The deal continues Googles broad investment in renewable energy
In 2012 Google was criticized by The New York Times for wasting energy and for using non-green energy sources to power its massive centers. Give Google credit, yesterday the California-based company announced the signing of a renewable energy deal with MidAmerican Energy Holdings Co. The deal will cost an estimated $1.5 billion.
This is the company’s seventh and largest renewable energy commitment to date, bringing the total amount of renewable energy we’ve contracted for to over one gigawatt (1,000 megawatts), Google said on its Green Blog.
MidAmerican Energy, a unit of billionaire Warren Buffett’s Berkshire Hathaway Inc. will supply up to 407 megawatts of wind-sourced energy to Google’s data center in Council Bluffs, Iowa, according to RTTNews.
The deal with MidAmerican represents Google’s seventh and largest renewable energy purchase to date, bringing the total amount of renewable energy that the company has contracted for to over one gigawatt, or 1,000 megawatts.
The wind power for the Iowa data center will come from several wind projects that are part of MidAmerican Energy’s Wind VIII program, an initiative under which that company will bring 1,050 megawatts of new Iowa wind power online by the end of 2015.
Online companies data centers can waste 90 percent or more of the electricity they pull off the grid because they typically run their facilities at maximum capacity around the clock, whatever the demand, we noted in 2012. A yearlong examination by The New York Times revealed that this foundation of the information industry is sharply at odds with its image of sleek efficiency and environmental friendliness. “This is an industry dirty secret, and no one wants to be the first to say mea culpa,” said a senior industry executive in the Times story who asked not to be identified to protect his company’s reputation. “If we were a manufacturing industry, we’d be out of business straightaway.”
SInce then Google has invested heavily in green energy, predominantly financing wind and solar projects. That it was able to announce a deal of this magnitude on Earth Day is gilding the lilly.
“It’s Earth Day, so there isn’t a company on the Internet that isn’t trying to brandish its green image. Apple led the charge earlier this week and today, Google announced that it has inked a deal with MidAmerican Energy to supply its $1.5 billion Iowa data center with up to 407 megawatts of 100 percent renewable wind energy.” TechCrunch said, “Iowa — just like Oregon — has become a magnet for data centers recently thanks in large part to the availability of generous tax breaks and access to affordable and renewable energy, with Google, Facebook and Microsoft making heavy investments in the area.”
Interestingly, another way Google is pushing green energy is through advocating for a renewable energy tariff.
The concept of a “renewable energy tariff” is simple. Utilities would offer companies like Google the choice to buy renewable energy through a new class of service. The service would be voluntary, provided only to those companies that request it but open to all customers that want it and meet basic criteria. A key aspect of the tariff is that the costs of procuring the renewable power would be passed on to the customer that has elected this option, so the goal would be to avoid impact on other ratepayers.
This approach has many advantages. It lets utilities do what they do best: build power plants, procure power, manage the grid, and deliver electricity to customers. It draws on their ability to employ multiple power sources to better manage the variability associated with renewables. [... O]ffering companies the option of buying renewable power will lead to greater investment in local and regional renewable energy projects, which can provide jobs and opportunity in a utility’s service area and ultimately reduce the cost of renewable energy for everyone.
Des Moines, Iowa-based MidAmerican Energy provides electric service to 739,000 customers and natural gas service to 719,000 customers in Iowa, Illinois, Nebraska and South Dakota, RTTNews said.
Google noted that the deal will fully supply the first phase of its facilities in Council Bluffs with 100 percent renewable wind energy, bundled with and tracked by renewable energy certificates. The deal will also allow additional phases to be supplied with wind-sourced energy as Google grows in Iowa.
On Earth Day 2014, it’s worth noting a fault line is beginning to emerge between long time allies
Foes of the drilling practice known as fracking are frustrated at Labor Union support of drilling in the Marcellus and Utica shale basins, according to the Associated Press. More than 6,000 wells have been drilled in the region that encompasses large parts of Pennsylvania, Ohio, and West Virginia to extract oil and natural gas, and fracking has created many jobs while turning once dirt-poor regions and its inhabitants prosperous.
Environmentalists and green groups don’t like the perceived ecological damage. Penn Environment has called for much stronger regulations and a ban on drilling in some areas, such as state forests.
But blue-coillar workers particularly Laborers’ International Union, or LIUNA, have shown strong support because of the large influx of local jobs created over the last five years, the AP said. LIUNA represents workers in numerous construction trades. It’s mid-Atlantic regional manager Dennis Martire called the new industry a “lifesaver.”
Martire said that as huge quantities of natural gas were extracted from the vast shale reserves over the last five years, union work on large pipeline jobs in Pennsylvania and West Virginia has increased significantly. In 2008, LIUNA members worked about 400,000 hours on such jobs; by 2012, that had risen to 5.7 million hours.
Nationally, the Bureau of Labor Statistics says total employment in the nation’s oil and gas industry rose from about 120,000 in early 2004 to about 208,000 last month. Less than 10 percent of full-time oil and gas industry workers are represented by unions.
This has crated rift between the two reliably Democrat groups that threatens the coalition of voters the party needs to turn out the vote and win elections. But self interest is strong motivator and the prospect of long-term employment in a diverse and interesting energy sector is making converts of some workers who were once dubious.
And even now some powerful unions are withholding judgment. Anthony Montana, a spokesman for the United Steelworkers, declined to comment on how much drilling is helping that industry.
But others say the trend toward more local jobs is clear.
Mike Engbert of the Ohio Laborers District Council said that while some companies still use a lot of out-of-state labor, “Across the board, job gains have really shot up.”
For some, the drilling-related work is a big improvement over low-wage service jobs.
“I’ve probably worked 15 jobs, and none of them nearly as stable as this one, or nearly as interesting,” said Amy Dague, 38, of Wheeling, W.Va. She’s worked for a pipeline construction and maintenance company for a little more than a year.
“It’s definitely changed the way I see my future. I see this as long-term employment,” Dague said.
It’s hard to see how wind and solar can keep pace, even when heavily subsidized by the government. There’s just too much volume in oil and gas exploration from upstream companies paying for the rigs to midstream haulers and pipeline builders all the way to the downstream beneficiaries in the region like hotel providers, restaurant owners, and shop keepers providing services for field workers.
As Thomas Lifson said in an American Thinker piece, “Fracking is one of the greatest boons to America in my lifetime. In addition to all the domestic benefits, it disempowers the Muslim oil powers responsible for the spread of worldwide jihad, and Russia’s Putin.”
Indeed, but even when you take geopolitical considerations out of the equation, the sheer economic multipliers are strong enough reasons to continue oil and gas exploration in these rust-belt states. Interestingly, the political fault lines formed here because of Labors’ needs and Environmentalists’ disdain may prove more toxic than fracking itself.
A scathing internal report said the U.S. Department of Energy’s loan to Abound Solar ‘failed’ on multiple levels
An internal audit by the Energy Department found that Abound’s failure to meet its project milestones and its subsequent bankruptcy occurred as a result of a combination of market conditions and technical issues that negatively impacted its operations.
The report from the Office of the Inspector General Rickey Hass, released April 14, said the Department’s Credit Review Board, which is responsible for reviewing a loan’s terms and conditions, displayed a “lack of guidance” in how it dealt with millions of dollars in loan guarantees to now-bankrupt Abound Solar Manufacturing. The department also failed to establish comprehensive policies, monitoring procedures, and a records management system — a recurring problem within the program, apparently. “The need for transparency within the Program was identified in previous Office of Inspector General reviews.”
[It] recommended the conditional approval of a loan guarantee to Abound Solar Manufacturing, LLC, (Abound) in July 2010. In December 2010, the Program issued the loan guarantee to Abound for up to $400 million to construct and commission thin-film photovoltaic solar panel manufacturing facilities in Colorado and Indiana capable of annually producing up to 840 megawatts of clean renewable energy. [...]
In September 2011, Abound failed to meet certain milestones and the Program suspended funding to the project.
Colorado-based Abound filed for bankruptcy protection in June 2012 and laid off more than 100 employees following receipt of about $70 million of a $400 million loan guaranteed by the government. Just as damning, the Inspector discovered the monitoring of the loan was adversely affected by staffing issues. “In particular, we noted that the individual assigned to monitor the Abound loan had no prior loan management experience and limited background in project finance and financial statement analysis.”
Management did not agree that the identified weaknesses existed in the administration of the Abound loan, the report said. The loan program office denied that it had failed to reconcile the various internal assessments of Abound’s ability to repay taxpayers.
The DOE in recent years has tried to help commercialize the production of solar equipment such as panels and photovoltaic modules with a series of loan guarantees. In this case the loan was funded by the Federal Financing Bank, the program was responsible for loan underwriting and approval, the subsequent loan servicing and monitoring, and the credit subsidy to reimburse the Federal Financing Bank for any losses on the loan, the report said.
According to The Washington Free Beacon, Abound was backed financially by Bohemian Companies, an investment firm owned by Democratic mega-donor Pat Stryker. Bohemian was also one of Abound’s largest customers, purchasing its solar panels for the company’s Loveland, Colo., headquarters. Stryker helped steer thousands of dollars to a congressional candidate who later lobbied for a $400 million loan guarantee for Stryker’s now-bankrupt solar company, the Free Beacon said.
In an early sign of trouble for Abound, Bohemian had to remove an entire rooftop of solar panels due to product defects a month before DOE approved its support for the company, according Watchdog.org.
A senior fellow for the Competitive Enterprise Institute specializing in environmental policy, William Yeatman, called the IG report “stunning,” the Free Beacon said, and said it demonstrated that DOE’s loan program officers were “reckless” in their stewardship of taxpayer funds.
The Energy Department agreed that its process could be strengthened but disagreed with many of the specific findings, The New York Times said. A change in the estimate of how much money could be recovered if Abound defaulted did not raise the chance of default, the agency said. And most of the problems raised by the outside engineering consultant were, in fact, answered by the department’s in-house solar expert, the department said in a reply.
However, the Inspector General’s office specifically found the program had not:
- Consulted with the Board concerning a material change in the credit subsidy subsequent to the Board’s recommendation to approve the loan. Specifically, the Program lowered its recovery rating estimate, the potential recovery in the event of default, from 38 percent to 8.3 percent prior to loan closing. This change increased the credit subsidy from $71 million to $96 million, an increase of $25 million in taxpayer funds appropriated under the Recovery Act.
- Resolved the conflicting opinions of its advisors regarding Abound’s ability to overcome technical issues. In January 2011, 1 month after issuing the loan, the Program learned that Abound’s solar panels were underperforming by as much as 15 percent. As a result, Abound reported that its second largest customer returned $2.2 million of product and cancelled other orders in December 2010, the same month the loan was issued.
- Adequately documented the assumptions in the financial modeling used to support loan approval and monitoring. Program officials stated that assumptions used in the models fully considered deteriorating market conditions, overcapacity in the solar panel industry and Abound’s technical performance issues. However, we were unable to verify the Program’s assertion because the results of key/critical discussions that led to assumptions used in the models were not formally documented as part of the Program’s official records.
Additionally, the program did not conduct ongoing, formal financial and industrial analyses as part of its monitoring activities for the loan as required. And more disturbingly, that the program used available financial data to determine whether Abound was meeting the financial provisions of its loan, the report said.
None of these risky loan guarantees were actually issued until President Obama came into office, though the program was created and signed into law by President George W. Bush in 2005. But President Obama issued the first loan guarantees on the program as part of his stimulus effort, which has shown mixed results (see here and here for example). The department completed the first round of loan guarantees in 2011 and since then has made only one, for a new nuclear plant in Georgia, in February, the Times said. It issued a solicitation for new applications in December.
The American Recovery and Reinvestment Act of 2009 (Recovery Act) temporarily expanded the Program by providing loan guarantees for certain renewable energy projects that commenced construction on or before September 30, 2011, the Inspector General’s report said. The Recovery Act also appropriated Federal funds to cover the credit subsidy, funds used to protect the Government against possible shortfalls in loan repayments. As of December 2013, the program had approximately $15 billion in outstanding loan guarantees and $34 billion in remaining loan guarantee authority.
Still it doesn’t appear the management of Abound’s loan guarantee and other concerns about political favoritism will heighten scrutiny of DOE’s decision this month to restart one of the department’s stimulus backed loan programs.
On March 28, Reuters reported the Energy Department will renew its loan aid program, “doubling down on investments that have drawn intense criticism over past government-backed business flops.” As of then Energy Secretary Ernest Moniz had not specified how much would go to solar projects, but on April 16, Reuters reported the Energy Department revealed plans to loan up to $4 billion in aid for renewable energy companies despite the past failures of federally subsidized projects.
Friday Energy News Dump: Supplying Your Own, Surging Commodities, Delaying Keystone, Picking Favorites and Running Scared, There’s a Thread Here SomewherePosted: April 18, 2014
While China, Russia and India go all-in on nuclear power the U.S. grapples with needs and waste
Nuclear energy is a charged subject, but its value as an energy source is seldom debatable. Rather its the waste, disposal and high construction costs that are most polarizing. And since the Fukushima Daiichi nuclear disaster in 2011 the industry has been under deeper scrutiny. But new options for improving nuclear energy may be near, and that it may be time to looker at smaller sized options.
The Associated Press reports that tiny plants could help bring nuclear to the fore again. These would be small underground nuclear power plants that could be cheaper to build, easily fitting on the dimensions of coal plants they’re ultimately intended to replace in the United States, William Magwood, the incoming director of the Paris-based forum for nuclear energy countries, said to the AP.
They would have factory-built parts that are slotted together like Lego blocks and hauled by train or truck — making assembly possible anywhere. [...] The Energy Department has sunk $450 million into a multi-year effort to persuade companies that the technology can be developed profitably, but companies have been drifting away from the project, citing funding and regulatory questions. It would be at least another six years before one could be built. [...] A full-size reactor costs $6 billion to $8 billion and takes years to build — and decades to recoup the costs. It can produce enough to power more than 700,000 American homes, more than 10 times the output of its smaller counterpart.
According to the Environmental Protection Agency, nuclear power accounts for approximately 20 percent of the United States’ electricity production. More than 100 nuclear generating units are currently in operation in the United States. The United States has the most nuclear capacity and generation among the 31 countries in the world that have commercial nuclear power. France, the country with the second most nuclear capacity, relies on nuclear power for nearly 80 percent of its electricity, the U.S. Energy Information Agency said. The last new reactor to enter commercial service was the Tennessee Valley Authority’s (TVA) Watts Bar 1 in Tennessee in 1996, according to the EIA.
The idea of a different type of nuclear reactor has also been incubating for awhile and a Technology Review article from 2011 by Kevin Bullis said the large engineering and construction firm Fluor had taken a majority stake in NuScale Power, a startup that has been developing small, modular nuclear reactors.
The investment by Fluor is a vote of confidence in small modular nuclear reactors. These reactors generate 300 megawatts or less, about a third of what conventional nuclear reactors generate, and are designed to be safer and easier to manufacture. The technology has been gaining attention in recent years as high costs and safety concerns, such as those kindled by the nuclear accident at Fukushima, have hurt the prospects of large, conventional nuclear power plants. At the same time, organizations such as the International Atomic Energy Agency are anticipating a large market for small nuclear reactors in poor countries and in rural areas that don’t have the infrastructure or demand to accommodate conventional large reactors.
In another report in 2013 Bulis reported an MIT spinoff named Transatomic Power had an updated molten salt reactor, a type that’s highly resistant to meltdowns. “The new design improves on the original molten-salt reactor by changing the internal geometry and using different materials,” Bullis said.
A Gizmodo article on Transatomic Power said the design of the the Waste Annihilating Molten Salt Reactor (WAMSR) by co-founders and former MIT researchers Leslie Dewan and Mark Massie, “is fuel-agnostic and can run on either the uranium or thorium leftovers from light-water reactors. [...] What’s more, reusing this waste as a fuel source would reduce their radioactive lifetimes from hundreds of thousands of years to just hundreds. “
Interestingly, South carolina has been exploring how to re-use wasted plutonium, as part of the Obama administration’s pact with Russia to reduce nuclear weapons. But the state has run into bureaucratic problems as the Energy Department continues to work at odds with the administrations stated policy goals.
The Associated Press, via the Washington Times, reported yesterday the state is suing the U.S. Energy Department to keep the government from withdrawing funding from a multi-billion dollar project to turn weapons-grade plutonium into commercial reactor fuel.
Gov. Nikki Haley has said that the closure of the mixed-oxide fuel project would harm an international nonproliferation agreement and eliminate hundreds of jobs.
The project known as MOX is intended to help the United States fulfill an agreement with Russia to dispose of 34 tons each of weapons-grade plutonium – an amount officials have said is equal to 17,000 warheads. It would be the first of its kind in the United States.
Nearly $4 billion was budgeted more than a decade ago to build the plant, which is run by the National Nuclear Security Administration, a semi-autonomous agency within the Energy Department. But construction costs have ballooned to nearly $8 billion, and federal officials now say the facility will cost about $30 billion over the years it’s in use.
In its most recent budget request, the Obama administration proposed suspending the project. The administration has said MOX is too expensive and that another method needs to be found to dispose of the plutonium. Wilson has argued that proposal is unconstitutional, accusing the administration of using money Congress set aside for building MOX to shut it down. In essence, Wilson has argued, the proposed suspension is the administration’s way of stopping the program, which Congress has declined to defund.
It’s clear the fate of spent nuclear fuel, which for some years looked likely to go to Yucca Mountain, Nev., is in a state of uncertainty, with no program to find a repository and no decision by Congress on who should even attempt that task. Still, nuclear, while generating the third largest share of electric power, behind natural gas and coal, according to the EIA, is generally utilized more intensively than coal or natural gas units.
And what of greenhouse gases? Both the EPA and the EIA say generating nuclear power does not contribute to airborne emissions of carbon dioxide (CO2), although related activities such as the production of nuclear fuel for reactors do result in CO2emissions. Currently, its nearest competitor in size among non-greenhouse-gas-emitting electricity generating technologies is conventional hydropower, which accounts for about 6 percent of U.S. electricity generation, the EIA said.
In the meantime, Japan has found it would be difficult to replace the energy needs with alternatives after it shut down its nuclear energy production in a panic of popular opinion after Fukushima. The New York Times reported on April 11:
Japan’s cabinet approved a new national energy strategy on Friday that designates nuclear power as an important energy source and calls for restarting idled nuclear plants that meet new safety standards. The new strategy, first proposed by the government of Prime Minister Shinzo Abe two months ago, scraps a promise made by a previous government after the 2011 Fukushima nuclear disaster to phase out atomic energy. Under the new plan, Japan could start as early as August to restart at least some of its 48 operable commercial reactors, which were stopped after the Fukushima accident spread nuclear radiation across northern Japan.
And while nuclear power has stagnated in many western countries, three of the most geopolitcally aggressive countries in the world — China, Russia, and India — are ramping up nuclear energy, to at least 100 percent of their current capacity. China is investing $350 million over five years to develop molten-salt reactors of its own. It plans to build a two-megawatt test reactor by 2020.
With investment by these competing countries, and the emergence of new nuclear technologies, the U.S. may find its role in nuclear generation growing instead of declining, despite its critics most fervent wishes.
News that Russia has increased its interests and pursuits of an arctic foothold have been percolating for awhile but now comes an effort to gain a stronger purchase to begin hydrocarbon exploration
If there is place and way to start a new Really Cold War — by accident or by design — it would be a competition for energy resources in the Arctic.
Today comes a story from the English-language version of RT, a Russian viewpoint news channel and website, which said Russia is preparing to bring in the biggest bid to the UN to explore for hydrocarbons, while extending the country’s reach beyond its boundaries.
Ahead of Moscow preparing to file a 1.2 million square kilometer Arctic waters bid to the UN later this year, President Vladimir Putin commissioned Russian ministries to get ready to take the new territories in the Sea of Okhotsk under full control and protection.
The Russian president ordered maintenance of border patrols of the extended sea shelf be in place by July 1, 2014.
Russia’s Defense Ministry has been instructed to ensure maritime authorities extend the Russian shelf in the Sea of Okhotsk beyond the generally recognized 200 nautical miles zone by December 1, 2015.
The Foreign Ministry is obliged to bring all the necessary documents, including new maps of the Sea of Okhotsk and scientific data serving as proof of Russia’s bid, to the UN by March 1, 2015. [...] Last year, Russian energy giants, Gazprom and Rosneft, were granted rights to develop large hydrocarbon deposits recently discovered in the Pechora and Kara seas. The find could be a pot of gold for Russia’s gas industry.
Russia’s move into the Arctic can be seen as multi-pronged. It moves Russia closer to Asia, helps establish its own hegemony, and gives the U.S. another geopolitical shove. Still, there are motives for all sides to work together to accomplish energy exploration in a dangerous climate. All the countries bordering the Arctic are members of the Arctic Council and are working under agreements signed in 1991 outlining environmental and emergency guidelines.
So far, Russian and U.S. authorities have been saying the right things, as Putin has said Russia is ready to work with the Arctic Council, and President Obama has said, “The Arctic region is peaceful, stable, and free of conflict,” according to Secretary of Defense Chuck Hagel. But underneath there seems to be a tension building and actions that could heighten them.
In May 2013, Obama unveiled a 13-page U.S. strategy for the Arctic, according to the Associated Press, and other news outlets. The strategy asserted that nations must protect the region’s fragile environment and keep it free from conflict. “At the same time, however, the U.S. wants to make sure it is not left behind as countries like Russia, China, Canada and Norway map out plans ranging from gas and oil exploration to research and military exercises,” the AP said.
Russia’s military resumed a “permanent Arctic presence” in Sept. 2013, RT said in a separate story, marked by the arrival of a task group of 10 warships and support vessels to the western coast of Kotelny Island in the Novosibirsk (New Siberian Islands) Archipelago. “The task group is headed by Russia’s most powerful battleship and the flagship of the Northern Fleet, cruiser Peter the Great (Pyotr Veliky). The group is accompanied by four nuclear icebreakers facilitating the passage through areas with particularly thick ice.”
The Obama Administration in November said energy exploration in the largely untapped Arctic region could heighten international tensions, but that countries must work together to avoid conflict, the AP reported Hagel saying with regard to the increased interest in the Arctic’s lucrative oil and gas deposits. Hagel’s comments came as the military finalized plans to expand operations in the vast waters of the Arctic
It’s unclear because of Obama’s cutbacks in defense budgeting (see here also) whether the U.S. has the willpower to fill the wide gaps in satellite and communications coverage, add deep-water ports and buy more ships that can withstand the frigid waters or break through the ice.
An EY study says, the region above the Arctic Circle accounts for only about 6 percent of the Earth’s surface area, but it could account for as much as 20 percent of the world’s undiscovered but recoverable oil and natural gas resources.
The existence of hydrocarbon resources in the Arctic has been known for decades, but only in recent years has the opening to full-scale resource development and navigation — such as the fabled Northwest Passage that would connect the Atlantic and Pacific Oceans, or the Northern Sea Route that will connect Europe and western Russia with eastern Russia and Asian markets — become technically and economically feasible. [...] In 2008, the United States Geological Survey (USGS) released the first-ever wide-ranging assessment of Arctic oil and gas resources, estimating the region’s undiscovered and technically recoverable conventional oil and natural gas resources. Of the 33 Arctic sedimentary “provinces” that the USGS evaluated, 25 were found to have a greater than 10% probability of having oil or gas deposits larger than 50 million barrels of oil equivalent. The USGS assessment concluded that approximately 90 billion barrels of oil, 1,669 trillion cubic feet of gas, and 44 billion barrels of natural gas liquids (NGLs) may remain to be found in the Arctic. Of the total 412 billion barrels of oil equivalent (boe), approximately 84% is expected to be found offshore, and about two-thirds (67%) of the total was natural gas.
The Arctic region contains portions of eight countries — Canada, Denmark/Greenland, Finland, Iceland, Norway, Russia, Sweden and the United States. Finland and Sweden do not border on the Arctic Ocean and are the only Arctic countries without jurisdictional claims in the Arctic Ocean and adjacent seas, according to EY, which is member firm of Ernst & Young Global Limited, an assurance, tax, transaction and advisory services provider. And most of the hydrocarbons are believed to be in relatively shallow water, about 500 meters or about 1,500 feet.
While the Obama Administration claims to be pivot toward Asia about as often as it pivots toward the U.S. economy, between its muddled Middle East policy and regulatory rules-making at home, it really hasn’t done much geopolitically in Asia, though in energy it has continued its tariff war on solar panels with China.
Russia, on the other hand, is reaching out to China and Japan in its Arcitc policy as well. A Feb. 1, article in The Diplomat notes that:
The Arctic region has moved to the center of world politics in 2014, siting high on the energy security agenda of most East Asian countries, including China and Japan. The latter has recently been stepping up its efforts to build a stronger foothold in the area. Those efforts have been given a boost recently by Tokyo’s discovery of a new friend with a prominent role on the Arctic chessboard: Russia. A successful Japan-Russia rapprochement has the potential to serve as a game changer for both countries.
An April 11 Reuters story said Russia’s pivot toward Asia and the East made strategic sense.
In Yamal – which in the local Nenets language means “the end of the earth” – a $27 billion liquefied natural gas (LNG) scheme is assuming major political as well as economic significance.
The project fits well with a more aggressive eastward push by Moscow since the United States and European Union imposed sanctions over its annexation of Crimea from Ukraine last month.
Instead of sending gas by pipeline to long-standing EU customers, Russia aims to ship LNG from the remote Yamal peninsula by sea largely to Asian buyers such as China, which has avoided confronting Moscow since Russian troops took control of Crimea. [...] With the EU and Ukraine discussing ways to cut their reliance on Russian gas, Moscow has courted its Asian partners more aggressively, hoping to capitalize on record prices for LNG in Japan, China and South Korea. [...] A deal between Gazprom and China has been in the works for at least 10 years. If one is finally struck, Putin could hold this up as proof that Western attempts to isolate Russia are destined to fail.
Offshore-Mag.com, an oil and gas publication sees reason for cooperation in the Arctic because of the inherent risks in drilling in such a harsh environment. It notes the petroleum industry has explored and produced oil and gas in Arctic areas for more than 50 years, onshore and offshore. Factors such as melting sea ice, high energy prices, unrest in the Middle East, demand growth in Asia and the Russia/Norway delimitation agreement have led to significant increases in industry interest across the Arctic region.
Despite the frozen and inaccessible nature of the bulk of Arctic land and sea, the Arctic is not an unchartered and unregulated region as implied in some requests for a new binding Arctic Ocean Treaty.
On the contrary, the binding rules of the Law of the Sea and an extensive set of governance institutions weave their Arctic web year by year – and the bulk of Arctic resources are clearly and unambiguously under national jurisdictions of the Arctic five: Russia, Norway, USA, Canada, and Denmark/Greenland.
The Cold War heritage of military saber-rattling, the presence of virgin strategic resources, and a number of unsettled territorial boundaries have fueled the notion of a potentially destabilizing race to the Arctic. However, the dominant interest of all major Arctic players is peace, stability, and the rule of law based on modern Law of the Sea principles.
Powers such as China, Japan, and Korea have legitimate interests in access to shipping and high-seas water-column resources, and have been accommodated as observers in the Arctic Council and position themselves on commercial terms in shipping, energy extraction, fisheries, research, and tourism. The main threat of military escalation lies in potential conflict overflow from other regions. This is not considered a realistic scenario at present.
The RT article at the top seems to think that the ultimate goal for the U.S. is to establish international order under U.S. leadership. But it’s hard to square that with the actions of the administration, particularly in foreign policy. The more likely reading from here is that the U.S. abdicates its military efforts there unless it needs to defend Alaska and allows Russia all the room it needs. This would mean U.S. companies would need to work with the remaining countries with interests in Arctic energy exploration. And it also probably means U.S. power will be diminished more.
How futures prices are reacting, the capacity of upstream and midstream companies and Canadian interests all play a role on natural gas pricing
A report last week form the U.S. Energy Information Agency said the rough winter has left stores of natural gas at 11-year lows, at an estimated 826 Bcf for the season ending in March.
EIA now expects a large rebuild over the injection season, with inventories ending October at 3,422 Bcf. This represents a record stock build of nearly 2,600 Bcf. The EIA report said it expects lower electricity demands and record rebuild over the next six months. And it expects total natural gas consumption will average 72.1 Bcf per day (Bcf/d) in 2014, an increase of 0.7 Bcf/d from 2013.
As for production, the report said it expects natural gas production to grow by an average rate of 3.0 percent in 2014 and 1.5 percent in 2015.
Rapid natural gas production growth in the Marcellus formation is contributing to falling natural gas forward prices in the Northeast, which often fall even with or below Henry Hub prices outside of peak winter demand months. Consequently, some drilling activity may move away from the Marcellus back to Gulf Coast plays such as the Haynesville and Barnett, where prices are closer to the Henry Hub spot price.
Liquefied natural gas (LNG) imports have declined over the past several years because higher prices in Europe and Asia are more attractive to sellers than the relatively low prices in the United States. Several companies are planning to build liquefaction capacity to export LNG from the United States. Cheniere Energy’s Sabine Pass facility is planned to be the first to liquefy natural gas produced in the Lower 48 states for export. The facility has a total liquefaction capacity of 3 Bcf/d and is scheduled to come online in stages beginning in late 2015.
Growing domestic production over the past several years has displaced some pipeline imports from Canada, while exports to Mexico have increased. EIA projects net imports of 3.7 Bcf/d in 2014 and 3.0 Bcf/d in 2015, which would be the lowest level since 1987. Over the longer term, the EIA Annual Energy Outlook 2014 projects the United States will be a net exporter of natural gas beginning in 2018.
But what if the rebuild doesn’t materialize? A contrarians skepticism might be warranted, because rigs at work have moved from drilling for gas to exploring for oil. That in turn could lead to tighter supplies come October.
According to Baker Hughes, because gas prices had stayed low for the past several months, most of these rigs had been diverted to drill for oil instead of gas. “Whether a large number of rigs can be shifted to drill for gas in such a short duration is questionable. To sum up, all things are lined up in favor of a hike in natural gas prices towards the end of the year if the pumping season does not live up to expectations,” said Shrideep Murthy writing at Seeking Alpha.
Additionally, Natural gas working inventories fell by 74 Bcf to 822 Bcf during the week ending March 28, 2014, the EIA said, as colder-than-normal temperatures and a late-season winter storms during the month resulted in increased heating demand, prompting larger-than-normal withdrawals. “Stocks are now 878 Bcf less than last year at this time and 992 Bcf less than the five-year (2009-13) average for this time of year. Total stocks, as well as stocks in all three regions, are currently less than their five-year (2009-13) minimums,” the EIA report said.
This has pushed futures prices higher in the year-over average and could presage higher prices in the fall. Natural gas futures prices for July 2014 delivery (for the five-day period ending April 3, 2014) averaged $4.46/MMBtu.
Current options and futures prices imply that market participants place the lower and upper bounds for the 95 percent confidence interval for July 2014 contracts at $3.40/MMBtu and $5.87/MMBtu, respectively. At this time last year, the natural gas futures contract for July 2013 averaged $4.07/MMBtu and the corresponding lower and upper limits of the 95 [percent] confidence interval were $3.16/MMBtu and $5.23/MMBtu.
A separate report from EIA published on April 11, said lower natural gas prices drove down U.S. proved reserves in 2012, despite notable gains in the Marcellus and Eagle Ford shale gas plays. The decline stopped a 14-year trend of consecutive increases in natural gas reserves, according to newly published estimates in EIA’s U.S. Crude Oil and Natural Gas Proved Reserves 2012.
Proved reserves are volumes of natural gas that geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions.
At the state level, Pennsylvania and West Virginia reported the largest net increases (9.8 Tcf and 4.3 Tcf, respectively) in natural gas proved reserves in 2012, driven by the continued development of the Marcellus Shale play. The Marcellus Shale play became the largest shale play (ranked by proved reserves) in the United States in 2012. Proved reserves in shale gas plays accounted for 40% (129.4 Tcf) of U.S. wet natural gas proved reserves in 2012. However, gains in the Marcellus (10.9 Tcf) and Eagle Ford (7.8 Tcf) shale plays were more than offset by price-driven reductions in more mature shale plays (the Barnett and the Haynesville declined a combined 20.7 Tcf) in 2012.
Some upstream companies that could benefit from these findings are Chesapeake Energy (CHK), Southwestern Energy (SWN), and Range Resources (RRC), which are all part of the SPDR S&P Oil & Gas Exploration & Production ETF (XOP). Investors can also gain natural gas exposure through the U.S. Natural Gas Fund (UNG), according to Kshitija Bhandaru, the Market Realist, at YahooFinance.
She said one sector that really benefits from such production increase are the midstream companies (MLPs). These are not only the companies gathering and processing natural gas, but also are involved in transportation, storage, and marketing of hydrocarbons such as natural gas and oil.
Companies that will benefit from this continued increase in supply include midstream service providers in the right area. MarkWest Energy (MWE) and Williams Partners (WPZ) are major providers of gathering and processing in the Marcellus. Regency Partners (RGP) has major gathering and processing operations in the Eagle Ford. Exterran Partners (EXLP), which provides compression services, also stands to gain from increased natural gas production in the U.S. Many of these names are components of the Alerian MLP ETF (AMLP), the largest ETF with a focus on the energy MLP sector.
This U.S. activity is having an effect on Canada as well, according to the Globe & Mail, which said oil sands companies, which have benefited from years of low natural gas prices, are once again facing rising costs as the commodity they need to fuel much of their operations becomes more expensive.
If the price of natural gas climbs by one dollar, operating costs per barrel for such projects jumps by about the same amount, experts say. Companies without extensive natural gas operations of their own feel the most pain. MEG Energy Corp., for example, lacks natural gas operations, while Suncor Energy Inc.’s oil sands operations far outstrip its natural gas business.
On Friday, the May contract for natural gas traded at $4.62 (U.S.) per million British thermal units on the New York Mercantile Exchange, more than a dollar higher than levels reached last autumn and two dollars higher than lows hit in 2012. This comes as the U.S. Energy Information Administration last week said inventories of natural gas were at their lowest level in 11 years.
“It is something to keep an eye on,” said Justin Bouchard, an analyst at Desjardins Group in Calgary.
Increasing prices for natural gas hit hardest at projects that use steam to soften oil-rich bitumen deposits to the point where the bitumen can drain into wells from which it can be pumped to the surface. Natural gas is an unavoidable expense in these projects, because it is needed to heat water to create steam, the article said.
The Southern Co. plant has a chance to bring clean coal to the industry and reduce greenhouse gases through carbon capture and sequestration technology, but it’s not clear if it’s worth the cost and whether the EPA will regulate it away in the end
A coal-fired plant being built in Mississippi is coming in over budget, and many say it is the key to clean coal. it’s also emblematic of the weird way the United States government and the Obama Administration sets energy policy by doling out massive funding for projects that beg to be taken advantage of while undercutting these efforts with excessive rules making by government agencies.
Meet the 582-MW coal-fired Kemper power project, a subsidiary of the Southern Co., which is five months behind schedule and more than $2 billion over budget.
The facility that was originally scheduled to open this year will use treated wastewater in its power generation process. It will also remove 65 percent of its carbon dioxide by piping it to two companies that will inject it into the ground to force oil from old wells, according to the Los Angeles Times. In addition, the coal will be pulverized and turned into gas, which will then be burned to make steam that drives turbines.
The U.S. Energy Department has spent $270 million on the project — part of $3.4 billion in federal stimulus funds allocated to carbon-capture demonstration projects since 2009 — yet it remains unclear, according to some analysts familiar with the project, whether the Kemper plant will work as planned.
The carbon-capture plant and four others on the drawing boards, including one near Bakersfield, are cited by Obama administration officials as evidence that coal can remain part of the president’s “all of the above” energy strategy. But many power companies and environmentalists think the administration’s proposed standards for greenhouse gas emissions would all but eliminate coal power despite huge investments in the new technology.
Dalia Patino Echeverri, an assistant professor of energy systems and public policy at Duke University, said the new rules would “put coal at a huge disadvantage,” noting that the technology to capture and store carbon dioxide “is still an expensive, uncertain proposition.”
The project was budgeted for $2.4 billion but Kemper’s cost increased to more than $5 billion because of changes in design and miscalculations. Southern’s shareholders have already absorbed a loss of more than $1.1 billion on the project. The state Legislature passed a law that allows Southern Company to recoup costs from its customers, according to Power-Engineering.com.
But what progress that may be made with this project may ultimately come for naught because of the EPA, which is why this project and ultimately working with this Administration is so vexing. Kemper is the only major clean-coal power plant funded by the U.S. Department of Energy that has so far broken ground, according to Bloomberg Business Week:
Even with the offer of billions of dollars of government subsidies, the other projects have been scrapped, delayed or are facing funding woes that may doom them — illustrating the troubled history of efforts to cut coal’s environmental impact. Coal generates twice the climate-warming carbon dioxide as natural gas when burned to generate electricity.
Since the 1950s it’s been the mainstay of electricity production. It accounted for 39 percent of total U.S. generation last year, down from almost half in 2007. It’s use bounced back early this year, as frigid weather and pipeline bottlenecks forced a temporary spike in gas prices.
But utilities are going ahead with plans to shut coal-fired plants. In 2011 and 2012, coal units capable of generating 14 gigawatts of electricity were shuttered. Another 63 gigawatts — more than a fifth of the coal fleet — may disappear by 2017 because of rules curbing mercury and other pollutants, according to projections by Bloomberg New Energy Finance.
And more rules, which aren’t part of that estimate, are coming: EPA’s proposed emission limits would effectively ban the construction of new coal plants, according to industry critics. Separate EPA rules for greenhouse gases from existing plants are coming in June.
The possibility of carbon capture, so-called clean coal, is one reason the project has generated interest. Carbon capture storage has both been hailed as potential savior and ridiculed as a distraction, said Robert Kunzig of National Geographic.
The battle to forestall climate change, President Barack Obama said in a speech last summer, requires us “to put an end to the limitless dumping of carbon pollution from our power plants.” But because coal is one of the cheapest ways to fuel electricity, with abundant stores all around the world, global carbon pollution is growing. [...] Over the next two decades, when science says aggressive steps must be taken to curb greenhouse gas emissions, several hundred million people in the world will be getting electricity for the first time—and a lot of it will be fueled by coal. Many believe the world won’t be able to stop drastic climate change without a technology for curbing emissions from the cheapest, most-carbon intensive fuel.
The Kemper plant would be on of the larger U.S. coal plants, is designed to provide power for 165,000 Mississippi homes and is designed to capture 65 percent of its CO2, which would make it as clean as the cleanest natural-gas-fired one, according to Kunzig.
When the plant is operating, the coal will be ground up and dropped into a high pressure, low-oxygen chamber called a gasifier. The low-oxygen environment means the coal doesn’t burn, but is transformed into composite gases. Leftover coal ash is dumped out the bottom.
Ammonia, sulfuric acid and carbon dioxide then can be pulled off the gas stream. The carbon dioxide is absorbed by a solvent, which releases the compound when it flows to a lower-pressure chamber. It is then compressed into a liquid to be pumped into nearby oil fields to help squeeze out any remaining crude.
What’s left is mostly hydrogen and nitrogen, which is sent to a turbine to be burned and make electricity.
Because pairing carbon capture and new coal gasification technology and building on a large scale remains untested, there is still concern whether the plant will operate reliably, without frequent forced outages, and also manage to cut emissions at planned levels, said Edward S. Rubin, a professor of engineering and public policy at Carnegie Mellon University in Pittsburgh.
Kemper is the most expensive power plant ever built for the watts of electricity it will generate. The plant will end up costing more than $6,800 per kilowatt. By comparison, a modern natural-gas plant costs about $1,000 a kilowatt, according to the U.S. Energy Information Administration. A nuclear plant costs about $5,500. According to Drajem, Southern Co. has told state regulators that Kemper will open sometime in the last three months of the year. Its price tag has united in opposition an unlikely alliance of free-market advocates, Gulf Coast businessmen, environmentalists and at least one oil prospector.
But even if the Kemper project is a success the fate of the other four planned U.S. carbon-capture plants remains unclear. According to Howard J. Herzog, a senior research engineer with the MIT Energy Initiative, even the most efficient coal-powered plants may not meet the EPA’s ever-changing guidelines.
In a 2010 MIT paper, which is peer reviewed by Herzog among others, Gary Shu said carbon capture and sequestration technology could significantly reduce power sector greenhouse gas emissions from coal-fired power plants, but the technology requires higher construction and operating costs than is currently competitive in the private market. “However, for investment in CCS power plants to be economically competitive requires that the higher capital costs be recovered over the plant lifetime, which only occurs at much higher carbon prices.”
Additionally the Energy Department is financing between 10 percent and 50 percent of any potential new plant’s costs, but if construction does not begin by mid-2015, when the funding runs out, the projects would lose that money. “There’s a realistic chance that one or all may never get built,” Herzog said in the L.A. Times.
While only open two months Ivanpah solar plant acts more like Ivan the Terrible
Scrutiny continues to dog the Bright Source Energy solar project Ivanpah, as an alarming new report said the massive California-based thermal solar plant near the Nevada border is incinerating birds at a tragic rate.
A new report from the U.S. Fish and Wildlife Service has labeled BrightSource Energy’s Ivanpah project a “mega-trap” for insects and birds that may get singed or in some cases, burned alive flying through the intense solar radiation reflecting off the thousands of mirrors surrounding three solar towers at the plant in eastern San Bernardino County.
The Center for Biological Diversity posted the report to the California Energy Commission website on Monday as part of its testimony opposing Bright Source’s 500-megawatt Palen project, located east of the Coachella Valley, which would use similar technology — soaring solar towers surrounded by thousands of reflecting mirrors.
Particularly chilling is a section on the apparent incineration of birds and insects at the site, reported by staff from the Fish and Wildlife Service’s Office of Law Enforcement (OLE), who visited Ivanpah Oct. 21-24, 2013.
“Ivanpah employees and OLE staff noticed that close to the periphery of the tower and within the reflected solar field area, streams of smoke arise when an object crosses the solar flux fields aimed at the tower. Ivanpah employees use the term ‘streamers’ to characterize this occurrence.
“When OLE staff visited the Ivanpah Solar plant, we observed many streamer events. It is claimed that these events represent the combustion of loose debris, or insects. Although some of the events are likely that, there were instances in which the amount of smoke produced by the ignition could only be explained by a larger flammable biomass such as a bird. Indeed, OLE staff observed birds entering the solar flux and igniting, consequently becoming a streamer.”
Ivanpah is a joint effort between NRG, Google, and Bright Source Energy. Bechtel is the engineering, procurement, and construction contractor on the project. The project received a $1.6 billion loan guarantee from the US Department of Energy’s Loan Programs Office. The facility achieved commercial operation on December 31, 2013. NRG will be the plant’s operator.
“At full capacity, the facility’s trio of 450-foot high towers produces a gross total of 392 megawatts (MW) of solar power, enough electricity to provide 140,000 California homes with clean energy and avoid 400,000 metric tons of carbon dioxide per year, equal to removing 72,000 vehicles off the road,” according to the Bright Source website.
The project was heavily contested from outset. But with strong support of U.S. Senate Majority Leader Harry Reid (D-NV) and then Secretary of the Interior Ken Salazar the Federal Government fast-tracked large-scale soalr developments on Federal land, particularly in the West. The Ivanpah project is about 45 miles from Las Vegas. By July 2009 the Bureau of Land Management had received 166 applications for solar projects covering approximately 1.8 million acres, according to a BLM press release. The BLM lifted suspension of activities orders on June 10, 2011, which followed a U.S. Fish and Wildlife Service-issued Biological Opinion that found the project is not likely to jeopardize the endangered desert tortoise. Not mentioned in the opinion was the impact the solar plant would have on birds.
The Idaho-based conservation group Western Watersheds Project sued the federal government over its approval of the solar energy plant in 2011, “arguing that the facility was approved without an adequate environmental assessment,” according to a story today at FoxNews.com.
A California district court tossed the group’s lawsuit in November 2012. Western Watersheds recently restated its pleas to the U.S. Ninth Circuit Court of Appeals, the International Business Times reported.
“We know solar projects are an issue as far as birds are concerned,” Michael Connor, the group’s California director, told the publication. “But they say, well, it’s not significant, so we’ll monitor it. So what happens now? You find lots of dead birds. Then what happens? Nothing.” [...]
Western Watershed is continuing to push its lawsuit against federal agencies that reviewed the Ivanpah project. Connor said alternatives to the site were not considered and serious environmental impacts, including fragmenting the tortoise population, were ignored.
The Wall Street Journal reported on the opening of the plant in February, noting the entire cost was $2.2billion after the $1.6billion government loan, and “includes three towers as tall as 40-story buildings. Nearly 350,000 mirrors, each the size of a garage door, reflect sunlight onto boilers atop the towers, creating steam that drives power generators.
Ivanpah is among the biggest in a spate of power-plant-sized solar projects that have begun operating in the past two years, spurred in part by a hefty investment tax credit that expires at the end of 2016. Most of them are in California, where state law requires utilities to use renewable sources for a third of the electricity they sell by 2020.
Utilities owned by PG&E Corp. and Edison International have agreed to buy electricity generated from the Ivanpah plant under 25-year contracts, according to NRG.
Utility-scale solar plants have come under fire for their costs–Ivanpah costs about four times as much as a conventional natural gas-fired plant but will produce far less electricity—and also for the amount of land they require.
That makes for expensive power.
The intense heat surrounding the towers can reach 1,000 degrees Fahrenheit, the Wall Street Post said. The dead birds included a peregrine falcon, a grebe, two hawks, four nighthawks and a variety of warblers and sparrows. State and federal regulators are overseeing a two-year study of the facility’s effects on birds.
On top of that other concerns include the height of the height of the towers, which would be 750 feet tall, roughly the same as a 69-story building. Indian tribes have objected to the project, saying the tall towers and the light emitted from the facility’s mirrors would be visually obtrusive, according the Journal story. And there may be water issues as well as the Ivanpah plant draws water for the boilers atop its towers, and for washing its many thousands of mirrors, from underground wells at the site.
Via Hot Air, where Erika Johnsen notes the cost of birds dying might be worth if it were in the service of a competitive and cost-effective alternative form of energy. “[B]ut the problem is that this Ivanpah solar farm is not serving as a competitive and cost-effective alternative form of energy. It was only built because it received a $1.6 billion loan guarantee from the Department of Energy, on top of the tax credits and renewable portfolio standards that are otherwise propping it up, and the concentrating solar power (CSP) technology it employs comes nowhere close to providing energy as affordable as the value we’re currently getting from natural-gas plants. Green energy’s rent-seeking power players are trying to decide if it’s even worth replicating the CSP tech with a new project, or if Ivanpah should remain the first and only large-scale project of its kind — and bird incineration is just the icing on the cake.”
Combining technology with energy to develop a highly disruptive technology in the alternative energy sector
One of the more obscure technology companies surged up the NASDAQ today on the announcement of a new energy patent. MagneGas (MNGE) announced today that it filed a new patent protecting new methods of applying MagneGas to existing hydrocarbons and other materials, according to this article on YahooFinance, and many others.
The stock was up 4 cents to trade at $1.59, a gain of 2.58 percent, according to NASDAQ.com.
The patent describes new methods of binding MagneGas, or hydrogen extracted from MagneGas, to hydrocarbon fuels and other material through a proprietary process.
The new patent is based on a provisional patent filed in April 2013 titled “Method and Apparatus for the Industrial Production of New Hydrogen-Rich Fuels.”
The company believes that binding MagneGas to hydrocarbon fuels will improve fuel combustion efficiency resulting in reduced emissions.
The company is based in Tarpon Springs, Fla. near Tampa and may be on the cusp of revolutionizing an industry. It has already developed its trademarked MagneGas, a natural gas alternative and metal working fuel that can be made from certain industrial, municipal, agricultural and military liquid wastes. This, the company says has become a popular alternative to acetylene. It is unique because it uses recycles liquid waste through another patented process called Plasma Arc Flow to turn it into a natural gas alternative, which the company says has lower greenhouse gas emissions.
This new announcement pushes the company forward in the waste-to-energy market which is a $20 billion sector, according to this Seeking Alpha article.
Its CEO Ermanno Santilli says the company’s three main components are:
- Industrial production and commercialization of an industrial fuel called MagneGas; a cheaper, safer, and cleaner alternative to acetylene, which I believe is arguably the most dangerous industrial gas in the world.
- Sterilization; a technology that targets liquid wastes such as sewage and agricultural wastes and converts those into sterilized fertilizer and irrigation waters. This results in the production of MagneGas and the same quantity of sterilized liquid. In this mode the liquid is retained but completely sterilized.
- Co-combustion: A revolutionary technology of adding MagneGas in the process of combusting traditional energy sources like coal. This so called ‘co-combustion’ produces more energy, lowers costs and reduces CO2 emissions as well.
On March 31, it signed an expanded joint venture agreement with technology partner Future Energy Pty Ltd of Australia, according to its website. It also has a partnership with Nuova MagneGas Italia in Europe.
While MagneGas has a long way to go it seems poised to make a good market run, and is an interesting alternative energy company, and one that could prove an ecological boon, particularly for recycling wastewater. It’s worth keeping an eye, though as an investment it can’t be seen as anything other than risky, but with the potential for very high reward.
Baby steps, forward thinking and large investments are pushing hydrogen-powered vehicles forward
Just as a story pops up in the Denver Post about one of the hydrogen cars in the U.S., National Geographic posits on the future of hydrogen-based fuel.
Using hydrogen fuel cells, which produce nothing but heat and water as a byproduct, would help provide the energy the world needs, while slashing greenhouse gas emissions and curbing our dependence on oil, according to National Geographic’s Pete Danko.
If that notion seems too good to be true, that’s because it has been. Despite a flurry of investment in fuel cells over the past two decades, the vision articulated by former President George W. Bush of an America leading the world in producing “pollution-free” vehicles that run on hydrogen has seemingly evaporated into thin air. But the fuel cell is far from dead—indeed, it is gaining a commercial foothold in some niches, evidenced most recently by news that megaretailer Walmart is expanding its use of fuel cells to power forklifts at its stores.
Such implementations of fuel cells, which use hydrogen and oxygen to produce energy via an electrochemical reaction, are small but growing exponentially. According to a U.S. Department of Energy (DOE) reportreleased last October, annual global shipments of fuel cell systems increased sixfold between 2008 and 2012. And at least one major analyst forecasts that the market for some fuel cells will grow from $1.4 billion to $40 billion by 2022.
Still, industry players speak with an awareness of the gap between the lofty hopes that have been pinned to fuel cells and the market reality.
Danko notes a caveat that will probably not make using hydrogen all that more appealing to environmentalists despite the benefits. That’s because the abundance of hydrogen still must be harvested, and nearly all the produced in the United States comes from natural gas in a process called steam reforming.
Other potential feedstocks include coal or biomass. It is also possible to use emissions-free nuclear or renewable power to harvest hydrogen by electrolysis—running an electric current through water to break the bond between hydrogen and oxygen.
Even when fossil fuel is used as a feedstock to produce hydrogen, fuel cells can offer significant emissions benefits.
He notes three areas where hydrogen could see more immediate success. Forklifts: “In February, Plug Power announced a deal to supply 1,738 hydrogen-powered forklifts and associated infrastructure to Walmart;” Electricity for home and business, for example: “The world’s largest fuel cell plant, a 59-megawatt facility in South Korea that opened earlier this year, provides both power and heat to homes in Hwasung;” Backup power for telecom: “Fuel cells are also proving their worth as backup power, a key advantage in a world of more frequent extreme weather.”
Ultimately, it and he come back to cars.
Long after President Bush began a push to bring fuel cell cars to market, several automakers are advancing beyond the demonstration cars they began deploying a decade ago. Hyundai is now marketing a fuel cell version of its Tucson sedan, while Toyota and Honda will follow suit with their own fuel cell models next year. Meanwhile, NREL is evaluating a number of fuel cell bus demonstrations in the United States and Canada. In its most recent analysis, a 20-bus fleet operating in Whistler, Canada, over two years saved 4,400 tons in carbon dioxide emissions; on the downside, maintenance costs for the buses were 58 percent higher than for their diesel counterparts.
The Denver hydrogen-powered car is one of 100 like it being test driven throughout the United Sates. In Europe, a joint initiative between BMW, Daimler, Honda, Toyota, and Hyundai is being pushed to add 110 vehicles to the road. Hydrogen Fuel News said:
The European Union has become a strong advocate of clean transportation and has been investing in the development of a comprehensive fuel infrastructure that can support fuel cell vehicles. Several European countries have taken steps to build new fuel stations for these vehicles, but an expansive infrastructure is still lacking. Automakers have been aggressively pushing for infrastructure development, but building new fuel stations and acquiring the technology used to produce and deploy hydrogen fuel has been a costly endeavor.
The initiative is part of a $40 million project called HyFive that aims to promote the development of a working hydrogen fuel infrastructure in major cities throughout the region, the Hydrogen Fuel News story said. (Autobloggreen website said the investment price is $51 million, citing a press release.)
In a separate story at Autobloggreen, Toyota NA’s chairman sees rising excitement for its hydrogen-powered entry into the market. Coupled eventually with a reduced price tag for consumers, CEO Jim Lentz said, “After we’ve seen the product, understand its range, its driving dynamics, its refueling, we’re a lot more bullish than Japan – probably about fivefold more bullish. It’s just a question of how many can be produced now.”
Autobloggreen Sebastian Blanco said:
Well, we’ve driven this car, and we still feel that Toyota is placing a big bet on the technology. One important issue is cost, but Lentz would not say exactly how much the car costs to make or what it will be priced at. He did say, though, that the production cost has dropped by 95 percent from the $1 million price tag the car wore ten years ago. That hints at a production cost of around $50,000. Lentz also said he thinks it will take at least a decade for hydrogen vehicles to hit sales of 500,000 per year in the US.
The one common thread is that everything here needs more time, more infrastructure and more investment.
It’s worth giving Danko’s National Geographic article the last look here, as he balances the good and the bad.
“Even the most optimistic of fuel cell vehicle advocates will surely concede that, as U.S. Energy Secretary Ernest Moniz said in January, ‘there is still the need for substantial cost reduction’ in order for such cars to truly be viable on the market. Yet there’s also a firm belief that the cars will eventually make it. NREL’s Wipke said, ‘Even in the depths of the recession, the car companies, by and large, didn’t give up. That showed me that this wasn’t greenwashing. They really see this as the future.’”
America is in the middle of an oil and gas boom, driven largely by robust emergence fracking and horizontal drilling, yet insolvency is but a bad deal away
With the opening up of previously unreachable deposits have been opened up, new fields have been discovered, and old played out plays have been reinvigorated. Indeed, it seems as though everyone and anyone working in the industry is making it rich. But are they?
Despite the boom not everyone is, it turns out. Meet Lucas Energy, Inc. (LEI) trading today at 85 cents per share. Jordan Blum of the Houston Business Journal reports the New York Stock Exchange has accepted Lucas Energy’s compliance offer and “extended the financially struggling company’s deadline to meet the exchange’s listing standards.”
The problem for some companies like Houston-based Lucas is that drilling is a hit or miss proposition. Not all wells come in. Perhaps most importantly, they are expensive. They also vary depending on the type. According to Rigzone, a drill ship going 4,000-plus feet costs $500,000 a day. A jack up rig going 300-plus feet in $166,000 per day. Add in the cost of getting the ball rolling — transporting, set up, paying crews, fuel, area geological surveying, and about three or four weeks in the field — it can easily go well north of $10 million, and that’s hoping there are no mechanical breakdowns, which, of course, is wishful thinking.
Lucas also appears to have made a bad decision to go all in on a single-well operation in the Austin Chalk lateral.
We’ve spent a lot of time around Texas oil men and their investment bankers and used to hear them talk about $1 million to $5 million rig operations in the 1990s. But with deeper drilling and higher demand curves that’s just talk of the good old days. Lucas said in February that its Eagle Ford Shale wells running around $7-8 million.
Moreover, not all companies are good oil well operators, which the company finally seems willing to accept. The new deal finds Lucas teaming up with “an unnamed private operator to farm out approximately 400 acres on its Eagle Ford assets in Karnes County. Lucas will receive $1 million in exchange for a 75 percent working interest in an initial horizontal well. In the remaining acreage, Lucas retains a 75 percent interest,” according to the Houston Business Journal.
I have written many articles on Lucas, both positive and negative. Lucas is one of those companies where you must be willing to change your opinion when the facts change. This type of deal is what Lucas definitely needed to right the ship. My last article discussed the operational failures of Lucas to boost production.
The upfront money along with the additional money received for selling the 8% interest in the Madison County drilling unit should sustain LEI until the Eagle Ford well can be drilled in June. Last quarter’s cash burn was $345,000 which included elevated workover activity in an attempt to boost production. With the $250,000 a month from the operator, I think LEI can maintain a neutral cash position until the Eagle Ford well is drilled.
The question all along had been how was LEI going to be able to drill any of the Eagle Ford acreage. We received part of that answer [March 27]. Finally, a third party is putting up money to develop some of the Lucas Eagle Ford acreage. [...]
Another plus to this transaction is that Lucas is not operating. They don’t appear to be capable of effectively operating oil wells. A non-operated position is probably for the best. It is too bad the company did not initiate a transaction of this type sooner; however, better late than never.
Lucas sold $3.45 million worth of stock in September to right the ship. Today Lucas has a market capitalization of $25.48 million, has interests in 4,510 net acres in South Texas’ Eagle Ford, primarily in Gonzales, Wilson and Karnes counties.
So, there is a chance here for Lucas. By restructuring its drilling operation and working out a deal with the NYSE it has the potential to drill its way out of the hole its put itself in. Yet, Lucas Energy serves as a cautionary reminder how important is weighing risk, knowing your limitations, and that even in favorable conditions not every energy play works. There are oil and gas companies on the edge of sustainability.