NewEnergyNews: TODAY’S STUDY: SPENDING ON OFFSHORE WIND IS A BETTER INVESTMENT THAN SPENDING ON NAT GAS

NewEnergyNews

Gleanings from the web and the world, condensed for convenience, illustrated for enlightenment, arranged for impact...

The challenge: To make every day Earth Day.

YESTERDAY

  • Weekend Video: Bill Nye, The Science Guy, Explains New Energy And Climate Change
  • Weekend Video: This Changes Everything
  • Weekend Video: The People’s Climate March Is Sunday
  • THE DAY BEFORE

  • FRIDAY WORLD HEADLINE-CHINA, INDIA, RUSSIA LEADERS TO SKIP UN CLIMATE SUMMIT
  • FRIDAY WORLD HEADLINE-WORLD’S OFFSHORE WIND TO HIT 40 GW BY 2020
  • FRIDAY WORLD HEADLINE-SOLAR IS THE SOLUTION FOR SOUTH ASIA
  • FRIDAY WORLD HEADLINE-PARIS DIGS GEOTHERMAL
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    GET THE DAILY HEADLINES EMAIL: CLICK HERE TO SUBMIT YOUR EMAIL ADDRESS OR SEND YOUR EMAIL ADDRESS TO: herman@NewEnergyNews.net

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    THE DAY BEFORE THE DAY BEFORE

    THINGS-TO-THINK-ABOUT THURSDAY, Sept. 18:

  • TTTA Thursday-THE WORLD HAS 15 YEARS TO DO THE RIGHT THINGS
  • TTTA Thursday-WIND MAKES THE GRID MORE RELIABLE
  • TTTA Thursday-SOLAR OIL DRILLING
  • TTTA Thursday-A SPORTS CAR THAT RUNS ON SALT-WATER
  • THE DAY BEFORE THAT

  • THE STUDY: THE GREEN TRANSITION – MONEY KEEPS COMING TO NEW ENERGY
  • QUICK NEWS, Sept. 17: THE NEWEST NUMBERS ON BIRDS AND WIND; BIG SOLAR COMES TO THE SOUTHEAST; WHERE THE EV CUTS EMISSIONS MOST
  • AND THE DAY BEFORE THAT

  • THE STUDY: THE BENEFITS OF PUMPED HYDRO STORAGE CALCULATED
  • QUICK NEWS, Sept. 16: THE ENERGY TRANSITION TAKES SHAPE; A LABOR-ENVIRO CALL FOR NEW ENERGY, NEW WIRES; ADVANCES IN WATER POWER
  • THE LAST DAY UP HERE

  • THE STUDY: RENEWABLES IN THE COMING ARAB WORLD
  • QUICK NEWS, Sept. 15: SOLAR SUCCEEDING ON PRICE; EVEN MORE WIND THAT HONDA EXPECTED; THE HUGE UNRECOGNIZED BENEFITS OF EFFICIENCY
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    Anne B. Butterfield of Daily Camera and Huffington Post, is a biweekly contributor to NewEnergyNews

  • Another Tipping Point: US Coal Supply Decline So Real Even West Virginia Concurs (REPORT)

    November 26, 2013 (Huffington Post via NewEnergyNews)

    Everywhere we turn, environmental news is filled with horrid developments and glimpses of irreversible tipping points.

    Just a handful of examples are breathtaking: Scientists have dared to pinpoint the years at which locations around the world may reach runaway heat, and in the northern hemisphere it's well in sight for our children: 2047. Survivors of Superstorm Sandy are packing up as costs of repair and insurance go out of reach, one threat that climate science has long predicted. Or we could simply talk about the plight of bees and the potential impact on food supplies. Surprising no one who explores the Pacific Ocean, sailor Ivan MacFadyen described long a journey dubbed The Ocean is Broken, in which he saw vast expanses of trash and almost no wildlife save for a whale struggling a with giant tumor on its head, evoking the tons of radioactive water coming daily from Fukushima's lamed nuclear power center. Rampaging fishing methods and ocean acidification are now reported as causing the overpopulation of jellyfish that have jammed the intakes of nuclear plants around the world. Yet the shutting down of nuclear plants is a trifling setback compared with the doom that can result in coming days at Fukushima in the delicate job to extract bent and spent fuel rods from a ruined storage tank, a project dubbed "radioactive pick up sticks."

    With all these horrors to ponder you wouldn't expect to hear that you should also worry about the United States running out of coal. But you would be wrong, says Leslie Glustrom, founder and research director for Clean Energy Action. Her contention is that we've passed the peak in our nation's legendary supply of coal that powers over one-third of our grid capacity. This grim news is faithfully spelled out in three reports, with the complete story told in Warning: Faulty Reporting of US Coal Reserves (pdf). (Disclosure: I serve on CEA's board and have known the author for years.)

    Glustrom's research presents a sea change in how we should understand our energy challenges, or experience grim consequences. It's not only about toxic and heat-trapping emissions anymore; it's also about having enough energy generation to run big cities and regions that now rely on coal. Glustrom worries openly about how commerce will go on in many regions in 2025 if they don't plan their energy futures right.

    2013-11-05-FigureES4_FULL.jpgclick to enlarge

    Scrutinizing data for prices on delivered coal nationwide, Glustrom's new report establishes that coal's price has risen nearly 8 percent annually for eight years, roughly doubling, due mostly to thinner, deeper coal seams plus costlier diesel transport expenses. Higher coal prices in a time of "cheap" natural gas and affordable renewables means coal companies are lamed by low or no profits, as they hold debt levels that dwarf their market value and carry very high interest rates.

    2013-11-05-Table_ES2_FULL.jpgclick to enlarge

    2013-11-05-Figure_ES2_FULL.jpg

    One leading coal company, Patriot, filed for bankruptcy last year; many others are also struggling under bankruptcy watch and not eager to upgrade equipment for the tougher mining ahead. Add to this the bizarre event this fall of a coal lease failing to sell in Wyoming's Powder River Basin, the "Fort Knox" of the nation's coal supply, with some pundits agreeing this portends a tightening of the nation's coal supply, not to mention the array of researchers cited in the report. Indeed, at the mid point of 2013, only 488 millions tons of coal were produced in the U.S.; unless a major catch up happens by year-end, 2013 may be as low in production as 1993.

    Coal may exist in large quantities geologically, but economically, it's getting out of reach, as confirmed by US Geological Survey in studies indicating that less than 20 percent of US coal formations are economically recoverable, as explored in the CEA report. To Glustrom, that number plus others translate to 10 to 20 years more of burning coal in the US. It takes capital, accessible coal with good heat content and favorable market conditions to assure that mining companies will stay in business. She has observed a classic disconnect between camps of professionals in which geologists tend to assume money is "infinite" and financial analysts tend to assume that available coal is "infinite." Both biases are faulty and together they court disaster, and "it is only by combining thoughtful estimates of available coal and available money that our country can come to a realistic estimate of the amount of US coal that can be mined at a profit." This brings us back to her main and rather simple point: "If the companies cannot make a profit by mining coal they won't be mining for long."

    No one is more emphatic than Glustrom herself that she cannot predict the future, but she presents trend lines that are robust and confirmed assertively by the editorial board at West Virginia Gazette:

    Although Clean Energy Action is a "green" nonprofit opposed to fossil fuels, this study contains many hard economic facts. As we've said before, West Virginia's leaders should lower their protests about pollution controls, and instead launch intelligent planning for the profound shift that is occurring in the Mountain State's economy.

    The report "Warning, Faulty Reporting of US Coal Reserves" and its companion reports belong in the hands of energy and climate policy makers, investors, bankers, and rate payer watchdog groups, so that states can plan for, rather than react to, a future with sea change risk factors.

    [Clean Energy Action is fundraising to support the dissemination of this report through December 11. Contribute here.]

    It bears mentioning that even China is enacting a "peak coal" mentality, with Shanghai declaring that it will completely ban coal burning in 2017 with intent to close down hundreds of coal burning boilers and industrial furnaces, or shifting them to clean energy by 2015. And Citi Research, in "The Unimaginable: Peak Coal in China," took a look at all forms of energy production in China and figured that demand for coal will flatten or peak by 2020 and those "coal exporting countries that have been counting on strong future coal demand could be most at risk." Include US coal producers in that group of exporters.

    Our world is undergoing many sorts of change and upheaval. We in the industrialized world have spent about a century dismissing ocean trash, overfishing, pesticides, nuclear hazard, and oil and coal burning with a shrug of, "Hey it's fine, nature can manage it." Now we're surrounded by impacts of industrial-grade consumption, including depletion of critical resources and tipping points of many kinds. It is not enough to think of only ourselves and plan for strictly our own survival or convenience. The threat to animals everywhere, indeed to whole systems of the living, is the grief-filled backdrop of our times. It's "all hands on deck" at this point of human voyaging, and in our nation's capital, we certainly don't have that. Towns, states and regions need to plan fiercely and follow through. And a fine example is Boulder Colorado's recent victory to keep on track for clean energy by separating from its electric utility that makes 59 percent of its power from coal.

    Clean Energy Action is disseminating "Warning: Faulty Reporting of US Coal Reserves" for free to all manner of relevant professionals who should be concerned about long range trends which now include the supply risks of coal, and is supporting that outreach through a fundraising campaign.

    [Clean Energy Action is fundraising to support the dissemination of this report through December 11. Contribute here.]

    Author's note: Want to support my work? Please "fan" me at Huffpost Denver, here (http://www.huffingtonpost.com/anne-butterfield). Thanks.

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    Anne's previous NewEnergyNews columns:

  • Another Tipping Point: US Coal Supply Decline So Real Even West Virginia Concurs (REPORT), November 26, 2013
  • SOLAR FOR ME BUT NOT FOR THEE ~ Xcel's Push to Undermine Rooftop Solar, September 20, 2013
  • NEW BILLS AND NEW BIRDS in Colorado's recent session, May 20, 2013
  • Lies, damned lies and politicians (October 8, 2012)
  • Colorado's Elegant Solution to Fracking (April 23, 2012)
  • Shale Gas: From Geologic Bubble to Economic Bubble (March 15, 2012)
  • Taken for granted no more (February 5, 2012)
  • The Republican clown car circus (January 6, 2012)
  • Twenty-Somethings of Colorado With Skin in the Game (November 22, 2011)
  • Occupy, Xcel, and the Mother of All Cliffs (October 31, 2011)
  • Boulder Can Own Its Power With Distributed Generation (June 7, 2011)
  • The Plunging Cost of Renewables and Boulder's Energy Future (April 19, 2011)
  • Paddling Down the River Denial (January 12, 2011)
  • The Fox (News) That Jumped the Shark (December 16, 2010)
  • Click here for an archive of Butterfield columns

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    Some details about NewEnergyNews and the man behind the curtain: Herman K. Trabish, Agua Dulce, CA., Doctor with my hands, Writer with my head, Student of New Energy and Human Experience with my heart

    email: herman@NewEnergyNews.net

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    Your intrepid reporter

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      A tip of the NewEnergyNews cap to Phillip Garcia for crucial assistance in the design implementation of this site. Thanks, Phillip.

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    Pay a visit to the HARRY BOYKOFF page at Basketball Reference, sponsored by NewEnergyNews and Oil In Their Blood.

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  • Wednesday, January 23, 2013

    TODAY’S STUDY: SPENDING ON OFFSHORE WIND IS A BETTER INVESTMENT THAN SPENDING ON NAT GAS

    A Study into the Economics of Gas and Offshore Wind; A report for Greenpeace and WWF-UK

    November 2012 (Cambridge Economics)

    Executive Summary

    Key Findings

    • This research finds that, compared to a future power system more heavily dependent on gas, large-scale investment in offshore wind would impact positively on UK GDP and employment. GDP increases by 0.8% by 2030 and there are over 100,000 additional jobs by 2025, falling to 70,000 additional jobs by 2030. The development of offshore wind capacity would stimulate construction and manufacturing demand over the period to 2030. In the longer term, it would prevent locking the UK into natural gas usage and imports.

    • However, the scale of the macroeconomic impact depends on the location of the supply chain for offshore wind equipment. If the import content of offshore wind projects were to remain at current levels, the positive impact on GDP would be smaller (0.2% by 2030). Alternatively, if the development of the UK as a major global centre for offshore wind attracted investment in UK-based production, this could boost UK exports and lead to larger GDP gains.

    • The impact on GDP and employment by 2025 and 2030 of a high offshore wind deployment scenario, compared to a scenario with high gas-fired generation, is shown in Figure ES.1.

    Background

    • Greenpeace and WWF commissioned Cambridge Econometrics to assess the macroeconomic impact of large-scale offshore wind deployment, compared to a future with limited offshore wind power generation in the UK and, in its place, additional gas-fired generation.

    The macroeconomic impact of large-scale offshore wind deployment

    • Our analysis compares the economic outcomes of two alternative power generation portfolios to 2030. The first of these (labelled WIND) is similar to the Committee on Climate Change's (CCC) 65% renewable electricity scenario1 with large-scale development of offshore wind, while the alternative case (labelled GAS) relies instead on existing and new gas plants to provide the UK's electricity. It should be noted that the scenarios compare deployment of (currently) the most expensive large-scale renewable energy option against unabated gas power generation. In the real world, however, a high renewables scenario would include lower cost technology options, as outlined in DECC's renewables roadmap. The scenarios are described in more detail in Chapter 2.

    • The combination of falling capital costs for wind turbines and rising natural gas import prices means that offshore wind is only slightly more expensive than Combined Cycle Gas Turbines (CCGTs), by 2030. As a result, electricity prices in the WIND scenario are only 1% higher than in the GAS scenario in 2030; a very small difference compared to possible variation in relative prices caused by other factors such as changes in gas prices. This challenges the prevailing view that electricity produced by gas-fired plants will be much cheaper indefinitely.

    • The model results show several important economic impacts. The construction work for large-scale investment in offshore wind boosts GDP and creates jobs (which are mainly high skilled) in the UK. However, as noted above, currently much of the investment is in equipment that is produced overseas. The GAS scenario also relies heavily on imports (of natural gas) but captures revenues for government through the carbon price floor. In the WIND scenario the UK pays slightly more for electricity but more of the value added of the supply chain is located in the UK. Total UK imports of natural gas are 45% lower in the WIND scenario by 2030, a reduction of almost £8bn annually.

    • Despite a small increase in electricity prices, GDP is around 0.8% higher in the WIND scenario by 2030 because the domestic content (construction and manufacturing of offshore wind capacity) of electricity is higher than in the GAS scenario. The relative increase in GDP in the high offshore wind scenario is robust to all the key sensitivities we tested (see below). If a commitment to offshore wind led to major supply chain companies locating in the UK, it is likely that exports would also increase, serving to increase GDP further and create more jobs, but the potential impact of this is not included in the analysis presented here.

    Levelised costs and the import content of gas and wind generation

    • The study also assessed the prospective cost structures of gas and offshore wind power generation and compared the levelised costs for projects initiated between 2012 and 2030, with a range of assumptions and at varying discount rates. The findings draw on prior analysis and show that gas-fired generation is currently cheaper, for each unit of electricity generated over the lifetime of the plant, than offshore wind. However, as gas and carbon prices are expected to increase in the future and the unit costs of offshore wind farms are expected to decrease, this difference will become smaller.

    • The results also show that a large proportion of the operating cost of a gas CCGT plant over its lifetime is imported because of the large imported fuel cost component (see Appendix D).

    • At present a large proportion of the lifetime offshore wind farm cost also goes to imports, as offshore wind turbine manufacturing has so far remained largely outside the UK (see Appendix D). However, in a scenario with high offshore wind deployment, there would be the opportunity to attract investment into the UK supply chain, increasing the proportion of wind turbines that are designed and manufactured domestically.

    • There is considerable scope for offshore wind costs, both capital and operating, to fall over time, as economies of scale and learning effects drive costs down. In addition, as offshore wind projects become established, the risk premium associated with the borrowing cost for offshore wind will be reduced; this is currently a major cost of offshore wind relative to new gas projects.

    Impact on CO2 emissions

    • UK power sector CO2 emissions in the WIND scenario would be one-third of those in the GAS scenario in 2030, even though some gas-fired power is needed to provide backup when there is insufficient wind to meet power demand.

    • The development of offshore wind capacity envisaged in the WIND scenario, coupled with other low carbon sources and measures to deal with the intermittency, meets the CCC's recommended target for the carbon intensity of the UK's power generation target of 50gCO2/kWh by 2030 and would reduce total annual emissions in the UK by 50MtCO2 by 2030. The lock in to offshore wind would support decarbonisation consistent with the UK's legally binding emissions target for 2050 and encourage the development of the UK as an offshore wind technology leader.

    Sensitivity analysis

    • To ensure that the results of the economic modelling analysis are robust, the following sensitivity tests were carried out (discussed in full in Chapter 5):

    – Natural gas prices: The sensitivities are the DECC low and high gas price assumptions. The impact by 2030 on GDP of moving from the GAS to the WIND scenario is 0.7% in a world of low gas prices and 0.9% in a world of high gas prices.

    – Domestic gas production: Shale gas could reduce the UK's dependence on natural gas imports, but this has no impact on the scenario results. The reason is that increased UK gas extraction represents a positive impact on GDP regardless of whether or not it is used in UK power generation. In the WIND case the gas is sold on the export market (which is not generally feasible for new shale gas in the USA).

    – The future costs of offshore wind projects: Offshore wind costs are expected to fall considerably as offshore wind capacity is deployed, but it is not clear by how much. Under the low capital cost sensitivity the impact on GDP between the WIND and the GAS scenario increases to 1%, while high capital cost projections reduce the impact on GDP to 0.6%.

    – The import content of offshore wind projects: If significant offshore wind capacity is deployed in the UK, it is possible that a substantial domestic supply chain will be developed. In the central WIND scenario, the import content of the capital required for an offshore wind project is projected to fall from 63% to 37% by 2030. If the import content of an offshore wind project were to remain at 63%, the positive impact on GDP by 2030 would be reduced to 0.2%.

    – The required interconnection capacity to support intermittency: The two scenarios contain the same level of interconnector capacity. However, the requirement may be less if there is a high level of gas generation, but our sensitivity test for this assumption did not materially affect the positive GDP impact of 0.8%.

    • The results of the sensitivity analysis are shown in Figure ES.3. The results highlight the potential benefits of reducing the import content, and capital cost, of offshore wind projects, but still show that substantial emissions reductions could be made in the WIND scenario without a negative impact on the economy, even under conservative assumptions on import content and capital cost reductions for offshore wind. The assumptions tested on interconnection capacity, gas production and the price of gas have only a small impact on the economic results. These are described further in Chapter 5 of this report.

    • At the sectoral level the differences are also modest. Large-scale development of offshore wind is likely to benefit engineering, manufacturing and construction firms, and also possibly insurance and project financing companies. In contrast, utilities (including gas distribution) would benefit from increases in gas-fired generation.

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