ALTERNATE ENERGY INVESTING, PEAK OIL AND KYOTO COMPLIANCE

by Andrew McKillop
Founder member, Asian Chapter, Internatl Assocn of Energy Economists
Former Expert-Policy and programming, Divn A-Policy, DGXVII-Energy, European Commission
Former Director of Information, OAPEC subisidiary AREC, Abu Dhabi, UAE
January 12, 2009

ABSTRACT

Energy Transition away from fossil fuels is driven by two crises – declining resources of both oil and gas, whose prices are able to attain extreme highs whenever global economic growth is strong, then crash to extreme low prices when economic growth falters; and the intensifying crisis of climate change, which the IPCC and other sources warn may become catastrophic within less than 30 years. While public and political acceptance of the urgent need to mitigate climate change is nearly total, neither peak oil or peak gas are widely accepted as being, if anything, more urgent because the lead time to very serious impacts from declining export supplies of both these current pillars of the global energy economy is so short – no more than a few years.

These crises are intertwined and inter-dependent. The only lasting solution is Energy Transition away from fossil fuel dependence, to a fast-growing utilisation of alternate low carbon, and zero carbon renewable energy sources, developed on a worldwide basis taking account of local and regional availability of the renewables. This of course requires massive, stable, coordinated and long-term investment without extremes of market-induced volatility, within a plan that firstly targets the reduction of oil and gas intensity (average per capita demand) in the OECD countries.

Introduction

Through 2008 oil prices attained an all-time high of about 147 USD/bbl (WTI grade, front month contract, Q2 2008) before crashing to well below 40 USD/bbl in December 2008. This fall of about 75%, similar to the massive deflation or contraction in value for many equities, for world cargo shipping rates, base metals such as nickel or copper, and most agro-commodities, is usually hailed by political leaders and mass media in the consumer societies as a 'good thing'. At these price levels for oil, and related price levels for gas or coal, however, almost any alternate or renewable technology, such as windfarms (specially offshore), solar electric power, waste dump methane recovery, electric cars and linked battery technology, and other non-fossil energy sources and systems become totally uneconomic. As we have seen with the biofuels or agrofuels, and possibly soon with windpower in Europe, investor support and mobilization for continued growth of these alternate and renewable energy systems has quickly fallen away.

In a context of massive asset price volatility and therefore uncertainty, it is easy to forget the 'fundamentals', but for oil these are very clear. While the 2008 price peak exceeded the previous all-time peak of early 1980, which in 2008 dollars was around 100-120 US dollars/barrel, there were many differences between the two situations. The biggest difference was that the 1980 price peak had a single and simple cause: the ‘Iran crisis’ of 1979-1980, during which the overthrow of the Chah's regime slashed Iranian oil production and exports by about 60% for 6 months. Exports fell about 2.5 million barrels/day (Mbd), which at the time was well over 7.5% of world total export supply or 'offer'.

No similar, geopolitically caused, very sharp loss of export supply can be offered as the reason for the constant increase of oil prices through nearly a decade, from 1999.

Another major difference is that global economic growth had already collapsed in 1980, notably due to extreme high interest rate policies, at the time of the 'Iran crisis' which drove oil prices to peak highs. Through 2005-2007 global economic growth was at record highs, and continued until an essentially financial and banking crisis triggered a collapse of economic growth. Constant reductions of interest rates to historic lows have, so far, done nothing to restore conventional or 'classic' economic growth, but may lead to extreme high rates of inflation whenever there is any recovery in conventional economic growth as measured by conventional indicators like steel production, car sales, house sales, airline miles traveled, shipping cargo rates, etc.

We can therefore note that constantly rising oil and commodity prices, in 2005-2007, did not 'damage' the vintage economic growth of the period, nor produce exceptionally high inflation, but in fact tended to intensify conventional economic growth, in a process that I call Petro Keynesian growth. To be sure, oil prices of well beyond 125 USD/bbl in 2008 increased inflation, led to big falls in consumer confidence, and most certainly aggravated other existing problems in the economy, but the general process of rising oil, energy and commodity prices most certainly contributed to rising global economic growth, particularly in the period of 2005-2007.

New trends and Factors

Underlying the constant rise of oil prices we have a sometimes denied, but real depletion crisis well described and studied by ASPO groups in different countries. This relatively newly recognized, but long-term process is joined by climate change, as another long-term, newly recognized factor which will very surely affect world energy and the global economy for decades to come. Back in the 1980s, we can note, anthropogenic climate change was an unknown subject, even if Milankovitch's astronomic climate change theories were well known. By 1992 however, at the Rio environment conference the subject emerged.

Some 16 years later, after heroic attempts at 'climate change denial' by the Bush administrations of 2000-2008, and studied ignorance of the subject by emerging economy leaderships, climate change has become an integral part of effective political response to the basic challenge of oil depletion and natural gas depletion. Depletion is of course is not openly acknowledged as the driver for mounting calls to quickly, and massively develop alternate and renewable energy, particularly oil substitution and oil saving sources and systems. Other reasons for oil saving are usually preferred: for example energy security and dependence on Middle Eastern oil, high oil prices and their inflationary impact, and "long term" problems of "possible" oil depletion are more often communicated as the reason for seeking to urgently substitute oil in the energy economy.

In fact, the challenge of oil and gas depletion is at least as real as, and nearer-term than the onset of catastrophic climate change - which could start by 2025-2035, if world fossil fuel burning is not seriously curbed, and atmospheric concentrations of CO2 are allowed to spiral up to 500 ppm. Other impacts of global climate change, to be sure, will act well before these dates. However, uncontrolled reduction of oil and gas burning simply through depletion will occur a lot sooner than 2025, with the first onset of annual falls in export supply availability of oil and both LNG or pipeline gas in the period 2010-2012. The severity of the present and ongoing global economic recession may 'stretch' these dates a little, but not a lot.

We can be sure that political parties and consumer media editorialists feel that climate change is acceptable for mobilizing public opinion for an uncertain, and fast-changing economic future, and a useful way to not mention oil and gas depletion as the reason why alternate and renewable energy must be urgently developed. However, we are forced to admit that the process of free market asset growth and decline, that is boom followed by slump will surely penalize the fast-growing "Cleantech" asset sector (that includes alternate and renewable energy financing). In fact, unimpeded market freedom could lead to the "Cleantech" sector collapsing, with general equities and other investment sectors, if oil stays for any length of time at under 40 dollars-a-barrel.

Need for Safeguards

What are needed are safeguards. These will include state, bilateral or multilateral frameworks, subsidies, legislation and intervention aimed at ensuring rapid but efficient growth of non-fossil energy supplies on a worldwide basis while preventing, or limiting extreme price volatility for oil and gas supplies. Without these safeguards, and with continuing low traded prices for oil, gas and coal, the alternate and renewable asset bubble will almost certainly, and quite soon collapse in an inevitable slump, like the dotcom asset bubble of 1998-2001, or the housing and property bubble of 2002-2007.

If we look at world traded oil and gas supply, both are considerably smaller than total production and consumption, more so for gas than oil. The major exporters, and importers of both oil and gas supply and consume a very large proportion of both. For oil we find in 2007 that the 20-largest exporters, and 20-largest importers were responsible for over 90% of world total export supply, and over 90% of total imports. For gas we find an even larger concentration (over 95%).

World export supply of both oil and gas require visibility (that is predictability) regarding the volumes available, and unit prices. Due to the large concentration of total exports and total imports by a small number of countries, this process could be quite efficiently set in any forum able to bring together permanent delegations from the 20-largest exporter countries, and 20-largest importer countries. This would take oil and gas pricing out of, and away from the speculative market currently involving many thousands of participants or 'players', all seeking short-term gain, with no political responsibility for their actions, and no interest in the effects of extreme oil or gas price volatility on other sectors – for example long-term investment in alternate and renewable energy.

As to the so-called 'efficiency' of the private market pricing system, we can note that in 2008 it was able to shift oil prices by at least 75% each way in about 9 months ! Volumes of 'paper oil' treated by speculative traders, counting all major oil markets (Nymex, ICE, IPE, Dubai Mex, Tocom, etc) in 2008 were at least 100 'paper barrels' for each 1 barrel of physical oil changing hands. Adding the markets for petroleum products we easily arrive at well over 150 barrels of 'paper oil' treated for 1 barrel of physical. If this is 'efficient' the word obviously has special new, arcane or mystical meaning. We can simply note that low trading costs per barrel, which is a favorite defense of free market price setting without state or multilateral intervention, has to be set against trading around 150 times total real world deman for crude and products. This amounts to about 150 X 51 million barrels-per-day (close to 7.8 billion barrels per day).

World total physical oil consumption in the full 365-day year of 2007 was about 31.5 billion barrels.

Bringing the main exporters, and main importers together in a permanent, UN-level entity will very obviously help to prevent sequences of extreme and uncontrollable volatility, due to the market-only system based only on speculation. Numerous models and precedents in fact exist for this type of multilateral mechanism, taking the long period of 1945-2008 into account.

Paradigm change

To be sure in late 2008, and even more surely in 2009 it is the global financial and economic crisis that occupies most headlines and column inches. Few if any analysts and economic or financial authorities such as the European Central Bank and US Federal Reserve today forecast that economic recovery is 'just around the corner'. Less often stated in official press statements, we can be certain that world traded oil and gas prices will not stay for long at the derisory price levels of Dec 2008. Long-term trends of increasing depletion, and slower, smaller net additions of supply capacity (particularly export supply capacity) will quite soon lead to structural undersupply. For the moment of course, the massive slump in world economic activity, and therefore oil demand can hold prices down – for as long as the exporters cut their supply by 'too little and too late' – but this supposed 'happy interval' for consumers will not be durable or sustainable.

In other words and more simply, oil and energy prices will not stay depressed at the same price levels they stayed at through 1986-1999. The one-time chance of Cheap Oil through 1986-1999 is very unlikely to ever return again. At latest when structural undersupply intervenes, perhaps by 2010, the inevitable free market response – bidding prices to extreme highs – will lead to a sharp increase in world inflation and rapidly falling economic growth in a context of extremely high borrowing by national governments in response to the current economic crisis. To be sure, calls for oil supply volumes and pricing to be 'controlled' will almost certainly emerge. With further shortage of oil and gas supplies due to depletion, free market pricing will tend to be reduced, or abandoned, but in a context of open and constant crisis favouring uncoordinated bilateral, or perhaps regional supply and pricing arrangements.

Acting before this de facto abandonment of 'free market pricing' should be the focus of coherent and responsible proposals, today. Intervention in free financial and economic markets to try limiting the collapse of economic growth is now very certainly accepted by political deciders – the same is needed to safeguard the long-term transition to dependence on alternate and renewable energy and avoid or limit extreme oil and energy prices while free market trading still dominates supply and pricing.

De-linking oil with Economic growth

As we found during 2005-2007, world oil and energy demand remained very strong despite ‘extreme’ prices, proving that oil and gas price elasticity is very low oil in the conventional or ‘classic’ economic growth process: demand increases with rising prices until extreme high prices are attained – followed by economic slump. In other words the 'Petro Keynesian growth' process has little or no feedback until extreme high price levels are attained for energy and other commodities in short supply, after which economic slump results, with a collapse of energy and commodity prices – and investment in all competing substitutes.

Even in deep economic recession in the OECD countries (about one-sixth of world population, and about 45% of world GNP depending PPP corrections) it is likely that most fast emerging, new industrial giant and large economies like China, India, Brasil, Pakistan, Turkey, Bangladesh (and others) will continue increasing their oil and gas consumption. Some may be able to increase their domestic production of oil and gas, and coal, but most will not. Their increasing 'call on export offer' will tend to attenuate the fall of world oil demand, provisionally forecast for the year 2009 by agencies like the OECD's IEA at up to 1.5 Mbd, or about a 1.75% reduction in world total demand relative to 2008. In fact in 2009, this fall of demand may intensify, and further depress traded oil prices, on the one hand, threatening the reaction of more drastic oil export supply cuts by OPEC and Russia, on the other hand.

Taking entry to the 1980-83 recession for comparison, this economic slump compressed world oil demand by about 3.5% pa, but with the return of global economic growth in 1984, world oil demand also rapidly returned to growth.

The current very short term context of sharply falling oil demand, with a potential fall also of gas and coal demand in 2009, has to be compared with the expected falls in world oil supply capacity from as early as 2010, forecast by experts within the ASPO group. These estimates are of annual falls in world total production capacity quite rapidly attaining 4% - which is somewhat higher than the probable rate of contraction for world oil demand due to the current global economic slump. At any time there is recovery of conventional economic growth, the large and increasing shortfall in supply or 'supply/demand gap' will quickly become evident.

It is very clear that the emerging economies will continue increasing their national oil, gas and coal demand until and unless energy prices attain some extreme high – or that reason prevails, and these countries are brought into a global and multilateral plan and framework for accelerated Energy Transition. This must, as already noted, feature fossil energy intensity reduction in the OECD and accelerated, coordinated and automatically funded, worldwide development of ARE.

One major problem is the credibility of 'de-linkage' of oil with economic growth. For the emerging economies this is evidently and clearly not the case – their conventional and fast economic growth produces strong growth of their fossil energy demand. For the OECD group and according to ECB president Trichet, and US Fed chairmen Greenspan, then Bernanke, OECD countries have continuously cut their 'oil linkage' of economic growth since the Oil Shocks of the 1970s. However, this ‘de-linkage’ shown by an average fall of about 10%-25% in barrels consumption per 1000 dollars of GNP through the period of about 1975-2000 was only apparent. Since about 1998, many of the OECD countries have in fact increased their oil burn per unit GNP. In addition, the 'historic' fall in oil intensity in OECD countries was accompanied by a strong opposing trend, of sharply rising natural gas burning, and gas intensity (average gas demand per capita, per year).

Apparent falls in oil intensity in the OECD countries have also been strongly helped by de-industrialisation and delocalisation, which ‘exports’ oil and energy demand for industrial production and raw materials outside the ‘postindustrial’ OECD. This enables the de-industrialised OECD to 'swap' services and hi-tech product exports (needing little oil), for oil-intensive consumer products, semi finished goods, and raw materials. Consequently, the 'oil balance of trade' is heavily in favor of the de-industrialised, or de-industrialising OECD countries, and amounted in 2007 to around 1 barrel/capita/year, on average, for the EU-15 countries. For the USA exactly the same 'hidden oil imports' due to trade structure also apply.

The reality of continued, high level dependence on fossil energy, and linkage with economic growth has likely contributed to the political momentum in EU countries resulting in their adoption of the 'energy-climate package' of Dec 2008. This plan includes a target of 20% renewable energy in the EU energy mix by 2020, but without automatic financing outside the linked target of 20% reduction in CO2 (and other) climate changing gas emissions, which is still essentially based on CO2 permits trading. Regarding aid, assistance and investment for alternate and renewable energy development outside Europe, the plan still essentially relies on the ‘clean development mechanism' (CDM), for financing support, through emissions credits, for non-fossil energy development in nonOECD, often low income associated and developing countries (the ADCs).

The CDM process is far from transparent, is small scale, and has no structure or plan for efficient development of all available renewable energy sources in the ADCs. In particular we can note the absence of any automatic financing mechanism, which is strongly needed to ensure constant and rapid progress in non-fossil energy development outside the OECD.

The ‘impossible’ challenge of Kyoto compliance

The outlook for climate change is increasingly sombre, for example near-term and major impacts related to the accelerated melt of the northern polar ice cap. This in turn reinforces calls for an accelerated deployment of alternate and renewable energy (ARE), but no multilateral framework for their growth has so far been proposed. The need for this is increased when we take expected fossil energy demand growth of the emerging economies, which are outside the present Kyoto framework except for the CDM process.

In these still fast-growing economies, we find their typical oil demand per capita, or oil intensity, is usually less than one-fifth of the average in European Union countries, and one-tenth the US average. For natural gas and electricity demand, the differential is very similar, or larger. Only with coal demand do we find a smaller differential relative to average per capita consumption in the OECD countries – noting of course that coal emits the highest-possible amount of climate change gases per unit of useful delivered energy.

The Kyoto Treaty has since its first ratification by present adhering countries lacked credibility because it excluded, and may for some while continue to exclude ‘large emitter’ countries with massive coal burns, specially USA, China or India, to which we can easily add Russia, Indonesia and Australia. In particular, one of the strongest constraints on bringing the world's largest coal burning countries into the Treaty will be their implied need to abandon or sharply reduce coal-based thermal electric power generation as their main choice for electric power, until and unless economically feasible 'clean coal technology' emerges.

Energy sector development will necessarily include the renewables, especially when the intrinsic high cost, and long lead-time choice of nuclear energy is confronted by the nearly unlimited national security risks of the « friendly atom ». Many renewable energy sources excluding geothermal, hydro and wind are essentially concentrated, or more richly-available in low-latitude or intertropical regions. Their efficient development requires attention to and acceptance of this reality, that is basic resource availability - this problem (of basic resource availability) explaining a certain part of the difficulty impeding faster renewable energy development in the Northern, higher latitude countries.

The nearly impossible challenge of Kyoto compliance for signatory countries – that they should reduce total emissions of greenhouses gases to 1990 levels - should logically focus attention and resources on faster development of non-fossil energy outside the OECD group. This will focus attention on ‘intertropical’ renewable energy resources, and related economic development such as food production and water supply. However, as at present, no plan, mechanisms or frameworks – including financing mechanisms - exist for accelerating and widening the process.

Using less Oil and Gas

For the OECD countries the most urgent priority is very simply – using less oil and gas. Oil burning is considered by the Kyoto process as more pollutive than equivalent natural gas burning (per unit energy), despite the fact that release of unburnt methane necessarily increases with total amounts produced, transported and consumed. Worldwide loss-in-production and transport losses of natural gas, by LNG tanker, through regasification, and by pipeline are very high – at least 10%, compared to well below 2% for oil. Estimates made by the World Bank and US satellite defense agencies for 2006 were that gas losses only associated with oil production (flared, vented gas and gas-in-liquids lost), these amounted to about 160 Billion cubic metres, more than 25% of total gas consumption in the EU-27.

Reduction of oil burning but with greater (sometimes much greater) use of gas is however favoured or prioritized by the Kyoto process. For ‘model compliant countries’, as for the other less compliant countries, the recent past of 1990-2005 shows that restored economic growth nearly always restores fossil energy demand growth.

As most European Union leaderships like to advance their political adherence to the goals of the Kyoto Treaty (reducing CO2 emissions, notably) we can compare this stated goal, with the reality of oil and gas consumption growths of some major EU countries through 1990-2005

Table 1
Growths of OIL and GAS consumption for selected EU-15 countries, 1990-2005

Country
National OIL consumption
National GAS consumption

Ireland
110%
100%

Spain
55%
350%

Portugal
45%
250%

Netherlands
40%
25%

Denmark
15%
175%

Germany
(small)
50%

France
(small)
45%

Italy
(small)
55%

U K
(small)
85%


Figures (approx) rounded to nearest 5%. ‘Small’ = 10% or less
(Data for above table/ Eurostat, BP Statistical Review)

The above short list excludes countries from the ‘new’ mostly East European EU member states, which are a special focus of ‘clean development’ as currently considered by the Kyoto process. The East European EU countries, which have attracted considerable industrial investment and EU ‘internal delocalisation’ to benefit from cheap labour and weak environmental legislation, have through 2005-2007 experienced growth of their oil and gas demand at rates up to 5% per year for oil, and 7%/year for gas. Their coal demand has also increased rapidly. This growth of fossil energy demand, similar to that in Russia, is due to so-called ‘re-industrialisation’. This trend follows the de-industrialisation of the 1990s, triggered by the political collapse of the Soviet Union and the economic collapse of Russia.

Economic collapse, we can note, can 'deliver' very radical and fast cuts in oil and gas demand – but this only stacks up an equally fast rebound, whenever economic growth returns. Collapse of oil and gas demand in the ex-Warsaw Pact countries and in Russia through about 1990-96, in the Russian case led to large but temporary export surpluses of Russian oil and gas. In energy and economic policy terms, this gave credibility to the New Economy myth of ‘unfettered market forces’ being able to overcome physical limits on supply. In fact and basically, oil and gas importer nations benefitted from the chaotic economic rout and mass poverty caused by 'market liberation' in Russia, under Yeltsin, with a rather sure strengthening of nationalist policies regarding energy resources by the following Putin and Medvedev regimes.

With Russia's economic recovery and re-industrialisation, energy demand spiraled up, the same way it had spiraled down, previously. The net result was that energy conservation, efficiency raising, and transition to renewable energy were completely sidelined by a classic 'boom-bust' (or in fact 'bust-boom') process in the economy and society. Energy transition was of low interest to policy makers or business deciders, and of little or no concern to the public.

Does Kyoto compliance mean Energy transition ?

As signed by over 180 countries, this presently political engagement of 'Kyoto compliance' can be contrasted with the implied target of reducing national oil and gas burn to 1990 levels in the ratifying countries. We could, for example, consider what annual percent cut in oil burn, and natural gas burn would be needed in the selected EU-15 countries listed above, if they were to re-achieve 1990 levels of oil and gas consumption by 2008-2012. Figures of over 20%-per-year would in some cases be needed, particularly for gas burning, proving (if needed) that the Kyoto Treaty cannot be considered as an 'energy transition' tool or strategy, except under some hypothetical and massive change in public opinion and political decision, making climate change mitigation a national emergency. If for any reason there was an attempt to achieve 'total compliance' in a short period of time, this would in fact require deep and permanent economic depression.

The Clean Development Mechanisms (CDMs), notably the supply of renewable energy based, or lower emission conventional fossil fuel technology to associated developing countries (for the EU this is the ACP group of countries), are in fact equally needed inside the ratifying countries. For several ratifying countries, even the current and heavily reworked emission cutting targets are as high as 3.5% - 4.5%/year, strongly implying that very intensive, and organized plans for national oil and gas saving, and development of alternate and renewable energy must be set in place very quickly. We must add that due to Peak Oil and Peak Gas, targets at least as high as these will be needed for reducing oil and gas intensity, in all the OECD countries.

It could be argued that ratifying states will have no option but to seek compliance procedures other than national oil and gas consumption cuts. This will include extension of tradable licenses to pollute, perhaps worldwide and to more sectors (like transport and agriculture) and rapid growth of CDM, so as to buy or obtain sufficient ‘emission credits’. In the absence of this cumbersome, opaque and probably very slow process, we may easily find that, by 2012, total CO2 emissions have simply grown, and the free markets for oil and gas are in permanent extreme-price rout.

In reality, greenhouse gas emission cuts should be as high as 7.5% or more, each year, with ideally about the same amounts of annual cuts in oil and gas burn - but few if any economists would care to estimate what these heroic cuts would do to the economy in the absence of effective multilateral frameworks. We can however compare these huge implicit targets with actual oil and gas demand cuts during the 1980-1983 world recession: this as already noted led to about an annual fall of 3.5% in world oil demand, for 3 years. This recession was the worst-ever since the 1929-36 Great Depression, and at least concerning the severity of its onset was close to the start of the present recession in 2008-2009.

During this recession, world oil demand consecutively fell for 3 years, for the first time in the entire period since World War 2. OECD-wide cuts in oil demand, over 3 consecutive years (1980-1982), were about 9.6%. By 1983-1984, world oil demand was again growing.

Even worse in relation to implied targets for national fossil energy demand cuts, world gas demand did not follow oil demand, but increased from about 1300 to 1340 Million tons oil equivalent (Mtoe) in 1980-1983. Since then, world gas demand has increased much faster than oil demand, and is about 2650 Mtoe today.

The place of renewable energy based CDMs

The Kyoto Treaty is above all still-fluid, with unfinalized objectives, calculation bases and methods. Targets for emission cuts are still imprecise and unsure, and have been ‘politically sweetened’, for example regarding coal dependence for electric power production (about 55% of world electricity is coal based). Emissions reduction inside the ratifying countries will have to considerably increase in a short period of time, but because of the economic and technical difficulty of this, the CDMs in the ADCs and in the emerging economies will become an inescapable, vital part of the framework and process for compliance.

This context must focus the intertropical renewable energy technologies and systems, where potentials are so large they offer some scope for reducing or limiting the inevitable and large impacts of world oil depletion, and world natural gas depletion. While denial of impending depletion can be maintained a short while longer, these inevitable trends will soon exercise leverage on policy and public opinion, as depletion accelerates rather fast in the next 5 years.

The intertropical renewables include real potentials for large-area solar, large-area biomass and large scale Ocean Thermal Energy Conversion (OTEC) systems and processes, also including electric power system interconnexion and integration. Particularly in the case of OTEC, solar and biomass energy development, the net outputs for economically feasible projects will necessarily include non energy products, for example fish and crustaceans in the case of OTEC installations, and food commodities in the case of large area biomass and solar energy projects.

Probably the key element is scale. The merited reproach of renewable energy technology is that it is small-scale, high-cost and unreliable, as well as imposing multiple and strong economic, social, cultural or other constraints. This concerns many of the renewables in high latitude environments, where only wind electric power (among the 'new renewables') has radically grown and been easily-integrated in existing, fossil-based energy mixes. High land costs and incompatible existing infrastructures, and especially the cultural values of energy-intensive society also reduce the applicability and feasibility of fast growth of alternate and renewable energy in the higher latitude, Kyoto Treaty ratifying countries.

This being the case it is therefore rational to re-focus attention to the intertropical renewables, and focus North-South cooperation in the rapid and efficient, large-scale integration of this form of economic and infrastructure development. CDMs offer an avenue and focus for this effort. Without large-scale and preferably automatic financing mechanisms it is doubtful if fast progress can be achieved in this domain – and in fact in global Energy Transition.

Conclusions

Restoration of global economic growth – the current N°1 target of all political leaderships worldwide – will inevitably restore global oil and gas demand, but within a short period this will face structural undersupply of markets.

Political and public opinion support to strong action for limiting climate change and developing alternate and renewable energy is nearly total, but no global plan, programme and, in particular, multilateral financing mechanism and framework exists.

The need to reduce oil and gas intensity of the OECD countries is implicitly accepted or targeted by Kyoto Treaty application, specially in the EU-27 countries – which however will need to obtain, or buy, very large amounts of emission credits through the CDM procedure in the implementation period of 2008-2012.

Renewable energy based CDMs, in this context, will become of great economic significance and political interest. This will notably include the ‘intertropical renewables’, which not only have large economic potential, but also have very large energy supply potentials.

Extending the Kyoto Treaty for Energy Transition faces numerous obstacles, suggesting that a linked, multilateral transition plan, programme and frameworks – specially including financing mechanisms – must be quickly proposed, debated and put in place.

The Rush for Gigawatts in the Desert

The Rush for Gigawatts in the Desert Explodes
Although the economy is in the dumps, there's been a 78% jump in applications to build solar projects on BLM land in the last six months.

There might be a credit crunch, but that's not stopping solar companies from trying to lay claim to millions of acres of desert real estate.

The federal Bureau of Land Management has seen a 78 percent jump in the number of solar energy project applications since it reversed a controversial decision last July and started to accept applications again.

The number of applications has risen to 223 from 125. The applicants are vying to build solar power plants that are 10 megawatts or larger in California, Arizona, Nevada, New Mexico, Utah and Colorado, according to the BLM data provided by Andrew Malone in the agency's public affairs office.

In all, these projects would occupy 2.3 million acres. It's difficult to say what the total power generation capacity that has been proposed is since some developers have yet to specify that information on their applications. Many of the proposals call for building projects with hundreds of megawatts of generation capacities.

"I didn't realize they had gotten that many," said David Briery, a spokesman for BLM's Desert District in California.

Briery isn't so surprised by the high number of projects being proposed in his district, home to the Mojave Desert and other vast tracks of sunny, rural land (see map for proposed solar energy projects). The BLM has listed on its Website 75 projects worth 51.6 gigawatts in the Desert District, but the numbers don't reflect the total applications it has received because the list isn't updated quickly (you can download an Excel file for the partial list on the BLM Website).

Overall, there are 107 applications for the BLM land in California, 71 applications in Nevada and 35 in Arizona, Malone said. New Mexico, Utah and Colorado make up the rest.

Although the BLM oversees 258 million acres of land in the country, many tracks are not suitable for power plant developments because they are too far from the transmission lines or don't receive enough hot, direct sunlight, which certain types of solar technologies call for.

The rush of applications is a strong indication that entrepreneurs see gold in desert land. In fact, some locations are considered so desirable that several companies are lining up for the chance to develop the same plots. So if the first company fails, then the second applicant can step in, Briery said.

Although the BLM has been flooded with solar energy proposals, it doesn't process them quickly. That's because the path to getting permits for build those power plants will involve lengthy environmental and other reviews by not only the BLM but also other federal and state agencies.

"There's always a sharp fallout between the application stage and when a plant can be successfully permitted, designed and built. That's the big unknown," said John Geesman, a former member of the California Energy Commission and the current co-counsel of the American Council on Renewable Energy.

Out of the 223 proposals, only 2 projects are far enough along to undergo environmental reviews, a critical juncture in the permitting process. The two projects come from BrightSource Energy in Oakland, Calif., and Stirling Energy Systems in Phoenix, Ariz. Both are proposing solar-thermal power plants which, unlike rooftop solar panels, use the sun's heat to generate electricity.

BrightSource wants to build three solar-thermal plants totaling 400 megawatts in the Mojave Desert (see project description). The company has signed contracts with PG&E to deliver the power from the project.

Stirling Energy is proposing a 750-megawatt solar-thermal power project to be located in Imperial County, which is south of the Mojave Desert (see project description).

BLM will need more employees to review those applications promptly, Geesman said. But whether it will get the staffing boost from a new administration that portrays itself as a solar energy booster remains to be seen.

"Until the new administration presents a budget, you are not going to know what the regional BLM staff is going to be," Geesman said.

Given the strong interest in developing solar energy in California, the state has tried to streamline the permitting process. For example, it signed a memorandum of understanding with the BLM in late 2007 to jointly conduct environmental reviews of each project.

That will help to speed up the process, but doing environmental reviews is an inherently time-consuming process that requires detailed assessments of each project's impact on wildlife and other natural resources, Geesman said.

The BLM is drafting a document that it hopes will also speed up the permitting process. The document, called the Solar Energy Programmatic Environmental Impact Statement (PEIS), would carry out a comprehensive analysis of solar energy projects' potential environmental, social and economical impact.

Each applicant will still have to carry out an environmental review of the project to gauge its specific impact, but the PEIS would serve as a reference. The PEIS, among other things, would identify land that is suitable for solar energy development and the best procedures and practices for approving projects.

The need to do a PEIS is what prompted the BLM to stop accepting solar energy applications last year (see BLM Lifts Moratorium on Public Land for Solar). The PEIS was to take two years to complete, and the agency wanted to focus on getting the PEIS done before considering more projects.

The agency has completed a PEIS for wind and geothermal energy developments.

Dyesol and Corus Accelerate Solar Cell Commercialisation

Building Integrated


At a time when virtually all of the construction and solar cell industry is experiencing a significant slowing of activity and short term demand and profitability declines are the norm, the Corus/Dyesol partnership has announced that the project to bring dye solar cells (DSC) onto metal roofing is being accelerated. The decision to accelerate the project was made on the basis of anticipated demand growing dramatically from 2010 and the success of the program to date, wherein the achievement of product milestones is well ahead of schedule.

Dyesol and Corus will commit more technical and production engineering staff to the project, and initiate real life product testing by mid 2009. The commercialization path will be shortened to eliminate one stage of the manufacturing assurance phase. This will mean that product will become available from the first production line in 2010 for selected customers.

The acceleration of the current phase is being financed predominantly by bringing forward planned commitments. Details of plans for the earlier commitment of production facilities from 2010 will be released over the coming months.

The dye solar cell integrated into steel roofing promises to be the first solar cell technology that can be grid competitive in the normal light conditions experienced in most cities around the world. The advantages of dye solar cells derive from the similarity with photosynthesis. Consequently, dye solar cells exhibit operating voltage stability across the normal daily solar conditions, including cloudy and hazy conditions. DSC is also less susceptible to hot conditions than other solar technologies – and it comes in a variety of natural colours. The technology has been demonstrated by Dyesol through accelerated testing to have an operating lifetime well in excess of the 25 years needed for BIPV applications. Combined with the low energy required for manufacture and relatively cheap materials of construction, DSC has tremendous potential for application wherever steel roofing is used.


For further information contact Viv Hardy at Callidus PR on +61 (0)2 9283 4113 or on +61 (0) 411 208 951.
In Europe contact Eva Reuter, Investor Relations, Dyesol Europe on +49 177 6058804

Dyesol and Corus Accelerate Building Integrated Solar Cell Commercialisation

At a time when virtually all of the construction and solar cell industry is experiencing a significant slowing of activity and short term demand and profitability declines are the norm, the Corus/Dyesol partnership has announced that the project to bring dye solar cells (DSC) onto metal roofing is being accelerated. The decision to accelerate the project was made on the basis of anticipated demand growing dramatically from 2010 and the success of the program to date, wherein the achievement of product milestones is well ahead of schedule.

Dyesol and Corus will commit more technical and production engineering staff to the project, and initiate real life product testing by mid 2009. The commercialization path will be shortened to eliminate one stage of the manufacturing assurance phase. This will mean that product will become available from the first production line in 2010 for selected customers.

The acceleration of the current phase is being financed predominantly by bringing forward planned commitments. Details of plans for the earlier commitment of production facilities from 2010 will be released over the coming months.

The dye solar cell integrated into steel roofing promises to be the first solar cell technology that can be grid competitive in the normal light conditions experienced in most cities around the world. The advantages of dye solar cells derive from the similarity with photosynthesis. Consequently, dye solar cells exhibit operating voltage stability across the normal daily solar conditions, including cloudy and hazy conditions. DSC is also less susceptible to hot conditions than other solar technologies – and it comes in a variety of natural colours. The technology has been demonstrated by Dyesol through accelerated testing to have an operating lifetime well in excess of the 25 years needed for BIPV applications. Combined with the low energy required for manufacture and relatively cheap materials of construction, DSC has tremendous potential for application wherever steel roofing is used.


For further information contact Viv Hardy at Callidus PR on +61 (0)2 9283 4113 or on +61 (0) 411 208 951.
In Europe contact Eva Reuter, Investor Relations, Dyesol Europe on +49 177 6058804

GreenSmith launches backup battery for grid

Washington D.C.-based GreenSmith Energy Management Systems unveiled technology it says can solve the peak demand problems of U.S. utilities.

CEO Rodney Smith said the company has designed a battery control and management system that, when paired with lithium ion battery GreenSmith acquired from a manufacturer overseas, can store 20 kilowatt-hours at a time and provide between 3,000 and 4,000 full-discharge cycles.

The idea is that utilities could charge the battery when it's cheaper to produce energy, such as in the middle of the night, and could discharge that energy onto the grid when it's most expensive to produce power.

Smith said ideal circumstances would be to use the battery during peak demand instead of firing up a peak power plant, which is more expensive to run. The unit could help reduce the need for additional power plants and prevent utilities from losing excess power generated.

"Utilities are far more receptive to distributed storage technologies than they are to smart grid, and for a reason," Smith told the Cleantech Group. "Grid replacement is like trying to replace the air traffic control system. You have to put a lot of money into it before you see any rewards from it. With our technology, you get the benefit right away."

The technology can be paired with intermittent renewable energy sources, such as wind and solar, to better align power supply with power demand, Smith said.

That field is also being targeted by companies such as ZBB Energy, which has contracted with the Australian government to accelerate development of the company's zinc-bromine storage systems for renewable energy projects (see ZBB gets Australian contract for renewable energy storage and ZBB, Zest in energy storage deal).

Tyngsboro, Mass.-based Beacon Power (Nasdaq: BCON) is promoting its multiple-flywheel systems to supply or absorb electricity, giving extra stability to a grid that's experiencing demand or supply peaks (see Beacon slows flywheel storage plans).

According to the Carnegie Mellon Electricity Industry Center, there is a strong economic case for flywheel installations to improve grid stability, as evidenced by the New York Independent System Operator and the PJM Interconnection.

Last year, Windsor, Colo.-based Ice Energy revealed a device to shift up to 95 percent of air-conditioning load to off-peak hours while providing full cooling performance (see Ice Energy cools down power demand).

Other technology is attempting to use molten salt for energy storage (see Concentrated solar gets salty and Cleantech Group picks winners and losers in concentrated solar thermal).

GreenSmith's systems are designed to be managed from a central location, either programmed to optimize cheap energy price or manually controlled. Utilities, regional transmission agencies and co-ops in the U.S. are the current market, but GreenSmith eventually plans to target global markets, especially those with intermittent access to the electric grid.

Consumers aren't the target for GreenSmith, although Smith said the devices could be modified for home use.

GreenSmith is in talks with several utilities and expects a pilot project with a utility to begin operating in about two months. The company plans to produce commercially by mid-2009, with tens of thousands of units sold that year.

After that, GreenSmith expects to sell hundreds of thousands of units to utilities a year. A large utility would probably use about 3,000 units in a pilot test and as many as a million units in full deployment, whereas a small utility might seek between 100 and 1,000 for a pilot, Smith said.

Each unit would cost about $10,000, minus volume discounts, which Smith said produces an energy cost of less than 10 cents per kilowatt hour.

GreenSmith has raised an undisclosed amount in angel funding from private investors. The company is currently raising a Series A round led by Blue Lagoon Capital, but Smith declined to reveal the size of the round, saying that reports of a $20 million round were incorrect.

The company, which Smith said has a "handful" of employees, originally pursued smart grid technology when it was founded in 2007 as an offshoot of think-tank Intelligent Power Unit. Smith decided energy storage presented a more lucrative business model because it was faster to market.

"We thought, what if instead of trying to fight peak you could shift peak?" Smith said. "So we decided to focus on storage."

One of the next big things...biochar

POZNAN, Poland (Reuters) – An ancient technique of plowing charred plants into the ground to revive soil may also trap greenhouse gases for thousands of years and forestall global warming, scientists said on Friday.

Heating plants such as farm waste or wood in airtight conditions produces a high-carbon substance called biochar, which can store the greenhouse gas carbon dioxide and enhance nutrients in the soil.

Plants absorb carbon dioxide from the atmosphere as they grow. Subsequently storing that carbon in the soil removes the gas from the atmosphere.

"I feel confident that the (carbon storage) time of stable biochar is from high hundreds to a few thousand years," said Cornell University's Johannes Lehmann, at an event on the sidelines of U.N. climate talks in the Polish city of Poznan.

Lehmann estimated that under ambitious scenarios biochar could store 1 billion tons of carbon annually -- equivalent to more than 10 percent of global carbon emissions, which amounted to 8.5 billion tons in 2007.

Under a conservative scenario the technique could store 0.2 billion tons of carbon annually, he said. That would still require heating without oxygen -- called pyrolysis -- some 27 percent of global crop waste and plowing this into the soil.

Lehmann cited experiments on 10 farm crops suggesting biochar can also increase yields by up to three times, because the organic matter holds on to nutrients.

The International Energy Agency (IEA) said in November that global greenhouse gas emissions were so out of control that avoiding more dangerous levels of climate change depended on creating negative emissions later this century.

The energy adviser to 28 industrialized countries cited biochar as one way of achieving that.

The technique rings alarm bells among some environmentalists worried it could spur deforestation, but its chief problem may be that it is barely proven on a commercial scale.

"It will remain theoretical without making demonstration plants on the ground," Lehmann said.

Soils containing biochar made by Amazon people thousands of years ago still contain up to 70 times more black carbon than surrounding soils and are still higher in nutrients, said Debbie Reed, director of the International Biochar Initiative (IBI).

The IBI was in Poznan to lobby for research funding for biochar. In Poznan, 187 countries are meeting in ongoing talks to agree a new climate treaty to replace the Kyoto Protocol after 2012. They hope to finalize a deal next year.

Lehmann emphasized that the technique was not a substitute for fighting climate change by curbing man-made greenhouse gas emissions, especially carbon dioxide from burning fossil fuels.

New steel works facilities opened

New steel works facilities opened
New high-tech environmental facilities at a steelworks in Deeside have been opened by First Minister Rhodri Morgan.

The two new multi-million pound projects at Corus' Shotton steel works should safeguard around 600 jobs at the plant.

One will produce panelling which includes insulation for roofing on commercial or residential buildings.

The second will undertake research into steel coated with solar cell technology to produce electricity.

Rhodri Morgan said it showed how companies were putting environmental technology at the forefront of investment plans.

"During difficult times in the construction sector, it is more important than ever for companies to be right at the forefront of new environmental technology exploiting new niche markets," he said.


"That's what today's product launches are all about.

"They are yet another example of how Corus continually looks to innovate and invest in delivering some of the most sustainable products available to today's construction sector."

The Shotton plant employs around 600 workers.

The new £6m production line at the works will produce around three million square metres of panelling a year using three shifts of workers.

It is widely recognised as the most automated and efficient production line in Europe.

The two panels sandwich insulation material between them.

The second project is an £11m joint collaboration between Corus and the Australian company Dyesol.

It is backed with about £5m in assembly government money, said a Corus spokesman.

The scheme aims to produce metal cladding products coated with a special dye including cells to make electricity.

"Steel production is being reduced across Western Europe, but demand for innovative products is very high," said the spokesman.

Shotton has lost more than 490 jobs since 2001 with the slim-down in the steel industry.

Corus was taken over by Tata Steel last year and the combined enterprise employs around 82,700 people across four continents.