Wednesday, October 31, 2012

Scary Halloween Story - Fracking Complications

So what's in the eyes of this Halloween Spectre? Looks like a pair of fracking Pennsylvania gas wells (one's a clone of the other), doing a number on the environment near NY State in search of some quick bucks. But more likely than not, it's really drilling for dollars from Wall Street and any suckers (oops, impolite term for "investors") while posing as a way to extract methane from algae long dead and buried for over 350 million years.

That methane supposedly will prevent coal or oil from being burned and slow down the rate of Global Warming that causes storms like Hurricane Sandy to be able to morph into Frankenstorm Sandy, but for all practical purposes, this substitution of one source of CO2 pollution into another source of CO2/CH4 pollution won't improve things much at all. If you really wanted improvement, best to leave the methane buried along with the radon it contains, and install wind turbines instead. But, owners of methane extraction companies like billionaire Trevor Rees-Jones, owner of Chief Oil and Gas, insist on behaving like sane climate hating psychopaths, totally focused on getting richer faster, to the exclusion of all else, whether by selling methane or ripping off clients/investors and anyone else he can. He's behaving in a far more evil manner than what the Pumpkin attempts to imply (

This story is complicated, so let's pretend that it is sort of imaginary (we won't say just how imaginary, and it might not be imaginary at all...). That way the plot can avoid being too "thick". Perhaps this needs a bit of plausible deniability, as a lot of it gets various people quite aggravated, very hot under the collar and unable to process thoughts in a  "big picture" manner. Topics like energy, big money, dreams of cheap energy, of get rich quick and get out while the getting is good will do that to people.

A lot of people are really sensitive about these topics. For example, a member of Gov. Cuomo's staff (just following orders, most likely) recently told an attendee at the NY State Beer and Wine meeting in Syracuse not to mention Fracking (and how it could trash water quality and thus beverage integrity/tourism potential) - see Well, maybe that should be amended to say that the Cuomo administration officials just did not want Cuomo, the person, to have to discuss this ever more unpopular subject (fracking) at a public event in front of any of the public. Public events are exercises in Public Relations (PR), nothing more, at least in Cuomo-land (and most other politicians probably tend to adhere to that view) and these are supposed to take place exactly as they were scripted to occur. And especially at  an event with actual reporters (who might ask non-stenographic questions) in attendance and where other people might ask pertinent questions, in contrast to the stenography events the present NY Governor generally uses to get his messages and wishes dispersed... After all, if fracking is never discussed in an official manner with the present NY Governor, then maybe it can be implemented in NY State in the proverbial dead of night, when the public is distracted. For example, like on November 6 (see, when everyone's attention will be on election outcomes.....

So, this story has a lot to do with fracking for natural gas (Ngas) - not much on the toxic waste, air and water pollution or small town societal effects associated with this practice, but instead with the economics (or at least some of the money aspects) of it. This is a bit ironic, because opponents of fracking (anti-fracktivists) in NY State have successfully used public resentment, distrust and well-justified fear of corporate/paid-for Governmental hybrid arrangements who wish to frack NY State no matter what to great effect (and with very little money, too). The wretched economics/bad business of fracking are really not (and to date have not been) relevant to opponents of fracking, at least for the time being. Anti-frackers have kept their focus simple, and focused - the KISS approach (Keep It Simple, Stupid) has worked better than anything else tried to date.

Another aspect of the story is how wind turbines have rained on the fracking parade (well, actually, helped to depress natural gas prices), and that of the profits of coal burners/nuke owners who used to rely on high natural gas prices for awesomely huge and wondrous (to them) profits. In fact, even if the Ngas people only make minimal profits, the nuke and coal plant owners can be the big winners, as long as Ngas prices are high - but when Ngas prices are low, their profits also go down the drain. All "corporates" absolutely lust for above average profits, and rewards to upper management can be very lucrative if such profits happen, whether out of skill or just plain dumb luck. To balance out the rewards for excessive money-making, there is punishment for those who fail to achieve "rentier" profits - especially for the "small fry" employees of corporations. However, those NY opponents of fracking don't really care about such matters, either.

But there is more to the story, and some really unsavory stuff, too. Many environmentalists and often well-endowed (with money and political/social connections) environmental groups have bought or once upon a time did buy into the line about natural gas (molecular formula = CH4) being the "bridge" fossil fuel between coal (empirical formula = CH) and renewables like wind, tidal, run-of river hydro, solar, biogas and biomass. The pitch to these groups was so seductive - methane delivers 1.58 times as much heat as does coal per ton CO2 given off, and there is no particulate, acid gas, heavy metal poisons or much radon emanations to speak of (but fracking the Marcellus does have its radon aspect) with Ngas versus coal. And then (in their imaginary plan to replace pollution based energy), once coal was replaced with Ngas, natural gas would deplete shortly thereafter, get expensive and then renewables could (maybe) replace the Ngas. But, along came fracking, and the rapid depletion of "conventional" Ngas became not so relevant. Of course, some important environmentalists also thought that nukes made sense (electricity with minimal CO2 pollution, as long as meltdown were kept to a minimum and the rad-waste could be stashed somewhere). Yes, unsavory, to say the least... but after all, humans are only human....

In this story of complication, there is also the topic of depletion, as Ngas supplies once thought to be essentially infinite are now known to be very finite. Ngas is best transported by pipelines, which means that North America is an entity to itself, more or less, isolated from the world of "world" Ngas pricing. Oil is a different matter, as it is easily transported across oceans, and the US more or less pays world oil prices these days, even if oil extraction costs in some cases are $20/bbl while pricing hugs the $100/bbl level. Oil also depletes in a similar manner to Ngas, and in some cases (where there is lots Ngas and not much oil), Ngas can be converted to liquid fuels. An example of such an approach is Qatar's giant Pearl Gas To Liquids (GTL) facility, an $18 (to perhaps $24) billion dollar modern wonder that makes about 140,000 bbls/day of liquids (plus other products) from 1.6 billion cubic feet/day (bcf) of Ngas (about 2.5% of present US Ngas consumption). Since it is profitable at $40/bbl oil and oil is now going for $100/bbl, this now becomes a serious "cash cow" with an "extra" profit of $8.4 million PER DAY. The huge "extra profits" for the two owners of the Pearl complex exists because oil (a liquid fuels source) goes for around $20/MBtu, and Ngas is only $3.50/MBtu (in the US), or around one sixth the price of oil. They (oil and Ngas) used to be more or less equivalent in price... Meanwhile, in Europe and Asia, Ngas and oil are much closer in price, and crude oil is even more expensive there than it is here.

In fact, the reason companies have to go to all of the added expense of fracking compared to a conventional (and generally much less expensive to drill) Ngas well is... depletion. There is no way that conventional Ngas can be delivered at a rate of 63 bcf to American customers any more - this situation has been ongoing since the Enron crime wave of 2000-2001 (up until that crime spree, Ngas prices were very stable, very affordable, and cheap). Fracking now supplies close to one third of US Ngas; without at least some of this fracking Ngas supply, coal consumption would be greater, wind energy might be profitable without Federal subsidies and Ngas would be priced near what oil is going for these days. Of course, houses would also be better insulated, too, and wasteful usage of Ngas would be much less common in this country than it presently is because it would be such an expensive, money bleeding habit. We in the US might still be in a recession caused by a Ngas price spike, though that depends on when and how fast the particular  price spike occurred. And there would also be copious complaining about the high price of natural gas from most people, businesses and governments (think schools, where Ngas usage is a big expense) who consume Ngas.... and any politician who wanted to get re-elected had better promise cheap Ngas, and be quick and loud about it, too...

We also cannot forget greed, financial speculation and the Great Recession of 2007-2010, which lingers on in some ways to this very day.. Part of the reason that fracking for Ngas became as widespread as it did is that money from those who profited from the Great Recession (or stolen/swindled/defrauded, as often was the case) - or from entities who did not lose money - flowed into the Ngas Exploration and Production (E & P) business from 2004 onwards, about $500 BILLION worth, and this created another financial bubble. Based on prices for Ngas seen in 2005 and then in 2007-2008, this seemed like a sure fire way to strike it rich FAST. It was a gold rush mentality that soon led to overproduction and then to a price collapse for all Ngas produced. It was also the fee based compensation system that got financial promoters to push fracking projects (you don't get fees for organizing and financing projects/financing corporate buying of other corporate assets/companies if these deals don't get done, whether they make sense or not). The low Ngas prices (in general, way below the cost of fracking-based Ngas production) in turn allowed Ngas usage to be expanded in electricity production, colliding with nuke and coal users (a good thing) and wind turbine developers (not so good). And then there is the roughly $300 billion in losses (mostly investors, some banks) from the $500 billion in investments ( that investors and companies who buy/have bought up what turn out to be overpriced shale gas assets have laid down - which itself is a decent sized swindle. For details, try this one for size:

Of course, when companies are already losing money before properly disposing of wastes (in this case, from drilling and fracking) and also paying for damages to roads and water supplies, properly disposing of wastes becomes even more of a money losing prospect, and ever more unlikely. It becomes easier to make sure not enough state pollution prevention enforcement officers are hired in those states controlled by fracking interests, such as in Pennsylvania and Ohio, or any of the old tried and true ways of polluting ("midnight dumping" on rural back roads) without getting caught. Ditto for workplace safety - safety tends to be a long term concern, and a lot of fracking is a rapid payback scheme, or an "asset play" - where the newly discovered gas reserves are sold before they are extracted, often to "investor rubes", and with predictable results. Way too many people either don't care or are "feeling lucky" to a far greater extent than seems justified by actual data with respect to fracking job safety. And as for "fugitive" methane emissions (up to 7% of the total extracted methane produced per well can be vented and thus "go fugitive"), well, drillers have to be caught doing this before they can be punished for it. It is those fugitive emissions that make fracking the Global Warming equivalent to coal burning, despite the greater heat produced per ton of CO2 pollution from combustion of Ngas. So, lots of law breaking can be done in the cause of fracking, and since it is done by corporations, some of who are extraordinarily well connected to various Governors, Judges, Senators and Congresspeople, well, you get the picture.... Corporations may be people (at least, in Mitt Romney's way of looking at things), but corporations don't do jail time, and corporate executives also seem to rarely do time, either. Just look at the BP Macondo well spill that so polluted the Gulf of Mexico in 2011 as an example of the "low probability of enforcement of corporate crimes" arrangement - no jail time and also no $20 billion fine levied against BP and its partners in this environmental and murder (also called industrial accidents, with 11 dead workers) event. So, no justice, at least, so far...

Part of the reason anti-fracker activists have been as successful as they have to date is because fracking for Ngas is generally such a money loser at present prices, and has been for most of the last four years. The renting/purchasing of politicians (in this case, the Republican Party - national as well as local - pretty much comes as pre-packaged pro-fracktivists), the PR campaigns, the "public education" (also the same as advertising, brainwashing and propaganda) and various University (SUNYAB included!) affiliated "research institutes" have only been done at a fairly amateur effort to date. This is because the big oil majors (who also have major natural gas divisions - Exxon-Mobil is the largest producer of Ngas in the US) who are collectively sitting on tens if not hundreds of billions in cash (for example BP "only" has $16 billion in cash on hand as of October 2012 - those paupers!), are only minor players in the shale-gas fracking so far, though this will likely eventually change. If and when it does change, "market discipline" will be re-established, and  a profitable balance between the cost of production and the rate at which Ngas from tight shales (like the Marcellus and Utica shales) is extracted will re-emerge. And when the Ngas business is once again the highly profitable business Big Oil desires it to be, most opposition to fracking is likely to be buried under a combined blizzard of PR, political, rural social and legal blitzing that makes present efforts look like amateur hour. Oil and gas company stock prices are not a function of stashed cash but instead of their identified hydrocarbon reserves, and since oil reserves in North America are few and far between (mostly having been drained already), shale gas and shale oil seems to be about all that remains. And oil companies will do just about anything to keep their stock prices high, including slow self-liquidation via stock buy-backs.

The facts:
In Figure 1, the sources for our Ngas are shown (fracked, imports and non-fracked) from 2000 in the US are shown.  The "non-fracked" content of the US Ngas supply mix has dropped by 15.3% since 2000, though it is still the majority of Ngas used (63%) in this country. Imports have dropped by 50% since 2000, and now comprise about 6.4% of US demand. However, fracking sourced Ngas has become a much bigger factor, rising from 1.4% of the US supply mix to 30.4%. Most Ngas imports come from Canada (from Alberta, too), and whatever does not get used in the US probably gets used in the production of tar sands sludge. However, the Canadians also have conventional Ngas depletion issues, especially in the massive Alberta natural gas basin.

Figure 1 

In Figure 2, the wellhead average price for Ngas is shown as the total sales of Ngas (price times volume); this is approximately equal to what Ngas suppliers are paid. Since the quantity of Ngas sold has been roughly constant (consumption has been rising at roughly a 1%/yr rate), the total sales and well head price show roughly the same trend. This dollar haul peaked in 2008 at almost $185 billion/yr, but by 2010 had collapsed so that with a slightly larger quantity of Ngas sold, less sales resulted ($60 billion/yr). Obviously, a capital intensive business that needs some long term stability (Ngas E&P) cannot find that in such wildly fluctuating prices; instability is thus a detriment to long term development of the Ngas industry. But instability can be quite rewarding to fast buck artists, especially betters on Ngas pricing, corporate deal makers and those financing those deals.

Figure 2

Overall Ngas consumption has risen slowly for both  all uses of Ngas (mostly heating) and for that used in electricity production, though of late it has been going up at a 2.7%/yr rate for electricity generation. As of 2011, coal usage to make electricity in the US had dropped slightly from 2000 levels, but coal production in the US has remained pretty stable (exports have gone up). In 2010, wind turbines made almost 12% of the electricity that Ngas based generators produced in our country. By the end of 2012, wind turbines will now make around 4% of the US supply mix. Ngas usage to make electricity (which is just a subset of all Ngas used, but a more profitable one than for heating uses) would have risen by close to 50% if wind turbines did not exist. This would be equal to close to 1.5 trillion cubic feet per year (tcfy) of extra Ngas consumption, AT LEAST.

That 1.5 tcfy of Ngas that is NOT used is probably the difference between sales of/consumer spending of $180 billion/yr for Ngas and instead only $60 billion/yr. Most of the higher prices for Ngas are paid by residential and commercial customers (heat) and by industry (heat and raw materials) - in turn, lower Ngas  prices fkeeps production costs for manufactured items lower and allows American manufacturers to be more competitive against foreign manufacturers. Prices of Ngas are extremely sensitive to the balance between supply and demand, as can be seem by comparing the essentially flat demand profile over the last 12 years (Figure 1) with the wild price/sales gyrations (Figure 2). Of course, the wind industry gets NO CREDIT for keeping Ngas prices much lower than they would otherwise be if wind turbines were little more than a curiosity.

Wind turbines also depress electricity prices via the Merit Order Effect in two ways. Firstly, they keep Ngas prices lower than they otherwise would be by keeping the demand for Ngas lower than it would be if there were essentially no wind turbines in use. Since Ngas is now about 25% of the source of US electricity, this effect is significant on electricity prices. Ngas prices are normally the highest priced source of electricity in a grid mix, and in half of the US states, there exists a casino style pricing system for electricity, where coal burners and nuke generators also get the prices that Ngas sourced electricity generators get. The effect of knocking higher priced Ngas out of some of the hourly pricing outcomes can significantly benefit consumers of electricity, and prevent the owners of those old, paid off nukes and coal burners form "pigging out at the trough", so to speak. While this is difficult to quantify (here is an example or two: and the combination of a lower Ngas price AND lower electricity prices by substituting wind turbine electricity for Ngas (or in some cases, oil) would be significant. This could easily be $50 billion/yr, and the more wind electricity added, the more significant these effects become. Savings to US Ngas and electricity consumers could range between $100 to $200 billion per year; the cost of the tax avoidance subsidies needed for a viable wind industry in the US pales by comparison ($10 to $15 billion/yr).

This consumer protection service has not gone unnoticed. Wind turbines are now thoroughly hated by executives in the nuke, Ngas and coal business. And since the Ngas business revenue (especially massive "bonus profits" due to price spikes) is affected, the oil business is affected (they own lots of Ngas production), and they are not happy, either. Rumor has it that the Koch fiends (the four Koch brothers) are demanding that right wingnut congressmen vow to keep the meager wind energy incentives out of any budget settlements/fiscal resolutions, more or less like Grover Norquist rules the Republican Party with his "no tax raises" pledges of allegiance (to him). And since the expiration of a tax avoidance is the same thing as a tax increase in their twisted minds...well, don't worry about the inherent hypocrisy in that. After all, this is about hatred of those messing with extraordinary profits. And Hate resonates strongly in the Republican national party these days.

An Anti-Fracking Strategy:
Increasing the generation of renewable electricity and decreasing the use of Ngas to make electricity will keep Ngas prices lower than they would otherwise be, and this decreases the need for fracking. It will also keep electricity prices lower by keeping Ngas prices lower for those states where the Merit Order Effect comes into play.

Increasing the use of electricity in home and business/governmental heating applications can also drop the demand for both heating oil (now a minor factor in the US "heating mix" because oil is just too darn expensive). This is best done via the use of ground sourced heat pumps, where one unit of energy (as electricity to power the heat pump compressor) delivers between 5 to 6 units of heat ("pumps" heat from the ground up a temperature "incline"). Heat pumps also deliver much more cooling for a given input of energy versus conventional air-to-air cooling units. However, for this to make any environmental sense, it is important that the extra electricity consumed via heat pumps would not be supplied via polluting sources, especially Ngas units. However, a heat pump with a 5:1 Coefficient of performance (COP) will use 1/3 of the Ngas to deliver the same amount of heat even if the electricity is supplied by Ngas.

Of course, efficiency rules. Wasting electricity and heat is not a good thing, and its more and more of a waste of money that could otherwise be spent on food and beer, or lots of other things. Inefficiency is just like burning paper money in the camp-fire.

It is important to concentrate on decreasing the demand for Ngas EVERY year from now on - via less used for heat and/or less used for electricity. This keeps prices far below the level needed to, on average, make fracking economically viable. Costs to produce fracking based Ngas are in the $5 to $10/MBtu (= $10/kcf) level, and proper waste disposal plus a profit is going to boost the needed PRICE for Ngas even higher.

"Conventional" sources of Ngas (often a by-product of oil production, sometimes by itself) has been falling since 2000, by 15% as of 2010. This trend will continue, since the "easy finds" have been found (biggest fields closest to the surface, lowest cost to produce) and are being tapped/have been largely tapped out. The only way to maintain present Ngas consumption rates (or increased ones) is via fracking. And if you want to stop fracking - especially in NY State - the way to do this is to keep Ngas prices low, and below the cost to produce it to the best extent possible. Fracking is an expensive way to produce Ngas, and if the price obtained for it does not justify the money spent to get it, the Ngas will stay in the shale, safely buried underground. The way to keep it in the ground is to prevent it from being profitable, since once it is profitable, the profits can be so humongous that all the health, safety and environmental arguments will become irrelevant. Besides, when things get cold, people want heat, and if the only source for that heat is Ngas.... well, people will vote for heat any day. However, we presently have time to forestall such a Hobbesian Choice. We need to get to where our heating and electricity needs are LESS dependent on Ngas, ASAP.

Obviously, being efficient with electricity and heat is good, but all the efficiency that can be economically afforded will do no good unless there is a supply of electricity. And even more obviously, nukes are passe thanks to Fukushima and absurdly expensive new installation costs, even with extravagant governmental subsidies. New coal burners are also very expensive, and not the way to proceed, especially if there is a profit goal in mind. But the sucker-play that Ngas can be a bridge fuel is valid only if you want to go towards a hell on earth by traveling on that bridge.

In the US we have a wind resource way past 20 times what we presently consume in electricity. No other form of renewable electricity can deliver this much electricity at that low a cost. If you think that delivering the most CO2 pollution replacement for a given giga-dollar invested (as we need to think in increments of billion dollars when it comes to national AND NY State electricity sources) is important, then you need to get in with the wind industry. If you don't like fracking, you need to be an ally of the wind biz. And if you think that a future filled with Frankenstorms like Hurricane Sandy - made so much more intense via CO2 pollutant induced Global Warming - is not you cup of tea, you need to get behind the wind, so to speak.

Otherwise, you, your descendants and you neighbors will see a world going down the tubes, first by fracking, and then via a destabilized climate.

Of course, it would be nice to have a renewable electricity pricing system that actually allowed wind turbines to be profitable without bizarre tax avoidance permutations - that can be done best via Feed-In Tariffs. Then things like this can be done:

Nordex N100 x 140 m tower at sewage treatment plant, Hamburg, Germany. Hey Buffalo, get the hint?

This, too (another Hey Buffalo!  Hail Mary....):

Energy Hill - WW2 toxic landfill now with 3 wind turbines on top of the toxics buried underneath: AND photo:

And the tax avoidance system cannot exist when the wind turbine business gets successful - such as when it does $200 billion a year in business in the US, and not chump change like $20 to $25 billion/yr - the avoided taxes get too huge in quantity. But we are not there yet. And if Ngas prices do rise to the level needed to to justify fracking, that's when wind turbines no longer need subsidies, but that is a dangerous road to take, as that could allow a lot more fracking to take place. So the trick to getting to a world with more employment (wind turbines generate more jobs than fracking or coal or nukes), low Ngas prices and a better climate is either a FIT pricing system or subsidies to lower wind based electricity to the point where it can compete with cheap Ngas. As for those looking to raise the prices of all pollution based electricity so that wind turbines are at "grid parity", well, that won't be popular at all. After all, it's not like MOST Americans have much of ANY extra money these days for much of anything. If they did, there would be more economic demand, and a much better economy, and we don't have that, either.

But economics are a whole other story....

Sources for initial images:
Pumpkin =
Fracking Well =

Monday, October 22, 2012

US Foreign Policy, Iran and Wind Power

Iran's wind resource is concentrated in the north, especially northeast, often in "wind canyons" similar to Tehachapi in California, or Oaxaca in Mexico. So far they only have 130 MW of capacity in some world class windy areas (only Turkey, Morocco, Pakistan and Egypt have more installed capacity in the Middle East/North Africa). Wind sourced electricity in Iran means that natural gas (or fuel oil) that might be burned locally to make electricity can instead be exported to Europe or India, and given what world natural gas AND oil prices are and are likely to be, that's a money gusher. The light orange areas could utilize Low Wind Speed Turbines at reasonable delivered electricity prices.

At tonight's Presidential Debate - the Foreign Policy edition - some topics unlikely to be discussed include Peak Oil, Global Climate Change (significantly brought on by oil and natural gas combustion), income and wealth inequality/mal-distribution (within countries, and among countries), world population and controlling birth rates as well as the use of defacto slave labor throughout the world (a way to use up all those surplus people in pursuit of wealth enhancement by the Global upper 1% of the world income distribution). Romney (a champion of the 1% both within the US and throughout the world) will try and keep things vague, meaningless and will harp on issues that defy the ability to quantify them ("weasling" opportunities). He is, after all, pushing the reincarnation of George W. Bu$h's/Dick Cheney's foreign policy (just like your local crack'n smack pusher is trying to maintain sales), which managed to make our country one of the most hated pariahs in the world in just a few short years. Obama is unlikely to be able to say much of substance in 30 second or two minute intervals, either, though he is obviously the lesser of the two on the Evils Scale. And they might both drone on about the virtues of drones....

So, since they won't say much of value (though it is meant to sound substantive), here goes. Oil, and access to it, is of Prime Importance; wars have been and will continue to be waged to gain access to it, or at least be threatened. Besides, you seriously can't wage wars without oil... The world population of 7 billion and counting is way beyond the ability to sustain so many people UNLESS massive energy use (renewable, nuke and/or fossil fuel) is continued. And since most women of child bearing years do not have access to birth control or much of a say in when they get impregnated/if they stay impregnated, or else feel that they have to reproduce in order to have children who will support them in their old age, so much for getting the population under control and back below the 2 billion mark in a peaceful manner.  Of course, educated women are also a part of the solution; ignorance seems to breed overpopulation, as well as epidemics of death by pregnancy complications, just like it used to in the US and Europe. The recent arrival of Peak Oil (declared in 2011 to have been 2006) is leading to a succession of economic crises wrought by rapidly increasing oil and natural gas prices (North America is a temporary exception to the natural gas trend). This is pulling huge amounts of income and wealth from much of the people/countries on the planet and dumping it into the small number of those with access to the oil/the ability to provide it. Petro countries and companies have more money than they can invest/find things to profitably invest in at rates they deem acceptable. So much of this money sits idling, doing nothing productive to wean us off of fossil fuels and onto a renewable energy based world, as it can't be invested in things with the present profitability of oil exploitation. And as for those oily opportunities - it's slim pickens these days, and getting ever slimmer as the dregs of new oil resource discoveries keep getting "dreggier".  This also acts to further impoverish much of the world, as well as the vast majority of people in what are considered wealthy countries. Meanwhile, relatively cheap oil (for transport of goods) and telecommunications has allowed "third worlders" to sort of participate in the world economy, especially when the ruling cliques in most of these countries are so easily bribed/lured into an alliance with the "worldwide 1%". Workers in these countries make stuff for multinational corporations (sometimes owned by other national governments, too, but mostly just by wealthy people, mostly American and European) at slave labor like wages, but these products are sold at prices based on "what the market will bear", and the ginormous profits are wisked into "1% territory", wherever that is. But the workers who make the stuff cannot afford to buy much, and with inadequate consumer demand, standards of living generally only rise to the top 10% of the world (the 1% and helpers/facilitators), but especially to the apex of the worldwide income pile.

Meanwhile, false hopes like nuclear power have turned out to be so incredibly expensive that nukes are no longer economically viable. So, affordable energy is increasingly made by coal in much of the world (especially China and India = "Chindia"), trashing our climate control system at an increasingly perilous rate. But, not to be outdone, those pushing natural gas (LNG, fracking, ever more drilling) are also busy at work, often using lies and weasel arguments like "cleaner than coal", which is not saying much, especially with regards to renewables - and in the case of fracking, almost non-existent in terms of Greenhouse Gases potentials. And the one thing that could reverse it - a massive worldwide renewable energy push, with technologies appropriate to the region where they are installed - is, with the minor exception of western Europe, nowhere at the level they need to be. The U.S. still is deluded in thinking that our renewable energy technology is needed by the rest of the world (wrong, it is now a European led effort, though it could be US led, if renewables were actually allowed to be economically viable in the US), but this is ONLY because renewable energy is not allowed to be profitable via arrangements like Feed-In Tariffs or else with quota systems at the scale needed. And what the world really needs is for the US to go renewable in a big Keynesian-like effort with Made in USA stuff (no imports needed, especially slave labor made stuff), massively increasing economic demand and wealth creation in the USA, as well as dropping demand for oil, coal, natural gas and uranium in the world. Other countries/regions would get the hint.... even if the US never really exported much of this renewable energy stuff, the world and the bulk of the US population would massively benefit.

An then there is Iran, which used to be a sort of US colony after we killed the leader in 1953 who kicked out the extremely vile and hated Anglo-Iranian Oil Company (predecessor to British Petroleum = BP) from Persia. At least until the chickens came home to roost in 1979, when the Khomeni took over and formed a theocratic dictatorship. The US via the Reagan Administration (who, before elected, got Khomeini's allies to hold the embassy hostages in Iran until after the US 1980 election (released the minute Reagan took the oath of office - just a coincidence, right? - and thus helping with OUR religious fundamentalists) then had another pet petro-dictator - Saddam Hussein of Iraq - wage an epic war on Iran (though it may have been inevitable), killing a least a million on both sides, and ending in a stalemate, and impoverishing both countries (and both with awesome oil and natural gas resources, which should have made both incredibly wealthy) something fierce, as only meaningless wars can do. A male dominated theocracy in Iran led to a population explosion of a sorts (like in Saudi Arabia), and now more than half of the 90 million people in Iran were born after 1980. They are bored, restless and have too much education to tolerate a Theocracy which is getting corrupt via crude oil (least value added, least job creating form of oil) sales to Europe and/or Chindia for much longer. The complicated Iranian ruling cliques (it is not mono-dimensional) need diversions badly in order to perpetuate their reign of error, but this system is by no means unique to Iran. It just sort of works....

There is quite the love-hate relationship between Iran and the U.S., as well as a lot of the rest of the world, mostly bordering on the hate and severe mistrust aspects. For the US and Iran, each government and nation provides a GREAT EXCUSE/FOIL to the other, sort of what was going on in George Orwell's novel "1984". It always helps to hate, and to have someone to hate if you have to distract attention from a crappy economy, a nation full of stifled young people with opportunities stunted by religious wingnuts (kind of like the 2012 version of the US Confederacy, = core Republican states) and extreme prudes who work really had at imposing their own form of Hell on Earth. Maybe death is supposed to be a relief that only religious ecstasy can provide for the faithful….

So, in the US it's election time, and the perennial favorite Scourge on the Horizon - the Iranian Bomb - is in full display mode. And at the same time, this country where mass quantities of oil and natural gas have been tapped since 1916 and which sits on some of the largest oil and natural gas reserves still remaining on the planet can't refine enough gasoline from the crude oil it produces, and instead has to IMPORT refined gasoline and diesel from neighboring Kuwait. Seriously, that is some impressive incompetence. It has yet to have any LNG (liquified natural gas) facilities, yet neighboring Qatar has 7 LNG "trains" and a world scale Gas To Liquids (GTL) facility - the $18 billion Shell Oil Pearl GTL complex, the world's biggest. So the humongous Iranian methane (North Pars) field underneath the Persian Gulf remains untapped, and uneconomic…so whether it is corruption (rumor has it, there is a fair amount of that going down in Iran, as the Mullahs settle into 40 plus years of absolute power), religious zealotry, internal Iranian power struggles or just greedy factions (national and international) facing off, Iran is way behind in the value added economic model. And without access to world money and world export markets, Iran's economy is in the pits, dropping fast, as their oil can't buy them "friends", even the likes of China and Pakistan, thus violating the adage that money can buy you friends, or at least rent them, no matter how grotesque they (Iran's real rulers) become...

Anyway, it IS true that Iran's government has blown many tens of billions of dollars of resources on nukes, including U235 enrichment (uranium ore mining, yellowcake (U3O8) preparation, a fluorine and hydrogen fluoride facility, UF4 and UF6 facilities, those infernal centrifuges (which had their controllers corrupted with the Stuxnet computer super-virus) and defluorination facilities, plus the facilities to handle uranium metal and presumably make it into materials suitable for reactor fuel rods and perhaps eventually into Bombs. They may even have plutonium extraction facilities at the ready. You can almost bet that one of the reasons they don't have sufficient local gasoline production/refining capacity for their cars is the failure to invest in some new refineries…. and that's because they "bet it on the ponies" (nukes), so to speak. What a waste….

After all, the technology to make A Bomb is 65 years old, and a 2010 laptop computer has all the information processing capability needed to design one, or design a system to make one, or mass produce them. Plus, The Bomb is a known fact - so it does not need to be invented. But, Iran must also know that if they do posses A Bomb, they will need to possess lots of them to be considered credible - maybe around 40 to 100 of them, at minimum, like Pakistan, that other nuke possessing economic basket case. And they also know that if they are stupid enough to use them, they will be annihilated as a people and a country. So, the Mullahs plus their wealthy and corrupt partners/facilitators would be unable to live large on all that oil and gas money if they go full tilt stupid, and they just are not THAT stupid or any longer THAT zealous. But, obviously, it would be preferable if they never make The Bomb, or mass produce them. Indeed, it would be preferable if they would just go max out on renewables (i.e invest their oil export monies in something that would employ Iranians in mass quantities and make them better off, too), and prepare for the day when solar thermal and wind plus pumped hydro provide their energy, especially when their one-time bounty of oil reserves run down to the point where they would otherwise need to import them. Southern Iran in particular has lots of sun, not much water and is next to lots of ocean, and sun plus ocean can lead to fresh water for agriculture, pumped sea water for energy storage and an energy system suitable for the 21st century. But not if thye keep "blowing the rent money on the ponies" - alias wasting it on nuclear pipe dreams, as either Bombs and nuclear reactors.

Maybe this is another case of "Imitation is the greatest form of flattery". Iran is busy imitating the US and Europe with respect to the so-called "peaceful atom", even though wind, solar thermal and biomass are now far less expensive ways to make electricity. Heck, even PV is probably cheaper, and even in Iranian deserts, PV is still and expensive way to make electricity, but it is more job creating (especially if the PV systems were made in Iran) and on a full cost basis, probably lower cost than nukes. But, nukes are an interesting cross between religion and technology - it requires the BELIEF that nuke reactor catastrophes won't happen to justify the insanely huge investments needed for nukes. But, the inevitable ALWAYS happens, and the more corrupt, the more theocratic (as in non-nuke religious arrangements) the government/society, the more likely it is to happen per unit nuke per unit time. And just for good measure, Iran is also located on the "Ring of Fire" - where tectonic plates are colliding and really intense earthquakes happen. So if earthquake initiated nuke disaster happened in Japan, it is even MORE likely in Iran (BTW, Fukushima 1 was toast even without  the tsunami that came into shore one hour later...).

Of course, the US is right to accuse the Iranian government of ambitions to make The Bomb. After all, the way WE made The Bomb was to make nuclear reactors and grow a vast supply of plutonium, as well as separate U235 from U238 and then make a special Bomb that just used U235 as the fissile material. So did Russia, France, Britain, China and Pakistan; India used Canadian CANDU reactors and just went right to plutonium based bombs… And no one would ever accuse Pakistan of being a wealthy country, or a particularly stable one these days, either, but THEY got The Bomb, and rumor has it, about 40 of them, too, which cannot be used if Pakistan wishes to remain in existence after it uses one or many of them. It's not called Mutually Assured Destruction (MAD) for nothing…

Anyway, looks like this essay is longer than a 30 second advertisement, so that also means it can't be discussed in our Presidential Foreign Policy Debate. And given the blizzard of lies that Romney (on the two previous TV sessions) and Ryan emanated onto TV Land, well, there is no reason to assume that he would not do the same and make for a perfect 3 for 3 "Lie-athon". How to debate against someone who just says ANYTHING as long as it sort of sounds reasonable and has been vetted by supreme advertising/propaganda talent is a tough problem. Won't someone ask him about his relationship with prime scum of the litter vulture capitalist Paul Singer (, a guy who has a business model of holding millions of starving third worlders ransom for his bought on the cheap distressed Sovereign bond tactics. heck, Singer used that to shake the US Federal Government down for at least $12 billion on the Delphi deal, then fire 25,000 UAW members and offshore those auto parts jobs to China. Singer's  corporate hedgie blackmail activities are considered so vile that even Europe - home to all kinds of hedge-fund and bankster fraud via bonds these days - banned them. And just think how HATED the US becomes when tens of millions are starved so that this greedster can bulk up his winnings. Well, with the Delphi deal, we see how behavior considered uncivilized in the "First" world but practiced in the "Third" world and especially the "Fourth" world (if you think things are bad in the "third" world", well, check out areas worse than those in places like Equatorial Guinea or Somalia) can come back and bite us in the USA bad. Foreign or domestic, a human being is a human being, and after all, we only have one planet to live upon. Since it is the 21st century, maybe it is time we in the USA behave like we are a part of it. The separation of Domestic and Foreign is not at all as clear-cut and mono-dimensional as is commonly believed.

Peak Oil. Global Warming. Energy wise and Climate-wise, do unto others as you would have done unto you. Oil is not forever - we are now down to less than half of the decent quality oil reserves we started with. In North America, we have already burned through most of our "conventional natural gas" we started out with, not to mention the liquid hydrocarbons (way past half consumed). We have an awesome wind energy resource that can supply us with all the electricity, heat and most liquid fuels (along with biomass) we really need, and at a price at least 6 times less than non-slave labor made PV can ever dream of doing. What's the problem? Perhaps we could be a good example to the world, like we keep thinking that we are but actually have rarely behaved like in those "lesser worlds" numbering past "Second". And while we are at it, let's start mass producing birth control, both for us, and also a lot of the world's women. Odds are, they don't appreciate breeding themselves to an early grave, not that they have much of a say in the matter. And maybe we could set tariff rates based on prevailing wages, so we compete on the basis of quality, and not level of Dickensian workplace horror. And can't someone put Paul Singer in the slammer? How about that for an educational moment?

Ugggh. There can be so much that needs to be improved upon, including what comes out of the mouths of US Presidential candidates at what passes for debates among the top twosome, especially the more maniacal and less truthful of the pair.

 Of course, improvement can be a good thing, it actually is possible, and it's what got "clunker" wind turbines in the 1970's in California morphed into items like this Alstom 3 MW unit that just got installed in Scotland in a new addition to the Whitelee wind farm (a 217 MW project) - see And in Brazil, the first installation of ECO 122 turbine - 2.7 MW units with 122 meter rotor diameters - will soon begin. That's the one part of a cure for Global Warming, Global unemployment, Global lack of economic demand, and eventually, Peak Oil, without going into massive "die-off" of humans and roughly half the present number of living creatures on the planet. We don't need some equivalent to a "Resident Evil" plague to restore a sense of normality to the climate control system of our plant, just some common sense and perhaps a touch of decency. And if Iran can't figure out that that nukes and bankruptcy (moral, economic, ecologic, income distribution) go together like  absolute power and corruption, well, give them a bit of time and more rock music, movies, and internet access. Maybe the mullahs will be too busy downloading porn to notice how obsolete they have become, and they can join the Republican Party dominating American Taliban Teabaggers in a common alliance of blissful ignorance. Or they can all complain about those infernal wind turbines that mess up the view and inspire too many young women to limit the number of children they have to sensible levels, since they have to go off to work at making and installing more wind turbines... Yes, they can all pine for the days when oil was cheap, cars were big and fuel efficiency sucked, and how American petro-gluttony was so tightly intertwined with Middle Eastern petro-client states, who also believed in all things oil so much more than their professed religion told them to believe in their male deity.


Oh well, time to move along now. The plan is to eventually have our descendants make it to the 22nd century, and current arrangements will not let that happen. Maybe we need to change current arrangements... ya think?

Tuesday, October 16, 2012

Course Correction - Why Renewables Deployment is Not Cutting It in NY State

Every once in a while, it's good to get introspective, kick back and examine how things are progressing or regressing. And in particular, we can use the CO2 pollution rate of the US and NY State as a metric for this judging with regards to a lot of matters, including things like morality,  environmentalism and Climate Change. Are these CO2 Greenhouse Gas emanation rates rising or falling, why are they doing what they are doing, and in particular, is the CO2 pollution rate falling as fast as is required to avoid totally trashing the world's climate control system? After all, this control system is based on having the input of solar radiation equal the output of heat that is radiated from earth into the great beyond, right?

Obviously, it would be an understatement to say that we are performing (in this country, this state, this world) way below expectations with regards to stabilizing our climate control system, and thus our climate. Heck, we barely rate "minimal performance standard", even among the most optimistic environmentalists. But we are also performing way beneath our capacity in many categories, notably economic, income equality, access to health care.... the list just goes on and on. Why be any different with respect to climate related matters?

But, let's say you are the curious type, one of those inquiring minds that wants to know (and thus probably not a reader of the National Enquirer) how it's going. And, if it's not going well (and it is not, though it actually could be doing worse, and if Romney and his sidekick "Junior Mints" (alias Lyin' Ryan) get into power, well, a worsening trend would be a certainty), what can be done about it?

So, a bit of an analysis of where we presently seem to be:

There are three major types of energy usage in the U.S. associated with CO2 pollution (= combustion of fossil fuels):

A) Electricity
B) Heat
C) Liquid fuels for transportation (now mostly petroleum based)

C) is going to be the really difficult one to solve because it involves cars and suburbs, and things like subtle racism, economic classes and income inequality not to mention the math and social aspects of Peak Oil. That will not be easy to deal with. Plus, there is no ready substitute for petroleum at prevailing prices - gasoline and diesel prices at least double what are presently in effect may be required to make biofuel substitutes at the required scale and do the demand destruction that forces good mileage on the American driving public. And while we may be able to make enough biofuels for us as we presently (and wastefully) consume gasoline, diesel and kerosene, this transfer to biofuels can be possible if liquid fuel efficiency is drastically increased, and the number of vehicle passenger miles (in liquid fuel consuming vehicles) traveled per year and per person is drastically decreased (mass transit, living near where you work, etc). For example, doubling average car fuel mileage and cutting in half the vehicle miles traveled per year (in fuel consuming cars) means that only 25% of the fuels now consumed to power cars would be needed. That would be good for our economy (no more exports of money for imports of crude oil) and our world, too. Less demand also drops oil prices, and who can argue with that, either?

 So, let's ignore petroleum for the moment, since that is essentially intractable in terms of providing for the present rate of consumption of gasoline, kerosene (jet fuel) and diesel at current prices. Not. Gonna. Happen.... right away, anyway. Instead, let's concentrate on electricity. To go "all the way" (or at minimum, a lot of the way) towards a future based on renewable electricity, consider the following:

1) An economic demand for renewable electricity has to exist. That is, electricity made via renewables has to be sellable at a price equal to the cost to make it plus some reasonable profit, or at cost for public entities that say they are "non-profit". While taxpayer based subsidies can be used, given the quantity of electricity consumed and the difference between present "market" prices (almost invariably based on pollution sourced electricity), that's a lot of taxpayer money needed to "equalize pollution based and renewable electricity (even just the lower cost renewables).

2) With that demand for renewable electricity,  people, companies and municipalities can buy stuff that makes renewable electricity. Without an economic demand for renewable energy, nobody will buy renewable energy systems, and pollution sourced electricity will not be replaced by renewable electricity. Plus, the connection between positive economic activity and the renewables biz won't be significant, and that is not good at all. This applies to capitalist and "other" economic systems alike.

3) The customers for renewable energy equipment create an economic demand for labor and raw materials/components for that renewable energy equipment. That allows existing businesses supplying parts as well as services to expand, new ones to be started and above all, creates an increase in employment. The employed people ARE the economic stimulus that drives this process.

4) Employed people tend to vote and are listened to by politicians. Money making businesses are also listened to - probably too much so, but listened to nevertheless - by political leaders.  Other businesses (but businesses nevertheless) tend to own the media, too, and the media (a big determinant in public opinion about things like renewable energy) are readily "rented" by advertisers. Advertising takes money, and businesses that do not remain viable cannot purchase either media time, media access OR advertising. Businesses/employed people in the renewables biz create the social and political force needed to insure that we replace pollution based energy with renewables. The best example of this social/political/economic combined force is the auto industry in the U.S......

Next we can move onto heat. In WNY, almost all residential and commercial buildings are heated with natural gas (= Ngas, essentially none is used to make electricity), and this heat could also be provided cost effectively using electricity powered ground sourced heat pumps (also makes for much more efficient (and thus lower cost) air conditioning). In NY state, about 60% of all natural gas is used for building/home heat. Replacing natural gas usage in ANY way lowers the demand for natural gas, and this forces the prices for methane DOWN. The best way to keep gas prices low is to use less of it....

Replacing home and office heating with ground sourced heat pumps is an awesome job creation enterprise. For WNY this represents around a $7.5 billion dollar opportunity, and it avoids the massive export of wealth and income to "elsewhere" for Ngas. It also gets rid of the so-called "need" to Swiss Cheese (frack) much of southern/SE NY State that contain Marcellus or Utica shales that might contain commercially viable hydrocarbons. After all, if it is not "commercially viable", then for all practical matters, such hydrocarbons do not exist. In NY State, conversion of obsolete natural gas and oil based heating systems (if it uses oil or natural gas, it's pretty much obsolete) to heat pumps is at least a $100 billion opportunity. And this also means that there is a big opportunity for job and company creation to manufacture heat pumps and the parts that go into such systems.

Of course, about 55% of all CO2 pollution made in NY State is from oil, and most of that is transportation related. Unfortunately, we are 6 years "post Peak Oil" - the official year it happened was 2006 - so from now on we have the world wide situation of more and more transportation fuel customers chasing fewer and fewer supplies. This leads to pricing for oil based on how much price pain customers can tolerate (and it is a lot; the alternative is to do without your car), not competition where if someone tries to charge too much money, another competitor can undercut the price. Nowadays, it's all about how high prices can go without crashing the world economy and the major national/regional economies. Since 1998, prices on average have doubled every 5 years. Given the original 2.2 trillion barrels of of fairly easily exploitable oil that were present in 1800, over half is now gone, and it is being burned through at a rate of 30 billion bbls/yr. The price rise rate shows little signs of slowing, though year to year variation is bound to be significant, leading to a "noisy" trend. The economically smart will learn to get efficient with oil fast, and to evolve to something different, fast. Or fail, because the math behind depletion is pretty relentless, and like the Laws of Thermodynamics, there is no dodging them.

For example, there is approximately 215 megatons/yr of CO2 pollution made in NY (55% oil, 35% natural gas, 7% coal sourced, 3% "other" - see and About 36% of all natural gas (434 billion cubic feet/yr out of 1.2 trillion cubic feet/yr) used in NY is converted into electricity. Nationwide, the change in supply or demand for Ngas by a few percentage points can readily cause prices to double; keeping demand low is important to maintaining low Ngas prices. In NY State, we can do our part by lowering the quantity of Ngas used to make electricity in the short term (after, that vast majority of Ngas used is for heat); the prime beneficiaries will be heating customers. And at an average of $15,000 investment per residence for heat pumps, this can be a major demand on household incomes ($1500/yr for a 7.7% loan for 20 years). Even though the major target of CO2 pollution reduction should be cars (gasoline), there really is no substitute for gasoline at the present time, when crude oil is priced at roughly $100/bbl. Natural gas used to make electricity only constitutes about 12% of our state's CO2 pollution rate, but it can readily be replaced with wind turbine sourced electricity (this is a commercially viable technology, and the resource exists), recycling up to $2 billion/yr within NY instead of exporting it for Ngas even at the present below cost of production prices for Ngas. Eliminating the 7% of CO2 pollution made by coal could be done with biomass or wind turbines (also preventing the export of about $350 million/yr).

Getting rid of our CO2 pollution can be a complicated process, and done correctly this could be a major push to real wealth creating manufacturing employment. Done incorrectly (like many of the "carbon tax" proposals) and a major fee based tax dumped onto poor and middle class consumers could result. And a "carbon tax" that causes lower cost electricity (coal based) to rise will also cause ALL electricity prices to rise in NY's casino based electricity pricing system. And depending on cheap Ngas prices as a way to stimulate the economy also seems like Stupid taken to an extreme level. After all, more that $500 billion has been invested nationwide in fracking based Ngas adventures, with roughly half of that Ngas so far extracted. This is a capital cost of roughly $22/MBtu; the eventual cost may be higher than $11/MBtu. Since the present bulk price of Ngas is around $3.30/MBtu (Oct12, 2012), that is roughly a "bath" of around $360 billion (now) which MIGHT only be around $250 billion. Who would be stupid enough to invest in Ngas exploration and production with such low prices and high E & P costs?

Wind turbines presently put a cap on how much Ngas prices can be before it costs more on an unsubsidized basis to make electricity with wind versus the present subsidized Ngas pricing system. For example, the cost to make electricity from a new LWST in WNY is about 8.5 c/kw-hr (at 7.7%/20 yr money cost and 38% net output, $4.5 million installed turbine cost); obviously, it is cheaper with subsidies. If Ngas gets goes above $10.25/MBtu ($9/MBtu bulk pipeline price plus $1.30/MBtu delivery cost), it becomes cheaper to make electricity via wind turbines. If the present wind subsidies (averaging 2.8 c/kw-hr for 20 years) are allowed to remain in effect, wind turbine production costs would be around 5.7 c/kw-hr, and this is equivalent to a bulk Ngas price of $4.85/MBtu (which is still well below the cost to produce fracking sourced Ngas for most Marcellus wells). There really is not much future in Ngas for electricity, even in moderate wind places like NY State unless the Ngas boys put the political fix in.

So, instead of using the CO2 pollution rate as a metric to see how well we are doing, maybe there is another metric that can be used, and that would be the number of direct jobs in the manufacturing and installation aspects of the wind turbine business in the U.S. Before it started shutting down in preparation for the hibernation that will occur after December 31, 2012 (when certain Federal subsidies go extinct, and need to be renewed or else replaced with something better, such as a Feed-In Tariff (both things could happen, too)), about 70,000 people were employed. They supplied about 70% of the components and assembled products for the roughly 10 GW of wind turbine capacity that will be installed in 2012 in the US (around 20% of total world wind turbine capacity installed). The 2012 installation rate results from an investment of around $21 billion for that 10 GW (based on 2011 prices - see By the end of this year, total US capacity will be around 57 GW, or about 4% of US supply on an average basis.

We need to be looking at a wind industry that needs to be doing $200 to $250 BILLION per year annual business in just THIS COUNTRY. That will do something about Global Warming. That can be looked upon as a bit of a success, in contrast to the  $20 billion/yr that will be done in 2012 (10 GW of wind capacity). It will replace the 40% of the CO2 pollution made in this country at this time to make electricity within a decade. It will put a dent in natural gas consumption, initially by replacing the Ngas used to make electricity, then the coal used to make electricity and followed by replacing the Ngas used for residential and commercial heating with electricity powered heat pumps. And yes, insulation is great, but it makes more sense with renewable electricity powered heat pumps than it does with (presently) ultra-cheap natural gas.

That $200 to $250 billion/yr of wind turbine sales/installations is 100 GW capacity, which is at least 35 GW on a delivered basis. Of the 450 GW now made, we make about 27 GW with hydro, 17 GW with wind, 3 GW geothermal and around 13 GW of biomass, and roughly 80 GW of nukes (pollution based that has to go away, but more or less CO2-less electricity given that the "CO2 investment" has already been made). Anyway, the nuke biz can be classified as "stick a fork in it", and new ones are unlikely to be made in any significant numbers. And all those wind turbines are 1 million direct employees, and 4 million indirect ones. Plus, there would be lots of people who actually know people involved in making stuff for the wind biz, or involved in installing/permitting/site evaluation for them. That also matters in the social/political realm.

As for PV, consider that the frosting on the cake, the desert portion. It now takes at least 18 c/kw-hr of subsidies and PV is still ridiculously expensive. PV is a very expensive way to eliminate CO2 pollution from natural gas and coal, and is thus one of the least cost-effective ways to eliminate CO2 pollution. Solar hot water panels probably are a more cost effective way to eliminate CO2 pollution, though since they are a Rodney Dangerfield technology (they get no respect), solar hot water tends to get slighted big time.

Anyway, with a million people gainfully employed in making and installing wind turbines, maybe NY State could actually pick up it's "national share" of them, which is around 65,000 of them. That would be annual sales of around $16 billion/yr, and 6.5 GW of new installs every year, replacing about 2.5 GW/yr of pollution based electricity. Then we could really push on the heat pump biz, which could use some of that wind sourced electricity to power these up. It is a natural fit, since October to April tends to be both the heating and the windy season in NY State. And even though it would only be 65,000 new jobs statewide PLUS the heat pump manufacture PLUS the heat pump install jobs, it does sound better than the pablum that is being emanated by Gov. Cuomo and most other politicians. So many pull out that old worn sock of an idea - education - like more education will get people employed. If that were true, Buffalo and Erie County, with a college student population of ~ 70,000 (about 8%)  should have an economy booming, but no dice. Over 50% of these college students, when graduated, will be taking jobs easily done by high school or even no high school graduates. Too bad politicians aren't also required to update their skills. They could start with a review of Keynesian economics, and how it is economic demand that creates business and employment opportunities, not a massive over-supply of ultra-skilled labor and so much money rattling around just looking for a place to invest (corporate America has close to $2 trillion or more stashed overseas, awaiting a decent investment opportunity). Or, to get it local, there are tens of billion of dollars floating around in Toronto, looking for a home in renewable energy - a result of what is known as FAIT  (Fixed Asset Investment Trusts). FAIT investments are tax free to Canadian investors (capital appreciation AND income) if used for renewable energy production OR use in North America.

Hey WNY, got any investment opportunities for these Canadian billions? All you need is a long term viable FIXED price to make it happen. All you need is projects either making OR using renewable energy. Is that too much to ask? Or must gambling ideology with respect to electricity prices reign supreme?

Some Vestas V100 x 2 MW units planned for Brazil (see June 2012 wagengineering); these would be a great addition to WNY in many decent wind speed locations, like the Lake Erie coastal regions. But, there are plenty of other models to choose from in the Low Wind Speed Turbine category.

Friday, October 12, 2012

80 Days and Counting a Downward Spiral

From, a picture of a high voltage offshore electric cable being installed in one of the North Sea's many wind farms. A multi-billion dollar offshore wind farm cannot get its electricity "product" off to market without these. This one is probably an AC (3 wires in the center) with a fiberoptic communications cable (often with 48 fibers, capable of enormous data transfer rates/communications) located on the right side of the set of copper wires. The fiber optics are used to monitor and control the turbines from remote, onshore locations, hence the need for the big data transfer capability. Underwater HVDC cables are simpler (one copper wire assembly, one fiber optic set), as the ocean is the second wire (ground), but HVDC converter stations are really expensive, so long distances and huge power flows are needed to justify these expenses. An AC cable might be good for around 200 MW, while underwater HVDC ones can be rated near 500 MW.

Hint: GREAT JOB CREATION POTENTIAL and NEW BUSINESS POTENTIAL for any WNY manufacturers interested in a rapidly growing big market where quality manufacture and delivery are worth a huge premium. Anyone at the REDC up to the challenge? How about what passes for the local Chamber of Commerce?

These underwater cables can be 6" in diameter, and have a protective steel cable sheathing embedded in the high grade polyethylene (PE) outer wrap. The inside will have an inert polymer gel (for flexibility) surrounding the electric wires, which themselves tend to be surrounded by a 3/4" thick or so PE coating. These cable assemblies can be up to 50 miles long (or more) are are very expensive. Then there are the "internal" cables (between turbines, and leading to the offshore sub-station) which tend to be rated at 35,000 volts and about 40 MW and are up to half a mile long. Though these cables can be repaired, these tend to be made in custom quantities so that no splicing at sea is required. The cables and cable laying boats (trench diggers, cable ships and scour protection boats (the cable trenches have to be covered with rocks in case somebody's anchor digs one up and shorts out the wind farm)) cost about 5% to 10% of a wind farm, which is typically north of $US 1.5 billion these days (and there are lots of them under construction, in the engineering and design phase and in the planning/looking for finance).

Wind farms on and offshore are veritable job creation systems. The new low wind speed turbines are an investment of around $2.5 million per MW of capacity, but that is going up as taller towers than the standard 80 meter ones get deployed. Offshore wind is about $4.5 million per MW of capacity (about a third for turbine, and the rest is for the offshore foundation and the installation). That investment is someone else's job, (lots of someones) and this works out to around 15,500 job-years per billion dollars invested. These tend to be high value added manufacturing and construction jobs; in the case of offshore wind, there is also quite the boom in the construction of the armada of ships needed for underwater surveys, turbine installation, cable installation and supply boats for those boats; the larger pieces of marine construction rent for around $150,000 to $250,000 per day. The higher costs of the offshore projects tend to be compensated by the superior winds present offshore, especially in windy offshore areas like the US Northeast coastal waters (like those near Long Island) or those in the North Sea. Since the turbine output is proportional to the cube of the wind speed for a given swept rotor area, winds at 10 meters/second (m/s) can provide twice the energy per year as winds averaging 8 m/s, 3 times that of 7 m/s and about 5 times that of winds averaging 6 m/s. In Europe, they actually tap winds averaging 6 m/s for onshore turbines, so that is where the offshore motivation comes from...

There are a lot of similarities to offshore oil and gas platform installation and construction and fabrication, but wind turbines have essentially zero water pollution potential. There will be no equivalent to the April 2011 Macondo blowout (BP Gulf Coast) from the Greater Gabbard offshore wind farm...

The jobs created by the loans and equity investments needed to build these wind turbine arrays get repaid from the sales of electricity in Feed-In Tariff (FIT) pricing systems and those where  large PPA contracts are given (like Quebec). With pricing systems that the US has, a mix of electricity sales and avoided taxes is supposed to provide the wind farm owners sufficient revenue for repayment of loans and probably a profit (except for non-profit owners). The reason why Quebec awarded contracts to developers at near 10 c/kw-hr (9 to 11 c/kw-hr - see despite significantly superior wind speeds compared to prices obtainable in NY State is that no subsidies (other than the 20 year fixed price contract, which lowers prices by at least 2 c/kw-hr compared to developers who cannot get long term fixed prices (= essentially anyone in NY State, to date)) are granted to these developers in Quebec. The wind farm owners are expected to make a profit and pay taxes on those profits based on the prices they submit in their bids, like what businesses are supposed to do. However, in places like the U.S., electricity prices are subsidized by taxpayers (in NY, the RPS "booster revenue" administered by NYSERDA is paid for by the Systems Benefit Charge (SBC), which is a sales tax on electricity in NY State). The Federal Government has two primary subsidies - the most important one is the MACRS rapid depreciation (also used in conjunction with the paid interest deduction), and then there is the choice of the Production Tax Credit (PTC, 2.2 c/kw-hr) or Investment Tax Credit (ITC, one time 30% of investment). Together, these amount to roughly 2.8 c/kw-hr as examined over a 20 year period for a NY wind farm.

The hope is that these subsidies will lower the production cost of electricity from wind turbines enough that this electricity can be sold at "market rates", whatever those may be. In the last 6 years, in in WNY market prices have varied from 2.5 c/kw-hr to 10 c/kw-hr (monthly average), and up to 99 c/kw-hr for very brief periods for Long Island. Thus, the 2.8 c/kw-hr federal subsidies and the (roughly) 1.2 c/kw-hr (20 year basis, actually 2.4 c/kw-hr for 10 years per last auction) RPS means that a NY State wind developer can get a 4 c/kw-hr subsidy added onto the (present) ~3.5 c/kw-hr NYISO price (average statewide for the last 3 years) for a "real price" of 7.5 c/kw-hr. Even at those levels, this is a tough challenge, as this is very close to the cost to produce this electricity from wind turbines in WNY. And because of events in 2007 and 2008 (where high futures prices for electricity were locked in), no one will offer electricity price hedges anymore. The losses for just those two years of futures contracts is between $50 million/yr to $100 million/yr, for up to the next 16 years.....

The business case for basing wind turbine prices on some mix of natural gas and oil prices (these set the upper limits of electricity prices) does not exist in any logical form except as a way to hinder wind turbine development. There is no fossil fuel component to the cost to produce wind sourced electricity, and there is no reason to set wind turbine prices with natural gas prices unless one wishes to "bet on the ponies" - i.e. run the NY State electricity pricing system as a defacto casino. Bulk natural gas prices (Henry Hub) have varied by a factor of 7 based on monthly prices over the last 6 years. The present low natural gas prices appear to be ending because some market discipline is finally being imposed on the North American gas market - fracking wells (about a third of US production) deplete very fast, and by not drilling as many wells per year, any gas "excess" can rapidly switch to a "deficit". And under those conditions, gas prices can rise to the levels needed to at least provide a profit to the frackers (around $8/MBtu, versus the present $3.3/MBtu). Gas rig deployment is nowadays about 25% of what it was in 2008, when the surplus of methane got built up:

From for October 5. So, natural gas drilling is generally a money losing prospect (losses mostly taken by those investing in those wells)  these days. On the other hand, a lot of oil drilling rigs (often the same drilling units, just outfitted in a slightly different manner) are now deployed, since oil drilling is profitable at $100/bbl oil sales prices. The fracking based oil from North Dakota costs between $80 to $90/bbl to extract, and even though average yields per well average near 284 bbls/day for the initial 12 months (and declining to much less that that by the end of year 2), there are over 5000 of them at work in the Bakken fields: While those profit rates and production rates per well are far below what oil companies would desire/are used to, it's now the best that there is in North America.

Of course, the neat thing about wind energy is that it does not deplete, and there is no fracking mess to clean up after the profits have been extracted. Some of the recent trends have been to get more energy out of a given piece of land or water over which the wind blows. For offshore wind, this means ever larger wind turbines, and ones with larger rotor area to generator capacity. For example, the first 6 MW unit from Siemens (a 154 meter rotor and a gearless drive, permanent magnet generator system) was turned on this week - they already have about 300 sold. Mitsubishi announced a 7 MW one with a similar diameter that uses a hydraulic ("automatic transmission") driven generator, also for offshore.

A new happening location is Finland, which recently passed a FIT based pricing system into being, with plans of at least 2 GW capacity by 2020 (they have about 7% of that presently in place). Gamesa announced a 117 MW wind of 4.5 MW units (128 meter rotor diameter) to be placed on 140 meter tall towers. Vestas recently had their V112 x 3 MW units also put on 140 meter tall towers (about 460 feet tall). And Nordex has a 277 MW order for their N117 x 2.4 MW low wind speed turbines (LWST)  on 120 and 140 meter tall towers (location dependent). Wind speeds can be 12% faster at 140 m heights than at 80 meter heights, which means about 40% more power out at the same location/with the same turbine. Large wind turbines getting 40% to 50% net outputs in moderate wind speed locations should be the result of these efforts; in NY State, the present average is near 25%.

These turbine towers are either all reinforced concrete or hybrids (lower portion is reinforced concrete and perhaps the upper 60 meters is steel). A recent example is seen by Nordex in Bavaria - their tower is 22.5 meters at its base (73 feet). Another nifty aspect of these concrete or hybrid towers is that they almost have to be "home made", as the transport costs with distance get really extreme. The days of importing steel towers from slave labor countries like China may be ending just because tall towers are evolving from steel which is too flexible and too expensive for big tall units. And after all, it is job creation that appears to be more important that the CO2 pollution avoided by these turbines being used to make electricity. Next in importance is the forcing downwards of natural gas prices by lowering natural gas demand (tight supplies brought on by increased demand lead to high prices). Next comes the forcing down of electricity prices via the Merit Order Effect. And pulling up the rear is the feel good benefit of being a solution to Global Warming while still supplying electricity....

As for the importance of job creation (in case you missed the memo...) - even the International Monetary Fund (IMF) now recognizes the importance of growing the world economy, after spending the last few years trying to shrink it via Austerity (see One of the basics in Economics is the concept of Multiplier Effect. If this is less than 1 (as in military spending, fraudulent financial investments and general bankster type gambling), cutting that activity out is a good thing. But if the effect is greater than 1 (as in unemployment benefits (1.7) or most governmental activities like teaching (1.2)), then stopping that actually DEPRESSES economic activity on a net basis. For governmental austerity of non-military activities, this means that lowering spending actually lowers tax revenues, often more than the budget saving. Oops.... And that Austerity also depresses overall economic demand (unemployed people don't buy as much stuff as when they are employed). And less demand is bad for businesses of most every type.

Wind turbine manufacture, like auto manufacture, has a multiplier effect more like 4. But unlike cars, making more wind turbines does not increase gasoline consumption (a drag on the US economy). And so, even the wimpy tax avoidance incentives (PTC, ITC, RPS), which cost the government money, actually stimulate our economy. Maybe that is the major reason Republicans hate the wind industry, especially if it takes place during the Obama Administration. They want our economy to fail, as that maximizes the probability that Republicans will get elected, and Democrats will not get elected (for some reason the public will blame the people trying to overcome Republican obstinency and economic sabotage, instead of the Republicans who are actually doing that bad stuff). Then there are those effects on natural gas prices and profits to owners of nukes and coal burners, which get pushed back to normal levels when more wind based electricity is put into the grid mix.

So, we have 80 days before the US wind turbine industry once again goes into hibernation, with only a few still employed making wind turbines for EXPORT to places like Canada, Peru, Nicaragua and Mexico. There will be an obsession on behalf of the wind industry and their supporters to get the PTC/ITC/MACRS incentives back on track, and no discussion about FIT pricing systems, which make the tax avoidance systems look pathetic by comparison. And maybe they will win out, get an extension next year or in a lame duck session of Congress (doubtful - if the Teabaggers get skunked in this upcoming election, they will just be obstinate sour-puss types, and prevent the PTC from coming back out of shear spite). And this, despite the fact that the prime beneficiaries are Republican Congressional districts (81% of wind turbine installations are in Republican districts).

As for the U.S., the wind business is a great way to stimulate the economy, tax avoidance incentives or not. Too bad it is not at least 10 times the current size - maybe then it would be messed with to a much lesser extent. But it is not, and a lot of nuke and fossil fuel industry types want to make sure that it stays small and insignificant (at its peak, only 70,000 people were employed in it, and it supplied about 70% of the components in US installed wind turbines). It would be much more preferable to have 1 million people busy making and installing wind turbine stuff. And as for the tax avoidance losses, those would eventually amount to around $140 billion/yr (70% of $200 billion/yr in installs at 10 times above 2012 industry levels. Whether those kinds of tax losses would stimulate interest in Feed-In Tariffs... well who knows? After all, just think of the legal and other consulting fees that go with advising clients on how to avoid at least $140 billion each year for taxes. Heck, with those fees, the PTC might never end....

Monday, October 8, 2012

The G.U.Ts. of Erie County and Fracking NY Politics

G.U.Ts. is the plural of form of G.U.T., an acronym for Grand Unified Theory. In physics, this boils down to the problem of uniting the Standard Model with Gravity (alias all four forces), something that eluded Einstein for several years (though the Standard Model was not established until 20 years after Big Al died). The Standard Model unifies the electromagnetic, weak nuclear (as in nuclear fission and fusion) and strong nuclear forces into 16 basic particles - 6 quarks, 6 leptons and four gauge bosons (see, but where gravity fits in is still elusive (maybe String Theory can provide unification?). Maybe the recent proof (remember the day - September 12, 2012 - it should go down in history.... of the Higgs Boson will help in uniting all four forces into one consistent model, but this is amazingly complicated.

But, compared to what political scientists (as if that is not an oxymoronic term) attempting to describe/quantify the permutations of Erie County Democratic politics have to do, maybe the particle physicists have it easy. After all, the physicists can use concepts like truth and logic, and concepts like de-facto but still sort of legal bribery, arm-twisting, intimidation and conflicting loyalties are not supposed to play any role with elementary particle physics. And then there's the money - physicist's theories often make useful future industries - things like LED's, high power lasers, electron beams and perhaps soon quantum super-computing. For politicians, money is usually the means to get elected (it buys advertising on TV and in print/on the internet), and shaking down those with money (in ways defined as legal) and the willingness to "invest' in politicians for later financial gain happens all across the political spectrum, though the Republicans (the party of the rich) tend to get more of the available pile used for political purposes.  A lot more. And for all you gamers, try playing the new version of Resident Evil on a quantum supercomputer (physicists, again) and coming out ahead - you'll be lucky if you make it out as a zombie. Odds are, that computer will totally kick your butt.

Erie County Democrats recently elected a new Chairman, but the election process was pretty ugly, marred by interference and meddling from NY's Governor, who, by the way, got royally defeated along with his proxy. But, it is probably best to compare Gov. Andrew Cuomo to rust, as in Neal Young's saying that rust never sleeps. If defeated in this instance, the Governor and his allies will probably find some other point of weakness, some other position to attack whoever they are attacking. And in many ways, the "whoever" or "whatever" seems a bit nebulous, but odds are, fracking seems to be involved.

Some fracking facts have come out lately with regards to the Marcellus shale efforts in Pennsylvania and West Virginia. There are now something like 5000 wells permitted, but the bloom is off the rose, and it is turning into quite a financial hoser. There are a few lucky ducks ("sweet spot tappers"), but looks like those "sweetie" wells in the Marcellus are the minority of fracked wells, as is the case with most large scale fracking operations. Yes there is natural gas there, but in general it just can't be extracted cheaply, and especially at current market prices for natural gas. So, money-wise, there is no natural gas worth extracting except in rare cases in the "Marcellus Play".

Here's a real dandy of an article (caution, it has math in it!): A couple of key take-aways are that there is a $500 billion debt load associated with Ngas shale based exploration in the US right now ($22/MBtu for the gas produced to date) for gas with a present bulk sale price of $3/MBtu. Financially, that's quite some ugly on a stick. And the average Estimated Ultimate Recovery (EUR) for these efforts is 1.43 billion cubic feet (bcf) per well. Fracking wells deplete really fast, and most of the gas that will ever come from them is gone in 5 years (which is near the average age of US fracked shale gas wells).

As for how much it costs to drill and frack those wells, try this one on for size: (Washington County, Pa)

The costs to drill a Marcellus Well breaks down this way:
Rank      Amount        Description

====  ========  ================
# 1      $2,500,000    Hydraulic fracturing

# 2      $2,100,000    Land acquisition and leasing

# 3      $1,200,000    Horizontal drilling

# 4         $663,000    Vertical drilling

# 5         $472,000    Production to gathering

# 6         $400,000    Site Prep

# 7         $200,000    Completion

# 8           $10,000    Permitting
            $7,545,000    Total (1 well on 640 acre PU)

Notice that it has nothing for decommissioning or for waste disposal; these will add to costs. Dividing $7.545 million by 1.43 bcf gives $5.28/kcf (kcf = a thousand cubic feet). Costs like financing and investor returns (what investor returns?) are also not listed. And these are not supposed to be break-even affairs, but highly profitable ones. Supposed to be ....

So who makes money off of fleecing investors at this high rate? Well, lots of banks (loans to investors, speculators, corporate take-over specialists), those supplying the services, goods and expertise to do fracking, real estate speculators, stock speculators, lawyers (lots of land leases), and more banks when it comes to futures markets and commodities trades. States make a one time killing on selling leases, and states wise enough to put a severance tax on gas extracted (like Texas, but not NY!) also get money.

And as long as the glut of gas continues, large scale consumers of gas (like the NY City metro region, certain petrochemical businesses, some electricity speculators) also get a bargain. Consumers can live large as producers sell gas below the cost needed to extract and deliver it along with a reasonable profit. But that can't go on forever, as the investors in those money losing wells can only get tapped for so long before they stop behaving like really stupid suckers in a con game. Eventually, they will get tapped out.

So why the rush to repeat this boondoggle in NY State? Wouldn't it just be smarter to raise marginal income tax rates on obscenely rich people rather than trash a lot of the Southern Tier? And if Ngas prices fianlly do rise back up to the level needed for at least minimal profitability (north of $8/MBtu), a few things happen:

1) Coal becomes a much cheaper way to make electricity than does natural gas
2) Biomass becomes a much cheaper way to make electricity than does natural gas
3) Wind turbines become a less expensive than Ngas burning way to make electricity
4) It becomes cheaper to use groundwater sourced heat pumps (powered by wind turbines, no less) to provide heat for residences and businesses that by burning Ngas.

Now, how cool is that! And add in the other coolness factor of wind and biomass (they create lots of jobs in the growing/harvesting of biomass and manufacture of wind turbines parts/systems/installation of them), and it turns out that fracking sourced gas is about as useful as bringing a fully loaded set of skunks to a political meeting (EC Dems, which may have metaphorically happened) or a high society wedding. Only a nasty person would do such a thing.

And the same goes for bringing that plague known as fracking to NY State, IMHO. After all, after this election, fracking will be on the legislative agenda, once again. And electing those opposed to fracking NY could have great effects upon NY's economy and to our environment.


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