Peak Energy, Coal Reserves, and Climate Change

The blog The Oil Drum has posted a writing by Dave Rutledge, the Chair for the Division of Engineering and Applied Science at Caltech. In this post and in a YouTube video Rutledge makes a few basic claims or revelations, that if correct, should profoundly affect how we (the United States and the World) treat the issues of energy supply and climate change. Also see a webpage posted by Dave Rutledge where you can download his power point presentation and Excel files.

The three basic points he makes are:

1. Coal reserve estimates are inaccurate, outdated (derived and unchanged significantly since 1974), and in need of revision quite a bit downward. He references a National Academies report that discusses the need for new and accurate accounts of coal reserves and resources.

2. Hydrocarbon (oil and natural gas) and coal resources are well below those that are use by the IPCC climate models to estimate future global warming. The end result is that there is not enough mineable fossil fuels to cause the warming and sea level rises that are being predicted. For example, in some IPCC models, oil production is assumed larger in 2100 than today. Is this possible? Does this mean the use of tar sands and oil shale, or is using those resources even not enough? Rutledge's discussion of this concept makes it seem unlikely that new sources will take up the slack.

3. For climate change reasons, or fossil fuel depletion reasons, work on implementation and research and development into renewable energy systems is an imperative. I'll add not energy efficiency per se, but energy reductions that still enable us, as humans, to continue to be healthy and interact culturally as needed to have good lifestyles.

I will not further discuss this topic as one should refer to the links within this post for further information from the Dave Rutledge himself.

New Energy Bill

The US Congress passed an energy bill yesterday and Bush signed it into law. It is both a step backward and forward for energy policy. See this CS Monitor article for a synopsis.

Creating a higher CAFE standard to get to 35 mpg by 2020 is certainly a good step forward, and it has been a long time coming. The biofuels mandate is a marginally good idea. The emphasis on corn ethanol is not the greatest due to the environmentally unfriendly aspects of using a tremendous amount of irrigated water (200-2,500 gallons of water for every gallon of ethanol) consumed and fertilizer runoff into the Gulf of Mexico. To most engineers who study the problem, I would say they believe biofuels must be non-irrigated and farmed in a way that sustains the nitrogen cycle, and not only the carbon cycle we hear so much about.

The removal of the renewable energy production tax credits for wind, solar, etc. is disappointing, but it has lapsed and been restarted three times already in its brief history. What we really need is a PTC scheme that sets it at a medium to high level (note: it was 1.9 cents/kWh) and has it steadily decrease in a set manner which cannot be changed. This gives businesses the ability to know the future of this kind of incentive such that they can invest in infrastructure that must be amortized over several decades.

The CS monitor article mentioned above does point out one thing that I think is good: energy policy might now be, as it should, a perennial subject. That doesn't mean that energy policies should change every year, it just means they should be evaluated every year.

Deregulated vs. Regulated Energy Prices

In Texas in 1999, Senate Bill 7 created a deregulated electricity market within the Electric Reliability Council of Texas (ERCOT). Some areas opted not to join into the fun of a deregulated market, where consumers could choose their retail electricity provider of choice. Examples of these ares are the city of Austin (Austin Energy) and the city of San Antonio (CPS).

So since 1999, I wondered: if the economic 'free' market is supposed to be optimal and drive prices lower for the consumer, why aren't prices in the deregulated market lower than those at Austin Energy and CPS Energy?

Today, the winter charge for electricity within the Austin Energy domain is near 8.5 cents/kWh if using 1000 kWh per month. The summer rate this year was near 9.4 cents/kWh. If I look on the Texas Public Utility Commission's website for finding a retail electric provider (Power To Choose) in Round Rock, Texas (just north of Austin) in the Oncor region, I notice for the fixed rates (I will not consider variable rate electricity) the price varies between 10.2 - 14.1 cents/kWh. This is approximately 1.5 cents/kWh more than Austin Energy averaged over the year. Note that the price a consumer pays is due to costs for (1) electricity generation, (2) transmission, and (3) retail electric providers (REP) who administer the service. The ERCOT deregulated market makes it such that no one company can perform more than one of those functions.

One major reason for this discrepancy is how electricity is priced in the deregulated market.

Assume the following:
1. Company A is in the deregulated market in ERCOT, and Company B is a city municipality within ERCOT but not engaged in the deregulated market (like Austin Energy).

2. Both Company A and B have identical power generation capacity and mix at: 33% natural gas combined cycle, 33% pulverized coal, and 33% nuclear.

The deregulated market prices electricity at the 'marginal price' (i.e. the cost to generate the last bit of electricity). Also, all coal and nuclear power runs almost continuously with the natural gas units cranking up and down to follow the rise and fall of electric demand. Assume the case now with high natural gas prices, it is the most expensive.

Say nuclear power costs 1.7 cents/kWh, coal costs 3.5 cents/kWh, and natural gas generation costs 5.0 cents/kWh.

For 1000 kWh of generation the deregulated cost of energy is:

= (nuclear electricity)*price + (coal electricity)*price + (natural gas electricity)*price
= 333 kWh*5.0 cents/kWh +333 kWh*5.0 cents/kWh + 333 kWh*5.0 cents/kWh
= $50.00

For 1000 kWh of generation the municipality cost of energy is:

= (nuclear electricity)*price + (coal electricity)*price + (natural gas electricity)*price
= 333 kWh*1.7 cents/kWh +333 kWh*3.5 cents/kWh + 333 kWh*5.0 cents/kWh
= $34.00

So using THE EXACT SAME GENERATION units, the municipality is inherently cheaper. Of course, municipalities can be less efficient running their organization than competitive companies and end up charging more. But, competitive REPs also need to pay for marketing their product, which incurs costs. Thus, municipalities can afford to be less efficient in their general operation and organization up to the point that they make up for marginal price differences and marketing costs from REPs. There are also other factors, but the basic price structure for charging for generated electricity is perhaps the most influential.

Of course, since the deregulated market was created after lots of infrastructure existed already, it is not truly a 'free' market system since some companies started with a tremendous amount of assets. But that is a discussion for another day ...

An oil scare story from the past ...

“It is the Summer [two years from now]. Violent uprisings have shaken Saudi Arabia, and the House of Saud has fallen. For months, the nation has been kept in turmoil by dissidents with strong religious and anti-Western feelings: ultraconservative Muslims of the Wahhabi sect, angered by corruption among some of the ruling princes and embittered by the erosion of family and tribal values; and disaffected foreign workers, many of them Palestinians, stirred up by radical forces in other lands.

Oil no longer flows from rich Saudi fields. Critical elements of the oil distribution system, systematically wrecked, lie in ruins. The giant terminal at Ras Tanura, which once sent half a dozen tankers a day down the Persian Gulf and out to the global oil routes, rusts silently under a scorching sun.

The free world has lost a fifth of its oil supply – some ten million barrels a day.

For a brief time, the United States seemed not to feel the loss; its daily share from Saudi Arabia was less than a million and a half barrels, and there were stockpiles and a small strategic reserve to draw on.”

Does this projection sound believable? It did in 1981, because that is when it was written in National Geographic magazine along with comments about projections that oil could be at $80 per barrel in 1985. It turned out that the cost of a barrel of oil in 1985 was about $27, and only $14 in 1986 (which is roughly $52 and $27 in early 2007 dollars). How wrong was that oil price projection?

See http://www.wtrg.com/prices.htm and http://www.inflationdata.com/inflation/Inflation_Rate/Historical_Oil_Prices_Chart.asp for discussion and charts of oil prices.

What this look into the recent past indicates, is that projecting energy prices and uses into the future is pretty much as good as looking into a crystal ball. The reason that oil prices dropped is due to efficiency improvements and adjustments in the world economy that reduced demand. These adjustments were caused by people, just as the price increase and embargo was also caused by people.

And a large part of the reason it has taken approximately 25 years for us to have the same conversation again about the future of oil supplies and Wahabbi sects in the Middle East, is because people had the ability to act and change the future. Thus, in the 1970s and 1980s, people were the major influence in energy consumption and energy prices. Today, people are still the major influence as we still have room to become more energy efficient to choose the goal for oil consumption for the next few decades.

The question is: how long can people’s choices and adjustments remain the most influential factor in energy consumption and prices? Because, if people are not the most influential factor, then that means nature’s limitations in resources is the most influential factor. At no point yet in history has per capita energy consumption declined. Human choices can possible maintain high standards of living even if and when energy per capita begins to decline, sometime in the future. Our goal should be to maintain the world and society such that humans always have the most control over energy consumption, because otherwise, it means, by definition, we are not in control.

Google's Energy Ventures - Can Computer/Programming Companies Tackle the Commanding Heights?

The "Commanding Heights" of the economy were what Vladimir Lenin referred to as the segments and industries in an economy that effectively control and support the others: energy, banking, and transportation/shipping. Google and other so-called 'tech' companies (note: it is a misnomer to call technology only concepts that involved computers and programming) are aiming at solving both their own and others' energy cost problems.

In all likelihood, companies venturing in this space see their future growth limited if energy does not stay cheap and abundant. Venture capitalists see the large amount of dollars possible for finding the next major contributor to the energy mix. But tackling the Commanding Heights takes a lot of physical capital - the steel, silicon, wires, etc. that actually exist on the ground somewhere - and the paybacks times are historically slower than what Google and others are used to.

In the case of Google, their servers have grown at such a rate that they likely see limitations in their ability to continually increase their offers for free hosting services. Since providing the energy to power servers is critical to many of Google's business aspects, they Google executives have decided it is worth their while to try to solve the problem for themselves. They likely can do that, but making a new renewable energy technology (besides wind power) go mainstream will be tough, but I'm glad they are taking this challenge.

The fact is, that for almost any building in the United States, putting photovoltaic panels (for example) at the facility to offset electricity purchases will provide a payback on the investment within the lifetime of the building, and likely in less than 15 years, and possibly in less than 10 years depending upon location and incentives. The reason why this is typically not done (except on government buildings) is that there are other investments to be made with the same money that have higher paybacks in shorter time frames: this is the crux of the issue.

As long as the paybacks in energy investments take longer than other investments, companies will fulfill their fiduciary duty to make the non-energy investments. Energy simply does not cost enough to change the economics. Making renewable energy generation cost less than coal can be done by two ways: (1) cheaper renewable energy and/or (2) more expensive coal energy. The latter is not likely to happen anytime soon, even with a possible future carbon, or carbon dioxide, price. One way for the former to occur is to allocate semiconductor factories toward building solar cells instead of microchips. But then this means more expensive servers (because of less supply of chips and processors) for Google ... a catch 22.

Pros and Cons of Wind Energy

Here is a link to another article in an ever increasing list of discussions about wind power and its pros and cons. More and more negative or problematic points about wind energy are surfacing, and it is mostly because wind energy is starting to have a measurable impact instead of just being 'in the noise' of the electricity generation mix.

Essentially, because utility and grid operators don't know exactly when wind power will be getting generated due to the unpredictability in wind speed, there are additional actions that need to be taken in operating a reliable electric grid. As the amount of installed wind capacity (the MegaWatts installed if all wind generators were operating at maximum power) gets to over 10% of the entire grid capacity (wind, nuclear, coal, natural gas, hydroelectric, etc.), the other electrical generators are required to operate to account for the increased wind capacity. This assumes, of course, that you are going to allow the full available wind power onto the grid at any given time.

A study by GE (see http://www.ercot.com/meetings/ros/keydocs/2007/1022/Variablity_and_Predictability_draft_dlvd_2a.zip, or link on page http://www.ercot.com/calendar/2007/10/20071022-ROSWIND.html), done for the Electric Reliability Council of Texas (ERCOT)
shows that the dispatchable generators (those that can be turned on at any time) have to be able to ramp up and down faster the more that wind is integrated into the grid. Interestingly, the predictability of the total load that needs to be served by the dispatchable generators stayed about the same as without wind. This is because there is already enough uncertainty in the electricity demand throughout the day such that the added uncertainty of wind generation was not incredibly influential.

Basically, with more wind, we are deciding how many other additional aspects (higher generation ramp rates, more transmission lines, etc.) we are willing to deal with to have a clean source of electricity. The fact that wind energy is getting questioned for its newly-perceived (though not new at all) drawbacks is a testament to the wind industry already solving many problems to become a mainstream source of electricity.

Top 10 Arguments against Global Warming Rebutted

This story by the BBC discusses some point-counterpoint discussions of the "Top 10" counterarguments for global warming. It is a pretty good short mention of some of the main points.

Click the title to go to the BBC site.

Time Scales and Quality of Life: How they define our Future

Since before Roe vs. Wade (1973) …

the United States populace has been divided on how to treat the current/potential “quality of life” of the unborn who are not capable of expressing will of their own.

For the past 20 years …

the world has been hotly debating on the short and long term consequences of trying to preempt and mitigate effects of global warming.

Quite recently …

an electric utility executive told me the way he attempts to express the tradeoffs of his job to environmental advocates is to define “quality of life” as a tradeoff among three areas: health (environment), affordability (cost), and availability (abundance of supply and grid integrity).

And still more recently …

a diabetes research [Huang et al., 2007, Diabetes Care] study indicated that, for some, the cumulative burden of diabetes treatments (pills, insulin shots, etc.) is so great, that they claimed they were willing to forgo some years of living with treatment for a better “quality of life” during less years without treatment. Essentially, they said they were willing to risk having longer term ailments, including blindness and amputation, resulting from stopping medications in lieu of continuing traditional medical treatment and its associated side effects in the shorter term.

What do all of these instances have in common? They are all defining, or struggling to define, what and when they mean by the term “quality of life”. In fact, this discontinuity in timescales underscores much of the political and social debate on these topics, and almost everything else.

Albert Einstein told us that space and time were one in the same. In a similar vein, when we neglect timescales in political and social discussions, we miss part of the argument and prevent people from coming together on compromise.

Short time scale (0-1 year)

Pro-life advocates want to speak for those that cannot speak for themselves and are not yet born. The time frame of debate focuses from the time period from conception to birth.

Short-Medium time scale (1-10 years)

Some patients with chronic illnesses wish to make the remaining years of their life as enjoyable as possible rather than as long as possible. The time frame of debate focuses upon the last decade or so of expected life for the individual.

Medium-Long time scale (5-50 years)

Energy and electric utility companies and municipalities need to plan for infrastructure investments that economically depreciate over several decades. The time frame for the internal economic debate usually focuses upon the lifetime of the assets.

Long time scale (> 50 years)

Environmental sustainability advocates concerned about climate changes want to speak for those that cannot speak for themselves and are not yet born. Because of concerns about the emissions and wastes (e.g. CO₂ and radioactive materials) of fossil fuel energy sources, the time frame for debate focuses on time spans greater than 100s of years.

As a society we are struggling to define the quality of life for different people and timescales. Until we settle on how we view these different timescales, our social policies will fluctuate with no apparent purpose or guidance.

Some elements of a proper energy policy

A proper Energy Policy in the United States would promote (1) clarity of purpose, (2) diversification of use of energy resources, and (3) more transparent and accurate pricing of energy such that the market (consumers and energy companies) can properly make both short and long term decisions.

How to promote each item above:

(1) CLARITY – State, through actions and rules in the Energy Bill, that the U.S., being the largest energy consumer in the world, and the largest energy user per capita, must always consider the tradeoffs of such a large amount of energy. These tradeoffs are environmental stewardship, security/accessibility of energy resources, and costs that don’t cause disruptive economic conditions (but that if changing slowly over time in the right direction can work to our benefit). For example: The fact that private banks will not underwrite new nuclear facilities is testament to how high they perceive the risk. Does this mean that the U.S. should have no new nuclear facilities? Not necessarily, BUT if the taxpayers underwrite (through government loan guarantees) the high infrastructure costs (for nuclear plants and disposal), then the taxpayers should also reap the economic benefits of this underwriting. I don’t want a “national energy company” (i.e. U.S. government running a nuclear facility), but I might rather have that than the U.S. citizens taking the risk of a nuclear facility without directly benefiting from the cheaper operational costs of generating electricity from nuclear facilities.

(2) DIVERSIFICATION – The oil shocks of the 1970’s took petroleum out of the mix (almost, but not entirely) of electricity generation. We are benefiting from this decoupling today with higher oil prices. Consumers will generally benefit when there are multiple competing sources of fuels/energy for various applications ranging from heating/cooling homes to fueling cars. The market is NOT SET UP to take into account these concerns, so it is the responsibility of the government to set up the rules such that various companies end up filling the need for a diverse energy supply that includes ALL fuels renewable, fossil fuels, and nuclear. THE MOST IMPORTANT thing to do regarding this concept, and energy policy in general, is to promote higher CAFE fuel standards for cars AND LIGHT TRUCKS AND SUVS. We, the United States, can do this, and should. More fuel efficient cars are being made, and can be made. Also, the more fuel efficient a car is, the further it can go ON ANY FUEL (electricity, hydrogen, gasoline, diesel, etc.). AND, higher fuel standards do not mean people will buy less cars, so I’ve never been sure why automakers are so concerned about this issue as long as the time for transition is appropriate.

(3) TRANSPARENT PRICING – Every energy usage today is subsidized in some way by the government at both the state and federal levels. This is not inherently bad as the governments have concerns and perspectives that the players in the economic market do not have. The U.S. has established over long time scales that it is willing to promote and fund expansion of fuels that are BOTH NEW (wind, solar) AND WELL-ESTABLISHED (coal, petroleum exploration). Arguments abound such as (1) fossil exploration is “new” and R&D is needed, or (2) wind energy is starting at a disadvantage and needs R&D to compete as well as new transmission lines and rules, (3) etc. on other energy resources. All of this is generally true, and people are just bickering over who is not getting their fair share. Everyone has an argument because the coupling between energy subsidies and subsidies in other areas of the economy are sufficiently blurry. There are some areas where U.S. investment can have a more direct effect upon pricing than others. For example, the U.S. is only one player in indirectly dictating (by consumption, production, and intervention in oil-rich areas) the price of oil. But investing in resources that exist within the U.S. (renewables, coal) a more direct effect will be had upon how much citizens spend on energy. We can make a start to people understanding this by making some basic information available in a simple and straightforward manner: 1. Government dollars given to promote each fuel (wind, oil, coal, etc.) 2. Amount of energy consumed from each fuel (absolute values and percentages) 3. Dollars per energy consumed 4. List of externalities that are and are not accounted for in prices of energy. Examples include SO2 is not sufficiently internalized for coal plants (due to technology for scrubbing) and nuclear waste disposal is not sufficiently internalized for nuclear power.

Politics and Science: A Different set of Units, not Values

With the awarding of the 2007 Nobel Peace prize to the Intergovernmental Panel on Climate Change and Al Gore, don’t get confused on the distinction between science and politics. Be sure not to read more into this award than is actually there.

Bjorn Lomborg, an ardent critic of climate change mitigation, was quoted as saying “Awarding it to Al Gore cannot be seen as anything other than a political statement. Awarding it to the IPCC is well-founded”.

To quote Alfred Nobel’s will regarding the awarding of the Peace prize bearing his name:

“… and one part to the person who shall have done the most or the best work for fraternity between nations, for the abolition or reduction of standing armies and for the holding and promotion of peace congresses.”

Why are Lomborg and others irked that Gore shares the award with the IPCC? How can Peace be seen as anything other than political? The Norwegian Nobel Committee in fact acknowledges Gore as “one of the world’s leading environmental politicians” and says his commitment is “reflected in political activity.” So of course the award was political. If Gore were awarded the Nobel Prize for physics or chemistry, then I would join the side denouncing that act.

The fundamental issue is that as time goes on it is becoming more and more difficult to draw the line between science and politics, but there is an easy test. If a person discusses what is happening or how things are happening by the use of units (e.g. ‘meters’ for distance, ‘centigrade’ for temperature, ‘parts per million’ for concentration, etc.) then that person is reporting science. If a person discusses what is happening and what should next happen without the use of units, but by only using words (e.g. great, accelerating, harm, chaos, etc.), then that person is acting political.

So, can a person act both scientifically and politically? Of course. Forcing a scientist to subside political thoughts is a reduction in his or her civil rights. And neglecting a politician’s input into the ramifications of scientific revelations is a reduction of duty.

The fact is that given a single number or trend, even with 100% certainty in its validity, people will disagree about its ramifications and importance in directing action. The measurements and numbers have to exist before we can even debate them. Considering topics such as climate change there are many numbers and measurements to sift through. Thus, there are many opinions and interpretations to sift through.

Gore may or may not be stretching the validity of some of the results of IPCC and other climate change researchers, but his intentions are inline with the purpose of the Nobel Peace Prize. Whether you agree with Gore or not, he is causing people, on both sides of the issue about whether to plan ahead for global warming effects, to speak their minds and contribute to the political discussion. And politics is a substitute for violence. Hence, the definition of peace.