Three facts about wind generation of electricity in the UK:
(1) Headlines exclaim that the UK has beaten its own record and produced 55% of its demand from renewables alone.
(2) Similar headlines (here and here) boast of the average contribution of renewable power over the year (2020 is likely to be a record) and demonstrate the real and laudable displacement of coal and consequent dramatic (world-leading) reductions in GHG emissions.
(3) No headlines, but very real – days when wind and solar don’t contribute and these cause significant perturbations to the grid, price spikes and CO2 emissions rise.
All of these are factually correct – but depending how they are presented (or ignored) can significantly change the narrative.
It has been fashionable to look for equivalences between the Covid pandemic and the climate crisis. These have often had the form of: Covid is a global problem, the virus doesn’t respect national borders, and coordinated multilateral response is needed, short-term pain for long-term gain etc. Then, add on the clear and present benefits – clear air, bird song and a slower pace of life and equivalence becomes clear (at least for richer people). We can solve the pandemic through mutually supportive action, through following the science and we may even have the recipe to solve climate change into the bargain. Build Back Better.
However, as the virus goes from epidemic to pandemic to endemic, so cracks in this narrative are showing.
Peak Oil Demand or “Peak Demand” has been much in the news recently as some major oil companies bend to stakeholder pressure and embrace the energy transition. I got the opportuniyu to discuss peak Demand in terms of perception vs reality with the Canadian Global Affairs Institute CEO Kelly Ogle.
The webinar focuses on what energy security means to different people and how this plays into policy. Participants will discuss the physical security and cyber-security of installations as well as the security of energy supply and the security of trade routes. Questions discussed include: how will the need for electricity infrastructure to be resilient, and for electricity itself to be affordable, affect the fate of unconventional energy, including the “oil sands”? Do Canada’s high latitude and long transmission distances exclude a good match between supply of renewable energy and demand for it? In light of the last question, what decisions will be made about nuclear power? While the webinar focuses on Canada, these issues will be addressed for other countries as well. The use of information and communication technologies, including artificial intelligence, in the energy sector will also be addressed.
It is normal to want to live in harmony with nature and the unrelenting negative news about climate and CO2 and energy speaks to this. Exciting examples of how things are being done create expectations about how the system should change but also create exasperation about how slow progress is. But the use of flagship projects should be managed with care – these are often in the news because they are the exception, not the norm.
A while ago, there was a widely-shared video of a huge truck carrying quarried rocks – the electric truck was painted green (of course) and to much adulation was reported to “never need charging”. Factually correct because the specific circumstance is that the quarry is high on a hillside and its destination (a cement factory) is in the valley. The truck uses regenerative braking to charge its 600kw batteries, and the charge is sufficient to get it back up to the quarry. Magic. The nuance is of course that it carries load down and comes back up empty; thus the losses in generating and storing electricity are compensated for by the additional kinetic energy provided by gravity on the way down – the unladen truck weights 45 tons and carries 65 tons of material – so is 110 tons on the way down and 45 on the way back up.
In many ways this is not too different to counter-weight systems like funicular tramways or building elevators – only here instead of a mechanical transfer with friction losses and a “top-up” of input energy, there is an electro-chemical transfer (with associated losses but net gains). The laws of thermodynamics still hold.
In the simplistic position in which all fossil-fuels are bad and that catastrophic climate-change is a few years away, gas is just another problem that has to be done away with.
However, in the real-world there are complex considerations that are lost in a binary, dogmatic world-view. The discovery of significant gas reserves offshore South Africa is a good case study.
Total and partners are currently drilling the second exploration well in the Block 11B/12B in the Outeniqua Basin offshore South Africa. The first well “Brulpadda” was drilled in 2018/19 evidencing a significant hydrocarbon accumulation.
This discovery of a large gas-condensate accumulation was correctly described as a “basin-opener” – as it significantly de-risks four additional prospects mapped across the block in a classic “string of pearls”, including the current Luiperd well. Whilst there is always the voice in the background that says “oil would have been better”, this is still a fabulous prize, given its geographical location. Finding wet-gas 175 km offshore of Port Elizabeth and the 60 million people of South Africa, is not inconsequential, and indeed has been rapidly hailed as a “game changer” by WoodMac
I had the great honour of speaking (virtually) to the venerable Geological Society of London yesterday on the subject of what the transition to low-carbon energy might mean to the economy and to society as a whole. The video is available via the Geological Society and the raw feed here.
Returning to one of my favourite subjects – those disgraceful subsidies for fossil fuels. One of the features of having teenage kids is you often hear “whatever”, or more recently “no one asked” as conversation stoppers. In the same way, having reasonable conversations about fuel subsidies is often met with the “concerned citizen” equivalent – one such appeared on a previous blog post that laboriously (I thought) tried to show that it wasn’t a simple case of “Fossil-Fuels Bad (and subsidised), Renewables good (and yes subsidised, but that’s OK)”. Despite this I got the “whatever” style comment of how “we should just stop subsidising fossil fuels”.
So here I go again. The infamous $5.2 Trillion headline has been widely debunked so will be ignored hereafter and whilst there are some places that have direct subsidies for production, in the vast majority these are “implied” subsides whereby the specific and very high petroleum taxes simply generate some rebates, and were discussed at length in the previous post.
However, there clearly are countries who subsidise the cost of (notably) petroleum products to their citizens. The headline number is often mentioned “$426bn” or “$372bn” or some such. A far cry from the debunked $5.2 Trillion, but still a big number, but you have to dig pretty hard to see who these bad actors are. The platitudinous headline is “fossil fuels subsides to consumers must stop” or in more thoughtful works, “should be swapped to subsidies for renewables”. Let’s just ignore that petroleum product molecules and renewable electrons are not always interchangeable, especially around transport.
Note in the 33 pages of this report there is no definition of these subsidies other than the above – it is just gospel that they exist and must be swapped out. When digging, I found the cited IEA reference has no mention of subsidies at all in it, the Merrill paper is better, and references price-gap analysis.
Spoiler Alert: the countries that subsidise their citizens for say gasoline are clearly globally significant, get them to change and all will be well in the world…
By conventional logic, low oil and gas prices suppress demand for low-carbon alternatives, and conversely high oil and gas prices spur substitution. There is some debate that the current low oil prices will slow the transition to low carbon energies. I argue below that we should not be worried about low fossil-fuel prices undermining the energy-transition, but rather the complete opposite. High fossil-fuel prices will be a bigger problem.
In corporate finance the concept of the Weighted Average
Cost of Capital (“WACC”) is well known. This is the total cost of how the company funds
itself through equity and debt. Simply
put, the cost of funding a corporate entity is the percentage of equity times
by the cost of equity and the percentage of debt times by the cost of that debt,
WACC = (%E*costE) + (%D*costD) where %E+%D=100%.
When thinking about the concept of embodied or embedded
energy I have adopted and adapted the idea of the WACC to better explain the
issues. In this new model I call the
Weighted Average Cost or Energy – I am trying to capture, albeit very
simplistically, the idea that making wind-farms and solar panels requires a
large energy input, and the cost of that energy input(“cRE”) is today dictated
by the cost of fossil-fuel power (“cFF”).
This statement is true given that roughly 85% of the world’s primary
energy comes from fossil fuels – so it stands to reason that this will underpin
the cost base. Thus, the WACE can be expressed:
= (85% * cFF) + (15% * cRE)
If you are constructing a renewable energy project today,
the WACE for your project will be dominated by the 85%, that is by the cost of
fossil-fuels. This has important
implications for the Energy Transition: if the cost of fossil fuels increase,
the cost of renewable energy increases also.