas drilling, winter fuel payments to the elderly, road building to satisfy the Jeremy Clarkson brigade, or load guarantees issued in support of UK based (but often foreign owned) fossil fuel companies. Indeed, the UK government is currently in hot water over the loaning of £1.7 billion to support fossil fuel exploration in foreign countries. In other words, the Tory’s are willing to spend more money to increase our addiction to foreign owned oil than they’re willing to spend on increasing indigenous renewable energy supplies! And let’s not even bring up the matter of the government’s pre-Christmas hamper to the power industry, in which they gave away many hundreds of millions to the power companies to essentially do sod all.

Indeed the IEA has gone on further recently and suggests that once we assess all energy sources on a levelised playing field, i.e. account for the off the balance sheet costs such as dealing with climate change or the health effects of pollution, back up against intermittency, etc., wind power is actually the cheapest form of energy generation. And in another story a report by the WWF suggests that Scotland’s electricity grid could be carbon neutral by 2030 (if current expansion of the industry continues).

In short if the right wing opponents of renewables truly believed what they claim, why aren’t they clamping down on these stealth subsidies of fossil fuels? Indeed, given that it is the government who has to pay for the clean up costs whenever a storm (made that bit stronger by global warming) wipes out a town, or the state is forced to increasingly act as the insurer of last resort to coastal communities the private insurance industry refuses to insure (thanks to climate change). Well one has to ask, surely the libertarian response would be to impose a carbon tax of some sort to level the playing field and get the fossil fuel industry to pay what they owe?

Of course the answer to this betrays the truth, that renewable subsidies were always a messy compromise intended to get polticans off the hook for their unwillingness to upset too many apple cards by cutting off support for the fossil fuel and nuclear lobby. Rolling back renewable subsidies is more about protecting special interests than saving taxpayers money. An all too common trait of politicians on the right, in particular the hard-right populists such as UKIP and the Tea Party is to tempt people into the delusion that they can simply blame others for their misfortune.

Can’t get a job? its not your fault for being underskilled, nor the Republicans/Tory’s fault for wrecking the economy, its those nasty evil hobbits immigrants coming into the country. Stuck in a traffic jam? Its not because of a lack of public transport/investment in road infrastructure (thanks to tax cuts!), its the fault of foreigners clogging up our roads (even thought they make up less than 10% of UK drivers!). Taxes too high? Its not because of the $1.1 trillion spent on a war for oil, but those lazy migrants or “inner city youths”, who when their not busy working….or driving around aimlessly…are presumably claiming benefits….in what little spare time they have, one assumes!

Similarly when it comes to energy, those on the right also practice dog whistle politics, blaming “subsidies” for all manner of things, which they are not in any way responsible for. Indeed, if the hard right has its way, the results are likely to be entirely counter productive. More state money spent on energy sources (likely nuclear and fossil fuels) on projects that are in the long term, not viable, probably leading eventually to a lot of very expensive white elephants that will never generate any actual electricity.

Posted in budget deficit, clean energy, climate change, economics, efficiency, energy, fossil fuels, Global warming denial, nuclear, politics, power, renewables, subsidy, sustainability, sustainable, Uncategorized | 3 Comments