Blogging catch up – The consequences of the Tory election win

I’m in the process of preparing for a house move, so I’ve not been blogging much recently. Even so I have been keeping up on my personal blog. So I thought it might be a good idea to re-blog a couple of the stories that caught my eye over the last few months, in particular those relating to the fall out from the recent UK election.

Tory cuts to renewable subsidies…..while bankrolling shale gas and nuclear

The Tories are following through with their electoral threat to cut renewable energy subsidies. Furthermore, the government is even threatening to block wind energy from bidding on the CfD mechanism (their intended subsidy for nuclear), even in situations where wind energy offers a better deal. The renewables industry, particularly that part of it based in Scotland has warned that these cuts could lead to a complete halt to work.

Figure 1: Guess who was the biggest winner out of this election?

Figure 1: Guess who was the biggest winner out of this election?

As I’ve pointed out before, onshore wind represents the cheapest form of low carbon energy available. It also means ignoring the fact that the historical subsidies paid out to fossil fuels and nuclear have exceeded those paid out to renewables, by some significant margin.

Yet at the same time the government is willing to throw yet more subsidies at the fossil fuel lobby in an effort to promote fracking. And while they are promising to extend the rights to allow the landed gentry to object to wind farms within visual range of homes, they are going to remove people’s rights to object to fracking. Even if a company wants to frack underneath homes, they won’t having to apply for planning permission.

Figure 2: Companies will be allowed to frack under homes without the homeowners permission

Figure 2: Companies will be allowed to frack under homes without the homeowners permission

It has been suggested that being near a wind farm might impact on property prices by an average of 2-5%, or perhaps even 12% in the worse case scenario. Although another study suggests no significant correlation (my take on this is it probably depends, if there’s lots of property available, a buyers market, house prices might be effected as buyers are more choosy, but if the reverse is the case, as it often is in the UK, there’s no effect).

However if someone fracks under your home, forget about selling it…..ever! Already some near fracking operations are complaining of this very thing. They can’t sell their home, can’t move house, they are stuck where they are next to fracking operation.

And there is significant doubt as to whether the shale gas reserves of the UK are even economically viable, particularly given events in the US, where shale gas operators are loosing their shirts. Already its speculated that US shale gas output might well peak by the end of decade. The Tories are in effect committing the UK to an energy policy in the form of a new dash for gas, but in the blind.

Now that is not only bad as regards fighting climate change, but the UK is facing a squeeze on its power generating capacity. And it hardly seems to me a winning strategy to halt the production of the one energy source that’s growing, while coal stations are shutting down, as they cannot compete with wind power and hydro.

And let’s not forget about climate change. This amounts to a complete U-turn on the last 25 years of UK energy policy, a U-turn which was launched with little warning, one which will probably send the signal (as I speculated in a prior post) to the power industry to halt all investment in energy….keeping in mind that all the fracking in the world will be little use without power plants to burn it in. What the energy industry needs is not some get rich quick scheme, but a long term energy plan for them to work around. These proposals offer no such promises.

Irony not understood

Indeed its not just wind energy subsidies that are going to be cut, but those to solar power are also being cut. This will be the 6th cut (I’m guessing, as I’ve lost count at this point) in solar subsidies under the present government. The Tory line is that solar is now sufficiently mature to not need subsidies. While the solar industry agrees they are rapidly maturing, they have also pointed out it is hardly fair to cut solar subsidies at a rate of 25% of the overnight costs while subsiding nuclear to the tune of 68% of the overnight costs. And such a sudden cut is likely to have a very serious effect on jobs.

The environment minster Amber Rudd (pro-nuclear, from the same district as Dungeness NPP) openly admits this hypocrisy, but dodges the wider hypocrisy that she’s cutting subsidies to renewables on the grounds that they are now “mature” while still shovelling money into the bottomless pit called nuclear, an industry whom the government has been funding at a considerable expense ( exceeding any subsidy to renewables), for the best part of 60 years. Exactly when is nuclear going to be able to function without a subsidy? When hell freezes over seems to be the answer!

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 3: Subsidies to fossil fuels and nuclear (in this example, the US) have long exceeded any offered to renewables [Source: DBL Investor Capital, based on DoE data, via Cleantechica.org (2011)]

When pressured on this point she then claimed that renewables are the “wrong” sort of electricity. Ya, they sort of energy that doesn’t buy her a bigger house or include a few brown envelopes if you know what I mean! ;) And as I’ve pointed out before, the whole “intermittency” issue is something of a red herring, as nuclear also needs backing up (indeed there is an urgent need to add extra energy storage capacity to back up Hinkley C and billions have been committed to doing this, notably by expanding Ben Cruchan). And there are plenty of energy storage options available, as I discussed in a recent article.

The reality I’m afraid is, that the Tories are ideologically opposed to renewables. Anyone in this industry has good reason to fear for their prospect’s for the next 5 years.

Brexit may mean bis-exit

And of course its not just renewables who are in trouble thanks to the Tories. The general view of the engineering community to the Tory EU referendum and the risk it raises of Brexit would be something along the lines ofhave the rest of you gone mad or what?”. EU membership is crucial to trade they argue. While it is true that the head of JCB did back Brexit, this was taken by many of his colleagues as a sign that he’s slightly out of touch.

Figure 4: Very few UK companies think Brexit would be a good idea (Source: Public affairs 2.0 http://publicaffairs2point0.eu/2015/05/brexit-and-business-what-does-industry-think/ ), so why is it on the agenda?

Figure 4: Very few UK companies think Brexit would be a good idea (Source: Public affairs 2.0), so why is it on the agenda?

The pro-exit camp are often deluded into thinking that the UK is so important to the EU that we can drive a hard bargain and get a better deal with the EU (and other countries) outside the union, for example pointing to the large amounts of cross channel trade, about 50% of UK overseas trade is with the EU, about £11.8 bn in exports and £19.7 bn in imports.

However this has to put in the context of the EU’s total trade of 1.7 trillion euro’s and imports of 1.6 trillion. Yes UK trade with the EU might be worth 50% of our trade, but its just 1% of the EU’s total trade!

In the event of a break down in negotiations post Brexit, who do you think will blink first? the British delegation worried about losing 50% of trade, or the EU worried about losing 1%? The UK will be over a barrel in such negotiations, as they will also find themselves when negotiating with the US or China. Merkel could force Cameron to endure some sort of bush-tucker trial and he’d happily eat frogs legs or snails, perhaps get him to drink that awful Berliner Kindl beer, and yet he’d still sign anything they put in front of him. He’d have no choice!

Already there are signs that businesses are positioning themselves for Brexit. In the back pages of the engineering mag’s you’ll hear all sorts of stories, for example that Jaguar is building new factories, not in the UK (while the Castle Bromwich site is full, they’ve plenty of space at other sites) but overseas in Asia, Turkey or the EU. And this is by no means a one off, what’s left of UK automotive manufacturing would be in dire straits in the event of Brexit. Rolls Royce and Airbus, have not been quiet about their views on Brexit and its again worth noting that they seem to be either holding off on key investment decisions or have already decided to build new factories overseas. Even a recent announcement regarding HSBC had a Brexit angle.

The danger of course being, that all of these move will leave major corporations with essentially one foot already out of the UK, making it very easy for them to simply move completely out of the UK if (as predicted) there are major issues post an EU referendum.

Heathrow

Figure 5: Controversy over Heathrow is nothing new

Figure 5: Controversy over Heathrow is nothing new

An interesting piece here from the BBC about the long running saga of choosing the next airport for London. Would you believe that committee after committee has been debating this matter since the Roskill Commission in 1971! They recommended a new airport on a greenfield site in Buckinghamshire. Then, as now, the government rejected this proposal and fudged the issue. And successive governments have been fudging it ever since.

So with that in mind you can understand why this week’s Airports commission report went down like a lead balloon. The problem here is that politicians keeping asking for an answer to a simple question and then not liking the answer they get back.

Expansion of Gatwick or building a new airport in the Thames estuary comes with numerous difficulties, not least of those cost, but also the issue that such an airport will be in the wrong place. Any replacement for Heathrow will serve not just London but a large chuck of England, and the bulk of people in England live either north or west of the Thames, so an airport tucked away in the South East corner of the country will necessitate a change of trains in London and a journey across London, something that will automatically add 1-3 hours onto any journey time.

This is the whole reason why the Roskill commission picked a site north of the capital. The present Airports commission, perhaps recognising the impracticality of this option went for the next best thing, which was to expand Heathrow.

My own view is that instead of expanding Heathrow, just make sure its integrated into the HS2 network, as this will eliminate the need for commuter flights to Heathrow, freeing up capacity. Furthermore, as HS2 passes close to Manchester and Birmingham airports, it offers the alternative of expanding them instead and offering a fast connection time to London, Heathrow and the rest of the country.

Figure 6: An interchange loop between Heathrow and HS2 would go along way to relieving bottlenecks, as well as eliminating the need for short haul flights to Heathrow

Figure 6: An interchange loop between Heathrow and HS2 would go along way to relieving bottlenecks, as well as eliminating the need for short haul flights to Heathrow

Its also worth remembering that much of Heathrow is given over to cargo. Do the parcels really care where they land? Can’t we just take one of a number of airfields near London (or take over Luton or Oxford airport), turn it into a dedicated cargo handling facility (again ensuring good connection to the rail network as well as the motorways) and redirect all the cargo flights away from Heathrow.

But, like I said, the problem is that no matter what answer they come up with, its going to be unpopular with someone. The Heathrow HS2 link for example has been killed off by the usual NIMBY-ish reasons, indeed Gatwick expansion is also resisted by various NIMBY’s in that part of the country.

Ultimately the government needs to realise that part of their job is to make unpopular discussions. So either they need to disappoint someone by expanding Heathrow, or building a new airport to the North West of London. Or re-route HS2. Or do nothing and point out to anyone in London that wants to complain about how awkward air travel is in London, or that prices are so expensive and the airports so inaccessible, well we had plans to fix this, but you objected to them!

Railway cuts

The Tories also promised billions to help upgrade railway lines in the UK, all as part of their election plans for a “northern power house. Needless to say, that promise didn’t last very long. But I have to give the Tories credit. Most governments would at least go through the motions of pretending to keep their election promises, for a year or two anyway, then act shocked and surprised when the programme they’d badly managed and starved of funds failed.

Figure 7: Britain has some of the highest railway ticket prices in the world....and one of the poorest rail services. All thanks to the miracle of privatisation!

Figure 7: Britain has some of the highest railway ticket prices in the world….and one of the poorest rail services. All thanks to the miracle of privatisation!

Certainly it is true that there is a desperate need to upgrade the railway lines of Northern England. New lines have to be built to ease overcrowding, as well a long delayed completion of countrywide electrification (yes less than half of the UK’s railway network is electrified!). Taking a train in that part of the world is like going through a time warp. It takes so long to get from, say Liverpool to Sheffield or Leeds to Hull, you’d swear they still used steam trains. But any sort of meaningful upgrade of systems here was always going to be a major job, as big as HS2 itself.

But frankly anyone who honestly believed that the Tories, a party who have been screwing over northern England since the 1800’s, were going to spend tens of billions on the north, well I’ve got some magic beans you might want to buy! This was clearly an election ploy to steal a few lib dem seats.

Scrapping the bottom of the railway barrel

Meanwhile, north of the border, recently Scotrail was rather controversially taken over by the Dutch company, Abellio,….which sounds like a type of stomach complaint you’d get after eating too many Amsterdam space cakes! :oops:

Anyway, one of the things that Abellio did was to promise that they’d buy in new trains. However the IMECHE magazine has suggested, as has the Scottish Herald, that quite a few of these will be refurbished Intercity 125’s, a type of British rail era train set. So it would seem a “new” train to the Dutch is to slap a coat of paint on something you’ve pulled out of railway bone yard. Dressing up mutton as lamb doesn’t quite cut it, this is dressing up haggis and calling it caviar!

Figure 8: The cab of an Intercity 125 in the Yorkshire Railway museum. To the Dutch this museum exhibit counts as a new train!

Figure 8: The cab of an Intercity 125 in the Yorkshire Railway museum. To the Dutch this museum exhibit counts as a new train!

The IMECHE is also of course strongly behind HS2. However in recent additions, they’ve been recognising that there is still scepticism from large sections of the public. However they do point out that the major question critics fail to answer is, if not HS2 what else? The UK has an antiquated and inefficient railway system that most Eastern European countries would be ashamed of.

All in all, continuing the current policy of sticky plasters on a leaky dam isn’t going to cut it. New trains need to be bought in to increase speeds, relieve overcrowding and provide greater comfort. Stations need to be upgraded, after all we’re still using an infrastructure largely designed by the Victorians when the population was a fraction of today’s. In short, its time for some difficult and ultimately expensive spending decisions to be made. Or we’ll be still being trucked around on creaky overcrowded railway carriages older than the majority of the people sitting in them.

Perovskite Solar cells

Despite being a £120 billion worldwide business, renewables received very little coverage over the election. And, as noted, what coverage it did receive involved promises from the Tories to cut subsidies…and give an even bigger subsidy to the nuclear industry!

Well one innovation getting some recent attention is that of solar cells relying on Perovskite rather than silicon, with a British firm, Oxford PV, at the forefront of developments….well until the Tories run them out of town (you know how pro-business they are!).

What is interesting about the Perovskite panels is that they offer the opportunity for significantly enhanced efficiencies, particularly if used in tandem with a layer of silicon based panels. Also they offer a much lower environmental impact. The environmental impact of solar panels is often exaggerated by critics, who often ignore the fact that far more heavy metals are emitted by fossil fuel plants. That said, there is certainly a desire to cut those numbers further, particularly if the result offers yet another opportunity for major cuts in production costs.

The downside? Most of the world’s Persoviskite is sourced from Russia!

Bladeless Wind turbines

Another innovative idea is bladeless wind turbines. These rely on the principle of resonance to keep the turbines turning, without the need for any blades. This offers the possibility of lower visual impact, greater efficiency and lower costs.

Figure 9: Bladeless wind turbines could be a significant step forward

Figure 9: Bladeless wind turbines could be a significant step forward

Downsides? Well the technology isn’t very mature and it may prove difficult to scale up these turbines to the levels seen with HAWT’s. But its good to see this sort of research with people thinking outside of the box. However it also shows why subsidies are necessary, at least so long as we are effectively subsidising other energy sources such as fossil fuels and nuclear.

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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.

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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.

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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.

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