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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.

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.

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.

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.

China is the New Energy Dragon

It’s official.  China is the world’s largest consumer of energy.

This happened a lot sooner — at least five years — than projected thanks to the disproportionate impact of the Great Recession on the U.S. relative to China.  More significantly, this is an inexorable phenomenon as the IEA announcement notes:

Since 2000, China’s energy demand has doubled, yet on a per capita basis it is still only around one-third of the OECD average.  Prospects for further growth are very strong considering the country’s low per-capita consumption level and the fact that China is the most populous nation on the planet, with more than 1.3 billion people.

Of course, this is no surprise to energy industry observers.  In the recent past, energy growth in China has been the subject of numerous anecdotal tales.  More importantly, it has cast a long shadow on energy dynamics in the developed world.

For example, higher power prices in the first half of this decade were attributed to the 10% annual growth rate of coal consumption in China.  Two years ago, the high diesel-gasoline price differential was because of China’s dramatic spurt in diesel imports to fuel marginal power generation capacity in the wake of  an unusually harsh winter.  In the past year, energy circles have been abuzz with China’s green energy plans.  The “Green Giant,” as it has been dubbed, built 12 gigawatts of wind capacity in 2009, has retired or plans to retire up to 35 gigawatts of small and relatively inefficient coal-fired power plants, build 20 nuclear reactors, and has committed to reduce its energy intensity by almost half.

In addition, it is implementing an aggressive outreach program to access energy assets globally.  Recovering from a failed bid to acquire Unocal in 2005, China has purchased oil and gas fields in Central Asia, South America, Africa, and the Gulf of Mexico.  It has supplemented asset acquisitions with a concerted diplomatic effort.  As a result, it now attracts more barrels of Saudi crude oil than the U.S. and gas from places such as Australia, Malaysia, and Qatar, and even coal from the U.S.  In similar vein, it continues to invest in critical energy infrastructure.  For example, it has just completed a 1,100-mile pipeline to import gas from Central Asia and is amplifying its R&D and technology development capabilities in energy.

Interestingly, China has disputed IEA’s conclusion “highlighting the lack of clarity in China’s energy sector as well as the country’s unease at its growing global impact.”  The IEA and China have been at loggerheads regarding data quality and access.  Even so, China’s official estimate of energy consumption is a measly 1% lower than that of the U.S., a difference that would be most likely met in 2010.

While energy consumption per capita is much lower, China’s energy consumption per GDP is much higher than that of the U.S.  Further, its energy mix is heavily dependent on coal, which contributes 66% of total demand in comparison to 22% in the U.S.  Collectively, these two pieces of data show the intense draw of energy by the Chinese manufacturing sector.

Altering this energy mix will be very expensive but far more doable than suggested by some observers.  This is because China’s energy infrastructure is not at a steady state and the large investments it will need to support higher energy demand per capita can be directed far more easily (given its political economy) to renewable energy sources.  Indeed, the country’s on-going investments in green energy and its commitment to reduce emissions intensity reflect this thinking while responding to global pressure around climate change.

China as the New Energy Dragon is just the beginning of a fascinating story in the future of energy.