R-Squared Energy Blog

Pure Energy

The Energy Conundrum

The following is a guest post by Paul Winstanley, the Director of Energy Initiatives from the Stevens Institute of Technology.

1. Introduction

This paper was written as preparation for the recent Discover and Shell sponsored “Fossil Fuels 2050” event in October 2009 at Stevens Institute of Technology, Hoboken, New Jersey.

Energy demand continues to increase rapidly. For example, the worldwide marketed energy consumption has been forecast to increase by 44% to 678 quadrillion British Thermal Units (BTUs) from 2006 to 2030 [1]. Within this period, fossil fuels (oil, natural gas and coal) are anticipated to remain the dominant energy source. Against this avaricious appetite for fossil fuel there is ambiguity over the reserves [2]. In addition to the issues associated with the demand for fossil fuels the environmental impact associated with burning these fuels is an equally large concern.

Therefore, the future energy challenge is complex and highly interdependent. Specifically, we need to:

  • Consider the continued availability of fossil fuels;
  • Whilst we introduce credible energy alternatives;
  • Whilst we ameliorate environmental damage.
  • These three themes will now be considered in more detail.

    2. Continued Availability of Fossil Fuel

    Exploration of hitherto difficult reserves will continue. This will be driven by increasing energy costs and the availability of new technology that enable economic exploitation. Examples of technological advances include:

  • Exploration in deep ocean water;
  • The production of hydrocarbons from oil sands and shale;
  • Directional drilling to access non-vertical reserves.
  • Additionally, there is considerable scope to reduce and prioritize fossil fuel usage. This approach will be different by sector and by time. For example, the short-term viable alternatives for aviation are very limited and it is only recently that flights partially supported by bio-fuels have taken place. This contrasts to personal and mass land transportation where credible alternatives such as hybrid and all electric vehicles already exist. Here greater usage of alternative fuel vehicles should be encouraged by policy whilst longer-term solutions for aviation are researched and developed.

    3. Credible Alternatives to Fossil Fuel

    The previous section raised the opportunity to reduce and prioritize fossil fuel utilization. Given the increasing energy demand, this approach can only be pursued if credible alternatives to fossil fuel exist.

    a. Bio-Fuels. Considerable emphasis has been placed on the development and implementation of bio-fuels. In this case the overall enterprise must be environmentally and economically acceptable. Specifically, issues such as increasing the price of food crops and increasing the utilization of other resources, such as water, need to be considered actively [3].

    b. Renewable Energy. Emphasis has also been placed on the development of renewable energies. With the exception of hydro-electricity the impact of renewable energy to meet the global energy demand has been minimal [4]. There are many factors that underpin this situation:

  • Renewable energy systems and supply chains can lack maturity;
  • There is no “silver bullet” renewable energy solution;
  • Generally, renewable energy systems are large complex installations (e.g. large wind farms) that demand significant capital investment and complex planning and permitting.
  • To overcome these limitations innovation is crucially required at all stages in the renewable energy enterprise. One innovative approach could be the systematic application of energy storage and renewable energy at a smaller scale as a micro-grid. In the residential context this could be applicable at a township level. The micro-grid approach has the potential to deliver rapidly increased energy security and resilience as well as enabling a significant reduction in emissions.

    One important consideration is where geographically renewable energy systems could be developed. Much emphasis has been placed on the future energy demands of emergent economies [1]. It is important to recognize that these economies are generally not hindered by legacy. This is illustrated by the growth in cellular phones. For example, from 1997 to 2007 in emerging nations the number of cellular phones increased 18 times faster [5] on average than landlines and a technological generation was by-passed. Of greater relevance to this paper is rapid growth in London, UK of electric vehicles as a consequence of the introduction of congestion charging (which electric vehicles are exempt from). The dominant supplier of electric vehicles in London is G-Wiz [6], an Indian manufacturer. Therefore, the location of renewable energy system development may result in technological surprise.

    4. Amelioration of Environmental Damage

    The previous section raised the opportunity for an innovative micro-grid approach to reduce emissions. This approach could have a significant contribution to meeting the future emissions targets. For example, in the UK approximately 80% of the carbon emissions arise from energy consumed in buildings and electricity generation [7].

    As well as introducing renewable energy, reducing energy demands has the potential to reduce carbon emissions further. Approaches to reduce energy demands include:

  • Target setting on energy suppliers;
  • More stringent construction codes;
  • Energy labeling to highlight to consumers more efficient appliance;
  • Improved product standards, for example, minimizing power dissipation from appliances whilst they are in a “stand-by” mode;
  • Energy performance certification prior to renting or selling real estate;
  • Smart homes including smart meters and appliances to better inform users about energy consumption in order to highlight areas for energy reduction.
  • Building upon the latter point, it has been estimated that the domestic energy demand can be reduced by an additional 25% [8] by integrating appliances or products into the home so they can turn off automatically when not required. A key requirement is to realize effectively these crucial savings in a manner that is transparent to the occupants. This can be achieved by embedding intelligence and communications into appliances and is an example of an emergent systems engineering discipline – “cognition-centric systems engineering”.

    In order to meet the required 2050 environmental targets it has been estimated that 1% of the global Gross Domestic Product (GDP) needs to be invested every year from now until 2050. Given the technological element of meeting these target a shortage of skilled and experience staff is probable. At a smaller scale, this limitation has already been identified in the USA as a consequence of Stimulus Package Funding with the Department of Energy [9]. To overcome this there will be an increasingly urgent need to increase the availability of training and re-training at the technician, undergraduate and post-graduate levels.

    5. Discussion

    This paper has made the case that the future energy conundrum is complex and highly interdependent and the continued availability of fossil fuels needs to be considered along with the introduction of credible alternatives whilst ameliorating environmental damage. Pursuit of part of this triad is likely to result in an incomplete or inappropriate solution set. Therefore, it is essential to solve the future energy conundrum holistically and systematically. Moreover, the scope of the future energy challenge dictates that:

    1. Innovation will be required continuously through the energy enterprise. This is innovation in the broadest sense, not just technical, and will encompass areas such as systems to business process to supply chain.
    2. Advances are likely to happen in emergent economies that are unconstrained by the fossil fuel legacy; technological surprise could become a reality.
    3. Unless we act now there is a high probability that there will be a shortage of skilled and experienced staff, at all levels from technician to post-graduate. If this situation arises we will not have the number of skilled staff to realize our aspirations and needs.

    Paul Winstanley, Stevens Institute of Technology, November 2009

    [1] Report #:DOE/EIA-0484(2009)

    [2] http://www.independent.co.uk/news/science/warning-oil-supplies-are-running-out-fast-1766585.html

    [3] http://www.iwmi.cgiar.org/News_Room/pdf/Down_to_Earth__Rise_in_biofuel_demand_could_trigger_food_water_crisis.pdf

    [4] http://www.renewableenergyworld.com/rea/news/article/2009/09/renewables-global-status-report-2009-update?cmpid=WNL-Friday-September11-2009

    [5] ITU REFERENCE

    [6] http://www.greencarsite.co.uk/GREENCARS/GoinGreen-GWIZ-EV.htm

    [7] http://climatechange.cbi.org.uk/uploaded/Roadmap_SummaryDistance.pdf

    [8] http://climatechange.cbi.org.uk/uploaded/CCT_010_Buildings_v2.pdf

    [9] http://www.renewableenergyworld.com/rea/news/article/2009/04/if-we-want-more-renewable-energy-in-the-u-s-wont-we-need-more-engineers

    November 5, 2009 Posted by | alternative energy, electric cars, guest post, reader submission | 24 Comments

    Don’t Weep for the Trees

    While I have no intention of changing the general theme of this blog, I will spend some essays in the future providing more details behind my new job in Hawaii. I did this on occasion with my previous job at Accsys, but the focus of the blog remained on energy, sustainability, and the environment.

    As explained in the previous essay, my new role involves development of an integrated bioenergy platform. We believe this to be a different way of looking at the problem of turning biomass into energy, and then ultimately supplying that energy to customers. We are not tying ourselves to a specific technology platform; we are using different platforms as suited for specific local needs. We are also as concerned about the sustainability of the biomass as we are the sustainability of the processes we will utilize.

    Since moving to Hawaii, I have been asked to give talks at the local high school here about energy and sustainability. During one recent talk I was explaining some of the things we are thinking about as a company, specifically for alternative energy in Hawaii. One of the students said “I heard you were going to cut down all the trees.” At that moment, I realized that her view of forestry was much the same as my own view of forestry growing up in Weyerhaeuser country in Oklahoma. I viewed foresters as people who cut down trees, and I associated them with clear cutting.

    My views have changed a lot since then, because I have met a lot of foresters and have a better understanding of what they do. Foresters are people who manage forests. With a managed forest, sometimes that means you harvest the trees like you would harvest any other crop. But managing a forest entails replacing what you cut down (thinning is an important exception).

    That makes sense when you think about why people went into forestry in the first place: They love trees (and not in the same way that a polar bear loves humans) and they love the outdoors. They are very conscious of the important role trees play in the environment, and as such they are generally very good stewards of the trees and land they manage.

    As indicated in my recent interview with Katie Fehrenbacher, sustainable forestry is a critical component of our platform. We have a forestry company called Forest Solutions, and our ultimate goal is to manage all of the forest assets that we will use in our platform.

    So why do we like woody biomass? Why not switchgrass? Sugarcane? Crop residues? Various sources of biomass have their strengths and weaknesses. Very high on the list for a sustainable model is to take care of the soil. One of the questions I sometimes pose is “What would the soil condition be after 500 years in a particular service?” If the answer is not approximately as good or better than the present, then it doesn’t meet the sort of criteria that I am looking for (of course taking into consideration that the soil doesn’t have to be utilized for the same purpose for the entire duration).

    There are many potential pitfalls when considering biomass. Some sources are heavy users of nutrients, and as such the fertilization requirements can be high – especially when they are on short rotation. This can imply high fossil fuel inputs and a high risk for soil depletion. Some crops are heavy users of water. Sugarcane ethanol has been judged to be potentially sustainable for Brazil, but it may be a different story in areas that require irrigation.

    Trees are different. During the first 10 years or so of their lives, trees can accumulate biomass at the rate of 7-10 bone dry tons per acre per year. You may see some switchgrass yields that are claimed to be that high, but those were almost certainly with fertilizer and plenty of water. But even if the yields were the same, the difference is that you have many harvests of the switchgrass over 10 years to get the same yield as one harvest of trees. Each harvest comes at the cost of energy and labor inputs.

    But there is an even more compelling reason to utilize trees. Unlike most of the short-rotation crops that are frequently discussed as feedstock for fuel production, trees can actually improve the quality and health of the soil.

    While this is not news to our foresters, it was something that I had not given much thought to until recently. I was taking a tour of a new energy lab being built here on the Big Island, and someone pointed out a plot of land behind the lab and said “We tested the fertility of that soil, and it is much higher than that of the surrounding soil.” I asked why, and was told that there used to be a stand of trees there.

    What happens is that trees can bring up nutrients from the subsoil and concentrate them in the leaves and bark. This ends up falling back to the soil and adding to the organic material in the soil. Depending on the specific trees you use, managed forests can provide fuel while improving soil quality. You could also envision rotating trees with other crops to rebuild fertility.

    A good example of the potential of trees can be found on the Hamakua Coast of Hawaii. For years the coast was planted in sugarcane. While the area gets plenty of water, it is also very hilly. The sugarcane operations led to a large amount of soil erosion. People who were around during that time said that the normally blue water would be brown for long stretches as soil ran off into the ocean.

    The sugarcane industry was ultimately abandoned there, and the area is now planted in trees. The erosion has stopped, and the soil has started to recover. The ocean is once again blue there, and I was told today that a reef that had been damaged by soil runoff is healthy again.

    So do not weep for the trees we will use. The right trees are ideal sources of biomass if they are properly managed. Besides providing fuel, they are going to perform an important function – recycling nutrients from the subsoil to the topsoil. The trees that are cut will be replanted. The forests we use will be from managed plantations, and not from rain forest or old growth forests.

    That is a general overview of the first leg of the platform. There are a number of assets under management, as well as various acquisitions in progress. At some point I will provide details of these holdings and how we plan to use them.

    October 21, 2009 Posted by | alternative energy, forestry, Hawaii, sustainability | 127 Comments

    Lifting the Veil

    Over the next six weeks, I will start to talk publicly about what we are putting together in Hawaii. There isn’t a specific strategic reason for doing so at this time, nor is it for the purpose of soliciting investors. The deal is that I have three speaking engagements between now and mid-November, and I believe it will be necessary to spell out the details and answer questions over our activities.

    There have been very specific reasons for keeping a low profile. One is that we believe some of our technology pursuits are completely novel. We would rather not call attention to this until we have things nailed down a bit better. Another reason is that there will be specific competition for certain other technologies and biomass resources. Speaking publicly about those details could hamper our efforts.

    But I can talk in broader terms about what we are doing, and I will do so at these speaking engagements. Further, in the next few days I will post some bits on my blog that will fill in some of the details.

    My schedule between now and mid-November looks like this. This week, I have to go to Panama for a meeting. On the way back, I fly to San Francisco and will speak at the First Nations’ Futures Institute at Stanford University:

    First Nations’ Futures Program

    I will be on a panel session on October 27th with Stanford Professor Margot Gerritsen on the topics of energy and sustainability.

    On November 11th, I will be on a panel at the Pacific Rim Summit on Industrial Biotechnology and Bioenergy in Honolulu. The topic is Specialty Crops, Renewable Feedstocks, & Sustainability.

    On November 16th, I will be on the opening plenary session at a conference in Orlando on alternative energy and globalization:

    The Economics of Alternative Energy Sources and Globalization: The Road Ahead

    I have received some requests since coming to Hawaii about what we are working on, and I did the first interview on that over the weekend. It is still purposely vague on some technology specifics, but the other details will be laid out as needed:

    Our Holistic Approach

    I say this again and again, and sometimes I can feel my co-workers wince when I say it: The primary goals here are all long-term, and as such we aren’t planning to make fast money. On the other hand, we are trying to put something together that has staying power, and that can make a real net contribution.

    Additional details to follow in the next post.

    October 20, 2009 Posted by | alternative energy, Hawaii, sustainability | 41 Comments

    Renewable Energy Highlights and Commentary

    In Part I, I presented the notes on renewable energy that I took as I read through the 2008 International Energy Agency (IEA) World Energy Outlook. Here in Part II, I organize those notes, and then provide some general comments and conclusions. I am now offline for a few days. Happy holidays to those who celebrate Thanksgiving.

    ————————-

    As I read through the 2008 International Energy Agency (IEA) World Energy Outlook, I had the distinct impression that I was reading contributions from people with completely opposite points of view. The pessimist warned that we are facing a supply crunch and much higher prices. The optimist in the report said that oil production won’t peak before 2030.

    This trend held in the section on renewable energy. The optimist noted that renewable energy is expected to ramp “expand rapidly.” The pessimist noted that biofuels are predicted to only supply 5% of our road transport fuel in 2030. And so the report goes, part rampant optimism and part rampant pessimism.

    I guess the good news then is that there is something in there that will appeal to everyone, regardless of your outlook. The bad news? The claims that are directly opposed to your views will have you questioning the credibility of the report. And if you are like me – and note that between last year’s report and this year’s report they dropped their 2030 oil demand forecast by 10 million bpd – you are left wondering whether there is any credibility at all in forecasts that far out.

    But for what’s worth, here’s what the IEA had to say about renewable energy.

    Report Highlights

    World energy demand is forecast to grow from 11,730 Mtoe (million metric tons of oil equivalents) in 2006 to 17,010 Mtoe in 2030. Fossil fuels, with oil as the primary source, will account for 80% of energy used in 2030.

    China and India will be responsible for over half of the increased energy demand between now and 2030. Global demand for oil (excluding biofuels) is forecast to rise from 85 million bpd in 2007 to 106 million bpd in 2030. This forecast was revised downward by 10 million bpd since last year’s forecast.

    World demand for electricity forecast to rise from 15,665 TWh in 2006 to 28,141 TWh in 2030. Renewable energy will displace gas to become the second largest producer of electrical energy by 2015, but will still lag far behind coal. For OECD countries, the increase in renewable electricity is greater than the increase in electricity from fossil fuels and nuclear. The share of nuclear power in the world energy mix falls from 6% in 2008 to 5% in 2030.

    Electricity generation from PV and CSP in 2030 is forecast to be 245 TWh and 107 TWh, respectively. Solar PV will continue to have the highest investment cost of all commercially deployed renewable energy sources.

    Geothermal and wave technologies are forecast to produce 180 TWh and 14 TWh of electricity in 2030. Over 860 TWh of electricity from biomass is forecast to be produced in 2030. Present conversion of biomass to electricity is at 20% efficiency.

    Global output of wind power is forecast to grow from 130 TWh in 2006 to more than 660 TWh in 2015 to 1,490 TWh in 2030. It will become the 2nd largest source of renewable electricity (after hydropower) by 2010. Potential for hydropower in non-OECD countries is still large. Most good sites in OECD countries have been utilized.

    Energy storage is rarely the cheapest way of dealing with variability of wind and solar power, but several next generation storage technologies are under development. These include ultracapacitors, superconducting magnetic systems, and vanadium redox batteries. Electrolysis to produce hydrogen, later used in fuel cells on demand is an option, but the overall efficiency is only 40%.

    Carbon dioxide emissions from coal combustion are forecast to rise from 11.7 billion metric tons in 2006 to 18.6 billion metric tons in 2030. The ability of carbon sequestration to limit carbon dioxide emissions by 2030 is limited.

    The reference scenario presumes that by 2030 the U.S. will only meet 40% of the biofuel mandate set in 2007. In Brazil, biofuels are projected to account for 28% of road-transport fuel demand by 2030. The present amount supplied is equivalent to 13% of road-transport fuel demand. Demand for biodiesel is expected to grow faster than demand for ethanol.

    Biofuels in 2006 provided the equivalent of 0.6 million bpd, representing around 1.5% of global road transport fuel demand. The United States is the largest user of biofuels, and most of the recent growth has been in the U.S.

    The share of biofuels in road transport fuels is forecast to grow from 1.5% in 2006 to 5% (3.2 million bpd) in 2030. Second generation biofuels based on lignocellulosic biomass, converted via enzyme hydrolysis or biomass gasification (BTL) are expected to become commercially viable. However, the contribution will be minor, and not until after 2020. Capital costs for cellulosic ethanol are “significantly more” than sugarcane or grain-based facilities. As a result, full commercialization hinges on “major cost reductions.”

    The United States and Brazil both export soybean biodiesel to the EU. Some countries are beginning to scale back their biofuels policies due to concerns about environmental sustainability. Shortages of water availability will be a potential constraint for further expansion of biofuels.

    Most biomass will still come from agricultural and forestry residues in 2030, but a growing portion will come from biomass farmed for biofuels. A growing share of biomass is also projected to fuel combined heat and power (CHP) plants.

    There is considerable room for growth of solar water heating (water heating consumes 20% of all residential energy consumption). China currently has 60% of the world’s installed solar water heating capacity. Solar water and space heating projected to grow from 7.6 Mtoe in 2006 to 45 Mtoe in 2030.

    Hybrid vehicles are commercially viable today; electric vehicles have yet to gain traction. Electric vehicle technology is advancing rapidly, but further improvements in storage technology are needed for efficiency and cost improvements. Long term, electric hybrids, fully electric vehicles, and fuel cell vehicles have the most potential for minimizing the need for oil-based fuels. In the very long term – projecting out to 2050 – fuel cell vehicles are forecast to make up 33% to 50% of new vehicle sales in the OECD.

    Cumulative investment in renewable energy between 2007 and 2030 is projected to be $5.5 trillion, with 60% of that for electricity generation.

    Commentary

    The report reiterates the points I have argued on numerous occasions: Biofuels will not scale up to produce more than a small fraction of our fuel demand, and even then with potentially serious consequences. While the report spreads the blame for higher food prices on a combination of competition with biofuels, higher energy prices, poor harvests, and various agricultural policies, it correctly identifies water as a (highly underrated) issue in the future scaling of biofuels. On the other hand, the report identifies Latin America and Africa as regions with the potential for boosting biomass production by modernizing farming techniques.

    I think the report correctly identifies renewable electricity and renewable heating (especially solar water heating) as areas poised for growth. However, it also predicts that carbon dioxide emissions will continue to rise. This was a controversial issue I tackled earlier in the year, when I predicted “we won’t collectively do anything that will reduce worldwide greenhouse gas emissions.”

    The following figure was very interesting to me:

    This figure suggests that by 2030, the cost for solar PV and CSP will still be higher than all other renewable technologies are today. And not just a little higher; solar PV is predicted to be twice as expensive in 2030 as hydro and onshore wind are today. So much for Moore’s Law applying to solar PV.

    However the nagging issue for me is the credibility of the predictions. How much stock can I put into the renewable energy predictions from an agency that thinks oil production won’t peak until 2030, and that demand will exceed 100 million bpd (contrary to the opinions of two Big Oil executives)?

    Conclusions

    The renewable energy portion was a tale of two technologies: Renewable electricity and renewable biofuels. Renewable electricity is forecast to grow rapidly, and make up an increasing portion of electricity supplies. The share of nuclear power falls, but coal usage is projected to rise 60% by 2030 (with 90% of that increase in non-OECD countries). The expected increase in coal usage helps explain why greenhouse gas emissions are forecast to continue rising.

    Renewable biofuels, by contrast, are forecast to still make a very small contribution to overall road transport fuel by 2030. Cellulosic ethanol will be slow to be commercialized, and the contribution to fuel supplies by 2030 is small. Concerns about negative externalities will grow, and the impact of biofuel production on water supplies will be hotly debated.

    November 26, 2008 Posted by | alternative energy, biomass, iea, weo | 48 Comments

    Renewable Energy Highlights and Commentary

    In Part I, I presented the notes on renewable energy that I took as I read through the 2008 International Energy Agency (IEA) World Energy Outlook. Here in Part II, I organize those notes, and then provide some general comments and conclusions. I am now offline for a few days. Happy holidays to those who celebrate Thanksgiving.

    ————————-

    As I read through the 2008 International Energy Agency (IEA) World Energy Outlook, I had the distinct impression that I was reading contributions from people with completely opposite points of view. The pessimist warned that we are facing a supply crunch and much higher prices. The optimist in the report said that oil production won’t peak before 2030.

    This trend held in the section on renewable energy. The optimist noted that renewable energy is expected to ramp “expand rapidly.” The pessimist noted that biofuels are predicted to only supply 5% of our road transport fuel in 2030. And so the report goes, part rampant optimism and part rampant pessimism.

    I guess the good news then is that there is something in there that will appeal to everyone, regardless of your outlook. The bad news? The claims that are directly opposed to your views will have you questioning the credibility of the report. And if you are like me – and note that between last year’s report and this year’s report they dropped their 2030 oil demand forecast by 10 million bpd – you are left wondering whether there is any credibility at all in forecasts that far out.

    But for what’s worth, here’s what the IEA had to say about renewable energy.

    Report Highlights

    World energy demand is forecast to grow from 11,730 Mtoe (million metric tons of oil equivalents) in 2006 to 17,010 Mtoe in 2030. Fossil fuels, with oil as the primary source, will account for 80% of energy used in 2030.

    China and India will be responsible for over half of the increased energy demand between now and 2030. Global demand for oil (excluding biofuels) is forecast to rise from 85 million bpd in 2007 to 106 million bpd in 2030. This forecast was revised downward by 10 million bpd since last year’s forecast.

    World demand for electricity forecast to rise from 15,665 TWh in 2006 to 28,141 TWh in 2030. Renewable energy will displace gas to become the second largest producer of electrical energy by 2015, but will still lag far behind coal. For OECD countries, the increase in renewable electricity is greater than the increase in electricity from fossil fuels and nuclear. The share of nuclear power in the world energy mix falls from 6% in 2008 to 5% in 2030.

    Electricity generation from PV and CSP in 2030 is forecast to be 245 TWh and 107 TWh, respectively. Solar PV will continue to have the highest investment cost of all commercially deployed renewable energy sources.

    Geothermal and wave technologies are forecast to produce 180 TWh and 14 TWh of electricity in 2030. Over 860 TWh of electricity from biomass is forecast to be produced in 2030. Present conversion of biomass to electricity is at 20% efficiency.

    Global output of wind power is forecast to grow from 130 TWh in 2006 to more than 660 TWh in 2015 to 1,490 TWh in 2030. It will become the 2nd largest source of renewable electricity (after hydropower) by 2010. Potential for hydropower in non-OECD countries is still large. Most good sites in OECD countries have been utilized.

    Energy storage is rarely the cheapest way of dealing with variability of wind and solar power, but several next generation storage technologies are under development. These include ultracapacitors, superconducting magnetic systems, and vanadium redox batteries. Electrolysis to produce hydrogen, later used in fuel cells on demand is an option, but the overall efficiency is only 40%.

    Carbon dioxide emissions from coal combustion are forecast to rise from 11.7 billion metric tons in 2006 to 18.6 billion metric tons in 2030. The ability of carbon sequestration to limit carbon dioxide emissions by 2030 is limited.

    The reference scenario presumes that by 2030 the U.S. will only meet 40% of the biofuel mandate set in 2007. In Brazil, biofuels are projected to account for 28% of road-transport fuel demand by 2030. The present amount supplied is equivalent to 13% of road-transport fuel demand. Demand for biodiesel is expected to grow faster than demand for ethanol.

    Biofuels in 2006 provided the equivalent of 0.6 million bpd, representing around 1.5% of global road transport fuel demand. The United States is the largest user of biofuels, and most of the recent growth has been in the U.S.

    The share of biofuels in road transport fuels is forecast to grow from 1.5% in 2006 to 5% (3.2 million bpd) in 2030. Second generation biofuels based on lignocellulosic biomass, converted via enzyme hydrolysis or biomass gasification (BTL) are expected to become commercially viable. However, the contribution will be minor, and not until after 2020. Capital costs for cellulosic ethanol are “significantly more” than sugarcane or grain-based facilities. As a result, full commercialization hinges on “major cost reductions.”

    The United States and Brazil both export soybean biodiesel to the EU. Some countries are beginning to scale back their biofuels policies due to concerns about environmental sustainability. Shortages of water availability will be a potential constraint for further expansion of biofuels.

    Most biomass will still come from agricultural and forestry residues in 2030, but a growing portion will come from biomass farmed for biofuels. A growing share of biomass is also projected to fuel combined heat and power (CHP) plants.

    There is considerable room for growth of solar water heating (water heating consumes 20% of all residential energy consumption). China currently has 60% of the world’s installed solar water heating capacity. Solar water and space heating projected to grow from 7.6 Mtoe in 2006 to 45 Mtoe in 2030.

    Hybrid vehicles are commercially viable today; electric vehicles have yet to gain traction. Electric vehicle technology is advancing rapidly, but further improvements in storage technology are needed for efficiency and cost improvements. Long term, electric hybrids, fully electric vehicles, and fuel cell vehicles have the most potential for minimizing the need for oil-based fuels. In the very long term – projecting out to 2050 – fuel cell vehicles are forecast to make up 33% to 50% of new vehicle sales in the OECD.

    Cumulative investment in renewable energy between 2007 and 2030 is projected to be $5.5 trillion, with 60% of that for electricity generation.

    Commentary

    The report reiterates the points I have argued on numerous occasions: Biofuels will not scale up to produce more than a small fraction of our fuel demand, and even then with potentially serious consequences. While the report spreads the blame for higher food prices on a combination of competition with biofuels, higher energy prices, poor harvests, and various agricultural policies, it correctly identifies water as a (highly underrated) issue in the future scaling of biofuels. On the other hand, the report identifies Latin America and Africa as regions with the potential for boosting biomass production by modernizing farming techniques.

    I think the report correctly identifies renewable electricity and renewable heating (especially solar water heating) as areas poised for growth. However, it also predicts that carbon dioxide emissions will continue to rise. This was a controversial issue I tackled earlier in the year, when I predicted “we won’t collectively do anything that will reduce worldwide greenhouse gas emissions.”

    The following figure was very interesting to me:

    This figure suggests that by 2030, the cost for solar PV and CSP will still be higher than all other renewable technologies are today. And not just a little higher; solar PV is predicted to be twice as expensive in 2030 as hydro and onshore wind are today. So much for Moore’s Law applying to solar PV.

    However the nagging issue for me is the credibility of the predictions. How much stock can I put into the renewable energy predictions from an agency that thinks oil production won’t peak until 2030, and that demand will exceed 100 million bpd (contrary to the opinions of two Big Oil executives)?

    Conclusions

    The renewable energy portion was a tale of two technologies: Renewable electricity and renewable biofuels. Renewable electricity is forecast to grow rapidly, and make up an increasing portion of electricity supplies. The share of nuclear power falls, but coal usage is projected to rise 60% by 2030 (with 90% of that increase in non-OECD countries). The expected increase in coal usage helps explain why greenhouse gas emissions are forecast to continue rising.

    Renewable biofuels, by contrast, are forecast to still make a very small contribution to overall road transport fuel by 2030. Cellulosic ethanol will be slow to be commercialized, and the contribution to fuel supplies by 2030 is small. Concerns about negative externalities will grow, and the impact of biofuel production on water supplies will be hotly debated.

    November 26, 2008 Posted by | alternative energy, biomass, iea, weo | 47 Comments

    The 2008 IEA WEO – Renewable Energy Highlights

    I am working on an essay on the renewable energy portion of the recently released 2008 IEA World Energy Outlook. In Part I, I merely present some of the highlights of the report (actually the notes I jotted down as I read it). Part II will involve more commentary and analysis. Note that these are the IEA projections, and do not necessarily reflect my opinion.

    Report Highlights

    World energy demand is projected to grow from 11,730 Mtoe (million metric tons of oil equivalents) in 2006 to 17,010 Mtoe in 2030.

    Fossil fuels, with oil as the primary source, will account for 80% of energy used in 2030.

    China and India will be responsible for over half of the increased energy demand between now and 2030.

    Global demand for oil (excluding biofuels) is forecast to rise from 85 million bpd in 2007 to 106 million bpd in 2030. This forecast was revised downward by 10 million bpd since last year’s forecast.

    Solar PV has the highest investment cost of all commercially deployed renewable energy sources.

    The share of nuclear power in the world energy mix falls from 6% in 2008 to 5% in 2030.

    Renewable energy will displace natural gas to become the second largest producer of electrical energy by 2015, but will still lag far behind coal

    Carbon dioxide emissions from coal combustion are forecast to rise from 11.7 billion metric tons in 2006 to 18.6 billion metric tons in 2030.

    The ability of carbon sequestration to limit carbon dioxide emissions by 2030 is limited.

    Biomass, geothermal, and solar thermal are forecast to grow from 6% of total global heating demand in 2006 to 7% in 2030.

    Global output of wind power is forecast to grow eleven-fold by 2030, and become the 2nd largest source of renewable electricity (after hydropower) by 2010.

    The share of biofuels in road transport fuels is forecast to grow from 1.5% in 2006 to 5% in 2030. Second generation biofuels (e.g., cellulosic ethanol) will make a very small contribution by 2030.

    Shortages of water availability are a potential constraint for further expansion of biofuels.

    Most biomass will still come from agriculture and forestry residues in 2030, but a growing portion will come from biomass farmed for biofuels.

    A growing share of biomass is projected to fuel combined heat and power (CHP) plants.

    Latin America and Africa are regions that can boost agricultural production by modernizing farming techniques.

    Renewable-based electricity is forecast to grow dramatically. Most of the increase is expected to come from hydro and onshore wind power.

    For OECD countries, the increase in renewable electricity is greater than the increase in electricity from fossil fuels and nuclear.

    Costs for renewable power expected to continue to fall.

    Potential for hydropower in non-OECD countries is still large. Most good sites in OECD countries have been utilized.

    Global wind power expected to increase from 130 TWh in 2006 to more than 660 TWh in 2015 to 1,490 TWh in 2030.

    Energy storage is rarely the cheapest way of dealing with variability, but several next generation storage technologies are under development. These include ultracapacitors, superconducting magnetic systems, and vanadium redox batteries.

    Electrolysis to produce hydrogen, later used in fuel cells on demand is an option, but the overall efficiency is only 40%.

    World demand for electricity forecast to rise from 15,665 TWh in 2006 to 28,141 TWh in 2030.

    Electricity generation from PV and CSP in 2030 is forecast to be 245 TWh and 107 TWh, respectively.

    Geothermal and wave technologies are forecast to produce 180 TWh and 14 TWh in 2030.

    Over 860 TWh of electricity from biomass is forecast to be produced in 2030. Present conversion of biomass to electricity is at 20% conversion efficiency.

    Biofuels in 2006 provided the equivalent of 0.6 million bpd, representing around 1.5% of global road transport fuel demand. The United States is the largest user of biofuels, and most of the recent growth has been in the U.S.

    In 2030, total biofuel supply is expected to be 3.2 million bpd, amounting to only 5% of worldwide demand.

    Reference scenario presumes that by 2030 the U.S. will only meet 40% of the biofuel mandate set in 2007.

    In Brazil, biofuels are projected to account for 28% of road-transport fuel demand by 2030. The present amount supplied is equivalent to 13% of road-transport fuel demand.

    Demand for biodiesel is expected to grow faster than demand for ethanol.

    Second generation biofuels based on lignocellulosic biomass, converted via enzyme hydrolysis or biomass gasification (BTL) are expected to become commercially viable. However, the contribution will be minor, and not until after 2020.

    Some countries are beginning to scale back their biofuels policies due to concerns about environmental sustainability.

    Food prices are being driven by a combination of competition with biofuels, higher energy prices, poor harvests, and various agricultural policies.

    The United States and Brazil both export soybean biodiesel to the EU.

    Capital costs for cellulosic ethanol are “significantly more” than sugarcane or grain-based facilities. As a result, full commercialization hinges on “major cost reductions.”

    There is considerable room for growth of solar water heating (water heating consumes 20% of all residential energy consumption).

    China currently has 60% of the world’s installed solar water heating capacity.

    Solar water and space heating projected to grow from 7.6 Mtoe in 2006 to 45 Mtoe in 2030.

    Cumulative investment in renewable energy between 2007 and 2030 is projected to be $5.5 trillion, with 60% of that for electricity generation.

    November 24, 2008 Posted by | alternative energy, biomass, iea, weo | 30 Comments

    My Drilling Proposal is on the Table

    I said I wasn’t going to update until Wednesday, but have a little free time this morning. Imagine my surprise to read this headline today:

    Senate Democrats offer deal to break energy bill standstill

    Turns out they are proposing the same deal that I proposed in my essay from last week on coming to a compromise on the drilling question:

    WASHINGTON (CNN) — Senate Majority Leader Harry Reid surprised Republicans on Monday by offering them a chance to vote this week on four GOP-backed amendments to an energy bill, including one that would expand offshore oil drilling.

    The possible breakthrough comes days before Congress recesses for August and lawmakers return home to face constituents anxious for relief at fuel pumps.

    Reid, D-Nevada, said Democrats would allow votes on GOP amendments that would permit new drilling on the outer continental shelf; the development of oil shale in Western states; construction of new nuclear power plants; and broader legislation that Republicans have dubbed “find more, use less.” That legislation includes expanded offshore drilling, conservation initiatives, the improvement of battery technology, and language to curb speculation in the oil futures market.

    Energy legislation also has been stalled in the House. A bipartisan “energy working group” of 28 lawmakers hopes to break the impasse this week by proposing a compromise that couples new offshore drilling with conservation and renewable energy programs.

    Yet House Speaker Nancy Pelosi, a California Democrat, says she won’t allow a vote on a bill that includes new offshore oil drilling.

    It is exactly this coupling that I think will get both sides to an agreement. Pelosi runs the risk here of losing all negotiating power if she blocks this sort of compromise. Pressure to drill will continue to increase, and right now the Democrats could still demand pretty generous concessions. I predict that unless supplies can grow (and I don’t expect them to grow much) and stay ahead of demand, then the pressure to drill will only increase over the next few years – and the Democrats will be in a weaker negotiating position. On the other hand, I think we are going to end up with a Democrat for president, and he will have something to say on the matter as well.

    July 29, 2008 Posted by | Alaska, alternative energy, ANWR, energy policy, Harry Reid, Nancy Pelosi, OCS, oil exploration, oil imports, oil prices, politics | 29 Comments

    The Drilling Debate: Narrowing the Chasm

    I have given a lot of thought to the issue of opening up new areas for drilling in the Outer Continental Shelf (OCS) and in the Arctic National Wildlife Refuge (ANWR). My position has always been to leave that oil in place for a very rainy day. I wanted to see major conservation efforts in place before we considered tapping that oil. Opening those areas when oil was $20 a barrel would have meant that much of it would have been used frivolously.

    Now that oil is over $100 – and in my opinion will be much higher in 5 or 10 years (T. Boone Pickens predicts $300/bbl in 10 years) – we will have tightened our belts a good deal by the time any of this oil could actually reach the market. Therefore, I think now is the time for Congressional hearings on opening up these areas. Let’s have an open debate on the issue. However, if these areas are opened for drilling, I have a compromise that should be very attractive to those in opposition.

    Hopefully this essay conveys a pragmatic approach designed to bring two sides in this debate closer together. At present it is hard to imagine that they could be further apart. A big part of the reason for the chasm between views is that there is a great deal of misinformation and misunderstanding surrounding the issues. I hope to address those in this essay.

    A recent sampling of letters to the New York Times gives a flavor of the views of the opposing sides:

    To Drill or Not to Drill? There’s the Rub

    First a letter opposed to further drilling:

    Allowing offshore drilling for gas as a solution to high fuel costs, as President Bush urges Congress to do, is as sensible as growing more food in response to rising levels of obesity or robbing a bank in response to overspending one’s budget.

    While it is not popular, the clear answer, as it is in the case of overeating and overspending, is to cut back in the consumption of food, in the consumption of one’s salary and in the consumption of fuel.

    Painful as it is, I applaud the $4 gallon because it is the one thing that has finally gotten the public to focus on the fact that we need to consume less. For the first time, one hears from every quarter, turn off the lights in rooms you are not in, recycle that paper, drive less and take public transportation or ride your bike. That is the kind of talk political leaders should be encouraging, not new ways to keep up the old habits.

    And one in favor:

    As a 40-year Alaskan, I can tell you that opening of the Arctic National Wildlife Refuge is the most sensible solution for America’s oil problems. Most of the people who are trying to stop drilling in the refuge have never been in our state.

    You have no idea how little space they are talking about. Take a regular envelope, pretend that is the refuge … now where you would put the stamp, that is the area they want to open.

    Alyeska Pipeline has worked, the gas pipeline is in the process, and the Arctic National Wildlife Refuge should be. Congress is making this a party fight. How about putting that energy into fighting for all Americans, as oil prices don’t care whether you are Republican or Democrat?

    So, where does the truth reside? Is it not worth the effort? Or can we “drill here, drill now” and make a significant step toward energy independence? Let’s investigate.

    What is the Objective?

    This is the key to the entire debate. Different groups have different agendas, and desires are often based on misinformation. Take a couple of extreme examples. I consider myself an environmentalist, but one who is practical, and informed on energy issues. Let’s take an environmentalist who may be less-informed. Like me, they are concerned about the impact of continued fossil fuel consumption on our environment. When they think of drilling, they envision oil slicks washing up on the shore, and a polluted ANWR. They see oil companies – not ordinary citizens – as the primary beneficiaries if drilling is allowed. They are optimistic about the ability of alternative fuels to rapidly scale up and replace depleting fossil fuel reserves. Or, they don’t fully understand the implications of falling fossil fuel reserves, or in an extreme case they don’t care and think the earth could use a healthy die-off of the human population.

    Each of these groups is going to be vehemently opposed to opening up areas to additional drilling. They simply don’t think there is a need, and that it will simply delay our transition to alternatives. Those in Congress who are so outspoken against additional exploration likely fall into the category of ‘alternative fuel optimist.’ If they can only keep the ban in place, alternatives, mass transit, and conservation will rise to the challenge. The key to this approach is that the alternatives must deliver when they are needed, and they must cover severe shortfalls. What if they don’t? What is Plan B? Shortages? Rationing?

    For our other extreme example, let’s consider the Hummer-driving, non-negotiable lifestyle mentality. The majority of this group is also not very informed on energy. They believe that underneath U.S. territory lies an ocean of oil, waiting to be tapped – if those darned environmentalists would only get out of the way. They are prepared to drill through a polar bear’s head if it will mean cheap gasoline – which they know it will. These people are going to be very outspoken about the need to drill anywhere, anytime. This approach suffers from a very similar problem as the previous approach: What if the oil that is available simply can’t cover any severe shortfalls? What if the expectations of these vast oceans of oil lead us to delay actions on alternatives? Again, what is Plan B? Military action?

    The majority of us fall somewhere in between, but it breaks pretty sharply along party lines. Democrats don’t want to drill, Republicans think we should drill. Perhaps we should first develop an idea of the stakes.

    How Much Oil is at Stake?

    That’s a big problem. We don’t know. All we have right now are ‘educated’ guesses. Multiple government agencies have made assessments. The Minerals Management Service in the Department of the Interior estimated in 2006:

    The MMS estimates that the quantity of undiscovered technically recoverable resources ranges from 66.6 to 115.3 billion barrels of oil and 326.4 to 565.9 trillion cubic feet of natural gas. The mean or average estimate is 85.9 billion barrels of oil and 419.9 trillion cubic feet of natural gas.

    Of that, they estimate that reserves in areas currently off-limits to exploration amount to just under 18 billion barrels. Based on the 2007 U.S. consumption rate of 20.7 million barrels of oil per day, 18 billion barrels would last just under 2.5 years.

    The EIA estimate from areas currently off-limits to exploration was very similar at just over 18 billion barrels:

    Impacts of Increased Access to Oil and Natural Gas Resources in the Lower 48 Federal Outer Continental Shelf

    This graphic was recently used in a post at Grist by Joseph Romm, who argued that the amount of oil that is off limits has been greatly exaggerated. Based on the above graphic, Romm has a point, as the amount of undiscovered oil in areas open to exploration is more than twice the estimate from areas off limits to exploration. However, much of that oil is in mile-deep water that will be very expensive to develop. So the comparison isn’t necessarily apples to apples.

    Estimates of recoverable oil from ANWR are of a similar magnitude. The Energy Information Administration (EIA) in a 2008 report noted:

    In the mean oil resource case, the total volume of technically recoverable crude oil projected to be found within the coastal plain area is 10.4 billion barrels, compared to 5.7 billion barrels for the 95-percent probability estimate, and 16.0 billion barrels for the 5-percent probability estimate.

    The EIA also presumes that it will take 10 years to scale up and bring production online:

    At the present time, there has been no crude oil production in the ANWR coastal plain region. This analysis assumes that enactment of the legislation in 2008 would result in first production from the ANWR area in 10 years, i.e., 2018.

    The primary constraints to a rapid development of ANWR oil resources are the limited weather “windows” for collecting seismic data and drilling wells (a 3-to-4 month winter window) and for ocean barging of heavy infrastructure equipment to the well site (a 2-to-3 month summer window).

    The timeline broke down as 2 to 3 years to obtain leases, 2 to 3 years to drill an exploratory well, 1 to 2 years to develop a production development plan, and 3 to 4 years to build infrastructure.

    What’s the bottom line? With an estimated 18 billion barrels of oil offshore and 10 billion barrels in ANWR, there is potentially enough oil there to meet four years of U.S. demand. However, in terms of imports, currently around 10 million barrels a day, there is potentially enough there to eliminate oil imports for nearly 8 years. Further, based on my proposal below, there may be enough there to eliminate imports for 20 years.

    Finally, consider the economic ramifications. If we do nothing, despite well-intentioned calls for conservation, our insatiable demand for oil imports will continue. With production from some of our major suppliers having peaked (e.g., Mexico) and with internal consumption in other countries negatively affecting their exports, the price of oil will be under constant upward pressure over the long term. If we don’t produce those 28 billion barrels of oil, we will go and buy those barrels on the open market. At today’s oil price, that means that about $3.5 trillion will leave this country, much of it flowing into countries that are hostile to the U.S. By keeping that money at home, we can not only create jobs, but we have an opportunity here to fund a transition away from oil, and to more sustainable options.

    Let’s Compromise

    Both sides generally agree that our dependence on petroleum is a problem. Among the arguments from both sides is that this dependence puts our national security at risk and that it endangers the environment. I think both sides would agree that a long-term solution to the problem could be a combination of conservation, along with alternative options such as higher efficiency vehicles, electric transport, and mass transit. Where large numbers will start to disagree is whether this is achievable in the short-term, or whether it is going to take a few more years and a few more technological developments.

    I fall into the latter category, for a variety of reasons. I am pretty familiar with a lot of the alternatives, and they are simply not competitive even at gasoline prices of >$4/gallon. To illustrate that point, consider Europe, where gasoline prices in many locations are now approaching $10/gallon. Even at that price, fossil fuels remain the dominant choice for transportation. It is going to take more than price – or at a minimum much higher prices than Americans probably anticipate – to drive us away from a very high level of dependence upon fossil fuels.

    So how about a compromise? I propose that we open up some of the more promising areas to exploration, and then devote the royalties to funding fossil fuel alternatives. We could subsidize public transportation. We could provide a tax credit of $1,000 for each person who purchases a car that gets over 40 mpg. We could borrow a page from T. Boone Pickens’ plan, use these oil revenues to fund wind and solar power, and displace natural gas which could then be used to displace petroleum.

    It is true that the oil won’t flow from these areas for perhaps a decade, but by then we are likely to be in very bad need of it. Prices will probably be very high, which means the royalties from the oil will provide a lot of money for funding alternatives. This should be a compromise that parties from both sides could agree to. If not, then what’s going to happen is that as prices continue to rise, so will the pressure to drill, and Congress will eventually cave in to these demands. But by failing to earmark the money for alternatives, it will just postpone the inevitable. So now is an opportune time to hold open Congressional hearings on the subject.

    That’s a compromise I prefer. However, one that would have even greater support behind it would be to return an oil dividend to U.S. citizens (as Alaska has historically done). That is tangible for people, whereas funding the alternatives may not be. However, while I think this compromise would find wide support among many people with stretched budgets, it does nothing to address the problem of oil dependence. That, in my opinion, must be part of any solution.

    A final excerpt from those New York Times letters summed it up best, in my opinion:

    People say we should have a Manhattan Project-style program to develop alternative energy. That is fine, but while the Manhattan Project was continuing, we did not put World War II on hold while we waited for the atom bomb. The conventional war was continually fought throughout that time.

    Conclusion

    As I recently calculated, we could displace a great deal of our fossil fuel consumption with solar power, but it will ultimately take a multi-trillion dollar investment. We could borrow from T. Boone Pickens’ plan and use wind and solar power to displace natural gas that is currently used to produce electricity. That natural gas could then be used in CNG vehicles to displace petroleum. The net impact would be a large reduction in our fossil fuel consumption (and note that it is much easier to produce natural gas from biomass than it is to produce liquid fuels).

    We sit on top of trillions of dollars of oil. We should use it – sparingly – to wean ourselves from oil dependence. The realistic alternative to this is that we continue to be highly dependent upon petroleum. As a result, we will watch those dollars flow out of the U.S. – right up until the point that our imports dry up and we watch a new generation of sons and daughters march off to fight resource wars because of our failure to plan ahead.

    July 23, 2008 Posted by | Alaska, alternative energy, ANWR, OCS, oil exploration, oil imports, oil prices, solar power, wind power | 71 Comments

    The Drilling Debate: Narrowing the Chasm

    I have given a lot of thought to the issue of opening up new areas for drilling in the Outer Continental Shelf (OCS) and in the Arctic National Wildlife Refuge (ANWR). My position has always been to leave that oil in place for a very rainy day. I wanted to see major conservation efforts in place before we considered tapping that oil. Opening those areas when oil was $20 a barrel would have meant that much of it would have been used frivolously.

    Now that oil is over $100 – and in my opinion will be much higher in 5 or 10 years (T. Boone Pickens predicts $300/bbl in 10 years) – we will have tightened our belts a good deal by the time any of this oil could actually reach the market. Therefore, I think now is the time for Congressional hearings on opening up these areas. Let’s have an open debate on the issue. However, if these areas are opened for drilling, I have a compromise that should be very attractive to those in opposition.

    Hopefully this essay conveys a pragmatic approach designed to bring two sides in this debate closer together. At present it is hard to imagine that they could be further apart. A big part of the reason for the chasm between views is that there is a great deal of misinformation and misunderstanding surrounding the issues. I hope to address those in this essay.

    A recent sampling of letters to the New York Times gives a flavor of the views of the opposing sides:

    To Drill or Not to Drill? There’s the Rub

    First a letter opposed to further drilling:

    Allowing offshore drilling for gas as a solution to high fuel costs, as President Bush urges Congress to do, is as sensible as growing more food in response to rising levels of obesity or robbing a bank in response to overspending one’s budget.

    While it is not popular, the clear answer, as it is in the case of overeating and overspending, is to cut back in the consumption of food, in the consumption of one’s salary and in the consumption of fuel.

    Painful as it is, I applaud the $4 gallon because it is the one thing that has finally gotten the public to focus on the fact that we need to consume less. For the first time, one hears from every quarter, turn off the lights in rooms you are not in, recycle that paper, drive less and take public transportation or ride your bike. That is the kind of talk political leaders should be encouraging, not new ways to keep up the old habits.

    And one in favor:

    As a 40-year Alaskan, I can tell you that opening of the Arctic National Wildlife Refuge is the most sensible solution for America’s oil problems. Most of the people who are trying to stop drilling in the refuge have never been in our state.

    You have no idea how little space they are talking about. Take a regular envelope, pretend that is the refuge … now where you would put the stamp, that is the area they want to open.

    Alyeska Pipeline has worked, the gas pipeline is in the process, and the Arctic National Wildlife Refuge should be. Congress is making this a party fight. How about putting that energy into fighting for all Americans, as oil prices don’t care whether you are Republican or Democrat?

    So, where does the truth reside? Is it not worth the effort? Or can we “drill here, drill now” and make a significant step toward energy independence? Let’s investigate.

    What is the Objective?

    This is the key to the entire debate. Different groups have different agendas, and desires are often based on misinformation. Take a couple of extreme examples. I consider myself an environmentalist, but one who is practical, and informed on energy issues. Let’s take an environmentalist who may be less-informed. Like me, they are concerned about the impact of continued fossil fuel consumption on our environment. When they think of drilling, they envision oil slicks washing up on the shore, and a polluted ANWR. They see oil companies – not ordinary citizens – as the primary beneficiaries if drilling is allowed. They are optimistic about the ability of alternative fuels to rapidly scale up and replace depleting fossil fuel reserves. Or, they don’t fully understand the implications of falling fossil fuel reserves, or in an extreme case they don’t care and think the earth could use a healthy die-off of the human population.

    Each of these groups is going to be vehemently opposed to opening up areas to additional drilling. They simply don’t think there is a need, and that it will simply delay our transition to alternatives. Those in Congress who are so outspoken against additional exploration likely fall into the category of ‘alternative fuel optimist.’ If they can only keep the ban in place, alternatives, mass transit, and conservation will rise to the challenge. The key to this approach is that the alternatives must deliver when they are needed, and they must cover severe shortfalls. What if they don’t? What is Plan B? Shortages? Rationing?

    For our other extreme example, let’s consider the Hummer-driving, non-negotiable lifestyle mentality. The majority of this group is also not very informed on energy. They believe that underneath U.S. territory lies an ocean of oil, waiting to be tapped – if those darned environmentalists would only get out of the way. They are prepared to drill through a polar bear’s head if it will mean cheap gasoline – which they know it will. These people are going to be very outspoken about the need to drill anywhere, anytime. This approach suffers from a very similar problem as the previous approach: What if the oil that is available simply can’t cover any severe shortfalls? What if the expectations of these vast oceans of oil lead us to delay actions on alternatives? Again, what is Plan B? Military action?

    The majority of us fall somewhere in between, but it breaks pretty sharply along party lines. Democrats don’t want to drill, Republicans think we should drill. Perhaps we should first develop an idea of the stakes.

    How Much Oil is at Stake?

    That’s a big problem. We don’t know. All we have right now are ‘educated’ guesses. Multiple government agencies have made assessments. The Minerals Management Service in the Department of the Interior estimated in 2006:

    The MMS estimates that the quantity of undiscovered technically recoverable resources ranges from 66.6 to 115.3 billion barrels of oil and 326.4 to 565.9 trillion cubic feet of natural gas. The mean or average estimate is 85.9 billion barrels of oil and 419.9 trillion cubic feet of natural gas.

    Of that, they estimate that reserves in areas currently off-limits to exploration amount to just under 18 billion barrels. Based on the 2007 U.S. consumption rate of 20.7 million barrels of oil per day, 18 billion barrels would last just under 2.5 years.

    The EIA estimate from areas currently off-limits to exploration was very similar at just over 18 billion barrels:

    Impacts of Increased Access to Oil and Natural Gas Resources in the Lower 48 Federal Outer Continental Shelf

    This graphic was recently used in a post at Grist by Joseph Romm, who argued that the amount of oil that is off limits has been greatly exaggerated. Based on the above graphic, Romm has a point, as the amount of undiscovered oil in areas open to exploration is more than twice the estimate from areas off limits to exploration. However, much of that oil is in mile-deep water that will be very expensive to develop. So the comparison isn’t necessarily apples to apples.

    Estimates of recoverable oil from ANWR are of a similar magnitude. The Energy Information Administration (EIA) in a 2008 report noted:

    In the mean oil resource case, the total volume of technically recoverable crude oil projected to be found within the coastal plain area is 10.4 billion barrels, compared to 5.7 billion barrels for the 95-percent probability estimate, and 16.0 billion barrels for the 5-percent probability estimate.

    The EIA also presumes that it will take 10 years to scale up and bring production online:

    At the present time, there has been no crude oil production in the ANWR coastal plain region. This analysis assumes that enactment of the legislation in 2008 would result in first production from the ANWR area in 10 years, i.e., 2018.

    The primary constraints to a rapid development of ANWR oil resources are the limited weather “windows” for collecting seismic data and drilling wells (a 3-to-4 month winter window) and for ocean barging of heavy infrastructure equipment to the well site (a 2-to-3 month summer window).

    The timeline broke down as 2 to 3 years to obtain leases, 2 to 3 years to drill an exploratory well, 1 to 2 years to develop a production development plan, and 3 to 4 years to build infrastructure.

    What’s the bottom line? With an estimated 18 billion barrels of oil offshore and 10 billion barrels in ANWR, there is potentially enough oil there to meet four years of U.S. demand. However, in terms of imports, currently around 13 million barrels a day, there is potentially enough there to eliminate oil imports for nearly 6 years. Further, based on my proposal below, there may be enough there to eliminate imports for 20 years.

    Finally, consider the economic ramifications. If we do nothing, despite well-intentioned calls for conservation, our insatiable demand for oil imports will continue. With production from some of our major suppliers having peaked (e.g., Mexico) and with internal consumption in other countries negatively affecting their exports, the price of oil will be under constant upward pressure over the long term. If we don’t produce those 28 billion barrels of oil, we will go and buy those barrels on the open market. At today’s oil price, that means that about $3.5 trillion will leave this country, much of it flowing into countries that are hostile to the U.S. By keeping that money at home, we can not only create jobs, but we have an opportunity here to fund a transition away from oil, and to more sustainable options.

    Let’s Compromise

    Both sides generally agree that our dependence on petroleum is a problem. Among the arguments from both sides is that this dependence puts our national security at risk and that it endangers the environment. I think both sides would agree that a long-term solution to the problem could be a combination of conservation, along with alternative options such as higher efficiency vehicles, electric transport, and mass transit. Where large numbers will start to disagree is whether this is achievable in the short-term, or whether it is going to take a few more years and a few more technological developments.

    I fall into the latter category, for a variety of reasons. I am pretty familiar with a lot of the alternatives, and they are simply not competitive even at gasoline prices of >$4/gallon. To illustrate that point, consider Europe, where gasoline prices in many locations are now approaching $10/gallon. Even at that price, fossil fuels remain the dominant choice for transportation. It is going to take more than price – or at a minimum much higher prices than Americans probably anticipate – to drive us away from a very high level of dependence upon fossil fuels.

    So how about a compromise? I propose that we open up some of the more promising areas to exploration, and then devote the royalties to funding fossil fuel alternatives. We could subsidize public transportation. We could provide a tax credit of $1,000 for each person who purchases a car that gets over 40 mpg. We could borrow a page from T. Boone Pickens’ plan, use these oil revenues to fund wind and solar power, and displace natural gas which could then be used to displace petroleum.

    It is true that the oil won’t flow from these areas for perhaps a decade, but by then we are likely to be in very bad need of it. Prices will probably be very high, which means the royalties from the oil will provide a lot of money for funding alternatives. This should be a compromise that parties from both sides could agree to. If not, then what’s going to happen is that as prices continue to rise, so will the pressure to drill, and Congress will eventually cave in to these demands. But by failing to earmark the money for alternatives, it will just postpone the inevitable. So now is an opportune time to hold open Congressional hearings on the subject.

    That’s a compromise I prefer. However, one that would have even greater support behind it would be to return an oil dividend to U.S. citizens (as Alaska has historically done). That is tangible for people, whereas funding the alternatives may not be. However, while I think this compromise would find wide support among many people with stretched budgets, it does nothing to address the problem of oil dependence. That, in my opinion, must be part of any solution.

    A final excerpt from those New York Times letters summed it up best, in my opinion:

    People say we should have a Manhattan Project-style program to develop alternative energy. That is fine, but while the Manhattan Project was continuing, we did not put World War II on hold while we waited for the atom bomb. The conventional war was continually fought throughout that time.

    Conclusion

    As I recently calculated, we could displace a great deal of our fossil fuel consumption with solar power, but it will ultimately take a multi-trillion dollar investment. We could borrow from T. Boone Pickens’ plan and use wind and solar power to displace natural gas that is currently used to produce electricity. That natural gas could then be used in CNG vehicles to displace petroleum. The net impact would be a large reduction in our fossil fuel consumption (and note that it is much easier to produce natural gas from biomass than it is to produce liquid fuels).

    We sit on top of trillions of dollars of oil. We should use it – sparingly – to wean ourselves from oil dependence. The realistic alternative to this is that we continue to be highly dependent upon petroleum. As a result, we will watch those dollars flow out of the U.S. – right up until the point that our imports dry up and we watch a new generation of sons and daughters march off to fight resource wars because of our failure to plan ahead.

    July 23, 2008 Posted by | Alaska, alternative energy, ANWR, OCS, oil exploration, oil imports, oil prices, solar power, wind power | Comments Off on The Drilling Debate: Narrowing the Chasm

    The Drilling Debate: Narrowing the Chasm

    I have given a lot of thought to the issue of opening up new areas for drilling in the Outer Continental Shelf (OCS) and in the Arctic National Wildlife Refuge (ANWR). My position has always been to leave that oil in place for a very rainy day. I wanted to see major conservation efforts in place before we considered tapping that oil. Opening those areas when oil was $20 a barrel would have meant that much of it would have been used frivolously.

    Now that oil is over $100 – and in my opinion will be much higher in 5 or 10 years (T. Boone Pickens predicts $300/bbl in 10 years) – we will have tightened our belts a good deal by the time any of this oil could actually reach the market. Therefore, I think now is the time for Congressional hearings on opening up these areas. Let’s have an open debate on the issue. However, if these areas are opened for drilling, I have a compromise that should be very attractive to those in opposition.

    Hopefully this essay conveys a pragmatic approach designed to bring two sides in this debate closer together. At present it is hard to imagine that they could be further apart. A big part of the reason for the chasm between views is that there is a great deal of misinformation and misunderstanding surrounding the issues. I hope to address those in this essay.

    A recent sampling of letters to the New York Times gives a flavor of the views of the opposing sides:

    To Drill or Not to Drill? There’s the Rub

    First a letter opposed to further drilling:

    Allowing offshore drilling for gas as a solution to high fuel costs, as President Bush urges Congress to do, is as sensible as growing more food in response to rising levels of obesity or robbing a bank in response to overspending one’s budget.

    While it is not popular, the clear answer, as it is in the case of overeating and overspending, is to cut back in the consumption of food, in the consumption of one’s salary and in the consumption of fuel.

    Painful as it is, I applaud the $4 gallon because it is the one thing that has finally gotten the public to focus on the fact that we need to consume less. For the first time, one hears from every quarter, turn off the lights in rooms you are not in, recycle that paper, drive less and take public transportation or ride your bike. That is the kind of talk political leaders should be encouraging, not new ways to keep up the old habits.

    And one in favor:

    As a 40-year Alaskan, I can tell you that opening of the Arctic National Wildlife Refuge is the most sensible solution for America’s oil problems. Most of the people who are trying to stop drilling in the refuge have never been in our state.

    You have no idea how little space they are talking about. Take a regular envelope, pretend that is the refuge … now where you would put the stamp, that is the area they want to open.

    Alyeska Pipeline has worked, the gas pipeline is in the process, and the Arctic National Wildlife Refuge should be. Congress is making this a party fight. How about putting that energy into fighting for all Americans, as oil prices don’t care whether you are Republican or Democrat?

    So, where does the truth reside? Is it not worth the effort? Or can we “drill here, drill now” and make a significant step toward energy independence? Let’s investigate.

    What is the Objective?

    This is the key to the entire debate. Different groups have different agendas, and desires are often based on misinformation. Take a couple of extreme examples. I consider myself an environmentalist, but one who is practical, and informed on energy issues. Let’s take an environmentalist who may be less-informed. Like me, they are concerned about the impact of continued fossil fuel consumption on our environment. When they think of drilling, they envision oil slicks washing up on the shore, and a polluted ANWR. They see oil companies – not ordinary citizens – as the primary beneficiaries if drilling is allowed. They are optimistic about the ability of alternative fuels to rapidly scale up and replace depleting fossil fuel reserves. Or, they don’t fully understand the implications of falling fossil fuel reserves, or in an extreme case they don’t care and think the earth could use a healthy die-off of the human population.

    Each of these groups is going to be vehemently opposed to opening up areas to additional drilling. They simply don’t think there is a need, and that it will simply delay our transition to alternatives. Those in Congress who are so outspoken against additional exploration likely fall into the category of ‘alternative fuel optimist.’ If they can only keep the ban in place, alternatives, mass transit, and conservation will rise to the challenge. The key to this approach is that the alternatives must deliver when they are needed, and they must cover severe shortfalls. What if they don’t? What is Plan B? Shortages? Rationing?

    For our other extreme example, let’s consider the Hummer-driving, non-negotiable lifestyle mentality. The majority of this group is also not very informed on energy. They believe that underneath U.S. territory lies an ocean of oil, waiting to be tapped – if those darned environmentalists would only get out of the way. They are prepared to drill through a polar bear’s head if it will mean cheap gasoline – which they know it will. These people are going to be very outspoken about the need to drill anywhere, anytime. This approach suffers from a very similar problem as the previous approach: What if the oil that is available simply can’t cover any severe shortfalls? What if the expectations of these vast oceans of oil lead us to delay actions on alternatives? Again, what is Plan B? Military action?

    The majority of us fall somewhere in between, but it breaks pretty sharply along party lines. Democrats don’t want to drill, Republicans think we should drill. Perhaps we should first develop an idea of the stakes.

    How Much Oil is at Stake?

    That’s a big problem. We don’t know. All we have right now are ‘educated’ guesses. Multiple government agencies have made assessments. The Minerals Management Service in the Department of the Interior estimated in 2006:

    The MMS estimates that the quantity of undiscovered technically recoverable resources ranges from 66.6 to 115.3 billion barrels of oil and 326.4 to 565.9 trillion cubic feet of natural gas. The mean or average estimate is 85.9 billion barrels of oil and 419.9 trillion cubic feet of natural gas.

    Of that, they estimate that reserves in areas currently off-limits to exploration amount to just under 18 billion barrels. Based on the 2007 U.S. consumption rate of 20.7 million barrels of oil per day, 18 billion barrels would last just under 2.5 years.

    The EIA estimate from areas currently off-limits to exploration was very similar at just over 18 billion barrels:

    Impacts of Increased Access to Oil and Natural Gas Resources in the Lower 48 Federal Outer Continental Shelf

    This graphic was recently used in a post at Grist by Joseph Romm, who argued that the amount of oil that is off limits has been greatly exaggerated. Based on the above graphic, Romm has a point, as the amount of undiscovered oil in areas open to exploration is more than twice the estimate from areas off limits to exploration. However, much of that oil is in mile-deep water that will be very expensive to develop. So the comparison isn’t necessarily apples to apples.

    Estimates of recoverable oil from ANWR are of a similar magnitude. The Energy Information Administration (EIA) in a 2008 report noted:

    In the mean oil resource case, the total volume of technically recoverable crude oil projected to be found within the coastal plain area is 10.4 billion barrels, compared to 5.7 billion barrels for the 95-percent probability estimate, and 16.0 billion barrels for the 5-percent probability estimate.

    The EIA also presumes that it will take 10 years to scale up and bring production online:

    At the present time, there has been no crude oil production in the ANWR coastal plain region. This analysis assumes that enactment of the legislation in 2008 would result in first production from the ANWR area in 10 years, i.e., 2018.

    The primary constraints to a rapid development of ANWR oil resources are the limited weather “windows” for collecting seismic data and drilling wells (a 3-to-4 month winter window) and for ocean barging of heavy infrastructure equipment to the well site (a 2-to-3 month summer window).

    The timeline broke down as 2 to 3 years to obtain leases, 2 to 3 years to drill an exploratory well, 1 to 2 years to develop a production development plan, and 3 to 4 years to build infrastructure.

    What’s the bottom line? With an estimated 18 billion barrels of oil offshore and 10 billion barrels in ANWR, there is potentially enough oil there to meet four years of U.S. demand. However, in terms of imports, currently around 13 million barrels a day, there is potentially enough there to eliminate oil imports for nearly 6 years. Further, based on my proposal below, there may be enough there to eliminate imports for 20 years.

    Finally, consider the economic ramifications. If we do nothing, despite well-intentioned calls for conservation, our insatiable demand for oil imports will continue. With production from some of our major suppliers having peaked (e.g., Mexico) and with internal consumption in other countries negatively affecting their exports, the price of oil will be under constant upward pressure over the long term. If we don’t produce those 28 billion barrels of oil, we will go and buy those barrels on the open market. At today’s oil price, that means that about $3.5 trillion will leave this country, much of it flowing into countries that are hostile to the U.S. By keeping that money at home, we can not only create jobs, but we have an opportunity here to fund a transition away from oil, and to more sustainable options.

    Let’s Compromise

    Both sides generally agree that our dependence on petroleum is a problem. Among the arguments from both sides is that this dependence puts our national security at risk and that it endangers the environment. I think both sides would agree that a long-term solution to the problem could be a combination of conservation, along with alternative options such as higher efficiency vehicles, electric transport, and mass transit. Where large numbers will start to disagree is whether this is achievable in the short-term, or whether it is going to take a few more years and a few more technological developments.

    I fall into the latter category, for a variety of reasons. I am pretty familiar with a lot of the alternatives, and they are simply not competitive even at gasoline prices of >$4/gallon. To illustrate that point, consider Europe, where gasoline prices in many locations are now approaching $10/gallon. Even at that price, fossil fuels remain the dominant choice for transportation. It is going to take more than price – or at a minimum much higher prices than Americans probably anticipate – to drive us away from a very high level of dependence upon fossil fuels.

    So how about a compromise? I propose that we open up some of the more promising areas to exploration, and then devote the royalties to funding fossil fuel alternatives. We could subsidize public transportation. We could provide a tax credit of $1,000 for each person who purchases a car that gets over 40 mpg. We could borrow a page from T. Boone Pickens’ plan, use these oil revenues to fund wind and solar power, and displace natural gas which could then be used to displace petroleum.

    It is true that the oil won’t flow from these areas for perhaps a decade, but by then we are likely to be in very bad need of it. Prices will probably be very high, which means the royalties from the oil will provide a lot of money for funding alternatives. This should be a compromise that parties from both sides could agree to. If not, then what’s going to happen is that as prices continue to rise, so will the pressure to drill, and Congress will eventually cave in to these demands. But by failing to earmark the money for alternatives, it will just postpone the inevitable. So now is an opportune time to hold open Congressional hearings on the subject.

    That’s a compromise I prefer. However, one that would have even greater support behind it would be to return an oil dividend to U.S. citizens (as Alaska has historically done). That is tangible for people, whereas funding the alternatives may not be. However, while I think this compromise would find wide support among many people with stretched budgets, it does nothing to address the problem of oil dependence. That, in my opinion, must be part of any solution.

    A final excerpt from those New York Times letters summed it up best, in my opinion:

    People say we should have a Manhattan Project-style program to develop alternative energy. That is fine, but while the Manhattan Project was continuing, we did not put World War II on hold while we waited for the atom bomb. The conventional war was continually fought throughout that time.

    Conclusion

    As I recently calculated, we could displace a great deal of our fossil fuel consumption with solar power, but it will ultimately take a multi-trillion dollar investment. We could borrow from T. Boone Pickens’ plan and use wind and solar power to displace natural gas that is currently used to produce electricity. That natural gas could then be used in CNG vehicles to displace petroleum. The net impact would be a large reduction in our fossil fuel consumption (and note that it is much easier to produce natural gas from biomass than it is to produce liquid fuels).

    We sit on top of trillions of dollars of oil. We should use it – sparingly – to wean ourselves from oil dependence. The realistic alternative to this is that we continue to be highly dependent upon petroleum. As a result, we will watch those dollars flow out of the U.S. – right up until the point that our imports dry up and we watch a new generation of sons and daughters march off to fight resource wars because of our failure to plan ahead.

    July 23, 2008 Posted by | Alaska, alternative energy, ANWR, OCS, oil exploration, oil imports, oil prices, solar power, wind power | 71 Comments