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BP Announces Huge Oil Find in Gulf Coast

BP announced yesterday, Sept. 2, a huge deep-sea oil and gas discovery in the Gulf of Mexico. According to the company’s press release, the field is located about 400 kilometers southeast of Houston, where water is at a depth of 1,259 meters. The Tiber test well was drilled to a depth of 10,685 meters (35,055 feet), which makes it deeper than Mount Everest is high and one of the deepest or the very deepest ever. BP, the largest oil and gas producer in the Gulf, is developing the Tiber field in partnership with Petrobras and ConocoPhilips. The company produces at present 400,000 barrels per day oil equivalent —most of that at its Thunder Horse platform, which cost hundreds of millions of dollars to build and took a decade to get operating to BP’s satisfaction.

BP is not making any claims about the size of what it calls its "giant discovery," but according to accounts in The New York Times and Wall Street Journal, the Tiber field could contain as much as 3 billion barrels of oil equivalent. Analysts consider BP well positioned with the new find to remain the Gulf's dominant producer, and the Gulf to be in a position to keep U.S. oil production from declining in the short and medium run. The Journal cites an estimate by the U.S. Minerals Management Service that Gulf production will increase to 1.88 million bpd by 2013, versus 1.14 million in 2008.

U.S. Wind and Solar Grants Go Heavily to European Firms

This week the United States announced grants for wind and solar projects totaling more than $500 million. The bulk of the money will go to a handful of big wind projects and programs, most of them being developed by European companies: $284 to Spain’s Iberdrola; $47.4 million to Energias de Portugal; $42.2 million to EverPowerWindHoldings, in which Britain’s TerraFirma Capital Partners has the controlling stake. Germans have been fretting that their extraordinarily generous solar subsidies—put in place partly to foster development of a German photovoltaics industry— have been going of late largely to Chinese startups. Should Americans have similar concerns? I don't know the answer. Just asking.

Local Qualms Kill Ohio Carbon Capture Plan

Columbus-based sci-tech research group Battelle is pulling out of a $92.8 million project to test carbon capture and storage (CCS) in Ohio -- one of seven regional sequestration tests underpinning the U.S. Department of Energy's program to kick the wheels on CCS. A Battelle spokeswoman cited "business considerations" in a terse statement on Friday announcing the decision, but Ohio newspapers highlighted local fears that injecting CO2 underground would spark seismic tremors, disrupt underground water supplies, and depress property values.

The setback offers further evidence of the strong Not Under My Back Yard backlash elicited by CCS proposals. Earlier this month Energywise reported that similar concerns are blocking European power giant Vattenfall's plan to sequester CO2 from its innovative oxyfuel coal-fired power plant in Schwarze Pumpe, Germany. Burial of the CO2 is on hold until at least next spring.

Battelle's six-year-old effort, the Midwest Regional Carbon Sequestration Partnership, proposed to capture 1 million tons of CO2 from an ethanol plant in Greenville in western Ohio's Darke County and store it 3,000 feet below ground, starting next year. Columbus-based utility American Electric Power and Ohio State University figured among the consortium's members, and DOE planned to two-thirds of the cost.

Until recently the project seemed on track, despite early concerns raised by a citizen's group that the injection would cause tremors. Last summer Mike Bowers, then the newly-elected mayor of Greenville, told the Dayton Daily News that the proposal had "generated little rumbling" among Greenville residents: "Not being proficient in the geology of what's right under our area, if there would be any adverse effects, I would trust in what Battelle looks into," Bowers said.

Bowers' attitude, and that of his constituents, clearly shifted. The Columbus Dispatch, reporting last week on a separate CCS project by AEP and Battelle in West Virginia, counted Bowers among political leaders who had united to block the Ohio plan. Bowers cited fears that drilling the injection wells or escaping CO2 could disrupt the aquifer that underpins the county's agricultural economy. "Messing with the natural resources of our area didn't seem to be a wise thing from an experimental standpoint.," Bowers told the Dispatch. He called cancellation of the project "very good news."

Dayton Daily News coverage of Battelle's reversal cited opposition by Darke County's Republican state representatives Jim Zehringer and Richard Adams. And local CBS affiliate WHIO-TV, in a report titled "Protesters Win CO2 Battle in Darke Co.", said 90 percent of participants in a recent poll weighed in against carbon sequestration.

Even the ethanol plant operator had its qualms. The Daily News said that Neill McKinstray, vice president and general manager of The Andersons’ ethanol division, "hadn’t been assured to his satisfaction that any environmental contingencies, however remote, would be addressed."

For a straight taste of Darke County's qualms, check out the blog maintained by the ad-hoc Citizens Against CO2 Sequestration.

Electricity Demand Drops Notably with Complex Ramifications

The Wall Street Journal’s excellent Rebecca Smith reports today that electricity demand dropped 4.4 percent in the largest U.S. power market, consisting of 13 states east of the Mississippi. Average spot prices for electricity fell all out of proportion in the same operating region, by 40 percent. According to Smith, the pattern prevails throughout the  country. In the area around Houston, for example, spot prices were $61.72 per megawatt-hour in June, compared with $129.48/MWh  during the like month a year earlier. Generally, the declines in demand and prices are the most precipitous and most sustained seen in the United States since the 1950s.

Smith raises the question of whether the low prices could be discouraging potential investors in electricity generation and infrastructure, so that "if demand comes roaring back" there won't be enough new plant and equipment to support higher demand.

But that's not the only concern by any means. Those thinking of putting their money into renewables like wind and solar often find, even with very generous investment incentives, state portfolio mandates and energy credits, that a project is just at the margin of profitability. (A new PV plant in Pennsylvania that we profiled earlier this year is a case in point.) In open electricity markets, such projects have to compete successfully against tried and true sources of electricity like coal and natural gas. If it looks to investors as if electricity prices might actually stay low for years to come, or might fluctuate unpredictably with wobbly economic recoveries, then renewables will suffer even with the best of incentives.

(Note in this connection, however, the unequivocal superiority of the "feed-in" tariffs that countries like Germany and Spain have adopted to encourage investment in wind and solar. In those countries, investors are guaranteed prices for electricity generated by renewables over time, regardless of what happens to general electricity rates.)

Another complication: if as expected Congress enacts and Obama signs legislation that creates a carbon trading system, that system may work differently in a lower-price electricity regime than its inventors anticipated. On the one hand, if prices stay low, then purchase of carbon emission credits may have a smaller than expected impact on perceived prices. (Say you're used to paying 8 cents per kilowatt-hour for electricity, but the price has just gone down to 5 cents; soon, with your utility having to buy emission credits, your price may go back (say) to 7.5 cents, but it will seem lower than usual, not higher. In retrospect, then, legislators could have adopted a more demanding carbon reduction system without running into resentment.

At the same time, though, the relative cost to utilities of purchasing credits will seem larger in a lower electricity price regime, because the cost of credit relative to revenue per kWh will be greater. From this point of view, a given trading system may have greater effect at low price levels than at high.

GE Expands U.S. Green-Energy Production

According to a report in the New York Times, General Electric will build a 350-employee factory in Schenectady, N.Y., to make high-density batteries for diesel-electric locomotives, and a 420-employee factory in Lexington, Ky., that will make hybrid-electric water heaters—a product now acquired from China. As a quid pro quo, the International Union of Electrical Workers-Communications Workers of America agreed to accept a two-year wage freeze at the two plants and a lower wage tier for new employees; GE promised to not move any of the factories' operations overseas for two years.

In June, GE announced plans to build a 1,100-employee, $100-million research center near Detroit. CEO Immelt said that GE hoped to (re?)-insource some of the R&D it now does outside the United States. Elaborating in a recent speech in Detroit, Immelt said the United States should learn from China, which is trying to build an advanced economy without sacrificing old-fashioned manufacturing prowess.

That makes more sense, to this blogger anyway, than the confusing and confused rendition of GE's U.S. versus its global responsibilities that Immelt published in London's Financial Times several weeks ago.

More Than 2 Billion Dollars in Electric Car Manufacturing Grants

The Obama administration announced last week the first recipients of stimulus grants, in the $2.4 billion Electric Drive Battery and Component Manufacturing Initiative. The big winners were first of all the Big Three car makers, followed closely by the most substantial developers of lithium ion battery manufacturing technology, both U.S.- and foreign-owned. General Motors gets $240 million, Ford $100 million, and Chrysler $73 million. Automotive technology and battery specialist Johnson Controls receives $299 million, and France’s Saft America—Johnson's partner in a venture to establish a lithium ion battery factory in Holland, Michigan—comes away with $95.5 million. A123Systems, the Massachusetts lithium ion battery maker. is awarded $249 million, and Compact Power (a subsidiary of South Koerea’s LG Chem) 151 million.

It was Compact Power that won the prestigious contract to provision Chevrolet's Volt with batteries, and the Volt was a significant player in the stimulus awards, despite skepticism about its prospects. GM got $106 million for production of battery packs and $30 million to build 625 Volts as test vehicles for fleets. But Volt is not the only player.  A123Systems, which lost out in the competition for the coveted Volt contract, will be making lithium ion batteries  for a handful of Chrysler hydbrids.

Phoenix-based eTec, which had developed charging infrastructure to support GM’s deceased EV-1, gets $100 million to build and install 12,750 electric charging systems in five states, working with Nissan.

Overall, as Earth2Tech blogger Josie Garthwaite observed, the federal battery program’s priority objective of getting technology into large-scale production within a few years "tends to tilt the scales away from younger ventures." A losing venture-capital-supported company complained to the Wall Street Journal that if it were 1980 and the government were trying to kick-start the development of computer operating systems, Microsoft probably would not be among the grantees.

Considering the magnitude of the government’s battery program and its highly targeted ambitions, it has been surprisingly uncontroversial. Not very long ago such overt "industrial policy" would have been roundly denounced in the United States as socialistic, and in fact it is socialistic, as the term is generally understood. But industrial policy is an as aspect of socialist policy making that's been as enthusiastically and effectively practiced by conservative governments in Japan as by coalitions containing communists in France. That's because when an economy is in crisis and the chips are down, a determined government does what a determined government has to do.

A Billion Dollars and Counting in Smart Meter Applications

The deadline for grant applications to the government smart grid investment program was last week, on Aug. 6. About two fifths of program funding is earmarked for small grants, from $300,000 to $20 million, and three fifths for grants of $20-200 million. Three energy companies applied for $200 million grants to deploy smart meters: CenterPoint Energy, Houston; Dominion Virgina Power, Richmond; and Florida Power & Light, Miami. Oncor, Dallas, filed for $317 million for smart meter deployment and network improvement, and Commonwealth Edison, Chicago, for $175 million for smart meters.

Announcement of the filings raises in this blogger's mind an issue analogous to what's called "additionality" in the context of carbon trading: are some of the energy companies obtaining government money to do things they already were intending to do anyway, relying wholly on their own resources? According to a Spectrum compilation published earlier this year, even before the adoption of the U.S. stimulus bill energy companies around the country had announced plans to spend billions of dollars installing smart meters. Companies in California and Texas alone had plans to spend $6 billion.

So will this part of the stimulus bill actually make anything truly new happen? So far, like the car battery grants program, it has been surprisingly uncontroversial.

Times Too Wonders about Chu and Hydrogen

In an editorial today, Aug. 9, the New York Times agrees that President Bush over-emphasized hydrogen and that Secretary Chu is right to downplay it, but it joins this blogger in suggesting he might nonetheless want to restore $100 million in research funding to hedge against the possibility of breakthroughs. The $100 million "is not a lot of amount to invest to keep this promise alive," opines the newspaper.

Schwarze Pumpe Hits a Bump

Vattenfall's oxyfuel pilot plantLocal concerns about the safety of carbon sequestration are blocking European power giant Vattenfall's plan to close the loop on greenhouse gas emissions from its coal-fired carbon capture and storage (CCS) pilot plant in Schwarze Pumpe, Germany. The 'oxyfuel' plant has been burning coal in pure oxygen since starting up last fall, making its CO2 exhaust easy to capture. But burial of the CO2, set to begin this spring, is now on hold according to the U.K.'s Guardian newspaper. Staffan Gortz, Vattenfall's CCS spokesperson, told the paper that, "people are very, very skeptical."

This is a point I've been stressing of late. My feature story Germany's Green Energy Gap in the July issue of Spectrum ends with the anxieties of Brunsbüttel resident  Stephan Klose, who raises the specter of sequestered CO2 from coal plants escaping to the surface and causing mass asphyxiation. "If there’s a leak and you have a 1- to 2-meter-high level of CO2 , every animal, every human being within this zone will die,” says Klose.

And my Data page Where Europe Buries Carbon in this month's issue of Spectrum highlights both the extent of the European Union's carbon capture plans and the public acceptance challenge they face. "The EU must ... convince a wary public that buried CO2 will stay buried for good, protecting the densely populated communities above it," is how we put it.

But a mea culpa is in order: I underestimated the vehemency and immediacy of those concerns. The Data page shows Vattenfall's chosen sequestration site in central Germany as green or "operating". Alas even this relatively small-scale CO2 injection -- over an order of magnitude smaller than the CO2 volume that a full-scale coal power plant generates -- appears to be on hold until at least next spring.

Is Energy Secretary Chu Too Smart?

Long long ago in a time far far away, when the SATs were still called the Coillege Boards, I remember taking one such exam in which the reading comprehension section featured a short essay arguing that people of average intelligence often make better managers than super-smart people. The general idea was that average people are better at listening, weighing off competing views, and deciding judiciously.

Energy Secretary Chu reportedly is trying to kill federal funding for hydrogen-fueled cars, a feature you may recall of President Bush's vaunted "hydrogen economy" (which momentarily helped kill the electric car). Chu also is expressing skepticism about a House bill that would have the energy deartment spend $30 million annually to promote conversion of cars to natural gas, in line with the Pickens Plan that would substitute wind for natural gas in generation and have the freed up methane power vehicles.

Personally, I share Chu’s skepticism about hydrogen cars, and I'm inclined to think that natural gas would be better used as a substitute for coal in electricity generation. But then I may be wrong. Since I recognize that, perhaps I'm better qualified to be energy secretary than the famous Nobelist? It seems to follow logically: People of average intellect make better managers; I'm of average intellect; therefore I should be energy secretary.

Chu also has been getting a lot of play in the blogosphere for eloquent statements he's made of late in support of white roofs and roads, in speeches and most recently on Comedy Central’s Daily Show. I was very taken with the idea myself when I watched the Jon Stewart interview. But then I thought: white roofs in New York City, where the air isn't exactly clean? And white roads, with gasoline-powered cars spewing out dirty and noxious exhaust? I don't think we'll have white roads, actually, until we have hydrogen-powered cars emitting water vapor as their exhaust.

 

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