Monday, November 24, 2014

NY Wind Energy Gets a Stay of Execution


But it still is to be kept as an irrelevancy in the NY State electricity supply. There seemingly always has to be a catch….. Anyway, in the very recent past, NYSERDA announced the results of its 9th REC auction in the NY State RPS arrangement. A pair of ~ 78 MW (estimated as around 39 to 44 turbines each) are to be installed - one in Chautauqua and one in Franklin (north of the Adirondacks) counties. And there is a novel and good change in this auction versus the previous 8 - the RPS is now set for a 20 year deal. The award was for $22.96/MW-hr - almost 2.3 c/kw-hr See http://www.windpowerintelligence.com/article/4bQtFljyUj6/2014/11/13/usa_new_york_backs_156mw_in_wind_projects/

So almost 1/3 of the probable cost of electricity production is covered by the RPS award for a 20 year term. Cool. And then there is the two small ones going into central NY (Marsh Hill - 16.2 MW - and Black Oak - 12 MW) - see http://www.invenergyllc.com/ProjectsbyCountry/UnitedStates/MarshHill.aspx and http://www.blackoakwindny.com

The Arkwright Summit wind farm will be installed by EDP Renewables (a division of Portugal’s electricity monopoly - as they bought Horizon Wind) http://www.observertoday.com/page/content.detail/id/605846/Arkwright-wind-farm-proposed-for---.html. The town is located around 7 miles southeast of Dunkirk, on a ridge that should get nicely exposed to the winds coming across Lake Erie.

The Jericho Rise wind farm is also rated for 78 MW and will be located near several others now operating along the Quebec border. This farm also will be owned and installed by EDPR. An old version of the acoustic analysis can be seen here: http://www.edprwindfarms.com/wp-content/uploads/2014/04/Appendix-I.pdf

A nifty map of their locations can be seen here:


News articles about both projects say they are slated for operation in 2017, but given that the Federal tax avoidance subsidies will expire at the end of 2015, odds are the the wind arrays could be installed next year. EDPR has signed some really huge “bulk buy” contracts with a few major wind turbine companies (Vestas, for example) - see here http://www.bloomberg.com/news/2012-11-09/vestas-edpr-extend-delivery-period-for-1-500-megawatt-order.html - so this probably satisfies the “5%” rule needed to allow the company to take advantage of the ITC and/or the PTC incentive which should be worth, along with the MACRS, about 2.8 c/kw-hr over a 20 year period. The turbines quoted for them are also “old” (1.5 MW GE ale or Vestas V82 x 1.65 MW) in news articles and the preliminary permits EDPR has submitted for these projects. Given the amazing improvement in performance that comes from “Low Wind Speed Turbines” and how dominant this style of turbine is in the USA nowadays (it has been in Europe for some time) and the fact that NY winds can be decent, but nothing out of the ordinary, it would be surprising if any other option was chosen…

In fact, consider their newest model, the V110 x 2 MW unit that just got ordered for a wind farm in Minnesota (200 MW Odell) and another 200 MW one in Texas (South Plains - http://www.vestas.com/en/media/~/media/07dbc8ea2e9a4907ae68fc6f5a50fdcd.ashx). These would be some of the largest rotor diameter units installed to date in this country (there are a couple of 120 meter ones and several 112 meter x 3 MW units now operating), and they used to be reserved for modest wind locations - which Texas and Minnesota are NOT - those places are fast wind places. Using a unit like the V110 means that they are going for close to 50% net outputs. And that should drive the production cost downwards. Which is a good thing, right?

Maybe, but there is an exception - the low priced electricity will really get the natural gas boys frothing at the mouth. Those dudes need higher prices for their methane nowadays to finally pay down the massive indebtedness caused by the tracking for gas bubble, and having new turbines that are able to be able to economically survive at low electricity prices is NOT what they are looking for. Just how low will the prices go…? And the V110 is to be made in this country, no less (http://www.denverpost.com/breakingnews/ci_23917460/vestas-factories-colorado-build-new-v110-2-0). 

If the V110 can get to an installed cost of around $3 million per MW of capacity and have a delivered output of near 50% (requires an average wind speed near 7.5 m/s at 95 meters above the ground), this gives a delivered capital cost near $6 million for around 8800 MW-hr/yr. With a low cost of capital (say 6%/yr for a Fixed Charge Factor) and a O&M cost of around 1 c/kw-hr, the cost of electricity production would hover in the 5 c/kw-hr range. Take out the 2.8 c/kw-hr worth of Federal subsidies, and the turbine could break even at an electricity price near 2.2 c/kw-hr. Of course, the wind farm owners (and anybody else selling electricity in that market) would want a higher average price than that, as they are really in it for the money, and it’s not a charity….. But this is not good news to owners of old nukes, coal burners and especially methane based electricity production units, especially stand alone (no co-gen) ones. For them, it’s pass the bottle of headache pills, or bourbon….

In NY, our winds could definitely support a 40% to 45% net outputs (6.5 to 7 m/s average wind speeds) from LWST such as the V110 or equivalents made by competitors. And these turbines are not going to raise our electricity prices that have been averaging 4 c/kw-hr or less this year. But they will make those lame excuses and bogus claims that we need more methane burning electricity generators appear to be that much more pathetic. Besides, with wind turbines you can actually predict what the cost of generation will be over a 25 year period - something not possible with natural gas. Methane from those ever depleting North American fields seems so much more like an exercise in religion - a faith based decision. After all, what will the production cost from such a unit be in 15 years? There is just no way to tell. And when you take a leap of faith with Other Peoples Money but you tell them that you know it makes sense because it always has made sense and money - for somebody, anyway (well, mostly - there are times in the recent past when that kind of thinking was a lie), there’s a word for that.

Fraud. Or sometimes two words - Control Fraud…..

In order to base future electricity generation (and perhaps as a source of heat) on methane but to tell customers that price WILL (as it not just likely to be, but WILL) be reasonable, affordable and similar to what it is now (hey, and maybe forever more) you have to commit fraud to some degree. Of course, if you read what is said really carefully, claims that methane will make cheap electricity generally and/or probably do have weasel wording and a sufficient amount of equivocation that could make prosecution for fraud unlikely. And besides, our Federal Government generally never prosecutes against corporate fraud, anyway…. prosecuting war collar crime lords for  that - it’s just so quaint and yesteryear a concept…….

So the electricity via natural gas based generation business and associated businesses have now sunk to the level of US Investment Bankers, alias Banksters, and adopted their “Rip Their Face Off” business model. Well, isn’t that just precious…. 

Got any other excuse to ONLY add in 184 MW of wind capacity for the foreseeable future, oh Government of NY State? Don’t ya need to add a few zeros onto the right side of that number, such as 18,400 MW, for starts?



Tuesday, November 18, 2014

Recent Trends Worth Noting

Well, gee whiz there has been a lot of things happening of late, and not much of it good. But the fact that some non-bad stuff is taking place tampers the rate at which we seem to be tumbling into the Abyss, and some of the stuff (like the Russia-China deal that puts a big wooden stake in the heart of exporting Marcellusfracked methane out of the country as LNG) actually have a silver lining. But lets get the bad stuff out of the way.

a) The Republican Election Sweep of 2014. What if an election was help and hardly anyone voted? And what if the proverbial bad guys mostly voted and most everyone else kinda did nothing, making the mistake that Ralph Nader’s fanboys did back in 2000 - “Oh there’s really no difference between the really bad and the less bad side”. Well, how’s that working out for us these days….? In NY State, less than a third of those who could have voted bothered to vote...

So how to visualize this? How about what our Star Wars heroes said when they dropped out of hyper pace and took a gander at this - yes, that really famous saying: 

“I have a very bad feeling about this.” 

said Luke Skywalker in Star Wars 4 as the Millennium Falcon came upon this Death Star - what an understatement…..and very relevant to the 2014 election results....


                                                                                "That's no moon!"


And how prophetic for the next couple of years. Anyway, when hardly anyone votes and one side is activated and guided by the “50% plus one vote wins, and it’s winner take all”, well, that’s the easy summary of the 2014. And yet, an increase in the minimum wage, something opposed by the new party in power passed with a big majority in Arkansas, South Dakota and Nebraska, while Prohibition was repealed in Alaska and Oregon. Well, many can go on and on about what’s wrong with this picture and how come cognitive dissonance rules the day in 2014 America. Many it's just more inspiration to hit the bottle.

And speaking of that, in a recent SNL skit (11-14-2014), President Obama and Mitch McConnell were getting stinking drunk on Bourbon, and after going several sheets to the windward (9 BIG drinks each, 2 bottles down and perhaps more to go), and our President came upon this divine truth “So, I guess there’s nuttin’ getting done in the next couple of year” - “You damn right!” chimed in the Turtle...
http://dailycaller.com/2014/11/16/obama-and-mitch-mcconnell-get-drunk-together-in-snl-opener-video/. Sometimes you can only tell a truth through some pretty dark humor….

So what’s at stake? Well, for starts there is a ginormous package of tax credits and deductions (euphemistically called “incentives” and less diplomatically called “subsidies”) due for renewal in the next couple of months - http://www.nytimes.com/2014/11/19/business/in-congress-crunch-time-for-dubious-tax-breaks.html?_r=0. It’s the “Chinese take-out” mix - where everybody gets their “share” of "help" - subsidies for oil and gas, subsidies for wind turbines and biodiesel. Already there is a call by some right wingers to pull out the wind industry’s (for now) lifeblood incentive - the PTC and ITC. But that would more or less unravel the carefully knitted arrangement, and really anger some now very powerful senators - such as Chuck Grassley from Iowa, a big proponent (and one of the originators) of the PTC.

In 2016, it will be the make or break even for the solar electric industry - PV’s and Solar Thermal - as the Investment Tax Credit comes up for renewal. This allows 30% of the installed cost (presently averaging $4.5 million per MW of capacity across the country, and $6 million/MW of capacity in NY State) to be taken as a tax credit in the first year of the project. When added to the MACRS rapid depreciation, up to 75% of the cost of a PV or solar thermal system can be recouped via tax credits or avoided taxes within the initial 6 years of a project. Such a deal…. But since PV is a big and splashy technology, and in some places is starting to impact natural gas sales (a really big no for many Republicans), well, that ITC incentive could be held hostage by the Repubs (ITC for the Keystone, my pretties…… in that Wicked Witch of the West voice..). After all, the wind biz has seriously messed with prices and profiteering possibilities in the Ngas biz - and as a result US wind investment dropped from $25 billion/yr in 2012 to $3 billion in 2013. Get the message?

b) On the less bad side, it seems that the hostilities induced upon Russia and its popular (at least, over there, as he at least has thrown actual gangster banker oligarchs (banksters) in jail for making off with billions of dollars and meddling in politics at the same time) leader Putin has just dealt a major blow to the US Natural Gas production, exploration and delivery business. Unfortunately for most Americans, jailing evil Banksters and nefarious Vulture Capitalists who do blackmail and fraud on a routine basis is just so yesterday, and no longer done, with predictable results (More fraud! More fraud!) too - see http://www.rollingstone.com/politics/news/the-9-billion-witness-20141106. It seems that Putin has just negotiated a mega deal with China to deliver Siberian methane to China (and Korea and Japan). This just trashes the potential market for tracking based methane exports from the US something fierce as it lowers the prices these Asian countries will need to pay for methane. And since fracking sourced methane tends to be expensive anyway, and adding the cost of liquifying methane (capital and energy) will pump up the needed prices to near $13/MBtu and the methane being sold to China by Russia will be just a little bit less .. oh well. And the Russians have set up a sort of barter deal with China, so the US dollar will not be the medium of value exchange. And THAT may be the greatest sin of all. But, Putin has done this quite deliberately. And the methane biz head honchos in the US and Canada (British Columbian tracked gas was supposed to be marketed in Japan in ever larger amounts). The LAST thing this industry needs is either stagnant demand or shrinking demand - they are still attempting to regain some level of profitability by shrinking the supply-demand mismatch (temporary over-supply and what the biz considers as “under-demand. See http://www.resilience.org/stories/2014-11-16/did-russia-and-china-just-sign-a-death-warrant-for-u-s-lng-exports1.

c) On a still better basis, we have business troubles in the nuke biz - see https://www.nirs.org/reactorwatch/newreactors/cooper-smrsaretheproblemnotthesolution.pdf. So far - no more meltdowns, though the associated still unfolding disaster that is Fukushima still keeps emanating, and it is by no means safe and secure. Nor is the owner, Tokyo Electric, oner of the biggest companies in the world. Still, with only 7 years  to go until really crude average statistics (once every 10 years for the 400 plus operating nukes in the world) predict another really bad day at the office, well, hope springs eternal for a new lease on life for the nuke industry. Hey, no “oopsies” in the last 3 years - we’re on a roll. Locally, the 48 year old Ginna  nuke (a GE Mark 1 model), which should be in the prime of its profitability (debts paid off, and still no real cost to catastrophic insurance and radwaste disposal) is actually being considered for closure by its owners. The reason - it is NOT PROFITABLE ENOUGH to compensate for the danger that its continued operation present - see http://allianceforagreeneconomy.org/content/no-ginna-bailout. Part of the reason for this is the still continued collapse in electricity prices that is caused by selling methane below the marginal cost of production of that methane. That economic debacle has been going on for 5 years, and it won’t go away until the existing tracking based gas wells deplete in combination with less drilling in depleted fields. For example, the Barnett field production has dropped by 20% in the last year, though the decline has been matched by the recent commercialization of the Utica wells in eastern Ohio. But, stuff happens, and so does depletion. A lot of gas production companies are also depleting their cash reserves and ability to borrow money, as the costs of well drilling and land leasing are quite often not matching the revenues from the wells - profitability only happens for a small percentage of these wells, ones located in the so-called “sweet spots” that are only small percentages of the land area in the gas shale fields.

Anyway, nukes are not a good money making option in this country, or in Europe, and the people of Japan simply will not allow the resumption of nuke sourced electricity, despite the economic mayhem it is causing in their country. You would think political leaders would get the memo, since it is addressed from the big finance community. But some religions (and nukes ARE a religion, as they are based on the disproven faith that full core meltdowns will just NOT happen). There have been 4 full core meltdowns, 2 partial core meltdowns (both in the US) with commercial scale nukes in the last 40 odd years, not zero. Odds are, we have been lucky there have only been four major FUBARS to date. But that faith is no longer shared to the degree it once was. And besides, new nukes are are just too darned expensive. And the electricity made by onshore commercial scale wind turbines is a lot cheaper, easier to build out, and it never has a meltdown, nor can The Bomb be made from a wind turbine, unlike the fuel rods going in or out of a nuke.

d) And finally, just to negate any of the sorta good news about poor motivation (profitability) in the Ngas and nuke industries, along comes the killjoys at the UN’s IPCC (Intergovernmental panel on Climate Change) - http://www.ipcc.ch/ - and they just have not been sources of good news and unjustifiable mirth and optimism of late. And that’s because these things called facts just keep getting in the way of “happy button pushing”. The more that they find out the grimmer things look with respect to about half of the species of living things on the planet, as well as the vast majority of people now living and likely to be born in this century. As humans, we keep dumping more and more CO2 into the air that is easily identifiable as fossil fuel derived (this is observed by the C14 to C12 ratio of air - the “Carbon 14” based CO2 is the recent stuff, resulting from high energy photons (cosmic rays) beating on nitrogen atoms in the upper atmosphere and in the process flipping a proton in the nitrogen nucleus into a neutron (http://en.wikipedia.org/wiki/Carbon-14). Due to the modest lifetime (~ 5730 yrs) of C14, it’s possible to get a very decent read on what percentage of the CO2 in the air is fossil and what percentage is “recently recycled.

Anyway, these IPCC people are verbose, even when trying to be brief (the summary is 40 pages long, but this summarizes a humongous amount of work and data). And they really sweat the details. So here is the summary of the summary in four parts:

1) Human influence on the climate system is clear, and recent anthropogenic emissions of greenhouse gases are the highest in history. Recent climate changes have had widespread impacts on human and natural systems.

2) Warming of the climate system is unequivocal, and since the 1950s, many of the observed changes are unprecedented over decades to millennia. The atmosphere and ocean have warmed, the amounts of snow and ice have diminished, and sea level has risen.

3) Anthropogenic greenhouse gas emissions have increased since the pre-industrial era, driven largely by economic and population growth, and are now higher than ever. This has led to atmospheric concentrations of carbon dioxide, methane and nitrous oxide that are unprecedented in at least the last 800,000 years. Their effects, together with those of other anthropogenic drivers, have been detected throughout the climate system and are extremely likely to have been the dominant cause of the observed warming since the mid-20th century.

4) Continued emission of greenhouse gases will cause further warming and long-lasting changes in all components of the climate system, increasing the likelihood of severe, pervasive and irreversible impacts for people and ecosystems. Limiting climate change would require substantial and sustained reductions in greenhouse gas emissions which, together with adaptation, can limit climate change risks.

5) Climate change will amplify existing risks and create new risks for natural and human systems. Risks are unevenly distributed and are generally greater for disadvantaged people and communities in countries at all levels of development.

6) Without additional mitigation efforts beyond those in place today, and even with adaptation, warming by the end of the 21st century will lead to high to very high risk of severe, widespread, and irreversible impacts globally (high confidence). Mitigation involves some level of co-benefits and of risks due to adverse side-effects, but these risks do not involve the same possibility of severe, widespread, and irreversible impacts as risks from climate change, increasing the benefits from near-term mitigation efforts.

In other words or you and most all other living creatures are screwed royally unless humans clean up their act. And to compound it, (and confound it, too), a relatively small percentage of humans hold almost all of the decision making capability, and most seemed inclined to use their power for quick riches and could care less (or will do little to nothing, same deal) about changing their evil ways which are also our evil ways. It really is a morality issue, as well as political, economic, greed and power based, plus short term versus long term. And as Keynes said, “In the long run we’re all dead, anyway”.

So how does this shake out for the wind industry in the US, a country that could EASILY be powered up with respect to its electricity almost entirely on wind turbines and pumped hydro energy storage, given our huge wind resource compared to present and likely future demand for electricity? Try this on for size:

A) Nukes will fade away to insignificance with respect to electricity generation. Most are over 30 years old, and quite a few are creeping up to 50, which is 10 years past their maximum intended useful lifespan.. In general, they will not get replaced with new nukes. And the industrial supply-chain and infrastructure needed to keep them going and to design and build new ones is fading away fast. Without new orders, there is now business of new installations. The nuke biz can be categorized as “Stick a fork in it - it’s done”. New plants are so horribly expensive that they are best classified as massive money pits, where giga-dollars go to die an unseemly death.

B) The same applies to coal. Last year only two new coal burning electrical generation facilities were built, and new orders have shriveled up. Without new orders, the business of new builds and eventually maintaining old ones will shrivel up, along with the supply chain/infrastructure to build new ones. It too, is toast relying on continued use of old generation. New plants are generally too expensive, and there is the CO2 pollution issue to deal with. It’s whistling past the graveyard time for coal based electricity.

C) Natural gas based electricity and residential/commercial heat are also obsolete, but because it satisfies the short term mindset of corporations and politicians rented by the oil and gas business, that fact is still a bit of a mystery to most. New gas to electricity plants are half the cost of coal burners and less than 20% of the cost of a new nuke, but there is no valid way of making long term predictions about the cost to generate electricity from gas. This is because no one can predict the price of methane 10 to 20 years out, let alone 5 years out. There is really only decently probable estimates for methane prices on a short term basis - less than 5 years into the future. Anyone basing near term gas use on long term gas price estimates is living a fraud. Present gas prices do not reflect the cost of production from most new wells, and in general, a lot of methane is now made as a by-product from very expensive “tight shale, tight sandstone or tight limestone based oil. Consider this from http://www.resilience.org/stories/2014-11-18/shale-oil-expensive-over-hyped-and-short-lived:

“In 2012 the 80 largest north American energy companies spent $50 billion more than they took in from operations, a deficit that was twice as high as in 2001 and four times larger than in 2010.”

Take that way (and tight oil depletes really fast and - see  http://www.peakoilproof.com/2012/11/shale-fracking-energy-independence-or_25.html) gas prices will zoom past double present levels. At that point it will be cheaper to make electricity with wind turbines, even without the PTC subsidy. To keep market share, methane from mostly methane wells needs to be sold for below the cost to produce it, or at cost. If either case, massive profits do not arise out of that arrangement for the drillers - maybe for those that supply the “tools of the trade”, those who finance the deals, and those who gamble on the futures markets. Methane as a by-product of oil wells is a nice income supplement, but only if the oil is sold for more than the cost to extract it. And it takes $100/bbl to cover the costs of new tight oil production. Thanks to a Saudi power play and “market discipline” effort, oil prices are now only $75/bbl. If you do the math, you know that cannot be maintained for long...


D) The wind biz is currently THE major future competitor for Ngas on the electricity from, and via Ground Sourced Heat pumps, on the residential heating front. By the end of 2015, the US average electricity production from 75 GW of wind capacity will be 25 GW. This displaces over 2 trillion cubic feet/yr of methane consumption in the US. If that demand were still present, methane prices would likely be double their present levels, most Americans would be economically worse off, but the methane biz would at least be profitable, and coal usage would probably be higher than it presently is. Nukes would likely be much more profitable, as electricity process would be higher. Looks like the IPCC is not the only buzzkill - wind turbines are spelling doom to Ngas profitability and also to rising prices/rising production and an even more rapid depletion of methane, and more rapid global warming.

So this cute little wind turbine IS the future, assuming we have one. Costs of electricity production from such a turbine are perfectly predictable over a 25 year period. And at worst, the cost of electricity production from newer, larger, more efficient turbines is stable, if not declining in a gradual manner. Meanwhile Ngas prices have to rise in North America. And fossil fuel usage has to drop, and drastically too, from both the depletion and climate sanity perspectives. It’s just math. As for the falter stall and delay crowd now running the House and Senate, they are already obsolete, and their best efforts at enriching those who rented or purchased their services can at best last but a couple of years. But they can certainly pound quite a few nails in humanities coffin via ruining the planet on behalf of their paymasters (and that is not the country, in general), All their favorite ways of making electricity are obsolete. The best that can do is to try and hand over as much of the wind biz to China - which to date has not been possible due to quality issues - while buying a few more years for those extracting the dregs of North Americas remaining fossil fuel methane supplies. And you know they will do their best in that regard.

As for doing their best to make for a sane climate and a more sensible world, where war over oil and methane is not such a dominant theme - well, that one can wait. Maybe we can blame Canada. After all, that is where this particular turbine is located… 



And look, reasonably scenic, too for a 3 MW generator located where quite often, the sun rarely shines, or is even observable ...

Disclaimer: Opinions in this article are the author's, and not those of any organized group

Saturday, November 8, 2014

What Are the Odds?




Science Fiction certainly can be schlocky, bombastic, and absurd, as well as many other things sometimes all at once, but it can also come up with some nifty concepts (cell phones, anyone?). Star Trek had many, including those corporate prototypes, The Borg, who are only interested in new technology and submission to their overwhelming powers (Resistance is Futile!). And who can forget the concept of the Hive Mind, which seems to describe a lot of humans and right wing organizations on the loose across our country in this millennia. 

And then there are the Elementals from the Riddick franchise, a race of beings who constantly calculate the odds, and who strive to keep things in balance. Well, that and seemingly being able to dissolve into air and then reconstitute themselves when so needed. A classic line of theirs in the movie is “now what would be the odds of that?”, especially after observing something that was not supposed to happen but which just did happen.

Speaking of the ephemeral and constantly changing, we have the prices of methane (the main component in natural gas) in the modern, post Enron fraudfest era.  See Chart from http://www.eia.gov/dnav/ng/hist/rngwhhdm.htm. In the last 16 years, methane prices have gone from $1.77/MBtu (Feb 1999) to $13.85/MBtu (Oct 2005) to $1.95/MBtu (April 2012) to its present value of $3.98/MBtu. This is a very dysfunctional market, based not on what it costs to produce methane plus a profit (reasonable or otherwise) but on how much can be extracted from customers while massive speculation is undertaken.



Methane used be a very regulated commodity in the USA, and with generally very flat, very predictable prices. And not much of it was allowed to be used to produce electricity - it was mostly used as a chemical raw material or for heating (residential to industrial). But around the end of the 20th century, methane supplies in this country that could be extracted and delivered into a pipe for around $2/kcf or less started to get scarce, as century or more of usage started to take its toll and so did the use of methane in electricity production. In order to extract and deliver more methane, or at least keep the same delivery rates, natural gas with a higher cost of production needed to be tapped. This initially mean coal seam methane, associated gas from offshore oil and gas fields and eventually gas from soils with essentially zip for permeability (“fracked gas”).

Conventional natural gas production peaked around 2000, and since then, large supplies have been found in the US, but with a catch. This supplies generally cost a lot more to extract, and the wells where these were tapped depleted really fast. More data in a graph from http://www.eia.gov/dnav/ng/ng_prod_sum_dcu_NUS_a.htm:



By now, the only decent gas fields left in North America are located on the coast of the Arctic Ocean (North Slope, Prudhoe Bay, Mackenzie River delta:
http://www.theoildrum.com/node/2061, http://www.transcanada.com/mackenzie-valley.htmlhttp://www.theoildrum.com/node/8362 and http://en.wikipedia.org/wiki/Alaska_gas_pipeline. But since it still is too expensive to bring this distant methane to a market, the alternative has been to drill tens of thousands of wells in low permeability ground and to then “stimulate” the flow. This works for other crude oil or “wet” natural gas or “dry” natural gas, but because of the rapid depletion rate, this sets up a treadmill (The Red Queen Scenario” from Alice in Wonderland):

“The Red Queen has to run faster and faster in order to keep still where she is. That is exactly what you all are doing!” - “Now, here, you see, it takes all the running you can do to keep in the same place”, This is documented in amazing detail in a new report: http://www.nakedcapitalism.com/2014/10/drilling-deeper-new-report-casts-doubt-fracking-production-numbers.html and http://www.postcarbon.org/wp-content/uploads/2014/10/Drilling-Deeper_FULL.pdf

Since 1973, production/consumption has, on average, risen from 22.6 tcfy to 25.7 tcfy. In terms of an annual rate of increase, this works out to be 0.32%/yr, and most of that time period was before serious competition to methane usage had come into a commercial reality - wind turbines and Ground Source Heat Pumps (GSHP). There are probably two main reasons for this slow growth - better housing insulation in combination lower temperature setpoints for houses/businesses and de-industrialization (over 40,000 factories were “outsourced” to cheaper and or defacto slave labor locations outside of this country.

We now have greater economic output per unit of methane consumption. We have a lot more people (319 million in 2014 versus 1973 (210 million)) so population growth and Ngas consumption are not related. The GDP in 1980 was $2 trillion, and now it is $16.8 trillion, which is about a 6.3% annual rate, though some of that is also inflation. The GDP went up by at least 10 times the rate at which Ngas production in the US has gone up by on an inflation adjusted basis…

So, a doubling of population (1.7 %/yr rate) and 10 times the real economic growth rate (> 3.3%/yr) and meanwhile methane consumption rates only went up by 13.7% (0.3%/yr). During this time, wind turbine installations have resulted in 1.6 tcfy worth of avoided methane consumption, and that has only scratched the surface of its potential. Due to the immense and high quality nature of the wind resource as well as the recent development of Low Wind Speed Turbines, essentially all electricity in the US could be supplied by wind, though that choice (could still have hydropower, geothermal power, tidal and biomass power). The idea that rising natural gas consumption is a necessary condition for continued economic growth is just absurd….. And then there is the aspect of better home/business/office insulation and the replacement of natural gas (and oil and propane) residential heat with Ground Sourced Heat Pumps - over 2/3 of natural gas consumption is for heat, after all.

The days of needing natural gas to power up an increasing economy are long gone - “whistling past the graveyard is probably a better description. But that is a good thing, because the true meaning of having to frack for methane is that we’ve run out of high quality resources, and now we are trolling for the dregs. The smart thing to do would be to work at dropping Ngas consumption every year at a hefty rate - something like 10%/yr - and replace the avoided gas consumption via better home/office insulation, better energy efficiency and less harmful technologies - principally wind turbines for electricity and GSHP for residential and office heating. And with such an aggressive methane replacement campaign, a funny thing happens - economic growth actually improves. 

On the flip side, economic growth IS POSSIBLE via consuming more low cost methane. This is analogous to a drunken binge - things go along fine till the booze runs out or else the money to buy the booze runs out or the proximity of too many really drunk people too close together allows the inevitable disputes to flower into brawls. And then there is the hangover and dealing with the effects that acute ethanol intoxication has on lots of people - things classifiable as “it isn’t pretty”. With methane, as with all fossil fuels, depletion happens. Once the plentiful and easy to access supplies wear down/run out, then in order to keep the consumption party alive, more expensive to tap resources get tapped. And this meatball from Hell keeps on rolling downhill, as ever more expensive supplies become the only new ones that can replace the cheaper ones that have been depleted - that’s tracking the “tight soils” like tight sandstones, shales and limestones. But since the consumption part is based on CHEAP fossil fuels, that’s a problem. The party can only be prolonged as long as the consumable is cheap, such as by selling the fossil fuel below the actual cost of production (subsidizing it). In effect, free booze! But that always seems to end, eventually - someone always runs out of money.

Right now in North America, we have had a 6 year run where a lot of the methane that has been used was sold below the cost that was incurred to produce this methane. Of course, a lot of methane is still made that is incredibly cheap to produce, but those older, conventional sources are running out. An increasing percentage of methane is now supplied by fracking, which is significantly more expensive to get at than was conventional gas . Furthermore, the cost of that tracked methane will keep rising as the “sweet spots” of relatively plentiful stuff run out, and the dregs of the dregs need to get tapped to do the Req Queen marathon, of running faster and faster just to not fall behind. Over time, this means that methane prices will have to rise. But this rise has historically been a very noisy and “spiky” one since conventional methane supplies became so tapped out that the more expensive ones needed to get brought online. And since methane prices are not based on the cost to make that methane available for consumers but instead based on how much blood can be squeezed out of the proverbial rock that we as consumers are collectively viewed as, well, it’s likely to be a bumpy ride.. In effect, it’s Dirty Harry from here on out with respect to methane prices - “feeling lucky?” is the question that has to get asked every day from now on. And if you are unlucky and can’t pay the fare, well, perhaps you get to freeze to death. Rumor has it, once your body temperature drops to a certain point, it’s just like falling asleep.

Of course, there is a cure for this madness. There are energy sources that never run out, that require lots of people be employed to provide this energy, and where prices, perhaps not as cheap as in the past, are affordable. Here ’s picture of one of the new entrant - Siemens’ new Low Wind Speed Turbine entrant - the SWT-3.3-130:




So what are the odds of an economically debilitating natural gas price spike happening if all we do is build out more methane consuming infrastructure in order to increase the market demand for methane in North America? And especially if zip gets done on efforts to suppress methane demand, like energy efficiency and renewable electricity and Ground Sourced Heat Pumps? “The odds are good” would be an Elemental response, even if the consequences of such an event would not be good.


Oh well, just saying. It’s not like there is no warning or precedence for such an economic disaster, another “AGAIN!”

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