Alternative Energy

House Passes 15% Renewable Energy by 2020

2009-03-10T10:03:00.000-07:00

The United States House of Representatives has passed an Energy Bill requiring utility companies to produce 15 per cent of their electricity from renewable sources such as wind and solar power by 2020.

The Bill passed in the House on a 241-172 vote, despite strong opposition from electric utility companies and the White House, which has threatened to veto the measure. Twenty six Republicans voted in favor and nine Democrats opposed the bill.

A senior analyst for Lazard Capital Markets described the bill as "a significant positive step towards creating a cohesive energy policy."

The renewable electricity standard applies only to investor-owned utilities and exempts rural electric cooperatives, municipal utilities, the Tennessee Valley Authority and the state of Hawaii from the mandate.

The bill also calls for stronger energy efficiency standards for appliances and lighting and incentives for building more energy-efficient buildings. The bill bans the sale of 100-watt incandescent light bulbs by 2012 and requires that all bulbs be 300% more efficient than today’s ordinary bulbs by 2020. The bill also includes a range of loan guarantees, federal grants and tax breaks for alternative energy programs. These include building biomass factories, research into making ethanol from wood chips and switch grass and producing better batteries for hybrid cars.

The bill will repeal a tax break for oil companies from 2004, and another tax break relating to income from foreign oil production. Critics of the two tax breaks called them loopholes that the industry had taken advantage of.

The 786-page House energy bill does not include an increase in fuel-efficiency standards for cars and light trucks. That issue, as well as whether to force major increases in the use of E85 fuel as a substitute for gasoline, were left to be negotiated when the House bill is merged with energy legislation the Senate passed in June.

"There's a war going on against energy from fossil fuels" said Representative Ralph Hall, Republican-Texas. Representative Joe Barton predicted the bill "isn't going to go anywhere" because President Bush would veto it if it reaches his desk.

In a somewhat surprising comment from the White House, they accused the bill of making "no serious attempts to increase our energy security". This defies commonsense as by producing more electricity from domestic renewable sources rather than with imported natural gas by definition increases the United States' diversity and security of energy supply.

As with all legislation the details (such as a subsidy for installing gas pumps for expensive and inefficient E85 fuel) need to be checked carefully. Regardless a 15% renewable energy standard is good news.

Why are Oil Prices So High?

2009-03-10T09:59:00.000-07:00

Why are oil prices so high? This is the question being asked with increasing frequency in many countries around the world. Some would have you believe that the blame should be placed on "greedy oil companies", "Arabs", "speculators" or "OPEC".

While speculation is happening with investors and hedge funds looking to commodities for returns that are not being seen in the stock or property markets, there are underlying fundamental reasons which mean prices are likely to stay high.

Last November the International Energy Agency released its annual World Energy Outlook report. Traditionally the agency has projected energy supply based on projected demand.

The agency has projected that India and China will lead the increase in energy demand making 45% of total growth. Oil imports for these two countries combined will grow to 19.1m barrels a day by 2030 compared to 5.4m barrels a day in 2006.

Demand for oil will grow to 116m barrels a day by 2030, an increase of 37% on 2006 oil usage. In this report back in November the International Energy Agency warned the price of a barrel of oil could rise to $159 by 2030 due to high growth in demand. This estimate now looks very conservative.

The reality is there have been some fundamental changes.

Before if the United States went into recession, this would lower demand for oil and prices fell. Now with China, India and other rapidly developing nations demanding ever increasing quantities of oil a recession in America is unlikely to lead to falling oil prices like it did in the past. Were per capita oil use in China and India to reach the same level as in the United States, this would fully deplete the world's remaining proven oil reserves in just 15 years and prospective resources, in 26 years.

The other fundamental change is that there is little excess production capacity. While Saudi Arabia would like the world to think it could increase production if it deemed it "beneficial" to the stability of the market, this is just an illusion of control. The reality of the OPEC cartel is that while sticking to production quotas may have benefited the group as a whole, individual countries have always "cheated" consistently and repeatedly exceeded their production quotas. In the past this has lead to significant downward pressure on prices.

This time the signs are that the world is at or near its maximum oil production capacity. Does this mean Peak Oil has arrived? In my opinion - not yet.

New production will continue to come online in the coming years which is likely to raise worldwide maximum oil production. So we haven't reached peak production... yet.

What we may be experiencing is what Robert Rapier calls Peak Oil Lite, with the early effects of Peak Oil arriving. Demand is rising faster than supply. In its July 2007 report the International Energy Agency predicts OPEC spare capacity will decline to minimal levels by 2012. The lack of spare capacity means, that price volatility increases with price spikes occurring in the event of supply disruption.

So what we are likely to experience prior to Peak Oil is Peak Export. According to Eugene Linden in BusinessWeek when it comes to oil our biggest concern should be the amount of "global oil available for export".

According to the Export Land Model developed by Jeffrey Brown - exports decline faster than production declines, the rate at which exports decline accelerates over time and only a small percentage of a producing country's production is exported following peak production.

According to a report in last week's Wall Street Journal, fresh information from the US Department of Energy shows the quantity of petroleum products shipped by the top exporting countries in 2007 fell 2.5% last, while prices increased 57%.

Net exports from major producers Mexico, Norway and Venezuela have fallen in every year since 2005.

With the rise in prices individual producing countries in OPEC had every incentive to "cheat" and yet exports fell. The influx of wealth into the Middle East has led to a boom in domestic demand. It seems that Middle Easterners aspire to the same gas guzzlers and energy rich lifestyles as Americans. Soaring profits from high-price crude have fuelled a boom in oil demand in Saudi Arabia and across the Middle East, leaving less oil for export. In 2007 the output of the region's six largest oil exporters - Saudi Arabia, United Arab Emirates, Iran, Kuwait, Iraq and Qatar - fell by 544,000 barrels a day. During the same period domestic demand increased by 318,000 barrels a day, leading to a decrease in net exports of 862,000 barrels a day.

A recent report from CIBC World Markets also indicates that as much as 40% of Saudi Arabia's expected production increases will be offset by rising internal demand by 2010, and Iranian exports will decline by more than 50% for similar reasons.

Indonesia recently withdrew from OPEC as it has gone from being a net exporter of oil, to a net importer of oil.

The Wall Street Journal report comments that the fall in oil exports "defies traditional market logic." Perhaps that should be blind faith that OPEC nations can turn on the taps if prices rise "too high". It seems even oil traders are unsure what is driving prices as according to one market analyst quoted by BBC News "we really don't know what the fundamentals are doing at any point in time." Much of the information on fundamental factors in the oil market is not public or freely available.

In simple terms demand is outstripping supply and prices are rising. This is how the market is supposed to work.

Other fossil fuel prices tend to follow oil. IEA's latest World Energy Outlook forecasts coal is set to rocket in demand, increasing by 73% from 2005 to 2030. This means coal's share in global energy demand will rise from 3% to 28%. It is predicted by 2015 America will go from being a net coal exporter to a net coal importer. Coal is the most carbon intensive way of generating electricity and this report predicts that rather than becoming a smaller part of the energy mix, coal is predicted to play a much bigger role.

With a presidential election this year in the United States and gas prices at record levels, oil and energy in general is set to be a key issue. There is the opportunity to have a serious debate about energy - a fundamental part of our lives which has been taken for granted for far too long. However the responses from the presidential candidates so far have not been encouraging.

In 2002 McCain declared that ethanol is a "giveaway to special interests in corn-growing states as the expense of the rest of the country." In 2003 he put out a press release saying "Ethanol does nothing to reduce fuel consumption, nothing to increase our energy independence, nothing to improve air quality." He went on to describe it as "highway robbery." Hillary Clinton signed a letter saying that there is "no sound public policy reason for mandating the use of ethanol".

McCain, Clinton and Obama all seem to have drunk the ethanol Kool Aid and seen the bright white light that has converted them to E85. In 2008 none of these presidential candidates seems to have anything negative to say about ethanol.

In 2006 Barack Obama along with four Republican and one Democrat senator introduced the Coal-To-Liquid Fuel Promotion Act.

There have also been accusations made against "Big Oil", "OPEC" (including by British Prime Minister Gordon Brown) and suggestions that a "gas tax holiday" or "windfall tax" would fix everything. It's always easier to find a scapegoat.

One bandaid being suggested from some quarters, is to open up drilling in the United States in areas which are currently off limit. This would give access to 19 billion barrels of oil enough to meet US needs for approximately two-and-a-half-years or world demand for just over 7 months at current rates of consumption.

To quote the head of the International Energy Agency:
"All countries must take vigorous, immediate and collective action to curb runaway energy demand.

The next ten years will be crucial for all countries... We need to act now to bring about a radical shift in investment in favor of cleaner, more efficient and more secure energy technologies."

Further Reading:
The Ethanol Scam in "Gusher of Lies"

You can read more on what the energy policies of McCain, Clinton and Obama should be in this Open Letter to the Next President.

Zero carbon energy alternatives

2009-03-10T09:42:00.000-07:00

From the perspective of the climate change issue, low carbon economy fuels are alternative sources that eliminate carbon and methane emissions. For this goal, renewable or sustainable energies such as biomass combustion, and hydrogen derived from natural gas do not present viable alternatives because they do not aggressively confront global net carbon increases. Both nuclear power and carbon capture and storage techniques such as clean coal technology are low carbon emission alternative energy technologies but are reviled by other "alternative energy" advocates who argue that these energies do not provide an alternative to harming the environment

Ecologically friendly Energy alternatives

2009-03-10T09:37:00.000-07:00

Renewable energy sources such as biomass are sometimes regarded as an alternative to ecologically harmful fossil fuels. Renewables are not inherently alternative energies for this purpose. For example, the Netherlands, once leader in use of palm oil as a biofuel, has suspended all subsidies for palm oil due to the scientific evidence that their use "may sometimes create more environmental harm than fossil fuels". The Netherlands government and environmental groups are trying to trace the origins of imported palm oil, to certify which operations produce the oil in a responsible manner.Regarding biofuels from foodstuffs, the realization that converting the entire grain harvest of the US would only produce 16% of its auto fuel needs, and the decimation of Brazil's CO2 absorbing tropical rain forests to make way for biofuel production has made it clear that placing energy markets in competition with food markets results in higher food prices and insignificant or negative impact on energy issues such as global warming or dependence on foreign energy.Recently, alternatives to such undesirable sustainable fuels are being sought, such as commercially viable sources of cellulosic ethanol.

Alcohol as alternative to fossil fuels

2009-03-10T09:29:00.000-07:00

In 1917, Alexander Graham Bell advocated ethanol alcohol from corn and other foodstuffs as an alternative to coal and oil, stating that the world was in measurable distance of depleting these fuels. For Bell, the problem requiring an alternative was lack of renewability of orthodox energy sources.Since the 1970s, Brazil has had an ethanol fuel program which has allowed the country to become the world's second largest producer of ethanol (after the United States) and the world's largest exporter. Brazil’s ethanol fuel program uses modern equipment and cheap sugar cane as feedstock, and the residual cane-waste (bagasse) is used to process heat and power.There are no longer light vehicles in Brazil running on pure gasoline. By the end of 2008 there were 35,000 filling stations throughout Brazil with at least one ethanol pump.

Cellulosic ethanol can be produced from a diverse array of feedstocks, and involves the use of the whole crop. This new approach should increase yields and reduce the carbon footprint because the amount of energy-intensive fertilisers and fungicides will remain the same, for a higher output of usable material. As of 2008, there are nine commercial cellulosic ethanol plants which are either operating, or under construction, in the United States.