First, let me wish all my loyal followers a very happy and healthy new year! So what exactly does 2014 have in store for us on the energy and environment front? Below is a list of things that I am watching, please comment and bring any topics of interest to my attention.
Keystone XL Pipeline – Just today the State Department announced in their report that the Keystone XL Pipeline would have a minimal impact on the environment. This report was greeted with calls for Obama to approve the project by Republicans and even some Democratic lawmakers much to the chagrin of environmentalists. Critics of the report said it did not pay enough attention to the harmful practice of extracting the oil from the tar sands in the first place. The proposed $7B project would carry 830,000 bpd of crude oil from the Western Canadian Sedimentary Basin and the Bakken Shale formation to Steele City, NE before moving on to refineries on the Gulf Coast. Issuance of this report now begins a 30-day comment period for the public and a 90-day comment period for government agencies, as well as puts the heat on President Obama to take action. As recently as June 2013 Obama stated, “Our national interest will be served only if this project does not significantly exacerbate the problem of carbon pollution. The net effects of the pipeline’s impact on our climate will be absolutely critical to determining whether this project is allowed to go forward.” Environmentalists have called approval of the pipeline “game over” for the planet.
California Drought – 9% of California is now in a state of “exceptional drought”. While this might not sound like news to anyone who has seen the images of the forest fires in the Bear Republic, this is an extremely concerning issue. In fact, “Thanks to the magic of science (and tree rings), we can now safely say that California hasn’t been this dry since around the time of Columbus, more than 500 years ago. What’s more, much of the state’s development over the last 150 years came during an abnormally wet era, which scientists say could come to a quick end with the help of human-induced climate change.” Lack of rain combined with abnormally low snowpack could leave much of the state virtually dry within 60 – 120 days. If you think this is just a left coast problem, think again – California is responsible for almost 12% of the country’s agriculture.
Emerging markets – If you have been watching the markets lately you have seen a dramatic reaction to perceived threats from emerging markets. I’ll make it quick: Fed removes the free money punchbowl from the party; possible slowdown in China; currency trouble from Brazil, Turkey, South Africa and Argentina. So what does this all mean? Stay tuned and I will keep you posted.
Plus we have Super Bowl XLVIII, the winter Olympics and the World Cup all coming up. What a great year this is going to be.
This week’s Bloomberg Businessweek had an article titled On China’s Electricity Grid, East Needs West, that explained the mega cities of China’s east coast are consuming resources from the coal rich areas in the country’s far western provinces resulting in lengthy transmission lines and growing instability among the minority ethnic groups there.
One of the biggest problems with having cities so far removed from the natural resources that power those cities is transmission. In China, freight railroads and river barges are already overloaded and overcrowded. This led party leaders to push for development of interior regions of the country and build high voltage transmission networks called the West-East Electricity Transfer Project. By 2020 the total capacity of this project is projected to equal 60 Hoover Dams.
The second problem with this large-scale coal driven buildup is the lack of water resources available to produce steam in these plants. Many of these planned coal plants are located in water scarce regions including Xinjiang and Inner Mongolia and has led to tensions with ethic Mongolians and Uighurs who depend on farming and herding for their livelihood. By tapping already stressed aquifers and wetlands, there could be a larger problem looming.
A better idea would be harness China’s production capacity of solar PV cells and adopt a domestic policy of distributed generation. DG is sited near the end user of the electricity and therefore less vulnerable to losses during transmission. PV cells can be placed vertically up the sides of the country’s many skyscrapers eliminating the need to clear land for ground-based systems. Smart building design is another idea that could drastically reduce demand for electricity and save the country from building expensive, inefficient, centralized power plants.
China’s massive infrastructure build out has been nothing short of extraordinary. Now it has the opportunity to leap ahead of other developing nations by committing resources towards building the next generation cities. Distributed generation, microgrids, and smart integrative building design can all help to make this idea a reality.
I read a quick article in Bloomberg Businessweek last week that detailed an unlikely alliance between tar sands producers and environmentalists to put a pollution tax on the dirty, heavy crude coming out of Alberta. Yes, that is correct. Tar sands producers are actually lobbying for a carbon tax or cap-and-trade system that would help to clean up their operations. In British Columbia, a province that enacted a carbon tax, families are paying an average annual premium of $376 and have reduced their per capita emissions 10%. The producer’s biggest fears are to be viewed as “too polluting” by other nations, resulting in no market for their exports. America’s opposition to the Keystone XL pipeline highlights this fear. Unless the tar sands can change their appearance, it seems that the world would be okay without the product. An oil industry spokesman even said that “If your country looks at Canada and says your energy exports are too carbon intensive, then it becomes and economic competitiveness issue.”
Standing in the way of this unlikely alliance and subsequent carbon pricing is the Prime Minister Stephen Harper. Harper has traditionally emphasized business and job creation over environmental issues and is responsible for pulling Canada out of the Kyoto Protocol, the only nation to do so. Failure to embrace cleaner regulations on the tar sands may soon become an environmental and economic problem for The Great White North.
The winds of change are blowing, and nations are figuring out how to monetize carbon. If Canada can enact sensible regulation that appeases both oil producers and environmentalists, then it can be a leader in the carbon markets. If it fights the winds of change, then it risks being left behind by the rest of the world. The simple answer is to put a price on carbon and use the proceeds to invest in clean technology developments.
Years ago, when the US thought they would have to import LNG’s from abroad there was a massive build out of over 24 LNG plants for regassification. Thanks to horizontal drilling and hydrologic fracturing, the US will not have to worry about LNG imports for the next century at the earliest. Converting these regassification plants to be export terminals makes economic sense and environmental sense. With the exception of Sabine Pass in Louisiana who was just recently granted permission to export, all that equipment now sits idle along the gulf coast.
At the heart of the issue is the fact that American gas now sells for $3.40 per MBTU domestically but over $12 in Europe and up to $20 in Asia. Turning American nat gas to LNG cost about $5 per MBTU, so exports of LNG can be beneficial to the economy. Furthermore, the glut of natural gas has actually forced producers to stop producing until the supply dwindles or demand picks up. Tapping the international markets would allow this process to balance out. Of course, there is steady opposition to LNG exports from uncommon bedfellows of environmentalist and business proponents who respectively oppose fracking on environmental grounds and who want to maintain their access to cheap fuels.
I have gone back and forth on the subject of fracking several times now but generally agree with the economic arguments set forth in this article. While I am not a proponent of fracking, the following issues deserve mention:
Nat Gas is priced on a regional market as opposed to a global market. The lack of export infrastructure acts as a subsidy thereby keeping the price of gas artificially low and promoting inefficient use of the fuel. Increasing LNG exports will increase the price but will hopefully establish a free and transparent market. The revenues of the fuel trade should be used in clean technology research and developing next generation technologies.
With cheap nat gas prices in the USA, developing nations have been leaning towards coal to fuel their consumption. Access to natural gas will hopefully reduce the emissions in the developing world more than if the gas were kept in the US.
These two points rely on the assumption that fracking remains legal. As I write this, a moratorium on fracking (bill A.5424-A) was just passed by the Assembly and will go before the NY State Senate and then on to the Governor for signature.
Clean technology has never been more affordable or accessible to the masses. Policy makers are now realizing the national security and economic concerns of relying on fossil fuels. Clean, distributed sources of energy combined with sustainable development are our best options for a healthy, prosperous future.
If you have ever wondered how much energy is wasted in the United States, then look no further than this chart from the Lawrence Livermore National Laboratory. What your are looking at here shows how many Quads (Quadrillion BTU’s) of energy is produced from each source of energy . . . and how much is wasted through inefficient processes or simply lost as heat energy. In 2011 more than half (57%) of the energy produced was rejected. In terms of electricity generation, almost 2/3 of the potential energy is lost. Cogeneration plants achieve a much higher efficiency level than conventional coal or natural gas plants. In the transportation sector the efficiency ratio is even worse with only 25% of the energy produced actually being used. If there are any entrepreneurs out there, I see many opportunities for improvements here. In fact, I think this chart could show the next trillion dollar opportunity!
Well Mr. President, you proved me wrong. “Climate Change” was mentioned a total of 3 times during your SOTU speech last night. But more importantly was the context in which you used the phrase such as:
But for the sake of our children and our future, we must do more to combat climate change. Yes, it’s true that no single event makes a trend. But the fact is, the 12 hottest years on record have all come in the last 15. Heat waves, droughts, wildfires, and floods – all are now more frequent and intense. We can choose to believe that Superstorm Sandy, and the most severe drought in decades, and the worst wildfires some states have ever seen were all just a freak coincidence. Or we can choose to believe in the overwhelming judgment of science – and act before it’s too late.
The good news is, we can make meaningful progress on this issue while driving strong economic growth. I urge this Congress to pursue a bipartisan, market-based solution to climate change, like the one John McCain and Joe Lieberman worked on together a few years ago. But if Congress won’t act soon to protect future generations, I will. I will direct my Cabinet to come up with executive actions we can take, now and in the future, to reduce pollution, prepare our communities for the consequences of climate change, and speed the transition to more sustainable sources of energy.
The bill that Obama mentioned was the 2007 Climate Stewardship and Innovation Act that proposed a reduction to 2004 levels by 2012, 1990 levels by 2020, and 60% below 1990 levels by 2050. This can be done. We need to evaluate how we use energy and how we can make our products more efficient. As any homeowner knows, wasted energy is wasted money and right know we can’t afford it.
The State of the Union speech marking the beginning of a Presidents second term has historically been a chance for the President to lay out big, hairy, audacious goals for the upcoming administration. Reagan had tax reform, Clinton had education, and GW had Social Security reform. Some were achieved while others failed. So too tonight, Obama will lay out his agenda for the next four years. Given the economic condition of the US right now, it is rightly expected that jobs will be a major theme of the speech, but some others for consideration:
Jobs, Jobs, Jobs
Missing from this list is Climate Change. Will the President even mention those words tonight? With North Korea’s nuclear test last night, I expect the President to devote more time and attention to foreign policy issues rather than outlining climate initiatives. Prove me wrong Mr. President.
Question for my readers: Will Obama mention Climate Change or Renewable Energy in tonight’s State of the Union address?