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

Output falling to meet lower demand

The petroleum report showed crude oil inventories fall closer to the average range, with its fifth straight week of significant decline. This slide has been largely driven by lower imports. A drop in US crude output is also helping to restore some balance – production is now ~5% lower (~.3 million barrels per day (Mbd)) than its highs during the Spring.

However, petroleum product inventories remain high. Gasoline increased to high levels as demand remains down 1.3% from last year. Distillates (mainly diesel) and propane also increased last week, with distillate demand down a huge 28.9% from 2008. Continued weak demand has sent crude prices down more than 15% from their early July highs and has gasoline falling back below $2.60 per gallon nationwide after almost touching $2.70 a couple weeks ago. As I wrote last week, it will take a marked drop in output or recovery in demand for prices to hike back up significantly in this prolonged recession.

A similar story for natural gas

The weekly natural gas storage report conveyed a similar story. Low prices have lowered output and induced a greater consumption of natural gas for electricity generation (substituting coal). These shifts are slowly returning inventories to balance, as inventories are now 19% rather than 23% above the historical average. It will take months of suppressed prices (and thus lower output) before the surplus subsides.

Prices to mirror recovery

Economic stability is necessary to bring real balance to fuel inventories and lift natural gas and oil prices. These lower costs can help consumers get their finances back into balance before the age of efficiency and renewables really kicks in a few months from now.

Onwards-

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!

Oil Above $67 Per Barrel

The early signs of economic stability and a weakening dollar have doubled the lowest price of oil reached last December (~$32.50). Last week’s EIA petroleum report showed US crude inventories falling 1.5%, but still significantly above average. Gasoline supply fell below average levels, but distillates and propane remained above average. With most petroleum inventories above average and recessionary low demand continuing for the next few months at least, it is hard to imagine the price continuing to rise much further in the short term unless production begins to fall on the low rig counts and prices.

Low Gasoline Storage Sends Wholesale Prices Up

Wholesale gasoline prices increased further over the past week, and are poised to send pump prices above $2.55 and potentially as high as $2.60 per gallon in the near future.

Rig Count Up for Oil, Down for Natural Gas

Another reason oil prices should slow down its increasing trend is the oil rig count is increasing on oil’s recent price recovery. The oil rig count climbed 3.9%, which may keep second half 2009 oil production from dipping below 5 million barrels per day. For natural gas, the rig count continues to fall – last week at a 1.1% rate. By this fall, natural gas production will probably slide below the 2008 rate and help prices climb 50+% toward the marginal cost of production of $7+ per MMBtu. Then again, natural gas prices could remain below $6 into 2010 if companies like GM and Chrysler continue to struggle mightily to sell their products.

The current oil price climb is dangerous for our economy unless we accelerate our deployment of efficiency and renewables. Stay tuned in the weeks ahead for more details on the increasing price of fossil fuels and the role it plays in our Sustainable Energy Transition.

Onwards-

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-