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Shale gas drives oil / gas spread to a new record

On January 13, 1994 the ratio(*) of the price of oil to the price of natural gas was 1.14.   Today it hit a record high over this period of 5.26.   Gas traded at $3.28 today, just 21% of the $15.38 / mmBtu it traded for on December 13, 2005.   Shale gas is providing gas in volume at moderate cost driving this record high price disparity.

IMO, the impact of moderately priced gas hasn’t been factored into energy policy to any great extent.   Nor has the balance of the energy market had time to react.  And the media hasn’t realized this is happening.

But there should be many winners – combined cycle generation, CNG vehicles, chemical processing that uses gas, and gas consumers.  Why isn’t there a stamped into new fleet conversions to CNG….it’s way cheaper than gasoline?

The will also be disruption, – coal, climate change strategies, and renewable generation will be impacted.   Why sequester carbon when you can replace a coal plant with a super efficient, super clean, combined cycle plant and emit 50% less CO2?

My prediction for 2012 – electric generation clean tech feels some competitive heat.

(*) The energy price ratio is the price of crude on a $/mmBtu basis divided by the price of natural gas on a $/mmBtu.  The crude prices used are the front month NYMEX contract for WTI crude at Cushing Oklahoma.  The $ per barrel price is converted to $/mmBtu using 5.8 mmBtu / bbl.   The gas price used is the front month NYMEX contract for natural gas at Henry Hub Louisiana.

Originally posted here

Report from Grid Integration of Renewables Conference at Stanford

By Andrew Longenecker, guest contributor 

 The TomKat Center for Sustainable Energy’s “Grid Integration of Renewables” conference, which took place at Stanford University’s Jen-Hsun Engineering Center on January 13, 2011, brought together professionals and students to discuss various aspects of the integration of intermittent sources of power to the grid. The conference facilitated the discussion on technological, political, and international perspectives, bringing together a variety of views to create a comprehensive perspective on a very important problem.

Jeff Bingaman, US Senator from New Mexico, where he is Chairman of the Senate Energy and Natural Resources Committee and Chairman of the Subcommittee on Energy, Natural Resources and Infrastructure, opened the conference with his keynote speech. He first noted the importance of taxes for support for renewable energy (estimating that 80% of renewable energy support comes in the form of taxes) and indicated concern that these were not permanent features of the industry, as the Production Tax Credit (PTC) expires in 2012 and the Investment Tax Credit (ITC) expires in 2016. In discussing what to expect for the next two years, Bingaman was cautious, noting three separate “things to keep in mind”: there is a politically polarized environment (and upcoming election in 2012), there is strong ideological resistance to active government role in the transition of our economy to a clean economy, and there is an adverse budget situation, causing difficulties in finding the money to maintain spending on tax programs. He noted that there is an opportunity for a “clean energy standard” instead of a “renewable energy standard,” but cautioned against supporting “clean energy standards” that are simply veiled proposals designed to cut the current renewable energy programs.

Jeffrey Byron, appointed to the California Energy Commission by Governor Arnold Schwarzenegger in June 2006 who served as Presiding Member of the Energy Commission’s Research, Development, and Demonstration Committee and is a member of numerous other energy-related committees, gave the second keynote speech of the conference. He had an optimistic perspective of California’s accomplishments to date, particularly in regards to the prospect of reaching the target of 33% renewables by 2020. However, he acknowledged that there are challenges: lack of legally established renewable portfolio standards, no real-time pricing, lagging on renewables goals (e.g., California did not make its 20% renewables goal), and a lack of sophisticated thought about procurement of electricity in California. Further, he viewed the energy structure in California to be overly complicated, with too many stakeholders with overlapping jurisdictions and coordination issues. He emphasized the need to seek greater collaboration among constituents (e.g., electricity imports from neighbors), continue cost improvements, revise interconnection standards to pass costs accurately among stakeholders; create a path toward putting all generation on equal footing, and to improve the measurement of the grid. He closed his speech by emphasizing that people and policies really do matter and encouraging everyone to demand more from their government representatives. His view is that the United States and the world are looking to California’s leadership to develop the clean technologies and policies that the world will use.

The rest of the conference included speakers and panel discussions covering a broad range of topics. There sessions represented a wide variety of backgrounds, ranging from utilities (e.g., PG&E), academia (e.g., Stanford University, University of Delaware), government and non-profit institutions (e.g., NREL, Center for Energy Efficiency and Renewable Technologies), international perspectives (including professors from Germany, the United Kingdom, and Denmark), and startups like SunPower. One frequently mentioned topic was the need for flexibility in the grid in order for renewables to prosper. Speakers mentioned numerous potential sources for grid flexibility, such as automated demand response programs, dynamic pricing (which may come to California as early as 2013 for residential customers), renewable imports from neighboring areas (as well as intra-hour scheduling of renewable imports), smart charging of electric vehicles, and of course, storage. Debbie Lew from NREL shared two interesting examples of areas with large renewable shares (around ~30% renewables) that experienced significant difficulties in managing loads. Drastically increased volatility from wind intermittency, as well as significantly lowered minimum loads, caused massive problems for the system (e.g., cycling and ramping schedules for conventional plants, increased complication in load management). However, speakers were generally optimistic on the significant opportunities in solving these problems, particularly in California’s leadership on the issue.

Please note that presentations from the conference will be posted at http://tomkat.stanford.edu

African Sunrise for Cleantech?

This week I’m going to break one of my self-imposed ‘blog’ rules and dip into last week’s news. My reasoning will become clear.

On Thursday I attended Envirolink North West’s Developing New Technologies for off Shore Wind event at the Met in Leeds. Apart from gaining a new respect for gearboxes (not to mention the humble bearing), I was struck by a presentation delivered by Dr. Mike Barnes of the University of Manchester and Siemens Transmission and Distribution arm.

In particular, he highlighted a ‘desertec’ vision for future energy generation, whereby huge swathes of African and Middle Eastern deserts are used for the generation of solar and wind energy. Drawing on commentary delivered by Matthias Ruchser and Stefan Gaenzle of the German Development Institute (Deutsches Institut für Entwicklungspolitik DIE) on Deutsche Welle, Dr Barnes outlined that, once technology and cost allows, Africa could become a major source of energy.

The Desertec project aims to feed solar power from Africa and the Middle East to the EU Thursday night brought a counter perspective at EcoConnect’s Green in the City Event: ‘Future of Solar’ at the London HQ of City law firm SNR Denton. Although heavily slanted towards the investment and banking community, these events always deliver a valuable and informed insight.

Expert panel member Paul McCartie of Investec Capital Markets dismissed ‘desertec’ as unworkable. Sighting “energy security” as the primary issue, he commented: “Following the recent problems caused by a dependency on Russian gas supplies, I can’t see Europe relying on energy generated in African and Middle Eastern nations.”

Good point. Would folks in Milton Keynes rely on a light switch powered by electricity generated in the Sudan?

Last week, Environment writers Louise Gray in the Telegraph and John Vidal in Guardian offered a hint as to what the future may hold.

Both reported on a controversial announcement from International Development Secretary Andrew Mitchell MP that the Coalition Government was committing taxpayers’ money: “To encourage private investors to put their funds towards ‘green’ development projects in Africa and Asia.”  Mr Mitchell said: “In Africa, a potential new fund could see up to 500MW of renewable energy per year from 2015 – enough to provide for over 4 million rural households. In Asia the project could generate 5GW of new renewable energy and create 60,000 jobs.” he said.

Aid agencies greeted the news with immediate skepticism: Would private investors be doing this just to bring light and jobs to some of the most energy deficient and impoverished places on earth? Of course not, and Government wouldn’t expect them to.

So what’s going on here? Well, if the near ‘third-world’ is to be explored as a potential source of energy then this could be a sensible way to go – encourage investment under the guise of aid.  As for security, Matthias Ruchser and Dr. Stefan Gaenzle are of the opinion that: “renewable energy sources promote development, and development promotes security.”

So what leads us to believe that the development of African renewable energy will not be just an extension of the model followed by other large extractors of raw materials from the continent? The Angola and Nigerian oil fields are by no means models of security and progressive regional development.
Does renewable energy offer an opportunity for a new, fairer approach to international development, or will the same energy security problems prevail?

Guest Submission by David Innes-Edwards of Green Frontiers

RPAG – Renewable Power at Scale = Scotland?

Comments by Alex Salmond, Scotland’s First Minister, were a highlight of my fascinating introduction to RPAG – Renewable Power at Scale, this week.  With 206 GW of offshore renewable energy potential (wind and marine), despite it’s small size, Scotland has 25% of Europe’s wind power potential and 25% of its tidal resource potential.

Keep in mind, this is place with an average total demand of 6 GW of power, and already has almost that much in wind power under consent or in development, primarily offshore.  Part of a targeted 7,000 offshore wind turbine rollout in process around the British Isles over the next decade.  These are numbers that both in aggregate and relative size to their grid dwarf the last decade of renewables.  Already a net exporter of power, Scotland is basically planning on meeting the UK renewables requirements all by its lonesome, and export power across the Continent as well, if the proposed North Sea SuperGrid ever gets built.

This renewables push anchors the Scotland and UK climate change planning, with Scotland targeting 80% renewables by 2020, 31% by 2011 (11% hydro, the rest offshore wind). It was at 25% in 2008.  This compares to UK overall 32% renewable by 2020, currently at 6%.

The next couple offshore wind development licensing rounds in the UK and Scotland total numbers in the like 50 GW range.  It took me several presentations on the subject before I was comfortable typing a number that large, as it boggles the mind.

However, and it’s a big however – the industry has a long way to go.  Three key challenges, which will not be a surprise to any renewables industry aficionado:

  1. There currently isn’t anywhere near the grid required: either in offshore infrastructure to reach the locations, nor in modern onshore grid capable of accepting and exporting power from offshore.
  2. Once T&D is solved, the industry to deliver this scale needs to go to deeper waters, bigger and lighter turbines, and a roll-out speed approaching call it 5-10 turbine installs offshore per week within a few years, and no part of the supply chain is yet ready to handle that.
  3. And finally, export market integration.  If places like Scotland are going to be the Saudi Arabia of renewable electricity, the markets have to be open to cross-border trade and export.  For example, assuming it has T&D lines to get it there, and a supply chain to build it, can a Scottish wind farm sell renewable power to pick you favorite EU country and meet their RPS requirements?  Currently, that just ain’t happening.  No open power markets in Europe outside of the UK means no real cross-border market for renewable electricity.

But, it’s hard to utter anything other than OMG, as the number of roll-outs todate, the amount of development resource in process, and headlong sprint in the supply chain compared to 5-10 years ago, means the potential for offshore wind to deliver RPAG within this decade is really, really awesome.