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Friday, December 9, 2011

WITH OIL AT $100/BARREL, WHY IS THE RENEWABLE ENERGY INDUSTRY WALLOWING?


A few headlines from Renewable Energy News this morning worried me.  First, let me tell you that the $3/barrel oil of September 1973, just before the First Energy Crisis, has a worth today of $14.70/barrel.  In other words, oil today ($100/barrel) costs almost 7 times more than in 1973.  (For a comprehensive reference on everything you want to know about petroleum, go to WRTG Economics.)

One problem with next generation energy sources is that it is always too expensive.  For example, I was at the Lawrence Livermore National Laboratory in the mid-70's, two years after that original energy crisis, and the lament then was if petroleum only slightly went up a bit in price, their in-situ (in place) coal gasification concept could be commercialized.  Then came the second energy crisis in 1979 and oil jumped to $10/barrel.  But, aha, their official pronouncement was that if oil only increased to $12/barrel, companies would flock to get into in-situ processes for coal and oil shale.  I was then working in the U.S. Senate and helped get into law the legislation they needed through government-company partnerships.  Alas, with oil at $100/barrel, nothing is happening (mind you, there is growing fracking in oil shales for natural gas, but there are all kinds of environmental problems associated with this option), at least in the USA.  Australia, China, Indonesia, South Africa and a few other countries are pursuing this pathway.  Why?  Mostly, I think, because with global warming concerns, any situ process can theoretically capture a good portion of the carbon at cheaper cost and provide methane and hydrogen.  Why isn't the USA surging ahead?  I continue to be puzzled, but I guess too many companies were burnt in the 80's.

Okay, that was not renewable energy, but the same principle applies.  How really competitive are the sustainables?   New developments are being delayed awaiting Congressional renewal of the Section 1603 tax credits for wind and solar, which forgives 30% of the original investment.  This has cost taxpayers almost $10 billion thus far.  The ethanol tax credit also is in jeopardy.  I would not be surprised if both expire, especially the latter.  There is also the production tax credit to expire at the end of 2012.  If none of these benefits survive, there will be a major sustainable shake-up towards bankruptcy.

The average price of electricity in the U.S. is slightly less than 11 cents/kilowatt hour.  The average in Hawaii depends on your island:  from 35 cents/kWh to 45 cents/kWh.  Thus, if there is any success story on the mainland, Hawaii should be a veritable paradise for renewable electricity.  However, just try to install a large wind farm or undersea cable or significantly expand geothermal energy product, and just wait for the environmental/social reaction to ocean thermal energy conversion.  Yes, supposedly, some Hawaiians have come on board (after more than a third of a century) regarding geothermal, but the people of Hawaii tend to continually shoot themselves in the feet and head when it comes to any major development, energy or otherwise.


From the Hawaii Public Utilities Commission (but adjusted to links), here are the potential renewable energy projects for Hawaii (we average around 1000 MW of power):

Under Discussion/Negotiations (in megawatts)


Mililani Solar Far (Oahu)                            PV                         20
OTEC International (Oahu)                    OTEC               100
Castle and Cooke  (Lanai)                      Wind                  200
Hu Honua (Big Island)                                Biomass             24
H-Power Expansion (Oahu)                  Solid Waste     33
Kalaeloa Solar One (Oahu)                   Concentrated    4
                                                                                    Solar
AES Biomass  (Oahu)                             Eucalyptus          5
Oceanlix (Maui)                                            Wave                   0.5
Tradewinds (Big Island)                           Trees                       4
Lockheed (Oahu)                                        OTEC                  10









Note the terms:  discussion and negotiations.  Commitment is something else.  I can't see some of the above attaining any success.

Nationally, part of the problem with clean energy is that old coal without carbon recycle and nuclear power plants can produce electricity for around 5 cents/kWh.  Without tax credits, wind power is "higher" than 6 cents/kWh (it all depends on location, and can be more than 10 cents/kWh if you need to build long power lines.  Solar thermal plants exceed 10 cents/kWh and solar photovoltaics are closer to 20 cents/kWh, if not much more.  Again, without the tax credits.  People are more and more saying they wouldn't, actually, mind paying a little more for renewable energy.  But NOT if their electricity bill is doubled, and not a penny higher tax on gasoline.  A dollar/gallon would be okay as far as I'm concerned, but this would never get me elected into any public office, which suits me fine.

Which leads to the real worry that electricity is only one third the problem in Hawaii.  We are also dependent on fossil energy for ground and air transportation, and these sectors are almost completely dependent on petroleum.  Most of Hawaii's electricity comes from oil, unlike the nation, which uses coal and natural gas, plus nuclear.  We only dabble on finding solutions to our land transport needs and mostly ignore anything to do with aviation.

So about those Renewable Energy News articles, here are the headlines:



Mind you, wind energy companies have done well, for, since 2007, wind turbines have been installed at twice the power production rate of coal and nuclear facilities (which, of course, has been zero since the  1990's).  2011 should be a bumper year for wind farms because as long as you begin construction by the end of this year, you get the 30% tax break.

Offshore wind projects, in particular, are being cancelled, for they cost more (at least twice and maybe four times) than terrestrial machines and government/public reaction has generally be less than favorable.  However:

In February, Secretary of the Interior Ken Salazar and Secretary of Energy Steven Chu unveiled a national offshore wind strategy with a goal of the deployment of 10 GW of offshore wind capacity by 2020 and 54 GW by 2030.

And Portugal just commissioned the first floating offshore turbine, built by Vestas, a Danish company.  The next might well be off the coast of Maine...by a Norwegian firm.  I think the future of Hawaii wind power is in the region between islands, for the flow, while amplified (remember that the power increases with the cube of the velocity) is laminar, wind speeds are the highest and no one owns that space.  First, though, ocean engineers need to invent a plant ship that does not need mooring.  It can be done.

For more details go to the Renewable Energy World Conference and Expo:


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The Dow Jones Industrials shot up 187 to 12,184.  We are now slightly more than 5% higher than the beginning of the year.  World markets were up in Europe and down in the Orient.  Gold fell $2/toz to $1712, while the WTI crude is at $99/barrel and the Brent Spot at $109/barrel.

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