Block’s Indicator of Sustainable Growth

by Ray Block

The Financial Times energy source blog (May 16 2010) reports that Germany, with the largest Solar PV installations in the world, is about to reduce the gross feed in tariff subsidy on solar rooftop installations by 16 per cent.

The cut in feed-in-tariff incentives, along with an 11 per cent reduction in incentives for solar installations on conversion sites, and the scrapping of support for solar installations on agricultural land will come into force from July 1 2010. Predictably, shares in some of the leading solar companies have fallen.

PV-tech.org in a background note reported on April 16 2010 that feed-in-tariff laws place an obligation on energy companies to purchase electricity from renewable sources at a premium price. In Germany, the national gross feed-in-tariff provides access to the grid at a set price per kWh and is guaranteed for 20 years. This makes solar PV and other renewable energy investments secure for producers, investors and suppliers.

The German Government began offering incentives for renewable electricity generation with the introduction of the Electricity Feed Act. The scheme was enhanced with the adoption of the EEG in 2000, leading to a nine fold increase in solar installations. A more updated and refined FiT became law, with an amended EEG in 2004. The new law committed Germany to increasing electricity supplied by renewable energy sources to 12.5 per cent by 2010, and to at least 20 per cent by 2020.

Angela Merkel’s government in May 2010 said that the reductions of solar subsidies were necessary, because panel prices had fallen by as much as 40 per cent, causing overcapacity of silicon panels on the German market. The FiT rules give solar energy producers an extra 8 euro cents for each kilowatt hour generated when they use more than 30 per cent of the total produced.

Bank of America Merrill Lynch says that with “solar prices around E50/MWh in Europe currently, solar is costing consumers around E60 billion more than they otherwise would have paid for electricity. German households are paying E130 annual solar subsidies and rising rapidly. We fear an increasing backlash against overly generous subsidies.”

With all Eurozone countries warned to reduce their sovereign debt and government deficits, there will be a sharp reduction in FiT subsidies. Early in 2010, France cut its solar subsidies. Italy is next on the list, and the other high subsidy countries will follow suit.

Posted under Climate Change, Global Warming, Low Carbon Economy, Renewable Energies, energy efficiency

by Ray Block

In was not until 1982, before the first motor vehicle was assembled in China. And it took a further 10 years before one million vehicles were sold in any one year. But over the last 18 years, an astonishingly giant industry has been created to become in 2009 the largest auto market in the world.

And having come this far, it is inevitable that like the steel industry, where the Chinese produce about 50 per cent of global supply, the same trends are emerging in motor vehicles.

In hybrids and fully electric cars, China with its still current 200 auto manufacturers will dominate this space, with the government goal for 2011 of 500,000 electric vehicles seen as a modest beginning.

All the major international auto companies, with hopes of marketing success in the hybrid and electric vehicle space, with affiliates in China are extremely busy right now.

Indeed, all of the majors, whether joint ventures with foreign auto companies, state owned, municipal owned, or private owned are currently working two and three shifts throughout the week, with an almost endless supply of customers.

Passenger car sales rose 63 per cent to 1.26 million vehicles in March 2010, and commercial vehicles rose even more strongly to 470,000 units over the same month, according to the China Association of Automobile Manufacturers (CAAM).

In 2009, vehicle sales totalled 13.6 million units, a gain over the previous year of 45 per cent. CAAM expects the domestic auto market to grow 15 per cent this year suggesting a total market of 15-16 million. Another auto trade association, Shanghai based China Passenger Car Association is even more confident, suggesting that China’s vehicle sales will surpass 17 million units in 2010.

In 2008, the Ministry of Science and Technology mandated that 10 per cent of Chinese cars will run on alternative fuels by 2012 and called for research subsidies. The Ministry of Finance announced a new commitment to promote new energy vehicles in the country’s 13 largest cities- Beijing, Shanghai, Chongqing, Zhangchun, Dalian, Hangzhou, Jinan, Wuhan, Shenzhen, Hefei, Kunming and Nanchang.

The mandate called for public services to begin buying alternative fuel vehicles in these cities and provide subsidies for their production and purchasing. The subsidies included 50,000 yuan for hybrids and 60,000 yuan for pure electric cars.

A revised subsidy scheme is eagerly expected for new energy vehicles. China Daily (April 9 2010) reported that electric cars qualifying for subsidies are those that have received the government’s production license and are assembled in China, regardless whether they come from domestic or joint venture firms.

Zero emission pure electric cars is now the preferred technology path for new energy cars in China, which will be reflected in the new stimulus plan. Where hybrids and hydrogen fuel cell vehicles fit in is not clear, as they were targeted as the priority for new energy vehicle development in China’s 11th Five Year Plan (2005-2010).

Zhang Jinhua, vice secretary general of the Chinese Society of Automotive Engineers, who is also an official for the national 863 research program on energy saving and new energy vehicles says that China’s roadmap for new energy cars has shifted in “giving priority to pure electric cars and taking hybrid cars as complement.”

As part of China’s new12th Five Year Plan, the National Development and Reform Commission (NDRC), China’s major planning body has highlighted nuclear energy, wind energy and new energy vehicles as priorities.

Frank Liao, chief engineer of Chery, now China’s fifth largest automaker, says that the first round of competition for the electric car market share would mainly be between medium and small sized domestic private automakers, and the large state owned domestic automakers ,which had acted “sluggishly” in electric car research and development.

There has since been an element of change, with even the highly profitable state and municipal owned SAIC, the No 1 auto company in China, too content in its cosy joint ventures, finally getting the message that the government wants the industry to accelerate change. SAIC is releasing a hybrid model this year, and a pure electric car in 2012.

A number of pure electric cars are about to enter the market. BYD, the 7.5 per cent affiliate of Warren Buffett’s Berkshire Hathaway was first in with its own hybrid F3DM introduced in 2009. BYD for “Build Your Dreams” started in 1995 in auto batteries, and it is only in recent years that it entered the vehicle market.

For many years, a notorious reverse engineering outfit, which never paid for foreign technology,was openly exposed as such in a prominent online piece by Caexon Online. BYD sold 430,000 vehicles in 2009, and is building a new plant to double that output. It now wants to do its own research and development, and is prominent in the export market.

Chery started in 1997, and became the fifth Chinese automaker to reach a production goal of two million vehicles, the first one million was in 2007, and the second in 2009. At the beginning of 2010, Chery began a $350 million R&D program to develop traditional automotive technologies and new energy technologies at the same time.

The aim is to continue a strong program of technical improvements spending around 4.6 per cent of yearly sales on R&D. Chery, which launched its S18 electric car in March 2009, the first of its S series of fully electric cars, has been concentrating on “high efficiency, energy saving, easy operation, continuous variable transmission and quietness.”

The largest of the private auto companies Geely, which nreleased its EK-1 fully electric car, has just concluded a deal with Ford to buy Volvo, the Swedish motor firm for $1.8 billlion. Whether the Chinese company can meet the full purchase price at this stage is up in the air, but they retain first right of refusal advantage to purchase the prestige marque.

To make the 500,000 electric car target by 2011, there are generous production subsidies, and there is a scramble among large state owned enterprises to set up charging stations to enable the new car revolution to take place.

Posted under Climate Change, Economies, Global Warming, Low Carbon Economy, Renewable Energies, World Inflation, energy efficiency

by Ray Block

By all accounts, geothermal resources in the world are immense. The Union of Concerned Scientists says that within 10 km (about 33,000 feet) of the Earth’s surface, the amount of heat contains 50,000 times more energy than all the known oil and natural gas reserves in the world.

Greater effort is now being made to exploit these resources, as the need to create low carbon economies becomes more urgent. Although there is a small volume of greenhouse gases involved, geothermal energy is available 24 hours a day, providing base load power at a price almost competitive with coal.

At September 2009, United States with the largest known geothermal resources in the world, is generating geothermal electric power in eight western states. California is the long time leader, with more than 40 geothermal plants providing nearly 5 per cent of the state’s electricity.

The state’s renewable energy requirement of 33 per cent by 2020 will spur more development. Nevada, the second largest geothermal producer has a 25 per cent renewable energy target by 2020, and this will also facilitate increased production. Soon another five states will also be generating electricity.

Total US installed geothermal capacity is currently 3.1 GW. Although representing less than 1 per cent of total US electricity capacity today, the aim is to reach at least 5 per cent of US power needs by 2020, and 10 per cent by 2030. The US Geothermal Energy Association says that 144 projects are now under development in 24 states, which could provide additional electricity capacity of 7 GW.

Up to $338 million in Recovery Act funding was allotted by the Obama Administration in 2009 for the exploration and development of new geothermal fields and research into advanced geothermal technologies. These grants matched on a one-for-one basis with private and non-federal cost share funds will support 123 projects in 39 states.

Conventional US geothermal resources on private and accessible public lands has a mean estimate of 33 GW, while the latest study by the US Geological Survey of geothermal resources in hot rock technology suggest an additional mean estimate of 518 GW available.

While the capacity factor in conventional geothermal production, (the amount of electricity produced) is at least 73 per cent, and may be only 30 per cent in hot rock technology, the overall resources are so large, that one day they may be able to supply much of the country’s electricity needs.

European geothermal resources are mainly in heating and cooling, directly exploiting the aquifers (Paris leads in low and medium energy resources), where the temperature ranges between 30 degrees C. and 150 degrees C. The second way is to produce heat using geothermal ground source heat pumps. The major European producers are Sweden, Italy, France, Hungary, Germany, Denmark.

The EU-27 country geothermal electricity target for 2020 is 6 GW, and for geothermal heating installed 39 GW. Outside the EU, Iceland with about 300,000 people is the geothermal standout,with 17 per cent of its electricity and 87 per cent of its direct heating from geothermal energy.

Everywhere on Earth, the deeper you go, the hotter it gets. Some of the regions are within the “Ring of Fire,” characterised by volcanoes, hot springs and fumaroles, (vents emitting hot gases), where the heat is close to the surface. These areas are around the rim of the Pacific Coast on the US and Canadian west coast – California, Nevada, Alaska, Hawaii, and down the Asian coast to include Japan, China, Philippines and Indonesia.

There is also the Mid-Atlantic Ridge, an underwater mountain stretching from Iceland and the Azores to Antarctica, the East African Rift Valley mainly around Kenya, the East Pacific Rise paralleling the west coast of South America, the Rio Grande Rift running up through New Mexico and Colorado and the Juan de Fuca Ridge (tectonic spreading centre off the coast of Washington state and the adjoining province of British Columbia.)

There are two additional levels of geothermal resources. One of these is a steady supply of milder heat available for direct space heating, at depths down to 200 metres or so, which is available in parts of Europe and North America.

There is also the very large resource at depths of 3 km to 10 km (about 2 to 10 miles), where enhanced geothermal systems (EGS), also known as hot rock technology, has opened up a virtual Pandora box of energy treasures. In addition to the US, Australia, France, Germany and Japan have R&D programs to make EGS commercially viable.

In the EGS process, a fractured reservoir is created at a depth where the rock is hot. Water is continuously injected down a well into the engineered fractures, where the water heats as it flows through. The water is then brought to the surface via production wells, and its heat is extracted to generate electricity in power plants. Finally, the water depleted of its heat, is re-injected to be heated again.

Susan Petty, President of AltaRock Energy, whose company is exploiting an EGS project in Oregon gave evidence to the US Senate Committee on Energy and Natural Resources in 2007.She discussed the economics of the cost of geothermal electricity at depths of 3 km, and temperature of 300 degree C.

Her experience is that EGS at current technology could be generated for a cost of about US$74 MWh. This price includes financing costs and amortising the capital investment of the well field, but before profit. With incremental technology improvement, the cost of power could be cut in half

Posted under Carbon Abatement Scheme, Climate Change, Economies, Global Warming, Low Carbon Economy, Renewable Energies, World Inflation, energy efficiency

by Ray Block

Australia represents only about 1.5 per cent of global greenhouse gases, but on a per capita basis, it ranks No 1 in carbon emissions.

The  carbon pollution reduction legislation, which has been subject to endless committee hearings, and purposedly delayed to start July 1 2012,  to avoid  the disruption of the global downturn, requires only a modest 5 per cent reduction in carbon emissions by 2020 from 2000 levels.

The legislation went through the lower House, but has been held up in the Australian Senate, by a determined rabble of global warming sceptics, despite getting significant legislative concessions by the Rudd government.

If you measure Australia against a significant grouping of carbon emissions targets by other countries, the lucky downunder country comes out poorly.

The Copenhagen summit, from December 7 to 18, will go a long way to an international agreement, which can be codified in 2010, and if need be 2011, so as to slot in when the Kyoto Protocol comes to an end in 2012.

Carbon emission targets so far promised:

*European Union 27-country bloc’s  longstanding commitment to a 20 per cent cut in carbon emissions by 2020 from below 1990 levels. A few of the country membership, such as UK, Belgium, Netherlands would like the EU to move to a unilateral 30 per cent cut.

However, the eastern European members, particularly Poland, which have  coal dependent economies oppose this move, and would like the 2020 target changed to 2030.

*President Obama’s promise for the US is a  17 per cent emissions reduction by 2020 from below 2005 levels, although the cap and trade legislation is held up in the US Senate. According to the WWF, this is equal to a 4 to 5 per cent reduction from below 1990 levels to have a meaningful comparison with the EU target.

President Obama also said his Administration’s overall goal is to reduce emissions 30 per cent below 2005 levels in 2025, 42 per cent below 2005 levels by 2030, and 83 per cent below 2005 levels by 2050.

* China, which is now the world’s largest carbon emitter, with the US the second largest is committed to a meaningful slowing in greenhouse gas emissions. The undertaking is to reduce carbon intensity by 40 to 45 per cent by 2020 compared with 2005 levels. Carbon intensity is the amount of CO2 for each unit of GDP (gross domestic product).

UN climate officials have said to Associated Press that the 40-45 per cent cut would put China on a path to reduce greenhouse gas emissions about 13 per cent from business- as- usual, the level emissions would have reached without any action. As part of its pollution control policy, China has announced that it plans to invest up to US454 billion in environmental protection in the five years to 2015.

  *Japan is committed to a 25 per cent cut in emissions by 2020 from 199o levels. The new Democratic Party government hasn’t spelled out how the emissions cuts are to be achieved. 

But the Japanese steel industry, which has the most efficient emission controls among world steelmakers, will provide their latest technologies for cutting CO2 emissions to Chinese steelmakers.

 In return, the Japanese can include the emissions reductions in their own quotas under the Kyoto Protocol’s clean development mechanism. If more of Japanese industry  follow the same approach, it won’t be too difficult to reach the Copenhagen target.

*Brazil will be tabling its commitment to cut greenhouse gas emissions by between  36.1 per cent and 38.9 per cent of their business-as-usual level by 2020. The country is the fourth biggest carbon emitter in the world, largely due to deforestation in the Amazon. Brazil is looking to international funding to help in the remediation process.

*Canada is undertaking to reduce carbon emissions 20 per cent by 2020 from 2006 levels, although legislation is yet to be introduced. Even so, its emissions would still be 24 per cent higher in 2020 from 1990 levels.

* India is yet to announce a reduction in either carbon intensity, or in emissions, but it will make its plans known at Copenhagen. A range of incentives is shortly  to be announced  for 714 of the nation’s most energy-intensive installations across nine sectors.

As with China, energy efficiencywill be the key, with a national registry for energy-efficiency certificates, which will have a one year tenure. It sounds like a type of cap and trade. Prime Minister Singh says that the government has “a very ambitious national plan to combat climate change.”

 *Indonesia, the third largest carbon emitter in the world is undertaking to  reduce greenhouse gas emissions 26 per cent by 2020. As with Brazil, a strong campaign to save the forests and more of the peatlands, which  provide the carbon sinks would greatly help to achieve the target reductions. 

* South Korea is committing to a 4 per cent reduction by 2020 from 2005 levels.  This is equivalent to a 30 per cent reduction on the business- as-usual projection for 2020.

POSCO, the world’s fourth largest steelmaker, accounting  for 10 per cent of Korea’s total carbon emissions is currently studying the brand new technology of the hydrogen steelmaking process. This technology  doesn’t emit CO2 emissions, which would be a tremendous achievement, if it can be done.

* Russian President Medvedev said his country “would try” to reduce greenhouse emissions by 25 per cent, and in the process seek to increase energy efficiency by 40 per cent. 

* The 5o African countries, which have no plans to cut carbon emissions are demanding that rich countries commit to deep cuts in carbon emissions that add to global warming. In a show of unity, African countries blame advanced economies for using fossil fuels to take the fast track to prosperity, but at the cost os unleashing today’s climate nightmare.

A similar attitude to Africans is likely to be taken by Central and South American countries.

On the table for consideration at Copenhagen is that the rich industrial countries will subscribe US$ 10 billion a year to help developing countries become equipped to cope with climate change, and to make available technology transfers and know how on renewable energy. 

 

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Posted under Carbon Abatement Scheme, Climate Change, Commodity Prices, Economies, Food, Global Warming, Low Carbon Economy, Renewable Energies, World Inflation, energy efficiency

by Ray Block

For United States and China to collaborate on renewable energy is always  fraught with US politicians trying to outdo themselves, beating their chest, that it has to be made in USA.

A case in point involves the joint venture between A-Power Energy Generation Systems, a member of  the Shenyang Power Group, with two American companies, Cielo Wind Power of Austin Texas, and the US Renewable Energy Group.

The prominent US Democrat Senator, Charles Schumer of New York, is up in arms about the deal. An energy agreement to instal 240 2.5 MW wind turbines on a wind farm in west Texas to produce a total 600 MW of renewable energy at a cost of $1.5 billion is big news even in Texas, the dominant US wind state.

One of the two US companies involved, Cielo Wind Power is a wind energy specialist, having developed 1.15 GW (1,150 MW) of wind energy installations, largely in Texas. The other US firm, US Renewable Energy Group, is one of the largest US private equity groups focussed on investing in renewable energy.

The Chinese company, A-Power is one of the largest providers of distributed power generating systems in China, and although relatively new in wind turbines has a licensing agreement with the German wind  company, Fuhrlander AG and Norwin of Denmark, two long established wind turbine firms.

The US Department of Energy is making available loan guarantees authority for the rapid deployment of renewable energy projects, providing they are located in one of the fifty states, the District of Columbia, or a  US territory.

The Chinese are putting up the bulk of the funds, and this at a time when US banks are unwilling to finance renewable energy projects. Yet Senator   Schumer wants to block funds to projects, unless they use “high value components,” built in United States.

The Green Inc column of the New York Times (November 5 2009) reports a study by the Investigative Reporting Workshop at American University, finding that 84 per cent of green stimulus funding has thus far gone to foreign companies building renewable energy projects in the US.

The real problem is that American renewable energy companies are usually too small,  move  too slowly, and are often hampered by lack of funding , while Asian companies move more swiftly in this new exciting age of renewable energy development.

Reporting from China, New York Times correspondent, Michael Forsythe (November 18 2009) points to the excitement and sheer exhilaration in China, as regions seek to outdo each other in the race to develop alternative energy sources and reduce pollution.

The Breakthrough Institute and the Information Technology and Innovation Foundation in their report Rising Tigers and Sleeping Giant (November 2009) elaborate on this theme.

The speed in North Asia to become world leaders in elaborately transformed manufactures, and particularly in renewable energy, is very engaging, and yet quite worrying for the west, when compared to the much slower United States in gaining  first mover advantage in the new technologies.

The Breakthrough report says that China, South Korea and Japan will invest a total of US$509 billion in clean technology over the next five years (period through to 2013), while the US will invest $171 billion over the same period.

The Breakthrough report describes the exceptional incentives  in China at both the national, regional and local government level to develop clean technology and innovation clusters, including free land, low cost financing, tax incentives, and money for R&D.

In just over three years, Baoding in Central Hebei Province has been transformed into a second Silicon Valley, with nearly 200 renewable energy firms. The Christian Science Monitor’s Peter Ford (August 10 2009) describes the crusader Mayor Yu Qun’s determined stand to make his city a hub of renewable energy. An ancient city, but now a very modern one, proud of his “electricity valley” as the Mayor describes it.

Or take Ordos in Inner Mongolia, the centre of the most modern coal mine  in  the world. Jonathan Watts reporting for the London Guardian on the two faces of China’s coal industry (November 15 2009) says “China is trying to use science to clean up and expand coal production” at the same time.

“Dirty old steel factories are being upgraded or relocated. To rerduce smog, the low chimneys of small thermal power generators are being replaced by the towering smokestacks of more efficient supercritical plants.”

Ordos is also the location of one of the two major coal to diesel plants in China, which has pioneered a direct liquefaction technique, that cracks carbon with hydrogen extracted from water to produce clear diesel.

Ordos is also the centre of a 2GW solar photovoltaics panel array in the Mongolian desert. This is being developed by Arizona based First Solar, the largest solar company in the world, and the first one to join the Standard and Poor’s 500 index. In turn, the First Solar installations will be part of an even larger 12 GW solar project.

China’s fast moves ahead is obscuring to some extent, Japan’s many technologies in the clean energy space. Toyoto’s hybrid Prius and Honda’s hydrogen fuel cell Clarityare two prominent examples of world leadership.  Sanyo, now being acquired by Panasonic is the world’s largest rechargeable battery company, and about the third largest solar cell producer. Japan is also the centre of the exciting energy storage market.

The Chinese are providing the bulk of the finance, but Senator Schumer ants

Posted under Carbon Abatement Scheme, Climate Change, Economies, Global Warming, Low Carbon Economy, Renewable Energies, World Inflation, energy efficiency