Triple Crunch Log Jeremy Leggett

German power chiefs say that without more nuclear plants there will be blackouts. They want to follow the British-French lead. The Eon CEO Wulf Bernotat tells a German paper that Germany could face a 12-21 GW shortfall. Germany’s 17 existing nuclear plants (21 GW, a quarter of power production) would need to have their lives extended, he says. The RWE boss said blackouts could occur as soon as this summer because of wind power problems and cooling difficulties at other power plants. They are due to be shut by 2021 as things stand with the government’s political agreement, and no more will be built. Merkel favours building more.³²⁵

Head of Deutsche Bank Asset Management says its getting easier to use campaigning investment as a tool in fighting global warming. Until recently, mutual funds – the most popular form of investment – offered few options. In the last two years, an estimated 200 mutual funds and exchange-traded funds have been launched targeting companies mitigating or adapting to climate change. Some $66 bn (£33bn, €42bn) of retail investor money has flowed into them. (But only $55m of this from the US!). Wind and solar have proved particularly attractive, says Kevin Parker. “But they still have a long way to go, and tend to e expensive – high risk, in other words.” He advocates lower risk investments under the general heading of “improving efficiency.”³²⁶

24.3.08. “UN pleads for $500m to avoid food crisis”: FT front page headline. Government funds are needed in the next four weeks if rationing is the be avoided. Spiraling food costs are to blame, coming down in large part to the price of oil. Costs have leapt 20% in the last three weeks. The rises have spread from corn and wheat to rice now. The WFP provides food for around 73m people in nearly 80 countries, and would have a budget of $3.4bn if the extra funds are provided. Last year the US was the biggest donor with $1.1bn. The EU provided $250m.³²⁷

UAE announces a $100m agency to make it the first Arab nuclear state. This separate from the Gulf Co-operation Council’s plans for a joint scheme (Saudi Arabia, UAE, Kuwait, Bahrain, Qatar and Oman). Note: Masdar announcment was $22 bn.³²⁸

GTL and CTL are finding roles in world energy supply, Oil and Gas Journal claims. One has come in line, three are being constructed and many more are planned. Others have a less anguine view.³²⁹ (L)

25.3.08. UK’s leading government scientists warn against biofuels targets. Bob, Watson, chief scientist at DEFRA says going with biofuels that might actually increase net GHG emission is “insane.” John Beddington, chief scientific advisor to the government, says cutting down rainforest to make space for biofuels is “profoundly stupid.” They urge Brown to resist EU plans for increasing quotas. The 2003 EU directive on biofuels mandates 5.75% of petrol and diesel from renewable sources by 2010. The UK is committed to reach at least 2.5% from April 1^st en route to the 2010 target and the EU aim is 10% by 2010.³³⁰

Former nuclear regulator Ian Jackson says that waste costs would make nuclear plants unviable. If companies were to be charged the amount actually paid for waste storage by foreign companies at Sellafield, the entire programme would be threatened, Jackson calculates. The government would have to cap costs to utilities at 6-12% of the waste costs, and pass the rest on to the taxpayer. His assumptions: £10bn to build the repository, and £8.2 bn value if it is filled with intermediate waste by producers paying the same rate as utilities currently using Sellafield for storage. It doesn’t work.³³¹

Huge section of the Wilkins Ice Shelf, begins disintegrating. The collapse began 28 Feb when a 41 x 2.4 km iceberg broke off, triggering collapse in the interior and loss of 414 sq km already.³³²

27.3.08. UK GHG emissions down 2% in 2007 ….thanks to a price-driven drop in coal burning. So the government’s provisional figures say. Coal produced 9.5% less UK energy than in 2006, as high coal prices drove some generation to gas. GHG’s of 639.4m tonnes of CO2 equivalent are down 18% since 1990, well within our Kyoto target of 12.5%, not including aviation, shipping and carbon emissions of our imports. CO2 itself dropped from 554.5mt to 543.7 mt.

European Commission spokesman on energy defends biofuels targets. Ferran Terradellas says the new directive will call only for those that save at least 35% of the CO2 compared to the oil that would be used instead.³³³

Gazprom deputy CEO casts doubt once again on Kiev deal. Alexander Medvedev (no relation) says the intermediary Rosukrenergo remains in place. Gazprom has long term contracts with them that cannot be breached. (The Swiss-based intemediary is 50% owned by Gazprom and 50% by 3 Ukrainian businessmen. Those opposed say it exists to siphon off gas profits).³³⁴

28.3.08. UK tries new gambit to evade EU renewables targets: count renewables installed by UK companies overseas. Business minister Lady Vadera proposes this to a council of ministers meeting in Brussels this month. She also wants carbon captured at coal stations to count.³³⁵

New Scientist review of CCS points to long lead times and impossibility of zero emissions. A 2007 MIT study suggests the first commercial plants are as far off as 2030. An Edison Electric executive has told the House of Representatives committee that 25 years of R&D will be needed to get there at a cost of around $20bn. Coal produces around three times its own weight of CO2 when burned, all of which must be pressurised, liquified and pumped in pipelines to a site where it has to be buried deep enough to remain liquified. One IEA study suggests the EU alone would require 150,000 km of new pipelines heading for the North Sea. All this will be expensive both to procure and operate, and very energy intensive. The US government estimates an additional 75% on the price of a coal plant. The CCS process itself eats up no less than 10% of the energy from the plant, and perhaps as much as 40% (on top of the amount needed to reapy the diggging and transportation of the coal, which may be as much as 25%: i.e. up to 65% before the energy for building the plant is considered. A detailed study by the German Aerospace Center suggests CCS can reduce emissions from a typical coal plant by only two thirds. Then there is the scale of operation required. The three operational CCS projects (Statoil’s Sleipner West field, Weyburn in Canada and Salah in Algeria) couldn’t handle anything like the volume of CO2 from a large coal-fired plant. Even once buried, the furthest-advanced test site of CO2 in a reservoir (1,600 tonnes injected into the Upper Frio sandstone on the Texas Gulf Coast) shows that the CO2 has acidified the brine in the pores of the rock, leading to acid dissolution of minerals in the rock, prompting one of the research team to suggest that escape tunnels for the gas might thereby be created.³³⁶ (F)

29.3.08. UK power firms forced to pay billions to help the poor with bills. The companies will be told this week that £3bn of profits over 3 years will have to go towards helping pensioners and poor families save energy and lower bills. “The plan is also expected to help households who produce their own power – for example, by having a wind turbine on their roof – to sell surplus electricity back to the national grid, meaning the greenest homes could end up in profit.”³³⁷

30.3.08. Emerging scramble for oil likened to the Great Game between Russia and British Empire a century ago. In this round of the Great Game, energy shortage and glbal warming are reinforcing each other. The result can only be a growing risk of conflict.” Note: military oil-intensity. A Pentagon report says the amount of oil needed for each soldier quadrupled between WW2 and the 1991 Gulf War One, and quadrupled again by the 2003 Gulf War.³³⁸

1.4.08. “Peak power” is a bigger problem than peak oil, says American economist familiar with Gulf. Oil is at $100 primarily because of OPEC’s disappearing spare capacity. Petrodollars have also found their way from the producers into funds speculating in oil futures. Going forward, urban development in the Gulf will be a huge problem. Power shortages are delaying construction projects in several Gulf cities already. “A large number of housing towers stand empty in some Gulf cities for lack of electricity. It is not ‘peak oil’ that is driving the high oil prices, it is ‘peak power’.” A heat wave this summer would mean two things: gas diverted from lifting production in the oilfields to power plants to help with peak demand, and where that can’t be done, oil burned directly in power plants. There is no spare gas in the whole region: all the available gas has been allocated, even that from unfinished projects. Some countries in the region are already importing fuel oil for power plants. So building more gas plants won’t solve the problem. If OPEC had spare capacity it could lower prices while flushing out speculators, so helping itself while helping the ailing dollar.³³⁹

BERR announces latest “development” in the Slow Carbon Building Programme.” They are not increasing the Phase 1 cap, but are increasing the Phase 2 subsidies for all micro-renewables to the same level as PV: 50%. Of the 312m originally allocated for households, £10m remains in the pot. Of the £50m for oublic buildings, £41m remains. UK installed less than 300 solar roofs last year, Germany 130,000.³⁴⁰

“Splash and dash” biofuels scam exposed. Traders are shipping biofuel made in the EU across to the US, adding a splash of US biofuel or even conventional fuel, so as to qualify for subsidies, and shipping right back to sell at prices undercutting EU manufacturers who don’t engage in the scam. Its legal, but of course an environmental disaster, and the renewables fuels associations are screaming for the EU to ban it. As much as 10% of the one million tonnes exported to Europe from the US may be involved. Note: 10.3 million tonnes biofuels capacity in the EU³⁴¹

$600,000 a day to hire deep-water drilling rigs now, up from $70,000 five years ago. Three years ago a Norwegian billionaire ordered two ultra-deep water (7,500 feet or more) rigs on spec, ahead of any orders, confident a boom was coming. They cost nearly $900m. There are only 39 such rigs in the world now. Payback on a rig approaching half a billion is now as little as four years. Note: WSJ now attributes oil price anxiety in part to peak oil. “’Peak oil’ anxiety has contributed to the steep increase in the price of crude, which has nearly tripled since 2004.”³⁴²

ExxonMobil regains first place as biggest oil company by market cap. Last week, as the Chinese equities bubble deflated, Petrochina slipped back to second. Note: it still pumps more oil and gas than any other emerging market player, except Gazprom. At 4.5% upstream production growth in the last five years, none of the IOCs come close.³⁴³

Centrica MD warns that UK will be importing as much gas by 2015 as it produced in 2007. “Capacity does not mean volume,” he warns an industry gathering. See pdf of presentation.³⁴⁴ e-mail to me from Eddie Hyams afterwards: “Cooking with gas = food for thought.”

Oil executives harangued in Congress over high prices and low renewables spending. The Select committee on energy independence and global warming summoned top executives of BP< Shell, ExxonMobil, Chevron and ConocoPhillips to explain themselves. ExxonMobil took particular flak for paying out $7.5bn in executive pay and dividends, while spending only $100bn on anything related to renewables (The Stanford research funding).³⁴⁵

NDA consults industry on options for UK’s plutonium stockpile as Thorp reprocessing reopens. The NDA hopes to offer government a list of options for use or disposal at the end of the year, having sought help from industry. The stockpile is the result of 40 years of reprocessing of Magnox and AGR spent fuel. The reprocessing produces waste, plus uranium and plutonium, usable as Mox fuel, or for nuclear weapons. The decision whether to reprocess fuel from new nuclear plants is yet to be made. France reprocesses all its spent fuel. Carter banned it in the US in 1977, fearing proliferation.³⁴⁶ Meanwhile Thorp opens after 3 years down following a leak of radioactive acid that went undetected for months.³⁴⁷

Protestors disrupt work at Welsh coal mine. Ffos-y-Fran invaded. Operations carry on and two protestors are arrested.³⁴⁸

NHBC produces survey showing zero-carbon homes are unpopular. More than 30% say they have no interest in buying a home with built-in microgeneration. 60% prefer traditional looking homes. Builders surveyed professed themselves “not very confident” they could build zero-carbon homes profitable. Also: Only 45% of all surveyed think the changing climate is due to greenhouse-gas emissions rising.³⁴⁹

The emissions trading market was worth £31.6bn last year but has yet to work properly. Up 80% on 2006, the €40bn market is expected by analysts Point Carbon to hit €63bn in 2008. €12bn came from the UN scheme and the rest from the EU one. But listed companies are performing poorly on the whole due to the teething troubles of the market, notably the glut discovered in spring 2006, when the price of carbon crashed from €30+ to €10-. The technology linking the two schemes is unlikely to be ready until next April.³⁵⁰ The FSA warns that rapid growth in carbon trading threatens other commodities markets such as gas and electricity. Concerns include the sale of unsuitable products and insufficient data on risks.³⁵¹

2.4.08. Credit crunch hits oil industry as largest UK independent fails to find debt for Russia development. Imperial Energy wanted $600m (£300m) over the next two years to develop oil finds in the Tomsk region of Russia. Nobody would lend. It was forced to go for a rights issue, on news of which the share price fell by quarter.³⁵² Yet this is no cowboy outfit. Imperial has more oil reserves than any independent oil company listed in London except Shell, BP and BG Group: 920m barrels of oil equivalent, and 3.4bn if the Tomsk finds are included.³⁵³

Royal Society appeals to Hutton to mandate CCS on coal plants. UK’s top scientists want stations that do not capture 90% of CO2 by 2020 to be shut down. Meanwhile E.ON has asked the government to delay granting planning permission for Kingsnorth until the government approach to CCS is clear.³⁵⁴

Centrica claims that European energy firms force up energy costs in UK. This they do by buying up supplies in summer and not selling back down the pipeline in winter, when the UK needs to import gas. The effect of this “borrowing” when we don’t need so much gas, and then not “returning the favour” when we do, is price inflation. The Europeans have more gas storage than us. We are used to meeting demand spikes direct from North Sea production. France and Germany have one fifth of gas demand in storage, we have just 5%. Jake Ulrich, MD of Centrica Energy, aired the concerns at a meeting of utility executives.³⁵⁵

Carbon prices seem set to rise as emission trading rules tighten. The number of permits will be cut about 9% between 2008-12. However, the extent of the miscalculation in 2007 became clear as figures show emissions from industries covered by the EUTS were 1.88bn tonnes of CO2 against allowances of 1.92bn. Point Carbon analysts expect an average price of €30 for five years in Phase 2.³⁵⁶

3.4.08. Qatar gas-to-liquids project still well below planned capacity. Sasol’s Oryx project, the biggest in the world, will not be at full capacity of 33,000 bpd until at least the second half of 2009. Oryx opened last year, the first such plant for more than a decade, but was only at 9,000 bpd in December. Note: Shell has had a plant in operation since 1993, and has the biggest - a 140,000 bpd plant - under construction in Qatar. But the bill for that now stands at $18bn, three times higher than the original budget. ExxonMobil had a plant planned in Qatar but scrapped it. Sasol also has a plant with Chevron in a Nigerian swap. Availability of gas could also be a constraint on new GTL plants, because of building and LNG.³⁵⁷

Research starts on using calcium silicates in soil to absorb CO2. A plant uses photosynthesis to withdraw the gas from the atmosphere, then uses part of the withdrawal to grow. The rest is pumped via the roots into the soil around, there to escape back into the atmosphere. But researchers at the University of Newcastle think that calcium silicate in the soil might be usable to trap the gas, via a reaction leading to calcium carbonate. Professor David Manning thinks “we could potentially see applications in two to three years.”³⁵⁸

4.4.08. LSE professor proposes abandoning Kyoto because it can not go far enough with emissions cuts. A paper by Tom Wigley and others in Nature points to “dangerous assumptions” (the title of the paper) in the IPCC scenarios. They factor in a carbon-intensity decoupler as economies grow, based on lessons from economies – notably Japan’s - in the late 20^th century. But the modern global economy is not longer decarbonising, it is recarbonising. IPCC experts noted this, but it was edited out of the summary for policymakers. A new set of policies is needed, one that recognises that the developing world will need more energy, not less. “It would recognise that attempting to control human-created carbon emissions by setting binding output targets and relying on articificial carbon markets and dodgy offsets, as Kyoto does, has not and never will work.” It would focus first on the high-energy-intensity parts of economies: power, building, cement and metals production.³⁵⁹

EU plans biodiesel lawsuit against US imports. The European Biodiesel Board will ask the EU to impose import tariffs on US biodiesel imports. The target is not just splash-and-dash but basic US biodiesel imports, produced under a subsidy that does not allow fair competition. The US National Biodiesel Board denies there are any problems.³⁶⁰

As arson hits McMansions in US suburbs, Bush declares eco-terrorists public enemy number one. Last month 5 homes under construction were burnt, supposedly by the Earth Liberation Front, according to a hand-painted sheet left at the scene of the crime. Some suspect insurance crime, because the houses had not been sold. Bu the FBI has pit “eco-terrorism”, or ectoage, as the number one domestic terror threat, ahead of rightwing extremism and equal with al-Qaida. Some are likening the current “green scare” in the US to the “red scare” of the 1950s, in the era of McCarthyism. Green-motivated vandals are receiving astonishing sentences. A man who set fire to three cars in Oregon, trying bring attention to global warming and the role therein of gas guzzlers, was sent to prison for 22 years. A woman found guilty of setting fire to a tree laboratory could get 20 years. An act passed 400-6 last month in the House, the Home-Grown Terrorism Prevention Act, will soon be considered by the Senate. It targets beliefs, rather than acts, bringing us into the era of “thought crimes.”³⁶¹

French government could own British nuclear. As five energy giants court British Energy, including EDF, the UK government considers selling its 35% share. Five barriers would stand in front of EDF ownership. The first is nationality, because the French government owns 85% of EDF. The second is the effect on UK electricity competition generally, because BE has more than 20% of UK power capacity, the biggest share. The third is the effect on DBERR’s hopes for nuclear competition: BE owns all the best sites, apart from a few owned by the NDA. The UK government could end up writing a blank cheque to the French government.³⁶² EDF has made itself uniquely unpopular in its own industry. As one nuclear executive puts it: “EDF is the one company that unites all European companies against it. It is a company that it is totally impossible to buy, but it can buy everyone else.”³⁶³

5.4.08. UK faces looming electricity supply crunch, Economist concludes, forcing a return of coal. Only two 1950s vintage Magnox plants are left open and they are due to close in the next two years. Even ardent nuclear optimists say ten years at least before new plants begin to come on line. The LCPD means many coal plants must close. E.ON calculates that without new plants the comfort margin that we have today - peak demand plus 20% - will be eroded completely by c. 2015 (at something around 65 GW: see figure). E.ON has apparently entered Kingsnorth in the government’s CCS competition. But critics point out that the competition covers plants only up to 300MW. Kingsnorth would be two 800MW units. The more-then-half unsequestered would be “capture-ready”, E-ON says. It is far from clear what that entails.³⁶⁴

UN Chief calls for biofuels review as 33 countries face civil unrest over food prices. The demonstrations, riots - and deaths - are piling up.³⁶⁵ Governments are defying the IMF by lowering prices, banning exports, and hiking wages. The US has taken at least 8m hectares (20m acres) of land for maize, wheat, soya, and other crops out of production and into biofuels: enough land in two years to feed 250 million people with typical grain needs, enough land to grow 60m tonnes of food. In 2008, 18% of all grain production will go to biofuels, Lester Brown says.³⁶⁶

CTL momentum grows as US Air Force investigates flying entire fleet of aircraft on CTL fuel. Assistant Secretary of the US Air Force Bill Anderson tells a big CTL conference in Paris (attendees from 28 countries) that the Air Force wants to complete testing of its entire fleet on CTL fuel within three years. If they are successful, the RAF and French airforce would have to follow. A Chinese Academy of Sciences Study last year concluded: “production of liquid fuels from coal is, practically, the most feasible route to cope with the dilemma in oil supply.” Environmentalists protest that GHG emissions are around double that of oil.³⁶⁷

6.4.08. Jim Hansen calls for CO2 stabilisation at 350 ppm as evidence emerges that slow feedbacks mean climate sensitivity is twice the IPCC estimate. This would entail huge and rapid GHG reductions. Stay at 450 ppm for long enough and we melt all the ice, the NASA climate team leader says in a paper with his team posted on the web yesterday.³⁶⁸ Hansen later submits a paper to Nature, and Bill McKibben later endeavours to form a “350” movement.³⁶⁹

E.ON goes ahead with offshore windfarm planning application despite opposition from MoD. The farm is 300 MW off the Humber. The MoD is worried about its radar. This is the first application since Hutton said we need 33 GW of offshore wind to hit out 2020 target.³⁷⁰