Tech Talk - A Dickensian Situation revisited

Back in March 2005 I posted my first offering to the new site that Kyle and I had agreed to call “The Oil Drum.” Now, some eight years later, this will be my final Tech Talk to appear on that site, and it is perhaps appropriate to go back to that first post, and make a couple of comments on how it panned out. It read as follows:

When I was young I was fascinated by a small china statuette that my Grandparents had of Mr Micawber. He is a character, and a sympathetic one, in Charles Dickens's book "David Copperfield", in the course of which he goes into debt, His explanation of his financial condition can be compared to the coming world experience as we now live through Hubbert's Peak. You might, in today's phraseology, call this the Money quote:

'My other piece of advice, Copperfield,' said Mr. Micawber, 'you know. Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery. The blossom is blighted, the leaf is withered, the god of day goes down upon the dreary scene, and - and in short you are for ever floored. As I am!'.

In this case consider that our expenses, i.e. the world use of oil, went up last year to around 83 million barrels every day (mbd). (A barrel is 42 gallons). Now as long as our supplies (income) can match this outlay then we are in happiness. This was, in relative terms, where we ended last year.

However this year our expenses are going to go up. It is a little difficult to predict exactly how much but current predictions are for this to be around 2 mbd. Let us equate this to the old English sixpence (which was back then worth about a dime. Twenty pounds being worth about $100).

If we follow the Micawber example if our income, world oil supply is equal to or greater than our expenses then we can stay happy. But here is the rub.

When world oil production is just about as high as it can be (non-OPEC countries are now producing just about as fast as they can) and OPEC spare capacity is down to around an additional 1.3 mbd. then our income this year will likely not be much above 85 mbd, if it gets there. (In a later post I will explain why it probably won't).

So we are at the point where within the next few months income and expenditures will be in balance (Micawber's twenty pounds). Except that the industry being a big one there are always things going wrong. In the latter part of last year for example we had:
• the hurricanes in the Gulf that closed down about 0.5 mbd of production for several months,
• oil production in Iraq, which should be around 3 mbd, but because of pipeline bombings etc dropped below 2 mbd,
• there were frequent threatened strikes on the oil platforms in Nigeria,
• and Russian production declined more drastically than had been anticipated.

Some of these are still with us, some have been resolved. And other problems, such as the complete employment of the world tanker fleet, have yet to make an impact. But any one can drop supply.

Yet while our supply (income) is about at a peak (twenty pounds), our expenses (demand) are still going up by this sixpence a year. So that some time this year expenses will have gone from twenty pounds to twenty pounds and sixpence. A number of economists had been predicting that there would be a reduction in the rise in demand to keep us below that figure, but it is already clear that they do not adequately recognize the considerable needs in China and India that drive this increase (and they only have to read the papers to see it).

The big question is when will we reach the point that we cross over the balance point. Right now with the Saudi Arabian government saying that they can increase production by up to 1.5 mbd one might think we could get through to just about the end of this year. Unfortunately some of us are a little cynical about that number, and I'll explain why in another post.

One final gloomy thought - production in other countries (such as the UK) is falling, and the countries that used that supply must find another source. And if we are now at the peak of production, then our income cannot increase above twenty pounds and and may indeed fall back below twenty pounds, while our expenses will continue to increase to twenty pounds and sixpence. It is not the absolute size of the market that will now drive, but the relatively small fluctuations that take us out of balance.

The result is misery, and we are for ever floored.

Looking around it is reasonable to note that we don’t see the level of misery that, from reading that post, one might have expected to happen. We have gone through a major recession, yet demand has, overall, increased and production has risen to meet that demand. Yet looking at how this has been met is instructive.

Figure 1. Changes in liquid supply sources from 2000 to 2040 as anticipated by Exxon Mobil, with lines added to show 2005 and 2013. (The Outlook for Energy: A view to 2040)

I have added lines to show the situation in 2005, when the piece was written, and for this year. It is worth noting that, using the definitions that Exxon Mobil give, conventional crude and condensate production has, indeed, declined since I wrote those words. And if one includes Oil Sand and Deepwater then production has remained fairly stable at the levels back in 2005, and will (according to EM) likely stay so into the projected future.

The three sources that I had underestimated, in terms of production growth were in Biofuels (which is now at around 2 mbd), the growth in Natural Gas Liquids (which for OPEC alone is now projected to reach 6 mbd by next year up from around 3 mbd in 2005, and the growth in tight oil. This latter development, particularly with the use of long horizontal wells that are artificially fractured and injected with a slick-water suspension of a proppant, has been very successful in developing resources which were otherwise at best marginally economic. However the relative contribution that this is expected to make in overall supply is not that great, and I expect that, because of the high decline rates in individual wells, that this will only contribute on the margin of the problem.

When I began writing at The Oil Drum I was concerned that there was a lack of understanding of the impact that reservoir decline rates would have on long-term supply. As larger fields are depleted, so the world turns to smaller fields and these drain more rapidly, so that more and more are needed. (The Red Queen situation that Rune Likvern and others have so aptly described.

Deepwater resources have proven to be more difficult to bring on line than originally estimated and thus, for example, in the case of Brazil OPEC now anticipates that the production from the Lula field (originally Tupi) will only offset declines from wells in the rest of the country, with perhaps only a gain of 10 kbd overall from the addition of the 100 kbd expected from wells now coming on line. And thus, while this is a resource getting more attention (there are expected to be 60 Deepwater rigs in the Gulf of Mexico by 2015) the slow pace of development may not fill the increasing gap left as conventional oil production continues to fall, as Exxon Mobil suggest.

In retrospect, therefore, I was wrong in anticipating a relatively immediate impact from an anticipated imbalance between oil supply and demand. But, within the time frame the price of oil has risen, and the future looks no happier than it did back in 2005. The threats have changed – we seem to be in a quiescent period for major Gulf Hurricanes, for e.g. – but the threat of growing and spreading turmoil in MENA makes it less certain that we can count on much increase in production from Iraq, among others. Russian production rebounded more than I expected, but whether that can be sustained is still in doubt. The hope, at the beginning, was that the threat would spur increased looks into alternate sources of liquid fuel. But while there was a flurry of activity into biofuels (and I myself saw algal work that held a great potential, - though funding has now disappeared for that effort) there is less of a feeling of urgency in the air. Wind and solar sources have reached a point where they are no longer novel, and there is not much else in the near term that holds much potential.

Oil production takes money and resources, but most critically it takes time. Without that investment, particularly in viable alternatives, the oil “income” (supply) will likely soon start to fall short of the oil “expenses” (demand) and as Mr. Micawber so aptly said “we are forever floored.”

When these posts began, technical blogs, such as TOD, posed the potential for mass education in a way that had not been seen before. Readers have been kind in regard to the quality of the posts themselves. But the contributions from those interested, and those in industry who took the time to comment and debate ended up making this much stronger than the initial words in any post. Expertise came in many forms and informed me as well as the rest of the readers in what turned into a wonderful opportunity for many people to understand some of the complexities of supplying the world with hydrocarbon energy. I was thus able to help bring a little understanding of the energy business to vastly more folk than I had in the entirety of my academic career.

I will always be grateful to Kyle for giving me the opportunity to make this contribution, and to his efforts which led to its great success. I can illustrate that with some numbers – as an academic I took persuasion to allow my class size to rise much above 20, and at Bit Tooth Energy I see about 300 readers on a typical good day – Kyle had us above that number in a very few months, and at its peak TOD was handling 200 times that number. The site would not have continued too long as it grew in size without the indefatigable SuperG, who kept the site up under wide ranging pressures, and took care of the technical side of the house. Leanan brought and kept us readers, and provided many of the topics that we needed to create the posts on site, and Gail kept me going with encouragement and support in more difficult times. Nate orchestrated the closing posts and that was not easy.

The folks Kyle brought in to build an international forum were formidable and highly productive, and so to them, and to all of the gentle readership I say again a heartfelt “Thank You!”

(Heading Out – Dave Summers in the mundane world – will continue to write Tech Talks at Bit Tooth Energy, though he writes on a wider range of topics at that site).

The Shell future - a look at their new projections

I have recently reviewed the predictions made by BP and ExxonMobil as they relate to energy supply and demand in the years to 2030. Shell has just updated their predictions, which extend further out to 2050. In the opening discussion they make the point that new technologies will require, in their words significant time to develop.

New energy technologies must be demonstrated at commercial scale and require thirty years of sustained double-digit growth to build industrial capacity and grow sufficiently to feature at even 1-2% of the energy system.

Thus much of the focus of the report deals with existing fossil fuel capabilities. Specific new factors that have led to the modification of earlier predictions include the greater instability of the global economy; the growth of uncertainty over regulatory steps that will be taken both to address the concerns over climate change, and in light of the Macondo well disaster; the improved supply potential for natural gas both from shales and coal bed methane supplies; and the emergence of a re-invigorated Iraqi energy industry with a potential to develop significant new resources.

Shell has, in the past, developed two different energy scenarios – the first of which it calls Scramble, where the world moves along a Business As Usual (BUA) scenario, only making changes as these become forced upon governments and companies by the impact of changing circumstance. The second is called Blueprint, a scenario that Shell is now announcing it will advocate, where instead of the reactive approach of Scramble, a set of plans is developed to pro-actively address the issues of carbon dioxide generation, and to ensure the world has adequate energy.

The difference between the two approaches was illustrated in the initial document by the predicted sources of energy through the years to 2050. By putting these one after the other, it is possible to compare how supply changes in their two scenarios.

1. Energy supply scenarios for the future – Shell Scramble scenario

2. Energy supply scenarios for the future – Shell Blueprint scenario

One significant change between the two, apart from the lowever absolute level in the lower case, is the smaller role that biofuels play in the more distant out years. For example in the Scramble scenario they are given a much greater role in that future.

Change in biofuel energy production in the Shell Scramble scenario.

In their new set of projections Shell has more forcefully adopted the Blueprint route, and has produced an amended projection of future energy sources through 2030 that makes it easier to compare with the ExxonMobil and BP plots that I have posted in the past.

Comparison of BP and EM energy futures, (The vertical scale is in billions of tons of oil equivalent. )

However, each company having their own set of units, the conversion needed to compare with the earlier plots is that an ExaJoule (EJ) is about equivalent to a Quadrillion Btu (Quad), and a billion tons of oil is the equivalent of 41.9 EJ.

Shell energy sources for the future. Dividing the vertical scale by that 41.9 gives an equivalent full scale value of 19 billion tons of oil equivalent, not that much different from the two other plots above it.

Two things are evident from this plot, one being the increased role that Shell see natural gas playing over the next 20 years, and the other the decrease in the likelihood of biofuels being more of a significant player in that time frame.

The sources for these levels of production are left quite vague in the Shell document. Only the promise of increased production from Iraq – seeming to accept the more optimistic projections of the Iraqi government – is given as a justification for seeing sensibly no decline in overall oil production levels to 2030. However since Shell is a part of some of the new deals which that Government has struck perhaps there are reasons for this optimism. For those who forget:

Officials say the deals will boost Iraq's oil-producing capacity to around 12 million barrels a day by 2017, putting it on a par with Saudi Arabia. That, said Mr. Birol, "may be a challenge to the other oil producers."

Um! Yes!

Shell devote much more of their projection document to the impact of climate change regulation and response than do the other projections. One item that caught my attention was their comment on water needs.

Energy producers are amongst the largest industrial consumers of freshwater. The link between energy production and water will intensify as portfolio choices move increasingly towards more water-intensive production methods such as biofuels and enhanced hydrocarbon recovery methods (EOR). In the US alone, where energy currently accounts for 40% of all freshwater consumption, projected growth in energy production will require an increase of 165% in freshwater withdrawal by 2025.

Shell also tabulated, against their projections, past growth rates for different sectors of the energy supply scenario.



To sustain growth, and to change, for example, current coal burning practice to a total carbon capture and storage (CCS) system for coal use globally by 2050 will require considerable investment and continued research and development, and similar levels of continued development will be required to develop all the sources needed to meet demand needs over the next forty years. It will also require a smarter power distribution system.

Sometime between 2020 and 2030, we can expect the constraining factor for renewables deployment to move from industrial capacity building to accommodation within the energy system. This would impact land-use and require new infrastructure, such as major upgrades to grids 8, 9. These are essential for renewables to maximise their share of the energy mix.

The new report closes by citing some of the factors that might indicate that the world is following a Scramble path, and others that it might be moving toward to Blueprint option.

It will be interesting to see which one turns out, in the end, to be closer to reality. But there are plots in this document that show peak oil occurs around 2020.

Cost viability and algae

Robert Rapier recently drew attention to the demise of GreenFuel Technologies, the company founded on ideas from MIT and Harvard and supported by millions of dollars in venture capital funding. One of the creative ideas that the company has was to located their plant at existing power stations so that the carbon dioxide generated in the flue gas could be fed into the bio-reactors holding the algae, with the gas also keeping the algae at an optimal growing temperature. It was a company that was in the vanguard of promoting the use of algae in both carbon dioxide collection and liquid fuels production.
The company, however, ran into problems in raising more money in the current climate, and with the technology.

Getting the whole thing to run smoothly, though, was tougher than expected. GreenFuel could grow algae. The problem was controlling it. In 2007, a project to grow algae in an Arizona greenhouse went awry when the algae grew faster than they could be harvested and died off. The company also found its system would cost more than twice its target.

It is that latter part of the paragraph that is the more telling. When folk first consider using algae as a future fuel source, it is often because, when tabulated, algae can produce more fuel per acre per year, than any other crop.

(Source Biodiesel - Growing a New Energy Economy - Greg Paul, Chelsea Green Publishing Company, 2005, 281 pages)
However, getting what has been achieved in the short term, into a production mode that sustains the same yield for year after year is not that easy. Nor is simply finding the best algae the only solution required for the problem.
Given the collapse of GreenFuel, it is perhaps useful to look at some of the things that need to be considered, if you are going to have a shot at a viable algae operation.

First you need to select an algal species. This is not as simple as it sounds, because the initial thought might be to screen all the thousands of algae types that exist around the world to find the ones that (a) hold the most oil and (b) grow fastest. Algae grow by multiplication and so the common metric for the latter is the time it takes to double the volume of algae in a container, with less than a day being a good place to start. And a species that has 50% lipid content (the oil component) is also the sort of ballpark we are looking for. There are a number of candidates that meet (or come close to meeting) these criteria. One of the benefits of the program that the NREL review of algae produced was a filter of the thousands of candidates, that gave data from which to select some of the more productive.

Let us, for the sake of discussion, call one candidate AA, another BB, and a third CC. One of the early things you discover is that some of the better ones grow in salt water (seawater) rather than in river/lake conditions. That makes a little difference, particularly if you are interested in putting your algae operation (we’ll call it a farm) out in the middle of the country many miles from an ocean. So that if you need that water you can either make it or import it, neither cheap.

And speaking of cheap, one of the first steps is to decide how you’re going to contain your algae and growing medium (nutrient). GreenFuels used plastic tubes, but as Fireangel pointed out over at The Oil Drum these are very expensive and he concluded

That leaves gross profit of $3.00. That means at current prices it would take 50 years to just cut even on their investment. That is clearly not feasible. For one thing these polycarbonate sheets take a lot of UV damage and their useful life is almost always less than 15 years (usually 10 years).

It seems that at a recent algal biofuels meeting it was concluded that the large flat race-track type of layout is the only one that stands the chance of financial viability.

But that selection brings its own concerns. For the light to reach the algae throughout the water column in adequate quantity, the water can only be around 6-inches deep. This means that the ponds have to be large, (bringing in construction and other land costs). It also limits the species that can be grown, since the conditions are more tempered by local conditions and survivability. This almost mandates, for open systems, that the local conditions select the algae, rather than picking the best. (Which helps explain why we chose a confinement strategy based on facilities constructed for other purposes and paid for, but that is another story).

So having selected the algae and the farm, the next cost is for the nutrient that the algae needs, and to supply the carbon dioxide. Here the potential for beneficial selections should be considered, some algae for example can use sewage as the nutrient, and if cap and trade comes along, then some of the income can come from the carbon captured and used by the algae. (Proper distribution of the gas, and keeping the right quality and concentration also costs, as may the supply and its transport)

Having grown the algae, the next step is to harvest it and separate out the algae. There are some interesting new concepts (bearing in mind that the algae are a very small percentage of the pond volume).

One way of reducing the costs of separation by using an algae, such as botryoccocus, that weeps oil rather than creating it internally.

Another, Phycal, is trying to harvest oil from algae without killing the algae. Instead, Phycal bathes the algae in solvents which can suck out the oil. Some strains of algae can go through the process four times or more.

There seem to be two snags to the process, the first being that the algal productivity seems to decline with cycle number, and the other is that the biomass itself, once the oil is removed, may have value.

Costs from Solix for example:

Algae biofuel startup Solix, for instance, can produce biofuel from algae right now, but it costs about $32.81 a gallon, said Bryan Wilson, a co-founder of the company and a professor at Colorado State University. The production cost is high because of the energy required to circulate gases and other materials inside the photo bioreactors where the algae grow. It also takes energy to dry out the biomass, and Solix uses far less water than other companies (see Cutting the Cost of Making Algae by 90%).By exploiting waste heat at adjacent utilities (one of our favorite forms of energy around here), the price can probably be brought down to $5.50 a gallon (see Will Waste Heat Be Bigger Than Solar?). By selling the proteins and other byproducts from the algae for pet food, the price can be brought to $3.50 a gallon in the near term.

OriginOil noting that

“The energy cost of extracting algae is 10 times the energy cost ofextracting soybean oil,” Riggs Eckelberry, CEO said.

has a video on their site showing a cheaper way of getting the oil out.

The process also generates glycerin and oxygen as byproducts that could be collected and become part of the saleable product.

Alternately the algae can be used to generate natural gas ) as suggested by Genifuel

It works like this. Algae is grown in ponds and, while it is still wet, is it placed in gasifiers with a chemical catalyst that allows it to cook at relatively low pressures and temperatures, said president Jim Oyler. It cooks at 350 Celsius versus 700 Celsius.

The cooking produces a synthetic gas that is 65 percent methane, or CH4, and 35 percent carbon dioxide along with some other trace materials. The carbon dioxide is then pumped into algae ponds as food. It will be more expensive than natural gas pulled from the earth, but it will require lower subsidies than liquid algae fuel to be competitive with its fossil fuel equivalent. It yields 0.55 liters of gas per gram of dry material, Oyler claimed.

There are thus a lot of considerations (I really did not get into efficient light use, correct fluid temperatures, and secondary processing) which led to the conclusion some time ago that this has to be addressed as a system problem, and set of solutions, rather than piecemeal. Profits and income streams from as many sources as possible have to be included, since without them, as with GreenFuels, the concept is not enough to be sustainable. And to develop the systems approach needs a lot of different inputs.

Can politics be removed from biofuel generation?

The Administration has been praised for its move to rely more on science in the generation of policy, and on Tuesday a new group was announced that will work to encourage a new generation of biofuels.

The working group aims to accelerate funding to biofuels producers, in the hopes that they will phase out fossil fuel use at their own plants, instead using biofuels.

The group, which will be headed by the chiefs of the Environmental Protection Agency, the Department of Energy and the Department of Agriculture, also exists to encourage a new generation of biofuels made from biomass and other non-corn feedstocks.

Part of the study will, however, try to create a standard for assessing the GHG costs of producing and using the new fuel.

Mirroring a similar change in California, EPA is proposing to measure carbon emissions that come as a result of biofuel production. This includes a complicated and controversial formula that adds in emissions that occur when overseas farmers respond to higher food prices by converting forest and grassland to cropland.

“Life cycle estimates of the greenhouse gas relate to the fuel cycle and land conversion,” said EPA Administrator Lisa Jackson. “This research will be very important to future policies.”

It may well be that the “controversial” formula may take the discussion out of pure science, and give the opportunity to ease politics back into the discussion.

Certainly the Administration recognizes the financial cost, with some $800 million of DoE stimulus money being directed at research, development and the funding of test projects. However $484 million will go to demonstration projects, some of which are already being funded. The major emphasis seems to remain on generating ethanol, though an algae biofuels consortium will also be funded. This is to be followed by $1.1 billion in DoA funds much of that will go to help producers, through the biofuels credit program, restructure their businesses to survive. At present production is down and there is not enough (if any) profit to be made between the price of the corn feedstock and the sale of the ethanol.

The carbon costs of each process, will be calculated by the “controversial” formula, but the calculation was first subjected to “peer revew.” Though I guess that the validity of that process depends on the peers that were used.

In regard to the algae effort the Univ of New Haven are looking for better strains of algae to use. They note that some $195 million was raised for investment in algae work last year.

One of the greater drivers for algal biofuel development is coming from DoD who are anxious to find a replacement source for the jet fuel, on which an increasing percentage of their mobile systems run. DARPA have been taking a lead in developing this research. One of their advances has just been given some publicity

Researchers at the university (UT) have already developed an electromechanical process for extracting oil from an alga cell that is rapid, energy-efficient, free of solvents and less expensive than competing methods. The technique employs electric fields to break open the cell.

Another group of researchers at the university is focused on the science of separations research and is identifying techniques to separate the oil from the algae biomass once it has been released.

In another development Richard Sayre at theDanforth Center in St Louis has discussed the use of algae that can be milked instead of being destroyed. The goal of the DARPA program is to reduce the cost of the biofuel to $3 a gallon.

The fact that algae make fuel while consuming CO2 is also being presented to Congress at the same time as a new report on the subject is being released. (pdf).

In perhaps a sign of things to come, an ethanol plant in Iowa is going to add some algal photobioreactors to the plant. The algae will take advantage of the water heat and CO2 generated from the ethanol plant, with hopes to use some 60% of the CO2.

Energy Summit - the third part (end of day 1)

This is the fourth part of coverage of the Missouri Energy Summit, with the earlier posts listed at the end of this one. This post covers the final session of the first day.

The first speaker was Karen Harbert of the U.S. Chamber of Commerce Institute for the 21st Century., and she spoke of Energy and Climate Change realities. For her Energy Security means affordable, reliable supply and the reality is that to get that we need to establish our position, at a time when the world is growing and with it demands for energy. She pointed out that at present 1.6 billion people do not have access to electricity, and that will change. As it changes, and 70% of the demand for power will come from developing nations where most of these folk live, so it will become harder to both get energy supplies and to also get the credit to pay for them.

New production, and new sources of power will need time, the right policies and lots of money if they are to be realized. But even then “we cannot mandate what technology cannot deliver.”

Singing a song after the hearts of the academics in her audience, she noted that we need new talent to develop these new sources, yet we are graduating a lower number of engineers. That must be switched around, and while the optimal product might be an Engineeer with a Masters in finance, there is not yet enough incentive in the path to get many students to follow it, and without them the path will stretch longer before we have the supplies that we need.

(Ed. Note: To reply to a comment the top left section of the graph (though in another version) has been expanded and added to the bottom of the post. This is so that I can try and give a better explanation of what I am talking about).
.

She was followed by Himadri Pakrasi, of Washington University in St Louis. Washington U has recently got a significant infusion of money for bioenergy production, with a total commitment of some $55 million. This has created the Center that Dr. Pakrasi runs and which is dedicated to bioenergy production. He spoke of the availability of tall grasses in the mid-West and of algae, and the recent consortium that had created the Clean Coal Consortium on campus.

Bob Dixon followed with a talk entitled “The Perfect Storm meets the Global Tsunami.” Lest there be any doubt as to his position on global warming, his first remark was a question to the audience on whether they believed the world was warming, and when a lone dissenter raised a hand at the front, his response was that “he was not willing to take the risk.” (I will comment in a later post about the risks that he is quite happy to incur to avoid that of global warming). To show that the world was warming he contrasted winter pictures of the Arctic ice cap in 1990 and 1999 with the summer ice cap in 2007.

And since ex-Vice-President Gore mentioned the same thing in his testimony before the House Committee today, let me just put up the graph of Arctic ice cap size, so that you can judge their remarks against the truth. And it is also here because porsena referred to earlier plots, that only go up to 2005.


Source IARC – JAXA

You will note that the current size of the Arctic Ice field is larger than it has been at this time in any other year of this century. It is actually (as of yesterday) within the range of variability of the average field size over the past 28 years, and if the current trend continues, will exceed it by the middle of May.

Bob Dixon, having made his points about the Arctic ice, went on to talk about the need to conserve energy through better building design. He noted that 40% of energy expended goes into buildings and homes. And while we have standards for the performance of many things, and tests for their efficiency, we do not have any for buildings. Yet we are approaching a time where utilities will increasingly be able to turn off our air conditioners, for 10-minute periods, in order to conserve their energy outputs, when loads approach brownout conditions.

We are now at a time that there is a program to weatherize, where homeowners are encouraged to improve building efficiency, but the question is, who verifies that what is done is right, and that the costs will be recovered as promised?

Yet he gave an example of a program that works. The Australian Government rents office space, but will only do so if the building is energy efficient. By creating that demand, and then competition for its business, the Government has ensured that private owners are motivated to move forward and change, overall, the design and efficiency of business construction.

Michael Chesser of Great Plains Energy came back to talk about the punitive effects of cap and trade legislation. He noted that, on average, it will raise electricity rates 40% and there should be a wide ranging debate before such a step is undertaken. He expects that “the next ten years will see more change than has occurred since Edison invented the electric light.” But this requires that the partnership of players be expanded, and both utilities and customers must be willing to step up and be partners.

Te stability of energy prices over the past years has been an asset to the economy and American business. This has required that the utilities provide enough capacity to meet the maximum demand, but bear in mind that the average load is only 50% of capacity and it goes above 75% of capacity about 10% of the time. Thus the utilities have a large investment that rarely is fully paid for, and really does not address the efficiency of supply and demand. He again drew attention to the EPRI PRISM site (3.5 meg pdf).

And while bearing this in mind, remember also that there are now parts of California where there is sufficient wind energy available that the price of electricity goes negative in the evening. In that circumstance it would be nice to have a number of plug-in hybrids sitting ready to download the excess. Yet there are safety issues for such types of systems, and a central control of them.

The final speaker of the evening was Bob Kruze of GM. He noted that the study of physics saves lives. (It keeps the idiots out of Medical school). He looked into the future and sees some 900 million vehicles which are currently owned by only 13.5% of the global population, but by 2020 this will rise to where 15% of the populace will own a car. That rise in demand will consume a lot of transportation fuel. But we cannot pump enough oil to meet it. (He was one of very few who bent a nod in the direction of Peak Oil). We can, however displace some of the demand with efficiency and diversity. From the point of emission control cellulosic ethanol would be a winner, since it would lower carbon demand by 85% on a well-to-wheel basic comparison. He expects that ethanol will replace 40% of gasoline demand by 2030., and GM is partnering with two efforts, one thermo-chemical and one biological, to produce ethanol, with Coskata and Mascoma, the latter looking at prairie grasses. He anticipates there is enough off-peak capacity to power 30% of commuter demand. He claimed that GM did not kill the electric car, but talked about the Volt, the Extended Range Electric Vehicle (EREV).

He also spoke up for hydrogen, and that there is plenty being made today, that could provide a fuel. (Neglecting that it is used to help refine hydrogen deficient crude in refineries at a considerable cost). He felt (neglecting that) that hydrogen could be competitive at around $2 - $3 a gallon (untaxed). Hydrogen would be generated from Natural Gas. And just recently one of their card did a 300-mile trip to Terrytown NY.

Earlier posts in this series covered the program; the keynote address by T. Boone Pickens; and the first invited speakers.

Current Ice coverage in the Arctic - April 2009 Detail showing recent changes in slope

The Missouri Energy Summit

This is the season where Conferences seem to thrive. Thus, having recently got back from the EIA Energy Conference in Washington (that had, I believe some 1,200 attendees) this week sees me driving up North to the Missouri Energy Summit. Although taking place on the Columbia campus of the University of Missouri, the event is chaired by Jack Carney, the Chancellor of Missouri University of Science and Technology and runs for Wednesday and Thursday of this week. It is suggested that there will be over 2,000 folk at the meeting, and the Keynote Address by T. Boone Pickens is already sold out.

As with the earlier conference I will be trying to put up a couple of posts decribing what goes on, however, in contrast with the Washington meeting I am scheduled to take part in the Poster Sessions, and am also giving a paper (on coal use, mentioning in passing recent comments on the size of American and global coal reserves and the EROI on coal as it moves forward). But then I check the Website and lo! The breakout sessions at which I am speaking are also now sold out. So if you don’t have a seat, then, other than watching live video of the presentations through the Conference Website this may be your only other source of information – though we will see what sort of press we draw.


The meeting starts at 11:45 am on Wednesday with Mr. Pickens talking at 12:15 in Jesse Auditorium. This will be followed by a review of some of the Energy Related Research that is being carried out by the four campuses of the University system, and then a panel of invited speakers.

These include:
Hon. Dale Klein, chairman, U.S. Nuclear Regulatory Commission
Joan Woodard, Ph.D., executive vice president and deputy laboratory director for integrated technology programs, Sandia National Laboratories: "The Dimensions of Energy Security"
Daniel F. Cole, senior vice president, Ameren Corp.
Karen Harbert, president and CEO of the U.S. Chamber of Commerce Institute for 21st Century Energy
Himadri Pakrasi, director, International Center for Advanced Renewable Energy and Sustainability, Washington University
Bob Dixon, senior vice president and global head of efficiency and sustainability, Siemens Building Technologies; industry vice chair for the Alliance to Save Energy
Michael Chesser, chairman and CEO, Great Plains Energy and KCP&L
Bob Kruse, executive director of global vehicle engineering for hybrids, electric vehicles and batteries, General Motors.

On the Thursday the program starts at 7:30 am with:
Robert K. Dixon, leader, Climate Change and Chemicals Team at the Global Environment Facility
Mark Templeton, director, Missouri Department of Natural Resources
The Governor will then speak, followed by:
Richard Sayre, director, Enterprise Rent-A-Car Institute for Renewable Fuels, Donald Danforth Plant Science Center
Robert Duncan, vice chancellor for research and a professor of physics, University of Missouri-Columbia: Prospects for Discovery of New Energy Science


From 10 am there are then four concurrent tracks (on Power Generation, Transportation and Biofuels, Energy Infrastructure and Materials for Energy Applications) in the sessions through lunch.

In the afternoon there are break-out panels that run consecutively on Clean Coal; Transportation and Biofuels; Nuclear Energy and Infrastructure Development with the meeting closing at 5 pm.

I’ll let you know how it goes.

2009 Energy Conference - Renewable fuels

The renewable energies panel was moderated by Michael Schaal of EIA, and again took the form of a panel sitting around a table chatting. The panel each gave a short presentation and that took up most of the time before a short discussion.

Andy Arden of the National Renewable Energy Lab spoke mainly about the production path for ethanol, since the future supply of gasoline is likely to be flat, and ethanol provides therefore the only path to growth. He anticipates that with a 7% growth in use each year, the contribution from this fuel will grow from 2% to 15% of the total. A considerable part of the ultimate expansion in supply is to come from cellulosic ethanol, and the assumption, since companies are now constructing pilot and production plants, is that the techno-economic analyses are now coming up favorable. This is needed given that the target for that milestone is 2012, for it to be cost competitive, and that by 2022 the yield needs to be 21 billion gallons. The enabling bill has set specific targets for production after 2012, and all that is needed (ALL ??) is for the process to become cost effective.

The problem with that goal now is likely to be a lack of available credit, given the financial condition.

In the division of tasks for the National Labs, NREL deals with the thermo and chemical treatment of the biomass, INL and ORNL are responsible for the biomass production (including such examples as poplar). There is a concern however over logistics and an understanding of the issues of both quality and quantity. Because of scale issues in the economics of these plants a 5-mile gathering radius is too small, but as one goes to a larger harvesting radius then the costs of the harvesting, transport and storage also begin to factor into the equation (see the story from Dubuque). The resulting ethanol has to live within a price spread that makes it viable, which is thought to be around $2.50 as an equivalent price to gasoline).


Unfortunately the long-term numbers are not inspiring for ethanol, it is the current “biofuel du jour” mainly because it only “requires only one miracle to work” while some of the alternatives require several. And so there is a need to look beyond ethanol, to those technologies that, usually based on bacteria, will generate other fuels generally through aqueous phase reforming. One that I had not heard much of before was dark algae, which is a form of algae grown in the dark, that feed on sugar. Companies to watch in these areas are Virent, but the challenge will always be in the provision of an adequate feedstock at an acceptable price.

Matthew Hardwick of the Renewable Fuels Association lists 26 cellulosic programs, but things arre changing, since now credit is hard to come by and this is a capital intensive industry. He felt that the EPA models that consider ethanol were too low when it came to judging it against a carbon production standard, and felt that it was less of a polluter than it was painted to be. But there are other constraints, such as water and land use, that are only now becoming evident as plans to scale up production start to be put in place. And in developing the market forward, there is a blend wall that comes into play at 10% of the fuel market. This will hurt the ability to meet the target goals since they require that ethanol surplant gasoline at levels above 10% of the blend. The hope, therefore, is that EPA will change the mix max to 15% with the target of using an E50 by 2015. However once the mix gets to 12% engines will need to be changed to effectively use the new blend.

Denise Bode (who is the voice on the video at the American Clean Skies website, though is now with American Wind Energy) talked about the benefits of the coming growth in Wind Energy. Though did recognize that there are some concerns about transmission to get it where it needs to be.

Bryan Hannegan of EPRI spoke more from the point of view of the utilities, and noted that renewables still have a long way to go to ramp up to the levels of scale of production that are needed. He quoted a fiure of $27 a ton for carbon credit (allowance) that comes in in 2015, as being part of the models that they use for prediction. In their models gas prices float in the $4.95 to $7.95 range. But in looking at a goal of 35% of the national energy coming from renewables by 2050, there are some things that still must happen. Bear in mind that for that much penetration the renewable source must replace some of the existing legacy systems that are well established, and paid for. Without that there is not enough market for the growth.

He sees wind being the initial market penetration, penetrating even into the Tennessee Valley where there isn’t much wind, and a lot of competition. He had some land use and water concerns over biomass, though this will also be a big player by 2050. From the generation stations there will then be the need for transmission and linkage into the coming smart grids and those also are questions not yet answered. The EPRI position is spelled out in a report available on the EPRI website. He noted that just using natural gas as a fall back when the wind does not blow will put too high a demand on dedicated gas turbines, and that just relying on the grid being big enough so that the wind will be blowing somewhere might be a little optimistic. In the end he felt that to meet the carbon goals the country will need to do more than just rely on the renewables.

It was further noted in the discussion that less than half of the country could name a renewable fuel. And we need to avoid complacency over energy supply when business returns to normal.

Expanding Dr. Chu's Comments

After posting the P41 Pick Points, it was not until this morning, over a quiet cup of tea, that I could sit down and actually listen to what Dr Chu had said during his visit to Platts on Thursday. There were sufficient additional pieces of information (and the comment on OPEC was right at the end and of less significance than has been made) that I thought I would expand a little on what you can hear on the podcast. The prepared remarks, as I mentioned earlier, deal with the loan guarantee program, but the answers to questions were the more informative.

On being asked how the nation could double renewable output in 2 years, he said that wind is most mature technology and thus the most likely, solar thermal would be the next to see growth while photo-voltaics (PV) may also contribute. Numerous wind projects can be expected to go forward . He cited Bonneville Power as one who is capable of putting in lines to connect to turbines, with the system being installed within 2 years. There is Wind available in the Dakotas; and there are power plants capable of using solar thermal in the range of 100’s of Megawatts but those are the areas that he expects to get immediate funding and to meet the targets.


He does not claim that the government has all the answers, but anticipates going out into the market to find what the industry wants to bring forward, transmission isn’t there yet (maybe not until 2014).

He hasn’t reviewed the existing CCS projects yet, nor made any decisions; yes, there is FutureGen, but it needs a technical review before a decision can be made to see if it can progress. He feels that there are gains to be made in pre-combustion separation as well as post combustion separation of pollution. Oxyburn is also to be looked at. It is not a slam dunk which technology is going to prove to be the best, so he wants to carry out a suite of tests on potential solutions. 6 geological sites are going to be tested for CCS, and he wants also to look at EOR but all this has to be tested. The big money will be in capture and in sequestration, though it will be so expensive that the current investment will not go that far.

He sees power transmission as a national issue, combining renewable energy and being able to port it around the country. We have gone from local generation and use to a need to look nationally. Solar, for example, is concentrated in the Southwest. And wind also is focused. We need a national transmission system overlay. We need a discussion over the realization that this is a national issue. Yet while this is a national imperative that we go forward, we need to study this as these are complicated issues.

In regard to feeding the Strategic Petroleum Reserve (SPR) he said that the last thing we want to do is to is to have the 13 million barrels of the current commitment going into the SPR, when there is a tightening of supplies and OPEC cuts, but he is not sure if this is not already a done deal, and since there are complications to the issue – he will have to look into this. Having been dumped deep into the pool, and while he knows the technical issues, he will need to look at other aspects while he gets up to speed, and he was told this was a done deal.

What is the likelihood that the world will get the tipping point when tundra starts emitting carbon dioxide? He said that we don’t know when the tipping point when the tundra thaws, don’t know at what temperature and carbon dioxide concentration this will occur. It would, however, be prudent to stay away from that happening.

His goal is to focus DOE research and make it more results driven. It is the biggest supporter of physical sciences in the US. Many Nobel laureates have been supported by DOE. It is a primary contributor to our current prosperity, and so we cannot not do that, but must fund basic research. But at the same time there is a lot of government research that should be used and passed to the private sector. DOE is not as good at taking great research and transfer into things industry picks up. So he will be spending time trying to find out how to port discoveries over. Wealth creation was effective when Bell Lab results were transferred into industrial products, and our economic future was driven by electronics companies that believed and invested in research. Don’t have this philosophy yet in Energy, and so DOE has to fill the vacuum, National Laboratories and Research Universities will be the key. First priority is the economic recovery and the second is a green industry where US can lead.

If anyone thinks they can predict oil prices, they should be rich. For a long time he was a member of the America’s Energy Future study by the National Academy (the report should be out soon). He can’t predict oil prices, but sees higher demand and hopes they can decrease the rate of demand increase, though it will still go up, the peak of major oil companies, conventional oil production (not tar sands or deep water) is going to be soon. They will have to move to more expensive oil recovery this drives price up, cheap oil production will not increase. Price will go up in the long term, and so we must decrease consumption and use other means. Conventional oil has been increasing but it is now flat, and will have to go to more expensive sources. If we get smarter ways to get oil out it will extend oilfield life. But at some point you reach a limit.
The price of wind energy has gone down by a factor of ten and will go down further, PV is on the learning curve, and hopefully can get down a factor of 5 further, to make it practical. New technologies will come down in price = faster than more mature technologies. It is different because oil has only a finite supply. But with EOR oil may be not last 15-20 years but 50 years.

Asked about an increase in the blending cap for ethanol – he answered that the only issue is the auto industry opinion on harming engine at higher mix. You need to accept that you can’t deteriorate the engines of the present fleet, but we need to increase fraction of E85 vehicles, which means changing the fuel lines, seals etc. We can’t get to target on cellulosic – but this is a challenge, some smart work now being done, looking at bio-producing heavier fuels than ethanol. 3 bioenergy institutes have been started started, and in first 6 months altered yeast and bacteria have been sued to feed and sugars and make gasoline and diesel like fuels. These self-separate from water. These are better than ethanol therefore. Given the caliber of the scientists working on this – some of the best – suddenly the level of activity causes technology to lurch forward. He expects the work to be populated by really top people and students who no longer aspire to a life in finance but want to do science. Don’t need an ethanol pipeline.

On India he was asked how to do tech transfer of nuclear technology to India; reply - there is an understanding and that will go forward.

On how the US and China can they work together in climate change issues, he said that the key was that they do work together and mitigate carbon dioxide, increase the efficiency of their growth and the best choice of new sources of power. There are many opportunities. Building technologies, for example, provide a lot to be gained, since buildings can use 70-80% less energy thann conventional construction affords. We can now build 60% more efficient buildings and we think we can build 70-80% efficiency in ten years. China will build many new buildings so a lot of things can be done, and there are lots of chances for collaboration.

OPEC and his role and his message to them. Stable prices are very important to every country and he will do what he can to encourage stability. Major mission of DOE is to look to ourselves and what we have control over. We are the science house and he is aimed at promoting efficiency, and decreasing our use of oil. If oil is used more efficiently, particularly in personal use by a factor of two, this can have a great effect. He would argue for price stability – do we want OPEC to cut production. He needs to look into it more. No specific plan for doubling renewable power in 3 years, but there are mature renewable technologies, and he cannot divide how to get to the target but has to look at the technologies and how they can be best encouraged to develop the answer. He, personally, is big on energy efficiency in the home , and had a house in California where he paid very little for heating and nothing for air conditioning – through the efficient use of blinds.

P36. Pick Points

So today was Power day at CERAweek, and the President of the Environmental Defense Fund was pressing for increased research and development for carbon capture and storage. But he recognized that there would no industrial participation until there is more guidance from the Administration. They have already given Congress a blueprint on how to enact a carbon cap and trade legislation, and urged action. He was opposed by the Marathon CEO speaking instead for a carbon tax as being more simple, since cap and trade is a market set up by the government., and would provoke more volatility (and price rises) in that market.


The CEO of Energy Future Holdings bragged on Texas’ position as a leader in wind technology, and its willingness to adapt the grid to input from renewables. Given the need for a heavy investment in new plant (sometimes just to replace old capacity not to increase it) the demands for the great amounts of capital this will require was predicted to lead to consolidation in the industry, according to the CEO of PPL Corp of Pennsylvania. There are currently some 200 companies invested in the power production business, and with the demand for new plants (which are planned to be about half coal and half natural gas) the money will have to come from somewhere (including the general public.)

Looking at the scene from Michigan the CMS Energy President noted that his coal plant fleet was an average of 50-years old, and while demand would not rise, plant needed to be replaced because of age. Trying to permit a new coal-fired power plant was like “swimming upstream.” They had a plant replacement planned for Bay City but this has been postponed two years to 2017, even though the new plant was over rock which would be suitable for CCS. Collectively the industry is beginning to accept cap and trade, and just hopes that the money goes into research and development, instead of social programs.

Nissan is anticipating rolling out an electric car next year, that will be generally available by 2012. The plant will go into Tennessee, and they hope to see 10% of the fleet sold to be electric by 2020., though this depends on an agreement for a charging network, and that hasn’t been resolved yet. That may put up pollution, since the power must come from somewhere Pacific Gas & Electric said that either drivers learned to plug in and charge in off-peak hours or the country would need a lot of new electricity generating plants. There may be meters that would control activation and thus help to solve the “plug-in time” problem.

The next topic was biofuels, BP felt that these would comprise 10 – 20% of liquid fuels by 2030. It will take a billion hectares growing sugarcane to produce the ethanol to replace gasoline totally around the world, In a recent report (Sandia and General Motors said that the country could produce 90 billion gallons of ethanol, by 2030 this would replace a third of the 140 billion gallons of gasoline being used – but five sixths of the total must come from cellulosic ethanol (which we don’t have ready even in the lab yet). “P.S.” they added, “send money.”

The economists on the panel felt that the recession though severe should turn around within the year. But the blame game on that has started.

With the Shtokman field now being scheduled for development, Total is committing to $200 million on engineering studies, while the main base for the operation may end up in Norway. Part of this recent surge in activity may because Russia is suddenly realizing it will have to increase incentives if it is to halt an anticipated drop in production. The intent is to change the tax structure so that investment in new fields will be encouraged, now it is not. Remember that in Russia oil revenue taxes provide 43% of budget revenues.

Dr Chu's Hearing leaves me worried.

Looking back a day after watching Dr Steven Chu testify at the hearing before the Senate on his nomination to be Secretary of Energy, I think my overall reaction is “We’d better not be right!’ Yes, from the point of view of those that are seriously concerned about the climate, and the control of carbon, there is no question but that, to quote Andrew Leonard “listening to Chu is like listening to a dream.” Unfortunately, for those of us more concerned with how we get through the coming shortages of oil and natural gas, the message was not nearly as encouraging.

As I noted in my initial reaction yesterday, Dr Chu sees the role of the National Labs and the scientists within them, as a critical part of the answer, and fully expects that it will be they that lead us into that golden future. To which I think I am tempted to respond, that so far all the trust and money we have given to those “best and brightest” to get us to nuclear fusion hasn’t yet worked out. And I think it might similarly be the case in regard to the major effort that he anticipates putting into cellulosic ethanol as the saving technology to provide for us all.

And the other message that I clearly picked up differed from the perception that others had of him renouncing his earlier opposition to coal. What I heard and saw him saying was that unless there is an acceptable CCS (carbon capture and storage) technology, then he is still very strongly concerned about coal use. Further that in the near term there may well be no need to install any new coal-fired power plants since, just as in California, we can adopt significant conservation, load shifting, and increasingly efficient appliances and buildings, and keep the current load stable.

He pointed out that while power demand had risen in the rest of the country by 50%, the power demand per capita in California had remained stable for a considerable time (I think he said 35 years). This is something, therefore, that the rest of the country should adopt, given that it is the lowest hanging, and easiest fruit to pick. (Plus in relative terms it is not as expensive as some of the alternatives).

My take on this is that it is very theoretical, and perhaps easier to consider those steps if you live in Southern California than if you are battling 20 degrees below temperatures and the bad weather that is currently meandering along our northern borders.

He does recognize that one of the major steps that should be taken is through the development of more nuclear power plants. And he recognized the serious problems that still hang around the cleanup operations at Hanford (though whether he will give them an additional $2 billion or so to accelerate the process was left open to question). He dodged the long-term storage of nuclear waste issue, but was positive about taking a longer and perhaps in light of current perceptions, more rational review of the recycling of nuclear fuel. But certainly one of the resources for the future will be the construction and use of more nuclear power stations, ho pointed out that it provides 70% of the non-carbon electricity generating base load today. The only concern with that is the time that it will take to get them installed and contributing to the national supply. Certainly it will be long after he has left the Department before their impact will be felt.

And that is where I started to feel the concerns. He seemed very much of the mind that “the best and the brightest” scientists, if persuaded by money and their interest in working on problems of national interest, could be retrained and redirected to come up with answers. He sees as a major resource to help with this the 30,000 scientists and engineers that currently staff the National Labs (and just might put another one up in New England). It is around that nucleus that he expects the answers to come.

His current work has been supervising teams that have, among other things, been looking at the way bacteria inside termites for example, convert woody material into the fuels that can be used to displace gasoline, diesel fuel and jet fuel. Thus he sees cellulosic ethanol as a major contributor (it is mandated to be half of the 36 billion gallons of ethanol that must be produced and used).

This is still very much a lab bench type of study, the Hirsch report, Dixie Lee Ray and I have all at one time or another pointed out that it will take over 20 years, even without any slip-ups or glitches along the way, to get something from the bench to where it is making a significant contribution to the national need.

But I have two other worries that go along with this. The first may seem trivial, but I was at a meeting where we were discussing the harvesting and collection of products for a cellulosic plant. It turned out that the costs were about $60 a ton. Come the scientist working on cellulosic and he retorted that all it would take would be some of the "best and brightest” working on the problem for a year or two and they could get it down to the $4 a ton that he had used in his model.

Um! Man (and woman) has been harvesting crops for a rather long time. To suggest that a bunch of scientists/engineers can suddenly look at the problem and in virtually no time learn all that there is to know and bingo produce a new method that will cut costs of production 15-fold displays an attitude that is really worrisome, because it is totally unrealistic.

The other thing that I felt was not really addressed in the hearing was the factor of time. I did not feel that he had any sense of the imminence of the gasoline and oil shortages that will come to pass, nor what to do when they do. And so I just hope we are wrong, but sadly, I really don't think that we are.

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