Below the fold is the 3rd in a series of follow up posts providing analysis on the difficulties of maintaining our current energy paradigm with renewable energy (generally, 'the fake fire brigade'). The main authors are Hannes Kunz, President of Institute for Integrated Economic Research (IIER) and Stephen Balogh, a PhD student at SUNY-ESF and Senior Research Associate at IIER. IIER is a non-profit organization that integrates research from the financial/economic system, energy and natural resources, and human behavior with an objective of developing/initiating strategies that result in more benign trajectories after global growth ends. The authors have written an extensive follow-up to the questions raised in the original posting and I've broken into 5 pieces for readability - the 3nd installment, with a focus on electricity generation in an energy transition, is below the fold. This installment has been delayed a few weeks due to Hannes taking time off to get married....

The Biggest Part of Business As Usual - Electricity

In this third installment in this series, we want to put some emphasis on one of the most important enablers of human civilization of the 20th century: electricity. Its ubiquitous availability from every power plug is something we take for granted, despite the fact that stable electricity production is probably one of the most complex continuous endeavors of mankind, and one where many poorer countries fail.

In this post we would like to provide an overview of some of the properties of electricity, describe its nature (as a flow based system), and explain what challenges it faces in the future – especially those related to maintaining current delivery patterns once we have to increasingly rely on inputs no longer coming from fossil fuels that can be stored and burned mostly at our discretion, but from increasingly stochastic, largely uncorrelated flows such as solar or wind.

Electricity is a core topic of IIER’s research, because for us, maintaining anything that more or less resembles our current advanced economies is synonymous with uninterrupted, reliable electricity which mostly comes as a discretionary service to the user. Users, in this case, aren’t just private consumers, but also industrial and commercial applications, which are part of any advanced society.

Electric power is also the area of greatest debate, greatest hope and greatest investment, and the area where IIER thinks that societies face challenges with all their current attempts. Presently, OECD countries are targeting electricity generation as a means to meet carbon emission reduction goals, while simultaneously encouraging the development of non-fossil fuel based transportation (e.g. electric vehicles) and other moves away from coal and oil in industrial applications. They do this – so we think – without a robust plan as to how to maintain today’s delivery security. All plans aim at combining wind, solar, geothermal, and nuclear, super- and smart grids into one new robust delivery system, and there seems to be general agreement that this will actually work. But after thorough and unbiased research of the characteristics of electricity delivery systems, the parameters of those new technologies and the discrepancies between assumptions and reality, we are now skeptical as to whether societies will be able to provide stable electricity at acceptable prices going forward. We realize that this statement is almost considered a sacrilege.

Below, we will try to explain our concerns step by step, and why we fear that investing hundreds of billions in an electricity system that is far more complex and far less reliable will lead us in the wrong direction, given the details of our current situation. Once again, a clarification: we are not arguing the fact that we slowly have to move away from fossil fuels and start using more renewable sources to provide our energy needs. However, we disagree with the common notion that societies can make this renewable energy transition and still receive the same services as today: stable and affordable electricity not just for private consumption, but for all uses that are part of an advanced industrialized society.

IIER’s Electricity Availability Index

In our first post, we introduced IIER’s Electricity Availability Index. It measures the availability of electricity in a country based on penetration (% of population with electricity) and reliability (outages and duration of outages per average customer).


Figure 1 – IIER Electricity availability index

Some commenters questioned the relationship between electricity and wealth (measured in purchasing-power adjusted GDP per capita). Such was the first hypothesis we tested when developing the EAI metric. The chicken-and-egg question can - as we think - be resolved quite easily, by testing in which directions we find the outliers. In case the assumption of “wealth is possible without stable electricity” is correct, there should be countries with low electricity availability that still are quite rich (measured in GDP per capita). However, these do not exist, the “richest” outlier is resource-rich Botswana (diamonds, copper, nickel) with close to $14’000 per capita and an EAI of only 21.9%. On the other hand, we do find rather poor countries with almost 90% electricity availability (such as The Philippines and Mongolia, with a per capita GDP of around $3’500), which leads to the conclusion that the correlation is unidirectional, or in other words: You don't have to be rich to have stable electricity, but your country needs stable electricity to become (or stay) rich.

The benefits of electricity

There are two discrete aspects of electricity’s importance to society: the benefit of its ubiquitous on-demand availability, and the severe side-effects of power interruptions. Let’s look at a simple illustration. Few companies in OECD countries install backup power for desktop computers, despite the risk of data loss during a power outage. The reason is economic – outages are so rare that the possible the cost for buying, maintaining and operating the backup equipment outweighs the risk of outage, which is why only servers and data centers are deemed worthy investments into power backup solutions. In emerging or developing countries, backup systems are commonplace, but only if businesses can afford them. But most local businesses cannot, which makes it primarily an option for international corporations, while local companies are at a disadvantage.

Other applications, particularly of industrial nature, can’t even operate with backups; they simply need a power guarantee. The pots of an aluminum smelter require uninterrupted power 24/7, 365 days a year. If the power is lost for more than a few hours, not only does the process stop, but after a short while the aluminum begins to congeal, with the consequence that the entire pot has to be scrapped, incurring costs of millions of dollars. Or think of a shopping mall that suddenly goes dark. No lights except for emergency lighting, no access to transaction services to process a credit or debit card, no elevators or escalators, and ultimately no sales. There are multiple studies on the cost of “reliability events” in power grids, each reporting very significant losses (a lot of research has been done at Berkeley Lab, documents can be found at: http://certs.lbl.gov/CERTS_P_Reliability.html). So while – as many people correctly say - power outages are just a nuisance to private households as long as they don’t exceed the time a fridge or freezer can hold its temperature, they are a threat to all more complex industrial and commercial activities that make our societies “advanced” and require the humming of electricity-driven machinery almost around the clock.

This now ties back to the Electricity Availability Index – many things are either impossible or economically not feasible in environments where grid stability becomes an issue. And even for applications where it is theoretically possible to ramp them up and down without efficiency or material losses based on energy availability, there are significant social costs associated with unpredictability. If there is no power, should we send all the workers home for a week, and call them again at 1am on the Sunday when supply comes back? We can certainly do this, but in reality we would probably rather cease many of those activities, because the opportunity cost of underutilized equipment and labor becomes so big that the final objective no longer makes economic sense.

What is electricity and how is it delivered

There are two ways that electricity is supplied. In smaller, poorer, or more remote areas, electrical production is achieved by a standalone solution that provides comfort or capabilities to those able to afford it. Often this is provided by diesel generators which can produce electricity as required, or by standalone hydro, coal or natural gas power plants which serve a local area or industrial activity. Increasingly, solar panels combined with batteries provide this service, or wind turbines in conjunction with oil based generators. The key characteristic of this type of delivery system usually is very high cost per delivered kWh.

In richer economies or even in urban areas almost all around the world, electricity is delivered via a centrally managed grid, which balances inputs and outputs effectively to ensure that demand is always met. In poorer countries, this often does not work out, with the consequence of regular grid breakdowns. In OECD countries, however, we are so used to the grid’s reliability that even small power outages regularly make the news headlines. Below, we will mostly focus on grid based systems, as only those are capable of delivering the basic industrial and commercial services for societies we are used to receiving.

What we get from our power sockets as “electricity” is the product of an electric current that is converted into useful work by an appliance. To make sure that those appliances work, particularly more fragile ones involving electronics, voltage and frequency must be standardized across entire regions (for example 120V/60Hz in Northern America or 230V/50Hz in Europe).

An electricity delivery system can be compared to a complex set of water pipes where water (electricity) enters at multiple points and is withdrawn at hundreds of thousands of faucets. Contrary to a water delivery systems, these electrical ‘pipes and faucets’ are so fragile that they almost immediately burst or collapse when too much or too little water is in the system. Or in other words – electricity is a fully flow based system, where inputs and outputs have to be matched at any point in time with deviations of less than 0.5% between supply and demand (see ENTSO-E manuals for more detail: https://www.entsoe.eu/index.php?id=57, particularly the one on “Emergency Procedures”) .


Figure 2: Grid based system (Source)

Currently, this system is fully supply-controlled (i.e. production is following expected and actual demand), which is why it has become so beneficial to society. It delivers seemingly unlimited and unrestricted amounts of energy to each room in our homes, offices and factories, and except for heavy loads in an industry or computing (server farms), there is no user-level planning required before flipping a switch, plugging in a heater, turning on a computer. Electricity just flows according to one’s needs. Later, we will examine demand side flexibility, but first, we want to focus on the supply side, which is where electricity systems are controlled today.


Figure 3 – schematic delivery system (current status)

To meet demand, which follows the cycles of human ecosystem patterns (days, nights, work/non-work days, heat, cold) is today matched by a combination of power sources that together form a highly flexible supply system, which also includes reserves to match unexpected demand spikes or sudden supply-side failures, for example when a power plant experiences an emergency shutdown. We will dive into the different load patterns and reserve provisions a little further down, but the key characteristic of a vast majority of inputs today is that they are fully predictable and mostly controllable. This is because inputs come from steady flows (like a running river), but by a large majority from stock based resources that can be consumed whenever there is a need, such as coal, natural gas, stored water or nuclear power (the latter could, for reasons to be discussed further down, also be seen as a steady flow). So in essence, what we have built is a highly complex system that converts steady flows and stocks into a well-managed, demand driven flow of electric current.


Figure 4 – types of inputs into electricity grids

What most OECD countries plan to do is to replace some of those steady flows or stocks on the supply side by adding more and more renewables with erratic flows. Currently, those stochastic, non-controllable flows from solar and wind power account for a maximum of 5% of total power production in each interconnected grid systems we are aware of [see Table 1 for the U.S. (combining Western and Eastern interconnection for lack of data) and for the European interconnected grid system – ENTSO-E], but by 2030, most countries in the Western world plan for 20 or 30% of electricity to be delivered from those two sources alone, accompanied by other new technologies.


Table 1: wind and solar power share in 2009/10 for major grid systems (EIA 2010, ENTSOE 2010)

In Europe, the almost 5 % of solar and wind are very irregularly distributed, with some countries totaling close to 0%, and others already experiencing up to 20% (Denmark) of those renewable sources. All those countries with high shares manage their problems with the significant help of their neighbors. Very small Denmark for example uses the comparably huge water power systems in Norway and Sweden to buffer its heavily variable wind outputs.

This grand plan – to maintain something that already now is highly complex by adding multiple layers of complexity – is something we are very concerned about. The overlying challenge is to keep a flow-based demand system working while stochastic, non-controllable flows gain a significant share of supply, and to do so without jeopardizing grid stability, and at a price which is still affordable. We believe that most people underestimate this challenge and that it actually may be insurmountable. Important: “affordable” in this case doesn’t mean it can be paid by individual households for their relatively small amount of required electricity, as they may be able to bear 20 or 25 cents for a kWh, but instead for an entire industrialized society with the need to provide all the goods and services that make it what is considered “advanced”.


Figure 5 – shift to larger amounts of stochastic flows

What is an acceptable price for electricity?

What a high cost of oil does to societies has been well researched and documented in a number of papers (see: http://www.iiasa.ac.at/Research/ECS/IEW2005/docs/ppt/IEW2005_Maeda.ppt) . High oil prices seem to be a clear inhibitor of economic growth and early indicators of coming recessions. The reason behind this is the fact that the higher the cost for energy is, the less of our efforts can go towards discretionary spending (Hall, Powers and Schoenberg 2008). It is an inherent property of EROI: the energy and money we spend to procure and extract energy, is unavailable to spend on discretionary and non-discretionary investment and consumption.

There is no reason why the situation should be different for energy inputs other than oil, as higher energy costs always leads to this diversion away from consumption and investment. However, creating a benchmark is not easy, as electricity rates have been relatively steady during the times when oil prices fluctuated heavily, which gives us no past reference.

Using oil, where a relatively solid research base exists, we wanted to create a benchmark for “tolerable” electricity prices. Some papers suggest that oil prices that grow from 25 to 35 dollars have a negative impact of 0.3-0.5% on GDP in various countries (http://www.iea.org/papers/2004/high_oil_prices.pdf). We currently are at around $80/barrel, and are still in the middle of a bad crisis, which just looks less bad because governments have started to run up deficits at a breathtaking pace. At $150/barrel, in 2008, the current recession began with a vengeance, and many researchers suggest that high oil prices had their fair share in pricking the problem.

So based on experiences from 2008, we can probably assume that oil prices around $150 per barrel choke many economic activities, as the marginal cost becomes unbearable for many private and commercial consumers alike. Even at the current price of approximately $80/bbl, transportation and other energy-intensive sectors are under heavy pressure, and oil prices push commodity prices up. As a reminder: During the past 50 years, the median price for oil stood at about $25/bbl (inflation adjusted to current dollars). If we look at energy content in a barrel of oil (6.1 GJ or 1700 kWh), a price of $150 translates to a cost per kWh of 8.8 cents, $25 translates to 1.5 cents per kWh in oil.

The difficulty now comes in finding a meaningful comparison between oil and electricity. Oil is a high quality and high density raw energy source with excellent properties with respect to transportation, storage and processing, while electricity provides a distributed service at a comparably high quality. We assume that the same energy content in electricity is of higher value to society when compared to oil, which thus can bear a higher cost for the same amount of energy (this was also part of the Divisia index developed by Cleveland et.al.: http://www.eoearth.org/article/Net_energy_analysis).

One method of comparison would be to compare the ability to convert a specific source to heat (http://www.eia.doe.gov/cneaf/electricity/epa/epat5p4.html). To produce the same amount of useful heat, about three times as much oil is required when compared to electricity. So while the lower limit would ask for a direct 1:1 comparison, a “bonus” factor of three for electricity sets the upper limit. However heat – today – is no longer the key use of oil; heat may be produced with natural gas or coal at much lower cost (at less than a third of that of oil). In the predominant applications for crude oil today, transportation fuels and chemicals, electricity is at a clear disadvantage. We therefore decided to assume a bonus for electricity in the middle of the two possible values at 200%, i.e. we attribute twice as much value to a kWh in electricity when compared to crude oil, and equally, set the threshold for economic trouble at twice that of oil.


Table 2: relative prices of electricity and oil

Under such an assumption, we see in Table 2 that electricity prices become critical at around 9 cents per kWh, equivalent to about $70/barrel of oil, and then unbearable at 15-18 cents (equivalent to 130-150$ oil). This is an average value for an entire industrial society, as wealthy private consumers can tolerate rates even higher than 20 cents per kWh.

But unfortunately, a society doesn’t just consist of consumers; it also needs to produce goods and services, and there, a cost of 15-18 cents will definitely be unacceptable. Given that Chinese manufacturers often operate with final electricity cost between 4-5 cents per kWh, even the 2008 average price paid for industrial electricity of 6.83 cents puts domestic U.S. companies at a significant disadvantage. At today’s electricity levels, highly energy-intensive applications are no longer competitive, which is already visible in industrial trends – it is not only labor-intensive work that is going abroad, energy-intensive industries such as aluminum smelting and steel manufacturing are leaving areas with high electricity cost.

Another method available to create a metric for “acceptable” electricity prices is to use the ratio of electricity cost to total GDP. At the average rate of 9.74 cents per kWh of delivered electricity, all electricity consumption costs the United States about 2.6% of U.S. GDP. If we separate out the industrial portion of GDP (2,737bn US$ in 2008), a similar portion (2.5%) is spent on electricity, at the average price of 6.83 cents. Should this price – for example – triple to 20 cents, suddenly 7.4% of total industrial cost would go towards electricity. This is far more than the profit margins of most energy-intensive industries.

For the U.S., where a large portion of heavy industry has been cut back already due to the relatively high cost of labor and energy compared to other places, such an increase may seem bearable. But what if China would operate under the same regime, replacing current low-cost electricity from coal with expensive new sources? In China, electricity alone totals to approximately 3.5% of GDP at an average cost of 5 cents/kWh, quadrupling the cost per kWh to the same 20 cents would demand that the country diverts 13.8% of its GDP to electricity. This is not feasible, as it – together with oil, coal and natural gas, would divert more than 25% of total GDP towards energy alone – representing a society-level EROI of 4:1. One of the reason why China fares so badly here is because the country provides a lot of the cheap energy Western societies no longer have, and then import it embedded in goods.


Table 3 – electricity price sensitivity U.S. and China

If we want to run a complete industrial society, looked at on a global scale, energy prices above certain levels are not sustainable, as they reduce available surpluses for consumption and investment. And unfortunately, those cost levels of 15-20 cents per kWh on average are exactly where societies are headed with the planned changes. We will cover those aspects in more detail further below, when looking at individual technologies.

Meeting demand – in more detail

In order to understand what we need and what we receive from multiple technologies, it seems important to split out the various types of load grid operators have to deal with.

Base load – defined as the long-term minimum demand expected in a region – is usually provided by technologies with relatively low cost, high reliability and limited ability to modulate output. This includes nuclear power plants, lignite coal plants and hydroelectric water mills in rivers. Those plants typically have to operate continuously at relatively stable loads, as otherwise their efficiency is reduced significantly, leading to higher cost per unit of output. Also, re-starting those power plants is relatively time-consuming and inefficient. In most countries, base load capacity is capable of covering approximately 100% of low demand (during nights and weekends).

Intermediate or cyclical load – the foreseeable portion of variety in loads over a day is provided by load-following sources that can modulate to higher or lower output levels – or almost entirely be turned off and on within a relatively short time. However, these sources usually require some lead time to grow or reduce output, for example some coal power plants. Today, natural gas is used for a significant portion of cyclical load.

Peak load – usually required within very short periods of time for a few hours a day – can be provided only from sources that can be turned on and off within minutes, this typically includes gas and small oil power plants as well as stored hydropower (dams or pumped hydro). Peak capacity can be provided by spinning reserve plants (e.g. running plants that can increase capacity quickly) or by non-spinning sources, which can be turned on within minutes.

Beyond technology limitations that make it difficult or uneconomic to ramp capacity up or down quickly, the key factor in the eligibility of a technology for the use in peak, cyclical and base load mode is the cost share between capital investment and fuel cost. The higher the fuel cost share, the more suitable a technology becomes to support peak power; the higher the investment share, the more operational hours are required to arrive at an acceptable average price per kWh. We will look at this issue further below, but this for example is the main reason why nuclear power is such a bad load-following or peak source.

Demand flexibility has a (high) cost

Another point has to do with the flexibility of electricity use, i.e. the possibility of turning something on when supply is abundant, and turning it off when power is scarce. The problem lies with the nature of most uses: many applications are simply inflexible, like those that require something to run for 24 hours a day - data centers are among them, and so are some key industrial processes. Lighting is not flexible, nor is access to heavy uses of electricity in households, such as cooking, using electronics or most kitchen appliances. We also want hot water and cool air when we need it, and usually we don’t want to schedule our laundry because someone tells us to do so, even though this is probably the easiest part. Now some applications, particularly heating (air and water) and cooling (air and goods), indeed have certain flexibility potential. We can run a freezer or air conditioner that produces ice to bridge supply gaps, or we can build a water heater which produces enough hot water to get us through the day, a very common application today in Switzerland, where night energy rates are often half of daytime rates even for households. However, such a time shift comes with tradeoffs: any application that uses storage instead of directly converting electricity into the desired quality output (heat or cold here), ultimately adds cost, for several reasons.

Making equipment flexible comes at a cost, either the cost of information transfer (for price-regulated markets) or the cost of storing the required energy for later use. France has been quite active at experimenting with contracts allowing them to regulate energy according to supply, where customers pay less for power that can be cut off at any point in time. This is especially important in France because of the inflexible nature of their generation technology mix with almost 70% coming from nuclear power. Yet the flexibility French grid operators were able to evoke from that market mechanism, despite the heavy incentives, was around 2-3% of total peak demand (according to RTE, the French grid operator). Most users obviously prefer the inconvenience of higher prices versus the inconvenience of service interruptions, even for things that are not mission-critical. This fact leaves us with approaches that actively shift energy consumption without affecting the end-user. Mostly, this translates to some kind of storage, which has a number of disadvantages.

Every piece of equipment that includes a storage mechanism is significantly more complex than one that operates without, and because of that complexity becomes more expensive, more energy-intensive in its manufacturing, and more exposed to failure. Additionally, each storage process incurs losses. If we produce hot water at night that should last through the entire day, some of the heat dissipates, dependent on how well insulated the storage tank is (again this is dependent on cost and effort, as well as space). The same is true for air-conditioners or freezers that use ice produced at night as buffer – they are less energy efficient overall. Both applications can still be economical for the end user and society as a whole if they use cheap base-load power at night and avoid using peak electricity during the day. Ice-based air-conditioning systems are quite common in office buildings in some parts of the U.S., where utilities charge different rates between night and day. But there is a caveat: all those approaches are geared at balancing two almost steady systems with fully predictable 24 hour cycles, nightly base load production and daily usage patterns with a peak or two. Thus, the maximum storage time required is 10-15 hours, which reduces system complexity as well as conversion and storage losses to acceptable levels. Now with renewable energy supplies, we are suddenly confronted with irregular patterns that can include days to weeks of over- and undersupply. In those cases, storage and conversion losses beyond a few days become almost insurmountable hurdles, as cumulative losses grow quickly over time.

So in a nutshell – there are technical solutions for many of these problems, but often the outcome no longer makes economic sense – neither for the individual user nor for a society.

Moore’s law and receding horizons

A key assumption of many forward projections for renewable energy production is that the technology will become cheaper and cheaper over time. Unfortunately, this isn’t true for many technologies, especially as fossil fuel inputs become more expensive.

One of the often cited rules in energy discussions is Moore’s law, which describes the fast advancement of capacity improvements (and price decreases) in computing power. It says that the density of calculation power can double every two years, and has been relatively consistently achieved since 1970. This has led to the fact that a smartphone today has more capacity than large mainframe computers in the early Seventies.

However, outside electronics, Moore’s law does not apply and has never applied for anything. A physical structure remains a physical structure, and does not have the multiplication potential that comes from miniaturization. We may be able to raise the efficiency for a photovoltaic panel from 18 to 20%, but not double it every two years no matter what we do, given the physical limits. The same is true for the materials used for its manufacturing; we might reduce them, but often by 10-20% and sometimes at the cost of more complex tools and purer materials (which also require energy). And erecting a modern wind turbine always requires steel, concrete and many advanced materials, which won’t change, no matter how much we optimize it.

For normal industrial goods, price curves often show an asymptotic form. When a technology is new, neither its production nor its outputs are focused on efficiency; production facilities are small and processes involve a lot of manual labor. Also, new technologies often get produced in advanced economies with higher labor and energy cost. With maturing manufacturing technologies, more efficient and scaled up factories, and the inclusion of lower cost labor and energy from – for example – China, production becomes cheaper and prices fall. Eventually, when labor and production costs become optimized, the decline in price of the product slows, until it reaches a stable retail price more dependent on the raw materials and energy required to produce and transport the good.

In many cases, the picture for raw materials and raw-material-driven products begins to look like the dotted line, despite rapidly growing output:


Figure 6 - Marginal cost curve for supply-constrained resources

During the past few years, we have seen this important reversal in this key underlying trend, which briefly visited our economies in 2008 when - with rising resource prices – everything from food to fuels became suddenly more expensive. Thanks to the economic crisis and reduced demand, this phenomenon has partially disappeared, but for some key commodities (such as copper, iron ore, coking coal and some others), we are already back to pre-crisis levels or higher. This is the “glass-half-full” trend, which applies to almost all natural resources, but first and foremost energy. Even if we – as many people correctly state – have enough of something in the ground, getting it out becomes more difficult, has to happen further away and in geopolitically riskier places etc..

This is confirmed by the cost for new power plants, where cost estimates have recently gone up based on higher input cost (for almost everything ranging from nuclear to coal to wind towers), and even for solar panels, the permanent reductions experienced in the past haven’t continued between 2003 and 2008, despite rapidly growing production. The last important cost reduction happened since around 2006, when Chinese manufacturers entered the market, bringing low-cost production energy (mostly coal-based) into the game. Not truly a sustainable model. And, in 2009, due to overcapacity and massively reduced raw material prices, costs came down again, and there might even be more room for some reductions, but this story has an end once input prices go up.


Figure 7 - Cost of solar panels ((Pdf warning)

If that core trend of higher energy cost, particularly at the historically lowest-priced end, cannot be reversed, which we doubt it can, this has implications for everything that uses those inputs, as it raises the price with the cost of the raw materials and the energy that go into them. This effect might, in turn, effectively end the trend of lower and lower prices for everything, including energy generation technology, no matter what it is.


Figure 8 - The “old” trend ............. Figure 9 - The “new” trend

Base load power – a real problem

Except for solar and wind, most of the technologies currently seen as potential future output providers deliver base load power. This is true for biomass, for geothermal, for nuclear, and to a certain extent for coal. All those generation approaches have only limited load following capabilities, for very different reasons.

Now, stochastic renewable sources (mostly wind) coming into play, often with a “right of passage”, i.e. no limits in selling into the grid at a preferred price. Whoever comes next only gets to sell when there is still demand, and – in a free electricity market like we have it in most OECD countries – that means that prices for coal, nuclear and other base load outputs without a preferred status (biomass mostly has that status), drop sharply. Some analysts have even considered this a positive phenomenon, but actually it is not. What it really does: due to the preference of wind, it pushes marginal price (but not cost) of those steady sources down and thus makes base load generation economically unattractive, because less steady demand at lower prices simply translates to an unacceptable risk for investors. Spot markets are among the key reasons why no more nuclear and hardly any coal power plants were built in Western economies during the past decade.

In a future electricity system, we will see an increasing disparity between a growing pool of inflexible (for cost or technology reasons) base load power, a mission-critical pool of peak and cyclical load capacity, and that new, unpredictable pool of sources that deliver whenever they deliver, irrespective of demand.

A new electricity mix

If we use some currently available numbers for various electricity generation techniques, we might come up with the following for generation capacity in the United States, without any subsidies:


Table 4 – cost and suitability of various generation technologies

We are aware of the fact that the above numbers are being disputed, which is why we have included broad ranges. This is not the point we are trying to make – the point is incremental replacement of fossil fuel-based plants, especially cheap coal with more expensive technologies has the potential to lead to large increases in the price of electricity.

Now on top of the generation cost shown in Table 4, we have to bear the cost for maintaining and operating the electricity grid, which delivers the power to homes, offices and factories. For a standard grid today, which does not have to do much more than transmit electricity generated according to demand, this might add about 2-3 cents per kWh. When looking at the cost ranges above, it becomes quite obvious that even the lowest cost sources already bring the total price of electricity dangerously close to what industrial users can afford.

Now on top of the generation cost shown in Table 4, we have to bear the cost for maintaining and operating the electricity grid, of metering, and some profit margins for the utility companies which delivers the power to homes, offices and factories. For the U.S. today, where the grid does not have to do much more than transmit electricity generated according to demand, this adds between 2 and 7 cents per kWh.


Table 5 – approximate share of final electricity cost (multiple sources, IIER calculations)

When looking at the cost ranges, it becomes quite obvious that even the new lowest cost sources already bring the total price of electricity dangerously close to what industrial users can afford.

What really matters is “useful energy”

And now comes the challenge: Only power that meets someone’s demand has a positive price. If I am asleep and someone offers me free power to light my entire house like a Christmas tree, I don’t care. On the other hand, when the food in my freezer starts to thaw, I would probably be ready to pay a very high price for the few kWh it needs to keep that device going. The same is true in aggregate. Spot electricity prices go as low as 0-3 cents during the night (or even negative, http://www.scribd.com/doc/27816762/Negative-Prices-in-Electricity-Market), and up to 12, 15, sometimes even 50 cents at peak times during the day.

Now what we need to measure in order to understand the entire delivery system is not so much about the prices paid for one kWh of electricity produced, but instead the cost of electricity delivered according to demand. We want to determine how much it costs to provide a kWh from a particular source to supply our human energy demand patterns, and if that doesn’t work in a straightforward manner, we have to estimate the extra cost required to either shift it to the right time, or to shift demand to the time of production. Only once that has been factored in, do we know how expensive a kWh of electricity from a particular source really is.

Sources with little flexibility, such as coal and nuclear or run-of-river hydro plants, mostly produce around the clock. Given their low average cost, the average prices received are profitable, despite the fact that during the night they sell below full cost, but usually above marginal (fuel) cost. The rest (power plant investments, non-flexible operations cost) are incurred irrespective of plant outputs. Thus, adjusting output to more closely meet demand would incur even higher cost (or efficiency losses, or both), put stress on the equipment and require higher operations and maintenance efforts.

If we had to run our grids with just those base load sources, electricity would be more expensive, either from those efficiency losses, from lost overproduction during the night (to still meet peak demand), or from additional measures to shift demand, such as incentives and storage (either in the network or in end-user appliances, as described above). This would add to the basic generation cost. After including these extra efforts, electricity generated in coal or nuclear plants (see section below) would have to sell at a higher price than just the generation plus distribution cost.

Other sources, mostly dammed hydro, oil, and natural gas, are generally able to deliver exactly on time. (hydro only to a limited extent, as certain minimum flows need to be maintained in order to keep ecosystems in rivers below the dam intact). In general, we can turn them up when demand rises, and cut production back as soon as less power is needed. Those sources do not require extra cost on top of their generation cost and the basic effort to operate a grid. A kWh of electricity produced from natural gas thus usually costs approximately 6-10 cents (obviously as long as natural gas prices don’t change).

For sources that don’t have the characteristics described above, things become trickier. We wouldn’t be talking about smart grids, high voltage DC lines, storage in ELVs, and more, if it wasn’t for the fact that most of the sources we want to add to our grid are unpredictable beyond the reach of our weather forecasts. For sources that are capable of producing everything between 0% and 100% of total nameplate capacity at any given time, irrespective of demand, we need to have very different approaches to make them work, and none come cheaply.

So overall, as with all energy sources, we have limits in electricity cost to make it bearable for people. And not for us rich people who plan future energy systems, but also for everybody, and for those industries that manufacture the stuff we all use.

To be continued...

Next week, we will go through a list of all the currently available technologies for generation, transmission and storage, and review total feasibility and cost for each including transmission and grid management, and show certain trends for the future, and, ultimately, provide our assessment as to whether these technologies will be able to deliver what we need to keep grids going.

***************************
Previously in this series:
The Fake Fire Brigade - How We Cheat Ourselves about our Energy Future

Revisiting the Fake Fire Brigade - Part 1

Revisiting the Fake Fire Brigade - Part 2 - Biomass - A Panacea?

Note: The previous thread was http://www.theoildrum.com/node/6915.

Well, in one day the progress on the Deepwater Horizon moved significantly further towards the end. First the capping stack was removed from the well, and then, after a strong initial tug on the BOP, and transition spool, they were unlatched and moved away by the Q4000. As they left it was clear that there was no pipe, or hydrates under the BOP, though there was a thin film of a liner inside the BOP mount. This was then cleaned off, and a new gasket inserted. Once that was in place, then the new BOP (from the second relief well) was brought to the well, and lowered until it into place. (There is a Youtube video of the separation with the mount and BOP clearly separated by 3 minutes into the tape.)

Waiting for the new BOP

There was no drill pipe under the BOP, when it was lifted, nor any evidence of one or of any hydrates in the casing of the well itself. Thus some of the concerns that I had turned out to be unwarranted, but we did not know until the BOP was gone, what the conditions were likely to be. The next step in the process is to ensure that the BOP is working properly, and then the relief well will be completed at the beginning of next week.

With the "new" BOP in place.

That will likely be when we find out whether the annulus between the production casing and the well liner is full of oil or drilling mud. Given that a number of my concerns over the condition of the well have turned to be worse than the actual condition, I think I will hold off, at this time, on making any forecasts on that one.

IEA predicts greater reliance on OPEC oil NEW DELHI - Global dependency on the members of the Organization of Petroleum Exporting Countries (OPEC) for oil will rise in the next five to 10 years as production by non-OPEC nations declines, the head of the International Energy Agency (IEA) said Friday.

“We have seen an increase in non-OPEC supplies. But in the mid-term, non-OPEC production will decline,” Nobuo Tanaka, the agency’s executive director, told reporters on the sidelines of a conference. “So, dependency on OPEC oil will increase.”

“The cost of production in OPEC countries is also much cheaper,” he added. The agency’s forecasts are generally regarded as bellwether indicators for the energy industry.

Crude Oil Falls After U.S. Service-Industries Report Dims Economic Outlook Crude oil fell after service industries grew in August at the weakest pace in seven months, bolstering concern that the U.S. economic rebound will slow.

Futures slipped after the Institute for Supply Management’s index of non-manufacturing business, which covers about 90 percent of the economy, fell to 51.5 in August from 54.3 the prior month. It was the smallest gain since January. Prices rose earlier when a government report showed companies in the U.S. added more jobs in August than forecast.

Surge in use of natural gas helping to lower emissions Shale gas has begun to tip the scales such that experts deem the boom a game-changer, the most significant energy innovation in years. Shale gas accounted for 1 percent of our natural gas supply in 2000. Today it represents about 20 percent; by 2035 it could grow to 50 percent. Studies show that North America has about 8,000 trillion cubic feet of natural gas reserves - centuries' worth of reliable, domestic supply.

The timing couldn't be better, especially as we move to lower the carbon-intensity of our economy. Last year we witnessed the largest absolute and percentage decline in energy-related carbon dioxide emissions since 1949. Emissions declined 7 percent, or 405 million metric tons, according to the U.S. Energy Information Administration. A key contributor: fuel-switching in the electric sector from coal to natural gas. We need to commit to realizing the tremendous efficiency and environmental gains of converting fuel-oil and end-of-life coal plants to natural gas, simple-cycle gas turbines to combined-cycle turbines and heavy-duty trucks, buses and fleet vehicles from diesel to natural gas fuel.

Gulf of Mexico Oil Well Approved WASHINGTON - Federal regulators approved the first new Gulf of Mexico oil well since President Barack Obama lifted a ban on drilling in shallow water last week, angering environmentalists even as business groups urged his administration to relax a moratorium on new deepwater projects.

The Minerals Management Service said on its Web site Wednesday that it had granted a permit sought by Bandon Oil and Gas, LP to drill at a site about 50 miles off Louisiana's coast and about 115 feet beneath the water's surface.

Mariner Gulf Fire Sparks Calls to Keep Drilling Ban The blaze aboard a Mariner Energy Inc. oil platform yesterday shows President Barack Obama should maintain the drilling ban imposed after the BP Plc blowout in April, lawmakers and environmentalists said.

BP raises blowout preventer, key evidence in probe NEW ORLEANS — BP PLC was on Saturday slowly raising the 300-ton blowout preventer that failed to stop oil from spewing into the Gulf of Mexico, careful not to damage or drop a key piece of evidence in the spill investigation.

When the blowout preventer reaches the surface after its mile-long journey, government investigators will take possession of it and eventually examine it, hoping to gain insight into why the device failed.

Oversight of pipeline under St. Clair River called for Congresswoman Candice Miller is calling for an investigation into a dent in the pipeline under the St. Clair River. She recommended the item be added to a planned Sept. 15 hearing before the U.S. House Transportation and Infrastructure Committee, scheduled to investigate the July 25 Enbridge pipeline rupture in Marshall.

Miller said Enbridge informed her of the dent last August. The energy company assured her that they were handing the situation appropriately, but she isn't convinced.

GM to offer competitive pricing on Chevrolet Volt in China With its launch slated for the second half of 2011, Kevin Wale, president and managing director of General Motors China, promises that the Chevrolet Volt will be priced to compete in China's fledgling alternative technology car market. The selling price of the Volt will not be officially unveiled until the vehicle launches in China, but as Wale spoke at a news conference in Shanghai recently, the words "I believe the pricing will be competitive" resonated throughout the room.

Nigeria seeks to overcome its electricity failures, but people are skeptical The power grid of the energy-rich nation is a wreck, reaching less than half the people on a good day. The president has vowed to set things right by expanding, repairing and privatizing the system.

Hot summer results in higher electricity use, and cost As demand increased the market supply price of electricity also increased by almost 20 percent over the summer months this year.

“Electricity prices, like gasoline and other commodity prices are set on the wholesale market according to the laws of supply and demand,” said Central Hudson President James Laurito. “Higher demands lead to higher commodity prices, and higher temperatures this summer not only increased usage by our customers, but also raised energy prices as demand peaked.”

UN agency calls emergency summit over soaring global food prices A United Nations agency has called a special meeting to discuss the recent spike in food prices, responding to fears of a repeat of the shortages that led to riots in parts of the world two years ago.

Corn soars to 23-month high on crop outlook The forecast reaffirmed an emerging view in the industry that the crop will be weaker than first expected. Farmers and analysts say the crop is highly variable after a soggy summer that flooded out low-lying areas of many fields and washed away nitrogen, a crucial nutrient for corn. Hot night-time temperatures have also deprived the crop a chance to "rest" analysts say.

No felling trees or cultivation above 5,000 feet from sea level Sri Lanka President instructs Badulla: Sri Lanka President Mahinda Rajapaksa has instructed the officials to take measures to ban felling trees or new cultivations in areas above 5,000 feet from sea level.

The aim of this action is to protect the upper catchment areas of the island. Although there are laws to prevent these disastrous actions, the implementation lacks vigour. The laws are expected to be strictly abided in the future.

Exponentially on purpose: a century-and-a-half of ignored warnings The concept of peak oil, based on the pioneering work of geologist M. King Hubbert (right), states that world oil production will one day reach a natural limit due to geological factors. As he observed, “although production rates tend initially to increase exponentially, physical limits prevent their continuing to do so.” In other words, oil is a finite resource, and regardless of technology and investment, output cannot go on increasing year after year. Geology trumps economics, although the latter explains what will happen to oil prices once output begins to decline.

But no-one wants to hear the argument. Even International Energy Agency forecasts of record world oil demand, and warnings that the “era of cheap oil is over” made barely a ripple in the media. (In fairness, they are not talking about peak oil so much as the lack of investment in the oil industry causing spare capacity to slump – but it still means economy-busting oil prices are just around the corner.)

European Space Agency captures images of huge ice island The European Space Agency has released dramatic satellite images of the colossal iceberg that broke away from a Greenland glacier last month and is now drifting into Canada's Arctic waters.

The 250-square-kilometre Petermann Ice Island — the biggest free-floating frozen mass in the Arctic Ocean in nearly 50 years — has travelled nearly 30 kilometres from its birthplace in a Greenland fiord and is now moving into Nares Strait between Greenland and Canada's Ellesmere Island.

Bid to suspend California global-warming law gets $1 million from billionaire brothers' firm The donation to the Proposition 23 campaign comes from a subsidiary of Kansas-based Koch Industries, which owns refineries and controls 4,000 miles of oil pipelines.

Shipping companies eye fabled Asia route as ice melts Shipowners are showing growing interest in a fabled trade route to Asia which climate change is beginning to open up at last as polar ice recedes.

I wake up every morning in a state of profound grief. We humans have been given a privileged place in a world that is beautiful beyond description, and we are destroying it and destroying each other. I cope with that by building temporary psychological damns and dikes to hold back that grief. ... If I weren’t politically active, I would lose my mind. The only way I know how to cope is to use some of my energy in collective efforts to try to build something positive.
(Interview with journalism professor at U of Texas)

read more

One of the most successful performance artists of the 21st century has returned to the stage—and we’re not talking about Lady Gaga here.

Instead, I draw your attention to Bjorn Lomborg, who has just unleashed a dramatic reverse back-flip of his stance on global warming that may very well restore him, at least briefly, to the heights of the media firmament he first enjoyed in 2001, when he announced his apostasy from his (alleged) environmental roots with the publication of the global best-seller, The Skeptical Environmentalist.

read more

A short history of the peak oil movement and reflections on wizards, Transition and the interstices of reason. Let us start with persona, since one goes to any prizefight to see the metaphorical battle of two created characters, embodying sides, virtues, faults.

In this Corna... John Michael Greer, owner (by a whisker over Bob Waldrop) of the finest beard in Peak Oildom, Archdruid, moral descendent of Toynbee and Gibbon, considerer of declines in centuries, not weekends. No Zombies for Greer - we are Rome, and we might as well deal with it, dammit.

in this Corna...Rob Hopkins, beardless founder of the Transition movement, permaculturist, endless energetic optimist and municipal leader, student of the first half of the British century, bent of reorganizing his community and the world to adapt to energy descent. If we could live without that energy once before, well, we can do it now, and let's get at it.

read more

The peak oil debate is a case of history repeating itself: people have been ignoring warnings about exponential use of finite resources for a century and a half. No-one wants to hear the argument. Even International Energy Agency forecasts of record world oil demand, and warnings that the “era of cheap oil is over” made barely a ripple in the media.

read more

-Americans want smaller homes, not McMansions
-HafenCity: A Case Study on Future-Adaptive Urban Development
-Straw Bale Model House

read more

This thread is being closed. Please comment on http://www.theoildrum.com/node/6918.

Once again I am indebted to MoonofA, who is giving a more detailed hour by hour report, of some of the incidents that I miss. Fairly rapidly on Thursday afternoon, the team of ROVs and surface vessels moved forward with the removal of the existing infrastructure over the Deepwater Horizon well, with the intent of replacing it all with a functioning blowout preventer from the 2nd relief well (which now looks to be no longer necessary at all). One of the first steps was to move the methanol feed (used to dissolve and remove hydrates from the internal structures of the stack) down from the rams of the top stack to feed into the original BOP. This was used to ensure that the different parts of the stack, such as the rams, were able to function, when needed. And now, I presume, the hope is that it will similarly ensure that the BOP rams can function if needed.

Removing the line from the stack

Replacing line on the BOP

Once the feed line had been moved, then the Enterprise came in and lowered the latching device that has been floating just above the stack for the past few days. It did not take long (and by doing so did not convey the difficulty) to drop the cap over the top end of the stack, and not long thereafter the stack was released and lifted away from the underlying transition and the original BOP.

Approaching the stack

The more interesting part of the exercise will come when they start to lift the original BOP and the transition spool. There are a number of different scenarios that have been proposed, depending on what happens, and why, as the first lift begins. If they can lift the BOP with the underlying drill pipe (DP) still attached, then they appear ready to grab hold of the DP after the BOP has risen a short distance, and cut it off. This will make it easier to get the BOP to the surface, and means that a more conventional fishing tool can be used to capture, and bring up the remaining length of the DP. Toolpush, for example, mentions some of the options available.

Sliding into place

The capping stack was released at about 4:30 pm Central, whereupon Admiral Allen issued the following statement:

"Under the direction of the federal science team and U.S. government engineers, BP has completed the capping stack removal procedure – an important step in the process to remove and preserve the damaged BOP. This procedure was undertaken in accordance with specific conditions I set forth in a directive authorizing the capping stack removal and BOP replacement last week. BP will continue to follow these required conditions for the BOP removal procedure, which is expected to commence this evening. I will continue to provide updates as necessary."

One of the problems with the feeds from the Q4000 is that they are not time-stamped, so that it is hard to know if the latest glance at the feed below the moon pool, which shows that the pipe hasn’t moved since I last looked, is current or not.

Another Incident: Mariner Energy Platform Fire

The other significant news today was of the fire on the Mariner Energy platform in the Vermillion block of the Gulf of Mexico. The fire now appears out and there was apparently no leakage from the wells that were connected to the platform. The platform is in 340 ft of water, and was fed by 7 wells collectively supplying 1,400 bd of oil and 9.2 mcf of natural gas, that is now shut in.

I note that they were apparently water-blasting the rig and repainting it. One of the things to be careful of in those cases is the static electric charge that can build up in water vapor around the operation. From the Coast Guard report:

However, at this time, that is just conjecture, and we will have to see what the investigation reveals.

Peak oil and happy cows Type the phrase 'peak oil' into any popular internet search engine, and you will not be short of results to wade through.

Like the fuel itself, the topic generates a lot of heat and hot air. This week on One Planet, reporter Richard Hollingham seeks to define the term 'peak oil' before asking leading experts whether they believe the event is nearing.

We then sit down with the world's number one energy analyst Fatih Birol. He is chief economist at the International Energy Agency, and advises countries from America to Japan on energy policy. There is plenty we need to ask him about - from the Deepwater Horizon disaster, to drilling off the coast of Greenland, to recent claims that China is now the world's largest energy consumer.... Oh, and what does he think about peak oil?

Peak oil, "Big education" and "Big science" Regarding my own area, higher education, I take for granted that it will at best shrink considerably in size and scope. As late as in the early 1950's less than 5% of an age cohort in England, France or Australia went on to higher education/university studies - and that still represented a doubling compared to only a decade or two earlier.

Peak Denial about Peak Oil A funny thing happened on our way to permanent prosperity and unlimited cheap oil. The right to prosperity was yanked out from underneath us by the current Greater Depression. The worldwide economic downturn has masked the onset of peak cheap oil.

US natgas rig count climbs 4 to 977-Baker Hughes NEW YORK (Reuters) - The number of rigs drilling for natural gas in the United States rose by four this week to 977, its first gain in three weeks, according to a report on Friday by oil services firm Baker Hughes in Houston.

FACTBOX - China's refinery expansion plans BEIJING (Reuters) - PetroChina has won approval from the National Development and Reform Commission to double refining capacity at its Huabei plant to 200,000 barrels per day (bpd), the China Petroleum Daily reported on Friday.

The expansion is scheduled to be completed in October 2012 and the plant will be fully commissioned two months later, the newspaper report said.

Shallow-water platform fire raises wider questions on oil safety The fire Thursday at an oil platform off the Louisiana coast may not, in the end, do much harm to the Gulf of Mexico. But it could still mean trouble for both the Obama administration and the oil industry - by raising new questions about the gulf's oil fields.

A CEO Fights Feds, But Feds Don't Fight Fair Todd Hornbeck beat the Obama administration once again on Wednesday, and yet he is still losing.

Hornbeck was first to challenge the administration's industry-crippling moratorium on deep-water drilling in the Gulf. He handily won an order striking down the moratorium in federal district court. He won again in federal appeals court.

Yet with the stroke of a pen, Interior Secretary Ken Salazar simply imposed a second moratorium after the court blocked his first.

Analysis: Security, Regulatory Reforms Revive Colombia Oil Production After a period of steady decline, Colombia has seen an increase in oil production due to Colombian government efforts to curb drug and insurgent-related violence in the country and implement regulatory reforms to make investment in Colombia more attractive.

Despite strong production growth in the 1980s and 1990s, Colombia production began to decline due to increasing drug cartel and insurgent-related violence, low oil prices and unattractive contract terms that pushed upstream activity into a decline, according to analysts at Barclays Capital.

Comment: meeting the challenge of energy diversity It’s simple – improve energy efficiency and provide a stable framework to encourage investment in renewable resources. It’s not rocket science and it’s happening successfully overseas. While countries such as Sweden now deliver almost half of their energy from renewables, we languish almost at the bottom of the EU league table, on 3 per cent. That’s despite boasting pretty much the best renewable-energy resources in Europe.

Deadly riots in Mozambique over food prices "The high-income countries can pay even if cereal prices double. For them, it is not such a big deal. Many people in Asia and Africa simply do not have that option. For them, the only choice is to cut out a meal. That is the only adjustment they can make."

Storm surge a growing menace as sea levels rise worldwide The large waves, storm surge, and flooding that Hurricane Earl will spawn as it strikes Massachusetts tonight comes with an added dollop of trouble: sea level rise.

Very gradual, and in some cases accelerating, rises in sea level off our coast over the last century will boost the height of Earl’s storm surge — expected to be 1 to 4 feet — meaning the wall of water will be able to travel that much farther inland and over higher elevations to flood basements, streets, and other low-lying areas.

Corporate alliances help keep state parks afloat CUYAMACA RANCHO STATE PARK, Calif. — A visitor has to look closely to find it, but here, in a remote mountain forest of Southern California, is a sign of what's to come for state parks across the USA: Corporate logos.

From California to New York, states are turning to corporations for financial backing as recession and budget woes prompt cuts in public dollars to maintain parks.

South Africa: Car sales surge 50% as buyers skip carbon tax avoidance Pre-emptive buying to avoid the carbon dioxide emissions tax on new cars, which came into effect on Wednesday, and sales to the car rental industry drove new car sales last month to their highest level since January 2008.

New car sales rose 49.6 percent to 33 541 units last month from 22 413 units last August.

American Samoa, unlike California, bans plastic bags American Samoa, a U.S. territory, will soon make it illegal for stores to hand out plastic shopping bags -- a step that California rejected earlier this week.

We need a better understanding of the 'environmentalist's paradox' We hear lots of concerned chatter these days – not least, here on this site - about peak oil, peak water, deforestation, resource depletion and the like, but a popular riposte offered by those doubting such concerns is something commonly referred to as the "Environmentalist's Paradox".

The argument goes thus: "Why, despite resource depletion and the degradation of ecosystems, is average human well-being improving globally?"

People such as Matt Ridley, author of the Rational Optimist, argue that environmentalists are needlessly downbeat about humanity's prospects. After all, we are a resourceful, adaptable, highly intelligent species more than capable of riding out any current concerns (if only we would de-shackle ourselves from free-market constraints).

As a counterpoint, we have the likes of Jared Diamond, author of Collapse, arguing that we should heed the lessons provided by failed civilisations of the past who extinguished themselves by over-exploiting their available natural resources.

The latest edition of the journal BioScience includes a fascinating paper which examines just this paradox.

Crude Oil Heads for Weekly Decline on Forecast for U.S. Jobless Increase Oil declined, headed for a weekly drop, on forecasts that a U.S. government report will show the jobless rate rose in August for the first time in four months, threatening the recovery in fuel demand.

Futures are down 1 percent this week. Analysts surveyed by Bloomberg estimate the August payrolls report from the Labor Department will show the U.S. economy lost 105,000 jobs. Crude gained yesterday after an fire on a Gulf of Mexico oil and natural-gas platform prompted speculation that tighter regulations will cut production.

`Bear Flag' Signals a Decline in Oil Price to Near $60 Crude oil is set for a drop to near $60 a barrel, extending a descent started in May, according to a technical analysis by independent analyst Jim Stellakis.

“Last month’s breakdown in crude oil is continuing the longer-term bearish pattern which was started by the May decline,” Stellakis said. The bear flag pattern is signaled after a break occurs below a rising trading range.

Record Russian Oil Premium Vanishes on Refinery Run Cuts Russian crude’s unprecedented premium to North Sea Brent is vanishing as European refiners switch to higher-value blends and scale back purchases to protect their profits.

Oil May Fall as U.S. Refineries Conduct Seasonal Maintenance, Survey Shows Crude oil may fall next week as U.S. refineries perform seasonal maintenance, reducing demand, a Bloomberg News survey showed.

Fourteen of 34 analysts, or 41 percent, forecast crude oil will decline through Sept. 10. Ten respondents, or 29 percent, predicted that futures will rise, and 10 projected prices will be little changed. Last week, 41 percent of analysts forecast an increase.

Crude warning for policymakers South Africa imports around two-thirds of its liquid fuels.

The government's strategy regarding security of liquid fuel supply assumes that sufficient crude oil imports will be both available and affordable in the foreseeable future. The emphasis has been on ensuring that adequate quantities of refined products are available to meet rising demand, especially in the economic heartland of Gauteng.

Russia to double gas imports from Azerbaijan in a fresh blow to EU-touted pipeline project MOSCOW (AP) — Russia's Gazprom on Friday clinched a deal to double supplies from Azerbaijan in a bid to expand its control over gas produced by former Soviet republics.

...The European Union was planning to use Azerbaijan's vast energy resources as a key source of gas for a major pipeline project, Nabucco, to bring Caspian and Central Asian gas to Europe, bypassing Russia.

Ukraine May Give Russia Joint Control of Pipe to Cut Gas Prices (Bloomberg) -- Ukraine is willing to give Russia joint control of a pipeline to southeastern Europe in exchange for access to natural gas supplies, Prime Minister Mykola Azarov said as the country’s negotiate a gas venture.

The governments are seeking to create the venture between NAK Naftogaz Ukrainy and OAO Gazprom, both of which were once part of the Soviet gas monopoly, by year-end, Azarov said in an interview in his Kiev office yesterday. The agreement would reduce the price Ukraine pays for Russian gas, he said.

No sign of oil after Gulf platform fire: Coast Guard NEW ORLEANS (Reuters) – An oil and gas platform operated by Mariner Energy burst into flames in the Gulf of Mexico on Thursday, but the crew of 13 escaped and there were no signs of an oil spill, the Coast Guard said.

U.S. Probes Mariner Fire in Gulf of Mexico That Sparked BP Spill Deja Vu The fire started on or near upper-deck living quarters and was not caused by an explosion, Patrick Cassidy, a spokesman for Mariner Energy, said in an e-mail. The company said oil and gas production from the wells controlled by the platform, known as Vermilion 380, has been shut down.

Mariner may be facing BP-style crisis NEW YORK — Just a few months ago Mariner Energy was celebrating its imminent marriage to Apache Corp.

On Thursday, Mariner found itself in the middle of a potential BP-style crisis, with a rig off the coast of Louisiana that exploded and perhaps was leaking oil into the Gulf of Mexico.

Mariner shares dropped on the news, shedding more than 2 percent. Shares of Apache also fell.

Blaze Shakes Oil Industry HOUMA, La.—The fire that engulfed an oil and gas platform Thursday in the Gulf of Mexico heightened pressure on the energy industry, which is battling greater regulation and a deep-water drilling ban.

U.S. offshore oil fire may delay lift of drill ban WASHINGTON (Reuters) – The Obama Administration is likely to stay focused on toughening regulatory oversight of the U.S. offshore oil industry and may push back lifting a ban on deepwater drilling after the latest accident in the Gulf of Mexico, analysts said on Thursday.

The fire on a Mariner Energy oil and gas platform in shallow waters of the U.S. Gulf on Thursday was a major setback for companies hoping for an early end to the government's drilling moratorium and raised more questions about the safety of offshore drilling.

BP Says Limits on Drilling Imperil Oil Spill Payouts BP is warning Congress that if lawmakers pass legislation that bars the company from getting new offshore drilling permits, it may not have the money to pay for all the damages caused by its oil spill in the Gulf of Mexico.

The company says a ban would also imperil the ambitious Gulf Coast restoration efforts that officials want the company to voluntarily support.

BP oil spill costs surge to $8bln LONDON (AFP) – British oil giant BP revealed Friday that the devastating Gulf of Mexico oil spill disaster has cost it eight billion dollars so far -- with a sharp rise in payments in the last month.

Factbox: U.S. Energy Disasters in 2010 HOUSTON (Reuters) – Energy production and distribution in the United States can be a dangerous pursuit, in spite of strict safety regulations for oil, gas and coal producers and processors.

Following is a look at energy-related disasters that have rocked the United States in the course of 2010, including the deadly and environmentally destructive oil spill at BP's Macondo prospect in the Gulf of Mexico, which began in April.

Dreams of ships pass in the night Fazel Fazelbhoy is a man with a vision. With the age of easy oil passing, the chief executive of Topaz is casting further afield, and that means deep offshore. In the wake of the BP spill, such projects are fraught with risk, but this dreamer’s reveries include Brazil.

Russia Transneft not to increase 2011 oil fee (Reuters) - Russia's oil pipeline monopoly Transneft will not increase oil shipping fees in 2011, Interfax news agency quoted the company's head as saying on Friday.

"We are not going to raise the tariff at all," Nikolai Tokarev said.

Petrobras May Raise Up to $75 Billion in Sale of Shares Petroleo Brasileiro SA, Latin America’s largest company by market value, will sell as much as 129 billion reais ($75 billion) of new voting and preferred shares to investors and the government.

Wheat Rises on Russian Export Ban; Mozambique Riots Wheat rose in Chicago after Russia, the world’s third-largest grower, extended a ban on grain exports into next year, raising the prospect of higher food prices that already have sparked riots in Mozambique.

...Residents of Mozambique’s capital, Maputo, were on strike for a second day yesterday in a protest over higher food and utility prices. At least seven people have died in clashes with police and another 280 injured, Cabinet spokesman Alberto Nkutumula said yesterday.

Scramble for food companies a warning of crisis to come The corporate activity is a storm warning of how food shortages and famine will reshape the world and corporate strategies.

The Economist notes that by 2050 world grain output will have to rise by half and meat production will need to double to meet demand at a time when growth in grain yields is flattening out, there is little extra farmland and renewable water is running short.

Similarly, rising food prices are a poke in the eye that the world needs to remind us of how fragile the food production chain has become. The drought and bushfires in Russia, combined with limits on grain exports, have resulted in a 70 per cent price spike in wheat futures, which has caused prices for soy and barley to go up by 10 per cent.

Police say attacks on Pakistani minorities kill 23 QUETTA, Pakistan – Suicide bombings targeting religious minorities killed at least 23 people in Pakistan on Friday, driving up the toll of sectarian assaults in a country already battered by massive flooding.

The EPA's new gas-mileage labels are good but not perfect THE ENVIRONMENTAL Protection Agency is asking for comments on its proposed new gas mileage stickers for automobiles -- so here's ours.

Rating the new fuel economy labels The EPA's proposed fuel economy labels range from baffling to genuinely useful.

From Detroit, a fix for smog-belching motorcycles DETROIT (CNNMoney.com) -- When Americans debate the impact of fuel emissions on the environment, they usually talk about cars and trucks. But what about smaller vehicles like motorcycles, scooters, lawnmowers and ATVs?

Riding a lawn tractor for just an hour spits out as much pollution you'd get from driving a car for hundreds of miles, according to former Ford Motor Co. engineer Kyle Schwulst.

Report Says Heat, Not Smart Meters, Hiked Bills After Pacific Gas & Electric, the giant California utility, began installing smart meters in the state’s Central Valley, the company was swamped with complaints from residents that their utility bills had increased.

But an independent review of the smart meters released Thursday found that the devices were functioning properly and attributed the high charges to a heat wave last year that coincided with their installation as well as poor customer service by P.G.&.E.

Reactor design poses dilemma The nuclear industry’s federal regulator will face its first big decision early next year when it evaluates the design of a Korean reactor that conforms to most nations’ safety standards, but was rejected by a regulator in Europe.

The debate centres on a device known as a “core-catcher” that is built under the steel vessel containing the reactor core and serves as a last line of defence in a worst-case meltdown scenario.

Disasters data are our only guide Nuclear industry regulators have only two sets of real-world data – Three Mile Island and Chernobyl – to draw on when weighing the merits of safety systems to prevent a catastrophe at nuclear power plants.

Mass Extinction Threat: Earth on Verge of Huge Reset Button? Mass extinctions have served as huge reset buttons that dramatically changed the diversity of species found in oceans all over the world, according to a comprehensive study of fossil records. The findings suggest humans will live in a very different future if they drive animals to extinction, because the loss of each species can alter entire ecosystems.

Some scientists have speculated that effects of humans - from hunting to climate change - are fueling another great mass extinction. A few go so far as to say we are entering a new geologic epoch, leaving the 10,000-year-old Holocene Epoch behind and entering the Anthropocene Epoch, marked by major changes to global temperatures and ocean chemistry, increased sediment erosion, and changes in biology that range from altered flowering times to shifts in migration patterns of birds and mammals and potential die-offs of tiny organisms that support the entire marine food chain.

EPA to issue more rules in climate fight The U.S. Environmental Protection Agency will roll out more regulations on greenhouse gases and other pollution to help fight climate change, but they will not be as strong as action by Congress, a senior administration official said.

Climate Risks That Every Executive Should Know About We often think that climate change is something for the government to worry about -- the news is packed full of debate around government response to global warming, whether it’s the climate bill, or how China is outpacing us yet again in carbon markets.

But there’s a more immediate risk to companies in the U.S., something that is much closer to home and independent of whatever the public sentiment happens to be on climate change. For the first time in history, executives and their companies are being held liable for activities that contribute to global warming. It’s not a debate, it’s already happening.

New website to track climate aid, key to UN talks GENEVA (Reuters) - A website launched on Friday will help track whether rich countries are keeping a pledge to come up with $30 billion in climate aid for the poor, seen by the U.N. as a "golden key" to progress in talks on global warming.

India needs to shift from coal to other sources of energy: IEA India will need investment of $4.5 trillion in the energy sector to cut carbon emissions as part of a global initiative to reduce global warming by 2050, the International Energy Agency Executive Director, Nobuo Tanaka, said here Friday.

The United Nations Inter-governmental Panel on Climate Change has said global emissions of carbon dioxide have to come down by 50 percent to limit the increase in average temperate to between 2 to 2.4 degrees centigrade.

Ministry sets up task force to study North Pole policies TOKYO — The Foreign Ministry said Thursday it has set up a task force to examine Japan’s policies concerning the North Pole, as melting ice due to global warming opens the door to increased ship navigation and chances for resource development in the Arctic sea. The panel comprises deputy directors general of various bureaus at the ministry as the matter concerns such sectors as economy, security, environment and international law, a ministry official said.

World cannot afford worsening disasters, warns UN climate change chief The world cannot afford escalating disasters of the kind recently witnessed in Pakistan and Russia, the top United Nations climate change official said today, underscoring the need for governments to take swift action to lead the world towards a low-carbon future.

Tibetan nomads struggle as grasslands disappear from the roof of the world Like generations of Tibetan nomads before him, Phuntsok Dorje makes a living raising yaks and other livestock on the vast alpine grasslands that provide a thatch on the roof of the world.

But in recent years the vegetation around his home, the Tibetan plateau, has been destroyed by rising temperatures, excess livestock and plagues of insects and rodents.

The high-altitude meadows are rarely mentioned in discussions of global warming, but the changes to this ground have a profound impact on Tibetan politics and the world's ecological security.

...now does seem to be an auspicious moment to hold forth with a new piece of Peak Oil theory, because this is the year when, for the first time, just about everyone is ready to admit that Peak Oil is real, in essence, though some are not quite ready to call it by that name.

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-Land grabs, biofuel demand raise global food-security risk
-Commercial Organic Farms Have Better Fruit and Soil, Lower Environmental Impact, Study Finds
-Fears grow over global food supply

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In this post, I try to take a look at the amount of embodied carbon emissions, as well as the captured carbon in lumber etc, for an entire house, as well as a very quick comparison of the operating carbon emission to the embodied carbon emissions.

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Proponents of the so-called "barbarian invasion" theory today warned of the "potentially disastrous" effects of hundreds of thousands of Visigoths, Huns, and Vandals plundering the imperial capital, including death, despoilment and dismemberment of the populace, and destruction of the city's ancient architecture and temples.

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When a friend lent me his copy of Masanobu Fukuoka’s The One-Straw Revolution (republished last year by the New York Review of Books), I was struck by one sentence in particular. Somewhere in the middle of this charming, eccentric book, one of the founding texts of natural, non-interventionist farming, Fukuoka asserts that “the one-acre farmer of long ago spent January, February and March hunting rabbits in the hills”. Later on, he says that while cleaning his village shrine he found dozens of haikus, composed by local people, on hanging plaques; but “there is no time in modern agriculture for a farmer to write a poem or compose a song”.

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A report by the German armed services (the Bundeswehr) on the implications of peak oil on national security was leaked to the internet this week and picked up by Der Spiegel. The report, which was produced by the Future Analysis department of the Bundeswehr Transformation Centre, acknowledges that peak oil will happen, and that while estimates of the timing vary it could be any time from 2010 with the impacts on security likely to be felt 15 to 20 years later.

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...fortunately I don’t actually have to choose between Hopkins and Greer. If I did have to, I would feel that much of what drew me to Transition had been lost to organizational identity and pride. One is only forced to make such a choice when a set of ideas or principles gets mistaken for the foundation or orthodoxy of a Movement. Those of us in Transition should take this as a great warning.

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Peak oil will shrink the educational-industrial complex and we'll see substantial changes in priorities within and between different research areas and academic disciplines. Less funds will be allocated to "big science" and specialization will decrease. Neoclassical economics will compete in popularity with scientific communism and racial anthropology.

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Jim Kunstler’s question: Where the hell are all the “reasonable, rational, educated people of purpose in this country”? Well, some of us are at home tending chickens and pruning tomatoes. Some of us have realized that we can’t be everywhere at once and have made a choice. We may not be making front page headlines in daring acts of activism; but having organized marches down main street in my time, I can tell you that nothing has ever brought my community together more effectively than putting a shovel in the ground and growing vegetables in plain sight.

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- The Peanut Solution (patents and famine)
- Can science feed the world? (Nature magazine special)
- How to feed a hungry world
- Food: An underground revolution (Research on roots)
- Seeing a Time (Soon) When We’ll All Be Dieting
- World Carryover Grain Stocks Fall to 72 Days of Consumption
- Growing fuel by the roadside

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