Water And Electricity Up, Gas Off  

The SMH has a gloomy front page today, forecasting rising electricity and water prices (thanks Iemma for your desalination plant, thanks Rodent for creating uncertainty in the minds of energy investors) and noting we're so bad at forecasting demand for gas (or short of gas, or its another global warming feedback manifesting itself) that big corporate users had a shut off of supply this week. Watching these clowns in action is almost enough to get me started on the doomer litany...

WATER bills will rise by about $100 a year to pay for Sydney's new desalination plant, hitting consumers already facing an expected $100 increase in electricity bills by 2010.

As the State Government struggles with an unprecedented strain on water and energy, it also emerged yesterday that 400 big businesses had their gas cut off last week to ensure supplies could be guaranteed to half a million customers.

The Premier, Morris Iemma, announced yesterday that the desalination plant would be running by 2010 and be twice as big as originally announced - producing 250 megalitres a day, or about 15 per cent of Sydney's supply.

But to be commercially viable, it will operate about 300 days a year, despite earlier suggestions it could be turned off when dam levels are high. This drew immediate criticism from environmentalists, who say the plant will be another power guzzler adding to greenhouse gases. It will take 450 gigawatt hours a year to run the plant, about 0.7 per cent of NSW's current power consumption.

That is double the energy that would have been needed for the 125-megalitre plant originally planned, but the Government insists it will run on "green power". It says it will be cheaper to build than it had forecast, $1.76 billion instead of $1.9 billion.

The Government said water bills would rise by an average $97 to pay for the plant. This follows NSW's independent pricing regulator predicting last week that electricity prices would rise at least $30 a year for the next three years as the drought affects wholesale prices.

The strain on utilities and infrastructure was confirmed yesterday when Mr Iemma said it was "possible" the state would need not just one, but two, baseload power stations by the middle of next decade to meet rising demand. Any new stations are likely to be coal-fired, adding further to greenhouse gases.

Despite concerns about global warming, electricity and gas demand shows NSW residents are consuming fossil fuels at an unprecedented rate. Demand peaked last Tuesday at more than 13,000 megawatts, compared with an average use of 9700.

The big demand last week led to crisis talks to ensure gas supplies were not cut off across NSW, except for essential services. The gas network operator Alinta cut supplies to 400 big businesses on Thursday night when it realised demand had greatly outstripped the gas it had ordered. This created a potentially dangerous drop in pressure in the Moomba to Sydney natural gas pipeline.

"If we lost the network, every user would have to be turned off and restarted, which would take four to six weeks," said a spokesman for Alinta, Peter Wood.

The gas company AGL blamed unexpected demand caused by the cold snap and householders turning up the gas. But it was unable to supply details on the demand. The company's spokesman denied gas was diverted from NSW for Victorian electricity generators affected by the drought. ...

Also at The Herald, Stephen Bartholomeusz says that carbon trading is needed to help power plant plans. Unfortunately he is afflicted with a bad case of the baseload fallacy, but his point is sound enough - the sooner a price is put on carbon emissions the sooner low carbon power sources can be built.

The combination of the changing relationship between supply and demand - overlaid by the effect of the drought on the generators and surging and highly volatile wholesale prices for electricity - is putting pressure on the market, with futures prices soaring and making it difficult and very expensive for retailers to hedge their future requirements. With retail prices capped in some form in most jurisdictions, any retailer that doesn't have a reasonable degree of vertical integration is being squeezed or, more correctly, is facing a squeeze when it tries to buy forward cover.

The market position might be exacerbated by a degree of "gaming" by generators but, in any event, the fundamentals - a market that will be progressively constrained in terms of base-load capacity - support a significant long-term increase in electricity prices.

Premier Iemma has talked about new coal-fired generators and speculated that NSW's new capacity might be built by the private sector, a politically sensitive issue in a state where the issue of privatisation of power has been a "no go" area for more than a decade. The difficulty for NSW or any other state considering adding base load, however, isn't today's market, which could be considered to be sending a very strong "build" signal, but the massive question mark over the future of coal-fired generation created by the commitment of both major political parties to introducing a framework for carbon pricing and trading.

Who would even consider building a new coal-fired plant, at a cost of billions of dollars, without some certainty and clarity about the likely cost of operating within the new environment? A clean coal plant, or a gas-fired base-load generator, wouldn't be competitive unless carbon emissions were priced somewhere between $30 and $40 a tonne, if not more in the case of clean coal.

Unhappily for NSW and the other eastern states, the earliest we are likely to start trading carbon emissions is 2010, if Labor wins the federal election. If the Government is returned, trading wouldn't start until 2012. Whichever party is in government, it is probable that the market will be introduced with a cap on emissions a little lower than "business as usual" that establishes a low price for carbon initially before steepening (in Labor's case quite sharply) over time - much as has happened in Europe - to avoid too great a shock to industry.

With the electricity generators accounting for about 35 per cent of carbon emissions in this market, because of the reliance on coal, there is a risk of considerable dislocation to security of energy supply if the transition to carbon pricing is rapid.

If we weren't facing a shortage of base-load capacity, that pace of the move to carbon pricing and the steepness of the price path that the level of the caps on emissions will generate wouldn't be as much of an issue. To get a substantial increase in base-load capacity by the middle of the next decade, however, the planning and feasibility processes will need to get under way shortly and with some urgency.

If there isn't a market signal for carbon prices until 2010 or 2012, however, the economics of a prospective new generator would be quite rubbery, even if (as is expected) the sector received its initial allocation of permits or credits free. Base-load generators are multi-billion dollar investments whose returns are measured over decades.

The flip side of that, of course, is that if there is a clear price signal quite early, and the price path established by the caps is steep enough to bring less carbon-intensive types of generators into play, the introduction of carbon pricing at a point where new base-load capacity is needed could provide incentives for the earlier introduction of cleaner base-load capacity.

The SMH also notes that renewable energy company shares are starting to rise in anticipation of carbon trading starting.

Investors take a look at renewable energy companies with an eye to the future. With a national carbon trading scheme firmly on the agenda, renewable energy investments are looking at least a little more viable. In recent weeks, prices of several of the renewable energy companies have gone up as investors try to pick the winners from the now bipartisan commitment to a climate-change action plan.

Early this month, following the completion of a review by his emissions trading taskforce, Prime Minister John Howard finally committed to reduce the nation's output of greenhouse gases. Opposition Leader Kevin Rudd had already announced a plan to reduce emissions by 60 per cent by 2050. It means that whatever the outcome of the federal election, a carbon trading system will be implemented and probably no later than 2012.

Among the companies to have done well is Geothermal Resources, which has two hot dry rock exploration projects in South Australia. Its share price is up 102 per cent in the three months to June 6. Geodynamics, with its more advanced geothermal development, has jumped 20 per cent over the same time. Babcock & Brown Wind Partners is up 21 per cent over the past three months.

It has been a tough few years for the renewable energy sector but the introduction of an emissions trading system will be a major boost by raising the cost of traditional power sources. It is still years away but there is now at least the prospect of a more even market. As things stand it is almost impossible for any renewable energy to compete on price with coal-fired power stations, which generates about the cheapest energy in the world.

With a carbon scheme, though, energy prices would reflect the environmental and social cost of pollution. That opens the door for the companies that generate non-polluting solar, wind, geothermal, tidal or other renewable energy. ...

TreeHugger has a post on a new Global Renewable Energy Policies and Measures Database.

A new database aims to make parsing of the mind-boggling array of different national and regional policies governing individual states' renewable energy sectors an easier and more approachable task. The Global Renewable Energy Policies and Measures Database, currently being developed by the International Energy Agency (IEA), the European Commission and the Johannesburg Renewable Energy Coalition, will offer renewable energy market and policy information for over 100 countries in one comprehensive format.

According to a report released by the UN Environment Program, over $100 billion of new money was invested into clean technology and the renewable energy sector. Because most firms allocate their funds based on a state's specific policy regime, enforcement standards and financial incentives, having one database that provides a thorough overview would be extremely beneficial.

It will be freely accessible online and will provide a rich source of data for energy analysts, investors, policymakers and enthusiasts alike. Not only will users be able to search for information by country and policy tool, they will also have the ability to filter by renewable energy technology, renewable energy target and by market leadership positions.

Once the layout and basic infrastructure are completed, it will be easy to update the database with the most up-to-date statistics and figures. As we move towards a more integrated, international approach to reducing greenhouse gas emissions and adopting renewable energy standards, this database will prove to be an invaluable tool in facilitating future legislation and negotiations.

The Australian has an article featuring the Exxon and Shell CEO's saying we all must remain captives of the fossil fuel industry forever as renewables couldn't possibly provide our energy needs (of course not, heaven forbid) and that they want access to Iaq's oil. Given that Rex Tillerson was speaking to Chatham House this is probably a roundabout way of announcing British troops will remain in Iraq for the foreseeable future. On a positive note, Rex said carbon taxes are better than cap and trade, and Jeroen said we need to concentrate on energy efficiency, so there is some glimmers of truth in their ravings.

THE world is blinding itself to the reality of its energy problems, ignoring the scale of growth in demand from developing countries and placing too much faith in renewable sources of power, according to two leaders of the global energy industry.


The chief executive of Royal Dutch Shell today calls for a “reality check”. Writing in The Times, Jeroen van der Veer takes issue with the widespread public opinion that green energy can replace fossil fuels. Shell’s chief gives warning that supplies of conventional oil and gas will struggle to keep pace with rising energy demand and he calls for greater investment in energy efficiency. Instead of a great conversion to wind power and solar power, Mr van der Veer predicts, the world will be forced into greater use of coal and much higher CO2 emissions, “possibly to levels we deem unacceptable”. ...

The warning from Royal Dutch Shell coincides with a critique of public energy policy by Rex Tillerson, the chief executive of ExxonMobil. Speaking at the Royal Institute for International Affairs in London, Mr Tillerson pointed to a widespread failure by policymakers to understand the extent to which the aspirations of people in developing countries are fuelling growth in demand for energy. Mr Tillerson said that world energy demand would rise by 45 per cent by 2030, and fossil fuels – oil, natural gas and coal – were the only energy sources of sufficient size, adaptability and affordability to meet the world’s needs. ...

Mr Tillerson, speaking at Chatham House, expressed doubts about the oil industry’s ability to raise its game significantly without access to the oil reserves of the Opec countries of the Middle East. “The supply outlook for nonOpec countries will be modestly up or flat,” Mr Tillerson predicted. He was sceptical about the drive by governments to increase use of biofuels and said that a fifth of the US’s corn crop was being used to produce four billion gallons of ethanol, compared with targets of 12 billion gallons by 2012.

The ExxonMobil chief criticised the EU’s carbon trading system, calling it an administratively complex system that lacked transparency and failed to deliver a uniform and predictable cost of carbon. “It’s all about moving the money around,” he said. Mr Tillerson said he would prefer a carbon tax that would enable the cost of carbon to spread through the economy in a uniform way, letting governments use the revenues to mitigate its effect by reducing employment or income taxes.

The Australian also reports that motoring groups are calling for petrol price fixers to be jailed.

THE price of petrol hit a seven-week low today as motoring groups called for anyone found guilty of fuel price fixing to be jailed.
Australians are paying an average of 127.6 cents a litre to fill up the car with unleaded, down 2.1 cents from last week, the Australian Institute of Petroleum reported today.

CommSec equities economist Martin Arnold said the price was likely to drop further given the strength of the Australian dollar and rising refinery capacity in the United States. "Australian petrol prices are likely to move to around the $1.25 per litre level, pushed lower by the stronger Aussie dollar,'' Mr Arnold wrote in his weekly petrol market brief. "With global refining capacity gradually rising, we see no reason why petrol prices would reach highs of around $1.50 per litre in coming months.''

The fall in price has not stopped a campaign by motoring groups against petrol companies which are constantly accused of price gouging and collusion.

Alternet has an article on the great biofuel hoax.

Biofuels invoke an image of renewable abundance that allows industry, politicians, the World Bank, the United Nations and even the Intergovernmental Panel on Climate Change to present fuel from corn, sugarcane, soy and other crops as a replacement for oil that will bring about a smooth transition to a renewablefuel economy.

Myths of abundance divert attention from powerful economic interests that benefit from this biofuels transition, avoiding discussion of the growing price that citizens of the global South are beginning to pay to maintain the consumptive oil-based lifestyle of the North. Biofuel mania obscures the profound consequences of the industrial transformation of our food and fuel systems -- the agro-fuels transition.

The Agro-fuels Boom

Industrialized countries have unleashed an "agro-fuels boom" by mandating ambitious renewable fuel targets. Renewable fuels are to provide 5.75 percent of Europe's transport fuel by 2010, and 10 percent by 2020. The U.S. goal is 35 billion gallons a year. These targets far exceed the agricultural capacities of the industrial North. Europe would need to use 70 percent of its farmland for fuel.

The United States' entire corn and soy harvest would need to be processed as ethanol and biodiesel. Northern countries expect the global South to meet their fuel needs, and southern governments appear eager to oblige. Indonesia and Malaysia are rapidly cutting down forests to expand oil-palm plantations targeted to supply up to 20 percent of the European Union biodiesel market. In Brazil -- where fuel crops already occupy an area the size of the Netherlands, Belgium, Luxemburg and Great Britain combined -- the government is planning a fivefold increase in sugar cane acreage with a goal of replacing 10 percent of the world's gasoline by 2025.

The rapid capitalization and concentration of power within the agro-fuels industry is breathtaking. From 2004 to 2007, venture capital investment in agro-fuels increased eightfold. Private investment is swamping public research institutions, as evidenced by BP's recent award of half a billion dollars to the University of California. In open defiance of national anti-trust laws, giant oil, grain, auto and genetic engineering corporations are forming powerful partnerships: ADM with Monsanto, Chevron and Volkswagen, BP with DuPont and Toyota. These corporations are consolidating research, production, processing and distribution chains of our food and fuel system under one colossal, industrial roof.

Agro-fuel champions assure us that because fuel crops are renewable, they are environmentally friendly and can reduce global warming, fostering rural development. But the tremendous market power of agro-fuel corporations, coupled with weak political will of governments to regulate their activities, is a recipe for environmental disaster and increasing hunger in the global South. It's time to examine the myths fueling this biofuel boom -- before it's too late.

Myth #1: Agro-fuels are clean and green

Because photosynthesis from fuel crops removes greenhouse gases from the atmosphere and can reduce fossil fuel consumption, we are told fuel crops are green. But when the full "life cycle" of agro-fuels is considered -- from land clearing to automotive consumption -- the moderate emission savings are undone by far greater emissions from deforestation, burning, peat drainage, cultivation and soil carbon losses. Every ton of palm oil produced results in 33 tons of carbon dioxide emissions -- 10 times more than petroleum. Clearing tropical forests for sugarcane ethanol emits 50 percent more greenhouse gases than the production and use of the same amount of gasoline. ...

I haven't checked out the peak oil sites yet but I'm sure Raymond Learsy's column at the Huffington Post claiming "Peak Oil Is Snake Oil" is generating plenty of outrage. No science here, just a conspiracy theory of sorts - peak oil is a meme spread to push the oil price up and provide camouflage for the Iraq war. While I think the "peak oil now" camp are probably wrong, I still think it would require a huge amount of manipulation to keep production down everywhere (Iraq being the obvious exception where this tactic has been very successful) and to fake the depletion of existing large fields. Peak oil is probably 10 years off, but who cares, its time to ditch the oil habit anyway for all sorts of reasons. From the conclusion to the column, some generally wise words:

It seems that Mr. Hubbert's predictions will have to be revised again and again. This especially so with the vast Arctic reserves of oil being made progressively available by melting icecaps opening whole new frontiers for exploration. Talk about an industry having it both ways, helping to create global warming and then benefiting by its effects.

In this writer's opinion the "peak oil" prankster's zeal is closer to theology than to theory. They are aided by the oil companies that run TV ads advising us that half the planet's oil will be consumed in 20 years, or such as the very recently released study from BP cautioning us that available oil will be consumed in 40 years time. All permitting vested oil interests to tweet "peak, peak, peak" while stampeding us into ever higher prices.

And one last point: what we pay for fossil fuels needs urgently to be readdressed in terms of its cost on our environment, cost on our national security, and cost on our economic and future well-being. The oil and gas market as currently construed and managed is a manipulated and propagandized marketplace that has enriched the oil companies beyond the wildest dreams of Croesus while the rest of the nation absorbs the ancillary costs and is left to deal with their impact on our society. It is time we realized what is scarce is not oil but honesty and transparency.

One commenter notes:

I'm with Learsy. I first worked the oil patch in 1971, and have tracked developments in the industry since then. Bush 1 is in office and oil is expensive. Clinton is in office and oil is cheap. Bush 2 is in office and oil is expensive. If the price of oil goes up every time the oil industry controls the Presidency you can believe that it is coincidence or manipulation. For those of us who know manipulation when we see it, and know that Iraq oil flowing to market would put downward pressure on prices, there is no surprise in a political environment being created that keeps said oil off of the market.

Folks, big oil wouldn't be doing this if they needed Iraqi oil to be sold right now. Those guys live in this world also, and the last thing they want to do is intentionally crash the world economy. It's a fine balancing act but they believe that they are up to it.

We need to get beyond the fact that there actually is no oil shortage and enact the same crash program we would enact if we were in a crisis caused by an actual oil shortage. We need to just plain get off of the stuff, and I don't care if the "real" quantity is astronomical. If we don't use it now it ain't going any place so we haven't lost anything by saving some for the future.

What we need to do is crystal clear. The only problem is finding the will power to make hard decisions. We're not going to overcome entrenched obsolete technologies and industries without making tons of personal sacrifices.

And another commenter:

Greg Palast ("Armed Madhouse") claims the Iraqi incursion is to control, not produce oil. It is to make sure Iraqi production doesn't occur because it would de-stabilize world oil prices. If we keep the Iraqi oil in the ground, it'll raise oil prices all 'round. Working pretty well so far, wouldn't you say?

Palast is also quick to point out that Hubbert (the daddy of peak oil) was originally writing on behalf of Shell Oil, to promote a peak as well as the nuclear energy Shell was then promoting as an alternative.

Even if the peak is fishy as a fact of worldwide oil production, the peak in U.S. domestic production (1971) is really not controversial. The increase in the oil price ($1.75 in 1971 to $60+ now) is straight out of Economics 101's supply/demand curve.

And one final shot from the comments:

It's nice to see someone living in dreamland where all natural resources are endless and waste products can just be dumped in the ocean because it too is endless. The huge oil find in the Gulf of Mexico is 5 miles deep and at current world usage represents a 4 month supply. I also enjoy that you cite an economist as an expert in oil production. Just keep your head in the tar sand baby.

Bruce Sterling points to a Register article on "A Military Second Earth". A test environment for psyops ? At what point did reality start getting weirder than tinfoil ?

"Perhaps your real life is so rich you don't have time for another.

"Even so, the US Department of Defense (DOD) may already be creating a copy of you in an alternate reality to see how long you can go without food or water, or how you will respond to televised propaganda.

"The DOD is developing a parallel to Planet Earth, with billions of individual "nodes" to reflect every man, woman, and child this side of the dividing line between reality and AR.

"Called the Sentient World Simulation (SWS), it will be a "synthetic mirror of the real world with automated continuous calibration with respect to current real-world information", according to a concept paper for the project.

"SWS provides an environment for testing Psychological Operations (PSYOP)," the paper reads, so that military leaders can "develop and test multiple courses of action to anticipate and shape behaviors of adversaries, neutrals, and partners".

SWS also replicates financial institutions, utilities, media outlets, and street corner shops. By applying theories of economics and human psychology, its developers believe they can predict how individuals and mobs will respond to various stressors.

"Yank a country's water supply. Stage a military coup. SWS will tell you what happens next....

(((Yeah, and New World Order cybersoldiers are gonna be Warcrafting-out on awesome gizmoscapes like this while some nimble illiterate teen with a cheap assault rifle simply shoots them.)))

Links:

WorldChanging - Sequestering Carbon by Land and Sea
James Kunstler - Peak Suburbia. On the flip side, all those suburban garages are going to be housing our distributed energy storage infrastructure when the smart grid is built, so maybe the existing tracts of suburbia ain't so bad after all. That said, I think we've seen enough urban sprawl - its time to start consolidating into quality green buildings...
Tom Whipple - Peak Oil Review - June 25, 2007
Tom Petrie and Steve Andrews - A strategic perspective on 21st century energy challenges
Energy Outlook - Peak Preparation
SMH - US Expert Calls For Peak Oil Study
The Australian - Incentives For Greywater Users
The Age - Big wet On The Way For Victoria
SMH - Floods Cause Havoc In UK
SMH - Three Die In Texas Weather Havoc
SMH - Australia, EU Agree To Have Climate Talks
SMH - Woodside spruiks an independent future
SMH - Atom Energy doubles IPO price
SMH - Beach. Anzon to delay gas development
SMH - Venezuela prepares for 'resistance war'
Mike Gravel - Why Hillary Scares Me
SMH - Great Depression Fall Looms. Financial doomerism prompted by the BIS, with incomprehensible title.
Neofiles - Chaos in Theory & Practice
Popular Mechanics - Blade Runner at 25: Why the Sci-Fi F/X Are Still Unsurpassed