P56. Pick Points

I see that Jerome is a little upset with the NYT story about coal and renewable energy costs. In the story the question is raised as to how much extra the average consumer is willing to pay to switch from coal to renewable fuels. There are several aspects to the story – the first is that the Administration can raise the relative cost of burning coal by imposing some additional cost for generating carbon dioxide (whether by tax directly or through cap and trade). The second is that, by regulation, it can make it so expensive to build a new coal powered station that the alternatives become more attractive. Or, by driving improved efficiency and conservation (especially in a time of recession) it can lower the need for additional power. However if costs are raised, then the utilities will pass these additional costs on to the consumer, and as I have noted before, running as the candidate who doubled electricity costs is not a sure election ticket. The article does, however, question the veracity of some of the estimates for coal-fired power

One big question is how much it currently costs companies to produce coal-fired energy, and the answers are often colored by ideology or self-interest. Companies that sell coal or rely on coal-fired electricity often pick a low number; environmentalists cite the indirect costs to society, like strip mining or spills of coal ash. And since the electricity industry became more competitive, the utilities, even municipal ones, have become more secretive about their costs.

Yet if the backup power to wind is natural gas (and most new power stations are planned to be fueled that way) and costs pick up around the end of they year, then the combined cost of new power generated that way will still argue for coal.


The debate between natural gas and coal continues in Mississippi where utilities with underutilized gas production are arguing against a new coal fired power station. At the same time there is a claim from Canada of a process that can burn any coal to generate electricity with a negative carbon dioxide balance. The Canadian Government is investing in ways to improve carbon capture

In the world of oil and gas pipelines there continues to be the sound of change, if not yet the certainty. The Nabucco pipeline (the one that will bring natural gas to Southern Europe without going through Russia) is getting some favorable publicity with the anticipation of an intergovernmental agreement in June to get the program running. However some of the gas is anticipated to come from Azerbaijan and the Shah Deniz field, and that production is being delayed. Stage 2 of the program is being delayed from 2013 to the 2014-15 time frame, though given the potential current glut in natural gas as more LNG tankers become available, this may be smart timing. It could also use another pipeline, the Turkey-Greece-Italy one, rather than Nabucco, since Azerbaijan is on the west side of the Caspian and thus does not have to go through Russia.

Nearer home there is a question as to whether the natural gas pipeline through the Mackenzie Valley might be built before the Alaskan natural gas version. ConocoPhilips thinks they are ahead. There is not, however, universal support for new pipelines north of the border. China, meanwhile has signed a deal, which gives it the natural gas production off-shore Burma, as well as a pipeline to deliver it.

It is a little hard to grow the feedstock for conventional corn ethanol in Alaska, but a more traditional fermentation near Governor Palin’s home has created “Permafrost” (which is a vodka). The Mt Redoubt volcano continues to rumble nearby, and snow was used to help Anchorage airport remove ash and get the place back running after the volcano had gone through a total of 18 eruptions (The snow helps hold the ash together, so that it can be moved by plow). There are some oil storage facilities in the area that might be threatened.

Kansas is coming out of a record year for oil and gas production with production valued at $6.58 billion. This was up 10% over 2007, with most of the gain coming from oil. Unfortunately thefts of power (electricity and natural gas) are also up. The story is unlikely to be repeated this year, as the national rig count drops below numbers last seen in 2003. The question becomes when this decline will be seen in a production drop, given the short lives of most wells these days. The article suggests before the end of the year. In Colorado, where much production drilling has occurred, the rules are being tightened to include the Colorado Division of Wildlife in those deciding on new oil and gas location assessments. At the same time two new gas-powered plants are moving forward in the region.

Looking at alternate energy New Jersey is moving ahead with solar generation that will develop 42 MW of solar power by 2012. Meanwhile India appears to be opening up as a market for the technology. This goes beyond just building PV cells in country, a new plant will increase one companies production from 12 – 42 MW, The new Solar Cities Initiative will ultimately affect 60 cities, but will soon start with 2, including Nagpur.

Wind Energy, however, to return to Jerome’s topic, is becoming more recognized as the renewable to beat. The report by the Royal Society for the Protection of Birds (RSPB) this week stated

The RSPB believes wind energy has an important role to play in tackling climate change. Consequently we only oppose those windfarms that pose a significant threat to wildlife.

The title “Positive Planning for Onshore Wind,” also suggests the bent of the report – available as a pdf of 57 pages.

P44. Pick Points

Half-a-dozen or so stories of interest.

Well the new Administration now has a new budget, and there are significant changes for the fossil fuel industries. Oil and gas “preferences” will be eliminated for a total of $31.5 billion by 2019, and, as I noted earlier, there is the hope for carbon credit income of around another $80 billion. This is not a single shot proposal

It also recommended repealing the enhanced oil recovery credit, the marginal well tax credit, the expensing of tangible drilling costs, the deduction for tertiary injectants, and the passive loss exception for working interests in oil and gas properties.

The proposals have not gone un-noticed and there is the anticipated set of reactions. There is a difficult balance to be achieved between encouraging new production and extracting justifiable revenue. Unfortunately, relative to other industries the fossil fuel industries have one awkward catch attached to them. If we don’t have the fuel, we don’t have a resurgent economy. And, paraphrasing the remarks of the Saudi Oil Minister, “we cannot abandon the energy supplies from an old fuel, before we have achieved the supplies from the new.” And we are a long way from getting that amount of energy from sun and wind. So while we can take some money from the old, and give it to the new I sure hope someone has the balance properly evaluated. West Virginia, on the other hand, is just simplifying their tax structure While taxes have a habit, in the end, of being paid by the consumers, in Russia the government has just allowed the oil companies to increase charges, at a time that production costs are falling. The rationale falls back on the need for revenue if one is to continue investing in new fields.
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The decision of the new Administration to reject Yucca Mountain as a nuclear waste repository is now final. Both the President and Energy Secretary Chu are opposed and the funding has been removed from the budget. Which is an interesting time for a company to propose processing Italian nuclear waste in Utah. Currently the case is before a federal judge in Salt Lake. However if any of this waste is shipped through Missouri it will now cost a new set of fees.

The Philippines have mandated a percentage of ethanol in their gasoline, and now are looking for ways to produce the ethanol. Cassava is the new feed crop and plans are moving ahead, against local opposition, to install some 20 plants by 2011. China has found that it is cheaper to produce ethanol from cassava than from corn or wheat where it can be grown.

Up in Canada the Ontario government is encouraging investment in solar and wind energies through the Green Energy and Green Economy Act . The concern is that to have a significant impact on need, the scale of new farms must be large, and there are still some technical issues to be resolved. There is a map of existing wind farms in Canada. In California utilities are taking a more pro-active role in encouraging solar, looking to fund 250 MW of construction over the next 5 years. The plan is to use eSolar solar thermal technology, using small tracking mirrors to focus the sunlight. Meanwhile Kender Energy is promoting a solar thermal system that heats helium as the energy transfer fluid.

In Indonesia investment is going ahead to develop a number of Geothermal Energy projects. In Georgia home owners can take the 30% credit promised in the stimulus package and add $2,000 from the state to help pay for ground source heat pumps (or geothermal heat pumps as they are called there) . It is hoped that this will allow the investment to be recouped in about 4 years., with drops in heating and cooling bills predicted to be up to 50%. (This implies an installation cost of around $20,000).

There is some suggestion that a floor has been found for oil prices, though no sooner had that been posted, then the price dropped on news of Japanese fiscal problems. Meanwhile the low price is giving Iraq some concern, since they need the revenue and are anxious to bring partners in to produce more oil.

More stories can be found at The Energy Bulletin and Drumbeat at The Oil Drum.