Block’s Indicator of Sustainable Growth

by Ray Block 

The Minerals Council of Australia (MCA) is a fierce opponent of the Australian Government’s carbon reduction scheme.

 MCA commissioned Dr Brian Fisher, a one time director of the Australian Bureau of Agricultural and Resource Economics (ABARE) to prepare a report estimating the employment effects in the mining industry from the government’s carbon pollution reduction effects out to 2030, both on a national, state and regional basis.

 

Fisher’s report from his firm Concept Economics dated May 21 2009 is available on the web, with quick facilities for downloading. The report says that direct and indirect employment in Australian mining and related industries total an estimated 200,000 workers. This is made up of 142,000 directly employed in mining, together with 20,000 in the smelting and refining of minerals, and the indirect employment effects of the many communities dependent on mining commodities.

 

There is no question that these industries contribute a dominant share of Australian exports, with coal the largest export earner. Equally, the regional impacts given the geographical diversity of mining and related activities in north and central Queensland, most of Western Australia and the Hunter Valley and Illawarra regions of New South Wales are extremely large in terms of contribution to gross state product.

 

The Australian Government’s proposed 5 per cent reduction in carbon emissions by 2020 from 2000 levels is estimated on an Australian wide basis to displace 23,510 mining and allied workers by 2020, and 66,400 by 2030.

 

What I don’t like about an emotional study of this sort, designed to create hysterical levels of objection to an even modest reduction in carbon levels, is that there is no attempt to estimate the impact of a successful transition to a carbon capture and storage future, prolonging the carbon based regional economies for many years to come.

Equally, there is no allowance for a rapid resumption of medium term growth in demand for commodities, which is less than five years away.

 

To take just one example of why quick econometric projections on future employment usually turns out to be wide of the mark, the Beijing based consultancy Dragonomics, which publishes the China Economic Quarterly, with its own blog Dragonbeat in the Financial Times has an upbeat view on China and the medium term outlook for commodities..

 

Tom Miller, the managing editor of the China Economic Quarterly says- “somewhere between 2010 and 2013- China will again emerge as the key driver of global demand.” Financial Times (April 3 2009). Miller quotes a recent study by McKinsey Global Institute, which is forecasting that 100 new cities with populations of 500,000 to 1.5 million will mushroom around the country.

“By 2025, current trends suggest that six new cities- Tianjin, Guangzhou, Shenzhen, Wuhan, Chongqing and Chengdu- will join Beijing and Shanghai with real urban populations exceeding 10 million. As China’s growth and urbanisation continues for another couple of decades, Chinese demand for commodities will rise substantially, especially hard commodities for building houses and roads.”  

 Nor is there any acknowledgement, that the regional impact of employment effects of renewable energy projects in the mining communities could offset to some extent any direct or indirect loss of employment opportunities in mining communities.

 

The Climate Institute is claiming that renewable energy projects is likely to create 26,200 new jobs mostly in Australian regional centres. This ‘tit for tat’ report has about as much accuracy as the report from the Minerals Council. Tit for tat of equivalent retaliation, a strategy in game theory has Milton Hooke of the Minerals Council in one corner and John Connor of the Climate Institute in the other corner. Both are seasoned performers and enjoy the contest.

 

In reality, there is a bit of truth in the reports from both groups of lobbyists.

 

 

 

Posted under Carbon Abatement Scheme, Climate Change, Commodity Prices, Economies, World Inflation

by Ray Block

The Waxman-Markey Climate Change Bill, formally known as American Clean Energy and Security Act (ACES) H.R.2454 passed its first major hurdle, being approved by the House Committee on Energy and Commerce (May 20 2009).

 

The House bill is nearly 1000 pages in length, was described by one critic, Roger Pielke Jr of the Prometheus Institute as a “massively complex, sprawling and confusing piece of legislation.”   

 

The Committee vote in favour was 33 to 25. Only one Republican Party member, Mary Bono Mack of Calif. voted for the bill, with other minority party representatives solidly voting against. Republicans put up an almost endless stream of amendments, the effect of which would have destroyed the Bill. But fortunately their steamroller impact was brushed aside by the majority Democrats, who stood firm.

 

The Bill would provide for:

Ø      15 per cent renewal energy target by 2020.

Ø      17 per cent reduction in GHG (greenhouse gases) from 2005 levels by 2020.

Ø      42 per cent reduction in GHG from 2005 levels by 2030.

Ø      80 per cent reduction in GHG from 2005 levels by 2050.

 

The Bill goes to the floor of the House of Representatives in September, or possibly as early as June, for a vote to approve the measure. By this time, The Senate version of the climate change bill being determined will then be reconciled with the House version.

 

Currently, time is on the side of the Democrats, as they have an effective 59 votes in the Senate in a chamber of 100 Senators. This is made up of 57 Democrats, including the recently converted Democrat Arlen Specter, who changed parties. The majority also has the support of the Independent Democrat Joe Lieberman and the Independent Bernard Sanders.

 

The legislative clock will change dramatically depending on the outcome of a court case over the disputed election result in Minnesota. Democrat Al Franken appears to have won over Republican Norm Coleman, and the local media thinks the Democrat will get the Court’s nod. In which case, the majority party will be able to count on 60 votes in the Senate for climate change.

 

If the court’s decision goes to the Republican Coleman, the minority party will have the trigger to delay the climate change bill indefinitely. This is due to the time honoured filibuster tradition, which means that a senator can speak for as long as he or she can stand upright and continue to talk, unless a majority can muster 60 votes (three fifths of the chamber vote) and overcome the opposition.

 

The reality is that the Republicans will do anything they can to get the legislation defeated or delayed.

 

The extreme purists on the left, the tree hugging environmentalists, including Greenpeace won’t have a bar of the Waxman-Markey bill, because it gives too much away in pollution permits and extensive use of international and domestic offsets.

 

But the moderates say that is the price to pay for getting the legislative changes needed in Congress to give the Obama Administration a realistic legislative commitment to carbon pollution reduction, particularly in the December round of the UN Climate Change conference in Copenhagen.

 

Originally Al Gore, the Nobel Peace Prize recipient and former Vice President, now a roving ambassador for clean energy, along with other climate change advocates, wanted a carbon tax instead of the more complicated cap and trade system. But in the interests of forming an international agreement with the Europeans and hopefully other nations, Gore agreed to the cap and trade provisions.

 

In order to get the public onside, Al Gore and his two grassroots groups of volunteers in the Climate Project, and its partner association, the Alliance for Climate Protection, with what Grist calls “multi hundred million dollar campaigns” will be getting behind the Democrat legislation.

 

The US EPA (Environment Protection Agency) will design and organise the running of the auctions, which will begin by 2012. Initially, the cap and trade auctions will apply to only 15 per cent of the total allowances needed to meet the targets. Auction revenues will be allocated to low and moderate income families, as compensation for the higher energy prices inevitable under the scheme.

 

The EPA will allocate 85 per cent of the pollution allowances on a free basis to the following:

Ø      30 per cent to electric distribution companies –allocations to be updated in 2013.

Ø      9 per cent to gas distribution companies.

Ø      5-10 per cent (declines over time) to states to fund renewables and energy efficiency.

Ø      15 per cent to energy intensive industries- paper, steel, cement etc.

Ø      2-5 per cent for CCS (carbon capture and storage) applications.

Ø      2 per cent to oil refineries.

Ø      Balance to other interests.

 

The free basis of allowances generally last until the mid 2020s, at which time they phase out between 2026 and 2030, when the price of carbon permits is expected to rise faster.

 

The American Energy and Security Bill contains provisions similar to the (CDM) Clean Development Mechanism of the Kyoto Protocol.  Energy Intensive companies covered by the legislation, including utilities with power plants, oil refineries, aluminium producers etc are allowed to use up to a total of one billion tons of international emissions reductions, that is the offsets, to be used each year instead of necessarily reducing their own domestic emissions.

 

This will enable heavy emitters to delay the time before large scale costly pollution control equipment will have to be installed in their domestic operations. This explains why large energy intensive companies, such as Alcoa, with extensive operations in developing countries, are understandably supporters of the legislation, because they have a lot to gain from it.

 

The Bill also allows up to one billion tons of additional offsets each year, sourced from  domestic industries, such as agriculture and forestry, which do not fall under the pollution cap. If suitable supplies of domestic emissions offsets are unavailable, the limit on the use of international offsets may be raised to 1.5 billion tons annually at the discretion of the EPA Administrator.

 

 

 

 

 

 

 

Posted under Carbon Abatement Scheme, Climate Change, Renewable Energies

by Ray Block

The Australian Government’s commitment in the May 2009 Federal Budget for a $1.5 billion of solar energy investment in four solar power plants of 250 MW, which will require additional equity by the private sector, is a shot in the arm for renewable energy.

 Coming at a time when venture capital funding world wide for clean energy projects was becoming very scarce in 2009, the 1 GW of solar energy to be constructed by 2015 is a big step forward for Australia. It is expected that the projects for tender will be keenly sought by many developers.

 

 The Australian government’s initiative is part of its commitment to achieve 20 per cent renewable energy by 2020, under the mandatory renewable energy requirements set in place earlier this year.

 

Solar energy in Australia was languishing in the back seat, with wind energy projects in the lead, although the previous government had announced in 2006, a commitment to provide $125 million, with an additional $50 million from the Victorian state government for a 154 MW solar power plant to be built in north western Victoria, at a total cost  including private equity of $420 million.

 

The Victorian concentrating PV solar plant to be constructed by Melbourne based Solar Systems, which already has four small solar plants operating in outback Australia is a 20 per cent owned affiliate of TRUenergy, one of the largest integrated energy utilities in Australia, owned by the CLP Hong Kong listed energy utility group.

 

TRUenergy has already committed $1 billion to renewable energy projects in Australia.

 

The four new solar power plants to be managed by a single operator will allow for different technologies in each plant, if this is considered desirable. Apart from Solar Systems/TRUenergy group, the likely starters for bidding include:

 

BrightSource energy of Oakland Calif, the Israeli affiliate, which raised US$160 million in venture funds is achieving an outstanding record in California, with the biggest solar thermal projects in the world. The technology consists of a solar thermal power tower design, which includes thousands of small mirrors, known as heliostats, to reflect sunlight on to a boiler atop a tower to produce high temperature steam, which is then piped to a conventional turbine.

 

BrightSource has two major sets of contracts. One of these with the utility PG&E      involves power purchase agreements for seven solar thermal plants in the Mojave Desert of  northern California for a total of 1.31GW (1,310 MW) and to cost more than US$3 billion. The first solar plant is for installation in 2012. The other major contract is with Southern California Edison involving 1.3GW (1,300 MW), with the first plant expected in 2013.

 

Ausra, the Australian thermal solar start up which relocated to Mountain View, Calif, raised US$115 million in 2007-08, and a further $25 million some months later. The technology was designed by David Mills, the expatriate Canadian, who is the chief scientific officer, and previously a professor at the university of Sydney for 30 years. Mills, who is credited with designing the first solar water heater designed the linear Fresnel reflector system, which is optimising for the lowest cost of energy, not the highest technical sophistication. It uses an array of relatively flat mirrors that reflect sunlight to boil water in elevated tubes, producing steam that drives the turbines.

 

Ausra, which initially bid for large contracts with electricity utilities, and built in record time a 5 MW demonstration and test facility in Bakersfield Calif. in 2008 has repositioned itself from its Nevada factory as a supplier of solar thermal parts for other companies.

 

SolFocus of Mountain View, Calif. the concentrator PV firm, which was one of the few solar companies to raise US$ 67 million in the March quarter 2009, in addition to its $52 million raised in 2007 is achieving a very creditable record, with its technology of convex mirrors reflecting the sun’s rays 500 times onto a solar cell, which enables the system to produce solar power, with industry leading panel conversion efficiency levels of 25 per cent. It combines high efficiency solar cells approaching 40 per cent and advanced optics to provide solar energy solutions, which are scalable.

 

SolFocus is competing with solar thermal for utility plant contracts and large scale commercial operations, given its ability to deliver three times the efficiency of traditional solar systems with lower land use. Its largest project to date is a 10 MW commercial system being constructed in Greece.

 

First Solar Inc, the Tempe, Ariz. PV solar company is the world’s largest producer of thin cadmium-telluride PV solar cells, with a very efficient manufacturing process bringing its production costs for solar panels down to US$1 a watt, the lowest cost in the world, has been achieving record success even in the current world recession.

 

Net sales in the March quarter 2009 was a record US$ 418.21 million, 112 per cent higher than a year previously, with net income of $164.6 million. FirstSolar has been bulking up in recent months acquiring in March 2009 a $400 million portfolio of PV projects from OptiSolar. These include a 550MW Topaz site in Central California, which is under a power purchase agreement with the utility PG&E.

 

There is also a group of 1.3 GW (1,300MW) of development deals in the pipeline, mostly with utilities in California. In its own right, First Solar in conjunction with the German wind and solar company Juwi in April 2009 and the state of Brandenburg in Eastern Germany announced the construction of a 53 MW DC power plant near the city of Cottbus. The project being constructed on a former Soviet army base over 152 hectares will consist of 700,000 panels.

 

                                               

 

 

          

 

 

 

 

 

 

 

Posted under Carbon Abatement Scheme, Climate Change, Renewable Energies

by Ray Block

The Australian Government’s commitment in the May 2009 Federal Budget for a $1.5 billion of solar energy investment in four solar power plants each of around 250 MW, which will require additional equity by the private sector, is a shot in the arm for renewable energy.

 

Coming at a time when venture capital funding world wide for clean energy projects was becoming very scarce in 2009, the 1 GW of solar energy to be constructed by 2015 is a big step forward for Australia. It is expected that the projects for tender will be keenly sought by many developers.

 

 The Australian government’s initiative is part of its commitment to achieve 20 per cent renewable energy by 2020, under the mandatory renewable energy requirements set in place earlier this year.

 

Solar energy in Australia was languishing in the back seat, with wind energy projects in the lead, although the previous government had announced in 2006, a commitment to provide $125 million, with an additional $50 million from the Victorian state government for a 154 MW solar power plant to be built in north western Victoria, at a total cost  including private equity of $420 million.

 

The Victorian concentrating PV solar plant to be constructed by Melbourne based Solar Systems, which already has four small solar plants operating in outback Australia is a 20 per cent owned affiliate of TRUenergy, one of the largest integrated energy utilities in Australia, owned by the CLP Hong Kong listed energy utility group.

 

TRUenergy has already committed $1 billion to renewable energy projects in Australia.

 

The four new solar power plants to be managed by a single operator will allow for different technologies in each plant, if this is considered desirable.

Apart from Solar Systems/TRUenergy group, the likely starters for bidding include:

 

BrightSource energy of Oakland Calif, the Israeli affiliate, which raised US$160 million in venture funds is achieving an outstanding record in California, with the biggest solar thermal projects in the world. The technology consists of a solar thermal power tower design, which includes thousands of small mirrors, known as heliostats, to reflect sunlight on to a boiler atop a tower to produce high temperature steam, which is then piped to a conventional turbine.

 

BrightSource has two major sets of contracts. One of these with the utility PG&E involves power purchase agreements for seven solar thermal plants in the Mojave Desert of  northern California for a total of 1.31GW (1,310 MW) and to cost more than US$3 billion. The first solar plant is for installation in 2012. The other major contract is with Southern California Edison involving 1.3GW (1,300 MW), with the first plant expected in 2013.

 

Ausra, the Australian thermal solar start up which relocated to Mountain View, Calif, raised US$115 million in 2007-08, and a further $25 million some months later. The technology was designed by David Mills, the expatriate Canadian, who is the chief scientific officer, and previously a professor at the university of Sydney for 30 years. Mills, who is credited with designing the first solar water heater designed the linear Fresnel reflector system, which is optimising for the lowest cost of energy, not the highest technical sophistication. It uses an array of relatively flat mirrors that reflect sunlight to boil water in elevated tubes, producing steam that drives the turbines.

 

Ausra, which initially bid for large contracts with electricity utilities, and built in record time a 5 MW demonstration and test facility in Bakersfield Calif. in 2008 has repositioned itself from its Nevada factory as a supplier of solar thermal parts for other companies.

 

SolFocus of Mountain View, Calif. the concentrator PV firm, which was one of the few solar companies to raise US$ 67 million in the March quarter 2009, in addition to its $52 million raised in 2007 is achieving a very creditable record, with its technology of convex mirrors reflecting the sun’s rays 500 times onto a solar cell, which enables the system to produce solar power, with industry leading panel conversion efficiency levels of 25 per cent. It combines high efficiency solar cells approaching 40 per cent and advanced optics to provide solar energy solutions, which are scalable.

 

SolFocus is competing with solar thermal for utility plant contracts and large scale commercial operations, given its ability to deliver three times the efficiency of traditional solar systems with lower land use. Its largest project to date is a 10 MW commercial system being constructed in Greece.

 

First Solar Inc, the Tempe, Ariz. PV solar company is the world’s largest producer of thin cadmium-telluride PV solar cells, with a very efficient manufacturing process bringing its production costs for solar panels down to US$1 a watt, the lowest cost in the world. It has been achieving record success even in the current world recession.

 

For a renewable energy company only 10 years old, net sales in the March quarter 2009 was a record US$ 418.21 million, 112 per cent higher than a year previously, with net income of $164.6 million. The company has been bulking up in recent months acquiring in March 2009 a $400 million portfolio of PV projects from OptiSolar. These include a 550MW Topaz site in Central California, which is under a power purchase agreement with the utility PG&E.

 

There is also a group of 1.3 GW (1,300MW) of development deals in the pipeline, mostly with utilities in California. In its own right, First Solar in conjunction with the German wind and solar company Juwi in April 2009 and the state of Brandenburg in Eastern Germany announced the construction of a 53 MW DC power plant near the city of Cottbus. The project being constructed on a former Soviet army base over 152 hectares will consist of 700,000 panels.

 

                                               

 

 

Posted under Carbon Abatement Scheme, Climate Change, Renewable Energies

by  Ray Block

Two or three degrees Celsius warmer by 2100 is dangerous enough, as my previous post suggested from the articles in Nature. But what about double that figure – a median probability of 5.2 degrees Celsius, with a 90 per cent probability range of 3.5 to 7.4 degrees Celsius warmer by 2100.   

 

This is the findings of a climate change study by MIT- the Massachusetts Institute of Technology published in the May 2009 issue of the American Meteorological Society’s Journal of Climate.

 

Professor Ronald Prinn, study co-author, and co-director of the Joint Program on the Science and Policy of Global Change at MIT, and his collaborators used 400 computer runs of MIT’s sophisticated global systems model, a detailed computer simulation of global economic activity and climate change to project temperature outcomes. Prinn is the director of MIT’s Centre of Global Change.

 

The lead author of the climate change project was Andrei Sokolov, research scientist in the Joint Program. 

                        

Professor Prinn said that each of the 400 runs of the computer model used slight variations in input parameters, selected so that each run had an equal probability of being correct, based on present observations and knowledge.

 

Other climate projections have estimated the probabilities of various outcomes, based on variations in the physical response of the climate system itself. But Prinn explains, the MIT model is the only one that looks in great detail at the effects of economic activity, coupled with the effects of atmospheric, oceanic and biological systems. “ In that sense, our work is unique.”

 

While the outcome on a “no policy” change looks much worse than before, Prinn says that it is not too late to put in place strong policies to dramatically curb greenhouse gas emissions. “Without action, there is significantly more risk than was previously estimated. This increases the urgency for significant policy action.”

 

 Prinn says that with  motor vehicles lasting for years, and buildings and power plants lasting for decades, it is “essential to start making major changes through adoption of significant national and international policies as soon as possible. “The least cost option to lower the risk is to start now and steadily transform the global energy system over the coming decades to low or zero greenhouse gas-emitting technologies.”

 

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Posted under Carbon Abatement Scheme, Climate Change, Economies, Renewable Energies