Tech Talk - of Wheat and Coal

The release of the latest assessment of the IPCC on the future of the planet, failing their push to cut greenhouse gas emissions, has brought forth headlines and supportive editorials in papers around the world. Yet I could not help but note a couple of things that form the basis for this tech talk. The first was that the report discussed the impacts of climate change (for which I suspect in this case they mean global warming) on agricultural production. They stress the negative impacts on crops such as wheat, and so, being curious, I went to the Wikipedia page that provides a table of wheat production over the past eighteen years, and plotted the data.

Figure 1. Global wheat production in millions of metric tons (after the Food and Agricultural Organization via Wikipedia)

Clearly wheat production is growing rather than, as the IPCC report implies, declining with the increase in carbon dioxide levels and longer growing seasons in parts of the world. More to the point – which is providing more food – (h/t Joules Burn) the two staple crops wheat and corn, have both seen growing production, but it is the slower pace of growth of wheat (at about 0.9%) over corn (at about 1.6%) that is of current concern, and which is to be addressed with new investments in the International Wheat Yield Partnership that plan to more than double yields in the next 20 years. This is needed in large part to match the continued growth in world population, which is likely to continue to rely on wheat to provide roughly 20% of the calories that this population will consume. Gains come both from increased land acreage being used, but also from the yields of that land. In the UK, for example, yields now average 7.8 tonnes per hectare up from 2.5 tonnes in 1940, the current target is to reach 20 tonnes per hectare in the next 20 years. Given that the global average is still down around 3 tonnes per hectare, the ability to bring this productivity to the broader community will give significant help to feeding the world.

I mention this because of the clear disparity between this information and the way that material is presented by the IPCC. Further the real needs of the world and its nations are now increasingly being addressed with less attention to the strident demand of the more alarmist of those who push the climate change agenda, in part perhaps because of the overhyping of the message. The latest illustration of this comes from Japan.

Following the devastation of the tsunami following the Great East Japan Earthquake on March 11, 2011 the Japanese public has been very nervous about the use of nuclear power, banning the restart of 48 nuclear power stations until after a new series of safety checks. This has had two short-term consequences, the financial melt-down of the power companies, which is now being addressed through government bailout and the need to switch to alternate fossil fuels to replace the power that the country obtained from the reactors. The switch was largely to natural gas, and to oil but this has proved to be an expensive undertaking with companies feeling that they could only raise power prices to a limited degree, hence their need now for government funding.

Figure 2. The changing face of electricity supply in Japan following the Earthquake, (MIT technology review )

But the sustained high cost of the gas and oil is estimated to be costing the companies over $30 billion a year and even with the government bailouts this is not an acceptable long term solution, given that it is likely to be years before the safety changes are made in the reactors, and also given the continued public opposition to restarting the reactors. As a result the companies have sought permission to switch back to coal-fired power plants. Concurrently the Japanese Coal Energy Center has been looking for coal resources around the world ranging from Mongolia to Mozambique.

in 2012 Japan was the second largest of the coal-importing nations at 189 million tons (behind China at 289 million) and current plans are to increase the amount of power that the fuel will provide by roughly 20% through construction of new power stations. (Some of these will be needed since, while some nuclear power stations may come back on line others are proving to be too expensive to restart under the new codes, and thus will be permanently closed).

It is this clear benefit of cost that is driving the change, and that benefit is unlikely to disappear over the next couple of decades. The renewable energy industry has not been able to overcome the advantages of coal’s ubiquitous presence and low cost of production. In the case of Japan supplies are anticipated to come from Canada and the United States easing their dependence on Australia and perhaps helping reduce their costs as they develop more international suppliers. Glencore, for example, their Australian supplier, has now reduced costs to $88 a ton, from the $95 being paid last year. It is estimated that there is currently a glut of about 5% of the coal market, and the reduced demands for thermal coal in the United States and Europe is unlikely to change that picture in the short term.

The longer term remains more cloudy, since the potential for the United States to enter, in a significant way, the LNG market and potentially to change those supply costs is not yet clear. It seems, however, unlikely that the volumes that will become available will not have much impact on price, and if that remains the case then coal will continue to grow as the price differential continues to add pressure for the its use in generating cheaper electricity.

Whether this will change the recently better-defined coal resources off the British Isles into a reserve remains, in the short term, unlikely, but even in the UK power costs can only rise so far before the public complaints begin to have an effect.

Tech Talk - of Alaska, Libya and the belated bleat of awareness of a problem

I have written in earlier posts about the problems that the Trans-Alaskan Pipeline System (TAPS) will face, as production declines below 500,000 bd. The conclusions from that post are pictorially summarized in a graph in the recent edition of the Oil and Gas Journal.

Figure 1. Declining throughput through TAPS showing the points of concern (OGJ)

Looking at current figures, in September the pipeline had an average throughput of 524,181 bpd against the year-to-date average of 528,092 bpd. It has just passed below the upper limit at which operational difficulties can be anticipated, due in part to the flow being too slow to keep the temperature high enough to prevent wax from separating from the fluid, and starting to block valves and critical infrastructure. Because of the long lead times, and high capital requirements for the development of new fields in the Arctic, and the likely probability that these will not yield significant production until at least 2025, the article is pessimistic about both the fate of the pipeline, and future Alaskan production.

Despite those declines OPEC remains optimistic, in their October Monthly Oil Market Report that the world producers can continue to meet global demand as they foresee it rising to an average of 89.7 mbd this year, and then going up to 90.8 mbd on average next year. They foresee, for example, that non-OPEC supply will increase this year by 1.1 mbd (to 54.1 mbd) led by production gains from the USA, Brazil, Kazakhstan, South Sudan and Sudan. Next year they see an additional non-OPEC growth of 1.2 mbd with Canada replacing Kazakhstan among the five countries that will make up this additional production. In contrast OPEC itself is reducing production, with overall production reported to be down 390 kbd in September.

The gain in crude oil production seen in the US, which has risen from 5 mbd to an average of 7.3 mbd in the first seven months of this year has had a significant impact on these projections, though the change in the mix of product now available to the Gulf refineries will continue to have some impact on the overall import picture. This is because, as the EIA note, some of the heavier crude refineries along the Gulf are tied to foreign producers including Pemex of Mexico, PDVSA of Venezuela, and Saudi Refining (for a combined total of just under 2 mbd).

Yet it remains difficult to sustain the optimism that OPEC project. Libyan exports, at one time running up around 1.25 mbd remain down at some 90 kbd, due to tribal disruptions and internal political disputes that show little sign of resolution.

Figure 2. Recent Libyan oil production (Energy Policy Info)

Certainly the physical ability to return to around pre-disruption levels has been demonstrated, but the weakness of the central government does not indicate that the political problems will be resolved in the near future. And until they are there is the best part of 1 mbd being with-held from the market. This drain from global supply is not yet disruptive since it has, to date, been largely picked up by the Kingdom of Saudi Arabia (KSA).

The picture from the combination of Sudan and South Sudan following the division of the one country into two has not been promising, however it appears that the overall total decline has now been halted, and recent reports have raised production to somewhere between 190 kbd and 240 kbd.

Figure 3. Change in oil production from Sudan and South Sudan following the division of one country into two. (Council on Foreign Relations )

The IEA is not optimistic that the return to production will be as smooth as others think:

“Industry sources have been quoted as saying that restarting oil production could take six months or even longer, since the lines have been filled with water and because some wells were not closed properly.”

The OPEC projection that overall Sudanese production has returned to the 240 kbd level may, therefore, be still an optimistic estimate. The increase to 175 kbd following the repair to the pipelines from the Majnoon field in Iraq is encouraging (although the high level of violence that continues in that country does not give high confidence that the pipeline might not be struck again.)

The increased production from the Kashagan field in Kazakhstan – anticipated to rise to 75 kbd - has again been hit following system leaks so that this increased production that OPEC had anticipated has, again, been postponed.

And while production has now started from the Espirito Santo in the pre-salt fields off Brazil, it is not clear whether the production gains will offset the declines that have occurred in Brazilian production in recent months.

Figure 4. The Espirito Santo floating production storage and offloading (FPSO) vessel (Shell )

Just as there is a perception that the United States is heading toward independence in energy needs (a fallacy I have written about several times in the past), so there is a perception that OPEC is becoming a less critical supplier. This is far from the case. KSA has been producing over 10 mbd for the last months, in order to offset the loss in Libyan oil to the market, and the combined production of KSA, UAE, Kuwait and Qatar now supplies 18% of global demand. This is only the second time that this number has been that high in the past 30 years. It comes at a time when the Middle East is supplying 25% of Chinese oil demand, as that country passes the United States to become the largest importer of oil.

Figure 5. OPEC oil production (numbers compiled from secondary sources (OPEC MOMR October )

This comes at a time when the world still wonders about the actual oil balance as it flows in and out of China.

Unfortunately the picture that is emerging continues to show that OPEC is tending to be overly optimistic in its forecasts for production, which does not bode well for future supplies of fossil fuel.

Given that a group of environmental scientists have just released a letter calling for increased investment in nuclear power since, to quote James Hansen:

Hansen, who’s now at Columbia University, said it’s not enough for environmentalists to simply oppose fossil fuels and promote renewable energy.

“They’re cheating themselves if they keep believing this fiction that all we need” is renewable energy such as wind and solar, Hansen told the AP.

This comes a bit late, since as I noted recently, it takes over a decade to build a new nuclear power plant, and with the current schedule for existing plant closures moving inexorably along their timetable, this may presage a decade of power shortages. We shall see!! But in the meanwhile we had better hope that those folk concerned over the possible shut down of the Trans Alaskan Pipeline because of inadequate flow are being just a tad pessimistic.

Tech Talk - ten years is a long time to wait for power

Today the British Government are announcing the construction of the first new nuclear-powered electricity generating station in 20-years. The new plant, which will replace plants that will close will go up at Hinkley Point, and will be constructed by a French firm, with significant Chinese investment, and with a promised subsidy from the Government. It won’t, however, start producing electricity until 2023, and even then only if everything goes well.

Euan Mearns has been pointing out some of the problems that the country faces as it closes existing power stations in order to meet environmental directives from the EU. The long-term supply of power at an affordable price is being increasingly challenged as the margin between demand and available supply shrinks. The leader of the Labor Party is promising that prices will be fixed by edict, an action that is unlikely to encourage investment at a time when it is clearly needed to help provide additional plants to replace the lost capacity.

The information on the new power station construction highlights the problems that the county will increasingly face. Although it is relatively quick and straightforward to close a plant (and then to demolish it), funding, permitting and constructing a new plant will, in this case, take ten years. In the interim it will likely prove increasingly challenging to find an adequately priced source of power for the 7% of the British market that will be supplied from the new facility.

Power generation requires both that a power station exists to transform fuel into electricity, and also that there is a steady supply of that fuel (or energy source in the case of the renewable generators that rely on wind, the sun or water). The ten-year time frame for construction of the new plant means that it will not appear in the energy equation until there has been a considerable change in the available supplies of the different power sources needed to keep the electricity flowing. In the meanwhile it would appear that the UK will increasingly rely on diesel generators to provide more than just back-up power.

It is a time-scale that will see a continued decline in domestically produced oil and natural gas in the UK, and with domestically produced coal-fired power still viewed negatively, the country will be forced to increasingly rely on imports from the rest of the world to provide the fuel needed. But in that time frame the evidence that oil supply is finite is going to become much more visible to the general public. A steady growth in demand of around 1 mbd for oil cannot be sustained over the next ten years, since there are an inadequate number of new prospective fields capable of providing that increment, especially when the need to replace an annual decline of around 4.5 to 5 mbd in existing production is also factored into the equation. (Remember, in that time-frame, that current fields such as the Bakken and the off-shore Brazilian fields now coming on line will have moved well into post-peak production).

Oil-fired power, whether through use of major power plants, or through the more widespread use of diesel generators, will become an increasingly impractical part of the answer. The anticipated solution is expected to be through the more widespread use of natural gas.

The advent of large volumes of shale gas, and easier access to some of the large fields in Asia continues to radically change the potential supply sources and prices that will be charged for a fuel that can arrive either through pipeline or by LNG tanker. Yet, as the large conventional fields such as those in Turkmenistan are tapped to feed the growing Chinese market, the supply to the rest of the world will have to come from the more expensive shale gas and from regions more expensive to develop. Well costs are now quoted routinely at around the $10 million mark, and can only be anticipated to continue to rise. As the global market for natural gas at a higher price provides an incentive for increasing levels of exports from the United States, the current glut in supply will disappear and prices will to more closely follow those on the global market. This could well stop the migration of industry from the more energy-expensive parts of Europe to the USA, but it is unlikely that US prices will reach those of Europe, and so although overall prices will rise the relative ratio of prices will not change and that drift will likely continue.

But putting too much expectation on natural gas to become the energy savior of the world is unwise, given the very rapid decline in yield from existing wells, and the consequent need to continually drill new ones to sustain supply. Further the potential supply from some anticipated reserves has been reduced, as exploration shows that limits to both what is there and what can be reasonably recovered. (The Polish experience is a good example of this). This is likely to become increasingly clear over the next decade, as global natural gas reserves are asked to carry a significantly greater portion of global energy demand. Natural gas-fired power plants are cheaper and faster to produce than nuclear plants, and coal-fired plants can be converted to gas use. (The power plant at Missouri S&T, for example, although fired by coal and wood, was fitted with gas burners that were, for most of its operational life not used).

But there are limits to the practical volumes of natural gas that can be supplied, at reasonable cost. As these bounds start to appear over the next decade the questions that will arise will start to focus on what can be used to replace it. To date renewable sources have not provided the panacea that was heralded to occur as they were eased into the market place. The economic subsidies used to encourage more widespread use of solar and wind have become less acceptable to Governments and their budgets, and it seems unlikely that the subsidies can continue to be used to foster future growth at greater levels of scale.

Domestically produced coal-fired power will likely continue to be a major part of energy production in the less well-developed nations, simply because it will provide a viable way of providing power at an acceptable financial cost. Whether the vehement denunciations of its use in more advanced countries, as a source of greenhouse gases, is still dominant in ten years, particularly if global temperatures continue to remain relatively stable, is more a political rather than an energy source debate. But the decisions on what to build post-Hinkley Point will have to be made soon, and the choice may be more limited than is yet to be recognized.

My apologies, this is being posted from Terminal 5 at Heathrow, where I am frantically charging my laptop, as I travel through the UK. Posting will be a bit spotty for this week until I return home.

OGPSS - The Pope, Poverty and Power

The new Pope Francis comes from Latin America and has an understanding of the true depths of poverty that is not that common in the United States and Western Europe. Outside the very Western urban part of downtown Buenos Aires lie the barrios and the shanties of the Argentinian poor. Life is more transient in neighborhoods where there is a lack of water, food and opportunity, and where sanitation is a sometime thing. Government programs do not extend far enough, or help many at the bottom of the ladder and government statistics seem to hide much of the problem.

This holds true in many parts of the world. I was struck, at the time of my first visit to China in 1987 by the contrast between the opulence of the walled community in which the “Western” hotels were located in Shanghai and the desperate poverty of the communities just the other side of that wall. Move forward some fifteen years and the cities of China are much different, across much of the landscape. It is a transition that has been effected through large-scale industrialization and the vast quantities of power that is expended in the growth and continuation of that industry. Such a transition is the vision for many countries in the world, but the role of power in that change, and the increasing costs that it imposes, must be recognized. Just having a nominal power available is not, in itself, enough. Consider the case that India, a potential challenger to the Chinese in the market place, now finds itself in. As with China the country has desperate poverty, but it also has a developing industrial base that is driving change. But the rate of that change has, for some time, been limited by the amount of power available.

Power cuts in India are so commonplace that the Times of India recently ran an article detailing some things to do during these “incessant” cuts. And while it is only the major blackouts, such as the power failures at the end of last July that garner global headlines because of the scale, some 600 million people being without power in that event, it is the daily, smaller scale events that are making it increasingly difficult to run a business. In Coimbatore, for example, a city of some 3.5 million people, power outages can last up to 14 hours a day, and “load-shedding”, where power outages are rotated around the neighborhoods is an accepted part of daily life in the country. The ubiquity of these cuts mean that many folk have purchased stand-by generators, which in turn drives up the demand for fuel. But it is difficult to run a business – whether it be a factory or a restaurant, if you don’t have a reliable source of power. And if cuts are frequent enough, and the alternative power costs are too high, then business either closes or moves somewhere else. It is such a decision that is apparently facing small business owners in places such as Coimbatore, but it has the potential to spread to the larger, and now more dependant communities such as Bangalore, the third largest city in the nation, and the Silicon Valley of India.

The city consumes some 2,300 MW a day which it draws from the state grid. About 1,000 MW is generated in the state from nuclear power stations, with the majority of the rest coming from coal, gas and diesel power plants. Because of the prestige of the community it is likely that the city won’t see the worst of the anticipated power shortages this summer, which already have the state trying to buy an additional 1,500 MW. Current supply shortage is around 180 MW but is expected to grow as the weather warms into summer. And since overall Indian supply is challenged by a greater demand, the state can only hope to acquire 1,000 MW to meet the expected demand. They hope that this will be enough to keep the lights and power on in their “Valley.”

This is one of the drivers, expanded to a national scale, that is facing India as it decides what to do over sanctions on Iranian oil. Earlier in that debate India switched out of paying for the oil with US dollars to paying in gold. Given the volumes involved, India imported around 285 kbd from Iran in January, this does nice things (if you are a gold miner) for the price of gold, in dollars. But that can only go so far, and there are suggestions that the payments are becoming more about barter. As a result India has become Iran’s top customer and it is a difficult relationship to change, since some of the Indian refineries are designed only to take Iranian crude. However, as sanctions are growing to include insurance companies, Indian refineries that process the Iranian crude are threatened with the loss of coverage. Whether this will force a change in source of supply, or whether the Indian Government will find a way around the dilemma is an ongoing debate, complicated by the “good deal” that India is getting as a price.

The other fuel on which India is critically dependent is coal. And although the country has large reserves of coal, it is not developing them fast enough to meet demand, and thus must increasingly import both thermal and metallurgical coal.


Figure 1. Indian Coal Statistics (Energy Export Databrowser )

By 2017 imports are anticipated to rise to some 266 million tons of coal, in total. And while much of the press has focused on the Chinese development of new coal-fired power plants, India is planning some 455 new plants, while China has only 363 on the books. This comprises the majority of the 1200 plants currently being planned around the world.

Apart from challenging the opinions of those who suggest that coal demand has, or will soon peak, this speaks to the burgeoning need for fuel sources as nations struggle to bring their poor into a better standard of living. It may well be a debate that now acquires a religious overtone.

OGPSS - Thoughts on the Precautionary Principle

As Michael Brander tells it, in his book on the Scottish Highland Regiments, the Scottish Highlands produced, between 1740 and 1815 men for some 86 Highland Regiments who travelled around the world to strengthen the British Empire. But, towards the end of that period sheep were introduced into Scotland and the great land clearances began that replaced the crofters on the estates with the occasional lone shepherd and his flocks. Thus, by the time of the Crimean War when the Duke of Sutherland tried to raise a regiment he got no volunteers. As an old man explained to him:

I am sorry for the response your Grace’s proposals are meeting here today, so near the spot where your maternal grand-mother, by giving some forty-eight hours notice, marshaled 1,500 men to pick out the 800 she required. But there is a cause for it, and a genuine cause, and, as your Grace demands to know it, I must tell you, as I see that none else is inclined in the assembly to do so. These lands are now devoted to rear dumb animals which your parents considered of far more value than men . . . . your parents, yourself and your Commissioners have desolated the glens and the straths of Sutherland where you should find hundreds, yea thousands of men to meet and respond to your call cheerfully had your parents kept faith with them. How could your Grace expect to find men where they are not?

The anecdote illustrates that are long-term consequences to policy decisions, often not fully recognized when the original decisions are made. I was reminded of the Scottish situation as I contemplate the great race to renewable energy and natural gas, and the rapid replacement being urged for coal-fired power stations and nuclear power plants. And there are some grounds for seeing an analogy to that earlier situation.

Coal and uranium are found underground and while there is a large surface mining component to mining, as these reserves are exhausted, or embargoed for environmental or other political reasons, the need, over time will move increasingly to the development of the deeper reserves. Mines, however do not spring up overnight. Just as you cannot get a baby in a month by making nine women pregnant, so the process of discovery, raising capital, permitting and development can mean that over a decade can pass before coal is produced in commercial quantitites. And that assumes that the Administration is somewhat favorable to the idea. As a candidate, now President Obama said "If someone wants to build a new coal-fired power plant they can, but it will bankrupt them because they will be charged a huge sum for all the greenhouse gas that's being emitted."

As President he appointed Dr. Stephen Chu to head the Department of Energy, an individual who has said “Coal is my worst nightmare.”. And to follow on his statement as a candidate, the President appointed Lisa Jackson to the EPA who issued a finding that greenhouse gases constitute a threat to public health and welfare, with a series of actions to reduce carbon pollution. In such a political climate it is unlikely that applications for new mines and plants will receive an accelerated resolution. (Just consider the case of decision on the Keystone Pipeline, which continues to drag on.) If there is a sudden discovered need for new coal and nuclear power plants they will not (as with the Highlanders) be there to answer that call, and nor can they be for over a decade after the call is made.

Now it is not my intention here to argue the logic of a current change to natural gas, as the large reserve within the United States becomes available and, at low cost, provides a source of energy that helps keep the nation’s industry competitive. But what I would like to do is to invoke the same Precautionary Principle that has been used as an initial basis for action on control of power plant emissions and other factors with environmental impact. (see for example principle fifteen).

The precautionary principle can be briefly stated as:

the theory that an action should be taken when a problem or threat occurs, not after harm has bee inflicted; an approach to decision-making in risk management which justifies preventive measures or policies despite scientific uncertainty about whether whether detrimental effects will occur.

There is a significant scientific question as to the long-term reliability of the production levels for oil and natural gas that is being produced from the shales of the United States, and it has been articulated well both by Art and Rune, among others at the Oil Drum.

And as China draws an increasing amount of fuel out of Turkmenistan, Iran and the Middle East, with the potential for an additional increase in the draw from Russia, there is some concern that as China buys for the long-term, that tightening supplies will begin to limit the availability of fuel for Western Europe and the United States.

With the occasional collapse of the odd wind turbine, and the difficulty in seeing how solar power can help in the blizzards and snow storms I have gone through in the last week, there is some concern over the size of the contribution that these technologies can make into the energy mix of the next decade.

In those circumstances, a wise application of the Precautionary Principle to future energy supplies, in both Europe and the United States, might suggest that sufficient legacy power systems be left in place to ensure that neither community is left short of energy in the years ahead. This is to guard against the proposed replacements being either inadequate or insufficient to meet the future need.

And yet, unfortunately this is not likely to occur. As with many arguments and tools used in political debate, once a position or an argument has been adopted it is extremely rare for it to be renounced. The consequences of current decision making rarely come back to haunt those politicians who make them, since they often occur past the current elective term and are thus of less interest to those who are more focused on the next election.

Yet longer-term events do eventually arrive, and time having passed, the day of reckoning is becoming visible. It is likely that the Bakken will peak before the end of the current Administration. Ofgem has already raised concerns over an over-reliance on imported natural gas into the UK, and warned of possible shortages by the end of 2015, and urged a diversification of supply types. The IEA recently issued a chart that shows their projections for the energy future to 2035.


Figure 1. Past and future distribution of energy demand for the different sectors of the world (IEA )

The writing is beginning to appear on the wall. And while the Precautionary Principle is aimed more at less obvious, high risk scenarios – the risks to the world of a failure in the global supply chain, or even a national one is of such a high impact that even with a lower probability of occurrence than is becoming evident, it would be wise to start looking for answers. It is likely already far too late, and the world remains replete with folk denying the existence of a problem (even as gas prices continue to rise) but it will be interesting to see how the new Secretary of Energy addresses the situation.

OGPSS - An introduction to Iran

The theme of these posts, over the past eighteen months, has been to look at the leading producer nations that provide crude oil to the world, and see whether it is realistic to anticipate significant increases in their production. Posts have now looked at North America, Russia, Saudi Arabia and China based on the original list of rankings produced by the EIA in 2009. And, as I noted before beginning the China posts the interesting question at the moment relates to a) how much oil is Iran currently producing and b) how much, realistically, can it be expected to produce.

These are not questions with the same answer, since the current sanctions that have been imposed on the country have clearly already had an impact on the amount of oil that is being exported from Iran. Nevertheless the volumes produced have fallen below those now achieved by China, and for that reason China was given priority when it came to the order of writing these posts. But back at the beginning of 2011 there was no doubt that Iran was one of the top 5 producers (particularly if one combines the USA and Canada into the new “politically correct” term of North America as a way of dodging questions on long-term US production levels).

If one looks at the latest, September OPEC Monthly Oil Market Report (MOMR) for example, there is now a gap of 1 mbd between the official production claims, which are shown below, and the reports from other sources, which follow.

Figure 1. OPEC production reports, from the originating country (OPEC September MOMR )

Figure 2. OPEC production reports, as provided by secondary sources (OPEC September MOMR )

In passing it should be noted that OPEC is anticipating global oil demand to grow 0.9 mbd in 2012, and 0.8 mbd in 2013. To meet that OPEC anticipates that non-OPEC production gains will be 0.7 mbd in 2012, and 0.9 mbd in 2013, taking some of the pressure away from the OPEC producers. Within OPEC production, the gains from NGL’s are anticipated to further increase by 0.4 mbd in 2012, and 0.2 mbd in 2013. These figures again ease the need for OPEC to show increases in production to meet export demands, at the time that their internal consumption continues to rise.

Iran is thus, by the original criterion, the last of the Big Five to be looked at, although, in light of current production numbers it has clearly fallen into the second tier, and with current production below 3 mbd it joins others (Mexico and Veneuela, for example) who have fallen through from upper second tier into the lower second tier of nations that produce below 3 mbd, though this is likely transient, depending on how long sanctions last and, more critically, are effective.

If there is little likelihood of major increases in production from Russia, Saudi Arabia, and China, and that I take some of the optimism over North American production gains with a considerable grain of salt, then global increases in production must come from nations that are now producing below 3 mbd. With that size of an industry it is difficult to anticipate spectacular increases from a single producer. Rather individual country gains (with the exception of Iraq, which could increase production to 4 mbd) will likely only be perhaps on the order of 100 kbd. As a result, if global needs are to be satisfied, there has to be a whole series of overall gains in a multiplicity of countries. For it is only in this way that the total can combine to sustain the optimism of those who see a cornucopia of oil flooding our future through at least the next ten years.

That Iraq has moved into the second tier above 3 mbd this month (by both their own and other counts) makes it a separate point of discussion. But first there is Iran. And with President Mahmoud Ahmadinejad giving a more subdued speech before the UN this week as sanctions continue to bite, the role of crude in the Iranian economy may be becoming more evident to their government. Domestic consumption runs at about half of production, but the country needs the income from exports.

Figure 3. Iranian Oil statistics (Energy Export Databrowser )

Euan Mearns illustrated the range of Iranian oil facilities in his post last December prior to the embargo.

Figure 4. Iranian oil and gas fields and infrastructure (Euan Mearns at TOD)

Oil production in Iran has increased since the days in 2005 when, for a while, it appeared that the country had reached a point of declining oil production, and where natural gas injection was being debated as the possible answer. At that time as the debate over Iran “going nuclear” was beginning to build there was already a rationale for the development of nuclear power in the country.

Jump forward seven years and that debate is now at a much more intense level. The Israeli Prime Minister is seriously concerned over the development of nuclear weapons in Iran, as are other countries in the region, and around the world. The relative need for Iran to establish a nuclear-based electricity program, while used as a justification of the program by their government, has been largely neglected in the concern over the potential for weapons development. Sharing the largest gas field in the world (the South Pars: North Field) with Qatar, Iran has a resource that is being used at an increasing rate internally, with slight amounts being imported in the remote northern part of the country, where it is easier to use gas from abroad than to lay the delivery lines in country.

Figure 5. The South Pars: North Field Gas field shared by Iran and Qatar. (petroleum reports via The Encyclopedia of Earth)

Figure 6. Iranian natural gas statistics (statistics (Energy Export Databrowser )

And so, with the above as background, the next couple of posts will look at the Iranian situation in a little more detail.

Biofuel in the air and expensive gas on the ground

There are a couple of items in the news today this week that mark the face of a changing world of energy supply. Of the two the increasing problems that the United Kingdom are facing with maintaining a viable energy program into the future is being marked with an escalating cost and the need for politicians to begin walking back from some of their previous statements. The other is the decision by Lufthansa to use a biofuel mix as a regular fuel for scheduled flights. The latter decision is a little more complex than it first appears, since the logistics of supplying the fuel mean that the aircraft (which will fly the Hamburg to Frankfort route) will only be fueled at one airport, and – to facilitate the monitoring of maintenance and other possible impacts – only a single plane will initially be involved in the trials., which will go on for six months. The testing can now begin since the standards for the fuel have now been approved by ASTM.

After blending with conventional jet fuel, new lubricity, distillation and composition requirements in D7566 must also be met. As a result, the blended jet fuel used in the airplane is essentially identical to conventional jet fuel and does not differ in performance or operability.

The biofuel will be supplied by Neste Oil, which has declared a target of 2 million tons (around 40,000 bd) of jet fuel by 2020. Given that this is a 50:50 fix of biofuel and kerosene to meet the above standard, lowers the volume of biofuel needed, with the source described as:

Produced by hydrotreating renewable raw materials, NExBTL aviation fuel is compatible with all aircraft engines currently in use. Production is based on Neste Oil's proprietary technology, which can make use of a flexible range of various types of vegetable oil and waste-based inputs, such as animal fat from the food industry. Neste Oil is committed to only using verifiably sustainable and fully traceable raw materials that can be tracked all the way back to the original source.

In the United States there have been single plane flight trials, with the “Green Hornet” (flight video ) using a mix that included camelina oil .

Turning from the good to the rather more worrying topic, the British gas industry is in the process of raising natural gas prices by some 18%, which also feeds through into the price that they charge for the electricity generated by the gas, and also supplied to customers. This is occurring at the same time as a report from a British car insurance firm has concluded that the increased price of gasoline (petrol) in the UK has driven some 1.3 million people (out of 31 million registered drivers) off the road, with the cost of car operation reaching $4,800 a year. This is an increase of over 20% in a year, and when taken with the rising price of natural gas is an illustration of the costs that are being incurred as the UK moves more strongly from an exporting to a fuel importing nation.

The U.K. Government is beginning to realize that, without a sufficient domestic resource, they are constrained to pay what the rest of the global community decides is a proper price for their fuel. The UK Government is putting forward a plan that will increase the emphasis on nuclear power and renewable sources of power. The problem is that, to comply with EU rules, the UK is going to have to close a quarter of its generating capacity this decade. The eight nuclear power stations that it is now anticipating private industry will build (though there is some doubt) won’t come on line until perhaps 2025.

Possible Nuclear Power Station locations in the UK (LSE )

In the interim the problems to the consumer of the rising price of natural gas is perhaps being reflected in the same way as it was for gasoline, namely a reduction in demand. In the first quarter of this year, while coal use rose (albeit with two-thirds of the supply imported) by 7%,, the demand for gas fell 20%. Renewable energy sources increased supply by 27% but this should be placed in the context that the overall contribution from renewables was only 3.3% in 2010. Demand has been met by coal

Power companies have been benefiting from local coal production, however, with the small but active number of British facilities recording a 31% increase in output in the first quarter. Deep-mined coal showed an 80% rise as stocks were depleted due to demand from the utilities.

The problem, unfortunately, remains that the coal-fired power stations are going to be pulled off-line soon, and so the cheaper coal-fired power will not be available, and (providing that there are power stations available) the reliance on natural gas will continue to drive prices higher, which is likely to be increasingly unpopular with the British public.

However the first large solar farms in the UK are now on line, although with a combined output of 2.4 MW they are not likely to have much impact on overall supply.

That lesson (of increasing prices costing politicians their popularity) has already been cited as one reason for the release of oil from the Strategic Oil Reserve in the United States. Unfortunately it would appear that this release, coming with the increase in demand that I have referred to earlier, has not had the hoped for impact on oil prices. And, equally unfortunately, that action is still some months before the elections of next year.

The British experience is beginning to show that demand can be curtailed by price, but that still requires that there be an adequate supply to meet such demand. The problems with finding reliable power sources by 2015 for the British electricity suppliers is beginning to become evident and will likely further influence political popularity there. But the UK does not have to hold a national election for some years. That is not the case in the United States, even though the prices of gasoline and natural gas are still well below that of Europe, but where the public is more sensitive to those numbers, and where the elections are a whole lot sooner.

Japan - using water cannons and replacing lost power

There are two different time intervals (short and intermediate term) for my comments today on the problems that Japan now faces with their nuclear power stations, following the earthquake and tsunami that have left the nation facing concerns over radiation and a shortage of power, that have accompanied the vast and tragic damage to people and property. I am gong to give a short technical comment on putting water on the nuclear station fires (wet stuff on red stuff as they say in the trade) and then comment a little on what the alternatives might be for replacing the lost power in Japan. (UPDATE: The loss of petroleum products due to the damage to nine refineries has cut the amount of oil and its products that is available from 450 kbd to 310 kbd. )

The first aspect of the problem relates to the immediate short-term, and the need to cool the reactor sites and the spent fuel pools at the Fukushima Daiichi power plant. Because the attempt to drop water onto the critical areas using helicopters did not work, the current plan is to use police water cannon. Police cannon, for those who have lived a righteous life, are used to control riots where it is desirable to minimize damage to the participants. They can be used either with plain water, or a small amount of a polymer (also used in fracking operations) which reduces friction (it is usually a poly-acrylamide). The latter is sometimes referred to as “Banana Water” since when it is used it makes the ground surface very slippery. After all, it is hard to continue a riot when you cannot get up off all-fours. (The polymer also makes the jet throw considerably further). A water cannon might throw a jet up to 60-meters at a working pressure of around 160 to 200 psi. They are generally designed for relatively close operational ranges, and with a stream that disperses. More effective designs to throw longer distances would have a greater section of straight section behind the nozzle (to stabilize flow) though sometimes internal flow straightening devices are used instead, allowing a shorter barrel.

However, should they wish to get more water into the area from further away, they might want to consider using some of the old hydraulic pumps and monitors left over from the recent past when coal was mined hydraulically in the Hokkaido (large pdf). These can deliver over a thousand gallons of water a minute, with sufficient power that they can mine coal from more than a hundred feet away. The reactors are slowly cooling, and it is hoped, once the water is available to accelerate the process, that those particular problems will subside.

In the intermediate term there is the loss of power from the eleven reactors that have been taken offline. Japan suffers from a lack of indigenous fuels. though it has sought to improve the efficiency of consumption, and thus lowered demand over the past decade the demand for oil and natural gas has remained high. The demand may be constrained in the short term by the disaster, since roads and infrastructure have been severely damaged, with road displacements of over a foot in places. But demands for some form of power, and the need to get the country re-mobilized may shorten any significant decline in demand. Moreover use of fuel oil has, recently, been rising reaching 151,000 bbl/day in January.

(Source EIA)

Twenty-four percent of Japanese electricity is produced from nuclear power and it is a portion of this that may now be out of commission for years.

The Japanese are reported to have shut down some 6,800 megawatts of power, and it has been calculated that, were this to be totally replaced by oil, that this would impose an additional demand of 238,000 bd on the market. On the other hand were it could be replaced by natural gas, a perhaps cheaper alternative, then demand would increase by perhaps 1 billion cu ft/day (BCF/d).

There are several ways in which the power can be replaced, but they will likely be focused on the use of fossil fuels. It should not be forgotten that five coal-fired power stations were shut down by the quake and tsunami, and cargoes for those stations are now being picked up by other stations in Japan.

According to market sources, the five affected power plants are the Tepco and Tohoku Electric joint venture 2,000-MW Soma Kyodo plant; Tohoku Electric's 2,000-MW Haramanchi plant; Joban's 1,600-MM Nakoso plant, and Tepco's 600-MW Hirono and 1,000-MW Hitachinaka plants.

Analysts said the equivalent of 10% of Japan's installed coal-fired generation capacity for electricity was currently offline.

The coal-fired plants will likely prove faster and simpler to repair and bring on line than the nuclear plants.

(Source EIA)

Until the recent events occurred, it was anticipated that the large use of coal in the country would fall, and be replaced by nuclear power. That trend is likely over, and the coal markets are already anticipating the switch back. As noted on Seeking Alpha, the question that arises, in part, is just where it will come from.

No matter the outcome of the current problems with the three old-style reactors in Japan, all of which need pumps to be secure from damage so water can be pumped up into the reactor core to cool the fuel rods (vs. the newer designs that use gravity to let water fall down onto them), one thing is certain: Other coal-fired plants in Japan will be working overtime to make up for this loss of power in order for re-building to be able to take place.

One additional reminder: It isn't as if China isn't already desperate for US and Canadian coal. It isn't as if Australia hasn't already had to reduce coal production as a result of the flooding there. It isn't as if India doesn't need more of both types of coal to power and build infrastructure there.

Utilities in Japan were already taxed, before the earthquake, given that January was the coldest in 25 years.

The 10 main utilities consumed 5.21 million tonnes of thermal coal last month, up from 4.55 million tonnes a year ago. They burned 698,385 kl of direct-burn crude oil (Ed. Equivalent to 141 kbd), rising from 440,534 kl a year ago. LNG burn also climbed to 4.12 million tonnes from 3.71 million tonnes.

With the cold weather diminishing (although it snowed around the damaged reactors yesterday) fuel demand would normally decline, but the balance between what supply is available and that which can be delivered is, in places now as much as a 25% shortfall. This has meant rolling blackouts that may well last into April. Some of this can be alleviated by load shedding by customers, and a re-distribution of load through scheduling. That will, however, take some time to organize,

Repair of the nuclear power stations is going to take a long time, and some may not be replaced by the current means of generating the power. It is perhaps likely that the emphasis will switch to natural gas, since there are spare turbines available, and a plentiful supply of the fuel. Since Japan would be importing LNG this has already given rise to an increase in price.

South Korea said on Sunday it will supply LNG to Japan's utilities after Tokyo made a request on Saturday. It added that Japan was likely to import an additional one million to 1.5 million tonnes of LNG per month after April.

However Korea, which also buys in that market is not as concerned with the rise in gas prices longer term, instead it worries about the rising price of coal, if this is used to replace the lost nuclear power. Coal is a likely intermediate-term answer that Japan may have little alternative but to adopt. But it will depend on who can get the most power available the fastest that may ultimately decide how the Japanese energy picture now changes.

The UK - new Government, new Energy policy?

The new British Government has moved in, and Chris Huhne is the new Secretary of State for Energy and Climate Change, Charles Hendry is the new Minister of State for Energy while Gregory Barker is the new Minister of State for Climate Change. (Interesting set of pre-government employments). This post will look at the new policy statement, relative to the recent Ofgem Discovery Report.

(Saturdays on this site are usually devoted to issues of Climate Change, just to make a little break from the usual focus on energy, although the two are quite closely related. Because of the spill in the Gulf, and some travel before that, I have drifted away from the practice, but hopefully by next weekend things will have quietened down enough that I can return to analyzing the behavior of state temperatures over the last century.)

The challenge (Ofgem)

The policy statement for the new Government in the UK includes the following objectives for the Department:

• We will push for the EU to demonstrate leadership in tackling international climate change, including by supporting an increase in the EU emission reduction target to 30% by 2020.
• We will seek to increase the target for energy from renewable sources, subject to the advice of the Climate Change Committee.
• We will continue public sector investment in carbon capture and storage (CCS) technology for four coal-fired power stations.
• We will establish a smart grid and roll out smart meters.
• We will establish a full system of feed-in tariffs in electricity – as well as the maintenance of banded Renewables Obligation Certificates.
• We will introduce measures to promote a huge increase in energy from waste through anaerobic digestion.
• We will create a green investment bank. • We will retain energy performance certificates while scrapping HIPs.
• We will introduce measures to encourage marine energy.
• We will establish an emissions performance standard that will prevent coal fired power stations being built unless they are equipped with sufficient carbon capture and storage to meet the emissions performance standard.
• We will cancel the third runway at Heathrow.
• We will refuse permission for additional runways at Gatwick and Stansted.
• We will replace Air Passenger Duty with a per-flight duty.
• We will introduce a floor price for carbon, and make efforts to persuade the EU to move towards full auctioning of ETS permits.
• Through our ‘Green Deal’, we will encourage home energy efficiency improvements paid for by savings from energy bills. We will also take measures to improve energy efficiency in businesses and public sector buildings. We will reduce central government carbon emissions by 10% within 12 months.
• We will reform energy markets to deliver security of supply and investment in low carbon energy, and ensure fair competition including a review of the role of Ofgem.
• We will instruct Ofgem to establish a security guarantee of energy supplies.
• We will give an Annual Energy Statement to Parliament to set strategic energy policy and guide investment.
• We will deliver an offshore electricity grid in order to support the development of a new generation of offshore wind power.
• We will encourage community-owned renewable energy schemes where local people benefit from the power produced. We will also allow communities that host renewable energy projects to keep the additional business rates they generate.
• As part of the creation of a green investment bank, we will create green financial products to provide individuals with opportunities to invest in the infrastructure needed to support the new green economy.
• We will work towards an ambitious global climate deal that will limit emissions and explore the creation of new international sources of funding for the purpose of climate change adaptation and mitigation.
• Liberal Democrats have long opposed any new nuclear construction. Conservatives, by contrast, are committed to allowing the replacement of existing nuclear power stations provided that they are subject to the normal planning process for major projects (under a new National Planning Statement), and also provided that they receive no public subsidy.
• We will implement a process allowing the Liberal Democrats to maintain their opposition to nuclear power while permitting the Government to bring forward the National Planning Statement for ratification by Parliament so that new nuclear construction becomes possible. This process will involve:
– the Government completing the drafting of a national planning statement and putting it before Parliament;
– specific agreement that a Liberal Democrat spokesperson will speak against the Planning Statement, but that Liberal Democrat MPs will abstain; and
– clarity that this will not be regarded as an issue of confidence.

The big change, of course, between being in Opposition and being the Government is that the coalition how has to make the system work, as well as meet the objectives that they have now outlined.

There are some tough hurdles in the above that will now have to be reconciled with the actual state of British energy supplies, and the relative costs of providing energy to a nation that is on the downside of the curves for the provision of oil and natural gas from its own resources. The Prime Minister has stated that

So today, taking our lead from 10:10, I commit us to a ten percent reduction in carbon emissions across central government in the next twelve months. You’ll be driving this forward. But I have also made sure all Cabinet ministers are involved, developing plans to show how they will meet their share.

“And the public will be involved too - because we're going to publish the energy use of government headquarters in real-time, so people can hold us to account for our performance.

And lest you miss which is viewed as the more critical aspect of the new Secretary’s job, let there be no doubt, since he stated his goals.

Climate change is the greatest threat to our common future. We have a very short period of time to tackle the problem before it becomes irreversible and out of control.

“A lot of progress has been made, but we must now go further, faster and turn targets into real change.

And

Together we have the opportunity to make this the greenest government in our history. And to put energy security, for too long a second order issue, at the heart of the UK's national security strategy.

In the United Kingdom Ofgem (the Office of Gas and Electricity Markets) regulates the monopoly gas and electricity companies in the UK, and is intended as a consumer watchdog. In March it produced a “Discovery Report”, which notes some of the concerns that had then risen with regard to future energy security. It shows, through this figure, the need for adequate lead time for many of the changes that will come about as domestic supplies fall.

The challenge (Ofgem)

Specifically they note:

• The potential need for additional gas storage and gas ballasting facilities (to address gas quality issues) around the middle of the next decade as our import dependence passes significant milestones (as based on our Dash for Energy scenario);
• The possibility that additional combined cycle gas turbines (CCGTs) will be needed before 2016 to offset plant closures associated with the Large Combustion Plant Directive (LCPD);
• The need for low carbon alternatives, such as new nuclear or plant fitted with carbon capture and storage (CCS), to be deployable at scale to replace closing nuclear plant and large volumes of fossil fuel plant expected to close from 2020 under the terms of the Industrial Emissions Directive (IED); and
• The (at least) doubling of our wind deployment rate by the end of this decade that will be needed if the 2020 renewables targets are to be met.

They note that this is going to require significant investment, which may be a problem given that the UK is currently anticipating making major budget cuts to overcome the deficits left by the previous government.

The report calls for an investment of 200 billion English pounds by 2020, which, in context, is larger than the current UK budget deficit of 163 billion pounds, about 11% of the GDP. That deficit is leading to current plans for cuts of up to 6 billion pounds in the public sector. The first budget to more comprehensively address this will be announced on June 22nd.

In regard to the availability of funding the Ofgem report notes:

our assessment suggests that prices may indeed not rise sufficiently during periods of scarcity and we believe that this presents a material risk to security of supply. As a result, potential investors in new power stations could find it difficult to recover their investment costs and so may not build new plant. Some commentators suggest that this so called 'missing money' problem in electricity markets can only be addressed through separate mechanisms for rewarding capacity as have been implemented in the US and elsewhere. Others argue that capacity mechanisms are not necessary and lead to inefficiently high prices.

One issue that the report highlights that I had not previously considered is that of natural gas quality. There is a significant difference, apparently between that needed in the UK for existing appliances, relative to that obtainable, for example, from Russia.

The difference in gas specification creates a risk that gas cannot flow via the IUK interconnector to the GB market. Up until now, Fluxys, the Belgian SO, has been able to manage this risk to imports via the IUK by swapping higher calorific sources with lower calorific sources or by using linepack to keep gas within the GB specification. However, there is a risk that the high specification of new sources of Russian gas and the increasing specification of Norwegian gas arriving at Zeebrugge may make it more difficult for Fluxys to provide these services. This means that there is an increasing risk that flows could be curtailed on certain days to stop "out of spec" gas from entering GB.

To cut to the bottom line, the report notes that:

They lead us to conclude that, in the context of the risks identified in our scenario work, there are reasonable doubts as to whether the current arrangements will deliver security of supply and environmental objectives at affordable prices. . . . . . . Ofgem does not consider that leaving the current arrangements unaltered is in the interests of consumers.

That seems to be a realistic point at which to sit back, and see how the Government actually will overcome the problems – or at least try.

Energy Summit - the second morning

The second day of the Summit began early, but still had all four University Chancellors and the University President in the room at 7:30 am although it took a fair while longer for the body of the room to start to fill. In his welcoming remarks the Chancellor of the University of Missouri-Columbia noted that by changing to burning tires, switchgrass and an assortment of waste, the campus had cut its coal consumption by 5% this past year.

The first speaker of the day was Robert Dixon of the Climate Change and Chemicals of the Institute for Environmental Security. He was a member of the IPCC, and has been Head of the Energy Technology Policy Division of the IEA. (A glitch meant we did not see his opening slides). He began with the point that the world has areas of extreme energy poverty and that we need to change the way in which we do business. Indonesia will soon pass the United States in the amount of GHG that it emits, yet all our economies are built around the use of petroleum, and this is not a sustainable base.

Having been part of the IPCC and the IEA he commented on the difficulty in explaining positions to world leaders when you only get ten minutes of their time. At the moment we are not on a path to a sustainable future, and that message cannot be conveyed in that small an amount of time.

The world needs not only new technologies, but also a new system that should include energy efficiency, since that is the gift that keeps on giving. Yet, if we are to reduce GHG we need some 24 – 32 new nuclear plants a year, and the world is only installing 1 or 2. To force the change he feels that we should have cap and trade with a $50/ton cost for allocations, but if the world is to get down to the carbon dioxide levels required, then the cost should rise first to $200/ton and then to $500/ton. (On an editorial note, based on Missouri consumption, where a $50/ton carbon cost doubles our electricity price, this is calling for pricing that will take it up, first by a factor of 4 and then 10 – so that electricity will approach $1.00 per kilowatt hour, and if your bill is now $200 it will become $2,000 a month).

Replacing coal will require ALL technologies be advanced forward, and they should be funded, but there are many pathways being proposed and these must be co-ordinated to give a viable roadmap for the future. They will provide many opportunities for investment, but given that the current system has had its investment cost covered there is a challenge to find the funding for replacements. Public sector R&D is down, and so politicians must work to reverse this trend if we are to find the answers that we need. An energy revolution is urgently needed, but there are barriers of funding and timeliness so we must take action to induce change.


Mark Templeton has recently been installed as the new Missouri Energy Czar (coming from heading up Yale Law School). He began by listing some pluses including the first city (Rock Port) that is powered entirely by wind. Yet at the moment Missouri ranks 45th in Energy Efficiency and so there is a need to communicate to the public, giving them ways that they can save. If we could just save 15% of our electric use, and 10% of our natural gas use, this would, over time, add up to $2.8 billion in savings.

Yet we cannot only address the problems of the past (by weatherization etc) but we also have to find new future answers. Missouri is 49th in use of renewables, and 18th in use of wind power. (Ed note: Possibly because we don’t have enough of the higher speed winds we need?) In summer we get as much sun as Florida, and while biomass is not that far along, it is an indigenous resource. If Washington is going to push us, then we might as well move ourselves.

He noted that fuel prices are going back up and we are now at a time where OPEC cuts in supply are controlling cost. Missouri is seeing record unemployment, we need to find and develop the next generation of green jobs. To this end they are working with the Office of Economic Development.

The University President. Gary Forsee, then introduced the Governor of the State, Jay Nixon. The Governor picked up on the theme carried by Mark Templeton, tying Education and the Economy together, and stressing that we need a trained workforce, in the right areas, to move us out of the recession. We need to change our economy but must recognize that the energy demand per capita will not go away, though improved efficiency and conservation are going to be vital parts of the future economy.

He cited the new wind farm, and work on batteries to store excess wind energy, as current indicators of progress, but justified his continued investment in education and retraining . He noted that while normal drivers brake around a curve, NASCAR drivers accelerate so that they can take advantage of the coming straight stretch. He views Missouri’s economy in the same way.

He drew attention to his program to fund young interns to work in future areas of renewable energy with the comment, in passing, that giving kids money was sure to stimulate the economy, since they were certain to spend it. We must both walk and talk the talk, and so, at the podium, he signed an Executive Order lowering the energy use in state buildings.

The Governor was followed by Richard Sayre of the Danforth Center who spoke of the benefits of algae, and some of the paths that are being taken, including using algal species that weep oil and can be milked (using alkanes) and then put back out to pasture, rather than internally producing it and having to be destroyed to recover the oil. He again commented that ice caps could be gone in the summer before long (no I’m not going to put the reality graph up again).

Energy from biomass has the potential to create more “green” jobs than other renewables, and he noted that the United States already produces more ethanol than Brazil. But the parts of the country that have highest solar intensity to help plant growth also have poor soils and a lack of water. He showed a map for the country locating the 30-inch rainfall line as running down almost through Columbia, and questioned, based on it, which biofuels we should focus on. Since oil crops have more energy than starch, biodiesel producers are more logical. At present oil costs from algae are divided with slightly more than half in production, and slightly under half for harvesting. With a pond only containing 0.1% useful product there is obviously a need to reduce the latter costs. Interestingly he noted that, growing algae in Missouri, it is not the cold of the winter that is the problem, but rather the warmth of the summer. He then went on to make a number of the arguments that I have made when I talk of the advantages of growing algae underground (light spectra control, use of the full amount and at levels that algae will grow at optimally). By adding sugars to the water, they have found a dramatic increase in the oil production rate, and by changing the algae to use lower light levels they have doubled the production rates from deep ponds. With the additional change to “weeping” algae they have had a 3-fold increase in biomass production and a 40% increase in the oil production rate.

Rob Duncan the Vice Chancellor for Research at UMC, was on 60 Minutes (video report ) last week talking about cold fusion. He gave an expanded talk on the subject, noting that he had gone from being a cynic to a believer.

After reviewing the history he went on to share some of the photos and experiences from his visit to the Israeli lab doing the work. And in the process of explanation he may have made a number of other converts. When there has been talk before of energy output being greater than input in the experiments, I always got the impression that it was not that much. But he talked of vessels boiling over, and getting a MegaJoule of energy, where there should have been a hundred joules. But more convincing to me was the surface of the palladium rod, which, after the experiment had small “volcanic” pits with molten ejecta.

He could not yet explain it, but he noted that at this stage it does look real. However there is a huge gap between discovery and useful engineering application and so the topic must be approached with less hype and more focus on a scientific method for determining evolution of the technology.

Dr Duncan was the last of the Invited Speakers, and the Summit then broke into two consecutive parts. In the first there were four sets of concurrent papers by Missouri research groups talking about their work, and this was followed by two sets of two panels where there was discussion on Clean Coal, Transportation and Biofuels; Nuclear energy; and Infrastructure. Since this post is getting a bit long, I will summarize these in the next post.

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