Oil: Gasoline Gets Expensive Again

The financial collapse of September 2008 took the wind out of oil’s bullish run from $10 per barrel in the late 1990s to over $140 in mid-2008. But as the US economy regains its footing (even the housing sector by late 2011), gasoline is shooting back up toward $4 per gallon. Prices recently climbed back above $3 per gallon – meaning that Americans are again sending over $1 billion per day for overseas imports to serve our oil addiction.  It’s time for our country to embrace the bicycle and more walking – but I’ll leave more on that for another post. I see gasoline increasing toward $3.25+ on $100 oil due to an inability of non-OPEC producers to increase supply that matches higher demand, particularly from China. And most OPEC nations seem reluctant to increase output levels while prices rise.

Coal: Historic Highs on Their Way

China and India are becoming huge net importers of coal and this development will tighten the global coal market significantly. South African, Indonesian, and Australian exports will be maxed out, sending importers on the lookout for coal from the US and elsewhere. Supply increases take time so the tight global market will likely push spot market coal prices above $150/ton, potentially challenging mid-2008 levels above $175/ton.

Natural Gas: Rising from the Bottom

Natural gas prices in the US have remained relatively low even during the recent 18-month run-up in oil prices, a departure from the usual price link between oil and natural gas. This divergence in price is due to recent growth in natural gas supply based on new drilling techniques that use potent chemical mixes to extract shale gas formerly too difficult to retrieve. Unless the extraction techniques are slowed on water pollution concerns, this drilling is poised to keep a lid on natural gas prices and thus help natural gas keep market share it took from coal in 2009. I see natural gas rising from the bottom ~$4 per MMBtu lately but staying mostly restrained below $7 (still significantly below the summer 2008 high ~$10).

Solar: The Boom Continues

2010 is turning into another record year for solar. Globally, solar installations grew more than 100% to ~16 GW. This occurred in a year many analysts were fretting for solar due to accelerated cuts in German subsidies. But Germany still grew tremendously thanks to lower solar costs and the country remains almost half of the global market. German officials are considering more accelerated subsidy cuts in 2011 to slow their overheated market greater than 7 GW this year, causing some analysts to worry again. But I see next year playing out in a similar way to 2010, with another record year ahead as the global solar market passes 20 GW.

I expect German subsidy reductions will help solar consumers everywhere enjoy 10-15% price reductions for solar PV panels, bringing them below $1.50 per Watt. The strong recent profits of many solar producers such as First Solar, Trina, Suntech, Yingli Green Energy, JA Solar, and Jinko show that most producers can handle a price drop of this magnitude. Such a low price for modules and panels would send solar electricity prices below 30 cents per kWh for residential, below 20 cents per kWh for commercial, and ~15 cents per kWh for industrial. This is a price that can now compete without subsidies in islands and remote applications that don’t yet have access to a grid (a market that includes over a billion people). And sufficient subsidies in growing solar markets such as the US, China, India and Italy are poised to take up the slack from German demand stagnation until larger grid parity is achieved in 2012-15.

Wind

After record growth in 2009, 2010 has been a tough year for the wind industry. Low natural gas prices and the lack of new projects signed during the Great Recession has dramatically slowed wind power installation in the US and most of the world. Though China wind growth continues unabated due to its white-hot electricity demand growth and may have just passed the US as the global leader of wind power capacity. But the stagnant overall market this past year means that wind turbine prices are lower and getting more competitive with fossil fuel-fired electricity. Look for wind turbine prices below $1.45 per Watt and total cost including installation below $2 per Watt onshore. The offshore market has higher installation costs that are offset by more consistent winds and close proximity to demand centers (cities). Offshore wind can begin to take growing market share in 2011.

Efficient Renewables Closing the Gap with Fossil Fuels

As described above, I see solar and wind power prices further converging with fossil fuel prices in 2011. Therefore renewable subsidies can be lowered in cash-strapped countries without risking market collapse. Increasingly efficient lighting (such as CFLs and LEDs) and other appliances will open up solar and wind resources to the masses, especially when complemented by efficient active transport by bicycle along growing greenways and bike lanes. The key potential game changer for oil and other commodity prices would be a significant weakening or strengthening of the dollar, either stoking higher prices in the US or taming the increase, respectively.

The energy system is in for big change during 2011. Investment in efficiency and renewables will pay off for early adopters as cleantech moves from niche market to more mainstream source.

Onwards in the Sustainable Energy Transition-

Dennis Markatos-Soriano

Wind Tech Advances Quicker Than Fossil Energy Tech

Many fossil energy advocates who ignore the harmful global warming effects of burning oil and natural gas pretend like technological change will allow us to increase our use of these fuels forever. But the reality is that US oil reserves and production have fallen more than 15% and 20%, respectively, since the early 1990s. And at some point within the next decade or so a similar trend will likely constrain the natural gas market even though EIA estimates of its reserves have climbed ~50% since 1993. Over the same time period, the estimate of wind power potential has climbed more than 3.5 times what the Pacific Northwest Laboratory estimated in 1993. This shows that wind technology during the period has advanced much quicker than exploration and production technology for oil and natural gas. A major improvement comes from taller wind turbines today, since wind is stronger at 80 meters than at 50 meters above the ground.

The Biggest Changes

The main sources of growth for US wind power potential came in the Great Plains, which was already known to be the heart of our resource. Texas, long the largest wind power producing state, is now estimated to be the top state for wind potential after passing the Dakotas and Kansas. In fact, it is estimated that Texas can produce from wind 15X the amount of power it consumes from all electric sources today. Another twenty states can also produce so much wind power that they could become major exporters of this electricity to other states around the country. The estimate excluded wind potential in parks, urban areas and over water — so this is a major underestimate once you consider the offshore wind potential we have off the Atlantic and Pacific coasts. Even so, the 37,000 TWh per year (~365 quadrillion Btus) listed in their onshore wind power estimate is more energy than that contained in our oil and natural gas reserves combined.

Solar Energy Potential Even Larger

The estimate of solar energy potential is more than 100X that of wind power, at over 2,000 TW. So, the issue for renewable energy isn’t any lack of supply. The challenge is for us is to continue cost reductions for wind and solar to make them cheaper than their fossil energy competitors. The year 2010 could be a breakthrough period in that regard as prices for wind turbines and solar modules fall toward grid parity.

Renewables Dominance Will Take Over a Decade

Even when wind and solar are more economical, it will take some time for them to grow from their current base of ~2% of US electricity. Manufacturers of solar modules and wind turbines will have to ramp up global production capacity from current levels of ~10 GW and ~40 GW, respectively, to at least 50 GW each before these sources of electricity can take significant market share from natural gas, oil, and coal. And we will need to continue to improve energy storage capabilities and economics along with our development of a smart grid that can adjust to the intermittency of wind and sunshine for this transition to renewables to take place smoothly over the next 10-25 years.

Now we know there is plenty of renewable energy available to keep us warm, lighted, and wired throughout the 21st century once we have moved on from our dependence on fossil fuels. Let’s make 2010 a huge step in this monumental project!

Onwards in the Sustainable Energy Transition-

Dennis Markatos-Soriano

Global Growth Shines

The global wind power market also grew at an astounding rate — clocking a 37.5% growth rate in its annual market (37 GW vs. 27 GW in 2008). China’s annual growth became the biggest in the world at 13 GW, which makes sense due to their larger electricity demand growth. At the end of 2009, China became the 3rd largest wind energy producer after the US and Germany (35.1 GW, 25.8 GW, and 25.1 GW). China will become the 2nd biggest wind producer in 2010 and may challenge the US by 2011.

The global solar market didn’t grow as quickly due to the collapse of its top market of 2008 — Spain (~50% of the world market that year). But Germany rode to the rescue and extended its lead as the biggest solar power producer in the world (it may have passed 8 GW). Germans took advantage of a 40+% decrease in solar module prices and had record growth (becoming ~50% of the global market themselves).

In the US

As I wrote last year, wind was already replacing oil-fired electricity in 2008. In 2009, wind took some market share from the most polluting power source, coal. In the years ahead, wind and solar can provide for new electricity demand growth and then begin to take significant bites out of the market for the leading electricity sources, coal and natural gas.

At 35 GW, wind now produces ~2% of US electricity demand. At almost 2 GW, solar produces ~.1% of US electricity demand. Biomass and geothermal produce ~1.5% and hydro almost 7%. The big three power sources today are nuclear (~20%), natural gas (~23%), and coal (~45%). When you look at particular states, it is exciting to see that wind power already provides three states with more than 20% of their power needs (Wyoming, Iowa, and North Dakota). By 2023, wind could provide 20% of the whole country’s electricity and solar another 12.5% (based on growth rates of 17.6% per year for wind – half the recent rate – and 40.4% for solar – a slight pickup from the last few years).

The US Energy Information Administration predicts US demand growth for electricity at a rate of 1% per year through 2035. I personally think that rate is higher than necessary as electricity demand growth has fallen every decade since the 1950s and it only grew .4% per year in the ’00s. Increased efficiency efforts can help electricity demand stay flat or even fall, as Google presents in its Clean Energy 2030 Plan.

Trends in Europe as a Glimpse at Our Future?

Europe installed over 10 GW of wind power capacity in 2009. The continent now gets ~9% of its electricity from wind and wind was the top source of of new electrical capacity at 39%. Solar power was third at 16% after natural gas which supplied 26%. Adding hydro and biomass, renewable energy provided 61% of new capacity. Meanwhile, coal is on the decline, as over 3 GW were decommissioned. The US can accomplish this same feat of most new demand coming from renewables in 2010 and beyond.

Price Curves Favorable for Wind & Solar

The prices of wind and solar should continue to drop in 2010, as opposed to an increase in the price of oil, natural gas, and coal. This trend should help maintain swift growth from these sources and make them the new energy titans within a few more years.

The Human Toll of Fossil Fuels

As I discussed a few months back, our addiction to fossil fuels has a serious human toll (on top of inducing global warming and hurting air quality). The tragic blast at a Connecticut power plant that killed at least five people today is a grim reminder of this. Our transition to an efficient reliance on renewable energy will help to reduce such accidents in the future.

Nuclear & “Clean Coal” Not a Near-term Remedy

While Obama has been trumpeting nuclear and “clean coal” as a necessary bridge to a renewable energy future that he thinks is decades away, renewables are actually better situated to provide for us. It takes ten years to commission and build a new nuclear power plant. And carbon sequestration coal is not market-ready yet. In contrast, wind and solar are growing quickly, proven technologies, and falling in cost. Here’s to further record growth for wind and solar in 2010 — finally putting to rest any doubts that they can lead us to a new climate-friendly energy future.

Onwards in the Sustainable Energy Transition-

Dennis Markatos-Soriano

4 GW in First Half of Year a Record

While the second quarter’s growth rate was less than half that of the record first quarter, the two quarters add up to another record — for installed wind capacity in the first half of the year (~4 GW vs. 2.7 GW in H1 2008). And even though we are near the bottom of a deep recession, the second quarter growth of 1.2 GW was equal to Q2 2008. It brings total US wind capacity to a world-leading 29.4 GW.

Major growth occurred in 10 different states across the country. In percentage growth, Missouri led the pack by almost doubling its wind capacity last quarter to over .3 GW (too bad MO Senator Claire McCaskill (D) is slowing the current climate bill that would help the state take further advantage of their wind resources). Pennsylvania and South Dakota also had double digit growth rates at 28% and 21%, respectively. Texas extended its leadership in wind by passing 8 GW, while #2 Iowa passed 3 GW.

My top 10 states list in rough percentage of electricity from wind shifted a little:

1. Iowa (~19% of its electricity from wind)
2. North Dakota (just below 18%)
3. Wyoming (over 15%)
4. Oregon (over 8%)
5. South Dakota (almost 8%, up from a tie for #7)
6. Minnesota (~7.5%, down from #5)
7. Kansas (~7%, down from #6)
8. Texas (almost 7%, up from #9)
9. New Mexico (~6.5%, down from a tie for #7)
10. Colorado (~6%)

Wind capacity can now generate ~1.9% of US electricity demand. Wind may pass 2% by year’s end, further crowding out dirtier coal, oil, and natural gas consumption.

Fewer Wind Farms Under Construction Though

The difference between 2009 and 2008 is the second half of the year. Last July, there were ~9 GW under construction. But this July, the queue is a lower ~5 GW (even though it’s a vast improvement from the smaller 3.4 GW under construction at the end of Q1). As I wrote last week, wind farm construction is expected to pick up tremendously in 2010 to a new record above 10 GW.

Could 2009 Rival 2008?

The second half of 2009 is expected to witness a significantly slower pace of installation than last year (almost 5 GW) on more difficult financing and reduced US electricity demand. But the lower turbine prices and the federal stimulus support emerging in the months ahead may help 2009 get close to last year’s phenomenal growth. AWEA projects annual growth of 6-7 GW (second highest ever), with growth continuing at the second quarter’s rate over the next two quarters. They are probably right, since wind farms are such huge projects and take months to complete. But I would love to be surprised by another record year. And I will keep you abreast of progress here as it is made in the weeks ahead.

Onwards in the Sustainable Energy Transition-

Turbine Prices to Fall, White Hot Growth Rates to Return

Turbine prices have increased since 2001 as demand growth has been through the roof. Turbine prices have actually doubled since 2001 from a low ~75 cents per watt to ~$1.50 per watt in mid-2008. But the deep recession is inducing lower demand in 2009 (down 20-50% from the record high of 8.5 GW hit in 2008). This lower demand has allowed wind turbine supply to catch up, sending prices back toward lows of a few years ago as I mentioned a few weeks back. The grid parity I wrote may be reached by 2012 for solar was reached by wind power years ago (when the federal Production Tax Credit is included). As wind prices get more competitive and financial markets recover, the Energy Information Administration (EIA) predicts that record growth will return to the US market in 2010-12, sending demand to consecutive record highs of 10.4 GW, 11.9 GW, and 13.7 GW!

Another recent DOE report outlines a growth path to 20% of US electricity coming from wind by 2030 that has been far surpassed these past three years and by the EIA projections above. Thus, we may be able to reach 20% wind by 2025 or earlier.

Wind Farm Performance Improving

The capacity factor (percentage of time wind is producing its potential) for wind farms has improved over the years. Back before 1998, the capacity factor was in the low 20% range. Since 2005, the capacity factor has been 35-37%.

What About Solar and Other Renewables?

If wind provides 60% of new electricity demand in 2012, can solar, geothermal, and biomass provide a bulk of the remainder? My current projection is for solar to provide ~10% of EIA’s projected new demand in 2012 (over 2.5 GW). If geothermal and biomass can add a similar chunk together, we’ll only need a couple of new natural gas or coal plants that year (less than 20% of new capacity).

Bottom Line: Wind power has gone through tremendous growth in the US and worldwide. The EIA predict lower turbine prices and healthier financial markets will bring new record growth for the renewable electricity provider – making wind the leading source of new power for America. If we have similar rates of growth for other renewables, our need for new fossil fuel power plants will be miniscule by 2012. Let’s make it happen!

Onwards in the Sustainable Energy Transition-

There are significant costs to such a transition for this island nation and its 12,000 citizens. But when your highest point is less than 5 meters, you don’t have the luxury to procrastinate on emissions reduction. The more the US, China, and the EU can develop and improve renewables, the easier we can make the sustainable energy transition for our neighbors in the developed and developing world. Here’s to continued advances in solar technology that brings it to grid parity by the early 2010s so that we can all replace our older, dirty fossil fuel-based energy system.

Onwards to further climate progress-

The Details

After 2008 witnessed a US emissions fall of almost 3% (due mostly to oil demand decreasing in response to higher prices), all fossil fuels are contributing to this year’s emissions drop. Coal has the biggest drop, now estimated to be ~6.9% due to lower industrial demand and low-priced natural gas replacing some coal in the electricity sector. Oil demand is revised downward from June to a fall of 3.3% for the year. And natural gas was revised downward to a consumption level 2.3% below 2008. All of these drops translate into energy-related emissions that are 4.3% below last year.

1990 Levels Not Far Away

Such a drop would make 2009 emissions just ~6.5% above 1990 levels and already 7.5% below 2005 levels. It would make 1990 emissions levels within reach by 2015 and the Waxman-Markey goal of 17% below 2005 achievable by 2017 (rather than 2020) by just reducing emissions 1% per year going forward.

Room for Further Reductions in 2009

And I believe the EIA may still underestimate 2009 reduction in fossil fuel energy demand. Its prediction that oil demand will fall 3.3% is slower than the current consumption decrease rate above 5%. And coal demand is also falling faster than 8% so far this year (rather than the ~6.9% EIA predicts). Continuing current demand trends could send emissions down more than 5% in 2009.

Looking Ahead

The EIA predicts some rebound in energy demand in 2010, but only a fraction of this year’s drop. In fact, the .8% expected recovery in electricity demand in 2010 could be provided in full by wind, solar, and geothermal rather than switching the fossil fuel plants back on.

Bottom line: US greenhouse gas emissions are falling quickly in 2009 and bringing us within close reach (a few years) of 1990 levels. This fact means that the Senate can comfortably promote Waxman-Markey’s goal of 17% below 2005 levels by 2020 or even strengthen it back to 20% below 2005 levels by 2020. We need their leadership to get climate legislation to the President’s desk. Renewable energy and efficiency are ready to simultaneously drive economic growth, create jobs, and lower our nation’s emissions. I will keep you updated on progress as it happens.

Onwards in the Sustainable Energy Transition-

Oil Output Slides Slower than Demand

Oil demand is down more than 5% in 2009 thus far and shows few signs of change. The Energy Information Administration (EIA) Petroleum Weekly Report shows demand of most oil-based fuels nosediving. Gasoline, distillates (mostly diesel), and propane demand fell 3.2%, 24%, and a whopping 39%, respectively. As a tempering force to supply gains, US crude output slid 1.8% to 5.163 Mbd last week, just .8% higher than in 2008. Much further reduction in production could bring US stockpiles back into the average range and threaten to lift prices above $70 per barrel again. But more economic stability is necessary to raise prices much further.

Natural Gas Storage Finally Slows its Growth

It took sub-$4 per MMBtu and a heat wave across the South to finally keep natural gas inventories from its above average growth. Output may fall below 2008 levels in July and send prices back above $4. But again, some economic recovery is important for prices to climb significantly above $4.50 per MMBtu. Storage remains more than 20% above average, and is poised to hit new record levels by October. Natural gas will remain a strong substitute for coal this summer even though coal prices are half their 2008 average.

Low Energy Demand Means Slow Renewables Growth

It’s hard to justify strong demand for new renewable energy when overall energy demand remains significantly below 2008 levels. But if solar and wind producers can continue to lower costs and economic recovery picks up in the second half of 2009, we may be on the cusp of another wave of strong expansion.

Bottom line: The recession maintains its grip on fuel prices midway through 2009. Whether demand recovery, output decreases, or changes in the exchange value of the dollar will change that reality in the months ahead is difficult to know. I’ll keep you posted on these trends and their influence on greenhouse gas emissions in the weeks ahead.

Onwards in the Sustainable Energy Transition-

We have one of the best public transit systems, with a new subway line on the East Side being built to alleviate some of the current rush hour crowds. A strong transit system is one of the biggest pillars of Bloomberg’s PlaNYC goal to reduce greenhouse gas emissions 30% by 2030. And under the leadership of Department of Transportation Commissioner Janette Sadik-Khan, we have made great strides in our bicycling infrastructure. In the last three years, the on-street bike network (bike lanes and greenways) has grown more than 50%, from ~400 miles to over 600. Further expansion is needed to connect current greenways and bike lanes. For instance, those of us in the Upper East Side need a way to safely bike to and from downtown through a bike lane on 2nd Avenue and an expansion of the 1st Avenue bike lane below 72nd Street. These infrastructure improvement projects will provide much-needed green jobs for New Yorkers and would help NYC get on the top 10 list in 2010 and beyond.

Renewable Energy Deployment

Another area where New York City needs improvement to lead its peers is renewable energy deployment. While Governor Patterson has strong goals such as 100 MW solar by 2015 (with a significant portion serving NYC potentially), solar currently supplies less than .1% of our city’s electricity demand. New York’s solar market size is less than a third of New Jersey’s (the #2 state), so we will need to more than triple our efforts to rank as a solar energy leader. Luckily for us, prices for solar panels are falling more than 30% in 2009, helping to make deployment economical once the recession subsides.

There is also great potential for NYC to get more electricity from wind power. Earlier this year, New York became the eighth state to join the 1 GW wind club, but this only translates into 2-2.5% of the state’s electricity demand. Onshore and offshore wind potential could provide more than 15% of the state and city’s power needs within a few short years if we prepare ourselves to take advantage of lower wind turbine prices in 2010 and beyond. To compete with the renewable energy leadership of San Francisco and Austin, we’ll need aggressive deployment in the months and years ahead.

Recycling, Efficient Buildings & Green Space

Other steps we can take to get into the top 10 list include improving our recycling efforts and mobilizing building construction and renovation to achieve efficient LEED standards. On top of that, the Mayor’s efforts to plant more trees throughout the City should help as well – adding value to every neighborhood, especially those out of easy walking distance to our green treasures like Central Park and Prospect Park.

Bottom Line: New York City is making progress toward environmental and climate leadership. But we have a ways to go if we want to ensure a place in top 10 green American cities lists. If we accelerate the improvement of our bicycling infrastructure and the deployment of renewable energy throughout our boroughs, New York City can proudly establish itself as the Big Green Apple so many of us hope it will be.

Thousands of Deaths per Year

The same combustibility that makes fossil fuels a generous energy source claims the lives of thousands of people per year worldwide. A natural gas plant in Saudi Arabia recently exploded and killed 40 people. Several helicopters ferrying offshore oil workers have crashed in the last few months in the UK, the US, and Canada, killing scores of workers. But the most deaths probably occur in the coal mines of China, where thousands of miners lose their lives each year in explosions, collapses, and floods.

Renewable Energy Not Immune to Accidents

Wind turbines hundreds of feet in the air and rooftop solar installations can sometimes result in injuries or even a fatality as well. So the industry will need to take care and government regulations will be crucial to keep those numbers low as these industries scale up. Another risk that wind companies must take responsibility for is potential accidents at iron ore mines that are the source of their turbines’ steel (a recent iron ore flooding accident in China claimed 29 lives).

Bottom Line: The transition to efficiency and renewable energy reliance can help reduce mortality in our global energy system – not just from the effects of climate change and pollution. But even though wind and solar power may have inherently fewer risks, safety regulations will need to adapt to keep up with these new technologies and ensure the safety of the growing green-collar workforce.

Onwards in the Sustainable Energy Transition-