Absorption of Carbon Costs Will Prolong Our Dependence on Coal

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As we look towards the future and envisage a world that is entirely dependent on green energy, we need to look at how to reduce our usage of coal. Yet, while discussions generally revolve around coal mining and burning, there is little talk about the vital element that links the two: coal transportation. Transportation amounts to a significant cost of electricity and looks likely to be a cushion that will slow down the process of phasing out coal in the US energy system.

This is the conclusion that has been drawn by Louis Preonas, an Energy Institute PhD student. The paper, “Market Power in Coal Shipping and Implications for U.S. Climate Policy”, demonstrates how railroads make hefty profits from the transportation of coal. Indeed, in order to keep coal-shipping business, the railroads absorb some of the price increases carbon is facing. This is going to have a negative effect on a country trying to reduce its greenhouse gas emissions.

Preonas estimates that the charges levied on generators, associated with their greenhouse gas emission aren’t actually affecting coal profitability as much as it is assumed. As coal prices go up, transportation costs seem to be falling, which evens out overall profits.

Not all railroads are absorbing these extra costs but the impact can be clearly seen at plants that are serviced by just one railroad. This counts for almost half of all coal-fired power plants in the US. Plants that sit near rivers and lakes that have multiple railroad access routes are less able to cushion the blow of the levies and to keep their customer’s plant running.

At the moment the cost of GHG emissions is quite low or non-existent across most of the country so it is difficult to assess the impact GHG pricing will have on coal-fired generation. Nevertheless, the actions of the railroads are an indicator of how transportation companies are likely to react if the carbon price becomes a factor to contend with.

Preonas notes in his work that this practice by the railroads of lowering their prices in order to keep certain plants in business means that greenhouse gas emissions have reduced 8% less than they would have had the railroads not been cushioning the blows of the increased prices. The fracking boom was expected to have a much more significant impact on the level of GHGs being emitted.

The effects of fracking are fascinating and are worth considering but what should really be at the forefront of policymakers’ minds is the effect it will have on the effects of carbon pricing on coal plants. Preonas indicates that some coal plants could have as much as a quarter of their carbon price absorbed, which means they would be operating with 25% less extra cost than other plants.

As of yet, the world does not have much experience with using market mechanisms to regulate environmental pollution. They certainly have much less effect at the moment than legislation designed to control pollution. It will be interesting to see how these market mechanisms develop in the future and to see how effective we can make them.

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OPEC forecasts rise in oil demand, but now sees more US output growth

MW-DB861_oil_ba_ZG_20141218110209.jpgOPEC predicts that the global demand for crude oil is going to increase in 2018 along with an unexpected increased output from the United States and other various countries.

There has recently been an emphasis on capping oil production in order to reduce the global stockpiles that have affected prices for over three years. This is OPEC’s goal despite it having just extended output limits for Russia and another nine countries that produce oil. The total of main producer nations is now 24.

There are concerns that the supply increase from non-OPEC countries will make OPEC’s aim of reducing these stockpiles harder to achieve, despite the fact that OPEC’s production fell in November.

It has been forecast that production from non-OPEC nations will increase by almost 1 million barrels per day next year. That is significantly more than its previous estimate.

In a monthly report OPEC explained: “Higher-than-expected supply growth in the U.S., Canada and Kazakhstan have been the key contributors to the upward revisions, particularly U.S. tight oil.”

Oil production in the U.S has also been rejuvenated after it slumped, back in September of 2016. The current production rate is around 9.7 million barrels per day – up from 8.5 million. The driving factor for this new growth is the country’s shale fields, which use advanced and innovative methods of extraction to obtain oil and gas from rock formations. This system is also known as ‘tight oil’.

In 2018 the U.S was originally predicted to grow its production by about 180,000 barrels a day, but this has now be reconfigured and looks more likely to be around 1.05 million. This appears to be down to a number of reasons, including increased investment in tight oil and a more efficient extraction system. The same jump in growth has been forecast for other non-OPEC countries.

OPEC has stood by its bullish prediction for oil demand in the coming year and reckons that demand will grow by around 1.53 million barrels per day. This is a greater number than was forecast last month.

In the OPEC monthly report, it is recorded that November of this year saw oil production for OPEC drop by 133,000 barrels a day – taking the total down to 32.45 million. Angola is considered to be a notable factor responsible for this dip as its daily production went down almost 109,000 barrels per day. Saudi Arabia and the United Arab Emirates also saw some decline, as did Venezuela – a feature that has been steady since the country fell into its economic crisis.

Fortunately, Nigeria made up for some of the decline from other countries by increasing its production by about 96,000 barrels a day. However, Nigeria and Libya have agreed not to produce more than they did this year in 2018.

When considering next year’s production total, OPEC took into account its own production as well as that of non-OPEC countries. It came to the conclusion that next year will average 33.2 million barrels a day, which is slightly more than was produced this year.

“Combined with continued efforts by OPEC and non-OPEC to support oil market stability, this should lead to a further reduction in excess global inventories, arriving at a balanced market by late 2018,” OPEC said.

Offshore Wind Farm Cape Wind Officially Comes to an End

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The Cape Wind offshore wind project is officially dead. Situated just off the coast of Massachusetts, the wind farm was the object of some ire from the Kennedy and Koch families back in the day.

Once expected to be the first offshore wind farm in the United States, all efforts to build the facility have completely ceased. Indeed, the farm’s developer, which is based in Boston, has informed the Bureau of Ocean Energy Management that its development lease from 2010 has been ended.

The closure of this wind farm is by no means sudden. In fact, Cape Wind has been slowly but surely moving towards death for some time now. From the get go the wind project came up against heavy opposition from powerhouse families, including that of the billionaire industrialist William Koch. The aim of Cape Wind was to supply energy to Cape Cod as well as Martha’s Vineyard and Nantucket. Despite Energy Management, the company in charge of the wind farm, coming out of numerous court cases victorious, the final blow came when its contracts to sell power to local utilities was cancelled in 2015.

On Friday, Amy Grace, an analyst for Bloomberg New Energy Finance, praised Jim Gordon, founder of Energy Management. She said he was a visionary and said, “he brought the project to the goal-post. He just faced a very vicious and very well-funded lobbying organization to protect Nantucket Sound.”

Originally, the plan was to build up to 130 turbines in Nantucket Sound. It was predicted to be a pioneering movement for the United States towards a future of clean energy. The project was given the go ahead to build upon and develop an area 5 miles off the shore of Cape Cod. It was estimated by the U.S Energy Department that, once at full capacity, Cape Wind could have generated enough electricity to power 200,000 households.

Overall, the total cost of the project was going to be $2.6 billion and had already received a conditional loan guarantee of $150 million. It also had a number of big backers willing to offer debt packages and equity investments. These names included Mitsubishi, Siemens and Rabobank.

However, in the end all the backing it received couldn’t save it from its untimely death. The opposition proved too much and the project was called off. On the one hand, environmental activists said the wind farm would be a good thing and would decrease dependence on fossil fuels. This was countered on the other hand with shore-front real estate owners who said that the farm would ruin the views from Cape Cod and could interfere with fishing areas.

The project was hit with lawsuit after lawsuit and was seriously delayed, causing it to miss a number of contractual milestones. This is what led to its power supply contracts being cancelled in 2015. When this happened analysts declared the project ‘all but dead’.

Clearly the lesson to be learnt from all of this is simple: don’t build your wind farm within sight of the shore.

The Fate of the Energy World Lies With China

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It is looking increasingly like the future of the global energy market is going to depend largely on China. Beijing is now such a momentous force in the energy market that anything they do, or don’t do for that matter, can be felt by everyone.

Indeed, China has done great things over the past thirty years. They have pulled half a billion people from the depths of poverty and placed them solidly into the world of modern consumerism – each of whom has energy requirements. Nowadays, almost 60% of the Chinese population is resident in the country’s big cities and this means energy demands are higher. In fact, the Chinese energy demand accounts for 25% of all global consumption.

Naturally, as the demand for energy grows the country will need to consider ways to accommodate this. This means changing the energy mix to create a more sustainable system. Unfortunately, it is proving difficult for analysts to predict what this change will look like and when it will come.

So far, there are three possible options – all of which are completely plausible.

The first option is the China starts developing its own shale gas. The country definitely has the resources to do this and if it is done successfully China might lose its dependency on imported energy and become self-sufficient. This would have a huge impact on gas exporter countries like Russia and Australia which have factored into their plans the assumption that China’s demands for imports will grow. With China being estimated to become one of the largest gas importers on earth, you can just imagine the chaos that would be caused by the country becoming energy self-sufficient and withdrawing its import demands.

The second option on the table is that China fulfils its traditional ethos of self-sufficiency and reduces its oil imports. This would mean that only a select few processes would use oil – and only in circumstances where no alternative would do. The use of electric cars would then fill the gaps left in the framework of personal mobility. China could then buy its reduced oil requirement from a compliant supplier in the Middle East (namely Saudi Arabia) and relinquish its dependence on oil from places like Angola and Venezuela.

Finally, China might well decide that they cannot afford to close down coal mines and other industrial operations. This could lead to widespread unemployment and would look very bad for the Communist party. This being the case they would have to keep the operations going at the expense of continuing to produce high emissions. Or maybe not. China could well close down the plants in the big cities where the air quality is at its worst and keep its rural operations going. This would improve air quality in the cities without increasing the national unemployment rate too much as workers will have plenty of alternative job options in the city.

Whichever path China decides to take, the knock-on effects will be felt around the world. In brief, the fate of the energy market lies in the hands of China.

 

What is Shale Oil

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We are all in a certain way familiar with oil as a slick, liquid substance that is able to be burned as fuel or used in other chemical processes. But though the gasoline we pump in our cars may seem pretty standard, same with heating oil, there are many different types of crude oil, each with their own characteristics based on the location and way it was extracted.

Shale oil has become more and more of a household term globally, though often confused with shale gas and hydraulic fracturing. Shale oil is the result of treating oil shale rock fragments in order to obtain liquid oil for further refining and processing for use as fuels. So in essence, it is the result of turning a solid rock into a liquid. As early as the 14th century humans have been using shale oil as a fuel source for heat and light.

The discovery of crude oil, a more cost-effective source of oil, in the Middle East meant the demise of much of the shale oil industry which was established in Australia, Brazil, the United States, China, Estonia, New Zealand, South Africa, Spain, Sweden and Switzerland. However, some remained, and the industry was restarted in the early 21st century as a result of the rising cost of oil which made shale oil production feasible again.

Presently, the United States of America are known to have the largest deposits of extractable shale oil, maintaining 4 of the top 5 spaces with over 2,000,000 million barrels of in-place shale oil resources for these four, and over 3,000,000 million barrels when all reserves are added in.

As oil prices rise again in the coming years, we can expect these reserves to be increasingly exploited and growth in the sector.

What’s an Electricity Meter?

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Household electricity meters are one of the most common and most well known components of the electricity network. Utility companies use these devices to keep track of how much electricity is consumed, and will bill the customers accordingly.

Often, a customer will have someone from the utility company come by and “read” the meter, but this is no longer necessary in all cases. Many of the principles of metering electricity have remained the same, but the technology we use to log, store, and transmit these readings has changed significantly.

Advanced Metering Infrastructure, or AMI, is a wave of metering technology that allows for direct communication between the meters installed in homes and businesses and the utility. The benefits to utilities is that there is no longer the need to perform manual readings and checks, but also that any faults in the systems can be reported directly leading to a better management of outages.

Though these types of meters are not without their drawbacks. Consumer groups and industry watchdogs have cautioned against rapid deployment of these meters for privacy and security concerns. The more connected we are, in a way the more vulnerable we become, creating more portals for intrusion to take place. However, there are many safeguards and as electricity is seen in many jurisdictions as an essential public service, the government oversight and regulatory infrastructure is able to monitor and safeguard safety and consumer interests.

The benefits to consumers may not be as apparent with these so-called smart meters. Many rollouts have seen consumer backlash citing the disadvantages mentioned above. However, for consumers there is potential for more transparency and insight into energy use, and the integration of systems to allow for better management of consumption, to take advantage of lower rates in time-of-use billing scenarios.

Angela Merkel: The Fate of Humanity Depends on Climate Change

f-trukel-a-20161118.jpgAngela Merkel addressed the world’s nations at a recent climate change summit saying: “Climate change is an issue determining our destiny as mankind – it will determine the wellbeing of all of us.”

 

Attendees at the summit listened to a number of moving political speeches, urging them to use their time wisely and to do whatever they can to put the Paris Deal into action. The Paris Deal was agreed upon in 2015 and might just be one of the most important decisions of the century. Without it, it is expected that global warming will see the world heat up 3 degrees Celsius – the result of which would be utterly devastating.

 

The UN secretary general, António Guterres, spoke about his visits to the Caribbean in the wake of this year’s hurricanes. He commented on the catastrophic damage that had occurred and pinpointed climate change as one of the main causes for the disasters. He also directed his disappointment and disapproval at the $825 billion investment into fossil fuels that was made in 2016.

 

When Emmanuel Macron took the stage he openly criticised Trump’s decision to take the US out of the Paris Deal. But, he was met with hearty applause when he stated that France and its European partners would make sure that there would be no funding gap left by America’s departure. “They will not miss a single euro,” he said.

 

Macron went on to stress the importance of battling against global warming stating that “the fight against climate change is by far the most significant struggle of our times.” He also made it clear that it is up to the wealthy nations in the world to pay for the fight against climate change because it is they who are responsible for it. Climate change, he commented, adds yet another level of injustice to the world.

 

The French leader finished his speech with a rather unusual detail. He announced to the public that France aims to have all its coal plants closed down by 2021. He also said that there would be a ban on exploring new fossil fuels in all of its territories. These were among a number of measures he is adopting to drive out coal and gas and aim for a more sustainable future.

 

Angela Merkel has come under significant pressure recently to act regarding Germany’s coal-fired power stations. She acknowledged that Germany still uses a lot of coal but explained that it was important to take jobs into consideration before making any rash decisions. However, Prof John Schellnhuber, from the Potsdam Institute for Climate Impact Research in Germany, said that the 20,000 jobs in coal about which she was concerned would most likely be lost to mechanisation anyway.

 

What’s more, Schellnhuber stated that as the economy expands each year, around 600,000 new jobs would appear. This would be more than enough to compensate for coal jobs that were lost due to phasing out the power stations.