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Category — LNG

The Bear Growls a Bit More Softly Now: New Adventures in Pipelinestan

In the wake of the BP well blowout in the Gulf of Mexico and the attempted terrorist bombing of New York’s Times Square, the broadcast media have been full of the sackcloth and ashes crowd pronouncing once more the end of the hydrocarbon era and the vital need for the U.S. to “break our oil addiction” ASAP.

Their soundbites start with a half-truth and end with a fallacy.  We are told that “60 percent of U.S. energy supplies still come from oil and gas,” with the implication that (i) all of that is imported; and (ii) the pittance that we produce domestically all comes from offshore facilities.

 It is true that 60 percent (actually 62.5%) of our energy comes from oil and gas.  But the portion that comes from natural gas, about 24% of total U.S. energy supply, is 85 percent domestically sourced.  With oil and liquids, about 45% is domestically sourced.  Sure, we use a lot of oil and gas, and most of it, more than 60%, comes from the U.S.  More than two-thirds of that domestic production comes from onshore production facilities.

The fallacious recommendation that emanates from the incomplete data is that the U.S. has no chance to remain a viable society and economy if we continue to rely on all this foreign (onshore, Alaska, ethanol, Saudi Arabia, Russia, what’s the difference?) and offshore supply.  ”Therefore, we have no alternative but to turn to  .   .   .   wind, solar, biomass?”  The agenda pushers never want to let a good crisis go to waste.  But very quietly, mostly out of sight of the energy policy crowd in Washington, we have seen the emergence of major new sources of domestic energy production – natural gas from coalbeds and shale formations.  So great has been the rise in domestic gas production that it has weakened gas prices worldwide, benefitting users in homes and industry.

Moreover, the US example is setting off emulation in Australia, Canada and China, as well as Europe, promising still further major gas production increases.  Without this production the major conventional gas powers – Russia, Qatar, Algeria, Iran, Libya, Nigeria – would be able to garner ever-increasing market share, and with that monopoly rents and political power. [Read more →]

May 7, 2010   No Comments

Power Generation Industry Forecast: Natural Gas as Fuel of Choice, Little Change for Other Technologies (Part I of II)

“It’s déjà vu all over again,” said Yogi Berra. The baseball Hall of Famer could easily have been predicting the coming resurgence of new natural gas–fired power plants. A couple of nuclear plants may actually break ground, but don’t hold your breath. Many more wind turbines will dot the landscape as renewable portfolio standards dictate resource planning, but their peak generation contribution will continue be small (and disappointing).

The most interesting story for 2010 is that the dash for gas in the U.S. has begun–again. In Part II or this two-part report, we will explore the challenges facing nuclear, coal, and renewable energy electricity sources in 2010 and beyond.

Business Climate–Energy Demand

As we enter the second decade of the 21st century and a second year of avoiding an economic collapse, the U.S. business climate seems to have become more positive. A growing sense of cautious optimism is appearing. A mid-October survey by the National Association for Business Economics concluded that the largest recession since the 1930s Great Depression is over, and economic growth is likely for the U.S. economy in 2010. The government announced that third-quarter 2009 economic growth hit 3.5%, the first positive growth in five quarters, suggesting an end to the recession (Figure 1).

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Figure 1. Electricity growth resumes in 2010. After a two-year contracting market, total electricity consumption in the U.S. in 2010 is expected to increase. Source: EIA, November 2009 Short-Term Energy Outlook

The implications for electric generation are mixed. What gets built depends on a complex stew of credit markets, regulatory responses, economic growth, technology, and national politics. Some of those are leading economic indicators, some lagging, some not clear at all.

Renewable generation has not made a convincing economic case in the market. But politically it has the upper hand. Coal and nuclear continue to take a political battering at the hands of the renewables advocates. The politics of energy is being upended by new implications for natural gas. The political and regulatory landscape is a dog’s dinner (a Britishism for an undigested mess).

The need for new generation to supply load appears less urgent than in previous years. According to the EIA, demand for electricity has fallen since the economy tanked in 2008. The demand down-tick is the first since the EIA has accumulated these statistics in 1977.

Facing a sluggish economy, consumers have reduced thermostats, cut off air conditioning, and dialed down appliances, leading to the decline in electricity demand. A cool 2009 summer in most of the U.S. helped to reduce air conditioning load. Net electric generation dropped 6.8% from June 2008 to June 2009. That was the 11th consecutive month that electric generation slid downward, compared to the same month in the prior year.

Analysts say they expect the declining demand trend to reverse when economic growth shows up at the beginning of 2010 or thereabouts. But they have been wrong before and may be wrong again. The EIA, the U.S. Department of Energy’s statistical agency, says it suspects the decline in demand will continue into early 2010, despite what appears to be a bottoming-out of the recession.

Many electric power company long-term capital spending plans have been built on the dire forecasts of the past decade, particularly from NERC. For years, the conventional wisdom in the generating industry was that the U.S. was running out of generating capacity. Year after year NERC had the same message: It’s time to build baseload, particularly nuclear and coal, and make major investments in high-voltage transmission.

Maybe not. Intermediate-load and peaking units, suggesting new gas plants, may be the ways to hedge big investment bets on future baseload units. A recent Washington Post article quoted anonymous sources as saying that new nuclear plants aren’t economical until natural gas prices are above $7/mmBtu. That’s more than double the current price. [Read more →]

January 13, 2010   2 Comments

Energy Innovation as a Process: Lessons from LNG

Modern technical innovations operate unlike the traditional, pre-industrial advances: they too have their phases of gradual improvements based on tinkering and everyday experiences with running a machine or a process. But the initial accomplishments result almost invariably from deliberate and systematic pursuits of theoretical understanding. Only once that knowledge is sufficiently mastered the process moves to its next stage of experimental design followed by eventual commercialization.

That is precisely how Charles Parsons, Rudolf Diesel, and their collaborators/successors invented and commercialized the two machines that work–unseen and unsung–as the two most important prime movers of modern economies:

steam turbo-generators, which still generate most of the world’s electricity and

diesel engines, which power every tanker and every container ship besides energizing most of the trucks and freight trains.

The process of process is also how we got gas turbines (jet engines) and nuclear reactors, and many other taken-for-granted converters and processes. Ditto for solid state electronics that has evolved from crude transistors in the Bell Laboratories in the late 1940s to the now ubiquitous microprocessors.

Moore’s Curse

Unfortunately, this conquest of the modern world by microchips has helped to create a warped image of a universally accelerating technical progress, one that has been unthinkingly promoted both by computing gurus (Ray Kurzweil makes perhaps the most egregious claims, as he believes that the 21st century will be equivalent to 20,000 years of progress at today’s rate of advances) and politicians (nobody can compete with Al Gore in this category with his call for completely repowering America in just one decade). [Read more →]

January 11, 2010   1 Comment