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Oil Prices in Economic "Danger Zone"

At a time we're hearing talk of five dollar a gallon gasoline in the United States, International Energy Agency chief economist Fatih Birol is saying that the level of world oil prices could threaten global economic recovery. Birol was commenting on an IEA finding that the OECD member countries--essentially the world's advanced industrial countries--saw their oil import bill increase by a third last year, from $590 billion to $790 billion. The 27 members of the European Union, which has become notably more dependent on oil imports from OPEC and the Russian sphere, found themselves paying $70 billion more in 2010 for imported petroleum.

At present, world oil prices are edging toward $100 per barrel again, and though industry leaders are calling on governments to make life easier for them, it's not likely in the wake of the Gulf Oil catastrophe that their pleas will be heeded. A scathing report on the disaster, to be issued this coming Tuesday, will declare BP, Halliburton, and Transocean to all have been about equally culpable. Because of its alleged negligence, BP is widely expected to face criminal charges.

As energy writer Michael Klare has been putting it, we've entered the age of tough oil.

Subaru Pulls the Plug on Its EV

Back in July 2009, two Japanese automakers launched electric cars within weeks of each other. (And neither one was Nissan.)

One was Mitsubishi, which put its i-MiEV five-door hatchback microcar on sale after several years of consumer tests. That car is now the best-selling electric car in the world, with 5,000 sold as of December, and will be coming to the States as the 2012 Mitsubishi 'i'.

The other was Subaru, which offered an electric version of its Stella mini-car for retail sale the same summer, limited to the Japanese market. But unlike the Mitsubishi, the Stella electric car has languished in the market, with sales projected at just 400 by March.

Now, Subaru is killing its electric car. According to a Japanese newspaper, sales of the Stella could end as early as March. The Subaru Plug-In Stella uses a small 9-kilowatt-hour lithium-ion battery, driving a 47-kilowatt electric motor. Its range was quoted at roughly 50 miles.

The company says it will suspend work on electric vehicles for up to five years while it waits for the market to mature and public charging infrastructure to be installed.

Subaru's decision may reflect influence from Toyota, which now owns roughly one-fifth of Fuji Heavy Industries, parent company of the carmaker. Toyota is publicly downbeat on the chances for electric cars, reflecting its 15 years of investments in its Hybrid Synergy Drive system for hybrid-electric vehicles.

Next year, Subaru is expected to offer its first hybrid, a version of its Forester compact crossover utility vehicle, based at least in part on the Toyota system, but with Subaru's characteristic 'boxer' flat-four engine.

And just yesterday, news reports indicated that the next-generation Subaru Tribeca seven-seat SUV might share a platform with the next Toyota Highlander.

Subaru has several challenges in coordinating its products with Toyota, including its unusual boxer engine that requires different body-structure engineering. As well as the hybrid Forester, the two companies are cooperating on development of a long-delayed sports coupe model.

Meanwhile, the 2011 Nissan Leaf is expected to seize the crown of the world's best-selling electric car, with global production of up to 50,000 units projected this year.

It's hard not to imagine the hand of Toyota in Subaru's decision, though perhaps the company is simply allocating resources where it sees the most market opportunity. The company said it did not see opportunities for profit in small-scale electric car sales for some time to come.

Either way, an early electric-car pioneer is giving up on its first offering. Gee, does this sound familar?

 

This article, written by John Voelcker, originally appeared on GreenCarReports.com, a content partner of IEEE Spectrum.

What to Watch for in the New Year

There are four  big stories we'll be tracking, with an eye on long-term energy conservation and greenhouse gas reduction. In each there is likely to be a critical threshold; a stumble crossing any of them will have wide repercussions in power engineering.

(1) Electric vehicle reception. With Chevy's Volt and Nissan Leaf coming onto the market, with  a number of other electric vehicles soon to follow from other manufacturers, this is the year in which EVs at last have their chance to obtain a secure niche in the market--or flop. If consumers turn their noses up at them--whether it's because they're too expensive, their performance is not what it's cracked up to be, or the charging infrastructure isn't mature enough--we will have to conclude that they'll have little or nothing to contribute for the foreseeable future.

Through the 1990s IEEE Spectrum magazine ran a regular column called EV Watch, only to retire it at the end of the decade because there just wasn't enough to watch. This year we'll find out whether it was worth resuming the watch.
 

(2) Smart grid returns. The U.S. government having invested billions of dollars during the last two years in smart grid infrastructure, with smart meter rollouts leading the way, consumers and utilities are getting keen to see payback in terms of lower prices and costs. The credibility of the smart grid vision is seen to be at stake. Though the threshold may not be as sharp as with EVs, if there is nothing concrete to show for all the work by the end of the year, consumers won't be pleased and utilities will find themselves on the defensive.

The Energy Department would dearly like to obtain congressional authorization for a second big round of smart grid grants. But it won't be easy to round up a business consensus in support of such subsidies, or find favor in the environmental community, if it appears that money is being poured down the drain.

Fifteen years ago Spectrum published articles about the promise of flexible AC transmission--FACTS--with a sense that the technologies packaged under that name would soon be widely deployed. Nothing much happened. Has the time for FACTS now really arrived?

(3) U.S. energy trends. Though the Obama administration has aggressively promoted development of green energy technology, it gave up on trying to get a comprehensive energy and climate bill through Congress. That signaled the collapse of any concerted national effort to wean the country from fossil fuels. Yet spontaneous trends in the energy sector may be accomplishing much of what the government hoped to achieve with policy. The boom in unconventional gas already has prompted a distinct drop in coal-fired power generation, which is sure to translate into lower greenhouse gas emissions. The U.S. power sector's carbon dioxide emissions decreased to 5,400 million metric tons in 2009 from 5,800 million metric tons the year before. The results for 2010 are likely to be still better, but we won't know for sure until the numbers are in.

Meanwhile, oil prices have remained stubbornly high, leading to reductions in U.S. gasoline consumption and lower emissions from that sector too. Michael Klare of Amherst College has declared the era of easy oil to be over, and he appears to have few detractors.

Early in the last decade, a blue ribbon group sponsored by Princeton University proposed deliberating taxing up the price of gasoline to $5 per gallon. It seemed ridiculous, and was ridiculous, to suppose that Americans and their political representatives would ever embrace the idea. But now we are hearing a former CEO of Shell Oil predict that we will have $5 gasoline by 2012,.

(4) Greenhouse gas regulation. The U.S. Environmental Protection Agency is about to start issuing rules to limit greenhouse gas emissions, pursuant to a Supreme Court decision authorizing and indeed arguably requiring the step. But whatever EPA does is  sure to be challenged in court, and the issue is almost sure to find its way back to the highest court, now minus Sandra Day O'Connor, who provided the crucial swing vote before.

The Supreme Court doesn't like to reverse its own decisions, especially rather recent ones. But if I were a betting man, I wouldn't bet they won't reverse themselves in this instance.

2010 Renewable Energy Recap: Big Potential, Slow Progress

This year started with good news on the renewable energy front, with reports on impressive 2009 growth in wind power installations. 2010, though, wasn't quite as great a year in terms of the number of turbines and solar panels installed in the US and around the world. Instead, it was the year of potential: report after report showing just how much power the world really could get if all our renewable energy dreams are realized.

In May, we learned that the western portion of the US could be 35% renewable-powered if all the potential is realized, even without extensive (and expensive) transmission projects. And later, the National Renewable Energy Laboratory told us that the total offshore wind potential in the US is staggering -- greater than all the current electricity-generation capacity.

And speaking of staggering, other countries have amazing potential as well. One report demonstrated how Australia could be completely powered by renewables -- yes, 100 percent -- by 2020.

The potential isn't limited to wind and solar, either. In spite of West Virginia's coal-based economy, the state sits atop an enormous geothermal resource with potential to generate close to 19,000 megawatts. And moving even further from the traditional renewable sources, Spain even has the potential to get seven percent of its power from waste.

All this potential is encouraging, but at least in the United States the progress toward realizing it is still slow. The country lacks a renewable energy portfolio standard (though more than half the states have their own), and there are few indications that any major sea change in renewables construction is on the horizon. Still, there are good signs. Just in the past few weeks, major purchases of wind turbines have been reported for Iowa wind projects as well as in various spots around Europe. Solar power in the southwest is also looking up, with approvals for several projects coming toward the end of this year (though there is also some objection, which could slow progress).

It remains to be seen if 2011 will feature significant progress toward renewable energy goals, or just another year's worth of reporting on its potential.

(Photo via spg solar)

US Takes Trade Action Against China on Wind

Five years ago, on July 4, 2005, the Chinese government issued a regulation requiring 70 percent of the ingredients in newly built wind turbines to be home-manufactured. That, together with production subsidies, cheap credit, preferential orders from state-controlled entities, and a variety of advantages, rapidly engendered an industry that now controls almost half the $45 billion wold market for new wind installations. In the United States, though Chinese manufacturers have built only three turbines so far, companies like Goldwind USA are gearing up for an aggressive drive. Reacting to the circumstances, a U.S. labor and environmental coalition led by the United Steelworkers has been calling for trade action against China.

Yesterday, responding to that call, the Obama administration filed a trade complaint against China in the World Trade Organization, arguing that measures like the 70 percent local content rule flagrantly violate WTO rules. On the face of it, considering that just about every major country subsidizes wind and promotes home manufacturers, prospects for the Obama complaint may be dubious. Trade conflicts are notoriously complicated and drawn-out, and they often get settled long after the horse is out of the barn. In the case of wind--not to mention solar, nuclear, and high-speed trains, among other critical technologies--the big corporate players have been reluctant to join legal actions against China for fear of jeopardizing their long-term positions in the country.

Take the Spanish company Gamesa, the world's third largest wind manufacturer after G.E. and Vestas. As described in a recent New York Times feature, five years ago Gamesa supplied a third of the Chinese wind market, a fraction that has now dropped to 3 percent, the Spanish company having trained locals to go into competition with it. "Nearly all the component that Gamese assembles into million-dollar turbines here," said the Times, are made by local suppliers. . . . And these same suppliers undermine Gamesa by selling parts to its Chinese competitors." Yet Gamesa expresses no official regret, saying that if they had not trained the Chinese, some other company would have.

It's that kind of rationalization that time and again produces unfortunate or even tragic results.

Will Lower Solar Costs Revive Moore's Law Talk?

A recent report by researchers at Lawrence Berkeley Laboratory reports a rather sharp drop in photovoltaic installation costs in the first half of 2010, which may revive talk about a kind of Moore's law at work in solar energy. The report, however, does not find a steady decrease in costs, as the alleged law has predicted, and the reasons for the recent decline appear to have more to do with business cycles than with technological progress.

The authors found that in 2008 and 2009 costs held steady at about $7.50 per installed watt. Based on a study of the largest PV system incentive programs in the United States, they determined that installation costs dropped $1.20/W from 2009 to the first six months of this year. Surveying 78,000 grid-connected PV systems built between 1998 and 2009, they found an average annual reduction of $0.30 in real dollars, or 3.2 percent per year--good, but not earth-shattering.

Referring to the sharper decreases this year, one of the report's authors said that during the four previous years, costs stayed rather flat because a fast-growing global market put upward pressure on both module and non-module prices. "This dynamic has now shifted, as expanded manufacturing capacity in the solar industry, in combination with the global financial crisis, led to a decline in wholesale module prices." Though the lower installation costs are primarily associated with lower module prices, non-module costs--labor, marketing, overhead, inverters, and balance of system--also are important.

Curiously, the authors do not highlight the role of China, despite its conspicuously growing role as a low-labor-cost supplier of PV materials and modules in national and regional markets where solar is heavily subsidized. A year ago, Applied Materials--the leading supplier of PV panel manufacturing equipment--announced it was setting up its main solar R&D lab in China, reflecting that role.

Has the U.S. Passed Peak Gas (Demand)?

An interesting Associated Press article that's making the rounds asserts that the United States has actually passed the point of peak demand for gasoline, and instead of a continued rise in the coming years we will actually see a decline from 2006 onward. The data seem solid on that assertion, but the implications may be more complicated than at first glance. According to the article:

"Americans are burning an average of 8.2 million barrels — 344 million gallons — of gasoline per day in 2010, a figure that excludes the ethanol blended into gasoline. That's 8 percent less than at the 2006 peak, according to government data."

Also, Americans will burn 20 percent less gasoline in 2030 than they do today. However, as the AP article does note, this is far from a done deal. There have been declines in demand before, and there's no reason that shifts in the economy or marketplace in the future couldn't shift the demand trajectory as well. The Washington Post has a timeline of gas use and demand since the first gas station was built in 1905, and it highlights just how volatile -- over the long term, at least -- gas demand can be.

Also, there are caveats: as mentioned above, the 8.2 million barrels burned each day in 2010 does not include ethanol blended into the gasoline. If we're talking only about gas, fine, but if the point is to examine the impact of this declining demand then that note becomes important. The bulk of environmentalists, and some of the government at this point, believe that corn ethanol carries its own set of environmental risks and may not even have much of a greenhouse gas emission benefit over gasoline. With ethanol mandated to make up about a quarter of all gas bought at the pump in 2022, are we really sure that the resulting decline in oil-based gas demand is such a great thing?

Even aside from the ethanol questions, a decline in gas demand doesn't necessarily translate directly into greenhouse gas emissions savings. Improved fuel economy -- one of the factors involved in the anticipated demand decline -- can certainly lower emissions, but among the reasons for that improved fuel economy is the use of plug-in hybrid and electric vehicles. What electricity source is powering those vehicles? If it's coal, then we'll have traded one dirty energy source for another, limiting the greenhouse gas savings.

Declining gasoline demand is clearly better than increasing demand, but such issues are rarely completely straightforward when it comes to the impacts.

(Image via Daryl Mitchell/Wikimedia Commons)

Canada's Controversial Oilsands Get Top-Level Review

The Royal Society of Canada has issued a major report on the environmental and health impacts of oil sands development in northern Alberta, a subject that has huge economic implications for the province and country and big implications for North American fossil fuel supplies. The report will not be the last word on this immensely important subject.

The report, commissioned in October 2009, was prepared by a panel of well-qualified experts in environmental health, toxicology, land reclamation and ecological restoration, hydrogeology, integrative biology, economics, and engineering. It primarily addresses concerns articulated by environmentalists, representatives of indigenous peoples (the groups Canada calls its First Nations), and other local citizens. What it does not do is make a comprehensive cost-benefit analysis of whether, on balance, oil sands development is worth the prices paid in environmental degradation, scenic squalor, and human discomfort.

The Canadian oil sands are located in a relatively remote area that is sparsely inhabited and yet, to judge from photos, splendid in its vast isolation. It includes one major protected zone, the Buffalo National Park. So worries about oil sand development are not limited to just how it might affect this or that, here or there, but how it will transform the character of a whole region.

Thus, however authoritatively the report addresses the specifics, it remains open to the charge that it almost literally sees only the trees, but not the forests.

Among major findings of the report, Environmental and Health Impacts of Canada's Oil Sands Industry:

--no evidence of contaminant exposures at levels that could affect downstream populations adversely

--need for more frequent biological monitoring and more accessible research results

--enhanced regulatory capacities, with emphasis on acquisition of needed technical personnel

--more adequate provision of financial security, to cover projected costs of environmental reclamation and restoration

Given the critical edge of those recommendations, no reasonable person would accuse the Royal Society of whitewashing oil sands development. But the report nowhere adds up the total benefits expected to accrue from development and nowhere weighs such benefits against aggregate costs--including the costs that may in some sense be greater than the sum. And at times the report comes across as a little tin-eared, as in the first point above, where it says there's no evidence of contamination at levels that could hurt people. What is does not say is whether there's evidence of people being actually hurt.

Not surprisingly, First Nation representatives have reacted to the Royal Society report with skepticism, if not outright disdain.

At times the report expresses itself in a style bordering on the ludicrous: "Is the oil sands industry collectively Canada's largest emitter for air pollutants other than greenhouse gases?" "Is the oil sands industry the most environmentally destructive project on earth?" Such questions bring to mind, embarrassingly, the amusing Geico ads running these days on U.S. television--"Can Geico give you more for less money? Did the three little pigs squeal all the way home?"--except that in the Royal Society report the rote answer is no rather than yes.

No, oil sand development is not the most environmentally destructive project on earth. No, it is not Canada's largest emitter of air pollutants.

Given that style, it's not always easy to stay focused on Royal Society's technical specifics. But it's often worth the try. Take greenhouse gases. The report says that oil sands currently account for only about 5 percent of Canada's total emissions, compared to 17 percent from electricity generation and 27 percent from transportation. But sands also are the fastest growing share and therefore "create a major challenge for Canada to meet our international commitments for overall GHG reduction."

What are those international commitments? This too is a subject that requires a little extra concentration to correctly fathom. As the report notes, in the first Kyoto commitment period, 1990 to present, Canada's GHG emissions increased 24 percent, rather than decrease 7 or 8 percent, as the protocol required. As Canada, unlike the United States, is party to the protocol, it is in gross violation of it. Not surprisingly, then, it attempted earlier this month at Cancun--together with two other countries-- to have the Kyoto process canceled. But it failed after the Japanese leadership defected from the anti-Kyoto cause, having received personal phone calls from the leaders of the UK, Germany, and Mexico. .Accordingly, Canada ended up signing agreements in Cancun that in theory require it to do by 2020 even more than Kyoto asks, rather than much less.

To come anywhere close to conform to that obligation would be a Herculean task for Canada, and in fact, it might be flatly incompatible with oil sands development.

Solar Energy Zones: DOI, DOE, Announce Renewables Plan

A joint effort between the Department of the Interior and the Department of Energy has yielded a plan involving "solar energy zones," or massive tracts of public lands in the western United States deemed appropriate for industry-scale solar power development.

The eloquently named Draft Solar Programmatic Environmental Impact Statement outlines some of the best areas for solar power in six western states. It excludes a number of types of area: "those prohibited by law, regulation, Presidential proclamation, or executive order; lands with slopes of 5 percent or greater and/or sunlight levels below 6.5 kilowatt-hours per square meter per day; and areas with known resources, resource uses, or special designations identified in local land use plans that are incompatible with solar energy development."

That may seem like a lot of exclusions, but the Bureau of Land Management (part of the DOI) manages 120 million acres in the six western states alone. Even with all the exclusions, about 22 million acres are left over that could be suitable for development, and 677,400 acres have been included in the solar energy zones; the zones are in California, Colorado, Nevada, New Mexico, Utah and Arizona.

The government's aim to fast-track renewable energy development also means that the permitting processes for big solar projects are moving relatively quickly. Eight industrial-scale solar plants have been approved recently, which will eventually produce 3,572 megawatts of electricity. If all of the additional 104 applications currently on file with the BLM are built, that would mean another 60,000 megawatts.

These are lofty goals, no doubt, given that the total installed solar capacity in the US only climbed past 2,000 MW in 2009. However, it has become increasingly clear that solar installations have only begun to scratch the surface of both the US and worldwide potential. As discussed here earlier, some see the potential to jump as high as 980 gigawatts of solar power around the globe by 2020, so the joint DOI/DOE effort to get that started is certainly a good step.

(Image via DOE/DOI)

Unconventional Gas Revolution Goes Global

The revolution in unconventional gas, which began in Texas, Lousiana and other western states and now is transforming the energy picture in northeastern ones as well, is not just a North American phenomenon. Argentina's main energy company, YPP, announced a shalegas find that will guarantee the country adequate supplies for many decades to come; the company, controlled by Spain's Repsol, is teaming up with Brazil's Vale mining group in a $140 million deal to develop the Pataonian reserves, using advanced hydraulic fracturing techniques. Meanwhile, Norway's Statoil reportedly is "closing in on a deal" to undertake shalegas exploration in China, because of its extensive Marcellus shale experience and despite Nobel Prize tensions; Statoil already has agreements with Sinopec to evaluate shalegas prospects in the South China Sea and with Sinochem to do work in Brazil and elsewhere. It recently bought a big stake in Texas's Eagle Ford formation, and it's looking at opportunities in South Africa.

As the unconventional gas boom continues in the United States with no end in sight, many of the relatively small independent companies that have dominated exploration and development so far are selling non-essential assets to raise capital for further exploration--or they are letting themselves be acquired by the majors. Most recently, Chevron paid $3.2 billion for Atlas Energy, which owns Marcellus acreage in West Virginia, Ohio, Pennsylvania and New York. Earlier in the year, Atlas launched a $1.7 billion joint venture with India's Reliance Industries, for Marcellus work. Such lists go on and on . . .

The reasons include not just gas's relative abundance and cheapness, its cleanness, and its low carbon content compared with coal, but also its flexibility, as a recent Worldwatch report observes. Whereas baseload coal and nuclear plants are designed to run all the time and come generally only in large sizes, gas-fired plants "come in a variety of scales" and can be ramped up or down quickly. That makes them a nice fit with intermittent energy from wind and solar generators.

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