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Some realism returns to the Indian energy debate

August 18, 2017

There has been a demonisation of carbon dioxide which goes beyond the ridiculous. Atmospheric carbon dioxide concentration in the atmosphere lags temperature amd man-made carbon dioxide emissions are largely irrelevant to climate. Allied to the bloated hype about renewables, this has led to an anti-carbon imperialism which represents politically correct dogma. India has also been overwhelmed – in public – by the new religion. Of course India managed to ensure that domestic coal utilisation could be tripled while still complying with the sanctimonious, but meaningless, Paris agreement (note that China can double its coal consumption under the agreement). Publicly, however, it was not acceptable to admit reality. Fortunately, there are some signs of reality creeping back into the public energy utterances in India.

The Chief Economic Adviser to the Government of India has confirmed the importance of coal and criticised the “carbon imperialism” that is being religiously disseminated. The hidden costs of renewables are not to be ignored.

Arvind Subramanian slams carbon imperialism, calls for global coal alliance

Arvind Subramanian says coal will remain the primary source of energy for India in the short to medium term as it remains the cheapest energy source for development needs

Coal will and should remain the primary source of energy for India in the short to medium term as the fossil fuel remains the cheapest source of energy for India’s development needs, chief economic advisor Arvind Subramanian said on Thursday.

Renewable energy, on the other hand, comes with hidden costs, Subramanian said in a lecture organised by think tank The Energy and Resources Institute (TERI).

Subramanian called for setting up a global coalition for clean coal technology, mirroring the international solar alliance, which could find ways of sustainable use of coal in power generation.

“India needs coal in the short to medium term. Renewable sources must be part of the energy mix but they also come with hidden costs, which should not be overlooked in our headlong embrace with renewables,” said Subramanian.

India cannot allow the narrative of “carbon imperialism” to come in the way of realistic, rational planning for the country’s energy future, he added.

Subramanian’s call for caution in the adoption of renewable energy comes at a time when many state power utilities are forcing solar power developers to lower their power tariffs in a market where tariff discovered in subsequent auctions keep declining.

Although the solar power tariff keeps declining due to a fall in imported solar panel costs, renewable power projects bear the extra cost of power storage equipment. However, industrial consumers, which bear cross-subsidy for domestic consumers, find solar power cost attractive. This leads to reduced capacity utilisation of coal-based thermal power plants, adding to the stress in the power sector.

“Coal will remain and should remain. The time is ripe for creating a green and clean coal coalition mirroring the (international) solar alliance. That, rather than unconscionable calls to phase out India’s cheapest source of energy, will serve the cause of climate change and India’s development needs,” said Subramanian.

The chief economic advisor also said that policy decisions on coal and renewable sources of energy have to be taken jointly as these two are connected. Declining prices of renewable energy is threatening to upend the thermal power sector as prices are renegotiated by distribution companies, which themselves are in stress, Subramanian said. This renegotiation could transfer the stress in the power distribution sector to the renewable energy sector.

Railway minister Suresh Prabhu, who was present on the occasion, said the country’s energy policy was forward looking and was adequate to achieve overall economic growth as it captures the linkage between economy, environment and social development.

India meets its Paris emissions commitments (which are measured per capita) not so much by reducing coal use but by increasing the proportion of nuclear and renewable stations.

Institute of Energy Research

Between 2006 and 2016, 139 gigawatts of coal-fired capacity was brought on-line. A record 21 gigawatts of new coal capacity was built in 2015, and almost another 18 gigawatts in 2016. The planned construction of an additional 178 gigawatts would make it nearly impossible for India to meet its climate promises. By developing all of the planned coal-fired capacity, India would increase its coal generating capacity by 123 percent.

 

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Fresh water scarcity will be a thing of the past

April 4, 2017

There is no shortage of water on earth. There is not even a shortage of fresh water resources. However there is a fundamental mismatch between the availability of fresh water and the centres of population. If sea water (or brackish water) can be converted into fresh water at an acceptable energy and economic cost, the problem vanishes.

Excluding the vast amounts of water bound up within rocks in the earth’s core, the fresh water on earth is less than 1% of all the “free” water. (Note also that when humans consume water, the water is not destroyed. Most of it is discharged somewhat contaminated and a small amount is bound up as hydrocarbons. Water “manufactured” by combustion – whether induced by humans or by natural combustion processes – creates water vapour from bound-up hydrogen but the quantities are not very significant).

The UN estimates that by 2025 up to 15% of the world’s population may be subject to fresh water scarcity. Techniques for conversion of sea water into drinking water have been known for at least 3,000  years (and perhaps even 5,000 years). But desalination as an industrial process for providing fresh water to large populations only started in any significant way in the 1960s and started showing high growth rates from the 1990s on.  There are two basic paths to obtaining fresh water from sea water. Through evaporation followed by condensation (multi-stage flash – MSF) or by filtration (reverse osmosis -RO). Whether as heat for evaporation or pumping energy through semi-permeable membranes, the energy requirements (and cost) have been relatively high. Costs have reduced sharply over the last 30 years and currently the lowest cost of production is at less than $0.5/m3. Note, however, that costs of distribution are in addition to the production cost. The world’s population using desalinated water today is fast approaching 1% (perhaps about 500 million people today). But the growth rate here is currently above 5%/year.

For water scarcity to disappear as a potential problem, the cost to access the water (prior to distribution) needs to be less than about 50% of the cost of distribution. For that situation to arise, current desalination costs have to reduce by a factor of about 20 (production cost < $0.02/m3). It seems unlikely that such a cost reduction can be achieved along the evaporation/condensation path. The filtration path remains the best bet but would require

  1. a sharp reduction of the pressure drop across the filtration membrane, and
  2. a reduction in the cost of the membrane, and
  3. developments in the economic handling or treating of large amounts of the salts and minerals filtered out

The rate of development suggests that it is quite probable that such an advance in filtration technology can be achieved over the next 10 – 20 years. The advent of graphene and the use of graphene oxides to create nano-filters is one path which shows great promise.

 Tunable sieving of ions using graphene oxide membranes, Jijo Abraham et al, Nature Nanotechnology (2017), doi:10.1038/nnano.2017.21

BBC: A UK-based team of researchers has created a graphene-based sieve capable of removing salt from seawater. The sought-after development could aid the millions of people without ready access to clean drinking water. The promising graphene oxide sieve could be highly efficient at filtering salts, and will now be tested against existing desalination membranes.

It has previously been difficult to manufacture graphene-based barriers on an industrial scale. Reporting their results in the journal Nature Nanotechnology, scientists from the University of Manchester, led by Dr Rahul Nair, shows how they solved some of the challenges by using a chemical derivative called graphene oxide.

Isolated and characterised by a University of Manchester-led team in 2004, graphene comprises a single layer of carbon atoms arranged in a hexagonal lattice. Its unusual properties, such as extraordinary tensile strength and electrical conductivity, have earmarked it as one of the most promising materials for future applications. But it has been difficult to produce large quantities of single-layer graphene using existing methods, such as chemical vapour deposition (CVD). Current production routes are also quite costly.

On the other hand, said Dr Nair, “graphene oxide can be produced by simple oxidation in the lab”. He told BBC News: “As an ink or solution, we can compose it on a substrate or porous material. Then we can use it as a membrane. “In terms of scalability and the cost of the material, graphene oxide has a potential advantage over single-layered graphene.”

By 2100 global population will be declining almost everywhere. The water scarcity problem will be solved long before the population pressure reduces the demand for fresh water.

 

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A leaner, more aggressive shale oil retakes market share from OPEC

March 21, 2017

High oil prices at around $100/barrel fueled the first shale oil boom in the US. Drilling rigs proliferated and the ensuing oil glut led to the sharp drop of price in 2015. Saudi Arabia then started a price war for a variety of reasons:

  1. to attack the shale oil industry (and take away the market share they had won),
  2. to hurt Iran whose return to the international oil market was imminent, and
  3. to hurt Russia because of the vulnerability of their budget to oil revenues

But most importantly they wished to attack the shale oil industry which was thought to have its Achilles heel in its relatively high production cost. With Saudi Arabian production cost at around $3/barrel, even a long period at low oil prices was considered a critical advantage. The strategy backfired and Saudi was forced to participate in OPEC’s production cuts to prop up the oil price. But even that action is now backfiring as the shale oil industry has emerged leaner and meaner and is now ramping up production again. Last week the oil price dropped some 10% as shale oil now retakes some of the market share it had lost.

The glut continues and we are unlikely to see prices much above $50-60/barrel for the next 2 or 3 years. The Saudi attacks have only helped shale oil to reduce its own costs dramatically. They are far less vulnerable to attack now than in 2015. At that time they needed an oil price of around $80 to make any reasonable profit. Now they are so much leaner that they are viable at oil prices even as low as $40/barrel (and some wells are now rivaling the Saudi production costs).

Oil Wars

Has OPEC Underestimated U.S. Shale Once Again?

The U.S. shale cowboys are back on their horses and leading a strong recovery in the oil patch that is not expected to falter even as WTI prices dropped last week below $50 per barrel for the first time in more than two months.

With lessons learned from the oil price crash and budgets streamlined and focused on the most prolific shale plays, U.S. drillers are giving OPEC a hard time by raising output and hedging future production. Meanwhile, the cartel members are trying to cut supply and fix the price of oil at such a range that would allow them to reap higher oil revenues, but not allow the shale patch to recover too much too fast.

Two and a half months into the supply-cut deal, it looks like OPEC is losing the campaign to prop up oil prices. The drop in prices that began last week saw them retreating to almost exactly the same level as on November 30 – just below $52/barrel for Brent – when the OPEC deal was announced, the International Energy Agency said in its monthly report on Wednesday.  

At the same time, reduced breakeven prices in many shale plays and forward locking-in of production is allowing the companies currently drilling in the U.S. to turn in profits even at a price of oil at $40 a barrel. The U.S. shale patch has not only emerged leaner and more resilient from the downturn, it has also hedged future production with contracts guaranteeing the price of the crude they will be pumping a year or two from now, Bloomberg reports, citing industry executives and analysts.

This is a sign that OPEC may have underestimated—yet again—the resilience of the U.S. shale patch when the cartel decided to collectively curtail oil supply.

Last week Saudi officials told American oil producers that there would be “no free rides” and that they should not expect OPEC to extend or deepen the output cuts to make up for the jump in shale production in the U.S.

And U.S. shale output has been steadily growing in the past few months, thanks to, and quite ironically so, OPEC’s cuts that have been supporting WTI prices at above $50 (or at least above $48 this past week). The U.S. shale patch is expected to lift its April oil output by 109,000 bpd, the EIA said earlier this week.

 

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South Australian blackouts due to over-reliance on wind and solar were predicted 2 years ago

February 13, 2017

I see that in South Australia some people have been complaining about the “record” heat with temperatures of 44ºC. Of course they take this as “evidence” of global warming. Never mind that some 120 years ago without any urban heat effects and without any industrialisation, the temperature reached 48-49ºC. It wasn’t global warming then.

In any event, South Australians and their elected representatives must get used to the fact that they have only themselves – and their political correctness – to blame. Winning greenie points seems to take precedence over common sense.

The SA blackouts caused by unreliable solar and wind were predicted two years ago in the journal Transactions of the Royal Society of South Australia, and every MP in the Parliament was told.

The Telegraph: 

100,000 SA customers blacked out because of reliance on unreliable wind and solar power in our network – more than a third of SA’s generation capacity.

IT is hard to disagree with the blunt assessment of Business SA that South Australia has been caught on electricity planning like a frog in boiling water. The story goes, with mixed results in scientific experiments, that a frog suddenly put into hot water will jump out but if heated slowly it will not figure out the danger.

The state was warned of the electricity-shortage crisis – and consequent blackouts – yet ignored the warnings, according to Business SA executive Anthony Penney.

“The most frustrating aspect of this most recent event is that it was anticipated by many businesses and other energy industry experts well in advance but, like the frog in boiling water, nothing happened in time,” he says.

This week the SA frog boiled. About 100,000 customers were blacked out because of the reliance on unreliable wind and solar power in our network – more than a third of SA’s generation capacity. ……….

Ben Heard, a doctoral researcher at the University of Adelaide also runs environmental non-Government organisation Bright New World – which supports the use of nuclear – explains the problem. He says the SA blackouts caused by unreliable solar and wind were predicted two years ago in the journal Transactions of the Royal Society of South Australia, and every MP in the Parliament was told.

“Back when wind generation was providing only 28 per cent of SA’s electricity supply, we flagged the risk presented by low supply in extreme heat conditions,’’ he says. Mr Heard said it was well known that extreme heat conditions in SA were accompanied by very little wind. “Our expectation at the time was that this would make it impossible to retire other generators from the market because of the security risk. Instead, the generators were allowed to retire, we took the risk, and we have started paying the price.”

Trans. Royal Society of South Australia

sa-royal-society

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Death of coal slightly exaggerated

February 4, 2017

Come 2100, I expect the world will still be using fossil fuels for around 70% of its energy needs.

19th January 2017: German court issues permit for Uniper’s Datteln 4 coal-fired power plant

The German Muenster district court on Thursday granted an emission-control permit to Datteln 4, a hard-coal fired power station under construction by utility Uniper that has been held up by an intense legal battle with environmentalists.

Uniper said it aims to begin supplying electricity and district heating from the 1,050 megawatts plant in western Germany in the first half of 2018.

Datteln 4 under construction image uniper

Datteln 4 under construction image uniper

25th January, 2017: Loy Yang B project approved

A major generator of Victoria’s coal-fired electricity is set to be expanded.

ENGIE has welcomed the Environment Protection Authority’s (EPA) recommended approach to granting statutory approval for the turbine upgrade project at the Loy Yang B power station. The approved project will see the retrofit of two turbines with a higher efficiency design to improve the station’s thermal efficiency and increase operating flexibility. The works will occur in 2019 and 2020 during planned outages.

February 1st, 2017: Japanese government planning to build 45 new coal fired power stations to diversify supply

The Japanese government is moving ahead with its plans to build up to 45 new coal fired power stations. The power plants will utilise high energy, low emissions (HELE) technology that use high-quality black coal. Japan is the largest overseas market for Australian coal producers, taking more than a third of all exports. 

February 3rd, 2017: German coal, gas plant output at 5-year high in January

  • January average coal output at 17.3 GW, highest since Feb 2012 
  • Coal, gas ramped up to offset nuclear outages, low wind, demand gains  
  • Day-ahead power average at 59-month high, spot spikes to 2008-high 

German coal and gas-fired power plant output in January rose to its highest in almost five years as cold weather boosted demand while below average wind and record-low winter nuclear availability reduced supply.

February 3rd, 2017: GE helping modernise Serbia’s largest coal-fired power plant

GE’s Power Services will complete the modernisation of Elektro Privreda Srbije’s (EPS) TPP Nikola Tesla, the largest coal-fired power plant in Serbia. 

The power plant features two, 210 MW LMZ steam turbines and four (A3-A6), 308 MW GE units. GE will provide a steam turbine full shaft line retrofit solution for high-pressure, intermediate-pressure and low-pressure turbine modules, as well as a new turbine governing controller system. In addition to the controller, the project includes GE’s advanced 3-D blades, new rotors, rotary blades, stationary blades, inner and outer casings and other associated parts. As part of the agreement, GE will commission a WT23S-106 generator unit – the largest ever installed in Serbia – at the TPP Nikola Tesla B2 site to help improve availability and reliability of the plant. …….. The operating life of the steam turbine unit – an estimated 250 000 working hours – will be extended for an additional 100 000 operating hours, and the maintenance intervals between major overhauls will be extended to nearly 10 years.

 

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Trump’s choice for Energy Secretary will be a coal supporter

December 12, 2016

coal

It is reported that Donald Trump has a short-list of four for Energy Secretary. What seems clear is that whoever it is will be making coal jobs a priority. One of the four (Rick Perry) would be a fierce opponent of  all the fake science masquerading as “climate science”, while two (Heidi Heitkamp and Joe Manchin) are coal protectors rather than climate change opponents. The fourth (Ray Washburne) has been involved primarily in economic and finance matters and has (for me) unknown positions about coal and AGW. But he is from Texas and is unlikely to ignore the bottom line (which is of no consequence for the AGW orthodoxy).

Bloomberg: Donald Trump has narrowed his search for energy secretary to four people, with former Texas Governor Rick Perry the leading candidate. People familiar with the president-elect’s selection process said two Democratic senators from energy-producing states — Heidi Heitkamp of North Dakota and Joe Manchin of West Virginia — are also in the mix, along with Ray Washburne, a Dallas investor and former chairman of the Republican National Committee.

If Trump picks any of the four he’ll break with recent tradition of putting scientists at the top of the Energy Department. Among other things, the agency is responsible for policies on the safe handling of nuclear material and on emerging energy technologies.

A quick search gives the positions of the four on coal production and the global warming fantasy.

Rick Perry: Rick Perry said Wednesday morning that he does not believe in global warming science and suggested it is grounded in scientists manipulating data for financial gain. …….. Perry said scientists are coming forward almost daily to question “the original idea that man-made global warming is what is causing the climate to change.” He said the climate is changing but that it has been changing “ever since the earth was formed.” ……….. Perry added that “the issue of global warming has been politicized,” and argued that America should not spend billions of dollars addressing “a scientific theory that has not been proven, and from my perspective is more and more being put into question.”

Rick Perry could be expected to be quite active in cleaning out the muck in the Department of Energy Climate Change stables.

Heidi Heitkamp: I applaud the President’s efforts to address climate change and its effects. …… However, several of the initiatives introduced today by the President, while not new, amplify the Administration’s continuing war on coal and coal-fired power. While the President claims to believe in an all-of-the-above energy policy, he consistently fails to step-forward and truly commit to such a policy. Instead the Administration continues developing regulations that do nothing more than choke off good-paying American jobs, and threatening millions of Americans with the loss of a reliable and affordable energy source. Instead of taking this route, we need to find a path forward for the coal industry and coal-fired power by encouraging continued investments in new and existing technologies to further reduce emissions through clean coal technology projects including commercially scalable carbon capture and sequestration. 

Heitkamp is only concerned about jobs and will subordinate her thinking to that end. Her apparent belief in carbon capture and sequestration though suggests that her logical thinking is a little suspect. To be kind, it may just be her attempt to save coal jobs and not any strong belief in nonsense technology which which has no real purpose and which has a fundamental “floor” energy cost which makes it meaningless.

Joe Manchin: Senator Joe Manchin (D-WV) went on Fox News on Wednesday to slam President Obama’s renewed push to take action on climate change.However, returning to the refrain that Obama has declared a “war on coal” appears not to be enough this time. Now, the coal-backed senator has upgraded his rhetoric to a “war on America.”

STEVE DOOCY (HOST): The President of the United States declared a war on coal and a war on jobs and essentially a war on West Virginia.

MANCHIN: Well, really a war on America. When you look at it from that standpoint, 8 billion-tons of coal is being burned in the world as we speak. The United States of America consumes about one billion tons. Now, what’s going to happen to the other 7 billion-tons? What’s going to happen to the countries that are consuming and using 7 billion and it’s increasing rapidly? Nothing is being done there. We have done more to clean the environment than ever in the last two decades. And there is more that can be done.

Manchin, like Heitkamp, is primarily concerned about jobs in the coal industry. He has not dared, politically, to be heretical about global warming orthodoxy but has fought for coal jobs.

Ray Washburne: Mr. Ray W. Washburne has been the Chief Executive Officer of Charter Holdings since 1990 and its President. Mr. Washburne has been National Finance Chairman at Republican National Committee Inc., since February 2013. He is a Managing Partner at HP Village Partners Ltd., and served as Managing Director. He was the Chairman of Charter Holdings since 1990. He also serves on the board of directors for M Crowd Restaurant, which he co-founded in 1991. He serves as Director of Baylor Health Care System Foundation. He has been Director of Entrust Inc. since June 5, 2006. He has been an Independent Director of Veritex Holdings, Inc., since 2009 and serves as Director of Veritex Community Bank. Mr. Washburne is also a Director for Colonial Bank, Southern Methodist University-21st Century Council, and Dallas Citizens Council. He is an Adjunct Professor at SMU’s Cox School of Business and graduated from Southern Methodist University (“SMU”) in 1984.

It is not apparent that Washburne has any strong position on coal or energy or AGW. Nevertheless he can be expected to have a clear view of the bottom line and therefore, not a great supporter of subsidising non-commercial technologies for religious or ideological reasons.

If I had to bet, I would put a small amount of money on Rick Perry.

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Cold weather in Alberta gives record electricity consumption (thank goodness for coal)

December 11, 2016

Canada has been experiencing some rather cold weather with windchill factors down to -40°C.

Environment Canada has issued an extreme cold warning starting in northwestern B.C., going west through central and northern Alberta, central and southwestern Saskatchewan and southeastern Manitoba. By Friday afternoon, the extreme cold warning extended to most of central and northern Alberta, including High Level and Fort Chipewyan and as far south as Airdrie and Cochrane.

The Alberta Electric System Operator AESO reports record electricity consumption due to the cold spell.

Extremely cold weather across Alberta this week contributed to the province setting three records in a row for electricity consumption.

On December 8, 2016 between 5-6 p.m., Alberta was using a record hourly average amount of electricity at 11,442 MW. This surpassed the December 7 record of 11,404 MW, and the December 5 record of 11,400 MW.

The new winter peak usage was set due to cold weather, reduced daylight hours and the convergence of Christmas lighting load at homes, businesses, malls and buildings across the province. Another factor that contributed was the low market price for electricity – this prevented price sensitive industrial facilities from going offline during peak hours. The average wholesale price for electricity during that peak hour was approximately $30/MWh.

In Alberta the installed capacity and energy generation shows the reliance on fossil fuels in general and coal in particular. It’s a good thing they have coal to fall back on.

alberta-electricity

Reality.

 

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US shale gas arrives in Scotland today

September 27, 2016

The SNP’s idiotic environmental policies means that Scotland has to import shale gas from the US even though there is plenty available locally. North Sea revenues for Scotland have collapsed and Scottish energy policy is a self-inflicted wound. In Europe generally, it is misguided, meaningless, environmental constraints on energy policies which have been a major contributor to holding back the economic recovery.

The low oil price in 2016 has effectively postponed any new independence referendum for a few years to come. Without North Sea revenues Scotland – if it wants to be an independent EU country – would be the “poor man of Europe” for 2 decades.

Image result for Scotland north sea revenue collapse

graphic: market oracle

BBC: 

The first shipment of US shale gas is arriving in Scotland amid a fierce debate about the future of fracking in the UK.

A tanker carrying 27,500m3 of ethane from US shale fields is due to dock at Grangemouth, the refinery and petrochemicals plant owned by Ineos.

The company said the gas would replace dwindling North Sea supplies and secure the future of the plant’s workforce.

 

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Thermal efficiency and “emissions elsewhere” from electric cars

August 30, 2016

All electric cars shift emissions from the exhaust pipe of the vehicle to the place where the electricity is generated. The actual mix of fuel sources used to feed the grid then represent the emissions profile of electric cars. The efficiency of electric cars from generation of electricity to wheel-power is not much different from gasoline based automobiles and clearly inferior to diesel engines.

Fossil fuels used directly in vehicle internal combustion engines have a thermal efficiency ranging from 37% for gasoline to over 55% for very large marine diesels.

source JSME

source JSME

For electricity generation the thermal efficiency varies from less than 30% to over 60% for coal, oil, gas, solar thermal or nuclear power plants. Thermal efficiency is meaningless (and undefined) for hydropower, wind power or photovoltaic solar.

thermal efficiency of power generation

An electric car being charged from the grid does so after a further 10% of transmission and distribution losses but only accrues a further 2 – 5% losses through the motor(s) to shaft rotation. (There are further mechanical losses in getting to the rotation of the wheels but these are common to all kinds of motive power).

The emissions due to the use of an electric car are entirely dependant upon the emissions involved in the generation of the charging electricity. If the grid is largely dependant upon coal (India), or coal and gas (US) then the gaseous emissions are higher than for diesel engines but slightly better than for gasoline automobiles. If, the grid is primarily hydropower as in Norway, or primarily hydro and nuclear (as in Sweden) then there are virtually no emissions from electric vehicles.

The fundamental reality is that electric cars are not yet commercially viable (range, weight, charging time and cost). Two decades of subsidies also confirms for me my contention, that subsidies are usually counter-productive, always delay commercialisation and nearly always lead to a focus on milking subsidies rather than commercialising a technology.

A recent Forbes article addresses the fantasies surrounding emissions, and Tesla cars. I wouldn’t mind owning a Tesla car where my acquisition price is heavily subsidised. But now that the initial investors have milked the subsidies, and operations – in spite of the subsidies – have yet to show a profit, I would not invest in Tesla shares.

Earlier this summer, SolarCity, Elon Musk’s rooftop solar company, appeared to be headed toward bankruptcy. So it shocked investors everywhere when Musk’s other brainchild, Tesla Motors TSLA -2.21%, itself struggling, announced plans to acquire the struggling panel maker and installer.

“Tesla Talks Big, Falls Short,” read a headline last week on the front page of the Wall Street Journal. The subtitle: “Car maker has failed to meet more than 20 of CEO Elon Musk’s projections in the past five years.”

Surely combining two wrong businesses won’t make a right one. True, they’re both politically correct. But they’re economically incorrect.

Tesla’s operating losses, along with its fishy accounting practices and unrealistic investor promises, have led Devonshire Research Group to liken the car company’s business model to Enron’s.

Bad entrepreneurship is normally punished by market losses and contraction. But Musk’s market is rigged. A mountain of taxpayer subsidies is allowing Tesla’s bad show to go on — and even expand.

Musk’s various ventures have received almost $5 billion worth of government assistance. Nevada recently chimed in with $1.3 billion to incentivize Tesla to build its “gigafactory” — a new battery producing facility — near Reno. Each car sold by Tesla receives a federal income tax credit of $7,500. And California allows an additional $2,500 rebate to its citizens.

Even the White House is throwing cash Musk’s way. President Obama just announced $4.5 billion in loan guarantees for electric vehicle entrepreneurs. According to the president, the money will help fill garages with EVs and make charging stations ubiquitous.

Tesla is redefining “too big to fail” as “politically correct, so bail.”

….. 

So-called zero-emission vehicles reflect the fuel-profile of electricity generation. 2015 U.S. electricity generation consisted of 33% coal; 33% natural gas; 20% nuclear; 13% renewables; and 1% oil.

Fossil fuels, in other words, have a two-thirds market share for EVs, wind and solar just 5%. Nuclear power, hydropower, and biomass, account for the remainder. …..

…..

http://www.forbes.com/sites/robertbradley/2016/08/24/investors-confront-teslas-energy-fantasy/2/#78d77bfa2bbe

 

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Saudi Arabia is losing its war against oil shale

August 3, 2016

Saudi Arabia started its war on US shale oil in the autumn of 2014. Oil prices in June 2014 were around $110 per barrel and were on the way down as US shale oil producers were ramping up production. The expectation was that the OPEC cartel would reduce production to hold prices up. The conventional wisdom was that whereas Saudi Arabia had a production cost of about $3 per barrel, shale oil had a production cost of over $50 per barrel and upto close to $100. Oil from Canadian tar sands was thought to have a production cost of above $70 per barrel. Both were though to require oil prices well in excess of $70 and close to $100 to be viable.

But Saudi Arabia decided to strangle the burgeoning shale oil industry and started an oil war. It forced other OPEC members to focus on market share and hold production levels. Even though there was a glut of oil on the market. Oil fell to below $30 per barrel earlier this year before recovering to around $45. Saudi’s strategy was based on the assumption that rock-bottom prices would kill off the upstart non-OPEC, US shale producers. Low production costs would allow the OPEC producers to take some pain for a year or so. Certainly this strategy has had some effect. U.S. oil production is about one million barrels per day lower than a year ago.

Certainly some shale oil producers have gone out of business. But US oil production is much higher than thought possible at the prevailing price. The main effect of the Saudi strategy has been counter-productive. There has been a remarkable burst of innovation among the shale frackers which has drastically reduced shale oil production costs. The costs for shale production that I had reported 2 years ago no longer apply.Then the cheapest shale oil to produce was from Marcellus shale at around $24 per barrel. But the cheapest today costs $2.25 a barrel on horizontal wells in the Permian Basin of West Texas. That is directly – and even favourably – comparable with the Saudi production costs.

Reuters: Improved fracking techniques have helped cut Pioneer Natural Resources Co’s production costs in the Permian Basin to about $2 a barrel, low enough to compete with oil rival Saudi Arabia, CEO Scott Sheffield said on Thursday. 

The comments from Sheffield, who is retiring soon, were perhaps the most concrete sign yet that the fittest U.S. shale oil producers will survive the price crash that started in mid-2014 when Saudi Arabia and OPEC moved to pump heavily to win back market share from higher-cost producers.

Dozens of shale companies, many with marginal assets, have filed for credit protection in the biggest wave of corporate bankruptcies since the telecoms crash of the early 2000s. Sheffield said high costs would continue to make U.S. shale plays outside the Permian basin relatively less competitive. 

On Pioneer’s second-quarter results call, Sheffield said that, excluding taxes, production costs have fallen to $2.25 a barrel on horizontal wells in the Permian Basin of West Texas, so it is nearly on even footing with low-cost producers of conventional oil.

“Definitely we can compete with anything that Saudi Arabia has,” he said.

“My firm belief is the Permian is going to be the only driver of long-term oil growth in this country. And it’s going to grow on up to about 5 million barrels a day from 2 million barrels,” even in a $55 per barrel price environment, he added. …….. 

Pioneer expects output to grow 15 percent a year through 2020 after posting production of 233,000 barrels of oil equivalent a day this past quarter. It sees most of its growth in the Permian, though it also has acreage in the Eagle Ford.

Pioneer helps limit costs by doing much of its oilfield services work in-house. It also has its own sand mine, and uses effluent water from the city of Odessa for frack jobs using pressurized sand, water and chemicals to unlock oil from rock.

Pioneer said it is now introducing its third generation of well completion techniques, called version 3.0, that is using even more sand and water than the super-sized volumes introduced at the start of the price crash to pull more oil out of rock.

permian basin texas

Even at prices less than $20 per barrel, some considerable quantities of shale oil would continue to be produced.

The Saudi strategy is backfiring.

 

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Posted in Energy, Oil, Oil price | Comments Off on Saudi Arabia is losing its war against oil shale

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