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-

Competing with Thin Film’s First Solar

The cost leader for solar has recently been First Solar, who lowered their production cost per watt to 93 cents during the first quarter. But the lower efficiency of First Solar’s modules (at ~10.9% vs. 14-22% for silicon-based cells) means that selling its modules at $1 per watt is equivalent to Yingli Green Energy, JA Solar or Sunpower selling its modules for $1.30-$2 per watt. I thought sub-$1.75 per watt was unrealistic for crystalline silicon producers in 2009. But LDK’s revised second quarter guidance means that such prices are expected per silicon-based watt throughout the rest of the year.

Prices Less than Half 2nd Quarter 2008

Such a price translates into less than half the price of just a year ago. If installation costs can fall in a similar trajectory, relative prices versus fossil fuels will be similar to last year at this time. And once economic recovery begins to lift the price of natural gas in coming months, solar will become competitive and demand will soar.

The Strong Will Thrive

Solar companies who are strong enough to weather the next few months by lowering their cost of production will emerge highly profitable as the recession subsides. In the meantime, the second half of 2009 may witness serious consolidation throughout the solar industry as impaired financial markets fail to provide enough capital for smaller players. But the stronger producers (such as First Solar, Sunpower, and Suntech) appear poised to thrive as solar becomes mainstream and grid parity expands into several markets by 2010.

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-

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-

Coal Use Projected to Fall ~5%

Building on the lower coal consumption trend of the first quarter, the EIA estimates coal demand to be ~5% lower in 2009. With oil and natural gas demand down ~3% and 2.2% (respectively), energy-related US carbon dioxide emissions are projected to fall ~3.5%.

Still room for lower emissions

I still see room for even these projections to be overestimates. Coal consumption could remain almost 10% below 2008 levels due to the huge supply of natural gas and the cutbacks in industrial production from the likes of GM and Chrysler. And oil demand projections are based on a significant increase from the first five months. I see more likelihood that oil demand remains low to leave 2009 consumption at 5% or more below last year.

Such consumption would send overall carbon emissions down more than 5% in 2009 and to less than 5% above 1990 levels. Since the Waxman-Markey ACESA sets targets based on 2005 emission levels, I will also express these emissions relative to 2005. By my estimates, 2009 emissions falling 5% would lower them to more than 8% below 2005 levels. It makes the Waxman-Markey goal of 17% below 2005 achievable by reducing emissions only .8% per year.

Bottom Line: US emissions are poised to fall dramatically in 2009, putting us in a good position to lower emissions significantly below 1990 levels in the 2010s. Based on the prospect of strong growth for wind, solar, and efficiency in the years ahead, emissions levels of 20-25% below 2005 in 2020 (~8-14% below 1990 levels) are achievable by lowering emissions at a reasonable rate of ~1.5% per year.

Let’s make it happen!

ACES Act caps US greenhouse gas emissions

The passed bill would establish a cap-and-trade system to achieve lower US emissions levels by allowing institutions to trade their emissions permits so that the most efficient reduction projects are executed. This market-based incentive is estimated to be cheaper than mandating all institutions to lower emissions the chosen percentage without regard to each institution’s costs. The cap, beginning in 2012, is set for 2020 emissions to equal 17% below 2005 (or ~4% below 1990) and then 2050 emissions at 83% below 2005 (~80% below 1990). The original bill draft called for 20% below 2005 by 2020 but was relaxed as a compromise to shore up support among legislators from coal states.

The sharp drop in emissions during 2008-09 already has emissions at 6% below 2005 levels, so 17% below seems unaggressive to me. I hope advances in solar, wind, and efficiency help persuade legislators to lower the cap at least back to 20% below 2005 during the bill’s continued development or after it becomes law.

Electricity Emissions Continuing to Plunge

The EIA just published its preliminary estimate for March electricity generation, and the numbers are even more climate-friendly than last month. The most notable change is the large substitution from coal to natural gas due to the recent lower prices for natural gas. Coal use fell 14.5% from March 2008 while natural gas consumption increased 5%. More good news for the climate were a 1.2% increase in hydroelectric power generation, a .3% increase for nuclear, and a 4.8% decrease for petroleum liquids.

Year-to-date, 2009 coal consumption for electricity is down a whopping 10.2% (much more than the EIA projection of ~2.5%, as I wrote last week would probably occur). Natural gas use for electricity has fallen .8%. US emissions could fall as much as 5% in 2009 (to 7.5% below 2005 levels) if current trends continue. But for now, I’ll stick with the more conservative projection that they will fall more than 3%.

Here’s to swift passage of climate legislation to ensure emissions continue falling during our economic recovery in the 2010s.

Onwards in the Sustainable Energy Transition-

Quick Details

Oil consumption emits around a third of total carbon dioxide emissions. So, the 2.6 Mbd (3%) drop in oil demand would pull emissions down by ~1% overall. The question is whether coal, natural gas, and land use change/forestry would push emissions more than 1% to keep them climbing higher. Since the global economy is forecast to have negative growth, a significant increase in coal and natural gas consumption is unlikely. Therefore, my current prediction is that global greenhouse gas emissions will fall at least .5% in 2009.

As I said in April, this fall in global emissions gives hope that we are entering the era of declining carbon pollution. But the only way we can continue such a trend sustainably and prosperously is through rapid deployment of energy efficiency and renewables to begin replacing fossil fuels. We need to support the development of wind and solar markets from ~35 GW in 2008 to 50+ GW in 2010 and beyond.

Onwards in the Sustainable Energy Transition-

The Details

The EIA expects oil consumption to fall 3% in the US to a little more than 18.8 million barrels per day. Most of the reduced demand is projected to come from lower use of distillates (mainly diesel) and jet fuel. For coal, the EIA predicts consumption to fall ~2.6% based on much lower industrial and coke plant demand and a substitution to natural gas for electricity generation. Even after taking up some slack from coal, natural gas consumption is expected to fall 1.9% (.1% further than estimated in April). Adding all these decreases together produces emissions that are 3% lower than in 2008.

Room for Further Reductions

I see room for emissions to fall even further than 3% as petroleum demand is currently more than 5% below last year (not just 3%) and substitution from coal to natural gas may drive a huge drop in coal demand of 4+% (compared to their ~2.6% estimate).

Some Background on Natural Gas Substitution of Coal

The report included a supplement on coal-to-natural gas substitution which helped me understand the situation more clearly. Since natural gas power plants are more efficient (less heat needed per kWh generated), natural gas prices that are higher than coal prices by 33% or less are often competitive. While most coal demand is guaranteed through long-term contracts, as much as 10-20% of some regional electricity markets can switch from spot market coal to spot market natural gas purchases. A natural gas price of $4 per MMBtu is more economical than a coal price of $3.25 per MMBtu in many efficient combined cycle natural gas plants.

Bottom Line: US greenhouse gas emissions from energy are now predicted by the EIA to decline faster than the swift fall of 2008. For us to continue this trend in 2010 and beyond, we must base our economic recovery on efficiency and renewable energy deployment (through federal climate legislation and a Renewable Electricity Standard).

I’ll keep you updated as progress is made-

Composition Changes: Lower Carbon Intensity

On top of the lower overall consumption of electricity is a shift toward lower carbon intensity of the electricity generated. This shift was strongest in February when dirtier coal consumption for electricity fell 13.4% while demand for cleaner natural gas increased 2.4% and wind climbed significantly as well. The low price of natural gas is driving the shift from coal, as I wrote in February may happen. This could lead to coal’s share of electricity falling below 48% in 2009, a continuation of coal’s share decline of the last ten years described a couple weeks back.

Carbon Emissions Poised to Fall 3+%

When you add up fossil fuel consumption in early 2009, you get a picture of emissions in freefall. Rather than the 2.5% emissions drop I described a few days ago from the April EIA Short Term Energy Outlook, emissions from energy use are currently falling at a 5% rate. Coal use is falling ~8%, natural gas for electricity is down ~4%, and oil demand is more than 4% below 2008 levels.

Since it is possible that weather (a hot summer and cold early winter) and a late 2009 economic recovery may bring emissions levels closer to those in 2008, for now I will say that emissions are poised to fall more than 3% this year. But keep the higher 4-5% range in mind as possible – which would bring US emissions to just ~6.5% above 1990 levels.

Bottom Line: US carbon dioxide emissions are poised to fall dramatically in 2009. The more we deploy efficiency and renewables, the faster we can send emissions down and keep them down as our economic recovery revs up in late 2009/2010. I’ll keep you updated at SETenergy.org as this develops during the months ahead.

The Details: Natural Gas & Coal Demand Fall

Oil consumption remains about the same as the previous monthly Short Term Energy Outlook (STEO), falling over 2%. But the numbers for coal and natural gas are much lower than previously projected. Natural gas use is expected to fall 1.8% in 2009 on much lower industrial demand (versus the February estimate of ~1.3%). And the lower natural gas price that we are enjoying now incents some utilities to substitute coal-fired electricity with natural gas instead. Thus, coal takes the biggest dip at ~2.5% (versus the February estimate of ~1.3%).

The American Wind Energy Association’s prediction of 5+ GW of new wind capacity in 2009 will certainly help emissions fall by taking an almost 2% share of the US electricity market. If hydropower output also expands, emissions could fall even further.

A 2.5% fall in emissions in 2009 makes 1990 emission levels possible by 2015 as long as we base our economic recovery on clean energy deployment and efficiency (lowering emissions at half the rate of 2008-09 (~1.4% per year)).

I’ll keep you updated on progress as the months pass by…