The ASPO Conference - final thoughts

The remark that sticks most in my mind, as I look back on this year’s ASPO-USA Conference was one that I believe totally missed the underlying Conference message. It was Ralph Nader, the speaker at the final luncheon, who trying to encourage action, noted the likelihood of our still debating the same topic at the meeting ten or fifteen years from now. The chances of the happening are slim to none. If by that time there has not been an oil peak, with all its subsequent impacts, the Association will have lost any claim to be able to predict reality, and likely will no longer be having meetings. On the other hand, and the evidence was increasingly evident and worrisome, if the peak comes, then the group that met in Washington will have moved on to the equally worrisome topic of trying to predict how fast the decline in liquid fuels will be, and the impact. So we won’t be still talking about the same stuff.

And yet the tenor of the meeting felt different this year. I remember the excitement of going to Denver five years ago to meet the first group of folk that had the same concerns about future fuel supply that I did. I remember the video cameras, the emotional reaction when I realized that there were a significant number of folk, more knowledgeable than I, who had facts to substantiate an early rather than late date for Peak Oil to occur. Five years have passed. The intervening time has seen global oil use reach a rough plateau along which it has bounced. But the end to that plateau is now coming in the near future. This will make that future much darker than the present, and likely a lot of people are going to be hurt. Yet the mood at the meeting seemed more complacent, even as the message is becoming more urgent. Perhaps we have been talking to ourselves too long, for as the message becomes clearer, the reaction seems to lessen.

The Liquid Fuels problem (though there are concerns also over the effective supplies of energy as a whole) is not an immediately visible crisis. Yes the price of crude oil has gone up, but it is now held (largely through an adjust of the exports from a very few Middle Eastern countries) at a relatively steady price. As long as that reserve exists and is used, as it is now, the world can adjust to the current price and continue about its ways.

But the day when the carousel stops is almost at hand. The predictions at the meeting seem to increasingly focus on the 2012-2014 time frame. That begins to impact the next national elections. The price of crude will continue a slow ratchet up, that quickens towards the end of next year (there was at least one prediction that it will be back in treble digits by then). The slow growth of the crisis, partially because of the continued ill-health of the economies of the world, means that there are other more pressing topics of seeming more important concern. And so the meeting drew less attention than it should.

ASPO-USA is moving to Washington to seek more influence, but I suspect that the dawning awareness of the problem over the next eighteen months will do more to bring the group to national attention. What is needed is an underpinning of facts that explain some of the root causes of the problem, why it isn’t going to go away, and some of the resulting problems that are going to arise in the future. Plus of course the need to continue to work the numbers to better be able to estimate how bad it is going to get.

Robert Hirsch talked about what he has done to prepare – he knows it is coming and is getting ready – but I wonder how many other folks are? It has, to some, become almost an abstract topic, somewhat displaced from day-to-day reality in the way that some meetings change. We talk about the evidence, yes its getting stronger, and the dates are getting closer (even faster than that just due to time having passed) and yes the impacts could be severe, but . . . .

I remember coming away from my last ASPO Conference thinking I should talk to the mayor and council where I live. But it was still a few years from a crisis, and as someone said “if it won’t happen in this term, why should I worry, I might not be elected when it happens and so I won’t have to he concerned.” Well that isn’t true any longer. Those now being elected will begin to see the problem in their next term. The excuses for inaction are running out.

(Oh, and my wife, my eldest son and I drive hybrid cars. I spent the weekend before the Conference stacking wood for our tile stove. I have solar roll on the roof, and the house has been re-insulated. Living rurally I am loath to move nearer shops and we effectively have little public transport).

The evidence is stronger, more folk are becoming aware of it, the likelihood of significant mitigating measures being implemented are growing less, but, for a short while longer, we are off the public screens. But that will likely soon change – as earlier periods of awareness show, people do want web sites that can keep them informed, conferences that bring together folk that can build the encompassing picture of what is happening.

Unfortunately, as the Gulf oil spill showed, the current Administration thinks it can exist without much of that expertise. (The decisions were made by an overseeing panel assembled by the Secretary of Energy that did not contain a whole lot of Petroleum Engineering expertise, by number of members). It, sadly, takes time for those who don’t know the facts, or have the background knowledge, to be brought up to speed. So our role hasn’t gone away. It has actually become more important, and so we must continue to do what we do, until recognition comes. That it likely won’t be long coming is not necessarily good news.

Secretary Chu in Newsweek

My dependence on good internet service has been underlined by a week where it has not been available. Unfortunately the motel we were staying at in Maine had a problem with its server, and we returned home to find a problem with our own internet connection. Thus a couple of the posts that I was completing will be a little delayed, until I have that indispensable tool, a good connection. This has been prepared largely without, and similarly posted with access just to find a couple of references.

And in that meantime I have been perusing this week’s NEWSWEEK, on my Kindle, and noted that the Secretary of Energy had a new interview. The first thing that he said in it was in response to a request to define President Obama’s energy policy. Here is what he said:

We look at all the factors and we say, how can we get to the lowest possible level of carbon as quickly as possible and not only at the lowest cost but with the greatest possible economic opportunity for the U.S.?

That’s it!

The rest of the interview was not that much more constructive (one of the benefits of the Kindle is that it counts words, in this case the article – including questions – ran to 782 words - the attempted length of this piece). There was no mention of peak oil, or energy security or prices in the article. In response to the criticism that the Stimulus package did not make enough investment in energy, the Secretary said that they would fund projects for up to three years maximum, and encouraged innovators to “swing for the fences.” Whatever that means (in context)! I will admit to having helped put a couple or more proposals into the DOE hopper, though most came back rather quickly and negatively (one was successful). What struck me about the process, and the attitude redolent in the Secretary’s remarks was the focus on short term benefits and application. Most of the work is also oriented to larger group efforts, with a lot less focus on the smaller innovator to stimulate new ideas. If you can’t claim a home run within the remaining life of this Administration, don’t bother applying.

He appears to hope for a start to a Smarter Electric Grid, to double renewable energy contributions by 2012, and to get the nuclear power plant construction industry restarted in this term. But he also recognizes that carbon capture and sequestration is at least 10-years away from deployment. His “blue sky” hopes are for cheap (below $2) per watt photo-voltaic systems, (current costs he quoted as being over $4) and he still looks to the generation of fuels such as gasoline directly from biomass. This is not the ethanol production that the industry and government are still heavily involved in, but rather focuses back on the work he was supporting while at LBNL looking at using natural fauna to do the digestion and fuel generation.

But he returned to the need to put a price on carbon, and for a cap-and-trade bill to make sure that the point on where his focus was, would not be missed.

Sigh! He sounds as though the “scientist in a tower” description still fits him like a glove. There are considerable issues in regard to the changing energy supply of the planet that should be giving him pause in his charge against carbon. Increasing numbers of people are pointing to a coming crisis in oil supply. The British government, at the urging of folk such as the head of Virgin Airways, has decided that perhaps it is about time that it took its head out of the sand, and took a hard look at the situation. Of course it is also taking a look at the reality of climate change predictions, though with the coming of a general election, it is not clear whether either effort will amount to much.

I am increasingly struck by the perception that many of the folk that write about both climate change and energy supply do so with a very complacent attitude toward the continuing situation. The potential impact from a major impact on climate from a severe eruption of the Laki suite of volcanoes in Iceland seems to be being totally ignored. (A quick skim through some of the scientific papers suggests that the major eruption follows within a couple of years of the current eruption of the smaller volcano). The problem is that should there be a problem, running around in a panic for a couple of days is going to do nothing constructive in stopping folk from being killed.

Well we will have to see, in the relatively short term, whether that complacency is warranted. Being a Cassandra is unlikely to get more recognition this time around.

The OFGEM Report - bad news which may be optimistic

As the year starts its move towards a close, there are an increasing reams of reports coming out that review aspects of the global energy supply. One of these came out in the UK last week. It is the report from the UK’s Office of Gas and Electricity Markets (OFGEM) on Project Discovery – which looks at four future energy scenarios for the UK.

The report recognizes that the UK has a growing problem. This is because there are two directives from the European Union, the Large Combustion Plant Directive and the Industrial Emissions Directive (pdf) that increasingly restrict the use of coal and oil-fired power plants, when, at the same time, some nuclear plants will also be closing which will lead to a reduced number of major power plants being available. New power plants take time to plan, permit and construct and the postponement of construction of the new power plant at Kingsnorth this past week merely underlines the coming problems.

And so OFGEM set out to see what the challenges and risks to the UK would be over the next twenty years. The report is the result of that investigation.

It looked at four scenarios based on two levels of economic recovery and two levels of investment in green technologies, which combine to the four scenarios examined.

The four scenarios OFGEM examined.

The scenarios had some underlying assumptions to allow dealing with the conditions that were imposed in the models. There is, for example, the assumption that investment for each scenario (which reaches 200 billion British Pounds (BP) for The Green Transition scenario) will be available and will allow the timely investment in power generating systems that meet the targets set. (As a source of reference the UK spent $8 billion BP in 2008 on utility capital investment for the green scenarios this will have to rise to 30 billion BP in 2019).

With an increased reliance on imported natural gas, where the domestic production falls short, there is also the assumption that this will be available – an area of concern in times of high demand in a severe winter. (And this winter may be one) This will, however, become more of an issue in the UK as it responds to the EU directives and loses a significant sector of its electricity generating power after 2015. The report notes that the market and the regulatory arrangements can well undergo severe testing as the nation moves out of the comfortable position it currently holds, with large gas reserve (by normal standards) and a robust gas infrastructure.

The investigation applied a number of stress tests, under the different scenarios, and evaluated their results. The results were summarized in the following figure:

OFGEM stress tests and their perceived results (Bacton is the UK gas import facility)

The designation 1 in 20 refers to the worst condition in the past 20-years with the peak day being the highest demand for energy on the coldest day; and the severe winter being a period of 60-days of exceptionally high natural gas (NG) demand.

While the rapid response and move to green energy both tighten the NG market, when there is not this initial high demand, then the evaluation is that the market will remain oversupplied, though tightening towards the end of the study period.

Perhaps the assumption that raises the greatest doubt is the one that crude oil prices rise to $130/bbl and then fall back, as upstream investments provide the additional supplies needed, to a price of $110/bbl. They cite the IEA and the EIA models as justification for these assumptions, which apply to the rapid growth scenarios. When there is a slower rebound of the economy, then oil prices are anticipated to stabilize at $90/bbl (and they point out that the EIA is predicting that it would actually fall to $50/bbl).

The peak price that they see for NG is 100p/therm under the rapid growth scenario, while carbon dioxide prices are set at 50 BP/ton by 2025 (assuming a global agreement at the meeting in Copenhagen this winter).

In assuming that adequate NG will be available it appears that they are assuming that all the gas pipelines projected will be funded and adequately supplied at full capacity (something that is currently quite questionable for Nabucco, as but one example – though Nabucco only becomes necessary under the rapid demand scenarios), though they also assume that LNG will be available to fill any shortfalls, and that NG will appear from the Yamal fields in the time and quantities predicted (either 2013 or 2014).

OFGEM assumed European supplies of natural gas

In all scenarios they recognize that there must be an increase in the amount of NG supplied from Russia, though, as noted, there is an assumption that there will be enough LNG to make up any shortfall. (Global demand is expected to double or treble by 2020 – to somewhere between 350 bcm and 700 bcm/year – and largely the USA takes care of itself).

As with many of the models of an energy future this one includes the caveat

provided the market participants respond adequately to market signals

but with those responses governed also by perceptions of future politics, and the potential limitations of future supply, that caveat may well cover a multitude of unpleasant outcomes. Yet this is recognized also realistically (but with no real current solution being available to provide an answer).

there are security of supply risks within each scenario, but as important is to consider the implications for security of supply resulting from the huge range of uncertainty that the scenarios cover. For example, by 2020 gas demand could be as low as 77 bcm/yr or as high as 113 bcm/yr depending on the scenario, low carbon generation could make up anywhere between 21% and 52% of the mix, the levels of investment required in the GB energy market (excluding upstream investment) could range between £96bn and £200bn depending on the extent of environmental actions. Together with more traditional risk factors such as commodity prices and project risks, this means that investors face difficult decisions before committing large sums of capital to new projects.

The way in which these events unfold in the UK is that report is now open to public comment with specific questions being identified that OFGEM is interested in getting answers to.

It will be interesting to see how this plays out, though I fear that some of the assumptions that have been made as the review progressed are a little optimistic about future supplies of oil and natural gas.

Although it has the highest investment cost, it appears that the Green Transition is perceived as giving the best outcome:

The Green Transition summary

While perhaps the dash for energy scenario projecting the worst outcome:

The Dash for Energy summary of outcomes

It will be interesting to follow the story, and see how Britain reacts, given that, as the report notes, while the time for decision is here, the conditions are still pleasant, and the urgency of the situation is not yet apparent.

Old and new thoughts on energy and transport in Poland

The first part of my travel is now complete, and I have reached a place with a slightly slower pace of life, and one that is a little cooler than Missouri.

Market Square in Krakowa with the carriage horses lined up (and being kept working if not really busy).

We arrived this morning and came down here for a gentle lunch, the horses’ hooves are now shod with a rubber pad to lower the sound as the clop around the square.

Polish carriage horses with pads on the horseshoes

For those with less time, or perhaps romance in their souls, the taxis that go on tours have been changed so that small electric carts that now can carry you around (very similar to golf carts) are available.

Tourist transport – Kracowa (Cracow)
For the general populace electric street cars are ubiquitous and of a variety of vintages – this is one of the more modern.

Polish street car

The busses seemed relatively full – even for a Sunday afternoon, and ran very regularly – however we are located where we can walk to all the places we need to be, which gives an excuse to enjoy local food a little more.

The availability of public transport on a widely available basis in the centers of the cities in Europe and the ease with which you can move around the countries on such transport contrasts with some experiences in the Midwest, where one of us had just travelled by Greyhound bus and had discovered the hard way that having a bus ticket does not guarantee that you will get a seat on the bus – or even on it – and even first come doesn’t always help get a seat, since luggage can be moved to push you back down the line.

It will be interesting to hear what the current attitudes to the coming shortage of oil is currently. Certainly in our short walk to the square the motor traffic on the streets seemed denser, and moved faster than it used to, and there did not appear to be a concern with energy availability.

Their current priorities are:

Improving energy efficiency, increasing security of supply and developing competitive markets for fuels and energy, introducing nuclear power, increasing the use of renewable sources and reducing the impact of energy on the environment.

This is a broad enough set of goals not to offend anyone, I would have thought, but there is perhaps controversy in the details.

There is a plan to provide “white certificates” with financial value, to those who save the most energy, in a country where the plan is to maintain zero energy growth.

The country will aggressively pursue high-efficiency co-generation of power and heat , and promote more energy efficient appliances.

Increasing energy security involves:

Poland's energy security will be based on domestic fuel and energy resources, especially hard coal and lignite. This will ensure independence from the production of electricity and, in large part, heat from external sources of supply.
In the area of oil, gas and liquid fuels the document assumes diversification, which now applies not only to supply sources, but also to production technologies. Support will be given to develop technologies whereby it will be possible to acquire liquid and gaseous fuels from domestic resources.

The current forecasts on the possibility of covering future demand for electricity in Poland indicate the need to increase capacity. Commitments for the reduction of greenhouse gas emissions force Poland to look for low-emission solutions in the production of electricity. All available technologies to produce energy from coal will be utilized, provided that they reduce air pollution (including a substantial cut in CO2 emissions).

The plans for nuclear power at the moment are more focused on putting the necessary resources in place to be able to reach this objective.

To meet the targets for renewable energy a target of 15% share of consumption by 2020, and 20% by 2030. By 2020 there should also be 10% of the liquid fuel provided by biodiesel.

A ceiling will be introduced to cap levels of emissions of gases such as carbon dioxide, with limits on the amount that different industries can generate, while encouraging the use of CO2 for enhanced oil recovery and for other industrial uses.
At the present time the government feels that the nation is energy secure .

Pawlak (the deputy prime minister) said that Poland’s energy security is based on domestic black coal deposits. ‘The structure of primary energy use consists in 48% of black coal, 12% brown coal, 23% oil, 12% gas and 5% renewable energy sources’.

To maintain such security, however, will need more research on clean coal technologies and on renewable energy sources.