Triple Crunch Log Jeremy Leggett

Mini nuclear reactors can be delivered within 5 years, Los Alamos says. Smaller than a garden shed, deliverable by lorry for burial in the ground, they could power communities of 20,000. They would be factory-sealed and have no weapons-grade material. Hyperion, a New Mexico company licensed to mass-produce the technology, says each unit will cost around $25m (£13m), i.e. £250 per home. They would produce 10 cents per kWh electricity anywhere in the world. They would of course require nation-state resources to enrich enough uranium, and would need to be refueled every 7-10 years. An application to build will be lodged with the NRC in 2009.⁸⁸⁹

10.11.08. Solar PV stocks have taken a beating of late, but Fortune magazine still recommends some. In 2007, the global market roughly doubled in value, to $33 billion. From the beginning of 2008 to mid October, the Nasdaq fell 36%, but all the leading solar stocks fell more. Fortune expects three winners from the 14 pure-pay solar PV companies: First Solar (largly because of low-cost manufacturing), Suntech (scale in crystalline), and Sunpower (brand does matter).⁸⁹⁰ (L)

11.11.08. Oil falls below $60, its lowest level for 20 months, as the economy slows even faster than expected. Brent falls to $55. The World Bank is lining up $100bn in aid for hard hit poorer and middle-income states.

12.11.08. IEA World Energy Outlook warns crashing exploration puts world on course for an energy crunch. $390bn (€311bn, £259bn) was invested in oil and gas exploration and production last year, one of the highest amounts ever. But $450bn is needed for the two sectors annually now, and as Fatih Birol says: “We hear almost every day about a project being postponed.” Developing countries will be the only source of growth in oil demand until 2030, the IEA now predicts. But its study of 800 of the biggest fields shows 6.7% pa depletion, meaning 45 mbd of new production will need to be found over the next 22 years to 2030 just to maintain today’s level of production. That is four Saudi Arabia’s.^{891 892}

US Geological Survey report estimates 85 trillion cubic feet of gas is extractable from hydrates in Alaskan Arctic: enough to heat 100 million homes for more than a decade. Gas companies will be able to tap into it with existing technology, geologists say. Long-term tests will take place between 2009 and 2011, but shipments could not happen for years. It would take a pipeline – championed by governor Sarah Palin, that would take at least a decade.⁸⁹³

US drops plan to spend bailout on toxic assets, and redirect it at recapitalization and supporting consumer credit markets. This is a dramatic reversal by Paulson, who also says US carm makers can expect no help from Tarp.

Barclays faces shareholder rebellion over plan to raise $7bn in Gulf to escape government bailout. Investors including Legal and General are angry that the money is more expensive and their pre-emption rights have been ignored. The suspicion is that Barclays directors have opted for this route so they can keep bonuses in place.

13.11.08. Mexico takes out a huge position in put options to try and lock in 2009 oil revenues: 330m barrels worth (c. 900,000 barrels a day, i.e. nearly all Mexico’s exports) at a minimum price of $70 for the country’s crude oil export mix, roughly equivalent to $85 for the West Texas Intermediate benchmark. They did it quietly, in tranches, so as to try not to influence the pricing of oil in a way that harmed their own interests in the price being high. It cost them about $1.5bn to buy value – assuming $55 oil – of $9.5bn.⁸⁹⁴

14.11.08. EU proposes trans-Caspian gas pipeline from Uzbekistan to link with Nabucco pipeline. This move, the latest effort to access gas from Kazakhstan and Uzbekistan, is sure to annoy Moscow. The EU proposes to set up an entity called the Caspian Development Corporation, to buy gas and invest in infrastructure. It would be backed by the European Investment Bank. Ultimately the goal is to bring 60-120 bcm a year west: 12-25% of EU consumption today. The EU hopes and believes Uzbekistan and Kazakhstan will support the idea. Currently 42% of EU gas imports are from Russia, 24% from Norway, 18% from Algeria, and 16% ROW.⁸⁹⁵

Prominent peakist appeals to colleagues to “tone it down” during the credit crisis. Robert Hirsch sends round a memo arguing the “if the realization of peak oil along with its disastrous financial implications was added to the existing mix of troubles, the added trauma would be unthinkable. Others including Matt Simmons argue there is no point in burying heads in the sand, and the troubles have to be faced in the round.⁸⁹⁶

Arab News celebrates defeat for peakists in the IEA’s World Energy Outlook. Ghawar has been producing 5 mbd for decades – 6.25% of current global production, and will continue it seems. The kingdom has over 300 recognised reservoirs, but 90% of its oil comes from five supergiant fields discovered between 1940 and 1965, of which Ghawar – “fifty years young”, found in 1948 - is the most significant. It accounts for 55-60% of Saudi production, and its reserves are 12% of the world total. A Saudi Aramco official claims the depletion rate for the national reserves is 2% a year, and they will be able to maintain a minimum 30 year production plateau. The IEA report, according to the Arab News writer, is “music to ears in real, real sense …..Thank you Fatih!”⁸⁹⁷ (L)

15.11.08. Economist editorial says bailing out Ford and GM would be a mistake. They burnt their way through $15bn of cash in the third quarter, and say they need $50bn to see them through. But who is to say it would ever be paid back, given their failures? The government may have thrown twenty times more at financial institutions (>$1 trillion), but “banks qualify for help because the entire economy depends on their services.” Chapter 11 was created in the US to give companies the space to extract the good from the bad. The auto giants should go for it. Over the next 40 years the global car fleet is projected to rise from 700m to nearly 3 billion.

Economist, reviewing state of the financial markets, says there is no great plan on the table, so G20 leaders should be modest ….and certainly not do anything to curb capital flows.⁸⁹⁸ (L)

16.11.08. G20 leaders pledge to support growth at all costs. At the end of a Washington summit, 20 world leaders say they will take “whatever further actions are needed to stabilize the final system,” eschewing protectionism. By March 2009, Finance Ministers have to mitigate against “procyclicality” in regulatory policy, review global accounting stanrds, strengthen derivatives markets, review compensation practices in financial institutions, and review the international financial institutions. The IMF MD has called for a 2% GNP financial stimulus package, which would be £30bn of tax cuts in the UK (£1.5tn GNP): unlikely. The FT notes that the convening of the 20 rather than the 8 marks a shift in economic power.

Write offs in the banking system now total more than $1,000 bn (£670bn, €800bn). All down to a massive failure of discipline in the housing bubble.⁸⁹⁹ Global credit default swaps outstanding after the first half of 2008 amounted to $54 trillion (and the IMF estimates global GDP for 2008 at $62 trillion). Back in the first half of 2002, CDS outstanding amounted to $1.5 tn.⁹⁰⁰

CBI says UK economy will shrink 2.5% by 2010, and 3 million will be out of work. Meanwhile the tales clock up of real hardship today.

17.11.08 Total government bail-out funds pass $5 trillion as low carbon investment falls in 2008. New Energy Finance says the total will be $142bn, down from 148bn. Governments, it seems, favour efforts to stimulate fast consumption via taxes etc, rather than the slower route of the green new deal.⁹⁰¹

Schwarzenegger signs exec order lifting California's renewable energy standard to 33% by 2020, i.e. a third of all energy from renewables: America's most aggressive state target. He will now draft legislative language to require all utilities to meet the standard, and spread the cost across all ratepayers with safeguards for low income people. The CEC and Department of Fish and Game will create a one-stop permitting process to cut application time for renewable projects in half. At the forum where he does this, Obama – appearing on videolink - commits US to returning greenhouse-gas emissions to 1990 levels by 2020, and reiterates $15bn a year commitment to cleantech – wit solar first in the list of technologies mentioned, but including CCS and nuclear.

UK government amends Energy Bill to guarantee a renewables feed-in tariff by April 2008, with a surprisingly high cap per-project of 5 MW.

New UK energy minister Mike O’Brien reassures nuclear investors. “Without nuclear, the costs of generating the country’s electricity could be up to 40 percent higher,” he says. He sees the BE takeover by EDF as the catalyst for a 30% nuclear contribution to UK electricity.⁹⁰²

Government lawyers warn ministers of nine potential legal threats to the UK nuclear programme. All can delay construction. Meanwhile, a DECC discussion document shows that the second underground nuclear waste repository – adding another £12bn possibly to the bill – cannot be ruled out.

Barclays directors are humiliated over the Gulf bailout deal. They have had to agree not just to zero bonuses, finally, but will have to stand for re-election annually. Bosses at Goldman Sachs, UBS, Deutsche Bank and other had all agreed to take no bonuses before Barclays caved in. UBS have instigated a “malus” system where two thirds of future staff bonuses will be carried over for 2-3 years and withdrawn in the event of poor performance. Citigroup meanwhile cuts 50,000 more jobs. UK job losses are now headed by Northern Rock at 2,500, Citigroup 2,400, Barclays 1,800.

Former head of Fed blames “alchemists” and “bloated bonuses” for collapse of financial system. Paul Volcker, who ran the US central bank in the 1980s, crushing inflation during his tenure, has spoken out in London. “They were trying to turn dross into gold. We had a lot of alchemists out there.”⁹⁰³

Oil traders are set to make 2,000% returns on sub-$100 bets made in the summer. They were so cheap at that time they were called “lottery tickets”: December put options for the right to sell at $100 a barrel cost $1.80 in July.

Renewables are falling further than other stocks.The NEX Index of clean energy stocks rose 57.9% in 2007 while the Nasdaq (a stock exchange offering all kinds of tech stocks) rose only 9.8% by contrast. The NEX Index has now fallen well over 50%, to a level last seen in 2004, before the Kyoto Protocol came into force. But analysts still favour the view renewables will emerge “leaner, fitter, stronger.”⁹⁰⁴

Around 30% of Britons think anti-global warming policies will reduce jobs, versus 24% who think the reverse. This is the gloomiest view among UK, France, Spain, Italy Germany and US (>6,000 polled by FT/Harris). In the US, 43% think more jobs will result from cutting emissions, versus only 22% thinking less will result. In all countries, 40% think action to combat global warming is absolutely essential or very important, and only in the US does the number who think it important or somewhat important drop under 80%, and then by only a fraction.⁹⁰⁵

18.11.08. US auto makers ask for a $25bn loan package and Republican senators tell the three to seek Chapter 11 protection and restructure.

National oil companies expect the oil price to fall to $40, according the head of China’s CNOOC, speaking of a meeting of NOCs in Beijing in October. Such a consensus exists in 27 NOCs from 23 countries, and in their feeling of “panic” they will cancel “most” investment projects.⁹⁰⁶

19.11.08. US core price index (minus energy and food) fell negative in October for first time since 1982. BASF, largest chemicals company, cuts output 25%. Car companies cut production.

20.11.08 US stock markets end lower than after the dot.com bubble burst in 2000 as a new wave of panic sweeps around the world. Japan, now in recession, posts first monthly trade deficit for 28 years. More factories close in China. Iceland borrows $10bn to stop its economy collapsing completely. Russia lurches towards crisis as the loss of oil revenues pushes them towards a devaluation of the rouble.

The oil price falls below $50 for the first time since 2005. With Nigeria not wanting to cut production, Opec is in disarray. Only the UAE, Algeria can break even on their external accounts at $50. Goldman Sachs tells its clients it is closing all trading recommentations in energy.⁹⁰⁷ For Iran to balance its budget, it needs $95 oil, according to the IMF. In the markets, only one asset class is deemed safe: the liabilities of highly-rated governments.

US National Intelligence Council report says the era of US dominance is over. The four-yearly assessment makes a marked contrast with the triumphalism of the previous edition. “In the wake of the 2008 global financial crisis, the state’s role in the economy may be gaining more appeal in the world.”

Bush rushes through regulation to open up the Rocky Mountain states for oil shale exploitation (800,000 hectares, 2m acres) and other assaults on protection of wilderness areas.

BP guilty of greenwash, says Fred Pearce. They say they spend $1.5bn pa on alternative energy, but that includes natural gas power plants and an “emissions assets” business. Even then it is all only 7% of the $21bn planned investment in 2008.⁹⁰⁸

21.11.08. Short-sellers still picking on banks, as Citigroup’s shares lose 20% of value in a day amid another front-page crisis of confidence. Citigroup waited longer than most to recapitalize. The FT reports “an almost complete lack of buyers.”

Solar stocks continue to plunge faster than the general market. Year to date as of 21 November the S&P 500 had fallen 45.5%, but 24 of 28 quoted stocks more than a year old followed by Credit Suisse had fallen more than that, many of them more than 80%.⁹⁰⁹ (L)

22.11.08. Banks are still not lending, and UK government says it will not rule out complete nationalisation. Those who so valued risk a short while ago are taking none. The FT reports that Darling is losing patience, and Brown’s office has not ruled out taking the lot under state control. The lead FT editorial is entitled: “Bankers must start lending – or else.” It comes close to saying that if they don’t start lending, the government should nationalise the banks.

The oil market has completely disconnected from fundamentals. As the FT puts it: “Do supply and demand even matter any more when the futures pits have become the tail that wags the dog?” Citigroup charts a 460% rise in futures and options positions on Nymex in the last four years, while real physical oil trading has grown only 9%.⁹¹⁰

California tees San Francisco Bay up to be electric car capital. State and cities say they will unite to spend to spend as much as $1bn on charging and battery-swop points. Better Place will install throughout the area. One of their pick-up batteries, to replace a flat one, will deliver around 100 miles, ideal for commuting.

Ocean Thermal Energy Conversion enjoys a revival. Lockheed Martin has a $600,000 DoE grant to develop an OTEC plant on Hawaii and Hawaiian company OCEES International plans to have am 8 MW and 1.25 million litre per day desalination plant ready on Diego Garcia by the end of 2011.⁹¹¹ (L)

Chinese study shows soil erosion will cut harvests in China’s breadbasket (north-east) by 40% within 50 years on current trends. In SW China, almost 100m would lose the land they live on within 35 years.

23.11.08. Still there have been few apologies from the “monsters” at the top of banks to investors, says Will Hutton. Only UBS has invited any director to repay bonuses. Only outgoing RBS Chairman, Sir Tom Mckillop, has apologized to investors. Hutton recommendations for the UK pre-budget report include cheap (low billions) government insurance for all bank lending; and a national infrastructure bank like the one Obama proposes.⁹¹²

Machine developed that can extract water from household air. It uses the electricity of three light bulbs to condense water in the air and purify it with microbe-busting UV light, all in a three-foot diameter plastic half-dome attached to the wall. Element Four, the company responsible, exhibited it at the Wired magazine annual showcase of devices that can change the world. Bad news for the 30bn litres of water uselessly bottled every year at a cost of around $11bn. 1.5m barrels of oil are used just to make the plastic, according to the Earth Policy Institute. Sales price when it goes on sale in the spring: $1,200. If you buy bottled water, it would pay for itself in a couple of years.⁹¹³

24.11.08. US makes biggest bailout in history, $326bn for Citigroup: an injection of $20bn capital and $306bn in guarantees for risky assets. Once the biggest bank, Citigroup had a market cap of 4153bn last year, and 20.5bn yesterday – an 87% collapse.

Furious Barclays investors vote for the banks Gulf fundraising, but only for fear of not destabilizing the bank and perhaps the entire sector.

UK pre-budget report takes £12bn tax gamble, aims for 10,000 jobs in £100m home-insulation drive, extends the Renewables Obligation to 2037, and allocates £3bn to boost infrastructure. The government intends to claw the tax back later, after recovery they hope, by measures including lifting the rate for those earning more than £150,000 p.a. They will borrow £78bn this year, £118bn next, bringing total UK debt to £1 trillion within four years. As the Conservatives furiously oppose this “tax and debt bombshell,” the political divide in the UK is now suddenly clear again. The stock market seems to favour the return of social democracy and the death of New Labour: it rises nearly 10%, the biggest ever one-day increase.

The recession means lower investment in energy infrastructure and worsening energy security, a CapGemina report says. This in turn will undermine the fight against climate change. The report says the EU will ned to invest €1m between now and 2030 to meet rising energy demand and climate targets. The big companies have already said they will review some and even all their investment, which totaled €70bn last year. Shares in utilities have fallensharply in recent times. Plans for offshore wind are under threat at Centrica.⁹¹⁴

Chemical industry expansion in Asia means huge oil demand, industry experts warns Energy Institute. Stephen Bowers says that Asia, in particular China, will create a global deficit of the vital feedstock naphtharequiring an extra 7.3 mbd of oil by 2012. In Saudi Arabia alone, a massive programme of petrochemical plant building will soon consume “all” NGL exports, currently almost 1 mbd.⁹¹⁵ (L)

“Malaise and paralysis” grips Kuwait, according to the FT, notwithstanding the 10% share of global oil reserves. It is the only Gulf state to have bailed out one of its banks and its stock market has fallen steeply. Some traders are suing the government for failure to protect them.

PS20 power tower near Seville on course for February completion. More than a thousand mirrors, each half the size of a tennis court, are being positioned. They will generate 20MW of electricity, enough for 11,000 homes, at a cost of €80m. The 11MW PS10 plant, the forerunner, has been active for two years now. More than 50 CSP projects have been approved around Spain, capable of generating 2 GW by 2015 if all built. As the projects get bigger, the price falls, and analysts expect grid parity within a decade. The next stage for Abengoa, the Spanish energy company behind the plant, is a 50MW version that would give electricity day and night. 50% of the electricity produced during daylight is used to heat molten salt. Energy is released from the salt at night to drive the turbine. test so far show up to 8 hours of electricity can be stored by heating 28,000 tonnes of salt, in tanks, to more than 220C.⁹¹⁶

25.11.08. US injects another $800bn into the financial system. This time $200bn goes to consumer credit support, and $600bn for the Fed to buy up to $600bn of mortgage-backed assets.

Total so far pumped into the system by the US government is $4.2 trillion, according to CNBC: more than WW2, taking inflation into account.⁹¹⁷

Chief Executive of Ofgem warns credit crunch will worsen energy security. Alistair Buchan says the high cost of borrowing for energy companies will have a long-term impact in supply. The soutern stream pipeline from Russia has already been delayed.

House of Lords economic affairs committee says the “dash for wind” worsens UK energy security, and will cost £80 per household. Nigel Lawson is involved in their report. There will be a supply crunch around 2015 as old coal and nuclear plants are phased out, they say.

Ofgem CEO tells MPs that UK gas prices will become "very, very frightening." Alistair Buchanan cites a list of reasons, including our inadequate 10-12 days of storage capacity versus 70 days European average. The average gas and electricity and gas bill is now £1,303, and the gas part is not coming down, because suppliers buy their gas at fixed prices on the forward market, where prices are still high. VAT reductions do not apply because VAT is already 5%. Buchanan calls Ofgem a "toothless tiger."

London targets mass insulation as new mayor commits to 60% carbon emissions cuts by 2025, the same target as the previous mayor. His team is studying the Kirklees system of interest free loans secured on peoples' homes, where uptake has been higher than it has been for the £199 energy audit survey available (9-5) for Londoners.

Scientists say an unexpected carbon-driven rise in ocean acidity threatens shellfish. Water collected around an eastern Pacific island over the last 8 years by a University of Chicago-led team has acidified 20 times faster than scientists expected. The paper in the Proceedings of the National Acadmecy of Sciences describes research around Tatoosh Island off Washington State.

26.11.08. Even the most bearish economic forecasters failed to see the full ramifactions of the credit crisis, Chris Giles says in an FT review. A few spotted aspects of it, but even Nouriel Roubini (“Dr Doom”, as he was dubbed) persistently revised his forecasts lower. A former IM chief economist, Kenneth Rogoff, says that the system tends to look on the bright side because “it is difficult to make a living (on Wall Street) as a mega-bear.”⁹¹⁸

UK climate bill receives royal assent and enters law, 80% cuts by 2050 and feed-in tariffs and all. Next week the climate change committee set up under the act recommends the first 3-5 year budgets.