Tuesday, July 16, 2013

What We Know


We know that it's summer at this time of year around here, and this is the hot and sweaty part of the year. We know that summers tend to be a bit warmer than they used to, and that it's not so much the daytime high temperatures that tend to be breaking records as it is the temperature of the coolest part of the nights, which are getting warmer as Global Warming becomes ever more pronounced. We know that the main cause of the warming trend is  the ever greater concentration of CO2 in our air, and we know that there are ways to make lots of electricity at affordable prices that does not co-produce CO2 pollution and can also be done at a guaranteed zero probability of "nukes gone wild". Heck, we even know that the cows in the picture look pretty happy in this picture from last fall taken at the new Marble River wind farm in the very northeastern part of NY State. In fact, they appear to be unfazed by the presence of the of some of the biggest wind turbines installed in North America - 94 meter tall towers and ~ 56 meter long blades that can kick out 3 MW in windier periods. Evidently, they think that infrasound issues are just a bunch of "bull".

We know this wind farm of 210 MW capacity cost around half a billion dollars to install, and it should be able to make an average of 70 MW or more for around 25 years, or more. We know that the natural gas sellers in NY State and the owners of the six nukes in NY State are not happy about this project AT ALL. Odds are, they HATE it; these corporate wealthy types can get quite emotional about a lot of things and hate is a very primal, very motivating emotion (and often one that leads to a lot of evil things getting done). We know the frackers of Fracksylvania (new name candidate for the State of Pennsylvania) are most definitely not pleased about this project,  to put it mildly. After all, for a typical NY State Combined Cycle natural gas fired power plant (or set of plants), the Marble River project just trashed the sale of roughly 4.7 billion cubic feet of natural gas every year for at least the next 25 years, or roughly 0.4% of our state's average natural gas consumption. This may not sound like much, but we know there is still a glut of natural gas on the US market in 2013, despite drastically curtailed drilling rates for shale based natural gas in the US. And you can't make a methane surplus go away fast enough if fossil sourced methane consumption rates slow down, just because an upstart company from Portugal decided to put a wind farm in the North Country. And given the somewhat rigged casino pricing system for natural gas in this country (neither "free competition" nor "monopoly" but "oligopoly", with lots of lag times between pricing and when drilling and gas production occurs), we know that it is tough for a price rise to occur if there is a glut of natural gas STILL on the market - see this snapshot of the oil and gas drilling business for June of 2013, care of http://intelligencepress.com/features/bakerhughes/:


We know that when a natural gas field gets drilled, it is usually the best locations in that field that get tapped first. As a field like the Marcellus in Central Fracksylvania (Fa) gets tapped, the initial wells deplete fast compared to "conventional" ones and new wells are required to be tapped to maintain or even expand natural gas production rates. We know that these wells in "Fa" will average around 1.3 billion cubic feet over their useful lifetime (around 6 years) when at least 90% of whatever methane will get extracted does get extracted, though some will perform better than others, because methane deposits in the Marcellus are not uniformly distributed. We know these wells tend to average about $7.5 million in cost before the waste disposal costs for several million gallons of trash per well are even considered. Drillers will need an average of at least $8/kcf (kcf = a thousand standard cubic feet of methane) to meet the financial expectations of their investors, though again some lucky wells can get by on lower prices for a while, which means others will lose even more money…. And we know what not meeting investor expectations means, and it is not good (think axe and murderous rampages.…. or the corporate equivalent thereof).

We know that bankers are not loaning money to drillers in methane only "plays" much any more, because so much money has been lost on so many wells and drilling operations. Add in money costs, waste disposal and the continuing costs (water removal from the gas, "cleaning" operations, compressor energy usage as the wells deplete) and the need to make at least $1 million/well/year in profit, and not too many of these wells make the money promised by the project developers. If the average actual production is only 1.3 billion cubic feet per well over its lifetime (EUR = Estimated Ultimate Recovery, though actual recovery tends to be less, especially in the initial 5 years of operation), we know that you can't deliver as promised when prices are what they are these days. And we know that all acreage in "plays" like the Marcellus do not yield the same quantity of methane. We know that basing expectations of the haul of fossil fuel from a small number of the initial wells drilled in the best spots (thickest layers, highest organic content, and often the highest Radon content, too) is nothing short of foolish.

But we know there are a lot of foolish people in our country, especially in the financial sector, people who get ever more foolish when it is "Other Peoples Money" - alias OPM - that they are playing with. Why, just a few years ago, more than $4 TRILLION in wealth was abstracted from most of the American population via a particular kind of fraud known as "appraisal fraud" and "control fraud". Once the housing market crashed along with the value of "Mortgage Backed Securities", the question became "OK, where's the next bubbles to be had?" Fracking for methane seems to be one of them - especially the part about duping investors out of their money, and causing drilling companies to go bankrupt or nearly so, which allows those financing these deals to "re-sell" these drilling schemes. But it looks like that's getting a bit old these days, as we know that all wells are not equally as productive. Not everything is a "sweet spot". But we also know that there seems to be a big tolerance for wanton criminality in the financial sector, and that the saying "Buyer Beware" is more relevant than ever. See 
http://www.resilience.org/stories/2013-03-28/the-shale-gale-is-a-retirement-party, for an explanation of why shale gas is really a societal "retirement party" and not something that will last…

So where are the easy dollars to be had? Must we now have to suffer for "slow and steady"? How dull, or so it seems to so many "Hedgies" (Hedge Fund managers and "operators"). Does this mean that they might have to do what Energies de Portugal and its US subsidiary (EDPr, alias Horizon Wind) did, and invest for the long term in projects like the Marble River wind farm? OMG! Hedgies tend to be in it for the quick bucks, and not for the 20 to 25 year type of investment. They could care less if the cows are happy, or if the farmers on whose land the wind turbines are placed that give them that nice rental income are doing OK and the communities "hosting" wind turbines are no longer heading towards the Abyss (fiscally speaking) due to PILOT payments income from wind turbine projects. As for employing American workers (the Vestas V112 units were partially made in Colorado), Hedgies could care less. It's all about getting above average returns for their investors and themselves, like that is even a mathematically possible thing for everyone to do at the same time, or even for just all of the Hedgies… We know that if you add up the returns from all Hedgie investments, or even a random sample of them, that it is impossible for all of them to get an above average yield, or even most of them, especially when a few get really lucky or else do something really criminal and yet almost never get caught (and that rarely involves luck…..).

Yeah, we know a lot of that has gone on in the last decade, and the odds on putting white collar criminals away is somewhere between slim and none these days. This is especially true for the Obama Administration, despite the fact that the Hedgies, as the epitome of the "1%", tend to really hate the Obama Administration in general, and President Obama in particular. But, we also know that there tend to be a higher concentration of psychopaths amongst this set of people, and maybe it's not even personal - just money and its ever-loving pursuit above all else,

Anyway, we know that in northern part of North America (US and Canada), there is at least 40 times as much wind energy that could be used to make electricity compared to what is used nowadays. This can be made at a cost of less than 20 c/kw-hr (using 5% interest for 20 year money costs, subsidies not included) but averaging less than 10 c/kw-hr, which tends to be less costly than any other form of renewable energy in this part of North America capable of delivering electricity in such quantities. But if we just stick to the 2.5% of this wind potential that can be made and delivered at least cost, required production costs are in the 5 c/kw-hr range. And we know that, for the most part, you only need what is consumed at that moment, so all that excess is "insurance". We know that it is possible to store considerable quantities of electricity via Pumped Hydro, and that that is a good way to even out the variations in wind speeds that can't be easily handled via regional grids. But there seems to be a distinct lack of will power to do this in our country, a fact that should make none of us proud…, oh yes, unfortunately, we know that, too.

And so, we know that each summer will tend to get warmer than the last summer, especially as measured by how low the temperature dips to at night. We know that the correct analogy is the frog being slowly boiled in water, though no insult is meant to the frogs, in this case. We know that a lot more wind farms like the Marble River one, and ones bigger and smaller (minimum size, is, of course, a single decent sized turbine) are what is needed top keep natural gas prices depressed, and keep the vast majority of the shale gas buried in the ground, where it belongs. But we also know, or at least some of us do, that those who want to make a massive haul of money when natural gas prices spike need to do something about more wind farms getting deployed in the US and Canada. If they can't get rid of continued new wind turbines from being installed and connected to the grid, the giant bet on those future price spikes is just not going to pay off. The natural gas industry has lost close to $10 billion per quarter for the last 18 financial quarters (since January of 2009), and tolerance for the lack of market discipline and the frauds needed to pull that feat off is wearing thin among the "powers that be". And, as was said earlier, not meeting expectations is simply not allowed in Big Business. That we know for sure, and it does not matter how the losses are staunched and how the profiting/profiteering is resumed, just that it is, and soon.

So next time you hear some hucksters and harpy imitators going on about the hazards and horrors of infrasound (sound that humans cannot hear, below 20 Hz) made by commercial scale wind turbines, if you listen carefully, you might just hear the sounds of the pollution based energy industries doing some "astroturfing". They need to get rid of wind turbine based competition ASAP, lest their rulers start going on a rampage, and in defeating/eliminating their only serious competition (wind turbines), they will pretty much get rid of any significant competition from renewable energy. We know that around 40% of the CO2 pollution and a lot of the methane pollution comes from coal and natural gas used or intended to be used for electricity production. We know that propaganda can work wonders in our media centric country if enough money is spent on it and it is competently carried out, and the gas business is certainly deep in the hole already, so why not go all in?

What we don't know is whether the gas business can succeed in killing of their competition via a smear campaign, or set of them. Or if they can increase demand for methane to get out of the low prices still present 5 years after the Great Recession happened, and/or can get enough gullible and way less than intelligent politicians to approve the export of tracked gas so that we can export raw materials and continue to import highly value added manufactured things into our country. And in NY State, we don't even know if the Orangeville wind farm near Warsaw, NY will be the last set of commercial scale wind turbines installed for the next 5 years, or more. After all, it seems that our Governor is a lot of talk and not much on action in this matter, and he hasnt figured out that setting electricity prices via a casino mechanism is great for fossil fuels and nukes and not very good for renewable energy systems. Or maybe he has. But in all likelihood, that is something that we will never know, for sure….


Top image from http://www.northcountrypublicradio.org/news/story/20913/20121120/expiring-tax-credits-blow-ill-wind

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