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iEnergy has moved to the ADI Analytics web site, and can now be accessed at http://adi-analytics.com/category/ienergy-blog.  Thank you for your continued interest.

The global fight for resources

Nothing is more telling of the global fight for resources than a few trips to Asia and long conversations with clients as I have learned this past year.

To build the roads, bridges, cars, planes, and power plants their people need, policy makers, CEOs, and consumers in India, China, Thailand, and Malaysia in Asia are all consumed by sourcing the traditional commodities of coal, oil, and gas but also metals, minerals, and chemicals.  The same stakeholders in resource-rich nations such as Australia and Indonesia are focused on keeping their customers happy while fighting cost inflation and talent shortages.

Even so, companies across the value chain are proactively investing in innovation to improve extraction productivity, find substitutes for increasingly scarce ingredients, and promote recycling.  As a result, Mosaic now extracts 97% — up from 90% — of phosphorus from phosphate rock, BASF is developing alternatives to rare earths in key refining catalysts, and Dewalt is offering discounts to incentivize lithium battery recycling.

You, however, need not necessarily travel to Asia to learn more.  Three books — Winner Take All, The Race for What’s Left, and The Oil Curse — provide interesting if sometimes biased accounts of these issues.

                    

A portfolio of renewables can supply India’s demand for electricity

The big energy challenge of the future will be supplying enough low-carbon power to meet the emerging economies’ growing demands.  Although renewable capacity continues to grow, as this blog has noted in the past, notwithstanding depressed financing, waning popular interest, disappearing subsidies, and slower technological progress, there is growing concern that renewables cannot be an important part of the supply solution.  A couple of recent papers have debunked this myth at least for India.

In a simple but rigorous and illuminating analysis, Professor S. P. Sukhatme shows that India’s annual demand for electricity in 2070 — when the country’s population is projected to be 1.7 billion — can be met to a large extent by a portfolio of renewable energy technologies, as shown in the figure below.  Further, this is a conservative estimate since contributions from a number of other renewables, e.g., geothermal, offshore wind, tidal, etc., have not been estimated.  Finally, the role of technology and innovation in improving both yield and economics have not been factored.  Even so, the traditional challenges with renewables, in particular intermittency, need to be overcome to ensure reliably supply.

Progress, albeit small, on carbon markets

In the U.S., climate change and regulations on carbon emissions have been relegated to oped pieces thanks to the recession and lack of political will. Even so, there has been some progress as California advances toward implementing the legislation known as AB 32 that sets greenhouse gas emission targets by 2020. This week will mark an important milestone that industry observers are monitoring with the debut of a market that will auction emission allowances granted by state regulators. Albeit small, it is progress.

Advancing gas hydrate technology

In the age of prolific and immediately-recoverable onshore gas resources, gas or methane hydrates — a resource for the future — may not be a fashionable topic.  However, a successful proof-of-concept test on the Alaskan North Slope is a promising advance of gas hydrate technology.  

A consortium comprising ConocoPhillips, National Energy Technology Laboratory, University of Bergen in Norway, and Japan Oil, Gas, and Metals National Corporation have demonstrated the ability to recover methane by replacing it in hydrates with carbon dioxide.  The single-well test focused on demonstrating the concept’s technical feasibility; further work is required for demonstrating commercial production and economic feasibility.  Even so, this is a milestone towards exploiting a resource whose global estimates range from 100,000 to 1,000,000 trillion cubic feet (tcf) of gas.

E15 anyone?

The ethanol industry is struggling again thanks to lower gasoline demand and higher corn prices.  Plant shutdowns that started with players at the high end of the supply curve have now spread to the larger companies, including Valero and ADM who have reduced or idled capacity.  Crush spreads today stand at less than 10 cents a gallon.

Demand growth by blending more ethanol in gasoline is going to get difficult.  In 2011, the average gallon of gasoline in the U.S. had 9% ethanol against the allowable 10% (E10) for all cars.  Although the Renewable Fuels Standard and the EPA have allowed up to 15% (E15) for “newer” cars,  new testing commissioned by a joint auto-oil industry group is suggesting that E15 could damage valves and other auto parts, reduce engine compression and power, and lead to poorer operational performance and higher emissions.  It seems unlikely that oil companies, refiners, and retail outlets will adopt E15 anytime soon.

Stimulus’ impact on energy

Nearly $100 billion was invested in a large variety of programs in the energy sector as part of the U.S. stimulus in 2009. Michael Grunwald of Time magazine has been reporting on some of them based primarily from his research for a forthcoming book on the stimulus (see below). A recent column on BigBelly’s novel trash bins was discussed earlier. This week’s Time magazine describes the progress being made in the smart grid and utilities industry.

Spurring natural gas demand with technology

Just within a few years of its founding, the ARPA-E has done an incredible job of identifying critical innovation gaps and funding a number of creative ideas with the potential of delivering disruptive breakthroughs. We can now add speed and timeliness to the organization’s credit.

The continued slump in natural gas prices underlines the commodity’s lousy demand outlook while supply from shale gas basins shows few signs of abating. There is, unfortunately, not much to be optimistic about growth for natural gas demand as one of our recent multi-client studies has explored in great depth. Advocacy around natural gas vehicles has attracted interest but meaningful penetration of natural gas in the transportation sector is limited by a number of technological hurdles. Natural gas storage and compression are two of many such hurdles.

ARPA-E recognized this issue and recently conducted a competition for innovative ideas. Last week, it announced nearly $30 million in funding to over a dozen winners ranging from large companies such as GE, Eaton, United Technologies, and Ford to contract research groups including SRI, REL, and OtherLab. Almost all projects focus on addressing gas compression and storage using a variety of ideas. These and several other technologies will be profiled in our on-going multi-client study on natural gas transportation.

No fracking way?

I’ve always loved a good debate especially when it is conducted in the classical sense with two podiums, open microphones, relevant topics, and informed advocates. National Public Radio recently aired such a debate on hydraulic fracturing, which is the core operation behind the shale gas revolution in North America. Fracking is what industry hands call the process but it has now become the preferred term in both media and popular fora.

You will see that the defendants — a journalist and a policy expert — of fracking lost the vote following the NPR debate. It was unfortunate because the defendants — notwithstanding their distinguished backgrounds — failed to represent fracking in an effective fashion. Both debaters chose to defend fracking as a necessary evil acceptable only because shale gas was environmentally far better than coal, produced more power than renewables ever could, or led to jobs in difficult economic times. In other words, they seemed to implicitly accept the charge made by their opponents — two lawyer-environmentalists — that fracking caused unprecedented environmental damage.

This was a cop out because there is no dearth of hard, peer-reviewed scientific data showing how safe fracking is, how the industry is improving drilling and completion practices to protect groundwater, and how a range of regulations at the state levels are improving transparency, disclosures, and safety.

Renewable energy is growing and spreading but still challenging

Popular and media interest in renewable energy has waned in recent months but two reports issued this month show that the industry is growing in capacity and investment, spreading geographically, and delivering energy at increasingly cheaper prices.  REN21’s Global Status Report is a mammoth, 170-page document but is written and produced well making it easy to review.  The second is a short document produced by NRDC to benchmark various countries on their renewable energy footprints.

Even so, the industry faces a number of challenges.  Technology is developing slowly, subsidies continue to be important, and grid integration poses a number of challenges.  This was seen in an interesting layout of articles in the Wall Street Journal yesterday.  In two side-by-side pieces, the Journal first reported on how Japan’s new feed-in tariffs may not be sufficient for material supply of renewable power, while a second article just across talked about how the country was restarting a nuclear plant to meet electricity demand.