Remaking the industrial economy  

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KcKinsey Quarterly has a look at closed-loop "cradle to cradle" style industrial manufacturing systems which it calls the "circular economy" - Remaking the industrial economy. MKQ also has a related interview with the CEO of Phillips - Toward a circular economy: Philips CEO Frans van Houten.

Visualize, for a moment, the industrial economy as a massive system of conveyor belts—one that directs materials and energy from resource-rich countries to manufacturing powerhouses, such as China, and then spirits the resulting products onward to the United States, Europe, and other destinations, where they are used, discarded, and replaced. While this image is an exaggeration, it does capture the essence of the linear, one-way production model that has dominated global manufacturing since the onset of the Industrial Revolution.

Increasingly, however, the linear approach to industrialization has come under strain. Some three billion consumers from the developing world will enter the middle class by 2030. The unprecedented size and impact of this shift is squeezing companies between rising and less predictable commodity prices, on the one hand, and blistering competition and unpredictable demand, on the other. The turn of the millennium marked the point when a rise in the real prices of natural resources began erasing a century’s worth of real-price declines. The biggest economic downturn since the Great Depression briefly dampened demand, but since 2009, resource prices have rebounded faster than global economic output. Clearly, the era of largely ignoring resource costs is over.

In light of volatile markets for resources, and even worries about their depletion, the call for a new economic model is getting louder. In response, some companies are questioning the assumptions that underpin how they make and sell products. In an effort to keep control over valuable natural resources, these companies are finding novel ways to reuse products and components. Their success provokes bolder questions. Could economic growth be decoupled from resource constraints? Could an industrial system that is regenerative by design—a “circular economy,” which restores material, energy, and labor inputs—be good for both society and business? If the experience of global automaker Renault is any indicator, the answer appears to be yes.

A circular economy replaces one assumption—disposability—with another: restoration. At the core, it aims to move away from the “take, make, and dispose” system by designing and optimizing products for multiple cycles of disassembly and reuse.2 This effort starts with materials, which are viewed as valuable stock to be used again, not as elements that flow through the economy once. For a sense of the scale involved, consider the fast-moving consumer-goods industry: about 80 percent of the $3.2 trillion worth of materials it uses each year is not recovered.

The circular economy aims to eradicate waste—not just from manufacturing processes, as lean management aspires to do, but systematically, throughout the various life cycles and uses of products and their components. (Often, what might otherwise be called waste becomes valuable feedstock for successive usage steps.) Indeed, tight component and product cycles of use and reuse, aided by product design, help define the concept of a circular economy and distinguish it from recycling, which loses large amounts of embedded energy and labor.

Moreover, a circular system introduces a strict differentiation between a product’s consumable and durable components. Manufacturers in a traditional economy often don’t distinguish between the two. In a circular economy, the goal for consumables is to use nontoxic and pure components, so they can eventually be returned to the biosphere, where they could have a replenishing effect. The goal for durable components (metals and most plastics, for instance) is to reuse or upgrade them for other productive applications through as many cycles as possible. This approach contrasts sharply with the mind-set embedded in most of today’s industrial operations, where even the terminology—value chain, supply chain, end user—expresses a linear view.

Swanbank shut-down a swan song for gas fired power in Australia  

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Tristan Edis at the BS has a look at how LNG exports from Queensland are killing gas fired power generation - Swanbank shut-down a swan song for gas.

Queensland government-owned Stanwell has announced it will be mothballing its gas-fired 385 megawatt Swanbank E power station in October for up to three years. Meanwhile, it will restart one of its two mothballed units at the coal-fired Tarong Power station instead but, critically, is yet to give a firm indication on timing.

This announcement marks a pivotal point in the east coast National Electricity Market – the end of gas’ rise and the beginning of a major fall as a source of power generation. According to Stanwell’s chief executive officer Richard Van Breda, “With subdued market conditions and increasing gas prices expected to continue, Stanwell can earn more revenue from selling our gas rather than using it in electricity generation.” ...

As the chart below, from Pitt & Sherry’s Hugh Saddler, shows gas has experienced a steady rise in output from June 2006 to December 2013 while black coal and, more recently, brown coal have suffered.

Back around 2006 it all looked very bright for gas as the low carbon bridging fuel to renewables. It was thought that gas would steadily increase its share of power generation while coal declined on the back of policies to reduce Australia’s greenhouse gas emissions.

Lots of new gas had been discovered within Queensland coal seams that meant there was little risk of the east coast running short. Gas prices at around $3.50 per gigajoule plus power plant construction that was quicker and lower cost meant that there was only a relatively small difference in the economics of a new coal versus a gas power plant. A relatively moderate carbon price of around $20 to $30 was all that was needed for coal to lose out to gas in baseload operation, not to mention coal’s inferior flexibility and larger minimum size that increased its risk profile.

The Queensland 13% Gas Target and NSW’s Greenhouse Gas Abatement Scheme were already in place, providing a clear precedent for what many saw as an inevitable national emissions trading scheme. A dash for gas, like what had been seen in Europe and the US, seemed to be on the horizon. But then Santos announced it planned to build a plant to liquefy Queensland coal seam gas and export it overseas. It changed everything, although at the time the consequences were not entirely clear.

Now they are. Gas contracts are now being struck at prices of $9 per gigajoule rather than the $3.50 price of the past. There is also talk of gas shortages because of a huge surge in demand from a range of LNG plants coming online within short succession.

Ground Broken At First Utility-Scale Solar Project On Tribal Land  

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Climate Progress has an article on the transition from coal fired power to solar power in the south west US - Ground Broken At First Utility-Scale Solar Project On Tribal Land

Ground has been broken on the first utility-scale solar-power plant in the country to be built on tribal land. The Moapa Southern Paiute Solar project about 50 miles northeast of Las Vegas will be built by Moapa Southern Paiute Solar, a subsidiary of First Solar Electric. The construction project will employ 400 people and, when completed in 2015, will generate 250 megawatts or enough energy to power 93,000 homes in Los Angeles.

The Los Angeles Department of Water and Power (LADWP) has contracted to buy power from the plant for 25 years. By 2015, LADWP has indicated that it will stop using power from coal entirely, much of which currently comes from the Navajo Generating Station in Arizona. LADWP has a target of supplying its customers with 33 percent renewable energy.

For the tribe, which owns 29,137 hectares in Nevada, the new solar project represents a triumph in a long-fought battle with dirty energy and hope for a cleaner, healthier future. For over half a century, the Reid-Gardner coal-fired power plant just outside of town has been dumping ash laced with mercury, lead, and arsenic into the community, which has been plagued with health problems.

Carnegie to test CETO 6 at world-leading wave energy hub  

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ReNew Economy reports that Australian wave power Carnegie Energy is to test it's CETO technology at the UK wave hub - Carnegie to test CETO 6 at world-leading wave energy hub.

ASX-listed wave energy developer Carnegie Wave Energy has won a berth at the world’s largest purpose built wave energy demonstration facility in the south west England, to test its CETO 6 commercial-scale technology.

The berth – and the generous tariff being paid for a demonstration plant – means that Carnegie could have two full scale projects underway with the latest version of its technology. This comes after the Clean Energy Finance Corporation allocated a $20 million loan facility if it built a similar plant in Australia. However, the UK deal provides Carnegie with a ready-made, grid-connected berth at the “Wave Hub” in Cornwall, to deploy and test an array of CETO 6 Units in open water conditions.

Weighing in at 1MW, the CETO 6 array will have a power capacity some four times that of the current CETO 5 generation being deployed in a world first 3 unit array in Carnegie’s Perth Project in Western Australia.

RNE also has a report on the demise of wave power company Oceanlinx - Wave energy company Oceanlinx goes into receivership.

Australia’s Oceanlinx, whose home-grown, commercial-scale wave energy converter technology was unveiled with some fanfare last October, has been placed in receivership after the Sydney-based company hit troubled waters in February.

Rahul Goyal, one of two receivers appointed to the case from KordaMentha, said the company had “suffered financially” after an incident at sea several weeks ago delayed the final installation of its 1MW GreenWave wave energy converter – billed, at the time, as the world’s first such machine to be deployed.

The commercial-scale unit was damaged en route to its destination of Port MacDonnell, in the south-east of South Australia. This caused delays in funding, said Goyal, which was dependent on meeting installation deadlines.

Oceanlinx’s plan had been to install the 24m by 21m, 3,000 tonne unit 3km offshore and transfer the electricity it generated to the grid via a subsea cable. Once operational, the 1MW turbine was expected to produce enough electricity to power 1000 homes. Instead, the commercial-scale unit, which sits on a base of prefabricated reinforced concrete, was towed into shallow waters at Carrickalinga, where it remains.

Formed more than 15 years ago, Oceanlinx was a promising player in Australia’s ocean energy sector, having a number of wave power prototypes, including three units off the NSW coast, and had plans to expand to North America, Asia and Europe.

Carbon Delirium The Last Stage of Fossil-Fuel Addiction and Its Hazardous Impact on American Foreign Policy  

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TomDispatch has Michael Klare's latest look at American fossil fuel dependency - Carbon Delirium : The Last Stage of Fossil-Fuel Addiction and Its Hazardous Impact on American Foreign Policy

It should be obvious to anyone who has followed recent events in the Crimea and Ukraine that increased U.S. oil and gas output have provided White House officials with no particular advantage in their efforts to counter Putin’s aggressive moves -- and that the prospect of future U.S. gas exports to Europe is unlikely to alter his strategic calculations. It seems, however, that senior U.S. officials beguiled by the mesmerizing image of a future “Saudi America” have simply lost touch with reality.

For anyone familiar with addictive behavior, this sort of delusional thinking would be a sign of an advanced stage of fossil fuel addiction. As the ability to distinguish fantasy from reality evaporates, the addict persists in the belief that relief for all problems lies just ahead -- when, in fact, the very opposite is true.

The analogy is hardly new, of course, especially when it comes to America’s reliance on imported petroleum. “America is addicted to oil,” President George W. Bush typically declared in his 2006 State of the Union address (and he was hardly the first president to do so). Such statements have often been accompanied in the media by cartoons of Uncle Sam as a junkie, desperately injecting his next petroleum “fix.” But few analysts have carried the analogy further, exploring the ways our growing dependence on oil has generated increasingly erratic and self-destructive behavior. Yet it is becoming evident that the world’s addiction to fossil fuels has reached a point at which we should expect the judgment of senior leaders to become impaired, as seems to be happening.

The most persuasive evidence that fossil fuel addiction has reached a critical stage may be found in official U.S. data on carbon dioxide emissions. The world is now emitting one and a half times as much CO2 as it did in 1988, when James Hansen, then director of the NASA Goddard Institute for Space Studies, warned Congress that the planet was getting warmer as a result of the “greenhouse effect,” and that human activity -- largely in the form of carbon emissions from the consumption of fossil fuels -- was almost certainly the cause.

If a reasonable concern over the fate of the planet were stronger than our reliance on fossil fuels, we would expect to see, if not a reduction in carbon emissions, then a decline at least in the rate of increase of emissions over time. Instead, the U.S. Energy Information Administration (EIA) predicts that global emissions will continue to rise at a torrid pace over the next quarter century, reaching 45.5 billion metric tons in 2040 -- more than double the amount recorded in 1998 and enough, in the view of most scientists, to turn our planet into a living hell. Though seldom recognized as such, this is the definition of addiction-induced self-destruction, writ large.

For many of us, the addiction to petroleum is embedded in our everyday lives in ways over which we exercise limited control. Because of the systematic dismantling and defunding of public transportation (along with the colossal subsidization of highways), for instance, we have become highly reliant on oil-powered vehicles, and it is very hard for most of us living outside big cities to envision a practical alternative to driving. More and more people are admittedly trying to kick this habit at an individual level by acquiring hybrid or all-electric cars, by using public transit where available, or by bicycling, but that remains a drop in the bucket. It will take a colossal future effort to reconstruct our transportation system along climate-friendly lines.

For what might be thought of as the Big Energy equivalent of the 1%, the addiction to fossils fuels is derived from the thrill of riches and power -- something that is far more difficult to resist or deconstruct. Oil is the world’s most lucrative commodity on the planet, and a source of great wealth and influence for ruling groups in the countries that produce it, notably Iran, Iraq, Kuwait, Nigeria, Russia, Saudi Arabia, Venezuela, the United Arab Emirates, and the United States. The leaders of these “petro-states” may not always benefit personally from the accumulation of oil revenues, but they certainly recognize that their capacity to govern, or even remain in power, rests on their responsiveness to entrenched energy interests and their skill in deploying the nation’s energy resources for political and strategic advantage. This is just as true for Barack Obama, who has championed the energy industry’s drive to increase domestic oil and gas output, as it is for Vladimir Putin, who has sought to boost Russia’s international clout through increased fossil fuel exports.

Here’s why B.C.’s carbon tax is super popular — and effective  

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Grist has a look at the "best tax ever" - British Columbia's carbon tax - Here’s why B.C.’s carbon tax is super popular — and effective.

Suppose that you live in Vancouver and you drive a car to work. Naturally, you have to get gas regularly. When you stop at the pump, you may see a notice like the one above, explaining that part of the price you’re paying is, in effect, due to the cost of carbon. That’s because in 2008, the government of British Columbia decided to impose a tax on greenhouse gas emissions from fossil fuels, enacting what has been called “the most significant carbon tax in the Western Hemisphere by far.”

A carbon tax is just what it sounds like: The B.C. government levies a fee, currently 30 Canadian dollars, for every metric ton of carbon dioxide equivalent emissions resulting from the burning of various fuels, including gasoline, diesel, natural gas, and, of course, coal. That amount is then included in the price you pay at the pump — for gasoline, it’s 6.67 cents per liter (about 25 cents per gallon) — or on your home heating bill, or wherever else the tax applies. (Most monetary amounts in this piece will be in Canadian dollars, which are currently worth about 89 American cents.)

If the goal was to reduce global warming pollution, then the B.C. carbon tax totally works. Since its passage, gasoline use in British Columbia has plummeted, declining seven times as much as might be expected from an equivalent rise in the market price of gas, according to a recent study by two researchers at the University of Ottawa. That’s apparently because the tax hasn’t just had an economic effect: It has also helped change the culture of energy use in B.C. “I think it really increased the awareness about climate change and the need for carbon reduction, just because it was a daily, weekly thing that you saw,” says Merran Smith, the head of Clean Energy Canada. “It made climate action real to people.”

It also saved many of them a lot of money. Sure, the tax may cost you if you drive your car a great deal, or if you have high home gas heating costs. But it also gives you the opportunity to save a lot of money if you change your habits, for instance by driving less or buying a more fuel-efficient vehicle. That’s because the tax is designed to be “revenue neutral” — the money it raises goes right back to citizens in the form of tax breaks. Overall, the tax has brought in some $5 billion in revenue so far, and more than $3 billion has then been returned in the form of business tax cuts, along with over $1 billion in personal tax breaks, and nearly $1 billion in low-income tax credits (to protect those for whom rising fuel costs could mean the greatest economic hardship). According to the B.C. Ministry of Finance, for individuals who earn up to $122,000, income tax rates in the province are now Canada’s lowest.

McKinsey On The disruptive potential of solar power  

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McKinsey Quarterly has a look at the momentum of the solar power industry - The disruptive potential of solar power.

These cost reductions will put solar within striking distance, in economic terms, of new construction for traditional power-generation technologies, such as coal, natural gas, and nuclear energy. That’s true not just for residential and commercial segments, where it is already cost competitive in many (though not all) geographies, but also, eventually, for industrial and wholesale markets. Exhibit 1 highlights the progress solar already has made toward “grid parity” in the residential segment and the remaining market opportunities as it comes further down the curve. China is investing serious money in renewables. Japan’s government is seeking to replace a significant portion of its nuclear capacity with solar in the wake of the Fukushima nuclear accident. And in the United States and Europe, solar adoption rates have more than quadrupled since 2009.

While these economic powerhouses represent the biggest prizes, they aren’t the only stories. Sun-drenched Saudi Arabia, for example, now considers solar sufficiently attractive to install substantial capacity by 2032,2 with an eye toward creating local jobs. And in Africa and India, where electric grids are patchy and unreliable, distributed generation is increasingly replacing diesel and electrifying areas previously without power. Economic fundamentals (and in some cases, such as Saudi Arabia, the desire to create local jobs) are creating a brighter future for solar. Business consumption and investment

Solar’s changing economics are already influencing business consumption and investment. In consumption, a number of companies with large physical footprints and high power costs are installing commercial-scale rooftop solar systems, often at less than the current price of buying power from a utility. For example, Wal-Mart Stores has stated that it will switch to 100 percent renewable power by 2020, up from around 20 percent today. Mining and defense companies are looking to solar in remote and demanding environments. In the hospitality sector, Starwood Hotels and Resorts has partnered with NRG Solar to begin installing solar at its hotels. Verizon is spending $100 million on solar and fuel-cell technology to power its facilities and cell-network infrastructure. Why are companies doing such things? To diversify their energy supply, save money, and appeal to consumers. These steps are preliminary, but if they work, solar initiatives could scale up fast.

As for investment, solar’s long-term contracts and relative insulation from fuel-price fluctuations are proving increasingly attractive. The cost of capital also is falling. Institutional investors, insurance companies, and major banks are becoming more comfortable with the risks (such as weather uncertainty and the reliability of components) associated with long-term ownership of solar assets. Accordingly, investors are more and more willing to underwrite long-term debt positions for solar, often at costs of capital lower than those of traditional project finance.

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