Wednesday, January 27, 2010

German Solar Subsidies May be Cut.

Along with Japan, Germany has a thriving solar energy industry, assisted by generous government subsidies. However, the companies Q-Cells SE, Solarworld AG (SAG) face less cheerful prospects now if the German government goes ahead with cutting subsidies on the price of solar-generated power. There is also the knock-on effect to manufacturers of solar panels whose profits would be marginalised. Thus far the matter remains under discussion, and any actual reduction must first be debated in parliament but could come about in April.

10 billion euros ($14.1 billion) worth of investments in new manufacturing and research through 2013 are on the table, as part of a growth industry that employs around 50,000 people. It is likely that S.A.G. will cut its own investment in Germany when lower rates come into force this year, but expand in other markets, according to its chief executive. It is expected that Banks will insist upon capital being invested in solar plants, with a "massive" decline in ground-mounted systems compared with rooftop PV modules.

Subsidized rates for solar power for consumption in Germany, are guaranteed for 20 years, but the ruling coalition of the Christian Democratic Union, Christian Social Union and the Free Democrats are deliberating about by how much exactly the guaranteed prices for electricity generated using solar panels should be reduced. For pre-existing rooftop systems, about 39 euro cents (55 cents U.S.) per kilowatt hour will be earned from local utilities, in comparison with around 5 cents per kilowatt hour paid to generators using coal, natural gas or nuclear fuel for the provision of next year's base-load electricity.

The Environment Minister Norbert Roettgen is calling for a larger reduction in the price of electricity generated from solar plants installed on agricultural land than rooftop systems, which has enraged the chief executive officer of Conergy AG, Dieter Ammer, based in Hamburg. He says, "Both the size and timing of the cuts suggested by Roettgen are unacceptable. It took us 15 years to build up a solar industry here in Germany and this attractive industry is at risk."

The BSW industry lobby group has commented that the guaranteed prices for electricity from solar panels will fall by a quarter during a two year period, spanning 2011, and it is possible that the so-called feed-in tariffs could be reduced as early as April. This might result in a "boom" during the first quarter in an effort by providers to establish themselves with the guaranteed prices before they indeed fall.

Related Reading.

"Solar Spending in Germany May Suffer With Power Cuts (Update 2)", By Jeremy van Loon and Brian Parkin.

Sunday, January 24, 2010

Venezuela May Yield Twice as Much Oil as was Thought.

The Orinoco Oil Belt is now reckoned to contain 513 billion “technically recoverable” barrels of oil, or more than double the previous estimate of 235 barrels. Although this has been compared with and is said to dwarf the 264 billion barrels under Saudi Arabia, like is not quite being compared with like. The Venezuelan oil is “heavy oil”, which is a highly viscous bitumen rather than the light oil from Saudi which is highly prized since it is much easier to refine into fuel, especially petrol for spark-ignition engines. Converting the Orinoco “oil” into fuel will need a swathe of new engineering investment to build and develop refineries in order to derive fuel from it.

Nonetheless the Venezuelan President Hugo Chavez and his government have drawn-up plans to bring foreign investors including companies from China and India into the region, even though contract disputes reign with previous partners, based in the United States. The heavy oil is present in the form of oil-sands, similar to the tar-sands in Canada’s Athabasca region, and is highly intensive in terms of energy to provide heat to extract the bitumen and water too. Nonetheless Orinoco is the largest oil accumulation ever to be assessed by the United States Geological Survey, and the amount of recoverable oil is derived from estimates that 40 - 45% of it may be recovered, although there is some scepticism about this and one Venezuelan geologist, Gustavo Coronel, has put this down to 25%, noting that even then much of it would be too expensive to produce.

The latter does however depend on the prevailing price of a barrel of oil, which is now around $80 and rising. Sources of oil from Mexico (e.g. Cantarell) are in decline and American home-production of oil is falling even in the face of falling demand for it as driving-habits change. The Canadian tar sands are looking increasingly ripe, as supplies of conventional oil from the Middle East look to become more expensive and it is in no way certain that President Chavez will sell his oil to the U.S. anyway. In short, light crude oil will become an increasingly precious and scarce commodity, and heavy oil will be extracted instead.

As to the likely outcome of this, even if sufficient quantities can be recovered it is to the EROEI (Energy Returned On Energy Invested) that we should look to determine the viability of sources of “oil”. Middle East oil has various estimates of EROEI ranging from about 30 down to 8 (i.e. for each barrel of oil worth of energy, 30 to 8 barrels of oil may be recovered), while “oil” from tar sands is costed at anywhere from 3 down to 1.5. Clearly, whatever amount of hydrocarbon liquid fuels may be produced in the future, cheap, easily refined oil must soon peak, and along with it our global transportation network. It is the relocalization of civilization whose silhouette appears on the future horizon.

Related Reading.

“Venezuela oil ‘may double Saudis’.”

“Oil Estimates in Venezuela Doubled,” Jan Mouawad.

“Why the U.S. needs all the tar sands oil it can get,” By Jeff Rubin.

Saturday, January 16, 2010

Norway says "Yes" to Arctic Drilling.

According to a recent survey, the majority of Norwegians are in favour of an exploration study in a region of pristine Arctic wilderness, and which moreover is home to the largest spawning ground for cod in the world. Norway is not quite in the same straits as Britain in terms of the depletion of its North Sea fields, and yet its mature holdings of oil and gas are in decline. If Norway is to maintain its position as a major exporter of hydrocarbons, it needs to strike new resources and the oil industry believes that the waters near the Lofoten and Vesteraalen islands in the Arctic must be drilled down through to offset the decline in its existing fields.

Environmental groups fear that any spillage of oil would cause ecological mayhem. Indeed, the region has a complex ecology, with cold water reefs, pods of whales, some of Europe's largest seabird colonies and the spawning grounds of the world's largest population of cod. It is not expected that the government will decide firmly until 2013 whether to open up the area or not, but if some estimates of the timing and impact of peak oil are correct, the emphasis will have shifted acute by then, and all areas where oil is believed to lie will be up for grabs.

85% of Norwegians are of the view that the oil and gas industry will be highly significant to the economy of northern Norway, which also has appreciable fishing and tourism industries. Norwegian friends of mine applaud the oil industry for providing enormous wealth to the country and a very good standard of living for its citizens. Norway is seen by some as an ideal target for immigration, in view of its generous welfare system, although it is probably not as lenient as ours in Britain which we can no longer afford to prop-up on loans from the EU and elsewhere.

Norway invests much of the revenues from its oil and gas profits in an offshore wealth fund, although along with most other investments this was hit hard by the financial crash at the end of 2008. Nonetheless it still stands at $450 billion. It is through this pot of cash that Norway intends to provide pensions and other state benefits, and so maintaining its oil and gas income is crucial to the social welfare of the country.

Norway produced 3.5 million barrels of oil a day about ten years ago, and output has fallen to around 2 million bpd now. Britain produced around 3 million bpd at the end of the 1970s and early 1980s and now that has fallen to 1 million bpd and is declining fast. I heard the other day that there are deposits of oil off the Falkland islands around 60 billion barrels worth which presumably Britain will be entitled to some share of. At the time of the Falkand war in 1982, I recall there was some talk of "mineral rights" including oil and maybe that's why Britain really went to so much effort to defend a couple of small islands against Argentine invasion.

It is clear enough that environmental concerns will not prove sufficiently robust defences against a need to compensate for a dearth of oil production from established fields and we can expect drilling to occur in many currently sacrosanct regions of the world, maybe including the region of Lake Baikal and even Antarctica. The writing is on the wall, nonetheless for a world that gets 40% of its entire energy from oil.

Related Reading.
"Most Norwegians want Arctic drilling study: survey." By Wojclech Moskwa.

Sunday, January 10, 2010

Snow and Gas Supplies.

Gordon Brown has said that there is no reason to fear that Britain will run short of gas during this uncharacteristically severe spell of cold and snow, which has been impinging upon us since before Christmas. Apparently we have six days worth of gas in hand compared to the French reserve of 120 days. Now the two countries get their gas from different sources, and Britain can no longer rely on the output of the North Sea fields, which are in steep decline, but needs to import more from its co-owner of that geological bestowal, Norway. Part of the recent concern over gas-provision was indeed due to some technical troubles in the supply of gas from Norway. France, along with other countries in mainland Europe obtains much of its gas from Russia, but it surprises me that there is so much gas stored in reserve.

This may derive in part from the fact that France makes 80% of its electricity from nuclear power while Britain makes 40% of its power from natural gas, and so the demand for gas is less. In Britain, around 100 companies are on interruptable gas contracts, meaning that they pay less for their gas but in times of crisis, like now, they must defer their demand on the national grid so that there are sufficient gas supplies to keep homes warm.

Being an island, once lauded as being Britain's source of protection, inter alia from French invasion, e.g Trafalgar, and a secure vantage point for the reverse, when Britain attacked France, e.g. Agincourt, Crecy and Waterloo, now appears rather vulnerable since we rely relentlessly on imports of fuel and food, and presently salt to grit the roads, since our own mines in Cheshire are unable to keep pace with demand, even suspending normal exports of it to Germany. Some of the imported salt comes from as far away as Egypt, and reserves are falling so low that local authorities are having to ration its use, e.g. by only gritting main roads, leaving the minor B-roads treacherous. There is a babble of complaint about this, but frankly what else can they do. When they do grit and snow falls, the effect is blanketed; and when the temperature falls below about minus 8 degrees C, the salt no longer melts the ice, for good and well understood reasons of thermodynamics.

We have been reminded of late too, irrespective of the prevailing weather conditions, that we will need to produce more of our own food over the next 20 years, as part of the blanket excuse of global warming. Well maybe, but the most immediate reason is to use less fossil fuel, particularly oil which I note is around $83 a barrel once more. Britain imports around a third of its food and this just isn't going to be feasible within 20 years and probably far less that that. "Peak Oil", is a term muttered out of the corner of someone's mouth but Global Warming is the main rallying cry. It matters not in the most pressing term since the same actions of burning less carbon both mitigate and buy time to re-adapt society from the global to the local, and maybe avert some of the worst cataclysms of GW, although some mathematical models predict that it is already too late to stop the planet from heating into the foreseeable future.

When we do suffer from such sputterings in the normally well-greased engine of modern life, I am reminded of the inevitability of change. That within a decade or two, we must completely change the way we live, powering-down to a society that doesn't need to use so much energy and move both goods and people around in the extent of the status quo. The transition will not be easy and maybe to quote Chinua Achebe in the title of his novel, "Things Fall Apart".

Meanwhile, Happy New Year!