OWOE Staff: The world recently celebrated Earth Day on April 22 - 52 years after the first Earth Day celebration in 1970. Unfortunately, like pretty much all the prior Earth Days, very little concrete progress was committed to addressing the world's global warming crisis. If I may paraphrase my favorite environmentalist, Greta Thunberg, it was all "bunny, bunny…blah, blah, blah". Perhaps the biggest news in the fight against climate changes was Denmark's proposal for a new corporate carbon tax, which would set a value of 1,125 Danish crowns ($164.21) per tonne of carbon equivalent and make it the highest such tax in the world if implemented. But again, that’s just a proposal. In the meantime, fossil fuel use has recovered from its Covid lows, CO2 levels in the atmosphere continue to rise, the Arctic and Antarctic ice sheets continue to melt, and environmental damage from storms, fires, and rising sea levels continue. I personally witnessed a real-life example of that the very week of Earth Day when I visited one of my favorite beaches in the world, Cancun. I have been going to the beaches of Cancun almost every year since the early 2000s, and the change to the beach caused by the increase in seaweed over the past few years is dramatic. We all tend to miss the big picture when all we see are incremental changes, but after skipping two years because of pandemic travel restrictions, the magnitude of the beach changes was more obvious and led me to look back at my earlier visits and take a broader perspective. Figure 1 shows the change over the last 8 years, with a) from April 2014 and b) from April 2022, both the exact same stretch of beach.
This seaweed is Sargassum which reproduces vegetatively and never attaches to the seafloor. The Atlantic Ocean's Sargasso Sea was named after the seaweed for the large amount of Sargassum that collects there. More recently, an area of Sargassum has developed off the coast of Brazil near the mouth of the Amazon River.
Figure 2 from the University of Florida Satellite-based Sargassum Watch System (SaWS) shows how the Sargassum bloom off the coast of Brazil has evolved. Since 2011, Sargassum seaweed has appeared in the Caribbean Sea every summer except 2013, creating many environmental, ecological and economic problems. The seaweed originates in the tropical Atlantic and drifts with the current into the Caribbean. It is believed to be a result of climate variability combined with other natural and anthropogenic processes and has been getting progressively worse. One of those anthropogenic processes is deforestation, which causes soil erosion that leads to surplus nutrients being washed into rivers and flowing into the ocean, ultimately feeding the Sargassum. Deforestation also releases carbon into the atmosphere which contributes to climate change and increases ocean temperature, which then accelerates Sargassum growth.
2018 was a bad year for the seaweed, but April 2022 seaweed quantities have exceeded all prior years. The overall Sargassum amount increased significantly across the tropical Atlantic, the Caribbean Sea, the Gulf of Mexico, and the Central West Atlantic (the region east of the Lesser Antilles), setting a new historical record for the month of April.
How has Cancun been dealing with this problem? Not very well. Although there has been some attempt to clean the seaweed with vessels, most still washes ashore. Figure 3 shows the various ways the individual resorts in the Hotel Zone have been dealing with the problem: a) bury using tractor, b) what's left after burying – "sandweed fluff", c) leaving to decompose naturally – resulting in a prickly mess that is unsightly and uncomfortable to walk on, and d) haul-off using backhoes and dumpsters. Not shown is another common approach - hotel workers burying the seaweed by hand on the beach. They spend all day raking and shoveling and go home exhausted, only to return the next day and start over again. All approaches, other than leaving in place, result in significant cost for the hotels, and all impact the beach. The famous soft, white, pristine Cancun sand no longer exists.
Ultimately, this has an impact on visitors who hear about the problem and choose a different destination or who visit Cancun, are disappointed in the beaches, and choose to not return in the future. According to the Mexican government, tourism will fall by as much as 30% at Quintana Roo (state that includes Cancun and the Mayan Riviera) beach destinations this year due to the invasion of Sargassum.
When organizations try to calculate the cost of climate change, they focus on measurable costs – how much it costs to fight the impact of the change or repair the damage caused. But what about the indirect costs? What is the value to the world of walking on the beaches of Cancun or scuba diving along the Australian coral reefs or skiing in the Andes mountains or living on the coast of almost any place in the world, all (and much more) of which are at risk of disappearing?
Guest blog by S. A. Shelley: Governments' penchant for wasting taxpayer money and harming the environment is not a recent phenomenon but it went industrial in 20th century at all levels. At the beginning of the century Mother Nature and society had a tremendous capacity to forgive bad decisions even when some such decisions resulted in millions of deaths over the span of several decades. Human, sorry, people-kind abused Mother Nature and the pocketbooks of taxpayers in the name of progress and energy transition but managed to overcome crises such as anthropogenic acid deposition and the oil embargo of the 1970s. People-kind barely limped out of the 20th century into the 21st century. In all likelihood Mother Nature and taxpayer pocketbooks are now beyond the capacity to forgive our shortcomings and bad decisions for much longer. Who is to blame for this? Big business has big shame, but most blame lies entirely before the governments who are elected to be wise but are faddish populists with inherent graft and "ism" agendas. Difficult and complex solutions require deep thinkers, not pot-addled Princes of Privilege (shout-out to Justin Trudeau, see notes 1 and 2).
Let's look at some of those ghosts of decisions past…
In the middle of the last century, many municipal governments operated transit systems with electric trolly buses. Fig. 1 shows such a bus in operation by the City of Edmonton.
However, the continued operation of such clean, green and quiet public transit into the 21st century did not align with the vision of the then progressive city politicians of the late 1980s and 1990s. As one commentator wrote:
The fact that most other North American cities got rid of their trolleys does not mean that they (city councilors) were wise or far sighted when they did so. But if you had stood up then before those city councils and talked about oil at $150 a barrel and vanishing glaciers, you would have been laughed out of the room.
Before the decision was made to get rid of the electric trolley buses in Edmonton, politicians often made two arguments to support their case: 1) maintaining the overhead wires was too costly, and 2) modern diesel buses were cleaner and cheaper to operate. The argument against diesel should be obvious to everyone; the economic case is not as obvious but just as foolish. Studies have invariably concluded that electric trolley buses are, in fact, the cheapest transit system to build and operate, even cheaper than battery electric buses (see Urban Transport Magazine and Low-Tech Magazine). Unfortunately, battery electric buses are now the de riguer choice of city councils everywhere including in the city of Edmonton. Forty years after the initial decision was to get rid of electric trolley buses, the city is now buying more expensive battery electric buses.
Electric street cars were also quite common in urban municipalities, and they operated frequently, conveniently and safely for many years. Fig. 2, shows an electric streetcar operating in Los Angeles around 1960.
By 1960 over 1000 miles of streetcar lines (urban rail system) served the public in the greater municipality of Los Angeles. Yet in 1963 the city began ripping up and dismantling its once impressive system. There are numerous reasons given for the demise of urban rail system, and an often overlooked reason is that "…city rules often kept fares artificially low". In other words, inept political meddling killed a good thing. Now, almost 60 years later, city of Los Angeles councilors have decided that streetcars are again an integral part of the transit system and they have embarked on building a new streetcar system starting with the 3.8 mile downtown route.
On a large scale these days, politicians are justifiably and frantically proclaiming the need for green and energy efficient transportation. Yet when they had it, they got rid of it. How many times must taxpaying citizens pay for the short-sighted planning and outright mistakes of politicians? How often are cities going to switch between urban rail, "clean" diesel (or LNG) buses and E-buses? What is the government transit plan going forward (Fig. 3)?
It's not just municipal transit which has suffered immeasurable damage because of flaky political thinking: personal transit is now under relentless and inconsistent attack by politicians.
In Europe, diesel cars became the government solution to achieving Kyoto Protocol CO2 reduction targets, and governments threw their resources into convincing citizens to drive diesel instead of gasoline powered ICEs. Now politicians everywhere are coercing their citizens to drive EVs, which have their own issues with sourcing critical materials in a sustainable and socially just manner (see Climate Nexus and Inside EVs) and cost. I doubt that any politician knows that it takes about 500,000 gallons of water, or about 2200 tonnes of water to mine 1 tonne of lithium. Then there is the question of battery disposal, with forecasts indicating 2,000,000 tonnes per year of EV batteries will be tossed into landfills each year after 2030. Again, I doubt that any politician is thinking now about that future problem. I also wonder what the future of personal transit will be in the future: Will it be egalitarian or elitist (Fig. 4)?
If politicians are serious about clean and green transit and reducing CO2 emissions, then the politicians need to: (1) stop throwing out working municipal transit technology, and (2) get serious about shutting down all coal burning power plants instead of penalizing citizens for personal EV choices. Shutting down all coal burning power plants would cut umpteen millions more tonnes of CO2 emissions than taking all personal ICEs off the roads (see notes 3 and 4). As taxpayers, we're paying over and over for the mistakes and short sighted woke-infused dreams of politicians at all levels. We need more reality and careful consideration about our next step forward with regards to transit and energy.
Vive l'Alberta Libre!
Shut Down Line 5
Guest blog by S. A. Shelley: It is very difficult to keep up with all the energy changes in the world. Every week, some Big Government Agency, NGO, International Think Tank or Big Company proclaims some new solution to the looming global energy problem of too much of the wrong kind of energy and too often from the wrong place. While most of the analysts and prognosticators seem knowledgeable and well intentioned, OWOE analysts cannot conclude for certain that the resultant big government plans foisted through bureaucrats onto ordinary citizens are based upon sound knowledge and understanding of energy markets, resources, technology and costs. I emphasize technology and cost because most government edicts are based more upon woke and vote political expedience than anything technically attainable without causing significant long term economic pain, e.g., recent decisions to shut down nuclear reactors. Nor have governments shown themselves to understand the political issues of energy supply, as we now see with Europe stuck paying for Russia's conquest of Ukraine. We have some insightful and interesting comments about the Russian war, but these won't be discussed in this blog - maybe later.
There are so many bunny blah blah decisions being made in Western Capitals, that we cannot keep track of all of them. Nevertheless, some recent government actions that have further destabilized energy markets, exacerbated consumer pain and even aggravated the climate beyond keeping the planet comfy and cozy for humanity need to be addressed.
Earlier this year, in response to the Russkies invading the Ukraine, the U.S. Administration ran all around the world trying to find more oil supplies both for domestic consumption and for its European allies. The U.S. went to OPEC, the U.S. went to Venezuela, and the U.S. went to Iran. But the U.S. did not go to Canada or Mexico, let alone Alaska, Texas or North Dakota. Apparently, U.S. policy priority is to buy oil and gas from totalitarian regimes while championing freedom; Words are cheap but cheap all and gas are better. In this regard, the U.S. is following the European, and in particular, the German playbook (see WSJ.com and CNBC.com). Then the U.S. administration decided on March 31 that it would start plundering the Strategic Petroleum Reserve (SPR) at the rate of 1 million bbls / day. Officially, this was to relieve price pressure domestically and hopefully free up more oil internationally for the Europeans. If we look at the effect on oil prices, WTI and BRENT, we see that the release of oil from the SPR had an insignificant impact on prices (Fig. 1).
In the long run, the policy of releasing oil from the SPR is more likely to drain the reserve than alleviate price pain at the pumps. This government action is an attempt to manipulate market supply, not curb market demand: As long as oil (energy) demand is steady and growing, the price pressure will always increase regardless of short-term supply dumping, because demand is a long-term factor (OWOE’s First Law of Energy Markets) There has been a continued draw down of the SPR for quite some time (Fig 2).
When established, the SPR was meant to be a commercial reserve of oil in case of a major supply disruption, such as the1973 Arab Oil Embargo. What happens if the Russkie invasion of Ukraine turns global and Russkie aircraft start lobbing KH-35U missiles at oil tankers headed to America? The U.S. burns through about 20 million bbls / day of oil, of which about 8 million bbls /day is imported. In other words, the US has about 81 days of oil imports stored in the SPR. There is not enough people power and machinery available to turn up the American shale oil fields fast enough to produce 8 million bbls / day within 90 days of a global emergency. Strategic reserves are meant to overcome strategic problems, not temporarily reduce consumer price pain at the pumps. In addition, there are a number of financial analysts who believe any such attempt to artificially lower gas prices will increase demand, further increase inflation, and ultimately make the supply situation worse (see FoxBusiness).
Just before the commencement of Russkie hostilities in Ukraine, but well into the buildup of Russkie armor and troops at the Ukraine border, the U.S. Administration announced a program to spend $5 billion over 5 years to make EV charging infrastructure available to more Americans. This means that on average, maybe 20,000 EV charging stations will be built each year. Again, OWOE analysts understand the great benefit of EVs with respect to Green House Gas (GHG) emissions reduction. But there are better and quicker ways to reduce GHG that will have a quicker impact on the climate than forcing ordinary people to buy and use personal EVs. For one, as we've noted before, methane is a far more potent GHG than the CO2 emitted by personal gas powered vehicles, and thus spending $5 billion on capping leaking wells or stopping methane leakage will be far quicker and effective means of reducing GHGs. Investing money on EV fleets is also a better use of government resources than forcing American families to buy EVs that are still priced above affordability for the average family.
But America isn't the only country afflicted by dumb government policies and actions when it comes to energy. With a war raging on the flanks of Europe, someone in France decided that it would be a good time to simultaneously take offline 50% of France’s nuclear reactors. One can't make this stuff up. France gets about 70% of its electricity from long-term, stable nuclear power, but last week a cold snap coupled with the 'planned' shut down of 50% of France's nuclear reactors for routine maintenance resulted in record electricity prices in France, with a spill-over to European neighbors. The cold snap may not have been foreseeable, but the Russkie war has been raging openly for some time; surely someone in France could have said "Nyet" to the idea of scheduling all that reactor maintenance at the same time?
There are some bright spots in the world with respect to government planning for energy security and sustainability, and in our humble assessment, Finland which is focusing both on nuclear power and wind power is one such place.
Then, on the other hand, there is Canada, a place that totally messes up its energy security and stability. Canada is still one of the worst energy and climate hypocrite nations on the global stage. Canada continues to be one of the largest coal exporters, and Canada continues to operate and support the extremely environmentally hazardous Line 5 Pipeline through Michigan's state waters. If asked by anyone in any other government about what to do with respect to energy security and decarbonization transition, OWOE analysts always respond with "Do the opposite of the Canadian Federal Government, and then you'll be on a good path." A dedicated blog highlighting the historical, current and forthcoming expensive energy follies in Canada will come shortly. Such a "Canadian" blog is becoming sadly repetitive, and it is OWOE's hope that someday soon, someone at the Canadian government level will smarten up about energy and the environment. It is a quickly fading hope.
Vive l'Alberta Libre! Shut Down Line 5!
Guest blog by Mr. R. U. Cirius: Here are some interesting and somewhat offbeat energy stories that haven't gotten much media attention that OWOE readers might have missed.
Very Small Modular Reactors There has been a lot of press coverage for Small Modular Reactors (SMRs) recently, with some touting them as the solution to the world's energy challenges to others expressing doubt that they can actually be successful (see also OWOE blog Nuclear Power: Climate Solution or Hype). However, a new version of these nuclear reactors has just been announced that may actually meet the high expectations. William Fences, the entrepreneur and philanthropist, and his company MicroPower, claims to have developed the first Very Small Modular Reactor (VSMR). This is a stand-alone suitcase-sized micro nuclear reactor for both private and commercial use. The reactor includes: molten salt nuclear fuel module, molten salt pump, thermo-electric battery with inverter to export power at 480v, water coolant system that connects directly to the home or business water supply, and auxiliary air cooling motor that plugs easily into a standard 220v power receptacle, all enclosed withing an easily movable case (see Figure 1). Although not yet available for purchase, MicroPower is planning to sell units with power generation capability ranging from 5kW to 50kW.
HPZ Rigid Dirigible Aircraft On March 15th, accompanied by the soaring lyrics of the rock classic "Stairway to Heaven", the first modern-day commercial hydrogen powered rigid aircraft made its inaugural flight from Seattle, Washington to Portland, Oregon. The HPZ, which stands for Hydrogen Powered Zeppelin, is a so-called rigid dirigible aircraft, consisting of a fabric-covered rigid metal framework made up of transverse rings and longitudinal girders and containing individual gasbags. The gasbags are filled with a lighter-than-air gas, which gives the buoyancy necessary to fly. The HPZ is approximately the size of the ill-fated Hindenburg Zeppelin at 800 feet long (more than three times the length of a Boeing 747) and with a diameter of 135 feet. It can cruise at 75 mph and travel as high as 20,000 feet above sea level. Hydrogen gas is used both as the fill gas, but also as the fuel to power the aircraft. By utilizing the same gas, the HPZ was able to eliminate costly and heavy fuel tanks.
The HPZ was built by start-up technology firm HydroFlight. When asked whether there was a concern over safety using hydrogen gas, given the history of the Hindenburg Disaster, a media spokesman for HydroFlight responded: "There is absolutely no risk of such a thing happening to the HPZ. For one, we have very strict rules against smoking on board. But also, we are using 'blue' hydrogen for our gas that is provided by major oil companies. They have assured us that the 'blue' hydrogen they provide is much safer than the 'green' hydrogen that many other companies are trying to sell."
The HPZ will attempt a cross-country flight later this year from Seattle to New York City.
Wind Turbine Recycling No energy system is entirely neutral in terms of waste produced, including wind power. Fortunately, there are several consortiums of researchers and industry taking on this challenge, specifically how to reuse or repurpose the composite material wind turbine blades:
Bio-power Research Growing Corporate America is looking to improve their Environmental, Social and Governance (ESG) standing by using more animals for tasks, such as blog editing and remote tech support (see Figure 3).
Quote one corporate CEO. "To be truly carbon neutral, you have to return to animal power for many activities." Animals are part of the green cycle and they consume fewer critical minerals and require less power per kilogram than humans for many labor intensive and high tech / high cost solutions.
OWOE Staff: The Russian invasion of Ukraine is a tragedy on many fronts - for the civilians caught in the crossfire, for the concept of democracy, and for the rest of the globe that will certainly feel the impact of economic sanctions imposed in an interconnected world. One impact of those sanctions in the US can be seen in the sharp rise in gasoline prices. In high-priced gasoline states like California, gas prices at the beginning of this week reached an average of about $5.40/gal (up about 10% from the previous week - see Figure 1).
Such a sharp increase, especially coupled with inflation stemming from the Covid pandemic stimulus packages and more recent supply chain issues, is certainly going to have a significant impact on Americans. Other impacts of the sanctions, including the US banning of Russian oil imports will create another round of challenges. US companies curtailing business in Russia will see impact to their financial bottom lines which will have a follow-on effect on the stock market. And now we are now getting warnings that prices for other commodities that Russia exports to the world have become volatile and are surging. But can something good come of this?
OWOE believes that the world can use this opportunity to step back and reassess how it moves forward to address the challenges of energy security, energy transition and climate change. In particular, how we can change our dependence on fossil fuels from a supply-focused approach to a demand-focused approach? This has been a recurring OWOE theme (Don't Blame the Suppliers; The Fundamental (and Somewhat Existential) Source of Climate Change – and How We Might Overcome It). And just recently, Hal Kvisle, a former chief executive of TransCanada Corp., was quoted in BNN Bloomberg as saying: "Until consumers have other alternatives, other ways of getting around, or other ways of heating their homes effectively - until we address the demand on the consumer side - we're not really going to change the balance". Prior to the Ukraine invasion, the Covid pandemic dominated not only the news cycle but our daily lives. In 2020 the demand for gasoline (i.e., oil) dropped dramatically to a level not seen since the mid-1990s. This was driven in part by the economic stagnation during the first year of the Covid pandemic, with many people losing their jobs or being forced to take time off work and many others forced to work from home. As a result, transportation by both vehicle and plane dropped dramatically. Figure 2 shows petroleum consumption history from 1950 through 2020, with consumption by the transportation sector dropping from a yearly average of 14.1 million barrels/day in 2019 to 11.9 million barrels/day in 2020.
But we managed to survive. Then in 2021 as many of the Covid restrictions were lifted, people started to return to a normal life, and, driven by the pent-up demand from the prior year, oil consumption surged. In November 2021 consumption in the transportation sector jumped up to 13.7 million barrels/day, or just 3% under the 2019 peak, as shown with the added data points.
The first conclusion that can be drawn from these numbers is that, with the right behavior, banning Russian oil imports should have essentially no impact on the US economy. In 2021 average oil imports from Russia were 672,000 barrels/day. That was only 5% of transportation needs (and only 3% of total oil consumption of 23.2 million barrels/day across all sectors). Loss of all Russian barrels would mean the November 2021 transportation consumption would have been about 13 million barrels/day, which would still have been well above the 2020 value. Given that Americans in 2022 are now driving on average 14,263 miles/year (on track for 3.2 trillion miles total) and that the average car in the US gets 23 mpg, it would only take a decrease of about 25 miles per year per vehicle to eliminate completely the need for the Russian oil imports. Certainly, support of Ukraine against Russian aggression is worth driving 1/2 mile less each week.
The second conclusion is that we now have a very good data point for what behaviors can quickly result in a 10-15% reduction in oil consumption, i.e., the 2019 to 2020 drop. This drop was not driven by the cost of gasoline; it was driven by a much broader reduction in demand. While a Covid-scale drop might be too aggressive and costly to the economy, an intermediate value seems very doable. Let's continue to support clever ways to work remotely and reduce commuting; let's focus on energy efficiency with electric vehicles, LED lights, home insulation, etc.; let's scale back our rampant consumerism; let's walk and bike more in place of driving. These are easy technology changes that can be made with minimal impact to lifestyle and the overall economy and could be greatly enhanced with government encouragement, including ad campaigns and incentive programs. The result would be a huge step forward in the US effort to reduce oil imports, and, concurrently, reduce greenhouse gas emissions and help slow global warming.
OWOE also notes that we have been pointing out the risk that dependence on oil supplies from non-democratic countries creates for several years now. See OWOE blogs: Is There Any Limit to How Dumb Can Governments Get?, It's a Mad Mad World of Energy, Time for a New Energy Policy, etc. This crisis appears to be the catalyst might make that a reality. The European Commission just published plans to cut EU dependency on Russian gas by two-thirds this year and end its reliance on Russian supplies of the fuel "well before 2030".
Hopefully, the Ukrainian tragedy can be used to change the mindset and approach of governments around the world. We've proven that we can live with less oil; now we need to make that the norm. It is time to eliminate dependence on Russia for any commodity, moderate our seemingly limitless demand for fossil fuels, and save the planet!
Guest blog by S. A. Shelley: The answer is no, there is no limit to how dumb governments can get in terms of irrational legislation, fanciful proclamations and of course impossible energy policies. There are a few fundamental things that governments need to do right for society to survive, let alone thrive. Amongst them are protecting their citizens from external threats (military or viral, for instance) and protecting individual rights to conduct commerce or disagree with the government. After that, arguments start about everything else that people think governments should do or not do. I won't argue those points, but I will argue that governments all around the world, except for China, are being complete idiots when it comes to energy trade and transition.
Access to secure energy supplies is critical for a nation to exist. Henry Kissinger is credited as once saying that "Who controls the food supply controls the people; who controls the energy can control whole continents; who controls money can control the world." Energy supplies can be domestically sourced from natural resources and apart from Canada most nations feel blessed when they have an abundance of natural resources. Energy supplies can also be provided domestically by technology such as nuclear power in France or wind power in Denmark. There are many sources of energy, but problems arise in transporting the energy resources from where they are located to where they are needed, or with storing the energy from when it is produced to when it is needed. Access to stable energy supplies can also be achieved through trade (America - Canada), graft (China - almost everyone else) and intimidation (Europe – Russia). Fortunately, most governments recognize the fundamental need for stable energy supplies and the associated problems, but unfortunately every government is completely off base with their approaches.
I've written before about how Germany's energy transition is failing (CO2 emissions are rising), and how total domestic power demand is increasing while the renewable share of power supply is falling. Finally some thinkers and analysts with larger followings are beginning to come to the same conclusion that Germany's energy policy is messed up (techxplore, TheHill, reason.com). A lot of Germany's problems arise from politicians reacting to minority woke feelings and not undertaking thoughtful planning. Reviewing Germany's natural gas imports over the last few years along with the proportion of imports from Russia doesn't look good (Fig. 1).
Even though the import trend seems to be decreasing, the proportion of imports from Russia, even without Nordstream 2, seems to be increasing. The Brookings Institute even suggests that Germany may soon get 70% of all its gas from Russia. From the Russian side, Gazprom is happy to announce that Germany is its biggest customer.
Add in the interdependence of European states to each other, and it becomes obvious that Europe is in an energy pinch (cnbc, msn), which is something that we had long ago predicted in prior blogs. The time for nations to stand up to autocrats is at the beginning of the first autocratic stirrings, not when the autocrats have your economy by the throat.
What about the United States? Just as nuts.
Figure 2 is taken from the EIA and shows the oil imports from Russia. Notice the growth of oil imports over recent years to nearly 800,000 bbls / day?
Another way of thinking about this is that every day, the US pays about $72,000,000 to Russia (I'm using gross payments, and the Brent Price at time of publishing). In a year, that's over $24 billion, which buys the Russians a lot of artillery, tanks and mercenaries to cause mischief in Africa or the Ukraine. In what world does one pay money to one's foes then expect them to not cause trouble?
But in addition, pipelines that could bring oil from the Midwest to the East coast were cancelled (oilprice.com, huffpost). Similarly, oil that could have come from (almost communist authoritarian) Canada via Keystone XL (sized to bring about 800,000 bbls of oil per day to the US) was cancelled. That's a tough choice: 800,000 bbls of oil per day from Russia or 800,000 bbls of oil per day from Canada? Buckle up America, Russia now has you over a barrel too.
But the one pipeline that needs to be shut down, Enbridge Line 5 through Michigan, a ticking environmental disaster that delivers less than 5% of its contents to American states, keeps getting excused by Washington. What is that all about?
Why are governments doing so many dumb things? I don't have the definitive answers, but I have some ideas. Firstly, politicians are starting to believe their own hype and are becoming further removed from reality (narcissism). Secondly, the senior bureaucracy ranks are now filled with woke folks who have no idea about any hard sciences or data (stupidity). Thirdly, those bureaucrats who know hard science and data are being quiet because they enjoy keeping their jobs (fear). Fourthly, too much money is thrown around at governments (short term greed). Et cetera, et cetera, bunny bunny blah blah.
As I've written before, green energy is better energy, but the way that the western democracies and autocracies (Canada) lurch about reacting to minority woke mobs will result in a bigger mess than we have now.
Shut Down Line 5
Vive l'Alberta Libre!
Guest blog by S. A. Shelley: In early November of 2021, the UN'S COP 26 climate conference wrapped up in Glasgow with all sorts of politicians pledging this or that with respect to greenhouse gas emission reductions, renewable tech investments and invoking equity across the world. But really, what are the actions that followed those ballyhoo words bantered about in public? The staff at OWOE took at look at some of the subsequent oil production announcements away from the public spotlight. The following summarizes planned increases / decreases and shares what we found is the most amusing quote associated with each country's plans.
Countries INCREASING oil production
"The surprising reversal began as state-run Petroleos de Venezuela (PDVSA.UL), known as PDVSA, won help from small drilling firms by rolling over old debts and later obtained steady supplies of a key diluent from Iran."
Countries DECREASING oil production
U.S. crude output fell as demand dropped during the COVID-19 pandemic, and has not yet returned to pre-pandemic record production of 12.966 million bpd, seen in November, 2019. The EIA in their Short Term Energy Outlook stated that they "expect production to average 11.8 million b/d in 2022…"
What's the pattern? That for the most part authoritarian regimes are rushing to cash in on oil revenues, while democratic regimes are rushing to make everyone feel good.
More to come about gas, coal, nuclear and of course those dumb California offshore wind farm plans.
Shut Down Line 5!
OWOE Staff: California tends to be a polarizing state. As the most populous US state and what would be the 5th largest economy in the world if it were a country, as the home of the television and movie industry, as the home to Silicon Valley with its technology leaders and billionaires, and as the home base to many environmental organizations, it has always been a trendsetter. In the battle against climate change, California has been a leader. It is the #1 state for installed cumulative solar electrical capacity by a factor of about 3 over the #2 state (Texas). It has the highest volume of Electric Vehicles owned of any state by a factor of about 7 over the #2 state (Florida). It has required higher vehicle emission standards than the rest of the US since the 1970 Clean Air Act. It has set a goal of 100% clean electric power by 2045. It has banned the sales of new gasoline powered automobiles by 2035 and is moving toward accelerating that to 2030. Progressives and those concerned about the health of the planet love these programs. Conservatives and those beholden to the fossil fuel industry hate these programs. But, suddenly, California is making a move against residential rooftop solar power as in Florida, where utilities argue that rooftop residential solar affects their business model. That's correct; suddenly California is limiting the ability of its residents to achieve both energy independence and greatly reduce the State's overall carbon footprint.
The California Public Utilities Commission (CAPUC) has issued its proposal for the replacement for the State's current net metering rules that will likely kill the rooftop solar industry in the State. The new rules would reduce what the utilities must pay for power exported to the grid, reduce previously established grandfathering durations for existing rooftop systems, and add a Grid Participation Charge of $8/month per kW of installed solar capacity. For an average-sized California home with a 7 kW solar system, the fee would $56/month just to connect to the grid, which would be among the largest fixed costs billed to solar customers in any US state. Sage Energy Consultants has analyzed the effect and concluded that residential customers will see a 55-75% loss in the value of their systems as illustrated in Figure 1.
The driver behind the new proposal is pressure by the large electric utilities in the State (PG&E, SCE, and SDG&E) to stifle the rooftop solar market in order to protect market share and boost profits. The impact will be significant - these new costs, in addition to the capital outlay required to install a new system, will make rooftop solar unattractive for most new homeowners. After years of the state promoting rooftop solar power as an important climate solution, California will take a huge step backward.
OWOE believes that all participants in the fight for energy independence and against climate change need to take a stand on this issue:
CAPUC Commissioners – get out of the utility companies' pockets and do the job you have been tasked with. Your mission is to ensure that Californians have "safe, clean and affordable utility service", not to protect utility companies' present and future profits. Go back and revise this proposal to something that better balances electricity providers, in all forms, and consumers.
Utility Companies – yes, you are investor-owned and must ultimately account to your stockholders; however, if you don't provide good service to your customers, who are increasingly opposed to your practices, you need to go out of business - it is market Darwinism. It is time to accept the fact that the world is changing and your business model needs to change, or history will leave you behind. Instead of fighting the inevitable, you should be finding ways to lead (adapt or die).
Shareholders of Utility Companies – don't be short sighted. You need to put long-term survival and growth of your investment ahead of short term profits. Just look at what happened to the legacy telephone system. You need to force your companies to change with the world or you will be the losers.
Governor Newsom and State Senators – you have been energetic leaders and proponents of California's fight against climate change. You are also responsible for appointing the CAPUC Commissioners. You need to push them to rework this proposal to better align with your climate goals or you should replace them.
Solar Industry – you have been on the frontlines in the development of new technology to provide clean, reliable power to homeowners, and you have already taken a stand against this new proposal. But right now those are just words. You have the resources to fight the utilities where it hurts - in the pocketbook. How about taking a proactive approach to developing and pricing systems that will enable customers to totally disconnect from the grid?
Public – ultimately, you and your children and grandchildren will be the losers in this battle unless you make your voices heard. You can sign up here (thanks to Tesla) to provide a verbal comment directly to the five commissioners at the upcoming CPUC meetings on January 27. And/or you can email the CPUC and the governor's office with your comments.
What's missing from California policy is a truly integrated, long-term approach to clean and reliable energy. California needs to look at what it has (lots of sunshine, lots of geothermal) and what it needs (energy storage systems, distributed grids) before it embarks upon a flurry of disjointed, ill-conceived measures to kill its existing assets (rooftop solar, nuclear) for the sake of special interests.
OWOE Staff: An OWOE contributor shared a BBC News article with OWOE staff regarding the possible construction of four (4) Small Modular Reactors (SMRs) in the UK. This would be a demonstration project for nuclear reactors based on nuclear submarine technology that some companies are touting as a key contribution to the sustainable, renewable energy mix of the future. The following day Rolls Royce announced that it had procured sufficient funding to develop its SMR concept that would trigger additional funds from the UK government to kick-off the project, with the first plant targeted for completion in the early 2030s. A further BBC News article referenced these Rolls Royce SMRs again, along with barge mounted SMRs being developed by Denmark's Seaborg Technologies. The problem here is not with the projects themselves or the technology, but with the way they are characterized to the public. To quote the first BBC article:
"These reactors will be capable of generating nearly 500 megawatt hours of power - three times as much as much as most existing nuclear submarine reactors but more than six times less than the 3.2 gigawatts that the large plant under construction at Hinkley Point will deliver. Hinkley is expected to produce enough power to supply 6 million homes.
However, at an expected ultimate cost of around 2 billion pounds each, they should cost less than a tenth of the 20 billion pounds each of Hinkley and an anticipated, but not yet approved, sister plant at Sizewell in Suffolk."
Convoluted math aside, it sounds pretty good at first read. Cool technology with less risk than a big, old fashioned plant and less money. And one-sixth the power for one-tenth the cost sure sounds like a good deal. But this comparison is only for nuclear plants, and there is no comparison to what other forms of electrical power generation cost. Looking more closely at the math: 500 megawatts of capacity at a cost of $2 billion pounds ($2.7 billion usd) means that the capital cost for a single SMR would be $5,400 per kw. In comparison, using the quoted cost of $20 billion pounds ($27 billion usd) for Hinkley for 3.2 gw of power, the capital cost is $8,440 per kw. If (and that is a big if) they are correct, this in fact would be a significant improvement as capital cost is the largest contributor to the cost of nuclear power. However, the history of nuclear plant construction is one of significant cost escalation. The most recent example in the US is Plant Vogtle in Georgia which was originally budgeted at $14 billion usd but now has a final price estimate of $28.5 billion usd.
One must also compare nuclear power against other sources to understand the full picture. Lazard, a leading financial advisory and asset management company, published their Levelized Cost of Energy Analysis - Version 15 in October 2021. It compares the cost of key forms of electrical power generation, both in terms of Levelized Cost of Electricity (LCOE) and capital cost. Figure 1 shows the comparison for capital cost.
Of particular note, with the subject SMR estimate added in bold, these are the costs in usd per kW of nameplate capacity:
Figure 2 shows the comparison for LCOE.
These are the LCOE values in usd per MWh:
If the technology were proven and the quoted costs and LCOE confirmed, SMRs would move nuclear power into the range of being competitive with combined cycle gas plants but still the third choice for "green" power production behind onshore wind and PV. The one big advantage that would close this gap is that it is considered baseload power (i.e., not intermittent). Thus, a wind or solar facility would need to add some form of storage, at an additional cost, to provide the same value. However, history has shown that nuclear cost estimating has consistently and significantly underestimated capital costs. Why wouldn’t SMRs be the same? Then take into considerations the nuclear disadvantages - the risk of nuclear accidents (low probability but very high impact: think $73-$470 billion cost to clean up after the Fukushima-Daiichi disaster), lack of viable waste disposal options (a perfect example of that is the recent controversy over dumping radioactive wastewater into Cap Cod Bay at the Pilgrim Nuclear Power Station), and decommissioning costs (which can cost $1 billion usd and take decades).
OWOE believes that nuclear power should be one of many alternatives that should be pursued to address CO2 emissions and climate change and is very interested in the development of SMRs. But any attempt to characterize nuclear power and/or SMRs as the clear solution is premature and misleading. Too many cost numbers are being thrown around and obfuscated (hopefully inadvertently and not deliberately) for citizens to easily understand, and other critical issues are either ignored or misrepresented. A truly clear and neutral comparison that addresses all issues without obfuscation, political spin, and hidden agendas is sorely needed.
Take a look at the recent OWOE blog Nuclear Power: Climate Solution or Hype where we discuss issues surrounding nuclear power as a solution to the world’s climate crisis, including this exact issue of cost.
OWOE Staff: The energy world has been rocked by a number of crucial events during the past two months. In the transition to renewable energy and more particularly in the removal of fossil fuels form the energy mix, there are possibly three history-making game changers: Don't get me wrong – I have nothing against environmental activists who are trying to save our planet. In principle, I support most of the stated goals of these individuals and organizations, and of all the people I greatly admire, Greta Thunberg could well be at the top of my list. But the recent focus of these activists on shutting down big oil, closing nuclear power plants, blocking new pipelines, banning plastic straws, etc., is misguided. Yes, all of these are contributors to global warming and other forms of pollution, and yes, the world would be better off without all of them. However, the problem is that these things represent the supply side of the economic marketplace. They are there because people want them, either directly - we want gas to drive our cars, or indirectly - we want to buy lots and lots of stuff that takes energy to manufacture and transport. Cutting supply does not solve the problem if the demand remains: cleverer or less scrupulous players will gladly jump in to fill the void. And, at the end of the day, all of us will likely be worse off.
We are seeing many examples of how supply side restriction in the world of energy lead to very negative unintended consequences (See OWOE Blog: The Cobra Effect). US oil production fell during the pandemic as shale oil producers cut back operations or went bankrupt. Now that the economy is roaring back, there isn't enough supply, and prices are rising. The result: President Biden has asked OPEC to supply more oil. So, instead of paying US companies to produce the oil that people want and still need, we are sending our money to Saudi Arabia.
Germany had been proceeding with its plans to shut down all nuclear plants, but without a well-thought-out path on how to replace all that green power. Further, Germany supported Russia's plans to build the Nordstream pipeline to bring gas to Europe. With energy demand rising and lack of domestic supply, the result is that Germany and Europe are now held hostage by Russia.
Recently, a report has been released that ranks Canada as one of the worst emitters on the planet on a per capita basis. How can that be for a country that get about 30% of its energy needs from hydropower? The answer is that Canada's carbon footprint is not driven by internal energy needs, but by emissions associated with the extraction and refining of fossil fuels for export. I would advocate that a country shouldn't be penalized for what it provides to other countries. If Canada shuts down, the importing countries will just get what they want from somewhere else, the planet is no better off, and wealth has left Canada for OPEC or Russia (as predicted in the OWOE blog: Time for a New Energy Policy).
We can look at non-energy for guidance in how not to solve a public health problem. In the 1920's the US experimented with prohibition to eliminate alcohol use. It prohibited manufacture, transport and sales of alcohol, but people were intent on drinking and found ways to get around the law. Result: it was a failure and prohibition ended in 1933. In 1971 President Nixon started the War on Drugs, and it is estimated that over the course of 50 years the US has spent over $1 trillion on the effort with no fundamental impact except the incarceration of tens of millions of American. By all measures: another major failure. In contrast, we can turn to cigarette smoking as an example of an effective campaign to address a public health issue. In the 1960s medical health professionals realized that smoking was a serious issue and began a broad public health campaign to eliminate smoking. It focused on changing people's perception of the habit and behavior (i.e., the demand side of the equation) along with a focused and aggressive regulatory regime that dramatically raised the cost of smoking (also demand focused). Figure 1 shows the impact over a similar 50-year period to the War on Drugs.
Why can't the same tactics be used successfully to reduce greenhouse gas emissions? Let's make a major push on the demand side of the equation: implement a significant carbon tax and other taxes that reward the right behavior, focus on energy efficiency, invest in renewable energy, rein in the utilities so that their financial objectives align with world needs, regulate the oil and gas industry to eliminate fugitive methane emissions, stop the political bickering that is driven by individuals and organizations that choose to ignore the science of climate change for personal benefit, and create a public service campaign that helps all Americans understand the benefits of such plans.
And then let the suppliers battle on an even playing ground for the remaining, and ever shrinking, market.