For years, decades, even a century, retail residential electricity consumers like you and me have used kilowatt-hours as a commodity. We treat them as uniform and fully interchangeable. One kilowatt-hour is as good as the next. And within a respective geography and with some exceptions, we pay a single price per kWh without regard for where that kWh is generated (down the street or hundreds of transmission miles away), how it is generated (from coal, natural gas, nuclear, wind, or solar), the time of day or night at which we use it (and the relative supply and demand at that time), how much of it we use, and myriad other factors.
Those inside the electricity industry—regulators, utilities, grid operators, wholesale generators—of course know that every kWh is not created equal, though most customers consume them as if they are. But the days in which the kWh can be treated universally as a commodity on the retail-facing side of the industry are coming to a close. I’ve seen it happen in other industries.
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Lessons from the world of supermarkets
Outside of my energy-related work at RMI, I’m a cookbook author and food writer/blogger. It’s there—in the world of food and supermarkets—that I see the writing on the wall for the electricity sector. ( Continue… )
Risks, Rewards, and Soft Power
In oil markets, the year 2014 already looks to repeat 2013 with some important differences. Unpredictability in the commodities’ extraction and delivery, political risk, and policy risk may play a bigger role in 2014. The potential lifting of the crude oil export ban, which the industry and some lawmakers desire, may also stir up the market.
On the policy front, safety and methods of transporting oil and water disposal issues arose in 2013, and will likely again in 2014. The second rail disaster from transporting oil from North Dakota’s Bakken Shale, the Lac-Mégantic, Quebec incident with loss of life and the December 30th Casselton derailment, renewed the debate between pipelines versus rail transportation. The director of the North Dakota Department of Mineral Resources “predicted that as much as 90 percent of crude produced in the Bakken this year will move by rail” a recent article noted. In Parker County, Texas, the Texas Railroad Commission listened to residents’ complaints about earthquakes, which they attribute to disposal wells. The US Geological Survey sees a link between the earthquakes and wastewater disposal; a similar renewal in earthquake activity is reported in Oklahoma as well.
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Recent violence in Iraq, with Al Qaeda pushing into the cities of Ramadi and Fallujah of Anbar province, create concern about Iraq’s oil production potential in 2014. Iraq is the second largest OPEC producer behind Saudi Arabia. Bloomberg writes: “The violence hasn’t affected Iraq’s major oil fields, the country’s main source of revenue. Iraqi output increased by 100,000 barrels a day to 3.2 million barrels last month, the most since August. The U.S. has pledged support of various kinds to Iraq to help reverse the tide of Al-Qaeda advances and violence. ( Continue… )
Last year saw hundreds of complaints mounted against well-water contamination from oil or gas drilling in US, but the jury is still out as to whether hydraulic fracturing is to blame, news agencies report.
Complaints in Pennsylvania, Ohio, West Virginia and Texas—key venues of the US oil and gas boom—continue to suggest that drinking water is being contaminated by oil and gas operations, which has been confirmed in a number of cases, but not across the board.
According to complaint data examined by the Associated Press, there were 2,000 complaints registered last year, with 62 of those alleging possibly well-water contamination from oil and gas activity. (Related article: 10 Things to Consider about the Marcellus Shale) ( Continue… )
World powers announced Sunday a timeline for implementing an Iran nuclear deal that would ease economic sanctions on the Islamic Republic in exchange for its moves to limit uranium enrichment. The Iran nuclear deal gives the energy-rich country sanctions relief valued as much as $7 billion over the course of six months.
Oil prices slipped Monday with investors optimistic about new access to Iran's substantial oil and gas wealth. The Iran nuclear deal is progress toward bringing Iran oil online, but the relief set to take effect Jan. 20 is limited. The next six months will be less about opening up Iran's oil markets than it is about stopping efforts to close them.
"This is the first step in many ... a fuller return of Iranian oil is months, if not years, away," Andrew Lipow, president of Lipow Oil Associates in Houston, says in a telephone interview. "It’s not like the taps are going to be open, by any stretch of the imagination." ( Continue… )
Last week when I laid out seven misconceptions about energy shared by the public and policymakers, the pushback I received had little to do with the actual data I used to demonstrate my point. This is probably because the data are from official public sources and available to anyone with an Internet connection to inspect and verify. Most of the pushback bore the sentiment, "Well, you are right about the data. But, just you wait. There are big things that are going to happen in the future with (fill in your favorite fossil fuel) because of (fill in your favorite technology and/or name of supposedly large fossil fuel deposit)."
This is what I refer to as the "wonders-yet-to-come argument." It's an argument that ought to be familiar (and tiresome) to most everyone. It's been used frequently since the oil price hit a long-term low of $10.72 a barrel in December 1998. Even as prices rose ten-fold and supplies advanced only at a snail's pace from 2005 onward, we were treated to frequent pronouncements about how the wonders of technology would deliver cheap, abundant oil soon. Though technology has failed to provide cheap oil, the wonders-yet-to-come argument is still being used to great effect on unsuspecting minds.
We've actually had a good test of this argument since 1998 in the oil markets. Around that time it was deepwater drilling that was going to keep the world awash in cheap oil for decades to come. Check out how many times both the International Energy Outlook 2000 produced by the U.S. Energy Information Administration (EIA) and the World Energy Outlook 2000 produced by the International Energy Agency (IEA) mentioned the key role deepwater oil development was expected to play in raising world production and keeping prices low. ( Continue… )
While environmental regulations and cheap natural gas have worked together to kill off coal in the United States, coal is not dead yet. The rapidly unfolding shale gas revolution brought prices down so significantly in recent years that natural gas began to capture market share from coal in a meaningful way. In particular, coal’s share dropped from 42% in 2011 to 37% in 2012. There were even moments in time in 2012 when both fuels were making up equal percentages of the electric power sector.
Environmental regulations also are steering utilities away from coal. However, although some of the most biting regulations – limits on mercury pollution and greenhouse gases – will force the closure of dozens of coal-fired power plants over the next few years, they have yet to take effect.
That means that the recent rise in natural gas prices has made coal economically viable again, at least for the short-term. Coal took back some lost ground from natural gas in 2013, rising to 39% of electric power generation, while natural gas fell from 30% to 28%. That trend will likely continue into 2014 with natural gas prices now higher than they have been at any time in over two years. The Energy Information Administration predicts that coal’s share of the electricity market will add another percentage point this year, hitting 40%. Meanwhile, natural gas could fall further behind as it is projected to fall to 26.8% in 2014. (Related article: Four More Reasons to Bet on Coal in 2014) ( Continue… )
Internationally, 2013 was the year when any doubts about shale energy potential evaporated in the face of production of both natural gas and oil in the US achieved levels that were simply prodigious. The shale “bubble” theory was beloved not only by hybocarbondhriac shale antis, but also by many in the financial community, especially in Europe. Friends of the Earth and Co may have reputational capital at stake in the energy debate, but it was the financial capital invested in not only renewable technologies but elsewhere in energy that was felt to be at risk. Thus proponents of any number of expensive energy projects fear the emergence of a world where oil and gas were not running out. Whether shale lowers prices or not is both open to question and besides the point. What shale certainly proves is that prices will not be going up.
Among other things, the shale revolution is starting to put an end to “big” energy. Nuclear, Nabucco, Shtokman, Severn Barrage and Desertec are some examples, but 2014 will start to see the unwinding of positions in other mega projects. Even some major offshore projects, and the LNG projects attached, are likely to be disrupted or postponed this year. The lesson from the USA is simple: There are hydrocarbons almost everywhere and we no longer need to go to the ends of the earth to chase them. The new energy paradigm is a world where the most attractive projects are those closest to markets. In the older “conventional” model costs and geology were paramount, and Big Oil would consider undertaking any resource project anywhere. Today, in natural gas at least, local markets are key and oil is going to go feel some of that effect. OPEC oil and Russian gas will never be unimportant, but they do have to cast off some outdated concepts around resource scarcity that they shared, often unwittingly, with Big Green. A world where oil is abundant under not only the US, but in the UK, France, Germany, Argentina and Australian sub-surface as well, makes several new off-shore projects look expensive. West of Shetland, Arctic Oil and offshore Brazil suddenly don’t seem so important anymore. Mature provinces in the North Sea and Gulf of Mexico will thrive because they have both existing take away capacity and will be able to use some tight oil technology to produce more, but gone are the days when Big Oil was desperate enough to show up in the back of beyond producing expensive oil in habitats that were environmentally fragile and politically dubious. ( Continue… )
2013 was an exciting and inspiring year in many regards. And we’re not just talking the arrival of Prince George or the fact that the new Pope rides an electric bicycle. There were many remarkable clean energy developments that are helping to bring us closer to a clean, prosperous, and secure energy future. Here we list our top ten:
1. Renewables become cheapest option for many utilities
Multiple U.S. utilities added renewable energy to their mix in 2013, because it’s the cheapest option, with no state renewable portfolio standard (RPS) requirement calculated in. For example, Georgia Power joined Alabama power in buying wind energy from Oklahoma, and Xcel of Colorado filed a petition to the public utility commission stating that utility-scale solar is its cheapest peaking option. Xcel now plans to triple the amount of utility-scale solar it generates. (At the beginning of this year, a Minnesota judge likewise ruled that solar power offers Xcel ratepayers a better deal than natural gas.)
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2. Utilities look toward new business models
One of Europe’s largest utilities, RWE, announced it is shedding its old business model and transforming itself into a renewable energy service provider. Their so-called “prosumer” business strategy states, “Based on funds sourced largely from third parties, we will position ourselves as a project enabler, operator and system integrator of renewables.” Other utilities are also taking distributed renewables and business model transformation seriously as indicated by the oft-referenced Disruptive Challenges paper by Peter Kind of the Edison Electric Institute (EEI). ( Continue… )
A West Virginia chemical spill into the Charleston-area Elk River Thursday has closed schools, businesses, and left up to 300,000 people without water in nine counties across the state. President Obama issued an emergency declaration for the state of West Virginia, and officials are urging West Virginians of affected areas not to use tap water, which has been contaminated with a chemical used to clean coal.
"Due to the nature of the contamination, it is not safe to use the water for any purpose," West Virginia American Water (WVAW) said in a notice posted online. "Alternative sources of water should be used for all purposes. Bottled water or water from another, safe source should be used for drinking, making ice, brushing teeth, washing dishes, bathing, food and baby formula preparation and all other purposes until further notice." ( Continue… )
As Americans enjoyed the cheapest average gas prices last year since 2010, the prognosis is that prices at the pump will decrease further or remain flat for 2014 and beyond.
According to AAA’s year-end report, American drivers paid $3.49 per gallon of regular, on average for 2013, down about 12 cents from the record-high price in 2012 and slightly less than in 2011.