100% Carbon Free Electricity by 2018

We need a massive increase in electricity generated from alternative energy.

Here's Al Gore's vision:



Here's one way to achieve 100% Carbon Free Electricity

Thoughts?

Why are Oil Prices So High?

Why are oil prices so high? This is the question being asked with increasing frequency in many countries around the world. Some would have you believe that the blame should be placed on "greedy oil companies", "Arabs", "speculators" or "OPEC".

While speculation is happening with investors and hedge funds looking to commodities for returns that are not being seen in the stock or property markets, there are underlying fundamental reasons which mean prices are likely to stay high.

Last November the International Energy Agency released its annual World Energy Outlook report. Traditionally the agency has projected energy supply based on projected demand.

The agency has projected that India and China will lead the increase in energy demand making 45% of total growth. Oil imports for these two countries combined will grow to 19.1m barrels a day by 2030 compared to 5.4m barrels a day in 2006.

Demand for oil will grow to 116m barrels a day by 2030, an increase of 37% on 2006 oil usage. In this report back in November the International Energy Agency warned the price of a barrel of oil could rise to $159 by 2030 due to high growth in demand. This estimate now looks very conservative.

The reality is there have been some fundamental changes.

Before if the United States went into recession, this would lower demand for oil and prices fell. Now with China, India and other rapidly developing nations demanding ever increasing quantities of oil a recession in America is unlikely to lead to falling oil prices like it did in the past. Were per capita oil use in China and India to reach the same level as in the United States, this would fully deplete the world's remaining proven oil reserves in just 15 years and prospective resources, in 26 years.

The other fundamental change is that there is little excess production capacity. While Saudi Arabia would like the world to think it could increase production if it deemed it "beneficial" to the stability of the market, this is just an illusion of control. The reality of the OPEC cartel is that while sticking to production quotas may have benefited the group as a whole, individual countries have always "cheated" consistently and repeatedly exceeded their production quotas. In the past this has lead to significant downward pressure on prices.

This time the signs are that the world is at or near its maximum oil production capacity. Does this mean Peak Oil has arrived? In my opinion - not yet.

New production will continue to come online in the coming years which is likely to raise worldwide maximum oil production. So we haven't reached peak production... yet.

What we may be experiencing is what Robert Rapier calls Peak Oil Lite, with the early effects of Peak Oil arriving. Demand is rising faster than supply. In its July 2007 report the International Energy Agency predicts OPEC spare capacity will decline to minimal levels by 2012. The lack of spare capacity means, that price volatility increases with price spikes occurring in the event of supply disruption.

So what we are likely to experience prior to Peak Oil is Peak Export. According to Eugene Linden in BusinessWeek when it comes to oil our biggest concern should be the amount of "global oil available for export".

According to the Export Land Model developed by Jeffrey Brown - exports decline faster than production declines, the rate at which exports decline accelerates over time and only a small percentage of a producing country's production is exported following peak production.



According to a report in last week's Wall Street Journal, fresh information from the US Department of Energy shows the quantity of petroleum products shipped by the top exporting countries in 2007 fell 2.5% last, while prices increased 57%.

Net exports from major producers Mexico, Norway and Venezuela have fallen in every year since 2005.

With the rise in prices individual producing countries in OPEC had every incentive to "cheat" and yet exports fell. The influx of wealth into the Middle East has led to a boom in domestic demand. It seems that Middle Easterners aspire to the same gas guzzlers and energy rich lifestyles as Americans. Soaring profits from high-price crude have fuelled a boom in oil demand in Saudi Arabia and across the Middle East, leaving less oil for export. In 2007 the output of the region's six largest oil exporters - Saudi Arabia, United Arab Emirates, Iran, Kuwait, Iraq and Qatar - fell by 544,000 barrels a day. During the same period domestic demand increased by 318,000 barrels a day, leading to a decrease in net exports of 862,000 barrels a day.




A recent report from CIBC World Markets also indicates that as much as 40% of Saudi Arabia's expected production increases will be offset by rising internal demand by 2010, and Iranian exports will decline by more than 50% for similar reasons.

Indonesia recently withdrew from OPEC as it has gone from being a net exporter of oil, to a net importer of oil.

The Wall Street Journal report comments that the fall in oil exports "defies traditional market logic." Perhaps that should be blind faith that OPEC nations can turn on the taps if prices rise "too high". It seems even oil traders are unsure what is driving prices as according to one market analyst quoted by BBC News "we really don't know what the fundamentals are doing at any point in time." Much of the information on fundamental factors in the oil market is not public or freely available.

In simple terms demand is outstripping supply and prices are rising. This is how the market is supposed to work.

Other fossil fuel prices tend to follow oil. IEA's latest World Energy Outlook forecasts coal is set to rocket in demand, increasing by 73% from 2005 to 2030. This means coal's share in global energy demand will rise from 3% to 28%. It is predicted by 2015 America will go from being a net coal exporter to a net coal importer. Coal is the most carbon intensive way of generating electricity and this report predicts that rather than becoming a smaller part of the energy mix, coal is predicted to play a much bigger role.

With a presidential election this year in the United States and gas prices at record levels, oil and energy in general is set to be a key issue. There is the opportunity to have a serious debate about energy - a fundamental part of our lives which has been taken for granted for far too long. However the responses from the presidential candidates so far have not been encouraging.

In 2002 McCain declared that ethanol is a "giveaway to special interests in corn-growing states as the expense of the rest of the country." In 2003 he put out a press release saying "Ethanol does nothing to reduce fuel consumption, nothing to increase our energy independence, nothing to improve air quality." He went on to describe it as "highway robbery." Hillary Clinton signed a letter saying that there is "no sound public policy reason for mandating the use of ethanol".

McCain, Clinton and Obama all seem to have drunk the ethanol Kool Aid and seen the bright white light that has converted them to E85. In 2008 none of these presidential candidates seems to have anything negative to say about ethanol.

In 2006 Barack Obama along with four Republican and one Democrat senator introduced the Coal-To-Liquid Fuel Promotion Act.

There have also been accusations made against "Big Oil", "OPEC" (including by British Prime Minister Gordon Brown) and suggestions that a "gas tax holiday" or "windfall tax" would fix everything. It's always easier to find a scapegoat.

One bandaid being suggested from some quarters, is to open up drilling in the United States in areas which are currently off limit. This would give access to 19 billion barrels of oil enough to meet US needs for approximately two-and-a-half-years or world demand for just over 7 months at current rates of consumption.

To quote the head of the International Energy Agency:
"All countries must take vigorous, immediate and collective action to curb runaway energy demand.

The next ten years will be crucial for all countries... We need to act now to bring about a radical shift in investment in favor of cleaner, more efficient and more secure energy technologies."

Further Reading:
The Ethanol Scam in "Gusher of Lies"

You can read more on what the energy policies of McCain, Clinton and Obama should be in this Open Letter to the Next President.

World Leaders Needed: The Future of Oil and Everything Else

Today's post is inspired by an engineer, details of which I'll get to later.

Energy is the future. Our future depends on energy. Many people in the developing world spend much of their time thinking about and acquiring it. Firewood and food. Most people in the developed world spend little or no time thinking about or acquiring energy. An apparently endless supply of energy is assumed to be as certain as the sun rising tomorrow. Only a tiny proportion of us even consider this assumption, let alone question it.

And yet oil, gas and coal are finite and will run out (at least in economically significant and useful quantities). The end of cheap oil will arguably occur within a few short decades, if it is not already upon us. When I was at school I remember being told that oil would run out in a few decades. I remember feeling vaguely concerned, until it occurred to me that people much smarter than me must be working on it and would have a solution soon.

A few decades later I am wondering where these people are.

The answer of course is they live amongst us. Engineers, economists, bloggers, scientists, activists, and entrepreneurs. And yet at the moment most are not focused on solutions to our energy challenges, because many are not aware there is a problem.

Much of the mass media promotes materialism with shows such as MTV Cribs showing bigger and bigger houses with garages full of cars. Indeed here in the UK there seems to be one channel whose non-music programming is made up almost entirely of half hour shows titled "the fabulous life of" which seem dedicated to the worship of conspicuous consumption.

Most of our politicians seem dedicated to the "not in my term" mentality.

And yet despite our general lack of awareness, despite the scale of the challenges, the potential payoffs for coming up with solutions are huge.

For the companies and entrepreneurs who bring solutions to market there are bound to be significant financial rewards. Beyond this there is the prospect of a more peaceful world. I'm not proposing a utopian vision of a world where everyone lives in perfect harmony. However it is pretty easy to predict that having people compete over scarce resources is likely to result in conflict. Clean renewable energy offers the prospect of countries spending more time cooperating to harness the power of the sun, wind and ocean and less time competing over finite resources.

If the developed world stands to benefit from this, the developing world has even more to gain. Rather than experiencing the dirt and pain of industrialisation, renewable energy may allow them to leapfrog ahead.

As individuals it is time to become aware of our energy usage and its implications. Make our homes more energy efficient, switch to a renewable electricity supplier, generate some or all of our own power using means such as solar panels or mini wind turbines.

However it is not enough to act just as individuals. For humanity to move forward it is not about being more virtuous than everyone else. It is not about pointing fingers and assigning blame to drivers of certain types of car, people of a particular political affiliation or even to whole nations and continents. It is about building on what we can agree on and seeking consensus. We may not agree on the right solution but that's okay because there won't be one single solution - it will be a combination of many - it's more important to agree on a direction. A clean renewable, post fossil fuel future.

It is about informing, persuading, inspiring and influencing those around us. Our friends, neighbours, colleagues, society and the world at large.

Which brings me to the inspiration for this piece - a post by the Engineer Poet looking at the future of aviation once the cheap oil has run out and the discussion continuing in the comments section. It's just one example of people coming together to focus not on the problem, but on possible solutions.

Peak Oil: Non-Geological Peak Scenario

Geoff Styles has written a post on a recent report on peak oil by Science Applications International (SAIC) which was commissioned by the U.S. Department of Energy. What is particularly of note in Geoff's analysis is his emphasis on non-geological factors such as "geopolitics, access, and industry investment patterns".

In what I'm going to call the Styles Scenario - oil production could reach a temporary peak based on non-geological factors which could become permanent as a result of underdevelopment of resources by OPEC.

I agree with Geoff, time is wasting. The world needs a serious discussion about where our future energy supplies are going to come from.

The Styles Scenario: Geoff Styles' full post on a possible non-geological peak in oil production

Alternate Energy Japan: Energy Plan to Decrease Dependence on Oil

Japanese Prime Minister Junichiro Koizumi on Friday instructed ministers in his Cabinet to work out a long-term energy plan featuring increased use of alternatives to oil, such as solar and wind power, a government official said.

At a meeting of ministers on the country's energy policy, Koizumi said Japan should draft an energy plan that goes beyond the one the government has compiled up to fiscal 2010 and that the new plan should put priority on departing from oil dependency and boosting alternative energy consumption, the official said.

"We need to decrease consumption of oil and bring in new alternative energy sources including solar and wind power as well as fuel cells," Koizumi was quoted as saying. "That is the way we should transform our country from a nation with almost no resources."

Recent surges in crude oil prices to record-high levels are behind the policy, the official said.

The premier said nuclear power is an important source of energy for Japan but it would be difficult to increase the number of nuclear power plants.

Some electric power companies have become reluctant to promote nuclear plant construction because of local opposition and the high cost of building and running the plants, analysts say.

Under the government's revised energy supply plan, which is expected to be formalized by May, Japan aims to lower dependence on petroleum in primary energy supply from 47 percent in fiscal 2000 to 41 percent in fiscal 2010.

Considering the technological lead Japanese automakers like Toyota and Honda have shown in hybrid technology, it is time for the Japanese government to show leadership in promoting plug-in hybrid technology and alternative energy. By doing so Japan can lock in long term electricity and transportation fuel prices and reduce its significant exposure to rises in fossil fuels prices. It also has an opportunity to set an example on an international level by leading the way to a post oil age.