Gas prices set to soar as supply falls  

Posted by Big Gav in , ,

Nigel Wilson at The Australian has a look at the local gas supply scene. Obviously we aren't actually short of gas - Australia has lots of the stuff, its just that the biggest reserves are off the north west of the country and mostly destined for offshore LNG markets, while the east coast (where most of the people live) is steadily using up its own local reserves. Coal seam methane will likely be the answer for the east coast, unless companies like Santos think they can get away with turning it into LNG and exporting it as well. The article points out how little gas is consumed by households - if we stop burning the stuff to generate power and instead build a lot more clean energy generation capacity this will become less and less of an issue. High gas prices should help make any further construction of gas fired peaking plants uneconomic with any luck...

DOMESTIC gas prices are expected to soar after more than a decade when they have been too low to stimulate production, according to a study due to be released today. Argonaut Securities research director Ian Christie said yesterday the trend towards higher prices that had been evident in Western Australia for the past year or so was beginning to emerge in the eastern states.

While eastern states' domestic gas price movements might be affected by the increased use of coal seam methane, it was unlikely customers would be cushioned totally from price increases elsewhere. The WA Government's domestic gas policy forces developers of LNG projects using shore-based infrastructure to quarantine 15 per cent of reserves for domestic gas users.

Mr Christie forecasts that gas prices in WA could quadruple from $2 a gigajoule earlier this decade. A short-term supply gap would push prices to between $7/GJ and $10/GJ in the next two to three years until new supplies came online early next decade. His research showed there would be little respite in the longer term, as the costs of finding, developing and producing gas would rise sharply, he said. "The four Ds - gas becomes more distant, deeper, dirtier and dryer - will ensure a higher floor for prices even when supply comes on stream," he said.

His report indicates that the mining, minerals processing and electricity generating sectors in WA use 95 per cent of domestic gas production. Mr Christie said households, while politically important, used only 5 per cent. Western Australia has about 118 trillion cubic feet of gas reserves, mainly in the Carnarvon and Browse Basins, but only about 17 per cent of these reserves have been developed.

The report says about 70 per cent of gas produced in WA is exported in the form of LNG. The remainder is sold into the domestic market, and because it has been plentiful and cheap it has been the major driver of the WA economy during the past few decades. "Ample supply and competition has ensured that domestic gas prices in WA have traditionally been low (about $2/GJ) in comparison to international prices. This has changed dramatically over the past couple of years and we understand new contracts are being negotiated at prices in excess of $7/GJ," the report states.

With continued demand growth, larger projects such as Apache's Reindeer and BHP Billiton's Macedon reservoirs should come on stream in 2010-11, meaning there would be a short-term price spike, he said. "The main winners from this will be low-cost producers of domestic gas (not necessarily LNG projects). Onshore project development and proximity to pipelines and markets will be the key drivers of margins."

Technology Review has an excellent article on solar thermal plants and storing energy efficiently (as heat rather than electricity) using Ausra as the primary example. It points out that Ausra's solar plants should be cheaper than natural gas fired power in California by 2010.
Solar proponents love to boast that just a few hundred square kilometers' worth of photovoltaic solar panels installed in Southwestern deserts could power the United States. Their schemes come with a caveat, of course: without backup power plants or expensive investments in giant batteries, flywheels, or other energy-storage systems, this solar-power supply would fluctuate wildly with each passing cloud (not to mention with the sun's daily rise and fall and seasonal ebbs and flows). Solar-power startup Ausra, based in Palo Alto, thinks it has the solution: solar-thermal-power plants that turn sunlight into steam and efficiently store heat for cloudy days.

"Fossil-fuel proponents often say that solar can't do the job, that solar can't run at night, solar can't run the economy," says David Mills, Ausra's founder and chairman. "That's true if you don't have storage." He says that solar-thermal plants are the solution because storing heat is much easier than storing electricity. Mills estimates that, thanks to that advantage, solar-thermal plants capable of storing 16 hours' worth of heat could provide more than 90 percent of current U.S. power demand at prices competitive with coal and natural gas. "There's almost no limit to how much you can put into the grid," he says.

Major utilities are buying the idea. In July, the Pacific Gas and Electric Company (PG&E) signed a 25-year deal with Ausra competitor Solel Solar Systems of Beit Shemesh, Israel, to buy power from a 553-megawatt solar-thermal plant that Solel is developing in California's Mojave Desert. The plant will supply 400,000 homes in northern and central California when it is completed in 2011. Florida Power & Light, meanwhile, hired Solel to upgrade the 1980s-era solar-thermal plants it operates in the Mojave. Ausra, meanwhile, is negotiating with PG&E to supply power from a 175-megawatt plant that it plans to build in California, for which it secured $40 million in venture financing this month.

What distinguishes Ausra's design is its relative simplicity. In conventional solar-thermal plants such as Solel's, a long trough of parabolic mirrors focuses sunlight on a tube filled with a heat-transfer fluid, often some sort of oil or brine. The fluid, in turn, produces steam to drive a turbine and produce electricity. Ausra's solar collectors employ mass-produced and thus cheaper flat mirrors, and they focus light onto tubes filled with water, thus directly producing steam. Ausra's collectors produce less power, but that power costs less to produce.

One megawatt's worth of Ausra's solar collectors has been producing steam in New South Wales, Australia, since 2004; the steam is fed into the turbines of a primarily coal-fired power plant. The final piece of the system--a proprietary heat-energy-storage system--should be ready by 2009.

Mills will not say what material his company's system will heat, although several recent solar-thermal plants by Ausra competitors--including one in Nevada that started up this summer and two under construction in Spain near Granada--plan to use molten-salt storage. Molten salts are inexpensive salt solutions that absorb considerable energy when they melt and give up that energy when they freeze.

What Mills can say for certain is that Ausra's storage system will lower its power-generation costs. That is a surprising statement since energy storage can as much as double the cost of electricity from photovoltaics or wind turbines.

Heat storage is more efficient than electricity storage: just 2 to 7 percent of the energy is lost when heat is banked in a storage system, compared with losses of at least 15 percent when energy is stored in a battery. More important, says Mills, is the fact that storage enables thermal plants to use cheaper turbines.

The bottom line is that Mills vows that adding storage plus savings from economies of scale and lower cost of capital (as banks become familiar with solar-thermal technology) will cut Ausra's current 10 to 11 cents per kilowatt-hour cost of power in half. By 2010, he expects solar thermal to provide California with baseline power cheaper than natural gas, currently set by the state at 9.2 cents per kilowatt-hour.

Why has solar-thermal power received little attention from the energy-storage community despite such promise? John Boyes, manager of the Energy Storage & Distributed Energy Resources at Sandia National Laboratories, in Albuquerque, NM, says that solar thermal is viable but inflexible compared with other means of storing energy, such as, say, coupling wind farms to large batteries, flywheels, and supercapacitors that can be placed almost anywhere on a power grid. "You can store energy anywhere you have electricity and a little bit of floor space," says Boyes.

The footprint of Ausra's planned 175-megawatt plant will be, in contrast, about one square mile.

Technology Review also has an article on genetically modified algae to create hydrogen and biofuels, noting yellow algae are more efficient at processing sunlight as they let the light penetrate deeper into the bioreactors.
Algae are a promising source of biofuels: besides being easy to grow and handle, some varieties are rich in oil similar to that produced by soybeans. Algae also produce another fuel: hydrogen. They make a small amount of hydrogen naturally during photosynthesis, but Anastasios Melis, a plant- and microbial-biology professor at the University of California, Berkeley, believes that genetically engineered versions of the tiny green organisms have a good shot at being a viable source for hydrogen.

Melis has created mutant algae that make better use of sunlight than their natural cousins do. This could increase the hydrogen that the algae produce by a factor of three. It would also boost the algae's production of oil for biofuels.

The new finding will be important in maximizing the production of hydrogen in large-scale, commercial bioreactors. In a laboratory, Melis says, "[we make] low-density cultures and have thin bottles so that light penetrates from all sides." Because of this, the cells use all the light falling on them. But in a commercial bioreactor, where dense algae cultures would be spread out in open ponds under the sun, the top layers of algae absorb all the sunlight but can only use a fraction of it.

Melis and his colleagues are designing algae that have less chlorophyll so that they absorb less sunlight. That means more light penetrates into the deeper algae layers, and eventually, more cells use the sunlight to make hydrogen. ...

The process is still at least five years from being used for hydrogen generation. Researchers will first have to increase the algae's capacity to produce hydrogen. During normal photosynthesis, algae focus on using the sun's energy to convert carbon dioxide and water into glucose, releasing oxygen in the process. Only about 3 to 5 percent of photosynthesis leads to hydrogen. Melis estimates that, if the entire capacity of the photosynthesis of the algae could be directed toward hydrogen production, 80 kilograms of hydrogen could be produced commercially per acre per day.

The soon-to-be-no-more Business 2.0 has an interview with IdeaLab's Bill Gross - "The Startup King's new gig" - which touches on both distributed energy generation and distributed manufacturing on demand.
Some people can't stop thinking about food. Bill Gross can't stop thinking about new businesses. One of the world's great serial entrepreneurs, he's launched more than 50 startups through Idealab, his incubator in Pasadena, Calif. His track record includes both winners (CitySearch, Cooking.com, NetZero/United Online) and losers (eToys, Eve.com, Free-PC). But he's best known for inventing the pay-per-click advertising model behind Overture Services (formerly GoTo.com), the pioneering search engine he sold to Yahoo! in 2003 for $1.6 billion.

Now, after more than a decade of launching dotcoms, Gross has rediscovered the pleasures - and profitability - of the physical world. Idealab's current lineup is crowded with companies that make actual products: robots, 3-D printers, electric cars, rooftop solar collectors. As Gross puts it, he's much more interested today in "atoms businesses" than "bits businesses." He recently sat down with Business 2.0 Editor-at-large Erick Schonfeld to talk about why. ...

Q. Tell me about Energy Innovations. How is it disrupting the utility companies?

Well, I feel that the biggest disruption that will happen in this century is distributed energy generation. In the past, there was an economy of scale, so you had to build a 1-gigawatt nuclear or coal plant somewhere, and you had to do it far away from people because no one wanted it in their backyard. That was possible because of copper. Only copper could keep that plant far enough away that we wouldn't see it or smell it, and copper could bring those electrons magically into our house. But there's a huge loss by the time the power gets to us - with copper, it's up to 15 percent.

When you can build distributed energy generation on your roof with 10 feet instead of hundreds of miles of copper, you can avoid those huge losses. If you can get lower-cost solar, which we're working on very hard, and if you have the subsidies, all of a sudden it makes sense to have your own power plant on your own roof. Having your own power plant on your roof is just an unbelievable concept that wasn't even possible in the 20th century. It is going to be possible - and necessary - this century if we're going to solve the climate problem.

Q. Why solar?

We have to do all of them, but solar is the only distributable resource. Wind is very concentrated; there are very few locations where the wind is above 17 mph on average. Geothermal is unbelievably cost-effective but only in a few locations. Solar is the most uniformly distributed natural resource on the entire planet. Every day, 10,000 times as much energy strikes the earth as we use. Not to take advantage of it is a crime.

Q. How did you come up with the idea for Desktop Factory?

Desktop Factory is a 3-D printer - a device that takes a drawing from a graphics program and, rather than producing a piece of paper, outputs a physical object. It actually grows an object out of plastic. This is unbelievable. You can go from concept visualization to having a physical part in your hand in an hour. We have a 3-D printer for our own rapid prototyping at Idealab. It's amazing technology, but it costs between $50,000 and $500,000.

Q. You want to make this available to everyone, like a regular printer?

Right, so my dream was to take this $500,000 machine and make it available for less than $1,000. If you have one of these on your desk, then anytime you want to make an object, you just send it to the printer.

I thought that would be incredible. Not just for visualizing things but also for downloading things. It's a form of transporting, almost like faxing an object. It's not cost-effective for manufacturing, but it's very cost-effective for replacement parts.

Q. What is this going to disrupt?

We think this technology will certainly disrupt the way people deal with replacement parts. But it will also disrupt the way people use their imagination and prototype objects. We think it'll make 3-D creators out of people who are used to only working with 2-D, only printing on paper. Kids today think very visually and very interactively, and this new technology is going to have a big impact on the way they think.

Q. And down the road?

I think we could disrupt manufacturing. So much of our life is supported by cheap oil transporting stuff around. If you could make devices locally when they're needed, on demand, you save on packaging costs and you save on transportation costs. I think for a sustainable future, the idea of making just what you need is very, very powerful. People are thinking about doing it for books right now; people are thinking about maybe not cutting down trees to make print runs and only printing books on demand. I'd like to bring the same mentality to the printing of actual objects.

Q. Can you make metal objects?

Right now it's plastic, but it's possible that some day we could be able to make metal objects. Atoms and bits are becoming interchangeable ... It's really exciting that you could send someone bits and let them print out their own atoms. Many things have to go right for disruption to succeed. You have to have the right management team. You need an idea that customers actually care about. And the timing needs to be right.

Engadget has a post on "Inexpensive solar panels nearly ready for commercialization" (thin film cadmium telluride panels in this case).
We've been inching closer to low(er) cost solar panels (for the mainstream public to enjoy) for some time now, and apparently, AVA Solar Inc. is just about ready to start cranking out units that "will cost less than $1-per watt by the end of next year." The technology was reportedly developed by Colorado State University's Professor W.S. Sampath, and production is slated to begin soon in a "200-megawatt factory" that could employ some 500 individuals. Of note, it was said that the "cost to the consumer could be as low as $2 per watt," but even that figure purportedly rings up at about half the cost of current options.

Links:

* SMH - Woodside bails out of Mauritania, Africa to follow?. They must have lost money on the Mauritanian adventure.
* The Australian - Kazakh move for local Chevron boss. From Gorgon to Tengiz.
* The Australian - All gassed up, BHP pulls plug on its sales
* The Australian - Range Resources takes punt on oil in Somalia. Another empty log.
* Human Rights News - Burma: Natural Gas Project Threatens Human Rights. "Energy analysts estimate that Burma may have the largest natural gas deposits in Southeast Asia. Natural gas exports are now Burma’s main source of foreign exchange". A case of the curse of gas...
* New York Times - Inspector Finds Broad Failures in Oil Program. Big oil pay taxes ? What a ridiculous idea.
* The Oil Drum - To Grandmother's House We Go: Peak Oil Is Here
* ODAC - ASPO conference confirms a peak in global oil production by 2012
* Forgetomori - Aliens and Peak Oil
* SMH - Karl Kruszelnicki to run for Climate Coalition for Senate
* Grist - An amazing AP article on sea level rise
* TreeHugger - Quote of the Day: Al Gore on Climate Change Leadership, Montreal Protocol
* TreeHugger - Wild & Scenic Film Festival: Seeds, Hope, and Concrete
* SMH - China admits Three Gorges miracle could become disaster
* Renewable Energy Access - Solar Power 2007 is Focal Point of Industry's Success
* The Australian - Green light for geothermal comapny KUTH energy
* Groovy Green - I Ride My Bike
* The Raw Story - Jon Stewart tells Bolivian president America's elections are 'rigged'. Morales himself played it straight - interesting to see how much money they are making from oil and gas exports now.
* After Downing Street - Kucinich: Congress Must Stop Funding The War
* Open Democracy - America and Iran: the spark of war. "France's motives may include an oil-related desire to improve relations with Washington; the French oil company, Total, is now linked with Chevron in plans to develop the Majnoun oilfield in southeast Iraq".
* News And policy - Kucinich Opposes Iran Counter-Proliferation Act: 'We need to create a new opening to Iran, not proceed with another war based on falsehoods'
* Past Peak - Privatizing War
* Open The Future - Turning the Body Against Itself. Are "War on Terror" over-reactions a form of auto-immune response ?
* Open The Future - Give an XO, Get an XO. "I don't think the One Laptop Per Child project knows what it is about to unleash". All sorts of interesting things.
* 10 Zen Monkeys - Art or Bioterrorism: Who Cares?. Today's police state horror story.
* Cryptogon - Lehman Brothers Forced to Juggle Some of Its Own Hand Grenades; Where Are the Rest and When Will They Blow?. Financial doomerism is in fashion lately.
* Reuters - Rare van Gogh letters offer insight into artist

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