An oil rig is seen in the Gulf of Mexico near the Chandeleur Islands, off the Southeastern tip of Louisiana in this April 2010 file photo. Oil prices hitting $200 is unlikely to happen, Cobb writes, but if civil war spreads across the Middle East, prices will certainly rise. (Gerald Herbert/AP/File)
Unconventional wisdom: 5 possible energy surprises for 2013
Many people trot out their predictions for the coming year right about now. I'm generally allergic to predictions and think rather in terms of probabilities. Naturally, the world we live in is far too complicated to yield anything approaching certainty concerning such matters as the future price and supply of energy, future economic conditions, and future political developments. In the end, the future is simply unknowable. So, I've tried to think of some developments which conventional wisdom has judged rather unlikely and which would therefore significantly alter our lives and perceptions should they occur--precisely because we are not prepared for them.
I don't think any of the following is likely to happen in 2013. But, any one of them would certainly surprise most people and most experts and upset the plans and expectations of many governments, businesses, investors and consumers. Here are my five possible energy surprises for 2013: ( Continue… )
Bales of corn cellulose and a tractor mark the site where DuPont's planned Cellulosic Ethanol Facility will be constructed adjacent to Lincolnway Energy's ethanol plant west of Nevada, Iowa, in this November file photo. Cellulosic biofuel isn't ready to produce huge amounts of US fuel, which will require key federal adjustments in 2013. (Christopher Gannon/The Des Moines Register/AP/File)
Food vs. fuel debate: It's about much more than corn
Only a few years ago everyone was bullish on biofuels. It was that rarest of things: something that Al Gore and George Bush agreed on.
Times have changed – and changed quickly.
This summer’s drought and the withering of a corn crop, which now dedicates its largest share to fuel rather than food, has thrown the limitations of corn ethanol into stark relief. Yet for all the negative impacts of corn ethanol – it was never a very clean or low carbon alternative to oil – it is now a deeply rooted part of our fuel supply. So, rather than continuing to fight yesterday’s battles over corn ethanol, we should focus on another, more significant, decision over the future of US biofuels production.
And this time, we should nip it in the bud before it becomes as entrenched as corn ethanol. ( Continue… )
Figure 1. World fossil fuel supply based on world production data from BP’s 2012 Statistical Review of World Energy. Coal supply jumped after 2001, when China joined the World Trade Organization. (Gail Tverberg)
Why is world using more coal? The China trade.
A primary reason why coal consumption is rising is because of increased international trade, starting when the World Trade Organization was formed in 1995, and greatly ramping up when China was added in December 2001. Figure 1 shows world fossil fuel extraction for the three fossil fuels. A person can see a sharp “bend” in the coal line, immediately after China was added to the World Trade Organization (see Figure 1, above). China’s data also shows a sharp increase in coal use at that time.
China and many other Asian countries had not previously industrialized. The advent of international trade gave them opportunities to make and sell goods below the cost of other countries. In order to do this, they needed fuel, however. The fuel the West had used when it industrialized was coal. Coal had many advantages for a newly industrialized countries: it often can be extracted without advanced technology; it is relatively cheap to extract; and it is often available locally. It can be used to make many of the basic items used by industrialized countries, including steel, concrete, and electricity.
The industrialization of Asian countries was pushed along by many forces. Companies in the West were eager to have a way to make goods cheaper. Buyers were happy with lower prices. Even the Kyoto Protocol tended to push international trade along. This document made it clear that countries signing the document wouldn’t be in the market for coal. From the point of the developing countries, this would help hold coal prices down (at least in the export market). It also likely meant a better long-term supply of coal for developing countries. The Kyoto Protocol offered no penalties for exporting products made with coal, so it put countries that used coal to make products for export in a better competitive position. This was especially the case if Kyoto Protocol countries used carbon taxes to make their own products higher priced. ( Continue… )
In this July file photo, an Indian barber holding a candle gives a haircut for a customer at his shop in Kolkata, India. Was the world's biggest blackout, which left more than 600 million people in India without government-supplied electricity for several hours, the biggest energy story of 2012? (Bikas Das/AP/File)
Top energy stories of 2012. What's your pick?
For the past several years, at year end I rank what I felt were the the major energy stories of the year. 2012 lacked a blockbuster energy story like the Deepwater Horizon oil spill in 2010 or the Fukushima Daiichi nuclear disaster of 2011, so there was no clear #1 in my mind. But, I thought I would change things up a bit and just let readers vote. So below I have summarized 15 of the major energy stories of the year in no particular order. Please vote for up to 5 stories, and I will report the Top 10 vote getters on December 31.Note: There is a poll embedded within this post, please visit the site to participate in this post's poll.
The revolution in US oil and gas production continues
The fracking revolution in the US continued, with oil production at its highest level since 1998 and dry natural gas production at an all-time high. President Obama became the first president since LBJ to serve in office during four consecutive years of increasing US oil production. The International Energy Agency (IEA) projected that by 2020 the US will become the world’s largest oil producer. They also projected that the US would become a net oil exporter again by 2030, which would be the first time that has happened since the 1940s.
India blackouts leaves 680 million people in the dark
India’s overburdened power grid failed, resulting in the largest power outage in history. Three regional grids collapsed, cutting power to an astounding 680 million people. The country’s rail system was paralyzed, and there were major traffic jams in cities affected by the blackouts. ( Continue… )
Malta-flagged Iranian crude oil supertanker 'Delvar' is seen anchored off the coast of Singapore in this March file photo. Western sanctions have depressed Iranian oil sales and prices. (Tim Chong/Reuters/File)
Energy independence for fossil fuels? There's no such thing.
Anyone who tells you that energy independence can be achieved based on globally traded commodities such as oil, coal and natural gas is either trying to mislead you or doesn't understand the structure of energy markets. As of 2011 fossil fuels produced 83 percent of the world's energy according to the U.S. Energy Information Administration (EIA). Because fossil fuels can be transported anywhere in the world, producers seek out the highest price unless they are constrained by law or infrastructure from doing so.
This means that energy independence for a country is something of an optical illusion when it is based merely on the domestic production of fossil fuels. Here's why:
- Events far away such as wars; embargoes; strikes; and mine, oilfield and refinery disasters affect the level of domestic prices for fossil fuels in all countries where these fuels are freely exportable regardless of whether that country produces enough for its own consumption. In such countries consumers of these fuels including domestic industry and transportation, commercial establishments, households and government agencies are all subjected to fluctuating world prices that can be unrelated to anything happening in the host country even if the country extracts enough fossil fuel from its own soil to meet domestic demand. ( Continue… )
This September file photograph shows Solyndra headquarters in Fremont, Calif. The failure of the solar company has hurt the reputation of cleantech investing. (Paul Sakuma/AP/File)
Cleantech venture investing: dying – or just resting?
Two weeks ago, I sat on a panel of eminent (that is, other than myself) cleantech venture capitalists at the New England Venture Summit to discuss our sector as we approach the end of 2012.
The basic theme being explored was whether we should be optimistic or pessimistic about the current state of affairs for cleantech investing.
As I noted in my opening quip: “I have friends on both sides of this issue, and on this issue, I’m with my friends.”
Seriously, it’s easy to understand being pessimistic. While the data on cleantech venture capital investing activity has been mixed and erratic over the past few years, the qualitative indicators have led to a plethora of articles during 2012 suggesting a cleantech “bust”. True, the litany of woes is substantial. ( Continue… )
L'Oreal Professionnel lead stylist Joseph DiMaggio preps hair backstage at the Spring 2013 Timo Weiland runway show at Mercedes-Benz Fashion Week in September in New York. L'Oreal scored in the top five in Climate Counts's scorecard of major corporations because of its efforts to save energy and reduce its impact on the planet. (Charles Sykes/Invision for L'Oreal Professionnel/AP Images/File)
Why are US firms going 'green': CEOs or customers?
Minimizing waste. Reducing emissions. Conserving water. Increasingly, these are part of corporate culture as companies move to adopt sustainable business practices.
Five years ago, a quarter of corporations surveyed by Climate Counts had a publicly available climate and energy strategy. Now, two-thirds do, says the nonprofit, which ranks major companies. And in that time, their average score has improved from 30.6 to 52.1 out of 100.
"It's really become a science, almost," says Mike Bellamente, director of Climate Counts. "As recently as 10 years ago it was more compliance-based and philanthropic, and now it's, 'How do we develop our products and services in a way that aligns with sustainability?' "
The findings reflect the emergence of the "triple bottom line" – an expanded interpretation of business success that adds environmental and social factors to what is traditionally measured only in dollars and cents. ( Continue… )
This April 2011 file photo shows some of the 30,000 solar panels that make up the Public Service Company of New Mexico's new 2-megawatt photovoltaic array in Albuquerque, N.M. A dramatic drop in solar panel prices will likely continue to buoy the solar industry in the near future. (Susan Montoya Bryan/AP/File)
Energy in 2013: What's next for oil, gas, renewables?
Last year saw a shift from a reliance on oil and coal to an exploration of untapped natural gas resources and renewable energy. Few will bet against this topsy-turvy, transitional energy state persisting through 2013 and beyond. For the coming year, fossil fuels will continue to dominate the energy market, but renewables will continue their slow and steady gains, experts say.
"Alternative" no more
Clean energy will continue its creep into the mainstream. Wind-powered generation grew by 27 percent in 2011 and is projected to grow 15 percent in 2013, according to the US Energy Information Administration. Solar energy will continue robust growth, according to the EIA, with a projected 28 percent jump in consumption in 2013.
At this rate, alternative energy may even lose its distinguishing adjective.
"The word 'alternative', with its connotations of hand-wringing greenery and a need for taxpayer subsidy, has to go," writes Geoffrey Carr in The Economist. "And in 2013 it will. 'Renewable' power will start to be seen as normal." ( Continue… )
A storage tank looms over a freeway at the Enbridge Edmonton terminal in Edmonton in this August 2012 file photo. Enbridge has injected an additional $150 million into the Northern Gateway pipeline project, according to Consumer Energy Report. (Dan Riedlhuber/Reuters/File)
Enbridge ups investment in Northern Gateway pipeline
Despite continued opposition to the Northern Gateway pipeline, energy firm Enbridge has committed an additional $150 million to that project in a show of commitment to its goal to carry oil from Alberta’s oil sands into northwestern British Columbia, allowing it to be easily shipped to Asia.
Enbridge began work on the project with a $300 million investment, but ensuing controversy due to the perceived environmental risks associated with the long distance pipeline have slowed progress, leaving many wondering if Enbridge would abandon the project altogether. (Read More: Enbridge Set to Invest $6.28 Billion in Oil Pipeline)
On the contrary, this latest show of confidence indicates that the company plans to battle its way to the pipeline’s completion.
“We definitely believe in this project, and we are prepared to go forward and invest that kind of capital to move this project toward sanction,” Enbridge’s Northern Gateway senior project director, Barry Horon, told the Globe and Mail. ( Continue… )
A view shows the headquarters of Solyndra LLC in Fremont, Calif., in this 2011 file photo. The company had some savvy backers, including one venture capital firm that invested more than $63.5 million, before Solyndra went bankrupt. (Robert Galbraith/Reuters/File)
Eight reasons cleantech investors go wrong
I drafted this memo in early 2003 for a venture capitalist friend of mine, well before the bubble in cleantech. In light of the back and forth on the recent SolarCity IPO, I thought it was worth revisiting. Some of the points were pretty prescient, calling out many of the challenges cleantech investors and exits have faced, nearly a decade before they faced them.
Risk Economics in Energy Technology Investing
We believe there is substantial economics to be made from venture capital investment in energy technology, especially focused on clean energy and high efficiency or environmentally friendly applications.
However, investors unfamiliar with the sector tend to under-price risk and overestimate stage in technology development and commercialization in energy technology. ( Continue… )
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