The $US 134 Trillion, 100 Year Challenge

Posted in Uncategorized at 7:32 am by Administrator

As anyone who has read some of my blog posts knows I do not believe that we should be basing our transition to a sustainable energy environment on the need to moderate climate change. I’m not convinced that eliminating the burning of hydro-carbons altogether would make a huge difference to what our planet is doing.

But having worked in the oil & gas industry for more than 25 years and despite the current glut of oil on world markets there is one thing I am quite sure of. We will run out of hydro-carbons that can be economically extracted in less than 100 years – I might even see a significant shortfall of world production and as a result much higher prices within my lifetime.

It would be reasonable to argue that predictions of “peak oil” have consistently been incorrect as higher prices and more sophisticated technologies have helped maintain production levels. But hydro-carbons, and crude oil in particular, are finite resources and they will eventually run out. As a result I have done some analysis of how much of a problem that could be and how quickly we need to address the problem.

First things first. How much energy is the world currently using and what fuels are meeting energy demand?

Trying to find accurate and consistent numbers on global energy consumption is much more difficult than it should be. I was struck more than once by the obvious bias towards inflating the impact of renewables and their role in meeting global energy demand. This is a phenomenom that I have identified in a previous post.

One good source that provides an overview of global energy use is the U.S. Energy Information Agency. Figure 1-5 from the International Energy Outlook 2016 provides data from 1990 onwards with forecasts to 2040.

The table below displays the data from this report for 2015, converted from Quadrillion BTU to TW-Hours.













I always like to have multiple sources for information, especially when there are unit conversions involved. The following sources provide confirmation for the EIA report figures.

Oil: Bloomberg quoted an International Energy Agency figure for demand in 2015 of about 94 million barrels/day (bpd) which translates into about 58,293 TW-Hours which is within 5% of the figure provided by EIA. BP pegged the average amount as 92 bpd which would amount to 57,066 TW-Hours, even closer to the EIA figure.

Coal: Enerdata lists 2015 coal production as 7,800 Megatons which translates into 46,084 TW-Hours, very close to the EIA figure.

Natural Gas: BP listed Natural Gas production as 3,500 Billion Cubic Meters in 2015 which translates into 36,606 TW-hours. This figure is also close to that presented by EIA.

Combining these figures yields a figure of 139,742 TW-Hours for hydro-carbons compared to the EIA figure of 140,387.

Nuclear: Multiple sources including the World Nuclear Association and the Shift Project list global nuclear power production at about 2,400 TW-Hours rather than the 7,689 TW-Hours presented by the EIA. The EIA report itself presents 2,300 TW-Hours as the proper figure for nuclear generation for 2012 in Figure 1-7.

The source of the discrepancy is the difference between “Total Primary Energy Supply” and “Total Final Consumption”. “Total Final Consumption” discounts the energy used in generation, distribution, and conversion before reaching its final end user. Because hydro, wind, solar, and biomass all deliver electricity or heat to end users these sources are not impacted. Fossil fuel energy sources and nuclear are very significantly impacted. For example, in burning coal or consuming uranium fuel in a nuclear reactor to generate electricity more than 60% of the energy content of the fuel is lost as heat and through the limitations of thermodynamic engines. Therefore 7,689 TW-hours of uranium derived energy are consumed in nuclear plants to deliver 2,400 TW-hours of electricity to consumers.

Renewables: This is the category which has the most confusing and difficult to confirm backup data.

The best source of information regarding the complexities involved with renewables is the Ren21 network. The Global Status Report published by the group in 2016 and weighing in at 272 pages, is a great reference document although it also confuses matters a bit. The confusion comes because this report uses percentages of Total Final Consumption rather than actual consumption.

Using a global Total Final Consumption figure of 102,000 TW-Hours for 2015 (implied by the percentages for hydro and nuclear and roughly confirmed by the figure of 9,300 Mtoe on page 28 of the IEA Key World Energy Statistics) figure 1 of the Global Status Report can be reworked to present actual consumption rather than percentages, as shown below.

The aggregate figure of 19,692 matches the figure presented for renewables in the IEA report (20,548) quite closely. From the REN21 report almost half of this “renewable” energy is in the form of “Traditional Biomass” which represents the “use of fuelwood, animal dung, and agricultural residuals in simple stoves with very low combustion efficiency” (Note 12, page 201), primarily in undeveloped regions. Although this energy source is technically renewable it is certainly not one that we would want to increase or even maintain decades into the future. In fact the REN21 report points out that as the economic circumstances of a population improves these “Traditional Biomass” energy sources are replaced by the burning of hydro-carbons.

The largest category under “Modern Renewables” is “Biomass, Geothermal, Solar Heat” a large portion of which is produced in Combined Heat and Power (CHP) installations such as those common in Denmark. The economics of CHP plants are being under-mined by subsidized wind and solar power in many jurisdictions and as a result growth in this energy source will be severely constrained in the future.

The second largest category under “Modern Renewables” is hydro. Hydro has many very positive attributes including very low generation costs over many decades. It is a fact that almost all of the large installations developed in the last 100+ years continue to operate efficiently and reliably today. However, increasing environmental scrutiny and few remaining sites with significant potential will severely limit hydro growth in the developed world. There is significant potential in the developing economies but any new hydro power sources in those countries will be used to serve increasing domestic demand.

So in the end the job of replacing fossil fuels will come down to wind and solar (and hydro-kinetics and geothermal if they ever get the support they deserve).

The hype around wind and solar is amazing and very deceptive. It was extremely difficult to find reliable figures regarding actual generation from these sources although there was no problem finding hyperbolic statements about additions to wind and solar capacity. But commonsense tells us that because a solar panel can deliver 1 KW of energy between noon and 1 pm that does not mean that it can produce 1 KW of energy 24 hours a day, 365 days a year. Germany, with the second largest build-out of solar power in the world reports that solar generation over the course of a year is about 11% of installed capacity. Worse still, generation in the peak demand periods during the winter is almost zero.

Things are not much better with wind – maybe worse. Although wind generation continues to grow, availability of wind at peak demand times is unpredictable and inconsistent. On a cold, calm night in Northern latitudes (where more than 50% of the world’s population live) we will continue to be 100% reliant on fossil fuels until cheap and reliable energy storage solutions are developed.

But let’s assume that energy storage solutions can be developed sometime in the next few decades. How much wind and solar generation will be needed and how much will the development of those sources cost?

From the figure above wind and solar currently represent about 1.4% of the “Total Final Consumption” or about 1% of the “Total Primary Energy Supply”. According to REN21 the contribution of Fossil Fuels towards the “Final Total Consumption” is over 78%. A transition to 100% renewables will inevitably involve significant transmission and energy storage losses but for the moment lets ignore those. Therefore in the best case scenario wind and solar will have to increase by a factor of 78/1.4 = 55.7.

The development of wind and solar generation has been taking place aggressively since about 2004 when Germany started providing significant financial support for its Energiewende. Since then the world has invested more than $US 2.4 trillion in the development of renewables.

While it is true that the cost of renewable generation has decreased significantly during that time I would argue that the need to provide energy storage solutions and vastly upgraded transmission systems will more than make up for those savings. There will also be difficult challenges around replacing transportation fuels and finding new source materials for plastics and the many other products based upon petroleum feedstocks.

As a result the probable cost for the energy transition in constant 2017 dollars will be on the order of 2.4 * 55.7 = $US 134 Trillion. I think it will actually be much higher than that. That scale of investment would require that the world triple its current level of investment in renewables and maintain that higher level of investment for the next 100 years.

The next question is, do we have a hundred years to make this transition? I don’t think so. Peak oil is coming. That is inevitable. The date that peak oil will happen is the subject of heated debate. Some argue that oil production will start declining within a decade, others that production declines will not begin for many decades. Many major oil producing countries are already well past “peak oil” production.

Personally, I believe that a growing resistance to “fracking”, the rapid decline rates of tight reservoirs, and increasing demands for oil in developing economies will result in a permanent shortfall in oil production vs. demand by the middle of the century.

In a very thoughtful and I believe accurate article Robert Rapier postulates that peak oil is dependent upon price to a large extent. Higher prices allow the use of more expensive exploration and production techniques which bring to market supplies that were previously uneconomic. A graph from a 2008 publication serves to illustrate how unconventional sources may begin to play an important role in future years.

However, there will come a time when the input costs required to bring new production on stream exceed the value of that production. After that point in time oil production will decline monotonically.

In the decades leading up to that milestone event it will become more and more expensive to find and develop oil and gas resources which will lead to higher prices for fossil fuels. That reality will provide more incentive to develop renewables but it will also consume more and more of the world’s GDP to keep the hydro-carbon based economy functioning. So at a time when the world will need to spend ever increasing amounts to develop renewables and potentially on climate change mitigation measures rising energy costs will become a serious problem.

What’s the bottom line?

In order to transition away from a hydro-carbon based economy before oil and Natural Gas either run out or become prohibitively expensive the following must happen;

1) Investment in the development of renewables must ramp up to approximately triple what it was in 2016 and stay at that level for the next 100 years.

2) One or more very inexpensive and reliable (for decades) energy storage systems must be invented and deployed at a scale completely unimaginable today. To get an idea of how challenging that may be I invite you to read Euan Mearn’s analysis of the storage requirements to backstop wind in the U.K.

3) Peak Oil must occur after a significant percentage of the needed renewable generation is in place. It has taken 15-20 years to get to 1.5% of “Total Final Consumption”.

4) Global “Total Final Consumption” cannot increase or at worst must increase very slowly so that additions in renewable generation can displace fossil fuels. Inevitable increases in the energy consumption in developing economies must be offset by reductions in the energy consumption of developed economies.

Sounds tough, doesn’t it? But who among us doesn’t like a challenge?

And it could be worse. Consider the scenario described in this clip from Ghostbusters!

I think I will sign on to be one of Elon Musk’s first Martian colonists.

Unit Conversions

Oil: 92 BOE per day -> 33.58 billion BOE per year -> 57,066 TW-hours

Coal: 7,800 Megatons coal * 20.16 Million BTU/ton = 157.248 Quadrillion BTU -> 46,084 TW-hours

Natural Gas: 3,500 BCM * 35,687,347 Million BTU/BCM = 124.905 Quadrillion BTU -> 36,606 TW-Hours

Total Final Consumption: 9,300 Megatons Oil Equivalent -> 768.769 Quadrillion BTU -> 108,075 TW-Hours



Hydrokinetics – The Renewable “Silver Bullet”

Posted in Uncategorized at 10:37 pm by Administrator

In searching for technologies that can aid in the transition to a low carbon environment the following characteristics would define the ideal new energy source;

Characteristic Wind PV Solar Large
Requires no fuel for operation
Reliable at peak demand times including winters in middle latitudes
Does not negatively impact the environment in a significant way1
Available in most geographic areas

1Of course some would argue that wind turbines and utility scale solar have negative environmental impacts but those are not severe compared to the environmental advantages of transitioning away from a hydro-carbon based economy.

From the table above the clear winner is hydro-kinetics which captures the energy of water flowing in a river without using a large reservoir.  And yet this is the least developed renewable source on the planet.  I would suggest that this ideal energy source faces challenges which are not technical but rather are political and regulatory.  This posting will discuss the state of hydro-kinetic developments and suggest a path forward towards wide-spread deployment (this post focuses on river hydro-kinetics technologies deployed successfully in North America – there are other projects underway overseas but these face many of the same issues discussed here).

Hydro-kinetics – An Attractive But Elusive Technology

 A number of companies have spent the last two decades attempting to commercialize hydro-kinetic turbines in one form or another.  These companies have consumed, in aggregate, well over $100 million in Research & Development funding, have overcome many technical challenges and have staged numerous successful trial installations.  However, despite the best efforts of talented and dedicated teams none of these companies have achieved a commercial deployment of a single hydro-kinetic turbine.

Free Flow Power

Free Flow Power developed a 40 KW turbine unit which was deployed in a test configuration in the Mississippi River near Baton Rouge for six months in 2011.  The results of the tests were encouraging and the company undertook detailed site evaluations and identified more than 3 dozen locations on the Mississippi where turbines could be installed.  A serious drought and low water levels in 2012 called into question the viability of many of the sites and the company decided to focus on retrofitting conventional turbines in existing dams that did not already have electrical generation facilities.

In late 2014 the company was split into a non-operating entity holding the Intellectual Property rights for the SmarTurbine and a new company, Rye Development was formed to pursue the dam retrofitting.

Hydro Green Energy

Hydro Green developed a 100 KW hydro-kinetic turbine unit which was deployed near Hastings Minnesota in 2009 in what is claimed to be the first licensed hydro-kinetic generating facility in the U.S.  This turbine operated until 2012 when Hydro Green Energy, like Free Flow Power, decided to focus on dam retrofit.

Clean Current

Clean Current was a Hydro-kinetic company that developed several versions of turbines for use in both saltwater and freshwater environments.  They conducted several tests of the technology, most recently at the Canadian Hydrokinetic Test Centre on the Winnipeg River in Manitoba from September, 2013 to May, 2014.  At the end of May, 2015 it was announced that the company was being wound down after 15 years of Research & Development work.

RER Hydro

With substantial funding from the Quebec Government RER Hydro developed a technologically advanced hydro-kinetic turbine unit which was deployed in the St. Lawrence River near the city of Montreal in 2010.  It functioned as designed for more than 4 years.

Based upon the success of this initial test the Boeing Corporation entered into a global marketing and distribution agreement for the TREK turbines in November, 2013.  Phase II of the RER Hydro business plan involved the production of 6 additional turbine units in a brand new manufacturing facility in Becancour Québec opened to great fanfare November 11, 2013.

On April 7, 2014 the Parti Québecois lost the Provincial election.  The new Liberal majority government immediately halted payments to RER Hydro that had previously been confirmed.

With turbine construction for Phase II well underway and purchase agreements being in place with suppliers RER Hydro was immediately short of funds. Shortly thereafter the company made a court application for the Issuance of an Initial Order under the Companies’ Creditors Arrangement Act which was granted.  All RER Hydro staff were laid off in July, 2014 and after several further court applications what remains of RER Hydro is the Intellectual Property, some inventory related to the turbines being constructed and the contracts with the Boeing Corporation.  The company was declared bankrupt at the end of 2015.

Verdant Power

Verdant has been working on tidal power turbines in the New York City area for more than 15 years. From 2006-2009 KHPS (Gen4) turbines were installed in the East River in a grid-connected configuration as part of the Roosevelt Island Tidal Energy (RITE) project. In 2012 Verdant was awarded the first commercial license for tidal power issued in the U.S. There is no indication that any turbines have been deployed or power generated in regards to this license.

Turbines developed by Verdant Power have been proposed to be installed as part of the Cornwall Ontario River Energy (CORE) project with $4.5 million in funding from various government agencies and utilities. The project has been ongoing since 2007 but it appears that in 2013 the project was abandoned.

In the spring of 2016 Verdant announced the formation of a partnership that will focus on hydro-kinetic projects in Ireland.

Instream Energy

Instream was formed in Vancouver in 2008.  In 2010 the company, in partnership with Powertech Labs, deployed an array of 4 25 KW turbines near the Duncan Dam in British Columbia, Canada.

In August, 2013 a second demonstration site was established near Yakima, Washington State, U.S.  As of August, 2016 the company has plans for 2 more demonstration sites in the U.S. and anticipates a project in Wales, U.K. in 2019.

Hydro-Kinetics vs. Wind and Solar

It seems clear from the number of successful demonstration projects that have been undertaken over the past decade that the engineering problem of manufacturing a hydro-kinetic turbine that can reliably generate electricity has been largely solved.  It also seems clear that by combining the engineering expertise and learnings from several of the existing designs any residual problems can be resolved quickly and new designs that minimize fabrication costs could be developed.

The barriers to the implementation of hydro-kinetics are no longer technical.

Hydro-kinetics generation, like large-scale hydro and geothermal is qualitatively different from wind and solar power because it is reliable and dispatchable.  As a result, a backup power source (natural gas-fired plants being the most popular alternative in the current low gas price environment) is not required.  This is a very significant advantage which is not reflected in the various economic analyses that are used to justify regulatory and financial support for renewable energy.

In order to fully transition away from a hydro-carbon based economy it is necessary to have access to reliable electricity generation at times of peak demand.  In the middle and northern latitudes (north of about 35 degrees) peak demand occurs in the late afternoon and evening as the requirements for light and heat reach their maximum.  Obviously there is no solar power available at that time.  Wind energy is highly variable and generally speaking cannot be relied upon to generate electricity during a specific time period.

The most valuable measure of the contribution of wind generation would be the amount of wind available during peak demand times.  Very few organizations are willing to investigate that important metric because it would be hugely detrimental to the case for subsidizing wind energy.

MISO’s Independent Market Monitor (Potomac Economics) noted in a June, 2013 report on page 39 that

“wind resource output is negatively correlated with load and often contributes to congestion at higher output levels, so hourly-integrated prices often overstate the economic value of wind generation”

The report states that the MISO practice of counting 13.3% of wind as reliable is much too high.  They recommend instead that a value of 2.7% would be more appropriate (page 16 of the report).

If anyone was inclined to make a truly fair comparison of generation costs for wind and solar there would have to be a very large additional cost to maintain a reliable backup generation source for when wind and solar were not available.  This would probably come close to doubling the true cost of wind and solar generation.

Hydro-kinetics sources do not suffer from this problem.  They are reliable and predictable and can scale up to any degree without causing problems on the grid.  No backup generation sources are required.

Hydro-kinetics generated electricity is much more expensive per kw-hour of nameplate capacity than wind and solar – probably on the order of $8-10/kw of capacity.  But when reasonable capacity factors for wind and solar are considered (30% and 15% to be on the generous side) then the costs are not significantly different.  But the very important advantage of hydro-kinetics is that it is reliable during times of peak demand.

As long as a KW-hour of electricity is judged to be of equal value no matter the source then wind and solar PV appear to be much lower in cost than hydro-kinetics.

The Value of a Hydro-kinetics Partnership

The barrier to wide-spread implementation of hydro-kinetic generation is not technical.

The primary barrier is the perception, widely held amongst renewable energy advocates, government officials, politicians, and funding agencies, that wind and solar PV are the best options to fight climate change.

Utilities, that have a deeper understanding of generation issues and understand the problems associated with wind and solar PV generation, are not actively engaged in the debate.  This is because they largely see renewable generation as a nuisance that they have to deal with, like environmental regulations.  They continue to build out new natural gas fired plants and even a few nuclear plants to provide reliable generation.  They also are learning to manage rapid cycling of their plants in response to fluctuations in renewable generation.

Utilities do not own the majority of wind and solar farms and of course have no financial interest in distributed sources such as roof-top solar.

Finally, because they are either publicly owned, or earn an agreed upon return regulated by Public Utility Commissions, utilities are not particularly concerned about any additional costs associated with unreliable and unpredictable wind and solar PV generation.  Whatever costs they have to incur, including maintaining a duplicate fleet of generation assets that can be available when wind and solar are not, will ultimately be born by the rate-payers, not the utilities.  Consequently, utilities are not advocating for sensible options like hydro-kinetics.

The other perception, which is unfortunately firmly grounded in reality, is that hydro-kinetic generation has not been proven to be a really viable option at this time.

All of the hydro-kinetic companies discussed in this post are relatively tiny, privately held firms that are generally under-staffed and under-capitalized.  That statement is not meant as a criticism – these firms have achieved remarkable engineering accomplishments and have overcome very difficult technical challenges.   But it would not be much of an exaggeration to say that all of these companies are about one failed grant application or unsuccessful project away from bankruptcy.  Several have already succumbed.

This situation lacks “critical mass” in every dimension – economic, political, regulatory.

The only way to overturn the perception that wind and solar PV are better options than hydro-kinetics is through a very significant lobbying and public relations effort focused not only on national politicians in the U.S. and Canada, but also on regulatory agencies and utilities.  Hydro-kinetics is a superior option.  No exaggeration is needed to make the case.  But the case does need to be made.  Regulatory agencies and even utilities need to be strong advocates.

Politicians need to believe that additional support in the form of production tax credits or feed-in-tariffs as well as increased R&D funding are justifiable based upon the superior value of hydro-kinetics as compared to wind and solar PV.

At the moment a number of small companies are advocating different approaches and technologies using staff resources that have limited time and money to tell their stories.  Decision makers are faced with trying to choose a “winner” which leads to no decision at all in many cases.

A partnership of these firms could fund a professional and credible full-time lobbying effort.  As unsavory as that might seem to leaders focused on the development of hydro-kinetic technology the reality is that wind and solar PV already have entrenched and vocal proponents at all levels of government.

A partnership of these firms could also fund resources dedicated to interfacing with various regulators to understand their concerns and educate them with regards to hydro-kinetic technology.

Rye Development and Hydro Green Energy have extensive experience with the complexities of licensing facilities on the Mississippi, which has to be one of the primary targets for hydro-kinetic development.

Instream Energy, as well as former staff members from Clean Current and RER Hydro, have knowledge and contacts within the Canadian regulatory establishment.  The Fraser and St. Lawrence rivers also have great potential for hydro-kinetic development.

Verdant Energy has had success with regulators with regards to tidal energy development.

The pooled expertise of these firms with respect to regulatory and environmental matters would represent a very significant resource to aid in the advocacy of hydro-kinetics in North America.

Would a partnership of hydro-kinetic firms require that some technologies be abandoned?  Only if it made sense.

It is likely that collaboration on engineering issues under mutual non-disclosures would be beneficial to all parties, each of which would retain the Intellectual Property for their particular implementations.

Rationalization of the supply chain for major components and consolidation of some fabrication would reduce costs by increasing volumes even if the final products were quite different.

Centralization of some non-core administrative functions such as web site maintenance, legal services, and grant application preparation could be explored in order to reduce costs.

The “outside world” would benefit from having a single communications channel and a single core message representing hydro-kinetics.   The various technologies being offered by partner companies would be presented as options to address a particular opportunity.

It would be possible to have competing solutions proposed for a particular project in some circumstances but that would not be ideal.  It should be kept in mind that the real competition is wind and solar PV, not other hydro-kinetic technologies.  It would be preferable for the partnership to advocate one technology for a particular opportunity based upon the geographic location and availability of support staff and resources.  The possibility of supplementing staff at one organization with knowledgeable and experienced staff from one of the other partners would enhance the credibility of a response to any particular opportunity.

In Conclusion

Hydro-kinetics should be one of the most important foundations for a transition to a sustainable energy environment; more environmentally benign than large scale hydro, more reliable than wind or solar PV, and vastly scalable with every large river offering development potential.

Given the amount of investment and engineering effort that has been undertaken to date without attaining commercialization it seems clear that the current decentralized approach is not very effective.  A hydro-kinetics partnership would allow the technology to attain critical mass without compromising the technical achievements that have been made or will be made in the future by partner companies.