Block’s Indicator of Sustainable Growth

by Ray Block

Energy Information Administration, an agency of the US government, says that world coal consumption is expected to increase by 49 per cent from 2006 to 2030.

Over the same 24 year period, coal’s share of world energy consumption will rise marginally from 27 to 28 per cent. In the electric power sector, coal’s share of world energy consumption moves from 42 per cent in 2006 to 40 per cent in 2o2o, and then increases again to 42 per cent by 2030.

An even larger growth pattern in energy related CO2 emissions is projected by the International Energy Agency, which  forecasts a 57 per cent rise by 2030.

Hopefully by that stage, carbon capture, transport, and storage technology will have reached peak success  levels, such that CO2 emissions will become negligible.

This is not a fairy tale, at least not intentionally, because a large number of countries are willing to spend big to prove the technology’s success. The Global Carbon Capture and Storage Institute headquartered in Australia has as foundation members 23 national governments and 100 major companies and organisations.

All these participants have a stake in either coal production, coal generated power, enhanced oil recovery, CO2 pipelines and tankers, all reliant on successful outcomes in carbon capture and storage.

China, now the world’s largest carbon polluter consumes more than 1.1 billion metric tons of coal per year, and the US which has swapped places with China to be the second largest polluter consumes about half the Chinese total. These two countries consume over  70 per cent of world coal consumption. 

 Australia’s largest scientific and industrial research organisation, CSIRO, has a joint venture with the Huaneng Group for a post carbon  combustion pilot facility in China involving carbon capture and storage. Huaneng has a majority stake in Huaneng Power International, China’s largest electricity generating company with a capacity of 39,203 MW.

Post carbon combustion may not eliminate all the CO2 escaping into the atmosphere. But it is the only one of the three CCS technologies, which can be retrofitted to existing power plants.

From remarks made to the Shanghai Daily, you get the strong feeling that the Chinese at this stage haven’t any intention to spend much on carbon capture and storage to reduce carbon emissions. So that the Chinese-Australian initiative may not be much more than going through the motions.

Huaneng’s joint venture with CSIRO in carbon capture and storage started with a power plant in Beijing.  The intention has been that at the end of 2009, the research would move to a second carbon capture project in a power plant in Shanghai.  

The Shanghai Daily(June 1 2009) quoted Jiang Minhua, director general of Huaneng’s science and technology department as saying  CCS  ”is extremely expensive” He said that high costs are holding back further progress.

Jiang Minhua said that by 2050, capturing CO2 before it is released into the atmosphere could provide 15 per cent of the carbon reduction required to reduce greenhouse gas. 

Minhua said that “carbon capture costs around 200 yuan (US$29.31) per ton using current technology. And actually handling it, processing it, so it can be used industrially, will cost another 150 yuan ($21.98) per ton.”

The $51.29 in Huaneng CCS costs can’t be reconciled with  the consultants McKinsey’s estimate of $130 a ton in CCS  demonstration costs. But the latter estimate assumes large costs in transport and storage.  In May 2009, Brian Ricketts, coal analyst with the International Energy Agency, said that each CCS installation would cost “a billion euros” and funding was the biggest challenge.

Huaneng’s Shanghai project aims to capture 10,000 ton of CO2 per year from one of the company’s power plants, and it is the “next step to industrialising the process.” 

But it is only a small fraction of the  CO2 from the company’s Shanghai operations. The first use of the CCS post combustion technology at the company’s operations at Gaobeidian, on the outskirts of Beijing was even smaller capturing 3000 tons of CO2 a year.

Ever practical, Huaneng is endeavouring to market CO2, rather than going down the underground storage route. Jiang Minhua said that a market study suggested that selling 100,000 tons of CO2 in the Shanghai region will not be a problem. “That doesn’t include something else we are looking into-using the CO2 to boost extraction rates in nearby oil fields.” 

Su Wei, director general of the climate change department at the National Development and Reform Commission told a Bloomberg reporter (August 4) that “carbon capture and storage, particularly for China, is not one of the priorities- the cost is an issue.”

Su Wei said that ” if we spent the same money for CCS on energy efficiency and the development of renewables, it would generate larger climate change benefits.”

Bloomberg (August 6 2009) reported that Su Wei, director general of the climate change unit at China’s National Development and Reform Commission(NDRC) said that “darbon capture and storage, particularly for China, is not one of the priorities- the cost is an issue. If we spent the m=same money for CCS on energy efficiency and the development of renewables, it would generate larger climate change benefits.”

by Ray Block

With the US moving to a low carbon economy, the  new found enthusiasm for natural gas may seem odd at first, given that it is a fossil fuel.

 But it makes a greal deal of economic sense, at a time when carbon abatement in coming years becomes the prevailing theme in energy pricing.

And when you combine natural gas with renewable energy, you have an ideal  interim solution to CO2 reduction, for natural gas has only about half  the fossil fuel emission levels of coal. Natural gas is also cleaner than oil.

The Potential Gas Committee now says US natural gas reserves have increased to 2,o74 trillion cubic feet,  equal to about 100 years supply. This is more energy than all the known oil reserves in Saudi Arabia.

Much of the 44 per cent estimated gas increase in shale rocks, which drilling companies have only recenly learned how to tap is tremendously important for a country like United States, which regards energy security as a major preoccupation.

Enter the difficult- to- get- on- with T Boone Pickens, the billionaire who made his money out of oil and greenmail. Now a champion of both natural gas and wind energy, the Pickens Plan had proposed in 2008 a large expansion in wind power, with natural gas being shifted from power generation to fuel CNG trucks and other heavy vehicles.

The ideal location of wind towers in the US outside the coastal regions is the Great Plains, the prairies with large wind resources.

The states involved comprise  Colorado, Kansas, Montana, Nebraska, New Mexico, North Dakota, Oklahoma, South Dakota, Texas and Wyoming. It also includes the Canadian provinces of Alberta, Manitoba and Sasakatchewan, and into Mexico.

Pickens had proposed the US spending $1 trillion to build 200 GW on wind energy, and true to the man, he intended to develop in his own right a giant wind farm of 10 GW at a cost of over $10 billion.

Conditional on Pickens plan, the economics of wind power was justified only when natural gas prices were rising, such as in 2008, when gas prices were dovetailing the rise in West Texas oil(WTI) prices to over $140 a barrel. At the then prevailing gas price level, wind energy was competitive with natural gas.

But after the fall in oil prices to their low point below $33 a barrel in February 2009, and now more than doubling since then, gas prices have tanked.

Part of the oil price rise is due to financial speculators, and part of the gas price collapse is due to a 30 per cent expected rise over the next couple of years in world LNG supply.

As for Pickens, Newsweek (August 9 2009), asks what is he going to do with the 667 wind turbines he bought from General Electric for $2 billion, which are due for delivery in 2011. He says that when the natural gas price goes below $7 per cubic feet, it’s hard to finance wind energy, particularly when the gas price hits $4.

Michael Kanellos of Greentech Media says that a small but growing number of utilities are beginning to supplement natural gas power plants with solar thermal systems. “Unlike a standard solar thermal plant, a hybrid plant can provide electricity 24 hours a day.”

Some solar thermal developers add molten salt systems to their plants to save heat harvested in the daytime to make power at night. The existing solar thermal plants in California’s Mojave Desert are already hybrids, because they have small gas turbines.

by Ray Block

Peter Ford of the Christian Science Monitor (August 10 2009) in a wakeup call to Americans says that China already makes a third of the world’s solar cells, and in 2010, will become the largest market in the world for wind turbines.

Ford also referred to China’s innovation in launching the world’s first all electric car for sale this year. This is BVD’s F3DM, with its own proprietary LiFePO4 battery.   Ford quotes Li Junfeng, deputy head of energy research at the NDRC, China’s top planning agency in Beijing, who asserts: “we will catch up with international advanced technology very quickly.”

China currently ranks No 2 in the world economy having surpassed Japan and Germany, with only the US ahead. It will be fascinating in the next 20 or 30 years, to see who remains ahead in the race between the US and China.

But being a three leg race, with India hungry to get a share of technological leadership, the ultimate top dog may be a bit of a surprise.

In the first half of 2009, the US increased its new wind energy  generating capacity to just over 4 GW to reach a total capacity of 29 GW.

In the same six months to June, Germany, ranking No 2 in the world wind stakes after the US, added 800 MW to reach a total capacity of 27.4 GW. 

In the same six months, lower ranking China added about 4.5 GW to reach a total wind energy generating capacity of 12 GW. Over the last five years, China has managed to double its wind energy capacity every year. And this rapid growth is expected to continue over the next 11 years, so that by 2020, the 12 GW will have mushroomed to 100 GW.

The rapid growth in Chinese wind energy is being repeated in other renewables, most notahly in solar PV, where capacity is expected to be 2GW  after a 15 times increase to 2011. It will then undergo a similar rapid escalation to 20 GW by 2020.

Back to wind energy, Reuters report that China has started construction of the country’s first 10 GW wind farm in Jiuquan in the northwest Gansu province. This is being built in two stages.

The first stage, a 3.8 GW base comprising 18  200 MW and two 1oo MW wind farms will be completed in 2010. The second phase consisting of 40 200 MW wind farms will start in 2o10, and will be open to foreign investment.

 The government’s National Energy Administration has planned six 10 GW-level wind energy complexes in areas rich in wind resources, including Inner Mongolia, Gansu, Xinjiang, Heibei and Jiangsu.

Once you add China’s large hydro resources, and new nuclear power, along with biomass and biofuels, China will reach its 15 to 20 per cent renewable energy level by 2020.

by Ray Block

The US  Senate can’t deliver to Barack Obama the clean energy and security legislation he needs to negotiate at Copenhagen this December.

The  effect of this is that 2010 becomes an even bigger test for the United States, as to whether Congress can deliver effective legislation even then, allowing for the mid term congressional elections next year in November.

But even if Congress can deliver, China’s determination not to provide a short term carbon cap for 2020, but to fall back on aspirational targets for 2050 will make international negotiations more or less ineffective.

Coming on top of the giant US budget deficit following the $787 billion stimulus package, the health reform legislation, which is Barack Obama’s major reform undertaking to electors,  is giving the opposition Republicans renewed political will to upset the Democrat reform agenda.

The series of town hall meetings up and down the country on the proposed government health insurance reforms has more than ever polarised the electorate, forcing a possible backdown, as highly organised protesters are sapping the political support base of the President.

So, when it comes to the climate change and energy bill, which will have passed through the relevant committees by the end of September, and come to the floor of the Senate, there is no likelihood of the Democratic leadership securing 60 votes out of the 100 Senators for the measure.

The consequence is that the climate change and energy bill is going to have a tough time, with the Republicans delaying the measure to filibuster as long as possible.

The online www.politico.com and Bloomberg (August 14 2009) quotes four Democrat Senators seeking to abandon efforts to pass the climate bill this year, and concentrate on a narrower bill to require use of 20 per cent renewable energy by 2020.

The four senators- Kent Conrad and Bryon Dorgan from North Dakota, Ben Nelson of Nebraska and Blanche Lincoln of Arkansas are all from farm states. They are under no illusion as to the still vehement opposition of the American Farm Bureau Federation and related farm lobbies.

This is despite the considerable concessions which House Agriculture Committee chairman Rep Collin Peterson of Minnesota  forced on the Democratic leadership in the Waxman Markey bill, and the fact that the farm sector is excluded from caps on carbon emissions.

By Ray Block

There are no climate change sceptics in China’s leadership team.  The State Council Standing Committee, China ‘s Cabinet,(August 12) was told of the urgency of tackling climate change, and the need for domestic objectives to control greenhouse emissions.

Summarising a report from the Xinhua official news agency, Reuters says that the Chinese leadership saw the need for  “setting medium and long term development strategies and plans of government at every level.”

Jiang Kejun, a climate change policy expert at the Energy Research Institute in Beijing said that officials were considering whether to develop a specific plan to address global warming alongside the next five year plan.

“This shows climate policy issues are now a central part of the national strategy,” Kejun said.

Along these lines, the National Energy Bureau is being quadrupled in manpower to about 120 to create a unified national energy management regime to focus on energy supply and production.

China Daily says the Bureau will be in charge of energy policy, project planning and approval, electricity, coal, oil, nuclear power and international co-operation on energy.

China’s policy is firming along the lines, that the country will set dates for reductions in carbon  emissions for 2050 and beyond.  But it will not set caps on emissions for near term years, such as 2020, or 2030.

Financial Times (August 14 2009) reports that Su Wei, director general of the climate change department of the powerful National Development and Reform Commission is keeping to the line that “China still needs to grow its economy to help its people escape poverty.”

But as the FT reporter noted,  Su Wei “indicated an opennesss to compromise.”

“China will not continue growing emissions without a limit or insist that all nations must have the same per capita emissions.”  China sees its emissions peaking between 2030 and 2040. According to a UK study, If China’s emissions peak in 2030, this would be equivalentto  carbon emissions about 57 per cent above its current 2009 levels.

To its credit, China’s current five year plan to end in 2010 has a target of reducing energy intensity per unit of gross domestic product by 20 per cent,  and the next five year plan will reduce energy intensity on a far more reaching basis. From 2005 to 2008, energy intensity decreased 10 per cent.

The consultancy, McKinsey in its February 2009 report “China”s green  revolution” February 2009, estimates that for every five year plan period over the next 20 years, China cold achieve a 17 to 18 per cent reduction in energy intensity per unit of GDP.

 American observers agree that China has improved upon the most common coal technology to create some of the world’s most efficient power plants, allowing for higher energy production from the same quantity of coal.

But in a note of caution, McKinsey says that even with the degree of energy intensity reduction envisaged, China with  over 40 per cent of the world’s coal consumption would by 2030 still be utilising an immense amount of hydrocarbons- 4.4 billion metric tons of coal and 900 million tons of crude oil. Hardly a healthy outlook for reducing CO2 in the atmosphere.

In its international negotiating stance, the US Senate Foreign Relations Committee noted in its report “Seizing the opportunity for meaningful US-China Collaboration on Climate Change” (July 21 2009), that “China has staked out a particularly demanding and uncompromising position.”  It is calling for a 40 per cent cut in greenhouse gas emssions by 2020 by developed countries, as well as additional assessed contributions, indexed to GDP.”

China Daily quotes Lin Boqiang, director of the China Centre for Energy Economics Research at Xiamen University urging the developed countries to offer financial and technological aid to developing countries, such as China and India to cut emissions. “That is the way to bring them into the deal,” said Lin.