Anyone can make predictions for the next year, and this is the time of year many do. What strikes me looking back with 20/20 hindsight is how today's reality would have gotten me locked up four years ago. Predictions such as US LNG exports, US energy independence and Australian, UK and Chinese shale gas certainly got me laughed out of a couple of conferences in the early days. So in that spirit, here are my predictions for the next three years. Some may happen sooner, some later. But they'll all happen by January 1 2016. Probably.
These are in no particular order, but each one is linked to others in various ways. Natural gas pricing is a globally complex proposition that needs to factor in multiple variables. The evolution of natural gas isn't going to move in a 1,2,3 recipe. This is energy policy as mash up. Or hash up if your country get's it wrong.
Russia wises up.They'll figure out that the story is to increase demand, not try and scare people that supply won't show up. They'll be making so much oil money from their Exxon/XTO technology in the Bazhenov shale that oil gas link pricing won't matter so much.
But there's a connection in there to the oil link. In the be careful what you wish for category, the closer to 2016, the more likely we'll see $50 oil, but even 2013 wouldn't surprise me. All of sudden Gazprom for Russia, BG for LNG and any number of other energy dinosaurs will be scrambling to set up long term gas contracts at prices half of where UK and Japan prices are now. ( Continue… )
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… )
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.
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And this time, we should nip it in the bud before it becomes as entrenched as corn ethanol. ( Continue… )
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… )
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… )
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… )
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.”
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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… )
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… )
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… )
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.
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“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… )