Conventional wisdom: real and manufactured

Today's blog is posted by guest blogger, Ed Marshall, a senior account director at Beaupre. Check out his bio in our "About Authors" section.

Even as winds of change sweep through the media landscape, it remains a truth that the first audience for any pitch is the reporter. Without a compelling pitch that resonates with the reporter, your story will not get written and therefore will not influence the end-reader audience.

It's interesting, then, to see a campaign succeed with that initial target audience even as it butts up against a reality that could torpedo it.

This past Memorial Day Weekend, I happened upon an article in The Boston Globe (yes, I still have dead tree media delivered to my door, daily) assuring readers that the price of gasoline this summer would not be as expensive as last summer. Why the lower price? Well, according to article author Erin Ailworth, "The main reason is the boom in US production of crude oil, which accounts for about two-thirds of the price of gas. As a result of the controversial drilling process known as 'fracking' that frees oil from shale formations, US crude is flooding global markets and holding down prices."

That line has become conventional wisdom in the media, as well it should. As I've blogged in the past, vested fossil energy interests have expended a lot of effort to create it. A steady wave of research papers from institutes, investment houses, agencies and academics with ties to the energy industry have received breathless uptake in the media. Those who have taken critical views of those papers have been largely ignored. Not really a surprise because people prefer information that assures them the world they've known will continue on untroubled. The media, like corporations, is made up of people and the message they've been receiving on a regular basis from fossil-fueled sources is that all is well.

The problem with this manufactured conventional wisdom is reality. If you make it to the bottom of that Globe article you come across this paragraph:

In the meantime, gas prices remain historically high and may convince some people to stay close to home, said Mary Maguire, spokeswoman for AAA Southern New England. The auto association estimates that 34.8 million Americans will journey 50 miles or more from home during the holiday, a decline of about 1 percent from last year, when 35.1 million people traveled.

So, yeah, reality. Fracking for oil is expensive, both in terms of labor and materials. Those sustained high prices are tamping demand in the US, especially among those who remain among the ranks of the unemployed. Faced with a dearth of summer jobs and low wages, teens, too, appear to be less interested in dropping $60 or $100 in the tank every week to cruise around.

Meanwhile in what are still called "the emerging economies" of countries such as China, India, Indonesia and Vietnam, demand for refined petroleum products continues to climb. That rising demand will more than make up for declining demand here in the US. That trend will ensure both high gasoline prices and that fracking for oil remains a profitable endeavor. But, profitable or not, it's unlikely to result in production rates that can replace that lost from depleting conventional wells and this trend will also help ensure prices for crude stay high enough to keep frackers in business.

And as the fracked oil flows, the conventional wisdom will as well, while people at the pump bump into the underlying reality of a world no longer awash in cheap fossil energy.

Plugging in electric cars is easy, but paying for them might kill you

Charging a plug-in vehicle is a lot like a middle school science project – except most middle school science projects don’t leave you stranded in a parking lot hundreds of miles from home.

Electric_car_chargingThat's the implicit message permeating the public duel between Tesla Motors CEO and founder Elon Musk and New York Times writer John Broder. The former objects to the latter’s review of Tesla’s swanky Model S electric sedan. Broder's travelogue legitimizes a central fear about plug-in vehicles: that they’re unreliable if they stray too far from a high-speed charging station. (Which, incidentally, aren't all that speedy at 30 minutes for a 150-mile charge.)

Broder wrote that he did everything short of pumping magic beans into the Model S to keep it rolling. He drove at low speeds without the heat on for miles to get from one charging station to another. He stayed in almost constant touch with Tesla customer service. He took long breaks while the Model S slowly sipped from electric outlets.

Even with those accommodations, Broder claimed that the Model S ran out of juice and shut itself down in Milford, Conn., about two thirds of the distance from his starting point of Washington DC to his destination of Boston.

Tesla struck back – persuasively. Musk cited the car’s on-board activity log and Broder’s own communications with Tesla customer service to charge that Broder deliberately ran the Model S down for dramatic effect. Oh yeah, and he didn’t putter along at 50 miles per hour with the heat off in February, as he claimed. He drove at highway speeds with the heat on.

No matter whom you believe in this beef, the underlying issue is bogus. Electric cars are not going to fail for lack of places to plug them in any more than gasoline-powered cars failed for lack of gas stations at the end of the horse-and-buggy era.

When gasoline engines hit the scene, the technology was good enough to spur growth of an infrastructure around it. The same thing is happening with plug-ins. Nissan and Tesla Motors are rolling out coast-to-coast networks of high-speed charging stations for their electric vehicles. There are already gujillions of charging devices on the market. The Baltic nation of Estonia has made it a national priority to establish a network of charging stations and they’re off to a good start.

I know, Estonia doesn’t compare to the U.S. in size or population. Yet it has 1.25 million people and 17,000 square miles to cover, so it’s not a throwaway comparison either.

No, the issue with plug-in cars isn’t where to plug them in. The issue is also not that they plug into a grid powered largely by dirty-burning coal, which is the other popular red herring around plug-ins. The grid is getting more environmentally friendly and will grow steadily more so as more renewable energy sources come online.

The issue with plug-in cars is that they’re too expensive for large-scale consumer adoption. A Tesla Model S costs $54,000. A similarly tricked-out Mercedes Benz E-class sedan goes for $51,000. A Chevy Volt is $39,000, compared to $21,000 for a Chevy Mailbu. A basic Nissan Leaf costs $21,300 – and the Leaf is the econobox of the electric car set. A comparable conventionally powered car costs about $14,500.

These price points make plug-in vehicles irrelevant to most consumers. Even if they care for the environment, they can’t pay for a car with good intentions. So treat spitting contests like Broder versus Musk for what they are: entertainment. But when someone talks about making a plug-in that the average consumer can afford, you might want to pay attention. That’s the real obstacle for plug-ins.

Renewable energy is showing spark for 2013 and beyond

2012 had all the ingredients for a bummer year in renewable energy, but instead it gave us a lot to be optimistic about for 2013 and beyond.
 
Sure, the renewable energy and conservation grants in the stimulus bill are going away. Consumer demand for alternative energy systems dropped. A glut of solar photovoltaic equipment on the international market helped fuel a trade dispute between the U.S. and China. That dispute raised uncertainty about solar’s long-term prospects as free trade collided with low prices.
 
Solar energy companies, some backed by government loans and grants, scaled back operations or shut down. Critics in Congress derided each failure as a waste of tax money. Some tried to prevent the military from investing in biofuels.
 
In the end, Congress restored the military’s freedom to explore alternative energy sources. That was emblematic of what happened in the U.S. and the world in renewable energy. It didn’t look good for a while, but by the end of 2012, there were a lot of positives on the scoreboard.
 
Germany again showed what a developed nation with a large, complex economy can accomplish in renewable energy. The country’s renewable energy output rose to 25 percent of its total energy production in the first half of 2012. Wind led the way at 9.2 percent, followed by solar at 5.3 percent. When the final numbers from 2012 are in, Germany expects to beat its 2011 clean energy output by 15 percent.
 
China, the world’s largest energy consumer, erected 36 wind turbines per day in 2012. One of its provinces alone generates as much electricity through wind power as the entire United Kingdom does from all fossil-fueled and renewable sources. The Chinese government quadrupled the amount of solar power it wants to generate by 2015 to 21 gigawatts.
 
In the U.S., total renewable energy output dropped slightly in 2012 because of lower water levels in the Pacific Northwest that cut hydroelectric energy production. However, renewable output is forecast to rebound to 2011 levels in 2013.
 
As of Nov. 30, 2012, new wind power installations in the U.S. outpaced natural gas and coal with 6,519 megawatts of new capacity. Natural gas was at 6,335 megawatts and coal was less than half of the wind power total. Wind power electric generation increased 15 percent in 2012.
 
As good as 2012’s lagging indicators were, the signs of what’s coming in 2013 and beyond were even more encouraging.
 
Investor Warren Buffet bought the 579-megawatt Antelope Valley Solar Project in California for somewhere between $2 and $2.5 billion. It’s the world’s largest solar photovoltaic development. When a guy like Buffet puts that much down on a venture, he’s clearly not afraid of government subsidies drying up, or market peaks and valleys.
 
On the technology front, there are encouraging signs that companies are plugging away at the limitations holding renewable energy back from mass acceptance. A U.S.-based company has applied for a patent on a wind turbine design that stores energy as heat instead of immediately converting it to electricity. The heat generates steam to drive turbines when the wind isn’t blowing, a stubborn drawback of wind power.
 
In solar photovoltaics, the National Renewable Energy Laboratory and partner Solar Junction announced a solar cell that converts 44 percent of the light that hits it into energy. Efficiency has been a drag on solar photovoltaic; most panels only convert somewhere around 20-25 percent of available light into electricity. At the same time, the government research agency DARPA is experimenting with nano materials that can boost solar cell efficiency to 50 percent.
 
Politicians and economists are still guarded in their predictions about renewable energy. Even so, there’s a feeling of inevitability building around it. The feeling ebbs from time to time, but even during slack tides like 2012, the trend is for better and smarter renewable energy technology and a bigger renewable energy market.

At current rates

Today's blog is posted by guest blogger, Ed Marshall, a senior account director at Beaupre. Check out his bio in our "About Authors" section.

In the unfolding war of perception around fossil fuel availability, it’s always important to watch for key words and phrasings.

It’s important because they typically take two forms: “soothe and enthuse” and the “fine print.”

“Soothe and enthuse” phrases assure the public that there is plenty of resources available. In the realm of fracking and natural gas, the phrase that soothes and enthuses is “100-year supply,” as in “we have a 100-year supply of natural gas in the United States.”

The inline “fine print” wording ensures plausible deniability when physical realities and/or business needs undermine assertions made in the assurance phrases, thus dampening excitement. Again, in the natural gas fracking world, the one to watch for is “at current rates.” Sometimes the current rate cited is of consumption. Other times it’s production. Either way, it’s usually closely tied to the aforementioned “100-year supply” phrase.

With this in mind, I read with interest this story about a recently issued report written by NERA Economic Consulting at the behest of the Energy Department stating that exporting U.S. natural gas would be a big booster for the domestic economy. As I summarized previously, fracking for natural gas is expensive and not currently profitable. In short, fracking produces a quick rush and then a quick fall off in flow, requiring more drilling. That’s expensive. However, that initial rush produces a glut which drops prices, making the whole process rather uneconomic.

Clearly, shipping fracked gas overseas to growing markets such as Japan and China, where prices are currently more than triple what U.S. buyers pay, would do wonders for the bottom line of the frackers. But what would it mean for that “100-year supply”?

That’s where the aforementioned fine print kicks in.

You see, “at current rates” refers to a time when the U.S. natural gas supply isn’t part of a global market; it’s all consumed here for the things natural gas has historically been used for – cooking, heating homes and water, supplying chemical manufacturers with an important feedstock, pre-heating metals in iron and steel making, generating electricity in a power plant, that sort of thing – and produced at rates commensurate with those historical uses.

Open up the U.S. gas supply to the soaring demands of growing Asian economies and you are instantly no longer consuming “at current rates.” You’re consuming at much higher rates, which increases prices. Higher prices will drive driller’s revenue and provide capital for more fracking. Soon you’re no longer producing “at current rates” because it has jumped to meet the new, higher demand.

The boom in jobs fostered by this expensive, messy frenzy of resource extraction is unlikely to focus anyone on the math that “at current rates” encourages. Rather, some day hence, certainly much sooner than a century from now, when the issue becomes more than obvious, an intrepid scribe may wonder why the 100-year promise fell so short. This movie has played out before; but sadly it was a foreign film – British, to be precise – and we don’t really pay much attention to those here in the States.

Export Land Model watch - news from the Citi

Today's blog is posted by guest blogger, Ed Marshall, a senior account manager at Beaupre. Check out his bio in our "About Authors" section.

Once upon a time, the United States of America was the world’s largest oil exporter. We grew rich from the oil we sold and the oil we used powered new industries and ways of living that, in turn, amped up our use of oil until we had nothing to spare. Simultaneously, natural events ran their course and oil fields became less productive, causing domestic production to peak in the early 1970s.
 
That about sums up the Export Land Model, a conundrum I touched upon in a previous post. Now, it seems to be playing out, with its own localized twists in the home of the current number one oil exporter, Saudi Arabia.
 
Earlier this month, a report by analysts at Citigroup echoed that assessment, saying that the world’s biggest oil exporter may become “an importer” by 2030 due to rising domestic use – which the Citgroup analysis estimated was growing by about eight percent per year.
 
Even more recently, a Reuters story notes that Saudi Arabia burned record monthly volumes of oil in June and July. The story notes that the reason for the increase is a need to produce more electricity for air conditioning. Unlike the United States and most other Western countries, Saudi Arabia uses oil to produce a large percentage of its electricity. Switching to solar would seem to be a no-brainer – they have a surplus of sun and the rise in oil prices is keeping the cash pipeline flowing. The trick is in the transition.
 
This Wall Street Journal article has some good numbers and perspective on the challenges the Saudis (and other OPEC countries) face in trying to transition up to a third of their electricity generation to alternatives by 2032.
 
Meanwhile, a story from this week quotes the Saudis as saying that they will be turning increasingly to natural gas for electricity generation to reduce their dependence on oil.
 
Ditching one fossil fuel for another to generate electricity? That sounds really familiar – where have I heard that idea before?

Where's that confounded bridge?

Today's blog is posted by guest blogger, Ed Marshall, a senior account manager at Beaupre. Check out his bio in our "About Authors" section.

Hey, want to buy a bridge? How about a bridge fuel? It burns cleaner than coal for generating electricity, can heat homes and power a truck or a car. Best of all, we’ve got an embarrassing surplus of the stuff priced so low it’s sinful. It’s natural gas from shale, and it’s the answer to our energy problem for the next 100 years while we figure out this alternative energy stuff.

Or not.

The rosy assessments above are based on current consumption levels and an overly optimistic estimate of what we can get out of the ground at anything resembling a reasonable cost. In addition, the dollars don’t add up. The fracking that produces shale gas is expensive and when successful yields a short gusher of gas followed by a steep drop off, requiring a re-frack and repeat. It’s “an unprofitable treadmill.” The sheer number of wells drilled in the fracking frenzy has created a gas glut on the domestic market and, in turn, low prices that cannot support the expensive production model. Most companies producing shale gas are relying on steady inflows of investment cash to support their profit-challenged efforts.

Already used for cooking, heating homes and hot water as well as generate electricity and to provide feedstock for industry, expanding these uses of natural gas and creating new ones – such as in fleet trucking and even personal vehicles – is usually cited as a key way to put the shale gas glut to good use; lowering our national carbon footprint and increasing our energy independence. The big hope for producers, however, is in export. Clearing a few political and regulatory hurdles and building new facilities would allow for natural gas export in liquid form to foreign markets like Great Britain, Northern Europe and even Asia.

All of which would raise consumption levels well above current levels, reducing, in turn, the projected years of supply. Some estimates suggest shale may provide fewer than 30 years of additional natural gas supply when all is said and done. And as the glut diminishes, users will begin to be exposed to the true dollar costs of fracking extraction.

As this process plays out, a major concern is the effect on alternative energy. Another three decades of embracing the fossilized status quo aren’t going to help us achieve energy sustainability. People are fundamentally change-averse. Tales of “100 years of cheap energy under our feet” will resonate. And if the hype lures investment capital to shale companies, what does that do to the attractiveness of investment in green tech companies? Will cheaper natural-gas-fired electricity generation put further funding pressure on large-scale solar and wind projects?

If markets pick winners, then it’s hard to understand how an embrace of shale gas creates a bridge to a new energy regime, rather than to a familiar dead end. It’s time to stop digging for scraps in the past and find a new way forward.

Infographic: US renewable energy consumption on the rise

Today's GoFigure infographic looks at renewable energy consumption in the United States.
Source:LiveScience

Export Land Model - the Saudi update

Today's blog is posted by guest blogger, Ed Marshall, a senior account manager at Beaupre. Check out his bio in our "About Authors" section.

A quick update on the export land issue that I blogged about previously. In short, the problem is petroleum-producing countries becoming wealthy exporting oil and then finding their rising domestic oil use significantly cutting into what’s available for export even as their oil fields become less productive due to age. The ramifications are manifold – from unrest at home as shrinking revenues reduce subsidies and push up prices on things like food and gasoline, to turmoil on international markets as shrinking surplus capacity makes it easier for traders to drive price swings through speculation.

With this in mind, a few recent stories involving Saudi Arabia caught my eye. The first is a pretty straightforward endorsement of the export land model theory. In this story, Abdel Salam al-Yamani, head of the Saudi Electricity Company, is quoted as saying that, if left unchecked, Saudi Arabia’s current domestic oil consumption rates will deplete the country’s reserves by 2030. The second story involves the Saudi’s ramping up a nuclear energy program to the tune of at least $100 billion dollars. This story on the Saudi oil export and energy issue in the Wall Street Journal has a nice graph charting rising Saudi oil consumption. Finally, this story pulls in the previous points and also notes that the Saudi’s are going full bore into an energy source they’re likely to have in abundance for a long time to come: solar. Who knows, maybe one day they’ll be exporting that energy, too. In the meantime, the Middle East, in general, seems interested in conservation to ensure exports of their main revenue source remains high.

 

Global investors pour money into green energy

Global investors pour money into green energy; CleanSpeak Beaupre Clean Technology PracticeNothing like cool, refreshing facts to support the desperate hope for a renewable energy revolution.

New investment in green energy was up nearly one-third globally in 2010 to a record US$211 billion. That’s 32 percent above the 2009 level and more than five times that of 2004, says the United Nations Environment Programme (UNEP).

Other facts from UNEP’s new report:

  • Wind farms in China and rooftop solar panels in Europe were key drivers in the investment increase.
  • China was the world leader in “financial new investment” – i.e., investment in utility-scale renewable projects and equity capital for renewable energy companies. The nation's tally was US$48.9 billion, up 28 percent this year.
  • Developing economies (which invested US$72 billion this year) overtook developed ones (US$70 billion) in financial new investment. 
  • Investments in small distributed capacity, e.g., rooftop solar, rose 132 percent in Germany to US$34 billion.
  • Costs for renewable technologies are falling.
  • Wind dominated financial new investment in large-scale renewable energy. 
  • Biggest percentage jumps in overall investment were in small-scale projects, up 91 percent to US$60 billion, and in government funded R&D, up 121 percent to US$5.3 billion.

"The finance industry is still recovering from the recent financial crisis," Udo Steffens, president of the Frankfurt School of Finance and Management, said in a UNEP news release. "The fact that the industry remains heavily committed to renewables demonstrates its strong belief in the prospects of sustainable energy investments."

So there’s hope. And now facts.

More here

The Oil Curse (domestic version)

Today's blog is posted by guest blogger, Ed Marshall, a senior account manager at Beaupre. Check out his bio in our "About Authors" section.

The Oil Curse is a subset of the Resource Curse, describing an apparent paradox in developing countries “blessed with” large reserves of petroleum. The term refers to the political repression, corruption and violence that seem to accompany the development of oil resources in places like Nigeria.

But that definition might need to stretch because we in the United States - still a top three global oil producer – are living our own Oil Curse. It’s the curse of addiction.

Our transportation system and its supporting infrastructure are the lifeblood of the American lifestyle (which I’m told is not negotiable) and they’re built from the ground up around oil: the roadside stations that keep cars and light trucks fueled, the tanker trucks that keep the stations supplied, the roads the tanker trucks travel on to and from the tank farms, the refineries that keep those tank farms filled, the pipelines snaking cross-country and tanker ships docking at specialized ports. Deeply woven over the past 100-plus years, it’s a blessing that's evolving into a curse.

As we bump along the plateau of Peak Oil, supply becomes more difficult to maintain at a flow rate demanded by a constant-growth economic model. There is a clear need to move beyond petroleum. However, the influence of stakeholders heavily invested in, and greatly benefitting from, the current energy model creates a drag on innovation and transition. And to be clear, the stakeholders aren't simply the major oil companies and the firms focused on exploration, extraction, refinement and delivery. They’re also us. And that’s our version of the Oil Curse.

Addiction creates dependence. From strip mall to skyscraper, cul-de-sac to office park, we all have an enormous personal stake in a business-as-usual energy model. There's a reason that “drill, baby drill” made it onto bumper stickers nationwide. Adopting a new energy infrastructure is not as simple, or easy, as ditching a laptop for a tablet. It's a big part of the reason that the current administration has placed its weight not only behind innovation in alternative and renewable energy sources, but also in a lot more drilling.

History shows that transitions from one type of energy infrastructure – say wood to coal or coal to oil – takes decades. With the peak of conventional crude oil apparently already in our rearview mirror, the challenge in front of us is to reverse the curse. Hey, the Red Sox managed it. But we don’t have 86 years to figure it out.

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