Energy issues

[Crafty_Dog]

stratfor.com

Global Market Brief: Fear, War, Smog, Storms and the Price of Summer Vacation
Every summer, gasoline prices in the United States go up. This is not because oil tycoons get frisky and realize they can squeeze a little bit more from the people driving to the nearest park with bicycles strapped to the tops of their sport utility vehicles; it is the sum of a variety of mostly structural factors within the U.S. system that are susceptible to natural disasters, along with the risk factors that vary every summer and make the oil market susceptible to unrest, wars and rumors of war.

The good news is that this summer, a few of the key risk factors that inflate crude oil prices with panic premiums could subside -- such as violence in Nigeria, which should wane in the wake of national elections, and tensions between the United States and Iran over Iraq's future, which could be settled in talks soon. If all the stars align, there could even be a rare downward step adjustment in crude prices. The bad news -- aside from the unlikelihood of the stars aligning -- is that a world without strife would still have hurricanes.

Before looking at the specifics of this summer, it is worth reviewing why prices tend to pick up in March and spike around Memorial Day each year, remaining high until they begin to fall in November. Besides the obvious uptick in gasoline demand (first in the spring when farmers hit planting season and then for pleasure driving and vacations as days become longer and sunnier), one culprit for a spike in U.S. prices at the pump is smog -- or rather, how our federal and local governments react to it.

In winter, the standard gasoline is one of about three blends. In the summer, to reduce smog, a crisscross of federal and local government standards mandate special blends. These requirements are not in harmony; myriad blends are mandated and sometimes differ from one part of a state to another (as in California and Texas), depending in part on a location's temperature, altitude and urban density -- that is, the extent to which volatile organic compounds in fuel are likely to evaporate, and the extent to which the air in that place is already unhealthy. Even areas that have similar characteristics request different summer blends.

This variety of requirements results in the inefficient production of boutique blends -- and refineries initially tend to err on the side of caution, producing enough to meet the low end of estimated demand or adding additives to each blend as the trucks are filled rather than ending up with too much of a blend that no one else in the country will buy. Summer additives also tend to be more expensive than winter blend components. (The Environmental Protection Agency and the Department of Energy will release a "Fuel System Requirements Harmonization Study" in 2008. States probably will not want to give up their individual powers to regulate, however -- and new legislative authority would be needed at the federal level to overcome the boutique fuels phenomenon.)

Thus, as the switch is made from winter to summer blends, prices go up. Then, as the summer driving season begins, demand surges and prices stay high. The U.S. system is equipped to handle the boutique blends, so they do not pose the threat of shortages or worse price spikes -- unless there is an unexpected disruption in the supply chain by, say, an immense storm that hits the majority of U.S. refineries in the Gulf of Mexico. The government has demonstrated it can be flexible when a real disaster strikes; after Hurricane Katrina, the Bush administration temporarily waived the air quality standards requiring the variety of blends, which helped mitigate price spikes.

Another factor that can affect summer gasoline prices is oil and gasoline inventories. The Energy Department released its inventory report May 23, and the numbers were not as grim as feared. Although gasoline inventories are still 7 percent below their five-year average for this time of year, they have been climbing rapidly since April, following a three-month period of unexpected refinery fires and other problems on top of regular spring maintenance. Crude oil inventories are actually 7.6 percent above their five-year average, so there is plenty to draw from as refineries play catch-up. There are relatively few giant refineries in the United States, however, so each time one goes offline it is a significant concern. And contrary to the stories of conspiracy theorists, who claim oil companies choose not to build more refineries because they want to keep prices up, the actual reason is the difficulty of overcoming "not-in-my-backyard" campaigns bolstered by environmentalists whenever a new refinery is proposed.

This summer's bad news is that experts expect the hurricane season to be worse than average. Then again, in 2006 these same experts predicted a repeat of 2005 and, instead, El Nino caused a very mild storm season. A direct hit on refining infrastructure still recuperating from Katrina in 2005 is not very likely. However, the possibility remains and makes those who trade on risks jittery -- which brings us to the price of crude.

The price of Nymex crude is hovering around $65 per barrel. The average person can rattle off the reasons for this high price: their names are Iraq, Iran, Nigeria, Venezuela, Russia and Saudi Arabia. Almost every country that produces oil in large quantities is either nationalizing its energy sector (which tends to limit production) or is a political mess (or at risk of quickly becoming one). Then factor in the U.S.-jihadist war, hurricanes, pirates (yes, pirates -- though mostly around Africa and Southeast Asia, not in the Caribbean). And while these concerns about reliable supplies run rampant, world demand is increasing, driven by growing economies worldwide -- particularly China and India, the voracious newcomers to the global resource buffet.

It generally costs less than $32.50 to produce and transport a barrel of oil; the price of oil is floating on a cushion of fear-driven speculation. Even though there has not been an oil supply crisis for more than three decades, when buyers order for future delivery, they are willing to pay top dollar now on the chance that, if they wait, some catastrophe will drive prices far higher.

The circumstances behind anxiety-based oil prices are not likely to get a whole lot worse this year -- and, in some ways, they are getting better. Nigeria is over the worst of the election-driven attacks against oil infrastructure that reduced its output by one-third this year, and that production is beginning to come back on line. After a period of post-election calm, militant attacks are likely to increase later in the summer, but chances are that things will not get quite as bad as they were. In addition, Iran and the United States appear to be finally ready to sit down together and hammer out a deal on Iraq. The first direct and public bilateral talks are scheduled to take place May 28. If this process succeeds -- and, of course, many things could disrupt it -- it still remains to be seen whether the violence in Iraq can be tamed. However, the oil flow from Iraq mostly depends not on peace in the Sunni triangle but on revenue-sharing arrangements among Iraq's various interest groups and regions, which a deal with Iran could help solidify. And, of course, a deal with Iran would decrease the already slight likelihood of a U.S. airstrike against Iran or -- the nightmare scenario -- of conflict in the Persian Gulf leading to an obstruction of the Strait of Hormuz.

Oil traders do not tend to lower prices incrementally as things get gradually better -- only to raise them in fits as their fears are played upon. This means that, from time to time, there is a significant correction -- a sharp drop in oil prices. While we are not prepared to forecast such an adjustment this year, it seems to be more likely than the fruition of the worst fears propping up the current price.

One other thing to note: The Organization of the Petroleum Exporting Countries (OPEC) is back, in a light kind of way. That is, OPEC countries have actually begun pumping below capacity again -- something that has not happened for years. The flip side to this is that OPEC no longer controls nearly as much of total global production as it did in the 1970s. Furthermore, Saudi Arabia does not really want to curtail its production and Venezuela cannot afford to. So, while it is something to watch, OPEC is no longer the main issue.

Overall, while gasoline prices will not be kind this summer, they probably will not behave erratically. The main variables that would disrupt this equation are a very nasty hurricane or relative peace in the Middle East. One of those sounds a little more plausible than the other.

CHINA: China's new State Investment Co. surprised global markets May 20 by announcing a planned purchase of a 9.9 percent stake in U.S. private equity player the Blackstone Group. This move proved China's ability to outsmart the markets (as far as the management of its $1.2 trillion of foreign exchange reserves) and its ability to carry out internal economic reforms while mitigating adverse global market effects. Blackstone is the first foreign equity purchase made with Chinese state foreign reserves, but it will not likely be the last. Watch out for new Chinese foreign exchange reserve-funded purchases in other foreign financial intermediaries next.

RUSSIA: Russian nickel company Norilsk Nickel raised its offer for Canadian mining company LionOre Mining International Ltd. to $6.3 billion May 23, trumping a bid by rival Swiss company Xstrata of $5.7 billion. Norilsk Nickel's bid comes with the blessing of the Kremlin, which is expected eventually to solidify its control over the company and thus ensure Norilsk Nickel has access to whatever funding it needs to expand abroad. Norilsk Nickel already holds around an 18 percent stake in the global market for nickel production. By the time the Kremlin consolidates control over the company, it could find itself with an even larger and richer prize.

FRANCE: France will eventually sell its 15 percent stake in the European Aeronautic Defense and Space Co. (EADS), the parent company of aircraft maker Airbus, French President Nicolas Sarkozy said May 18. Though Airbus has experienced a bout of major setbacks, France's political desire to have a European aerospace champion has almost guaranteed its continued existence, and the company has been subsidized with almost $15 billion worth of EU funds. However, the new French government has promised to reform many of the problems weighing France down. Sarkozy's statement that the French government might pull out of EADS altogether suggests that Airbus' key government support is waning -- and that its lifetime could be limited.

AFRICA: The Common Market for Eastern and Southern Africa (COMESA) approved a common external tariff system May 23 at a meeting in Kenya. The agreement lowers tariffs for COMESA countries to 10 percent for intermediate products and 25 percent for finished goods, and eliminates tariffs on capital goods and raw materials. The agreement brings COMESA closer to implementing a customs union in 2008 that would allow the 20-state bloc to operate commercially like the European Union. Seven COMESA states have yet to join the free trade area launched in 2000, citing revenue losses and competition from more advanced states. The common tariff system will make trade among member states more efficient, and a customs union would improve COMESA's ability to compete with larger economies.

AUSTRALIA: Australian Prime Minister John Howard announced May 22 that Australia will transfer monopoly control of wheat exports from the scandal-engulfed AWB Ltd. (formerly known as the Australian Wheat Board) to a grower-owned company by mid-2008. An independent task force is investigating a claim that AWB paid $224 million in bribes between 1999 and 2003 to former Iraqi President Saddam Hussein's government. Though the move will benefit farm groups by transferring ownership back to the growers, the continuation of the single-desk structure likely will anger the U.S. farm lobby, which has long opposed the system. The move will benefit Howard domestically by strengthening his coalition and bolstering support from farmers in an election year. The group most negatively affected by the new deal will be nongrower investors in the AWB, who will have no stake in the new company.

IRAN: Gasoline prices in Iran increased by 25 percent May 22. Iranian state news agency IRNA reported that Interior Minister Mostafa Pour-Mohammadi said rationing will begin around June 5. The increase -- which follows a May 20 announcement that the government would not raise fuel prices -- is part of Tehran's efforts to reduce state subsidies for gasoline and discourage smugglers who have been buying fuel at Iran's relatively low price and sneaking it out of the country to sell. The pragmatic conservative establishment, led by Expediency Council head Ali Akbar Hashemi Rafsanjani, likely designed the move to create problems for Iranian President Mahmoud Ahmadinejad's administration as part of an effort to weaken his faction's influence in the government.

IRAQ/U.S./UAE: Halliburton is considering $80 billion in projects around the globe as it rethinks its exit from Iraq, Halliburton CEO Dave Lesar said May 22. Lesar forecasts Halliburton investments in the Eastern Hemisphere -- including the Middle East, Russia, Africa, East Asia and the North Sea -- to hover around 70 percent of total capital investment over the next five years. Halliburton also has shown a willingness to sign deals with certain state actors or companies in the Middle East and Russia that the international community frowns upon. Lesar's hint that the company will reconsider its exit from Iraq indicates Halliburton is expecting a political settlement in Iraq that will allow energy majors to re-enter the reconstruction process.

MERCOSUR: Mercosur members' foreign affairs and economy ministers announced some details about the proposed Banco del Sur on May 22. Most important is that the development bank will have equal representation and capital share from its seven members, with the initial capital likely totaling between $2 billion and $3 billion. At least initially, the bank will be capable of development lending, but not of bailing out countries in the event of a serious economic shock. This is a blow to the vision of Venezuelan President Hugo Chavez, who -- with support from Argentina, Ecuador and Bolivia -- has for months proposed Banco del Sur as an alternative to the International Monetary Fund, World Bank and Inter-American Development Bank. Brazil's involvement in Banco del Sur has created the terms to keep the bank tame.

BOLIVIA/BRAZIL: Bolivia said May 23 it will compensate Brazilian state oil firm Petroleo Brasileiro $112 million for the nationalization of two refineries by June 10. Brazil indicated May 21 that it would accept natural gas instead of cash as payment, but then said unless the first payment is made by June 11, the matter will be tabled. Talks over the compensation were troubled; Brazil threatened to suspend investment in Bolivia if fair compensation was not offered, while Bolivia threatened to expropriate the facilities if its offers were rejected. The compensation agreement is important to both countries, but more so to Bolivia: Brazil is a key investor in Bolivia and purchases about 25 million cubic meters of natural gas daily -- nearly two-thirds of Bolivian output.

[Crafty_Dog]

Global Market Brief: Biofuels Pushing Energy Firms 'Beyond Petroleum'
June 28, 2007 19 30  GMT



The June 22 passage of significant biofuel mandates in a U.S. Senate energy package is one of many factors suggesting the oil industry will move closer to matching the rhetoric of certain oil companies' claims that they are not part of an "oil industry" but an "energy industry." Throughout the past decade, energy companies -- most notably BP and Royal Dutch/Shell -- have forayed into the alternative fuel/energy sector. However, they have remained oil companies first and foremost, no matter how "beyond petroleum" BP claims to be. Oil will still be the backbone of the energy industry's operations, but unless a major impediment to biofuel production develops, oil will no longer be the only significant component of vehicle fuel worldwide. Economic and regulatory circumstances could, for the first time, compel some oil supermajors to truly move beyond petroleum and into a more robust fuel mix.

The Growth of Biofuels

The U.S. Energy Policy Act of 2005 -- which requires that renewable fuels make up 4 billion gallons of the nation's gasoline market starting in 2006 and 7.5 billion gallons by 2012 -- spurred much of the current growth in biofuel research in the United States. The U.S. Senate Committee on Energy and Natural Resources said that, as of 2006, these renewable fuel requirements led to the construction of 34 new ethanol plants and the planned construction of an additional 150. In Europe, carbon regulations tied to energy security concerns and Kyoto Protocol commitments have propelled investments in biofuel research; earlier in 2007, the European Union mandated that biofuels make up at least 10 percent of European liquid fuel by 2020.
To ensure that biofuel development continues, the U.S. Senate passed a comprehensive energy bill June 22 by a 65-27 vote, mandating at least 36 billion gallons a year of domestic ethanol production for vehicle fuels by 2022. The bill increases funding for bioenergy research by 50 percent for 2008 and 2009 and supports the development of biofuel infrastructure and transport. In July, the measure will go to the U.S. House of Representatives, where it will face few hurdles, given biofuel technology's political popularity among rural voters and the growing investment interest in renewable fuels.

U.S. President George W. Bush's endorsement of cellulosic ethanol in his 2006 State of the Union address and his recent plan for reducing domestic gasoline consumption by 20 percent in 10 years have not only brought biofuels to the forefront of the national energy dialogue, but they have also led to direct federal support for biofuel research. In February, the U.S. Department of Energy (DOE) awarded $385 million for six separate industry biorefinery projects expected to produce at least 130 million gallons of cellulosic ethanol annually. On June 26, DOE pledged to invest $375 million in three bioenergy research centers, to be located in Wisconsin, California and Tennessee, in an effort to speed up cellulosic research.

The auto industry has responded by committing to increase the production of flex-fuel vehicles. In 2006, the CEOs of Ford Motor Co., DaimlerChrysler and General Motors pledged to double the annual production of vehicles that can run on E85 -- a gasoline blend containing 85 percent ethanol -- or biodiesel to 2 million cars and trucks by 2010.

With the likely emergence of a global post-Kyoto agreement on climate change (though likely not within the current Kyoto framework), and the likely passage of carbon reduction strategies in the U.S. Congress in several years, biofuels will grow more attractive a fuel source that produces fewer carbon emissions -- particularly as the biofuel industry develops energy-efficiency advancements.

Industry Response

Government subsidies for biofuel production, likely to be hammered out in the 2008 Farm Bill, will make biofuels more competitive with oil; and, after years of fighting for permission to build new refineries rather than adding capacity at existing facilities, the oil industry is becoming uncertain about the future of the fuel mix and therefore about the future demand for refined oil products. This is not only leading many in the industry to give up on building new refineries, but it is also encouraging even the most reluctant within the industry to devise strategies to incorporate other forms of fuel into their portfolios. In other words, as the concept of supply and demand for transportation fuels radically changes, energy companies will change from primarily oil providers to transportation energy providers.

To take the most recent example, BP, Associated British Foods (ABF) and DuPont announced June 26 a $400 million investment in the construction of a bioethanol plant and a biobutanol demonstration plant. The business coalition is marketing biobutanol, a biofuel more similar to unleaded gasoline and less corrosive to existing pipelines than traditional biofuels, as the "next generation" of biofuels due for introduction in the United Kingdom's transport mix this year. BP also launched the BP Energy Bioscience Institute in partnership with the University of California, Berkeley, and the University of Illinois, Urbana-Champaign, on Feb. 1; BP will provide $500 million over the next 10 years to increase current biofuels' efficiency and develop biofuels from plant matter that does not compete with food crops.

Shell claims to be the largest global distributor of transport biofuels, selling slightly more than 900 million gallons in 2006. Shell has invested significantly in cellulosic ethanol and, in 2006, the company launched a study with Volkswagen and Canadian biotech company Iogen Corp. that claimed this fuel both produces fewer carbon dioxide (CO2) emissions than traditional ethanol and can be cost-competitive with gasoline. Later this year, Shell intends to demonstrate the first biomass-to-liquids plant that converts wood chips, through gasification, into a synthetic fuel that can be combined with diesel for use in diesel engines. Shell claims this technology could reduce CO2 emissions by 90 percent relative to conventional diesel.

While European-based majors have taken the lead in biofuel research and development, U.S. companies are increasing their involvement in the industry. In April, Tyson Foods Inc. and ConocoPhillips announced a partnership to turn animal fat into diesel fuel. The companies call the fuel "renewable diesel." In 2006, Chevron Corp. invested with Galveston Bay Biodiesel to construct a biodiesel production and distribution center and entered into a $400 million partnership with the Georgia Institute of Technology to develop cellulosic biofuels.

Coming Biofuels Challenges

While oil companies are increasingly retooling their portfolios to include biofuels, the move is not without its challenges. As momentum builds for biofuels, the debate will focus on what types of biofuels should be promoted and what type of constraints, if any, should be placed on biofuel production methods. Certain interest groups and legislators are concerned about the unintended consequences of increased industrial agriculture methods to produce biofuels and the moral dilemma of whether to use would-be food crops to power vehicles or to feed the world's hungry. Notably, the new Senate measure on biofuels requires that advanced biofuels not derived from cornstarch (the primary source used in current U.S. ethanol production) make up increasing volumes of the annual 36 billion gallons of biofuels required by 2022 -- from 3 billion gallons in 2016 to 21 billion gallons in 2022. These advanced biofuels include ethanol derived from cellulose and waste material (including vegetative and animal materials), biobutanol and biodiesel.

This provision is designed to spur research into less land-intensive and more energy-efficient biofuels to reduce the unavoidable increase in tension over rising food prices attributable to the increasing diversion of basic crops and cropland to fuel production.

A significant breakthrough in cellulosic ethanol might develop rapidly, or it could be 10 years away. Regardless, before cellulosic ethanol can be widely produced and used, technological advances will have to reduce production costs enough to overcome the likely enormous expenses of transporting cellulosic ethanol. In the meantime, supporters of traditional ethanol will have to temper anger over rising food prices and the negative environmental effects (such as habitat destruction and fertilizer runoff) of increased fuel crop cultivation using conventional biofuel crops in order to establish the biofuel infrastructure necessary to facilitate profitable growth in the biofuel industry and a true transformation of energy companies.

stratfor.com

[Rusty]

More Nukes!!!!!!!!!!

[Body-by-Guinness]

July 09, 2007, 6:30 a.m.

Economics in Reverse
Making energy so expensive that you will become carbon-free.

By David Freddoso

In order to decrease carbon emissions by 33 percent, we would have to remove every existing car and truck from the road (yes, that includes your hybrid), ground every airplane, and shut down every gas station in the United States. In order to bump up from there to a 73-percent decrease in emissions, we would have to shut down most of our electrical grid, with the exception of areas supplied only by nuclear plants, windmills, and dams.

No computers, no lights, no cars, no air conditioning. We’ve entered the third world already, and we’re still not anywhere near the 90-percent reductions that some respected climate scientists say we need immediately in order to save the planet.

So why is it considered anything but a big joke when former Vice President Al Gore asks millions to pledge “to demand that my country join an international treaty within the next 2 years that cuts global warming pollution by 90% in developed countries and by more than half worldwide in time for the next generation to inherit a healthy earth”?

Instead of the appropriate laughter, we hear ecstatic plaudits from news reporters, evidently too busy copying press releases about Gore’s Live Earth concerts to look anything up. Last week, Gore must have become the first man in history to receive the epithets “Eco-crusader” and “Environmental Guru” in a single mainstream-news article. These adjectives were applied uncritically by the Agence France-Presse, considered by some people to be a serious news source.

Green Hail Mary
Short of killing everyone, there is nothing the U.S. government can do to bring anything close to 90-percent carbon-emissions reductions within a generation. And as long as political opposition remains against nuclear- and hydroelectric-power generation, there is exactly one realistic way to reduce carbon emissions significantly: An inventor will find an economically viable way of producing and distributing all the electricity we need, carbon-free.

This is, to some degree, the Bush administration’s approach — to subsidize or at least wait for such a discovery. The New York Times derided this last August 5 as the “Hail Mary” solution, but it is also the only solution, short of economic collapse, that can achieve anything like 90-percent carbon reductions.

Historically, carbon emissions in the United States decline only in years of economic hardship, and even then only slightly. The last two such years were 2001, when the stock market underwent a major correction and New York City was paralyzed by a terrorist attack, and 1991, another recession year (see figure one). Even with the economic pain we suffered in those years, the nation reduced carbon emissions by just above or below one percent, and in both cases the tiny reductions were more than made up for by increases in the following year or two. As a rule, we emit less when have less, produce less, and employ fewer people. And as our population and economy grow, so does our demand for energy.

In the future, someone will make a lot of money by coming up with a practical and cheap alternative fuel. This will happen when a new source of energy becomes cheaper than what we have right now. In the meantime, incremental measures such as forced ethanol use, government-efficiency standards, and carbon caps have a completely negligible effect on carbon emissions. They do have the effect, however, of causing pain for consumers. The caps will drive up everyone’s electrical bill, as well as the cost of everything that it requires energy to produce or deliver. Meanwhile, new government standards are already making electrical appliances unaffordable and worse in quality, and they will only continue to do so.

Then again, perhaps the whole idea is to cause pain. That is the only way to interpret Senate Environment and Public Works Chairwoman Barbara Boxer’s statement to a conference call of reporters on Friday. Boxer has proposed a bill with goals not unlike Gore’s — to require an 80-percent carbon-emissions reduction by 2050.

“I’ve been in these conversations with this administration, and their claim is that technology can solve this problem (global warming) without controls on carbon emissions,” said Boxer. “But everyone has told us, including business leaders, that to drive the investment in these technologies that are going to solve our global-warming challenge, we need to have clear limits on carbon pollution.”

We normally think of higher prices as a byproduct of well-meaning-but-misguided environmental policy, but this is just the opposite. Boxer is arguing that we must make carbon-based energy artificially expensive now, in order to drive an artificial demand for competing environmentally friendly technologies.

The reasoning is that certain business leaders are unwilling to invest in discovering viable alternative technologies because they don’t want to shoulder the risk. Therefore, rather than be surpassed by speculators in a free market, they go to Boxer and others in government to drive up the price of carbon-based energy for all of us, in order to make it less competitive. Other winners include certain companies — such as DuPont — that are holding millions in carbon credits that will suddenly become very valuable if the U.S. government gets involved in a cap-and-trade scheme.

The only ones to lose out in this arrangement are people who use electricity or gasoline, or have to buy consumer products like cars and appliances. Keep that in mind the next time you hear a Democratic politician invoke the image of a single mother who can’t afford to pay her health-care bills.

 — David Freddoso is a political reporter for Evans and Novak Inside Report.

[Crafty_Dog]

stratfor.com

Global Market Brief: Canada's Arctic Potential
Following up on part of a major campaign promise, Canadian Prime Minister Stephen Harper on July 9 announced formal plans to construct up to eight Polar Class 5 Arctic Offshore Patrol Ships -- armed icebreakers -- and establish a deepwater port from which they will operate in the Far North. His speech was rife with words such as "sovereignty" and "national identity," and emphasized Canada's territorial claims in the Arctic. Not only are higher energy prices making more extreme forms of oil and natural gas extraction in the Arctic more attractive, but the receding summer ice pack also is opening up a world of possibilities -- literally.

Global warming has begun changing the geography of the Canadian North. And, given Ottawa's current status in terms of the U.N. Convention on the Law of the Sea (UNCLOS) and the slew of Canadian islands extending far into the Arctic, there is little doubt that Canada will reap substantial benefits from the increasing accessibility of the North. Under UNCLOS, countries have full rights to the minerals within their exclusive economic zones of 200 nautical miles. Special considerations for long continental shelves can extend those rights even farther. In the Arctic, these shelves extend for hundreds of miles, which means that, with the exception of a small disputed area on the U.S. border, the vast bulk of the resources under the Arctic in the Western Hemisphere belong to Canada.




Energy

Long-disputed claims in the Arctic are beginning to take on new relevance. The dispute between Denmark and Canada over Hans Island -- a hunk of rocks smaller than New York's Central Park -- began to heat up (in a Canadian/Danish kind of way -- flags were planted and pastry imports were threatened) in 2004, and the U.S.-Canadian spat over a sliver of a wedge of floor in the Beaufort Sea has continued. Though the area of the latter is small by Alaskan standards, it could hold huge oil and natural gas deposits.

But the renewed interest in the Arctic runs deeper than revived territorial disputes. As the ice pack slowly recedes northward, more of Canada's North -- and beyond -- becomes accessible, altering how energy is not only developed but also delivered to market.

The $7 billion, 750-mile-long Mackenzie Valley natural gas pipeline project, which would ship natural gas southward from the Far North, has already run into a four-year delay, and costs have more than doubled. But if the northern coasts of the Yukon and the Northwest Territories become accessible by water year-round for big liquefied natural gas ships, the pipeline (and its royalties to governments and First Nations) will become completely unnecessary.

Furthermore, as the ice pack continues to recede each year, it opens up more and more potential deposits to year-round offshore drilling without the need for massively costly hardened ice-proof rigs like those in the water off Sakhalin Island.

Given the resources already being exploited at the extreme edge of the ice pack -- the experience of Prudhoe Bay and the promise of Sakhalin -- one can only guess what might lie farther north. But rest assured, there are companies that will find out. And the stage will be set for even more hotly contested battles over the ownership of the North Pole itself.

Shipping

Oil and natural gas promise huge payoffs (and, despite some current small-scale disputes and the potential for larger ones, Canada will no doubt see its share of the wealth), but a more significant shift is possible: a true opening of the fabled Northwest Passage that could greatly change the face of business. But resource rights along the seafloor and territorial waters on the surface of the sea are governed differently under UNCLOS -- though, in Canada's case, they will be equally contested. While Canada might push the argument that the potential shipping lane (should it open) is within its territorial waters (using the straight baseline method outlined in UNCLOS, which in this case gives the most favorable outcome for Canada), the United States and others will make strong cases that it is an international strait connecting the Pacific and Atlantic -- the trump card in the treaty that would qualify the strait as international waters.

Whatever the ultimate legal status of the Northwest Passage, Canada will have effective control either way. Even before Ottawa's eventual acquisition of as many as eight armed icebreakers -- which will be far and away the largest fleet of such ships in the world -- it will be Canadian icebreakers patrolling the waters of the North. And a more direct route over the North Pole will only open up if the ice of the Arctic Ocean gets close to melting completely.

This is all, of course, 20 years down the road. Today, there are only the first indications -- a receding ice pack, rising energy prices and massive amounts of global maritime shipping. A small window each summer for crude carriers and container ships to make one headlong rush through the Arctic Ocean will hardly be worth the risk, much less worth altering the patterns of global shipping.

But if these trends continue unabated, exploration will certainly expand in the North. Spearheaded in all likelihood by energy interests, explorers will begin to chart and mark the most significant channels, expanding the navigability of the passage. If a reasonable assurance of safety can be made and shipping companies push hard enough, insurers could begin to take their bets. If those early bets pay off, the 21st century will experience one of those true rarities of history: a meaningful shift in global geography.

This will come at a cost -- any meaningful channel will mature amid treaties and compromises. Bad weather, poor visibility for much of the year and ice flow will all inject a certain amount of risk into the equation. But the prospect of cutting as much as 5,000 miles from transoceanic crossings from Europe to the U.S. West Coast is compelling and would fundamentally shift the center of balance of global shipping. The result -- pulling massive amounts of shipping traffic from Panama (and, to a lesser extent, the Suez Canal) -- could free the maritime world from the minor tyranny of the beam and draft restrictions, respectively, of Panamax and Suezmax shipbuilding standards. (Of course, exploration could reveal a new maritime design constraint -- a Canadamax tyranny. If anything, higher standards are needed for shipping hulls that are more likely to encounter ice.)

All that can be certain for now is a wealth of possibility -- and that the Canadian Coast Guard might soon have something to guard.

[Crafty_Dog]

Pond scum to jet fuel?


 On A Wing And... Pond Scum?
NZ Company Develops Process To Make Fuel From Algae
A New Zealand company whose beginnings lie in treating excess algae on sewage ponds has reportedly developed a technology to harvest that algae, and extracts the fatty lipids that can be used for fuel.

New Zealand's Independent Financial Review reports Boeing and Air New Zealand are secretly working with Aquaflow Bionomic Corporation, a Blenheim-based biofuel developer, to come up with an environmentally friendly aviation fuel made from wild algae.

The biofuel is made from bacterial pond scum that is created through photosynthesis of sunlight and carbon dioxide on sources such as sewage ponds. Marlborough local media said Boeing paid a visit to Aquaflow earlier this year.

The planemaker has publicly put its support behind biofuel development.

As ANN reported, Boeing has entered into a partnership with Virgin Atlantic CEO Richard Branson to develop a bio-fuel for jet engines... and both parties believe they can fly a 747 with one engine running on biofuel as early as next year.

"The positive effects of biofuel will hopefully reduce or almost get rid of the airlines' contribution to global warming," said Branson.

Branson met with NZ Environment Minister David Parker in January to discuss biofuels in general, including Aquaflow's new technology for wild algae. Up until now, the company has concerned itself with biodiesel for land and marine vehicles.

Dave Daggett, technology leader for energy and emissions at Boeing Commercial Airplanes Product Development, was reported as saying algae ponds totaling 34,000 square kilometers could produce enough fuel to reduce the net aviation CO2 footprint for to zero.

Air New Zealand is reportedly conducting the risk analysis and will provide a test aircraft.

Aquaflow Director Vicki Buck declined to talk specifics, but did say the company now has a major international shareholder and a $5 million capital-raising had been successful.

The paper also reports none of the other entities involved will confirm, deny or comment, either... citing confidentiality agreement issues... but adds there were rumors of the collaborative effort at Boeing's 787 Dreamliner rollout last week.

FMI: www.airnewzealand.com, www.aquaflowgroup.com, www.boeing.com

[Crafty_Dog]

By RUSSELL GOLD and ANA CAMPOY
DALLAS -- Since Henry Ford began mass production of the Model T nearly a century ago, car-loving Americans have gulped ever-increasing volumes of gasoline. A growing number of industry players believe that era is over.

Among those who say U.S. consumption of gasoline has peaked are executives at the world's biggest publicly traded oil company, Exxon Mobil Corp., as well as many private analysts and government energy forecasters.

The reasons include changes in the way Americans live and the transportation they choose, along with a growing emphasis on alternative fuels. The result could be profound transformations not only for the companies that refine gasoline from crude oil but also for state and federal budgets and for consumers. Much of contemporary America, from the design of its cities to its tax code and its foreign policy, is predicated on a growing thirst for gasoline.

View Interactive

Easing Off the Gas Pedal Gas Stations Fade From Sight
2:17
As Americans commute less, use more fuel efficient cars and take more public transportation, gas stations have shut down. There are 11% fewer places to pump gas in the U.S. today than there were a little over a decade ago.
In the vast market for crude oil, American gasoline consumption matters. One of every 10 barrels of crude ends up in U.S. gasoline tanks, more than is used by the entire Chinese economy.

Right now, the recession is curbing U.S. gasoline consumption, as laid-off workers stop commuting and budget-conscious families forgo long road trips. Drivers filled their cars with 371.2 million gallons of petroleum-based gasoline every day in 2007, according to the U.S. Energy Information Administration. It expects that to fall 6.9% to 345.7 million gallons in 2009, as demand at the pump declines and the use of plant-based ethanol increases. Even if usage climbs after the recession ends, it won't exceed 2007 levels, according to EIA forecasts.

Demand for all petroleum-based transportation fuels -- gasoline, diesel and jet fuel -- fell 7.1% last year, according to the EIA. This is the steepest one-year decline since at least 1950, as far back as the federal government has reliable data.

Many industry observers have become convinced the drop in consumption won't reverse even when economic growth resumes. In December, the EIA said gasoline consumption by U.S. drivers had peaked, in part because of growing consumer interest in fuel efficiency.

Exxon believes U.S. fuel demand to keep cars, SUVs and pickups moving will shrink 22% between now and 2030. "We are probably at or very near a peak in terms of light-duty gasoline demand," says Scott Nauman, Exxon's head of energy forecasting.

If Exxon is right, the full impact of falling demand for fuel would take years to be felt. But some deep changes are under way.

Impact on Local Funds
Declining gasoline-tax revenue is forcing local and federal governments to search for new sources of funding. Oil refiners, which for decades focused on bringing U.S. drivers more gallons of gasoline, are retooling their businesses. Some have said they could shut down some of their refineries entirely, along with thousands of small gas stations. Oil companies are beginning to invest in biofuels and battery technology.

 Diverse trends are adding up to a steady drain on gasoline demand. Gasoline engines are being designed to burn fuel more efficiently. Hybrid and other advanced-technology vehicles that minimize gasoline usage are joining the nation's fleet. Tanks of gasoline and diesel fuel are being leavened with increasing amounts of biofuel, now made mostly from corn but in the future also from perennial grasses and municipal waste. President Barack Obama's pledge to end the "tyranny of oil," and a push for energy efficiency and biofuels in recent legislation, could accelerate these trends.

Skeptics of the notion that gasoline demand has peaked point to a population that is likely to keep growing as Americans have children at roughly the same pace and the flow of immigrants increases. "Anyone who looks at population must think there is going to be some big bird flu if they think we've peaked," says Tom Kloza, chief analyst at Oil Price Information Service, a firm in Wall, N.J., that tracks prices and consumption.

Lower gasoline prices are back after a multiyear spike in prices. That could reignite consumers' desire for big, fuel-guzzling SUVs and tolerance of long commutes, especially when the economy strengthens. After the 1979 spike in crude-oil prices, U.S. gasoline consumption dropped for four years, but then rose again when fuel prices plummeted in the mid- to late-1980s.

This time, the forces suppressing gasoline usage are formidable. The 2007 Energy Independence and Security Act toughened requirements for both efficiency and biofuels use. By 2020, vehicles sold in the U.S. must average 35 miles a gallon, versus 27.5 for cars now and 23.5 for light trucks. The Obama administration is working on proposals to further increase the standard. Makers of U.S. transportation fuel must blend in 36 billion gallons of biofuels a year by 2022, compared with about 11 billion this year.

High corn prices last year, combined with low gasoline demand from consumers, decimated ethanol producers' margins, forcing several into bankruptcy. But government mandates requiring refiners to blend ethanol into gasoline aren't expected to change. The 2009 economic-stimulus law includes large new loan guarantees to help renewable-energy businesses get financing -- and provides huge incentives for oil companies to dive in, too. Most big oil companies declined to discuss their views on the direction of demand for petroleum-based gasoline for this article, but most are expanding their push into alternative fuels.

 U.S. government policy is pushing gasoline consumption "down, down, down," says Ed Feo, a partner with law firm Milbank, Tweed, Hadley & McCloy LLP, who advises clients on renewable-energy policy. "There isn't a single policy I can think of that supports increasing gasoline use."

Americans are changing, too. Demographic shifts that once spurred higher gasoline consumption have run their course, such as more women joining the work force and the flight to the suburbs.

More people are minimizing their commutes by living closer to their jobs. Inner cities and surrounding suburbs are growing denser, shortening trips to work and to the mall. Between the early 1990s and 2007, the majority of metropolitan areas in the U.S. saw an increase in the share of residential permits granted near or in their downtown centers, according to the Environmental Protection Agency. One quarter of new homes constructed in the Denver area in 2007, for example, were in the central city, up from 5% in the early 1990s. In Chicago, that figure rose to 40% from 7% in the same period.

A growing number of Americans are commuting by bus or train or working from home. And even as the population continues to rise, the rate of gasoline consumption appears to be slowing. From 1960 to 1970, the U.S. population grew 13% while vehicle miles rose 54% and gasoline demand 45%, according to government data. Between 1990 and 2000, the population grew at the same 13% rate, but miles driven rose only 28% and gasoline demand by 17%.

A very different scenario is playing out in China and other parts of the developing world. Exxon expects China's passenger-vehicle fuel demand to triple by 2030, as the number of cars per capita grows along with its economy. The company is starting up a giant refinery complex in China that will feed a network of 750 gas stations.

In the U.S., Exxon is getting out of the business of gasoline retailing, where profits are shrinking, and leaving it to others to own and operate Exxon stations.

 
Getty Images (left) AP (right)
Pumping gas in the 1950s, left, and ethanol now, right
In contrast to China, the number of miles Americans drive started falling in December 2007. There have been a few other declines, but this one is longer and steeper than any other since 1971, the year that the government began tracking monthly data.

These trends are reflected in Seattle resident John Scroggs's odometer. A decade ago, the information-technology specialist logged 10,000 miles a year in his Jeep Grand Cherokee. Today he drives only about 6,000 miles a year in a Toyota Prius hybrid, using only a quarter as much gasoline. Mr. Scroggs, 43 years old, works from home one day a week and commutes to his job downtown by bus to avoid traffic snarls and expensive parking.

"We go for relatively long stretches not going anywhere beyond five miles away," he says.

Road Repair
As people like Mr. Scroggs pump fewer gallons, government has less money available for one of its most basic functions: keeping roads in working order.

Federal gasoline-tax revenue fell 3% last year, according to the Department of Transportation. That plus other tax shortfalls left Congress having to plug an $8 billion hole last year in the Highway Trust Fund, previously kept flush by growing gasoline use.

Localities have begun facing their own gas-tax gaps. Neon-lit Las Vegas offers a glimpse of a possible future of transportation-budget squeezes. To save money, local officials are building some new roads without street lights, curbs or traffic lights. They've cut two bus routes in the suburbs.

One remedy proposed by a commission Congress formed to study the problem: Base taxes on the number of miles people drive, rather than on how many gallons they pump. The aim is to continue raising money as biofuels and other fuels displace oil-based gasoline. Oregon is considering the idea. More than a dozen states are considering an increase in their own gasoline taxes.

Refiners must adjust not only for less driving but for a higher biofuels component in what they sell. Last year, plant-based fuel made up about 7% of the gasoline Americans pumped into their tanks, according to an analysis of government data by researchers at the University of Texas's Center for International Energy and Environmental Policy. The federal EIA forecasts a doubling of that percentage over the next decade as mandates to use more biofuels kick in.

The lost business from falling gasoline demand has contributed to the demise of at least one oil refiner. Flying J Inc. filed for bankruptcy reorganization in December. It closed its refinery in Bakersfield, Calif., and hasn't said when or if it will restart production. Larger Sunoco Inc. says if it can't sell a refinery in Tulsa, Okla., by the end of the year, it will shut it down entirely.

View Full Image

Getty Images
The recession is curbing U.S. gasoline consumption, as laid-off workers stop commuting and budget-conscious families forgo long road trips.
Other crude-oil refiners are moving in to the biofuel business as new fuels grab market share. Big refiner Valero Energy Corp. started a renewable-fuels division last year. In March, Valero won a bid to buy a group of ethanol plants for $477 million out of the Chapter 11 bankruptcy of VeraSun Energy Corp.

Numerous start-up companies are building "biorefineries" to turn plants into ethanol or diesel, a response to mandates that say these fuels can't all be made from corn. One concern is that if too much corn is grown for fuel it could result in higher prices for corn-based food products. A Colorado company called Range Fuels Inc. is building a facility in Georgia to turn lumber-industry waste into ethanol, initially at 10 million gallons a year.

Gas stations are also feeling squeezed. There are 11% fewer in the U.S. than a decade ago, according to trade publication NPN Magazine. The trend, partly a result of retail consolidation, accelerated last year due to weak gasoline demand.

In Springfield, N.J., a 99-year-old Exxon station attached to a small auto-repair shop may not make it to 100. Exxon told the owner last year that it was "uneconomical" to keep supplying the station with gasoline and the oil giant wanted to remove its tanks, says Jeff Pinkava, the owner and a great-grandson of the station's founder. He filed a suit in an effort to keep the tanks, because the pumps attract customers for oil changes and other garage work. The case is pending. Exxon declined to comment.

The station has provided for the family for four generations, said Mr. Pinkava. Now, he says, Exxon is "kicking us to the curb."

Write to Russell Gold at russell.gold@wsj.com and

[Crafty_Dog]

Deep in Bedrock, Clean Energy and Quake Fears

By JAMES GLANZ

Published: June 23, 2009

 

The danger of digging deeper (An especially fascinating, and brief, interactive graphic)

BASEL, Switzerland — Markus O. Häring, a former oilman, was a hero in this city of medieval cathedrals and intense environmental passion three years ago, all because he had drilled a hole three miles deep near the corner of Neuhaus Street and Shafer Lane.

He was prospecting for a vast source of clean, renewable energy that seemed straight out of a Jules Verne novel: the heat simmering within the earth’s bedrock.

All seemed to be going well — until Dec. 8, 2006, when the project set off an earthquake, shaking and damaging buildings and terrifying many in a city that, as every schoolchild here learns, had been devastated exactly 650 years before by a quake that sent two steeples of the Münster Cathedral tumbling into the Rhine.

Hastily shut down, Mr. Häring’s project was soon forgotten by nearly everyone outside Switzerland. As early as this week, though, an American start-up company, AltaRock Energy, will begin using nearly the same method to drill deep into ground laced with fault lines in an area two hours’ drive north of San Francisco.

Residents of the region, which straddles Lake and Sonoma Counties, have already been protesting swarms of smaller earthquakes set off by a less geologically invasive set of energy projects there. AltaRock officials said that they chose the spot in part because the history of mostly small quakes reassured them that the risks were limited.

Like the effort in Basel, the new project will tap geothermal energy by fracturing hard rock more than two miles deep to extract its heat. AltaRock, founded by Susan Petty, a veteran geothermal researcher, has secured more than $36 million from the Energy Department, several large venture-capital firms, including Kleiner Perkins Caufield & Byers, and Google. AltaRock maintains that it will steer clear of large faults and that it can operate safely.

But in a report on seismic impact that AltaRock was required to file, the company failed to mention that the Basel program was shut down because of the earthquake it caused. AltaRock claimed it was uncertain that the project had caused the quake, even though Swiss government seismologists and officials on the Basel project agreed that it did. Nor did AltaRock mention the thousands of smaller earthquakes induced by the Basel project that continued for months after it shut down.

The California project is the first of dozens that could be operating in the United States in the next several years, driven by a push to cut emissions of heat-trapping gases and the Obama administration’s support for renewable energy.

Geothermal’s potential as a clean energy source has raised huge hopes, and its advocates believe it could put a significant dent in American dependence on fossil fuels — potentially supplying roughly 15 percent of the nation’s electricity by 2030, according to one estimate by Google. The earth’s heat is always there waiting to be tapped, unlike wind and solar power, which are intermittent and thus more fickle.

According to a 2007 geothermal report financed by the Energy Department, advanced geothermal power could in theory produce as much as 60,000 times the nation’s annual energy usage. President Obama, in a news conference Tuesday, cited geothermal power as part of the “clean energy transformation” that a climate bill now before Congress could bring about.

Dan W. Reicher, an assistant energy secretary in the Clinton administration who is now director of climate change and energy at Google’s investment and philanthropic arm, said geothermal energy had “the potential to deliver vast amounts of power almost anywhere in the world, 24/7.”

Power companies have long produced limited amounts of geothermal energy by tapping shallow steam beds, often beneath geysers or vents called fumaroles. Even those projects can induce earthquakes, although most are small. But for geothermal energy to be used more widely, engineers need to find a way to draw on the heat at deeper levels percolating in the earth’s core.

Some geothermal advocates believe the method used in Basel, and to be tried in California, could be that breakthrough. But because large earthquakes tend to originate at great depths, breaking rock that far down carries more serious risk, seismologists say. Seismologists have long known that human activities can trigger quakes, but they say the science is not developed enough to say for certain what will or will not set off a major temblor.

Even so, there is no shortage of money for testing the idea. Mr. Reicher has overseen a $6.25 million investment by Google in AltaRock, and with more than $200 million in new federal money for geothermal, the Energy Department has already approved financing for related projects in Idaho by the University of Utah; in Nevada by Ormat Technologies; and in California by Calpine, just a few miles from AltaRock’s project.

Steven E. Koonin, the under secretary for science at the Energy Department, said the earthquake issue was new to him, but added, “We’re committed to doing things in a factual and rigorous way, and if there is a problem, we will attend to it.”

The tone is more urgent in Europe. “This was my main question to the experts: Can you exclude that there is a major earthquake triggered by this man-made activity?” said Rudolf Braun, chairman of the project team that the City of Basel created to study the risks of resuming the project.

“I was quite surprised that all of them said: ‘No, we can’t. We can’t exclude it,’ “ said Mr. Braun, whose study is due this year.

“It would be just unfortunate if, in the United States, you rush ahead and don’t take into account what happened here,” he said.

Basel’s Big Shock

By the time people were getting off work amid rain squalls in Basel on Dec. 8, 2006, Mr. Häring’s problems had already begun. His incision into the ground was setting off small earthquakes that people were starting to feel around the city.

Mr. Häring knew that by its very nature, the technique created earthquakes because it requires injecting water at great pressure down drilled holes to fracture the deep bedrock. The opening of each fracture is, literally, a tiny earthquake in which subterranean stresses rip apart a weak vein, crack or fault in the rock. The high-pressure water can be thought of loosely as a lubricant that makes it easier for those forces to slide the earth along the weak points, creating a web or network of fractures.

Mr. Häring planned to use that network as the ultimate teapot, circulating water through the fractures and hoping it emerged as steam. But what surprised him that afternoon was the intensity of the quakes because advocates of the method believe they can pull off a delicate balancing act, tearing the rock without creating larger earthquakes.

Alarmed, Mr. Häring and other company officials decided to release all pressure in the well to try to halt the fracturing. But as they stood a few miles from the drill site, giving the orders by speakerphone to workers atop the hole, a much bigger jolt shook the room.

“I think that was us,” said one stunned official.

Analysis of seismic data proved him correct. The quake measured 3.4 — modest in some parts of the world. But triggered quakes tend to be shallower than natural ones, and residents generally describe them as a single, explosive bang or jolt — often out of proportion to the magnitude — rather than a rumble.

Triggered quakes are also frequently accompanied by an “air shock,” a loud tearing or roaring noise.

The noise “made me feel it was some sort of supersonic aircraft going overhead,” said Heinrich Schwendener, who, as president of Geopower Basel, the consortium that includes Geothermal Explorers and the utility companies, was standing next to the borehole.

“It took me maybe half a minute to realize, hey, this is not a supersonic plane, this is my well,” Mr. Schwendener said.

By that time, much of the city was in an uproar. In the newsroom of the city’s main paper, Basler Zeitung, reporters dived under tables and desks, some refusing to move until a veteran editor barked at them to go get the story, said Philipp Loser, 28, a reporter there.

Aysel Mermer, 25, a waitress at the Restaurant Schiff near the Rhine River, said she thought a bomb had gone off.

Eveline Meyer, 44, a receptionist at a maritime exhibition, was on the phone with a friend and thought that her washing machine had, all by itself, started clattering with an unbalanced load. “I was saying to my friend, ‘Am I now completely nuts?’ “ Ms. Meyer recalled. Then, she said, the line went dead.

Mr. Häring was rushed to police headquarters in a squad car so he could explain what had happened. By the time word slipped out that the project had set off the earthquake, Mr. Loser said, outrage was sweeping the city. The earthquakes, including three more above magnitude 3, rattled on for about a year — more than 3,500 in all, according to the company’s sensors.

Although no serious injuries were reported, Geothermal Explorers’ insurance company ultimately paid more than $8 million in mostly minor damage claims to the owners of thousands of houses in Switzerland and in neighboring Germany and France.

Optimism and Opportunity

In the United States, where the Basel earthquakes received little news coverage, the fortunes of geothermal energy were already on a dizzying rise. The optimistic conclusions of the Energy Department’s geothermal report began driving interest from investors, as word trickled out before its official release.

In fall 2006, after some of the findings were presented at a trade meeting, Trae Vassallo, a partner at the firm Kleiner Perkins, phoned Ms. Petty, the geothermal researcher who was one of 18 authors on the report, according to e-mail messages from both women. That call eventually led Ms. Petty to found AltaRock and bring in, by Ms. Petty’s tally, another six of the authors as consultants to the company or in other roles.

J. David Rogers, a professor and geological engineer at the Missouri University of Science and Technology who was not involved in the report, said such overlap of research and commercial interests was common in science and engineering but added that it might be perceived as a conflict of interest. “It’s very, very satisfying to see something go from theory to application to actually making money and being accepted by society,” Professor Rogers said. “It’s what every scientist dreams of.”

Ms. Petty said that her first “serious discussions” with Ms. Vassallo about forming a company did not come until the report was officially released in late January 2007. That June, Ms. Petty founded AltaRock with $4 million from Kleiner Perkins and Khosla Ventures, an investment firm based in California.

The Basel earthquake hit more than a month before the Energy Department’s report came out, but no reference to it was included in the report’s spare and reassuring references to earthquake risks. Ms. Petty said the document had already been at the printer by the fall, “so there was no way we could have included the Basel event in the report.”

Officials at AltaRock, with offices in Sausalito, Calif., and Seattle, insist that the company has learned the lessons of Basel and that its own studies indicate the project can be carried out safely. James T. Turner, AltaRock’s senior vice president for operations, said the company had applied for roughly 20 patents on ways to improve the method.

Mr. Turner also asserted in a visit to the project site last month that AltaRock’s monitoring and fail-safe systems were superior to those used in Basel.

“We think it’s going to be pretty neat,” Mr. Turner said as he stood next to a rig where the company plans to drill a hole almost two and a half miles deep. “And when it’s successful, we’ll have a good-news story that says we can extend geothermal energy.”

AltaRock, in its seismic activity report, included the Basel earthquake in a list of temblors near geothermal projects, but the company denied that it had left out crucial details of the quake in seeking approval for the project in California. So far, the company has received its permit from the federal Bureau of Land Management to drill its first hole on land leased to the Northern California Power Agency, but still awaits a second permit to fracture rock.

“We did discuss Basel, in particular, the 3.4 event, with the B.L.M. early in the project,” Mr. Turner said in an e-mail response to questions after the visit.

But Richard Estabrook, a petroleum engineer in the Ukiah, Calif., field office of the land agency who has a lead role in granting the necessary federal permits, gave a different account when asked if he knew that the Basel project had shut down because of earthquakes or that it had induced more than 3,500 quakes.

“I’ll be honest,” he said. “I didn’t know that.”

Mr. Estabrook said he was still leaning toward giving approval if the company agreed to controls that could stop the work if it set off earthquakes above a certain intensity. But, he said, speaking of the Basel project’s shutdown, “I wish that had been disclosed.”

Bracing for Tremors

There was a time when Anderson Springs, about two miles from the project site, had few earthquakes — no more than anywhere else in the hills of Northern California. Over cookies and tea in the cabin his family has owned since 1958, Tom Grant and his sister Cynthia Lora reminisced with their spouses over visiting the town, once famous for its mineral baths, in the 1940s and ’50s. “I never felt an earthquake up here,” Mr. Grant said .

Then came a frenzy of drilling for underground steam just to the west at The Geysers, a roughly 30-square-mile patch of wooded hills threaded with huge, curving tubes and squat power plants. The Geysers is the nation’s largest producer of traditional geothermal energy. Government seismologists confirm that earthquakes were far less frequent in the past and that the geothermal project produces as many as 1,000 small earthquakes a year as the ground expands and contracts like an enormous sponge with the extraction of steam and the injection of water to replace it.

These days, Anderson Springs is a mixed community of working class and retired residents, affluent professionals and a smattering of artists. Everyone has a story about earthquakes. There are cats that suddenly leap in terror, guests who have to be warned about tremors, thousands of dollars of repairs to walls and cabinets that just do not want to stay together.

Residents have been fighting for years with California power companies over the earthquakes, occasionally winning modest financial compensation. But the obscure nature of earthquakes always gives the companies an out, says Douglas Bartlett, who works in marketing at Bay Area Rapid Transit in San Francisco, and with his wife, Susan, owns a bungalow in town.

“If they were creating tornadoes, they would be shut down immediately,” Mr. Bartlett said. “But because it’s under the ground, where you can’t see it, and somewhat conjectural, they keep doing it.”

Now, the residents are bracing for more. As David Oppenheimer, a seismologist at theUnited States Geological Survey in Menlo Park, Calif., explains it, The Geysers is heated by magma welling up from deep in the earth. Above the magma is a layer of granite-like rock called felsite, which transmits heat to a thick layer of sandstone-like material called graywacke, riddled with fractures and filled with steam.

The steam is what originally drew the power companies here. But the AltaRock project will, for the first time, drill deep into the felsite. Mr. Turner said that AltaRock, which will drill on federal land leased by the Northern California Power Agency, had calculated that the number of earthquakes felt by residents in Anderson Springs and local communities would not noticeably increase.

But many residents are skeptical.

“It’s terrifying,” said Susan Bartlett, who works as a new patient coordinator at the Pacific Fertility Center in San Francisco. “What’s happening to all these rocks that they’re busting into a million pieces?”

[Crafty_Dog]

Solar energy in Israel

It's a knockout

Jul 23rd 2009 | JERUSALEM
From The Economist print edition


Two novel approaches to making electricity from sunlight



ISRAEL is a country with plenty of sunshine, lots of sand and quite a few clever physicists and chemists. Put these together—having first extracted the oxygen from the sand, to leave pure silicon—and you have the ingredients for an innovative solar-power industry. Shining sunlight onto silicon is the most direct way of turning it into electricity (the light knocks electrons free from the silicon atoms), but it is also the most expensive. The scientists are what you need to make the process cheaper. And that is what two small companies based in Jerusalem are trying, in different ways, to do.

The physicists and chemists at GreenSun Energy, led by Renata Reisfeld, think the way is to use less silicon. Traditional solar cells are made of thin sheets of the element covered by glass plates. In GreenSun’s cells, though, only the outer edges of the glass plates are covered by silicon, in the form of thin strips. The trick is to get the light falling on the glass to diffuse sideways to the edges, so that the silicon can turn it into electricity. Dr Reisfeld’s team do this by coating the glass with a combination of dyes and sprinkling it with nanoparticles of a metal whose nature they are not yet willing to disclose.

Depth of field

The dyes are there to absorb the incident sunlight (a mixture is used in order to capture all parts of the spectrum). The role of the metal, though, is more subtle. The dyes in question are fluorescent—having absorbed the light, they re-radiate it. Normally, that would mean it was lost. But interaction with the nanoparticles turns it into a form of electromagnetic radiation called surface plasmons. These, as their name suggests, propagate over the surface of the glass until they are intercepted by the silicon at its edges.

Not only does all this make GreenSun’s cells cheaper than conventional ones, because they use so much less silicon; it also makes them better. In a conventional solar cell much of the energy is lost. The energy of light varies across the spectrum (blue light is more energetic than red) but only a certain amount of energy is needed to knock an electron free. If the incident light is more energetic than necessary, the surplus disappears as heat. Unlike the sun, which scatters its energy across the board, the dye/nanoparticle mix delivers plasmons of the right energy to knock electrons free without waste.

According to Amnon Leikovich, the firm’s boss, the upshot is a device that could already, if put into production, deliver electricity at only twice the cost of the stuff that comes out of a conventional power station. That may not sound great, but the power from traditional cells is about five times as costly as grid electricity, so GreenSun’s system sounds like a winner for places that are not yet connected. Moreover, Mr Leikovich hopes that costs can be brought down, and efficiency improved, to achieve the alternative-energy nirvana of “grid parity”.

He is not the only one, though. Around the corner, Jonathan Goldstein of 3GSolar hopes to get rid of silicon altogether. 3G’s “dye-sensitised” solar cells use titanium dioxide (more familiar as a pigment used in white paints) and complicated dye molecules that contain a metal called ruthenium. When one of the dye molecules is hit by light of sufficient energy, an electron is knocked out of it and absorbed by the titanium dioxide, before being passed out of the cell to do useful work.

This is a well-known process (it was invented 20 years ago by Michael Grätzel, a physicist at the Federal Polytechnic School in Lausanne, Switzerland) and several firms are trying to commercialise it. Dr Goldstein, however, thinks 3G has an edge over its rivals because of the way it draws off the power—though he is reluctant to go into details. One thing that is clear, though, is that dye-sensitised cells will be cheap to make. Both silicon cells and a third technology, so-called thin-film cells (which use novel materials such as cadmium telluride deposited onto sheets of glass or steel), have to be made in a vacuum. That is expensive. Dye-sensitised cells can be made by a process similar to screen printing, which is cheap.

Dye-sensitised cells are not as efficient as silicon ones, but their cheapness may outweigh that in many applications. As Barry Breen, 3G’s boss, points out, more than a billion and a half people have no access to grid electricity. With people like Dr Reisfeld and Dr Goldstein around, soon that may not matter.

[Crafty_Dog]

second post of the day:



Nearly a century ago, American engineer Frank Shuman erected five immense, trough-shaped mirrors in Meadi, Egypt. The parabolic reflectors directed sunlight onto a tube suspended above their 200-foot lengths. Water inside the tubes boiled and created steam. The steam powered a 65-horsepower engine, which pumped 6,000 gallons of water per minute from the Nile River to nearby cotton fields. It was the world’s first concentrated solar power (CSP) plant.

CSP entails focusing the sun’s rays with a reflective surface and putting that energy to work. These days, the heat usually goes to generating electricity. But the principle is quite old.

The ancient Chinese used concave mirrors to start fires, and, according to legend, the Greek mathematician and scientist Archimedes once used mirrors, perhaps of polished bronze, to ignite and burn an invading Roman fleet.

Shuman was addressing a concern of his time: Fossil fuels, particularly coal, powered the Industrial Revolution – the trains and mills, among other things, that radically changed human experience. But what happens when they ran out?

“One thing I feel sure of, and that is that the human race must finally utilize direct sun power or revert to barbarism,” Shuman told Scientific American magazine in 1911.

Fighting during World War I destroyed Shuman’s plant. But in the end it was cheap, abundant oil that obviated his ideas – or seemed to.

The oil crises of the 1970s again piqued interest in CSP, and, in the 1980s, plants resembling Shuman’s began cropping up in the Mojave Desert. Then natural-gas prices plummeted and the cycle repeated itself. No new commercial-scale CSP plants were built for nearly 20 years.

Now CSP is poised for a second – or third, depending on when the count begins – renaissance. And this time, say experts, it’s here to stay. World CSP capacity is forecast to increase nearly 18-fold in the next five years, from its current 588 megawatt potential to around 10.5 gigawatts. (Very roughly, 100 megawatts is enough energy to power 80,000 houses.) More than half of that new CSP capacity will be installed in the United States.

Several factors are driving the CSP boom. Although utility companies have long viewed CSP as an option for generating electricity from the sun, they’ve hesitated to commit to the technology. That’s partly because CSP becomes efficient and cost-effective only at the megawatt (MW) scale.

Photovoltaics, by contrast, can be installed piecemeal on the kilowatt scale – a panel here, another there. And that’s why photovoltaics have so far dominated the solar market.

Now, the specter of carbon regulation has shifted attention back toward CSP. The prospect of large-scale solar plants is again attractive. The “renewable portfolio” standard – which requires increased production of energy from renewable sources – has also encouraged investment in CSP. And the investment tax credit – a potential 30 percent credit on qualifying solar projects – has made investors more willing to risk capital in CSP ventures.

Solar is here to stay, now

“Twenty years ago, everyone thought the solar era was upon us, and then the industry basically went away when oil and gas got cheap,” says Cara Libby, project manager at the Electric Power Research Institute (EPRI) in Palo Alto, Calif. Now, “it certainly appears that solar is here to stay.”

For their part, power companies like CSP for old-fashioned reasons. For one, it uses a technology – steam-driven turbines – that is familiar after decades of use in coal-fired plants.

CSP plants also have thermal inertia. That means that, if a cloud passes overhead, they can continue operating for a time with the heat already gathered, and that’s without storage.

Assuming no rechargeable batteries, photovoltaic fields, by contrast, stop producing electricity when clouds arrive.

Technology for storing heat in molten salts, meanwhile, promises to extend CSP plants’ generating capacity well into the night.

But the bottom line is that natural-gas prices are volatile, an unknown for anyone trying to turn a profit. By comparison, CSP costs – when stretched over the life of a plant – are mostly (80 percent, by one estimate) related to installation. CSP maintenance costs are relatively small, and the sun, its fuel, is free.

“There’s a hedging aspect in building a solar thermal plant,” says Nathaniel Bullard, a solar-sector analyst with New Energy Finance in Washington. “Right now it makes sense to burn gas; it’s really cheap. But you could, in the future, end up losing your shirt on it.”

Inventor Thomas Edison, a contemporary of Shuman’s and the man who gave us the system of steam-generated electricity distributed by wires, told friends late in his life that “I’d put my money on the sun and solar energy. What a source of power!”

Earth has a natural “sun belt,” a swath of relatively empty subtropical deserts including the US Southwest, the Sahara, the Middle East, and much of Australia. By one estimate, installing CSP plants in just 1 percent of the world’s deserts – an area slightly larger than Ireland – could supply all the world’s electricity.

The German Aerospace Center calculates that, assuming high voltage, transmediterranean transmission lines, just 6,023 square miles of CSP in North Africa could keep all of Europe electrified.

In the US, CSP plants in the Southwest could generate 11,000 gigawatts (GWs) of electricity, says Mark Mehos, principal program manager of concentrating solar power at the National Renewable Energy Laboratory (NREL) in Golden, Colo. That’s roughly 10 times all the electrical generating capacity currently in place, including coal, nuclear, solar, and hydroelectric – more than enough for the country’s energy needs.

In other words, there’s plenty of sun. The real challenge is making CSP technology competitive with coal.

Currently, CSP costs about 14 cents per kilowatt-hour (kWh), within striking range of current combined-cycle natural-gas plants, in which a gas turbine generator generates electricity and a steam turbine uses the waste heat to generate more. A combined-cycle natural-gas plant produces electricity for about 12 cents per kWh.

Pulverized coal plants, on the other hand, generate electricity for 6 cents per kWh – less than half CSP’s cost. But, says Mr. Mehos, if you assume that future coal-fired plants will require carbon sequestration, then that cost moves up to about 10 cents per kWh. That means CSP prices still need to drop by nearly one-third to be competitive with future coal plants.

A plethora of CSP companies are racing to innovate and reduce costs. At this point, CSP technology comes in four general “flavors,” each with different perceived strengths and weaknesses.

Parabolic-trough systems focus the sun’s energy onto a tube running their length. Temperatures in the tube can reach 750 degrees F. A medium in the tube – sometimes synthetic oil that transfers its heat to water, sometimes water itself – collects heat to drive turbines. A second troughlike system, called a Compact Linear Fresnel Reflector, uses several mirrors to focus the sun’s rays on a single receiver tube above.

Trough technology benefits from being proven. That was Shuman’s design, and it’s the one the Mojave plants installed in the 1980s and ’90s. A planned 280-MW CSP plant near Phoenix will use trough technology, and store heat for electrical generation in molten salts.

‘Power towers’ more efficient
But experts say that, although it’s a known quantity, trough technology may be less efficient than newer, albeit less-tested, approaches. One reason: Newer systems achieve higher temperatures, which greatly increase efficiency.

So-called “power towers” – thousands of mirrors, or heliostats, directing the sun’s rays at a central tower – can achieve 1,300 degrees F. They also benefit from not having to pump the receiver fluid through tubing, an energy loss.

The first commercial scale “power tower” plant began operating near Seville, Spain, in 2007. The 11-MW plant resembles a gigantic, silver-petaled flower reflecting rays of light toward a central stamen. (Others compare it to the lidless Eye of Sauron in the “Lord of the Rings” movies.)

In the US, eSolar recently brought a 5-MW “power tower” demonstration plant on line near Lancaster, Calif. It includes a number of innovations, says Jim Shandalov, eSolar’s vice president of business development. Its relatively small mirrors – thousands of them about a yard square – rise no higher than four feet. Compared with troughs, which can be up to 10 feet high, or the Spanish plant, which has mirrors mounted on frames more than 120 square meters in area, the four-foot height keeps the wind profile down. A smaller profile also means fewer building materials.

Small, flat mirrors are also cheaper to manufacture, transport, and install, he says. An automated robot on a track can clean and maintain the mirrors, further cutting costs.
Finally, new software calibrates each mirror individually, an improvement over the “two walkie-talkie men” method of yore, says Mr. Shandalov, “We’ve made it more efficient.” (He won’t say by how much – that’s a trade secret.)

A fourth CSP option uses a reflective parabolic dish. A Stirling engine, the basic design of which is 200 years old, sits at the dish’s focal point. About the size of a motorcycle engine, it contains hydrogen gas. When heated, the gas drives four pistons, generating electricity on the spot. Stirling Energy Systems and its partner company, Tessera Solar, use this approach in their SunCatcher. A 1.5-MW demonstration plant is slated to begin operating in January near Phoenix.

Most efficient method costs more

Some point out that this method’s large pedestals holding the glass parabolas, some 38 feet across, represent a cost that low-profile, flat-mirror approaches have successfully eliminated.

Nonetheless, in purely thermodynamic terms, the SunCatcher is the most efficient CSP approach so far. It converts 31 percent of the sun’s energy to grid-ready electricity. By comparison, photovoltaic ranges between 8 and 15 percent efficiency, and trough CSP between 15 and 19 percent.

The SunCatcher has one more advantage: The engines aren’t cooled with water. The hydrogen cools in an air radiator similar to that found in a car.

That’s important because, in the arid and semiarid regions of the desert Southwest, where CSP makes the most sense, water is already a hot-button issue. And it’s predicted to become more so.

“The Southwest is a great place to build solar, but it’s not a great place to build water-intensive solar,” says Peter Gleick, president of the Pacific Institute in Oakland, Calif., a nonprofit devoted to sustainability issues.

Air-cooling CSP is possible, but can decrease efficiency and – in some situations and regions – increase costs by 5 to 10 percent. Yet for some, it’s already a selling point. BrightSource Energy, a company developing a 400-MW “power tower” plant in the Mojave, touts the fact that its plant will be entirely air-cooled.

Other companies are developing new, cost-saving materials. SkyFuel in Albuquerque, N.M., is testing a reflective laminate material that, it says, is more durable than standard glass. Theoretically usable in any of the CSP approaches, it’s 10 to 20 percent cheaper than glass mirrors, says Andi Plocek, SkyFuel’s marketing director.

Many see cost- effective heat storage as the biggest long-term hurdle for CSP. “The cost of storage is higher than we thought,” says Mehos.

Eventually, utilities will want to generate electricity from renewable sources through the night. To do that with CSP, they’ll need to store the sun’s energy.

Molten salts – used as fertilizer in agriculture – are one solution. But they’re also potentially difficult to handle. They freeze below a certain temperature, possibly clogging the system if allowed to cool. Another consideration with any storage is that with each transfer of heat between media, energy is lost and efficiency diminishes.

In other words, on the cusp of a CSP boom, which technology will dominate and how it will store heat is still very much an open question.

“It’s hard to predict who’s going to win in the end, if there is a winner,” says EPRI’s Ms. Libby: “We need to get more hardware on the ground and really test out all the options.”

[Crafty_Dog]

New Way to Tap Gas May Expand Global Supplies Recommend
By CLIFFORD KRAUSS
NYT
Published: October 9, 2009
OKLAHOMA CITY — A new technique that tapped previously inaccessible supplies of natural gas in the United States is spreading to the rest of the world, raising hopes of a huge expansion in global reserves of the cleanest fossil fuel.

Italian and Norwegian oil engineers and geologists have arrived in Texas, Oklahoma and Pennsylvania to learn how to extract gas from layers of a black rock called shale. Companies are leasing huge tracts of land across Europe for exploration. And oil executives are gathering rocks and scrutinizing Asian and North African geological maps in search of other fields.

The global drilling rush is still in its early stages. But energy analysts are already predicting that shale could reduce Europe’s dependence on Russian natural gas. They said they believed that gas reserves in many countries could increase over the next two decades, comparable with the 40 percent increase in the United States in recent years.

“It’s a breakout play that is going to identify gigantic resources around the world,” said Amy Myers Jaffe, an energy expert at Rice University. “That will change the geopolitics of natural gas.”

More extensive use of natural gas could aid in reducing global warming, because gas produces fewer emissions of greenhouse gases than either oil or coal. China and India, which have growing economies that rely heavily on coal for electricity, appear to have large potential for production of shale gas. Larger gas reserves would encourage developing countries to convert more of their transportation fleets to use natural gas rather than gasoline.

Shale is a sedimentary rock rich in organic material that is found in many parts of the world. It was of little use as a source of gas until about a decade ago, when American companies developed new techniques to fracture the rock and drill horizontally.

Because so little drilling has been done in shale fields outside of the United States and Canada, gas analysts have made a wide array of estimates for how much shale gas could be tapped globally. Even the most conservative estimates are enormous, projecting at least a 20 percent increase in the world’s known reserves of natural gas.

One recent study by IHS Cambridge Energy Research Associates, a consulting group, calculated that the recoverable shale gas outside of North America could turn out to be equivalent to 211 years’ worth of natural gas consumption in the United States at the present level of demand, and maybe as much as 690 years. The low figure would represent a 50 percent increase in the world’s known gas reserves, and the high figure, a 160 percent increase.

The projections suggest that the new method of producing gas “is the biggest energy innovation of the decade,” said Daniel Yergin, chairman of the Cambridge consulting group. “And the amazing thing is there was no grand opening ceremony for it. It just snuck up.”

Over the last five years, production of gas from shale has spread across wide swaths of Texas, Louisiana and Pennsylvania. All the new production has produced a glut of gas in the United States, helping to drive down gas prices and utility costs.

Now American companies are looking abroad for lucrative shale fields in countries hungry for more energy. They are focusing particularly on Europe, where gas prices are sometimes twice what they are in the United States, and large shale beds are located close to some cities.

Exxon Mobil has drilled a few exploratory wells in Germany in recent months. Devon Energy is teaming up with Total, the French oil company, seeking approval to drill in France. ConocoPhillips announced recently that it had signed an agreement with a subsidiary of a small British firm to explore a million acres in the Baltic Basin of Poland.

Early estimates of recoverable European shale gas resources range up to 400 trillion cubic feet, less than half the industry’s estimates of what is recoverable in the United States. But European energy executives say they are excited about the prospects because the Continent’s conventional gas reserves are too small to meet demand.

“It is obvious to everybody that it has huge potential,” said Oivind Reinertsen, president of StatoilHydro USA and Mexico, a Norwegian company with growing shale interests. “You see a lot of land-grabbing by different companies in Europe, potentially spreading to the Far East, China and India.”

Donald I. Hertzmark, a consultant who advises multinational oil companies on gas projects, said that in a decade or so, the new shale gas resources would improve Europe’s ability to withstand any future reduction in Russian pipeline shipments. In 2006 and again last winter, Russia cut off natural gas deliveries shipped through Ukraine because of disputes between the two countries, causing shortages around Europe.

European companies are buying large interests in shale fields in the United States, partly to supply the American market, but also to learn the specialized mapping and drilling techniques required for shale gas.

Several of the European companies have entered into partnerships with smaller American companies. ENI of Italy paid $280 million in May for a stake in a 13,000-acre gas field north of Fort Worth operated by Quicksilver Resources. ENI has a crew of four engineers, a geologist and a geophysicist in Texas to learn from Quicksilver personnel.

One of the biggest marriages is between Chesapeake Energy of Oklahoma City and its strategic partner StatoilHydro.

Seeking cash, Chesapeake agreed to sell Statoil a large stake in its Marcellus shale holdings, centered in Pennsylvania, for $3.9 billion last November. The two companies are looking at shale fields in China, India, Australia and other countries. Seven Statoil employees are working in Oklahoma and Pennsylvania learning to map and fracture shale, and calculate shale gas pressures, and more are coming.

“We know the shale is out there,” said Lars Erik Oino, a Statoil geologist working at Chesapeake headquarters here, as he rubbed hydrochloric acid on a shale sample to test its mineral makeup. “This could have a huge impact on the European

[Crafty_Dog]

When an industry is this reliant on government subsidies, the last thing it needs is a dose of market forces. The industry is renewable energy. The market force is China.

The paradox of wind and solar power is that they are too expensive to compete properly with conventional fuels like natural gas, yet lower equipment prices from competition can prove fatal to manufacturers. Last week, U.S. solar panel maker Evergreen Solar went bankrupt. Despite shifting its factory to China, from a state-supported facility in Massachusetts, it couldn't compete.

China figures large in renewable energy's future. It already is the world's largest market for new wind turbines.

In solar, China's share of global demand is set to rise to 13% in 2015 from 7% this year, says Barclays Capital.

 .Moreover, if renewable technologies are to wean themselves off state subsidies, the sort of deflation imposed by the expansion of Chinese competitors is necessary.

Chinese demand for renewables is underpinned by economic development and government backing—handy when cash-strapped European governments are cutting subsidies. But Beijing isn't interested in helping Western suppliers. In wind power, for instance, foreign manufacturers' share of the Chinese market has collapsed from 80% in 2004 to less than 15% today.

Having conquered their home market, Chinese wind manufacturers aren't content to stay at home. Four Chinese companies made BTM Consult's top 10 list of wind turbine suppliers last year, up from two in 2008. Xinjiang Goldwind Science & Technology, No. 2 in China by shipments, has recently won orders in the U.S. and aims to derive 30% of gross profit overseas by 2015.

And Chinese suppliers make formidable competitors. Sanford C. Bernstein reckons Chinese turbines shipped to the U.S. and Europe are, on average, 20% cheaper than those built locally, and the gap could hit 30% next year.

If anything, Western solar equipment firms face an even bigger challenge, especially as they compete in a much more fragmented industry. This helped cut average solar module prices by more than half between 2006 and 2010.

Chinese expansion will accelerate this trend. Credit Suisse reckons China's GCL-Poly Energy, for example, could have production capacity equal to two-thirds of the entire global solar panel market in 2012. What's more, by then it could be churning out panels at a lower all-in cost than current cost leader First Solar, an American firm.

Solar power needs lower costs: Bernstein estimates it costs $142 per megawatt hour—multiples of current U.S. wholesale electricity costs—and that's with tax benefits included. But achieving lower costs means lower equipment prices. So while new solar installations in 2012 are forecast to be 25% above 2010's level by volume, the revenue pool will be 23% smaller, reckons Commerzbank.

View Full Image

Agence France-Presse/Getty Images
 
A general view of the eSolar Sierra SunTower power plant in Lancaster, Calif., in the Mojave Desert.
.Better technology offers one way to resist the competitive pressure. William Blair & Co. analyst Nick Heymann highlights Siemens. The German industrial group is taking substantial market share in the growing offshore wind market, where there is less competition. Siemens can also bundle transmission networks with its turbines, a critical piece of equipment Chinese competitors don't supply typically.

Western competitors will have to work hard to differentiate themselves in this way. Chinese rivals are following a well-worn path of conquering their home market and then expanding aggressively abroad, helped by generous domestic credit. An industry reliant on subsidies and needing to drive down costs anyway can hardly complain much. But don't be surprised if this most politicized of technologies becomes a flashpoint for protectionism.

—Liam Denning

[G M]

http://blogs.dailymail.com/donsurber/archives/46519

14,000 abandoned wind turbines
November 19, 2011 by Don Surber
 


As Jimi Hendrix may have put it: “And the wind cries bankrupt…”
 


Minnesotans for Global Warming report that in the last 30 years, the United States has had 14,000 wind turbines abandoned. Apparently, once the subsidies and the wind run out, these 20-story high Cuisinarts are de-bladed and retired. This means more bats and migratory birds will live.
 
From Minnesotans for Global Warming: “The symbol of Green renewable energy, our savior from the non existent problem of Global Warming, abandoned wind farms are starting to litter the planet as globally governments cut the subsidies taxes that consumers pay for the privilege of having a very expensive power source that does not work every day for various reasons like it’s too cold or  the wind speed is too high.”
 
Andrew Walden of American Thinker explored nearly 2 years ago the demise of the 37-turbine wind farm at Kamaoa Wind Farm in Hawaii: “Built in 1985, at the end of the boom, Kamaoa soon suffered from lack of maintenance. In 1994, the site lease was purchased by Redwood City, CA-based Apollo Energy. Cannibalizing parts from the original 37 turbines, Apollo personnel kept the declining facility going with outdated equipment. But even in a place where wind-shaped trees grow sideways, maintenance issues were overwhelming. By 2004 Kamaoa accounts began to show up on a Hawaii State Department of Finance list of unclaimed properties. In 2006, transmission was finally cut off by Hawaii Electric Company.California’s wind farms — then comprising about 80% of the world’s wind generation capacity — ceased to generate much more quickly than Kamaoa. In the best wind spots on earth, over 14,000 turbines were simply abandoned. Spinning, post-industrial junk which generates nothing but bird kills.”
 
When an honest history of this period in the United States is written, it will no be kind to the corporate cronyism that preyed upon public ignorance of earth science to create a crisis — global warming — to exploit and loot the Treasury.

[Crafty_Dog]

There's a witticism about minds being made up despite the facts that comes to mind , , ,

[DougMacG]

http://www.realclearenergy.org/2011/11/22/us_energy_policy_slow_national_suicide_243188.html

U.S. energy policy: A slow national suicide
With Keystone XL delay, America continues its slow economic strangulation

By Charles Campbell

November 21, 2011  Baltimore Sun

In 1969, three unrelated events occurred that have since been combined with political bungling to slowly strangle the U.S. economy. Moammar Gadhafi overthrew King Idris of Libya. He nationalized Western oil company reserves with no retribution from the U.S. Sensing our weakness, all of the other OPEC nations abrogated their concession agreements with U.S. companies. The Arab producers cut back production and embargoed the U.S. because of our support for Israel. Middle East despots have been in the driver's seat ever since, and as the Arab Spring seems increasingly likely to empower Islamists, things are unlikely to get better.

Also that year, an oil spill from a drilling platform off Santa Barbara was the catalyst for the current environmentalist efforts to prevent all exploration on the continental shelves on the East and West coasts and the Arctic National Wildlife Refuge. U.S. crude production went into irreversible decline.

Finally, in 1969 synthetic crude oil from the Athabasca tar sand of Alberta, Canada, began to be produced. It has been transported without incident to U.S. refiners by pipeline for 40 years. There is now an environmental movement to prevent the construction of the Keystone XL pipeline to deliver additional tar sands crude from Alberta to the U.S. to make up for declining U.S. production. Opponents of Keystone XL won a victory this month when President Barack Obama refused to sign off on the pipeline's proposed route, forcing at least a year's delay as the project is reconfigured.

    Related
    No to Keystone XL No to Keystone XL
    Proposed Canadian pipeline will increase our dependency on foreign oil
    Keystone XL pipeline, bringing oil from Canada, is a step toward the future
    Going to jail for the environment Going to jail for the environment
    Pipeline or no, oil is not the future
    The shrewd politics of Keystone delay
    Topics
    Upstream Oil and Gas Activities
    Conservation
    Petroleum Industry
    See more topics »

These are the same environmentalists, of course, who block exploration on the continental shelves and ANWR, which adds to the U.S. and global oil shortage, driving up prices that make the Athabasca tar sands projects viable. In any event, if Keystone XL is blocked, a pipeline will be built to Canada's West Coast for Chinese deliveries. This will reduce China's need for Middle East crude and increase our requirements for supplies from people who want to destroy the U.S.
Follow @BaltSunLetters for the latest reader letters to The Sun

The administration continues to push for wind and sun projects (see the Solyndra debacle). Multiple studies show that wind power does not reduce carbon dioxide because of the inefficient cycling operations in fossil fuel plants to provide instant power into the grid when the wind stops blowing.

As for solar, to provide a measurable amount of power it would be necessary to cover a major portion of the Mojave Desert with mirrors to collect heat at the peak of the day and again would require cycling of fossil fuel plants to make up for when the sun doesn't shine.

The same radical opposition to the Keystone XL pipeline has expanded to the production of natural gas from the Marcellus shale formation, which stretches from New York through Pennsylvania and Maryland into West Virginia, with unsubstantiated claims of impending disaster for the water tables. Hydro-fracturing has been used in secondary/tertiary oil and gas recovery for 60 years in the West with no detrimental effect on the environment or water supplies, and coupled with horizontal drilling is responsible for raising crude production in the Dakotas to slow U.S. declines. Maryland has a moratorium on shale gas production.

Much-maligned Big Oil still has the only technology capable of developing additional energy supplies, shorn of government impediments. Meanwhile, anti-nuclear activists have stopped all consideration of nuclear power in the U.S. in the wake of Fukushima — which, despite being the worst nuclear meltdown in history, caused no nuclear-related deaths.

CFP of France was thrown out of the Middle East, along with the U.S. companies, in 1974. The country immediately launched a focused strategy to reduce reliance on Mideast oil. Today France has the world's most sophisticated high-speed electric rail system, produces 80 percent of its power by nuclear plants and reprocesses its spent nuclear fuel. The Nissan Renault Leaf pure electric car is now in mass production. By 2030, France will be essentially carbon dioxide free except for jet fuel and diesel fuel for heavy truck transportation.

Sun and wind will never become a significant portion of our energy mix. High-priced oil since the 1970s has created 40 years of extensive conservation; there is little more to be gained. We can either emulate the French and in parallel aggressively expand our fossil fuel resources or face a slow, brutal economic decline against rising Asian power, coupled to increasing risks from an increasingly volatile region that controls the world's oil supplies.

The garrote is an unpleasant execution by slow strangulation. It is extremely difficult to commit national suicide by turning the handle ourselves, but we are trying.

[Crafty_Dog]

Frankly I disagree with the snark of the following piece from the WSJ.

IMHO EPA's Jackson is correct that there is a proper function for government in bringing a calculus of the external diseconomies of pollution into business decisions.

============================================================================



Psychoanalysis is usually the wrong way to understand politics, but the Obama Administration may be reviving the field with its Freudian slips. The latest to land on the couch is Environmental Protection Agency chief Lisa Jackson, who gave an unintentionally candid interview this weekend with Thalia Assuras of Energy Now News.

Ms. Jackson was asked about the EPA's regulatory boom and the resulting mass retirements of coal-fired power plants. She responded by claiming that "First off, EPA doesn't require shutting down of any plant," which is technically true: The EPA merely writes rules so stringent that those plants are no longer economic to operate.

When pressed, Ms. Jackson went on to say that "No, I can't say what a business will decide to do. Some businesses are investing in nuclear, some are looking at natural gas. There are states that are leading the way on solar or wind. . . . What EPA's role is to do is to level the playing field so that pollution costs are not exported to the population but rather companies have to look at the pollution potential of any fuel or any process or any plant or any utility when they're making their investment decisions." (Our emphasis.)

In fact, when Congress passed the Clean Air Act in 1970, its goal was clean air, not the industrial planning that Ms. Jackson's comments about "levelling the playing field" reveal. Under the law, the EPA is required to set source-specific standards depending on where the emissions come from—natural gas, coal or something else. It certainly doesn't contain a roving mandate for Ms. Jackson to guide investment decisions.

What Ms. Jackson really means is that she is trying to make coal—the workhorse of U.S. electric power—artificially more expensive. This is to serve her anticarbon goals, if not the consumers who will bear the costs and may suffer if the U.S. electric grid is compromised. But at least the EPA chief is finally admitting what she's up to.

[ccp]

incandascent vs compact fluorescent vs LED bulbs.  So far the CFL are the best for the money.  LED are only aroun twice as long lived as the CFL at ten times the cost:

http://www.scientificamerican.com/article.cfm?id=building-a-better-light-bulb

[Freki]

I hear the Chinese are working on Thorium Reactors. This is a TED talk about Thorium

http://youtu.be/N2vzotsvvkw