The Solar / Water nexus

by John Brian Shannon John Brian Shannon

Separate from discussions about airborne coal power plant emissions,  are the high levels of water usage — proportional to the downstream water loss experienced by farmers, citizens, and other water users such as wildlife — caused by obscenely high coal power plant water requirements.

Water used by power plants
At a time of increasing water scarcity, water use by power plants varies widely. In some regions, that different water usage level is becoming an important part of the decision-making process for planners. climaterealityproject.org

In some regions of the world, there exists acute competition for water resources as coal power station operators vie for water with agricultural, urban, and other users of water, while areas with plentiful water find their power plant choices aren’t constrained by water supply issues at all.

The era of increasing water shortages and frequent drought seem here to stay, and the huge volumes of water required by some power plants is becoming a factor in the decision-making process as to which type of power plant is most suited for any given location.

Therefore, the conversation is now arcing towards the local availability of water and thence, to the most appropriate type of power station to propose for each location.

So let’s take a look at the water usage of five common types of power plants:

  • Coal: 1100 gallons per MWh
  • Nuclear: 800 gallons per MWh
  • Natural gas: 300 gallons per MWh
  • Solar: 0 gallons per MWh
  • Wind: 0 gallons per MWh.

While 1100 gallons per MWh doesn’t sound like much, America’s 680 coal-fired power plants use plenty of water especially when tallied on an annual basis.

The largest American coal-fired power station is in the state of Texas and it produces 1.6 GW of electricity, yet it is located in one of the driest regions on the North American continent. Go figure.

At one time as much as 55% of America’s electricity was produced via coal-fired generation and almost every home had a coal chute where the deliveryman dropped bags of coal directly into the homeowner’s basement every week or two.

But in the world of 2014, the United States sources 39% of its electricity from coal power plants and this percentage continues to decline even as domestic electricity demand is rising.

Texas Utility Going Coal-Free, Stepping Up Solar

In a recent column by Rosana Francescato, she writes;

“El Paso Electric Company doubles its utility-scale solar portfolio with large projects in Texas and New Mexico. As if that weren’t enough, the utility also plans to be coal-free by 2016.” — Rosana Franceescato

She goes on to tell us that EPE serves 400,000 customers in Texas and New Mexico and gives credit to the foresighted management team. El Paso Electric is already on-track to meet the proposed EPA carbon standard. Their nearby 50 MW Macho Springs solar power plant about to come online is on record as having the cheapest (PPA) electricity rate in the United States.

This solar power plant will displace 40,000 metric tonnes of CO2 while it powers 18,000 homes and save 340,000 metric tonnes of water annually, compared with a coal power plant of the same capacity. That’s quite a water savings in a region that has been drought-stricken in 13 of the last 20 years, only receiving 1 inch of rainfall per year.

In February 2014, EPE signed an agreement for the purchase all of the electricity produced by a nearby 10 MW solar installation that will 3800 homes when construction is completed by the end of 2014. And they are selling their 7% interest in a nearby coal power plant.   Now there’s a responsible utility company that makes it look easy!

Solar’s H2O advantage

The manufacture of solar panels uses very little water, although maintenance of solar panels in the field may require small amounts of water that is often recycled for reuse after filtering out the dust and grit, while other types of energy may require huge volumes of water every day of the year.

Wind’s H2O advantage

Wind turbines and their towers also use very little water in their construction and installation, although some amount of water is required for mixing with the concrete base that the tower is mounted on at installation.

In the U.S. which is facing increasing water shortages and evermore drought conditions as global warming truly begins to take hold in North America, switching to a renewable energy grid would have profound ramifications. Estimates of water savings of up to 1 trillion gallons could be possible if utilities switched to 100% renewable wind and solar power with battery backup on tap for night-time loads and during low wind conditions.

Midway through that transition, the present water crisis in the U.S. would effectively be over. Yep, just like that. Over.

China’s Looming Water Crisis

China’s looming water crisis has planners moving to taper their coal and nuclear power generation construction programmes. You can’t operate these plants without the required water, even for a day. Yet, the people who live and grow crops and raise livestock in the surrounding areas need access to undiminished water supplies. What good is a coal power plant if everyone moves away due to a lack of water?

There are very legitimate reasons nowadays to switch to solar and wind generation — and the reduction of airborne emissions used to be the prime consideration and may remain so for some time, however, massive reductions in water consumption might now prove to be the dealmaker in some regions — and the emission reductions may now be viewed as the happy side benefit! Wow, that’s a switch!

Of course, the benefits of solar and wind power will still include no ongoing fuel costs, very low maintenance and the lowest Merit Order ranking (the wholesale kWh price of electricity) of any energy.

Granted, there are locations where renewable energy doesn’t make sense, such as some Arctic or Antarctic regions. In these places solar simply isn’t worthwhile and wind levels may not be sufficient to make the economic case. Biomass may be a partial solution in these areas and there may be the opportunity for geothermal energy — although finding ‘hot rocks’ underground near population centres is much more unlikely than many people may realize.

But in the future, the vast majority of locations will be powered by renewable energy paired with a battery backup or a conventional grid connection — or both. And its a future that’s getting closer every day.

Sustainable Energy Policy to save EU €81 bn/year by 2030

by John Brian Shannon John Brian Shannon

Accenture says a sustainable pan-European energy policy could save consumers €27 to €81 billion per year by 2030 and result in a cleaner utility grid model.
Accenture says a sustainable energy policy could save European electricity consumers €27 to €81 billion per year by 2030.

A recent report authoured by Accenture for EURELECTRIC says that if European nations work together towards an integrated and pan-European energy policy it could generate savings for electricity consumers between €27 to €81 billion per year by 2030 and the result would be a cleaner utility grid model.

Accenture is calling on European governments to phase-out renewable energy targets and renewable energy programme spending — replacing both with a carbon trading scheme, one that essentially rewards low carbon energy producers and penalizes high carbon energy producers.

All of this is happening during a time of unprecedented change within the European energy industry.

In the fascinating German example, that country shut down much of its nuclear power generation rather than spend multi-billions to upgrade its aging and oft-troubled nuclear fleet. Consequently, Germany is now burning record amounts of coal and natural gas to replace that lost generation capacity — in addition to the installation of record amounts of wind, solar and biomass capacities to the German grid.

In the decades following WWII, German utility companies operated in a cozy, sheltered environment. But few knew how expensive it was to operate and maintain on account of massive government subsidies and preferential treatment of the utility industry. German consumers never had it so good and likewise for sleepy German energy giants, which have now awoken to find that the energy picture has changed dramatically in little over a decade.

Hence, even more subsidies were employed to counter for the loss of German nuclear power via Feed-in-Tariffs (FiT) for wind, solar and biomass capacity additions to the grid, partially financed by a hefty nuclear decommissioning fee added to every German electricity bill.

At least in Germany, it turns out that while nuclear has practically disappeared, and with no fuel costs to worry about, renewable energy combined to lower German electricity rates during the hours of the day that wind and solar are active, causing downward pressure on electricity rates. At the same time, German utilities burned record amounts of brown coal and expensive Russian natural gas to meet total demand which caused upward spikes in the electricity rate during the hours of the day that coal and natural gas were required to meet total demand.

In simple terms, the removal of nuclear from the German energy mix has resulted in higher electricity rates — not because some of that capacity was replaced by renewable energy — but because significant fossil fuel burning was required to meet demand, combined with nuclear decommissioning costs.

Were German politicians and their voters wrong to shut down the country’s nuclear power plants? Not a bit. Germany’s nuclear power plants were problem-plagued and the costs to bring all 19 reactors up to modern standards were prohibitive. Shutting down the German nuclear fleet was unfortunate perhaps, but necessary.

German consumers continue to yearn for clean energy and low energy costs. Unsurprisingly, the German public has reacted to energy that seems to be getting dirtier and more expensive by the day, and the massive nuclear decommissioning costs which will continue long past 2022, perhaps until 2045.

After the loss of nuclear, the German energy grid initially became cleaner with the addition of wind and solar, but then became dirtier than ever as record amounts of brown coal and natural gas were burned! Es ist zum weinen.

And that’s just the story in Germany. Every European partner country has its own story to tell in an electricity market that is undergoing unprecedented and rapid change — and each country’s electricity market is as different from each other as they are from the German example. Although each story is different, the net result is the same; The energy industry across Europe must adapt to the loss of (some) nuclear and the growing consumer disenchantment with fossil fuels, and to the huge consumer driven additions of renewable energy to the grid. And it must be done in a cost-effective way or utility companies and their respective governments will face consumer backlash.

Utility companies shocked by the unprecedented and rapid changes thrust upon them by nuclear shutdowns and the multiple demands of consumers are hoping that a harmonized set of rules across Europe will allow them to meet rising electricity demand.

If you look at what utilities really want, it is one harmonized set of rules across Europe. Europe is one market; it’s one playing field, and utilities really benefit from a harmonized set of rules.

It is like playing football; if you play football,you don’t want different rules for different parts of the field. — Sander van Ginkel, Managing Director, Accenture Utilities

“European electricity prices are rising fast. As a result, the overall increase in energy expenditure is putting mounting pressure on residential end-users and undermining the competitiveness of European industry. The implementation of the energy transition has so far lacked optimization on a pan-European scale. Without a concerted effort to more effectively manage the costs of the energy transition, expenditure on electricity and gas in 2030 could be 50 percent higher than it is today.

A step-change in the reshaping of the European energy system is needed — by reconfirming the European power sector’s support for Europe’s sustainability agenda through an optimized approach that avoids unnecessary costs. Doing so would put significant benefits within reach: our analysis shows that implementing an integrated set of levers could generate net savings of €27 to €81 billion per year by 2030. Such savings could be achieved by further integrating energy markets and the supporting regulatory framework at a European level and by leveraging flexibility throughout the electricity value chain — provided utilities, governments, regulators and consumers can forge a joint commitment to work together.” — Quoted from the Accenture/EURELECTRIC report

Accenture’s report says that Europe’s utilities must meet customer demands for more energy, but make it cheaper and cleaner and that the existing grid model will fail unless changes are made. Accenture has suggested four main ways to achieve these goals.

  1. Optimizing renewable energy systems
  2. Market integration
  3. Active system management
  4. Demand response and energy saving

“The restructuring of the European electricity system will have to be carried out cost-effectively if we are to gain the support and trust of energy consumers. This study shows that, with the right policies in place, the energy transition could cost each European citizen over € 100 less a year than if we continue with business as usual.” Hans ten BERGE Secretary General. Union of the Electricity Industry – EURELECTRIC

It seems reasonable that all of Europe’s utility companies acting together could arrive at a better solution. Complementary and overlapping energy capabilities may prove to be the model that works for Europe, as opposed to the direct competition model favoured in the U.S.

A carbon tax which reflects the true societal costs of fossil fuels could be a just solution to Europe’s present grid malaise. However, it is doubtful that a carbon tax will ever reflect the true cost to society of fossil fuels — which have been estimated to cost €30 per tonne of CO2 — but a carbon mechanism may well provide the impetus to foster a new and better European energy paradigm.

No matter the how the equation looks, it is sometimes only the answer that matters. A cleaner energy mix and reasonable electricity rates within a stable electricity grid is something that all sides can cheer for. How very European!

See the Accenture video (click here)

Variability of Renewable Energy concerns not fact-based

by John Brian Shannon

Originally published on JBSNews.com

Merit Order ranking control room
Most utility companies have Merit Order ranking control rooms similar to this one where decisions are made about which power producer will contribute to the grid in real time. Microprocessors make the instant decisions, while humans are present to oversee operations and plan ahead.

 

On the Variability of Renewable Energy; The ongoing argument about renewable energy additions to national electrical grids.

Solar Variability

Some people argue that solar photovoltaic (solar panels) produce ‘variable’ electricity flows — and they assume that makes solar unsuitable for use in our modern electric grid system.

And it’s true, the Sun doesn’t shine at night. Also, if you are discussing only one solar panel installation in one farmer’s field, then yes, there is the variability of intermittent cloud cover which may temporarily lower the output of that particular solar installation.

But when grid-connected solar arrays are installed over vast areas in a large state like Texas, or throughout the Northeastern U.S.A. for example, it all balances out and no one goes without power as solar panels produce prodigious amounts of electricity during the high-demand daytime hours. If it’s cloudy in one location thereby lowering solar panel outputs, then it is sunny in 100 other solar locations within that large state or region of the country.

So, solar ‘variability’ disappears with many widely scattered installations and interconnection with the grid. So much for that accusation.

NOTE: The marginal ranking for solar is (0) and that ranking never varies. (More on this later)

Wind Variability

The situation with wind power is essentially the same, One major difference though; In many parts of the world the wind tends to blow at its most constant rate at night, which helps to add power to the grid while the Sun is asleep.

In fact, complementary installations of solar and wind help to balance each other through the day/night cycle — and through the changing seasons. There is even an optimum solar panel capacity to wind turbine capacity installation ratio, but I won’t bore you with it.

NOTE: The marginal ranking for wind is (0) and that ranking never varies.

Natural Gas Variability

What? Natural gas is not variable!

Oh really? Over the course of the past 60 years, how has the natural gas price per gigajoule changed? Got you there! The natural gas price has increased by orders of magnitude and wild price fluctuations are quite common.

OK, that’s not ‘output variability’ but it is a variable factor with regard to energy pricing. And that’s a variable that actually matters to consumers.

Natural gas prices have swung wildly over the years forcing utilities to peg their rates to the highest expected natural gas rate. No wonder investors love natural gas!

So there is ‘supply variability’ and ‘rate variability’ with natural gas, which is why it is often the last choice for utility companies trying to meet daily demand. Gas is a good but expensive option and it comes with its own variability baggage.

We won’t even talk about the associated CO2 cost to the environment. (OK, it’s about $40 per tonne of CO2 emitted)

Coal variability

Not to the same degree as natural gas, but coal also faces price swings and potential supply disruptions — again forcing utility companies to set their rates against unforeseeable labour strikes at a mine, a railway, or shipping line — and against coal mine accidents that can shut down a mine for weeks, or against market-generated price spikes.

These things are impossible to foresee, so this ‘averaging up’ of the price results in higher energy bills for consumers and better returns for investors.

Yes, there is variability in coal supply, coal supply lines, coal power plant maintenance cycles which can have a plant offline for weeks, and market pricing. These things can affect total annual output, yet another kind of ‘variability’. (Again, that doesn’t factor-in the other costs to society such as increased healthcare costs from burning coal which releases tonnes of airborne heavy metals, soot, and nasty pollutants besides CO2 — which some estimates put at $40-60 per tonne emitted — in addition to the environmental cost of $40 per tonne of CO2 emitted)

NOTE: Should we talk here about how much water coal plants use every year? More than all the other energy producers put together, and then some!

Hydro power variability

What? Hydro power is not variable!

Oh yes it is. Nowadays, many hydro dams in the U.S. can barely keep water in the reservoir from August through November. They cannot produce their full rated power in a drought, they cannot produce their full rated power in late summer, they often cannot produce power during maintenance, or during earthquake swarms. Just sayin’ hi California!

An impressive body of water behind the dam is meaningless when the water level isn’t high enough to ‘spill over the dam’. If the water level isn’t high enough to spin the turbines then all that water is just for show. Take a picture!

“In 1984, the Hoover Dam on the Colorado River generated enough power on its own to provide electricity for 700,000 homes because the water level of Lake Mead behind the dam was at its highest point on record. But since 1999, water levels have dropped significantly, and Hoover Dam produces electricity for only about 350,000 homes.” — CleanTechnica

 And then there is this problem; Global warming and its resultant drought conditions mean that some dams are essentially ‘finished’ as power producing dams for the foreseeable future.

Again, we have output variability; But this time it is; 1) lower power output due to reduced reservoir levels caused by anthropogenic drought and 2) the time of year that hydro dams cannot produce their full rated power.

Price variability: This is what Merit Order ranking is about

Merit Order ranking is a system used by most electric utilities to allow different types of electrical power plants to add power to the electric grid in real time. Thanks to a computerized grid, this occurs on a minute-by-minute basis every day of the year.

In the German example, electricity rates drop by up to 40% during the hours in which solar or wind are active, and this is what Merit Order ranking is all about; Using the cheapest available electricity source FIRST — and then filling the gaps with more expensive electrical power generation.

Solar and wind electricity are rated at (0) on the Merit Order scale making them the default choice for utility companies when the Sun is shining, or the wind is blowing, or both.

Why? No fuel cost. That’s the difference. And bonus, no environmental or healthcare costs with solar and wind either.

Once all of the available solar and wind Merit Order ranking (0) capacity is brought online by the utility company, then (1) nuclear, (2) coal, and (3) natural gas (in that order) are brought online, as required to match demand, according to the marginal cost of each type of energy. (German Merit Order rankings)

NOTE: In the U.S. the normal Merit Order rankings are; (0) solar and wind, (1) coal, (2) nuclear, and (3) natural gas, although this can change in some parts of the United States. Merit Order is based on cost per kWh and different regions of the country have different fuel costs.

(The one cost that is never factored-in to the kWh price is the cost of disposal for nuclear ‘spent fuel’ and for good reason, but that’s a discussion for a different day)

The Fraunhofer Institute found – as far back as 2007 – that as a result of the Merit Order ranking system – solar power had reduced the price of electricity on the EPEX exchange by 10 percent on the average, with reductions peaking at up to 40 percent in the early afternoon when the most solar power is generated.

Here’s how the Merit Order works.

All available sources of electrical generation are ranked by their marginal costs, from cheapest to most expensive, with the cheapest having the most merit.

The marginal cost is the cost of producing one additional unit of electricity. Electricity sources with a higher fuel cost have a higher marginal cost. If one unit of fuel costs $X, 2 units will cost $X times 2. This ranking is called the order of merit of each source, or the Merit Order.

Using Merit Order to decide means the source with the lowest marginal cost must be used first when there is a need to add more power to the grid – like during sunny afternoon peak hours.

Using the lowest marginal costs first was designed so that cheaper fuels were used first to save consumers money. In the German market, this was nuclear, then coal, then natural gas.

But 2 hours of sunshine cost no more than 1 of sunshine: therefore it has a lower marginal cost than coal – or any source with any fuel cost whatsoever.

So, under the Merit Order ranking of relative marginal costs, devised before there was this much fuel-free energy available on the grid, solar always has the lowest marginal cost during these peaks because two units of solar is no more expensive than one. – Susan Kraemer

It’s as simple as this; With no fuel cost, solar and wind cost less. Although solar and wind are expensive to construct initially (but not as expensive as large hydro-electric dams or large nuclear power plants!) there are no ongoing fuel costs, nor fuel transportation costs, nor fuel supply disruptions, nor lack of rainfalls, to factor into the final retail electricity price.

As solar panel and wind turbine prices continue to drop thereby encouraging more solar and wind installations, we will hear more about Merit Order ranking and less about variability. And that’s as it should be, as all types of grid energy face at least one variability or another.

Only solar, wind, hydro-electric, and nuclear have a predictable kWh price every day of the year. Coal, natural gas, and bunker fuel, do not. And that’s everything in the energy business.

Although utility companies were slower than consumers to embrace renewable energy, many are now seeing potential benefits for their business and henceforth things will begin to change. So we can say goodbye to the chatter about the Variability of Renewable Energy and utility companies can say goodbye fuel-related price spikes.

Buckle up, because big changes are coming to the existing utility model that will benefit consumers and the environment alike.

Follow John Brian Shannon on Twitter: @JBSNews_com

Modi changes India’s national conversation with Renewable Energy

by John Brian Shannon.

Prime Minister-elect Narendra Modi of India. Image courtesy of: www.narendramodi.in
Prime Minister-elect Narendra Modi of India. Image courtesy: www.narendramodi.in

India’s newly-elected Prime Minister, Narendra Modi says 400 million Indian citizens presently living without electrical service in rural areas of the country will have electricity within five years via upcoming, massive investments in solar power.

Not only that, but the country’s various electrical grids (which are not necessarily connected to each other, nor to the main national grid) will benefit significantly from thousands of distributed solar installations by adding to overall capacity and helping to stabilize weaker parts of the infrastructure.

PM-elect Modi sees no reason why each rooftop in the country cannot install a number of solar panels. Indeed, when millions of rooftops are involved with an average of 10 panels per rooftop (for example), and plenty of land that is unsuitable for growing crops and entire canal systems are already covered with solar panels, you know big numbers are coming.

So, what could India do with 1 billion solar panels?

For starters, every home and business in the country could have reliable (daytime) electricity. Many towns and villages in remote areas would have electrical power for the first time in their history, thereby allowing them entry into the world’s knowledge-based economy. With the advent of electricity, education and commerce should flourish and easy access to online government services will offer significant benefit to many millions of India’s citizens.

And for locations with home-battery backup or diesel-backup power, 24-hour-per-day electricity will become the norm. Employment and productivity in these regions could be expected to rise dramatically and online medical advice could be a lifesaver for those who live in remote areas. All of these are good things to have in a rapidly developing nation.

Then there is the possibility of electrical power sales between electrical power producers and energy consumers of all sizes, whether neighbour-to-neighbour or direct-to-utility, along the projected pathways of the constantly evolving grid system. Finally, (daytime) surplus electricity sales to neighbouring countries like Bangladesh, Pakistan, Nepal and Bhutan might become commonplace and profitable.

Mr. Modi is taking on an unparalleled task, fraught with challenges. Here is a comment on the present state of affairs in India as it relates to the proposed rural electrification of the country.

Four hundred million Indians, more than the population of the United States and Canada combined, lack electricity. An official of India’s newly elected Prime Minister, Narendra Modi, recently said that his government wants every home to be able to run at least one light bulb by 2019. Administrations have made similar claims numerous times since India gained independence in 1947, but this time renewable power sources could bring the longstanding promise closer to a realistic vision.

In a sprawling, diverse country of more than 1.2 billion residents this task is tantamount to a second green revolution, the first being agricultural advances that relieved famine across the subcontinent in the middle of the 20th century. — ThinkProgress

India’s utility industry is at a ‘tipping point’

The Indian utility industry is comprised of a mishmash of coal-fired generation, less than reliable nuclear power plants noted for their high maintenance costs, oil-fired power generation, along with some hydro-electric dams and biomass power generation. The ‘pylons and powerlines’ component of the national grid in India is in need of a complete overhaul. On top of all that, the fossil and nuclear power producers have been heavily subsidized for decades and theft of electricity continues to be a multi-billion dollar problem.

Prior to the Indian election, the country’s utility industry was summed up by industry expert, S.L. Rao;

Power retailers were behind on 155 billion rupees ($2.5 billion) of payments to their suppliers as of Jan. 31, reducing their ability to provide electricity to customers. Blackouts may spread as state utilities in Delhi, Haryana and Maharashtra slash consumer bills in a populist wave before elections. That’s jeopardizing a $31 billion government bailout of the industry, which requires companies to boost rates.

“The power sector needs tough politics, and the only person in politics today who might be capable of that kind of toughness is Modi,” said S.L. Rao, the head of India’s central electricity regulator from 1998 to 2001, according to his website.

The Indian utility industry “has reached a stage where either we change the whole system quickly or it will collapse.” Rao, who was appointed to the regulatory body by an independent committee, said he maintains no political affiliation. — Bloomberg

On the bright side however, India’s outgoing Prime Minister Manmohan Singh had begun a process to inform citizens of the benefits of renewable energy and was instrumental in promoting a 4 GigaWatt(GW) solar park being built in four stages. At present it is only partially operational, with 1GW of power flowing now and construction of the three remaining stages continues at a brisk pace. When completed, it will easily be the largest solar park in the world.

Dr. Singh also directed policy towards massive wind power capacity additions, with major offshore wind installations due to come online in 2015. However, even with the efforts of PM Singh, only 4% of total electrical generation came from renewable energy in 2013. Prime Minister Singh’s policy goal of 20GW of solar by 2022 looks likely to be superceded by PM-elect Modi. Perhaps in dramatic fashion.

Tulsi Tanti, Chairman of the Pune India based wind power company The Suzlon Group, told the newswire today that, “the BJP-led government will provide an environment conducive for growth and investments, with major reforms in the infrastructure and renewable energy sector. This is important as India’s economic environment will act as a catalyst in reviving the global economy.” — Forbes

It is time to roll up our sleeves and get to work

Hundreds of thousands of direct and related jobs are expected during the 2014-2024 Indian renewable energy boom. And, bonus for consumers, the falling cost of solar and wind power electricity rates will have an overall deflationary effect on the national economy.

Later, as solar and wind power begin to displace fossil and nuclear power, declining healthcare costs, improved crop yields, cleaner air in cities resulting in a better quality of life for citizens — the new and stable energy paradigm will remove many of the historic constraints on the country and its people, allowing India to become all that it can and should be.

At this point, it looks like India’s transition to renewable energy may happen quickly and turn out to be the good-news story of the decade with massive economic, environmental, and human health ramifications — not just for India but for the region and the world. Hats off to India!

Follow John Brian Shannon on Twitter: @JBSsaid

Renewables and the Future of Oil Companies

by John Brian Shannon.

It may surprise you to know that the world’s oil companies see renewables as an unstoppable force. Some oil companies have issued landmark reports informing us that by 2100 at the latest the world will be getting 90% of its energy from renewable energy, indicating this could happen as early as 2060 under certain geopolitical conditions.

Although oil companies were initially hesitant to embrace renewable energy, in recent years their position has changed somewhat, as the many positive attributes of renewables began to convince senior oil executives that changes were on the horizon and their choice was to either embrace that change or accept an ever-declining energy market share. By their own admission only 10% of late-century energy will be met by petroleum.

In the final analysis, energy is energy after all, and it is the energy business that the oil companies are in.

So, rather than cede energy market share to up-and-coming renewable energy companies, big oil decided to become involved in renewables, first with biofuel, then solar, and later, wind. Some oil companies even purchased solar companies with their already installed and operating solar farms to gain experience in the new frontier.

The Oil Industry: Early Oil

In the early 20th century it was all about the oil, but in the later 20th century it was all about refining it into diverse products and the oil industry then morphed into a much larger entity named the petrochemical industry which created billions of tons of plastics, fertilizers, liquids, products and even medicines every year. The petrochemical sector includes the natural gas segment and thousands of miles of pipelines exist on every continent except Antarctica to move methane from gas wells to processing facilities and then forward it as usable natural gas to the end users.

A much larger industry had sprung up out of the original oil industry, one that was far larger than the one that had merely pulled oil out of the ground and refined it for transportation use.

The High Cost of Oil

Almost all countries heavily subsidize their oil and natural gas industries, and the United States is a great example. Oil companies there get over $4 billion dollars per year (yes, every year) to ensure stable petroleum supplies, compliance with regulations even in difficult drilling locations, and to help levelize gasoline prices across the country.

It is commonly reported that the petroleum industry (worldwide) receives over $500 billion dollars worth of subsidies and tax breaks every year. The worldwide oil and gas subsidy reported by the EIA for 2012 was $550 billion dollars and 2013 will have a similar subsidy figure attached to it.

Besides the massive taxpayer funded subsidy scheme for oil and gas are the externalities associated with the burning of all those long dead and liquefied dinosaurs. For each ton of gasoline burned, 4.5 tons of CO2 are created. If you add up all the billions of tons of gasoline that have been burned since the first Model T Ford rolled off the assembly line on August 12, 1908, it totals an incredible amount of CO2. Not to mention the billions of tons of non-CO2 airborne emissions created by our petroleum burning transportation sector since that date.

All this burning has a significant healthcare cost for nations (look at China, for example) and pollution-related damages will continue to affect the agriculture sector and cause damage (spalling) to concrete structures like buildings, bridges and some roads.

Although an excellent source of energy for motive power with high output per unit, the necessary high subsidies and unfortunate climate-changing externalities have conspired to considerably shorten the age of oil.

Natural Gas, the ‘Bridge Fuel’ to a Renewables Future

The oil companies are ahead of regulators on this one. Knowing that emission regulations were getting stricter every decade, petroleum companies knew that they had to pull a rabbit out of a hat, as gasoline and diesel can burn only so cleanly without prohibitively expensive technology. This is why we hear every day about ‘Natural Gas the Bridge Fuel to the Future’ and how natural gas will revolutionize our power generation segment and transportation sector.

Convincing regulators, utility companies, and automakers to switch to natural gas became the new mantra of oil company executives in order to meet increasingly stringent emission targets in developed and emerging nations.

The ‘Bridge Fuel’ will peak between 2040 and 2045 in most published oil company scenarios and somewhere between 2060 and 2100 natural gas itself will be almost completely replaced by renewables.

Although natural gas is hundreds of times cleaner burning than other fuels, it still emits plenty of CO2, but emits only minute quantities of toxic gases — and, importantly, no airborne soot or particulates.

By mid-century or 2100 at the latest, cleaner burning natural gas will be replaced in order to meet emission targets, and natural gas would lose out to renewable energy anyway — even without emission regulations — for the simple reason that solar and wind have zero fuel cost associated with their operation, while natural gas will always have a fuel cost and a separate delivery cost per gigajoule.

Imagine all of the costs involved in prospecting for and siting natural gas fields, purchasing the land, drilling, installing pipelines, processing methane into natural gas and adding even more pipelines to deliver natural gas to the end user. It all adds up, and even the most efficient gas producers/processors/pipeliners must cover their overhead.

There are no comparable ongoing fuel or distribution overheads with renewable energy.

What will we miss in the Clean Energy Future?

Once a solar or wind power plant hits completion all it needs is for the Sun to rise or the wind to blow. No drilling, no processing, no pipelines, no supertanker spills or pollution, and no CO2 sequestration required. Just plenty of clean renewable energy.

For all the right reasons, renewables are making progress. Economics, human health and our environment are the factors driving this energy change-up.

Let’s hope in our energy future that oil companies and gas companies, simply yet profoundly, morph themselves into energy companies and upon actualizing it, become renewable energy companies in the process.

For further renewable energy reading:

World Cumulative Solar Photovoltaics Installations,  2000-2012
The world installed 31,100 megawatts of solar photovoltaics (PV) in 2012—an all-time annual high that pushed global PV capacity above 100,000 megawatts. There is now enough PV operating to meet the household electricity needs of nearly 70 million people at the European level of consumption. Image courtesy of the Earth Policy Institute
World Cumulative Installed Wind Power Capacity 1980-2012
Even amid policy uncertainty in major wind power markets, wind developers still managed to set a new record for installations in 2012–with 44,000 megawatts of new wind capacity worldwide. With total capacity exceeding 280,000 megawatts, wind farms generate carbon-free electricity in more than 80 countries, 24 of which have at least 1,000 megawatts. At the European level of consumption, the world’s operating wind turbines could satisfy the residential electricity needs of 450 million people. Image courtesy of the Earth Policy Institute.