Tech Talk - The Price of Power, and its consequences

The changing colors of the leaves carry the message that winter will soon be here, and so it is time to stock the yard with wood to carry us through until spring. In Missouri I just found wood, cut to the length I need, and stacked, for $110 a cord and (since it has to be cut) it will arrive next week. Only the chimney then needs a quick sweep, and we’ll be ready for another season. (We burn just under a cord of wood a month, and this keeps the electricity bill sensible).

At one time the wood was insurance, in case of an extended power outage (and we had one that lasted three days, one winter) but we enjoy the heat from the tile stove, and so it is now part of our life. And with the continued risk of a loss of power, the insurance remains comforting.

Driving back from Maine a couple of weeks ago, gas prices fell over $0.25 a gallon along the 1,300 mile trip, another benefit of living in the Mid-West. But at both ends of the drive, the impact of fuel prices continues to slow economic growth, as it does nationally. Gail Tverberg has written of the inter-relation between the economy and fuel prices, most recently on Monday. However we disagree on one point, since she anticipates a potential significant drop in oil prices, which I do not.

In the early days of The Oil Drum I remember walking through the streets of Denver to a meeting with two other contributors, and suddenly realizing that I, the more technically based of the three, was by far the most pessimistic. Increasingly I am realizing that while this pessimism has not ameliorated, the current relative abundance of oil and gas in the United States has given many folk an undeservedly complacent view of the next few years.

Ron Patterson recently pointed out that if one discounts US production, the rest of the world has seen a decline in production, with non-US production now down around 2 mbd from its all-time peak. (If one also removes Saudi Arabian and Russian production from the mix, the decline gets closer to 3 mbd). Now to assume that this is totally due to a loss in production capacity would be a mistake. Saudi Arabia continues to adjust the volume of their production to try and keep global prices relatively stable, dropping production by 400 kbd in August. In the immediate short-term that was not enough for their purpose, and they are now lowering price a little, perhaps in order to sustain their market share. The cuts were in the range of $0.20 to $1.20 a barrel). Although it could also be a way of trying to sustain global growth at a time of weakness.

Figure 1. Global Production without including the United States – as plotted by Ron Patterson. I added the trend line at the end of the top plot.

These flutterings at the margin however don’t help my concerns, because they are focused only on the short-term, and don’t consider the overall situation. If the production from the rest of the world is declining at around 700 kbd, and Saudi Arabia will only produce to a maximum of 10 mbd, and Russia appears to be in that plateau that precedes decline, even without the loss in funding that recent US Government mandates will impose, then that leaves the growth in US production as being the only source to match both the decline in global production, and the continuing demand for more oil which together total around 1.7 mbd. And US production projections, even at their most optimistic can’t do this, even for one more year.

Figure 2. Projected Growth in US production (EIA)

The mathematics are, of course, not absolute numbers but remain somewhat flexible. There could be a sudden cessation of conflict in Libya and full production might return; all conflict might end in Iraq and production development might surge at the investment opportunity; and sanctions might disappear against Iran – but somehow I don’t see any of these happening.

The argument of the Cornucopians, that one can either find a substitute for the fuel in some other resource, or that technology will suddenly become available to allow unanticipated levels of production from the existing reserves and resources is, perhaps why I – knowing a fair bit about the technology – am more of a pessimist than many others.

The analogy that I use may be a little crude – but you can’t have a baby in a month by making nine women pregnant. You can’t create new technology out of thin air by suddenly investing a few billion in a bunch of scientists pulled from lists on the Internet either. There are not that many folk who are sufficiently expert to be useful, particularly in the fields that relate to the production of fossil fuels. Many of those who do exist are, like me, coming to the end of their professional lives, so that the skill sets and knowledge bases that they have built are disappearing. Many of the doctorates that we see today are based more on computer modeling than on hands-on experimentation and engineering. And unfortunately the knowledge that we have about the nature of the rocks at depth, their behavior and how to change the way in which they yield their fluids still leaves a lot to be desired, when it comes to validating the models that are produced.

But even if such new technology were developed it would take decades to see it adopted in sufficient volume across the world that it would have a significant impact on global fuel production. It was for this reason that, back in 2005, the Hirsh Report discussed the need for a twenty-year lead-time to develop new technology that could replace our needs for fuel. The time that they suggested that we had available now is beginning to seem very optimistic, while the moves to ameliorate the problem have been judged less critical and thus no longer receive the attention and funding that the have in the past.

And so, when the crisis comes, and this is increasingly likely to come in the next two years, there will be no good answers, just tightening supplies and rising prices. This is perhaps why I am beginning to think that the next President of the United States still may well be, despite all the gaffs, Brian Schweitzer.

On burning wood, coppicing and pollarding

The power plant on our campus is set up so that it can burn either coal, natural gas or wood feed stocks. At the present time the natural gas lines are blocked, since the trends of increasing price made it uneconomic to use within the boilers. However the plant uses around wood for 40% of the feed, and has for a number of years. It helps, both with pollution control, and with the overall plant economics (oftimes being cheaper per kwh generated). We are located adjacent to a national forest and thus there is a ready supply of material.

This practice is beginning to catch on, as Bloomberg notes:

Using biomass for power and heat -- mainly from poplar, willow and pine trees -- grew by 25 percent during the past two decades, according to the International Energy Agency, the Paris-based adviser to 28 oil-consuming nations such as the U.S.
Industrialized nations got 4 percent of their energy from biomass in 2006, the most recent data available from the IEA. That was the equivalent of 151 million tons of oil.

Chips of wood stumps and branches, heated to 400 degrees Celsius (750 degrees Fahrenheit) at the Novus furnace, are as efficient as coal and cheaper: European Union rules don’t require carbon-dioxide permits because the trees absorbed a like amount of the gas before harvest, making them carbon-neutral.

Now in relatively small quantities this is a viable program, and for domestic heating wood has long been a fall-back supply (we buy several cords each winter to burn in our tile stove).

It is particularly useful as a supply in those parts of the country where solar and wind energies are not going to be locally available as viable resources (long-term, long-distance transmission of generated power is an issue I’ll duck today).

However, before everyone rushes out to get a stove, furnace, or even a fireplace it is worth reminding folks of some historic facts (some of which Bloomberg also catches).
Generally you burn up a tree a whole lot faster than you can grow a new one. Out of that reality grew the European practice of coppicing where the young limbs of the tree are harvested back to just above the stump, and the stump thenn allowed to regrow limbs. (The practice dates back to before Henry VIII). Trees such as birch may, for example, be harvested every three or four years, while the basic root of the tree may survive for centuries..

Coppiced trees. (Source Hampshire County Council)

The alternative practice is known as pollarding where the tree is first allowed to grow to some height, and then the limbs are cut back. Because the growth then occurs at a later stage in the tree life, the trees will mature in a way that coppiced trees won’t though the production can come faster. It is used where livestock could come in and eat the coppiced limbs (Henry VIII passed laws about fencing the coppiced plantations, thereby enclosing parts of the forest). Both practices were common in Europe with their need for fuel and fencing material, oak and willow being commonly harvested this way, and the characteristic tree shapes are a feature of landscape portraits by artists such as Gainsborough , Knight and Price. It is a practice that, though laudatory for many reasons, has fallen into abeyance, since it is, among other things, very labor intensive. It is suggested that less than 3% of modern woodland is coppiced. There are some attempts to regenerate the industry.

Pollarded Trees (source Wikipedia

Short of these land management and wood harvesting techniques, wood can only be expected to supply a limited amount of fuel before it too runs out. Pelletizing the waste products from wood manufacture has created an industry that can, again, supply a limited market with fuel. Until recently the price has been relatively stable in comparison with other fuels.

Relative wood pellet cost (source New England Wood Pellet LLC)

An average household is anticipated to use some 2.67 tons of pellets a heating season, and they have advantages of being cleaner and simpler to operate than the wood that heats me at least three times (stacking, moving and burning).

Were the whole nation to turn to wood, however, then as happened in Europe in previous times, the cost of the fuel could well skyrocket. I have mentioned in earlier posts that King Edward I (Longshanks) tried to ban the burning of coal back around 1306, but the costs for wood were so much higher, that the ban was ineffectual, as were subsequent bans by monarchs such as Elizabeth 1. And even today one finds that there are those who would rather burn coal than wood. The stove that we have can be adapted (using two grates in about 2 minutes) to burn coal, however, as yet we have not examined that option.

The Bloomberg article notes that one supplier of pellets has already sold this years supply, and with 800,000 households (I suspect many, like us in more rural parts of the country) already using wood, overall supplies may also become tighter. And, in Europe RWE is building wood-fired power plants, and eighteen months ago a large-scale plant opened on Teeside in the UK.

This 30 MWe plant uses 300.000 tons of woodchips a year.

The wood for the station comes from four separate sources. Around 40% of the 300,000t a year total is recycled wood from UK Wood Recycling. This is received, stored and chipped on a nearby, separately owned site at Wilton. A further 20% comes to the site already chipped as offcuts from sawmills. SembCorp is working with the Forestry Commission to bring another 20% from north east forests in the form of small roundwood logs – items sometimes left on the forest floor after routine tree felling operations.

Finally, 20% comprises specially grown energy crops in the form of short rotation coppice willow. The company Greenergy is supplying the wood, to be grown by farmers and other landowners within a 50-mile radius of the site.

The new plant required the growth of around 7,500 acres of coppice in the area, an activity that is creating local wildlife havens.

As an example of the benefits available to local farmers is the case of the Corrigans near Middlesborough and the power plant. They have three 25 acre willow plantations, the first of which has just come to first harvest. Once dried it will be shipped to Wilton and bring in around $20,000. As the plants mature this harvest is expected to increase. There are other advantages

He said: "There has been a dramatic increase in insect and bird life especially snipe, woodcock, lapwings and reed bunting as well as pipistrelle and long eared bats and three species of owl.

So we have found a couple more words that you should probably add to your energy lexicon. And they provide not only fuel, but also jobs.

P32 Pick Points

Half-a-dozen or so stories of interest:

In what appears to be a win-win situation New York is learning what those of us who live in more rural parts have been doing for a while – adding used cooking oil to fuel . while the oil is usually transesterified to give a biodiesel, in NY they are using the vegetable oil “as is,” saving the restaurant up to $22 for 5-gallons in disposal, and the county runs vehicles for almost free. Mythbusters shows that it works, even with no change, other than filtering, of the oil which is straight from the fast food shop. On a word of caution you need to check that your engine is designed for this before trying it, since there is a world of difference between running a liter of the stuff through your engine once, and running nothing but vegetable oil all the time. Not to mention the fact that EPA considers it illegal.

Ausra is changing from producing solar power to selling equipment to industry so that they can generate it themselves, either as solar thermal or steam. This is not long after the company opened the first solar thermal plant in California and is a reflection of the times. The speed with which such plants can be built is shown by a company in Israel that expects that they will be generating power in March from the new domestic size (100 kW of electricity and 170 kW of heat) plant. Power comes from the heated air running a gas turbine. Often these quite small projects are being undertaken by students from American universities who travel to poorer countries to help with such projects.

And speaking of small subjects, drying clothes can take 6% of the nations energy, thus a move has started to overturn rules against clothes lines. There is a promise of subsidies for renewable fuels, as they scale upwards from the small, in remarks made by the new Secretary of Energy though I'm not sure that a clothes line will count.

As Britain suffers under more bad weather the price of salt for the roads has risen from 25 to 100 British pounds per ton. However, once the sun comes back, up to a quarter of British homes may be eligible for energy efficiency makeovers – though it appears the government may only pay for insulation, while encouraging investment in more efficient appliances – including wood-burning boilers. (Did I hear a mutter from Edward I’s tomb?) If you are thinking about it, there is a friendly web site to help with wood burning issues. And yet, even as they encourage wood in the UK, Montreal is thinking of banning wood-burning stoves because of pollution problems.

The question as to whether or not to build a new coal-fired power station is difficult, given the uncertainty about regulation, but in Europe the fluctuating price of carbon credits is also making it difficult to determine the balance between cost and profit, whether for the coal-plants or for wind farms on the other side of the exchange. Finland, meanwhile, is planning on starting a new nuclear power station (they currently have four and would like six). Russia is selling nuclear fuel to India, the first after the international ban was lifted. (Though Australia is still debating whether to lift it. They may need the money, since even Gazprom is talking delays in the South Stream pipeline because of money worries. They are anticipating that gas sales to Europe may fall 5% this year, with a drop in price to $280 per mcm.

I may feel the urge for a new Tech Talk (sorry about today – just swamped with requests for information at work) since Bangladesh is talking about starting “Longwall Top Coal Caving” as a way of improving the extraction ratio in their mines. It is usually used in seams above 20 ft thick, so Americans and Europeans should not get too excited. The need for energy is critical in Bangladesh, since reduced supplies of natural gas are causing increased power shortages and load shedding of up to 480 MW in January, today (Sunday) it was 1000 MW. It translates into several hours without power, and is expected to get worse in the short term. India, meanwhile, is looking to hasten the move to solar power by creating 60 “solar cities” in the next five years, dropping power needs by 10%. The first city in this program began its planning last April China also has a “solar city” and is planning for the 2010 Solar cities convention there. The focus remains on solar water heaters at present. Meanwhile in the US utility companies such as Ameren have started encouraging consumers to consider using power from renewable sources, albeit at a premium. It is an idea that is spreading into the South-East.

Those of us who have concerns about the long-term prospect for fuel supply from fossil fuels have often seen our arguments disputed by Cambridge Energy Research Associates (CERA) which is headed by Daniel Yergin. It often seems we are on the opposite sides of everything. Well this is their big week in Houston, and it will be interesting to see what news their meeting makes. The title is “Risk and the Rebuilding of Confidence.”

For more stories visit The Energy Bulletin and Drumbeat at The Oil Drum.