Treehugger has never been fond of glass towers, even calling them “energy vampires.” Others see through a different window and envision them as power sources. Now researchers at the University of Michigan have developed an organic photovoltaic (OPV) applied to window glazing that has a remarkable 8.1% efficiency and 43% transparency with only a slight green tint, “more like the gray of sunglasses and automobile windows.”
Organic solar cells have been the future of photovoltaics for a while now; they are basically organic chemicals printed on plastic. The problem has been that they were way less efficient and didn’t last nearly as long, five years compared to the 25 years of the estimated life of a silicon solar panel because they break down under exposure to moisture and oxygen. Other researchers have figured out how to deal with the degradation problems, and now research scientist Yongxi Li claims to “balance multiple trade-offs to provide good sunlight absorption, high voltage, high current, low resistance and color-neutral transparency all at the same time.”
The new material is a combination of organic molecules engineered to be transparent in the visible and absorbing in the near infrared, an invisible part of the spectrum that accounts for much of the energy in sunlight. In addition, the researchers developed optical coatings to boost both power generated from infrared light and transparency in the visible range—two qualities that are usually in competition with one another.
A few years ago, when writing about an earlier attempt at power windows, I complained that this was a silly idea; that the best window isn’t as good as the worst wall, that glazing shouldn’t be more than 40% of a wall, and that we would be better off covering the 60% of solid wall with 20% efficient silicon panels instead of spending more to get 3% to 5% out of the windows. I also railed against all-glass buildings, calling them a thermal and aesthetic crime, quoting Chicago architectural critic Blair Kamin:
To be sure, glass signals modernity, its transparency is irresistible to those who crave panoramic views, and it tends to be cheaper than masonry. Yet is there no room for materials that last longer, have more character and are more energy-efficient?
But what happens when that glass is absorbing all that infrared energy that overheats glass buildings and turning it into electricity? Or if the transparent solar panel is in double, triple, or vacuum glass? Witold Rybczynski complained also about all-glass buildings:
The problem with transparent glass is that it doesn’t hold a shadow, and without a shadow there can be no “play of volumes.” Since minimalist modernist architecture doesn’t offer decoration or ornament, that doesn’t leave much to look at.
But if the glass is generating electricity, you don’t want a shadow. You want as much flat surface area as possible.
There are many reasons to dislike all-glass buildings. Marine Sanchez of RDH Building Science has explained how they are not sensible for working or living.
Talk to the occupants, as opposed to the people designing the space. An entire glass facade is not what people are after. If you’re in an office and there’s glare the entire day, then these are not adequate conditions. Privacy, if it’s your bedroom, it’s open everywhere to all the neighbors. Or if you’re at work, wearing a skirt and everybody can see you.
Just this week I was talking to a building consultant who wanted to start a sort of @mcmansionhell twitter feed for all-glass buildings, to embarrass architects who continue to design these “thermal and aesthetic crimes.”
But I wonder if our story has to change if they are energy providers instead of vampires, if it is is a high-quality window, tuned to filter out the heat, and is actually an effective solar panel generating useful amounts of electricity.
I just wrote yesterday about the ongoing march downward of solar panel prices. Those low solar panel prices, along with cuts to other aspects of a solar power project, bring down the cost of both rooftop solar power and utility-scale solar power. Of course, the latter (utility-scale) can provide much lower prices than the former, due to economies of scale. (The benefit for rooftop solar power projects, on the other hand, is they can typically compete with retail electricity prices, rather than wholesale electricity prices.)
When it comes to utility-scale solar power, we have another world record to highlight and celebrate. Portugal recently held a solar power auction (in which power plant developers submit different bids for what price they can offer electricity under a new contract), and one of the bids broke the world record for the lowest solar power price.
The auction was an auction for 700 megawatts (MW) of solar power capacity, with granted awards totaling 670 MW. Of those, 483 MW also include an energy storage component.
Naturally, with such smaller differences in price, changes in the exchange rate could make the projects swap places in the Lowest Solar Price Rankings. However, at the moment, that’s how the two projects compare.
“Consumers will guarantee savings of 559 million euros over 15 years,” the government of Portugal wrote.
“With an annual savings of 37.2 million euros, this value corresponds to a unit gain of about 833 thousand euros for each megawatt awarded, which represents an increase of about 80% compared to the unit gain obtained in the 2019 auction.”
This is not the first time Portugal has set the record for lowest solar power price bid in the world. It did so in 2019 as well. However, this is a major reduction despite being only a year later. “This tariff is about 25% lower than the lowest tariff obtained in the 2019 auction, considered at the date the lowest in the world (€ 14.76 / MWh),” the government added.
Portugal did not indicate who made the new record-low price bid. The electricity contracts are being awarded for 15 years. Update: the government did state (translated by Google): “Hanwha Q-Cells was the big winner of this second solar auction both in number of lots (6) and in awarded capacity (total of 315 MW).“
“The company [NuScale Power] expected to be the first in the United States to operate a small nuclear reactor is facing setbacks that have caused supporters to question whether the novel technology will ever realize its potential as a tool to combat climate change.”
1. Energy prices and production 2. Geopolitical instability 3. Climate change 4. The global economy and the coronavirus 5. Renewables and new technologies 6. Briefs
1. Energy prices and production
Oil: Prices rose for a fourth week in a row as the US Gulf Coast refineries began restarting, though gains were capped as investors shifted their focus from hurricane Laura toward the slowing rebound in consumption. While Laura was one of the most powerful hurricanes ever to hit Louisiana, facilities in southeast Texas avoided the worst of the storm, allowing infrastructure there to start the recovery process immediately.
New York oil futures jumped 1.7 percent to a five-month high on Tuesday as more than 84 percent of oil output from the Gulf of Mexico was shut down, and almost 3 million b/d of refining capacity along the Gulf Coast was closed. WTI closed at $42.97 on Friday for a 1.5 percent weekly gain, and London’s Brent closed Friday at $45.05 up 1.6 percent for the week. Oil prices have been in a narrow range around $40 a barrel since late May.
Natural Gas: Hotter weather has helped lift natural gas prices by nearly 75 percent since late June when they hit their lowest level since 1995. On the back of a scorching June and July, and the ongoing heatwave in August, natural gas has experienced a jump from higher air conditioning use. Prices ended on Friday at a nine-month high of $2.579 per MMBtu.
US energy companies are boosting their LNG production and export capacity despite a drop in exports over the past few months. According to the EIA, US LNG export capacity was three times that of the actual exports last month. Since February, LNG exports have fallen sharply from a record-high of 8 billion cubic per day to just 3.1 bcf.
Cheniere Energy, the biggest US LNG exporter, said earlier this month that it planned to complete the sixth liquefaction train at the Sabine Pass terminal in 2022 rather than 2023. Kinder Morgan is putting the finishing touches to the ninth train at its 10-train Elba Island facility. Pembina is fighting legal challenges in the path of its Jordan Cove LNG project, the first LNG export facility on the West Coast. All this comes despite dozens of canceled cargos and an uncertain outlook for gas demand.
“LNG prices are now far too low for US exporters to make any profit, prompting many to simply shut off,” finance analyst Clark Williams-Derry from the Institute for Energy Economics and Financial Analysis said recently. “It is not so much that the coronavirus crisis is going to last for a long time, it is more than the ‘new normal,’ post-COVID may be one in which the US LNG export dream seems out of reach,” he added.
Shale Oil: A Rystad Energy analysis shows that with WTI climbing past $40 a barrel, most exploration and production firms (E&Ps) have been able to keep their heads above water. However, unless prices strengthen further, about 150 more E&Ps will need to seek Chapter 11 protection during the next two years. According to Haynes & Boone, 32 E&Ps have already filed for Chapter 11 this year, with a cumulative debt of about $40 billion. In the oilfield services sector, 25 companies have filed for Chapter 11. If WTI remains at $40, Rystad Energy estimates 29 more E&P Chapter 11 filings this year, adding another $26 billion of debt at risk.
If WTI continues to hover around $40 over the next two years, we can expect another 68 Chapter 11 filings from E&Ps in 2021, and 57 more in 2022, adding $58 billion and $44 billion of more debt at risk. That would bring the total amount of E&P debt at risk from now until the end of 2022 to $128 billion.
This year, Norway’s Equinor will not drill any more shale wells in the US as it adjusts to a lower-for-longer oil price environment, a spokesperson for the firm said. The company stopped drilling during March in the Bakken and the Marcellus shale plays where it has acreage as it slashed billions in spending in response to the oil price collapse. Now, Equinor will also be cutting jobs in the shale fields, although it has yet to specify how many. “The action that we are taking now is to ensure that our business is profitable in a lower price scenario.”
Prognosis: Oil prices have failed to break out of their narrow trading ranges over the past few weeks despite a flurry of positive news including declining inventories and reports that OPEC+ producers are mostly sticking to their pledged cuts. After a brief, half-hearted rally, oil prices have dropped back to an average trading range in the low-$40s after the Labor Department reported that US weekly jobless claims totaled 1.106 million. This comes just a week after the tally dipped below the 1M mark for the first time since March, thus raising serious doubts about the economic recovery’s sustainability.
Given the uncertainties for the pandemic, climate change, the renewables boom, and oil’s supply glut, a sharp increase in oil prices soon seems problematic.
According to IHS Markit’s latest forecast, post-covid-19 global oil demand growth—on which the future of the oil industry hinges—is expected to taper off. This report joins the growing chorus of pessimistic forecasts looking at the future of global oil demand growth, which has been pushed down due to the lockdowns and much less travel.
Global oil demand is currently sitting at 89 percent of pre-pandemic levels, IHS Markit said. It is expected to rise a bit and level off at between 92 percent and 95 percent of the demand pre-pandemic. Therefore, oil demand growth will plateau through Q1 2021 as fewer people are commuting to work, and as air travel slumps considerably amid remaining travel restrictions and people’s fear of air travel which forces many people together in confined spaces. So far in 2020, global jet fuel demand and gasoline have rebounded from April lows, but global jet fuel demand is still off 50 percent year to date. US gasoline demand is down by a lesser amount, but still significant, at around 20 percent.
2. Geopolitical instability
Iran: One of the critical priorities for Tehran – along with completing all of the phases on its supergiant South Pars natural gas field and expanding its value-added petrochemicals sector – is to increase crude oil production and exports from its West Karoun cluster of giant oil fields. These fields contain at least 67 billion barrels of oil and dramatically increase Iran’s crude oil revenues. With China remaining a willing buyer for all oil that Iran can sell it, Tehran last week announced a swathe of initiatives aimed at completing the production-transportation-export chain for West Karoun oil.
Official data shows that China imported 120,000 b/d of oil from Iran in July. Beijing resumed reporting crude imports from Iran after reporting no such imports for June. According to Chinese customs data, imports of Iranian oil averaged 77,000 b/d between January and July this year, roughly 90% less than the figures China had reported before the US re-imposed sanctions on Iran’s oil industry and exports. In reality, however, various reports, media investigations, and tanker-tracking firms suggest that China is receiving much more oil from Iran than the official figures report.
The Caribbean island state of St. Kitts & Nevis has stripped four oil tankers of its flag after an investigation found that as many as 15 tankers under various flags had manipulated their trackers to skirt the US sanctions on Iran’s oil exports.
Iran held talks with the International Atomic Energy Agency head and will fulfill its commitments under the 2015 nuclear deal but will not accept any additional restrictions beyond those already in place. Iran’s nuclear agency said the fire last month at the Natanz uranium enrichment site was sabotage but has not said who it believes was behind the fire. Some Iranian officials have said the fire might have been the result of cyber sabotage. There were several fires and explosions at power facilities and other sites in the weeks surrounding the incident.
Years of recession, high inflation, and unemployment have all contributed to declining fertility rates. Iranian health authorities warned last month that the population growth rate had dipped below 1 percent for the first time. According to Iranian data, the fertility rate in Iran is 1.7 children per woman, below the 2.1 births per woman needed to ensure the population remains stable. For the Middle East and North Africa as a whole, it was 2.8 births per woman in 2018.
Iraq: The Trump administration urged Iraq to proceed with a project to connect its power grid with Saudi Arabia and other Gulf states that would reduce Baghdad’s longstanding dependency on Iranian energy. The grid-connection was the subject of consultations in recent months and was discussed during Iraqi Prime Minister Mustafa al-Kadhimi’s recent visit to Washington. The countries involved are moving toward making deals which would mark a significant rapprochement between Iraq and former Arab adversaries who clashed in the 1991 Persian Gulf War. Iraqi Finance Minister Ali Allawi said Friday the project was “on the verge of being defined and that Iraq’s electrical grid would probably be tied up to Saudi Arabia and Kuwait.
Iraq is hoping to reach an oil production capacity of 7 million b/d, compared with 5 million b/d currently, to stop flaring gas, and to stop importing fuel from Iran by 2025. OPEC’s second-largest oil producer is also increasing its oil export capacity to 6 million b/d from the current level of around 3.8 million b/d. The country has implemented nearly 80 percent of the projects to reduce gas flaring and imports from Tehran.
Libya: Last week, Libyan strongman General Haftar rejected the ceasefire announced by the UN-backed government of Libya and the east-based rival administration. Haftar dismissed the proposal for truce as a “marketing stunt”. If the ceasefire deal fails, renewed fighting between the factions could push back the reopening of Libya’s oil terminals and resumption of oil exports, which have been closed since January.
Venezuela: Venezuela is struggling with resuming production at its few operating refineries. PDVSA, the state oil firm, has resumed gasoline production at the Cardon refinery by processing naphtha and raising its octane levels. The reformer unit at Cardon—a refinery with a capacity of 310,000 b/d—currently produces around 25,000 b/d of gasoline from naphtha.
President Maduro thanked Iran for helping his country overcome US sanctions on its oil industry. He also floated the idea of purchasing missiles from Tehran. Maduro said he was weighing the purchase of these missiles days after Colombian President Ivan Duque accused him of doing so. “It’s not a bad idea,” Maduro said he’s since asked Defense Minister Padrino to look into “every possibility” of acquiring short-, medium- and long-range missiles from the Islamic Republic. “Venezuela is not prohibited from acquiring weapons,” Maduro said. “If Iran can sell us a bullet or a missile, and we can buy it, we will.”
Turkey-Aegean: The European Union on Friday urged Turkey to halt its “illegal” prospecting activities in the eastern Mediterranean and ordered EU officials to speed up work aimed at blacklisting Turkish officials linked to the energy exploration. Turkish and Greek armed forces have been conducting war games in the area. EU foreign policy chief Joseph Borrell said the sanctions — including asset freezes and a travel ban — could be extended, with Turkish vessels being deprived access to European ports, supplies, and equipment.
The Turkish vessel Oruc Reis has been carrying out seismic research escorted by Turkish warships. Greece, which says the ship is operating over the Greek portion of the continental shelf, sent warships to shadow the Turkish flotilla. Turkey disputes Greece’s claims, insisting that small Greek islands near the Turkish coast should not be considered when delineating maritime boundaries.
President Erdogan said last week that Turkey would make no concessions in the eastern Mediterranean. France announced that it was joining naval exercises alongside Greece, Cyprus, Italy, and Greece in the east Mediterranean amid the increasing tensions. Erdogan warned that Turkey would do “whatever is politically, economically and militarily necessary” to protect its rights.
3. Climate change
China has seen faster temperature increases and sea level rises than the global average over the past few decades and experienced more frequent extreme weather events. From 1951 to 2019, China’s temperature rose an average of 0.24 degrees Celsius every ten years, according to the Blue Book on Climate Change published this week by Beijing’s National Climate Center. The average sea-level rise near China’s coastal regions was 3.4 millimeters per year from 1980 to 2019, faster than the global average of 3.2 millimeters per year from 1993 to 2019. Last year, the level rose 24 millimeters from the previous year and was 72 millimeters higher than the country’s average from 1993 to 2011.
Last year, several significant glaciers and frozen areas in China melted at a faster pace, according to the report. Urumqi Glacier No.1 in northwest China, one of the glaciers most closely watched for the impact of climate change, melted in 2019 at the fastest pace since the 1960s, when data was first available.
The European Union is likely to propose the most ambitious acceleration of its emissions target as it ramps up efforts to slow pollution through its Green Deal. The EU Commission probably will seek to accelerate pollution cuts to 55 percent compared with 1990 levels by the end of the next decade. The current target, approved in 2014, is to lower pollution by 40 percent. The new 2030 target will be added as an amendment to an already proposed law to make the 2050 goal of climate-neutrality binding. To enter into force, it will need approval by the European Parliament and national governments. The plan is likely to fan tensions among the bloc’s member states given the differences in energy sources, wealth, and industrial strength.
In California and Colorado, the wildfires that exploded over the past few weeks show clear global warming influences, climate scientists say. They may also be the latest examples of climate-driven wildfires worldwide burning not only much hotter and faster, but also exploding into landscapes and seasons in which they were previously rare. According to a new analysis commissioned by the Environmental Defense Fund, the cost of this year’s fires can’t even be guessed. The report details how the financial impacts of fires, tropical storms, floods, droughts, and crop freezes have quadrupled since 1980.
In the last 40 years, 663 disasters linked to climate change in the United States killed 14,223 people. The total cost: an estimated $1.77 trillion. Economic losses in Europe resulting from climate-linked extreme weather from 1980 to 2017 were lower, totaling $537 billion. The difference was the cost of tropical storms, which don’t affect Europe but accounted for nearly half of the US’s total. The $1.77 trillion total cost in the United States included $954.4 billion from 45 tropical storms and hurricanes, by far the costliest extreme weather category. Next came $268.4 billion in costs from 125 hail, wind, ice storms, and blizzards, followed by $252.7 billion from drought, $150.4 billion from flooding, and $85.4 billion from wildfires.
Using tax dollars to move whole communities out of flood zones, an idea long dismissed as radical, is swiftly becoming policy, marking a new and more disruptive impact of climate change. Last week’s one-two punch of Hurricane Laura and Tropical Storm Marco may be extraordinary. Still, the storms are just two of nine to strike Texas and Louisiana since 2017 alone, helping to drive a significant change in how the nation handles floods.
This month, the Federal Emergency Management Agency detailed a new program, costing an initial $500 million, with billions more to come, designed to pay for large-scale relocation nationwide. The Department of Housing and Urban Development has started a similar $16 billion program. That followed a decision by the Army Corps of Engineers to start telling local officials that they must agree to force people out of their homes or forfeit federal money for flood-protection projects. New Jersey has bought and torn down some 700 flood-prone homes around the state and made offers on hundreds more. On the other side of the country, California has told local governments to begin planning to relocate homes away from the coast.
4. The global economy and the coronavirus
United States: US consumers boosted their spending in July, but more slowly than in prior months as new coronavirus infections rose and the expiration of enhanced unemployment checks loomed. “Spending numbers have come back more than the economy as a whole, with the help of a lot of fiscal support,” said Jim O’Sullivan, an economist at TD Securities. “The question from now on is as fiscal support wanes, to what extent will it weaken.”
The surge in unemployment in March and April was supposed to be temporary. Nearly half a year later, many of the jobs that were stuck in purgatory are being lost permanently. About 33 percent of the employees put on furlough in March were laid off for good by July. Only 37 percent have been called back to their previous employer. According to the Labor Department, there were 3.7 million US unemployed who had permanently lost their previous job as of July.
A new wave of layoffs is washing over the US as big companies reassess staffing plans and settle in for an extended period of uncertainty. MGM Resorts International and Stanley Black & Decker told some employees furloughed at the coronavirus pandemic outset that they wouldn’t be put back on the payroll. United is preparing for its biggest pilot furloughs ever after announcing the need to cut 2,850 pilot jobs this year, or about 21 percent of the total. American Airlines said it would cut more than 40,000 jobs, including 19,000 through furloughs and layoffs.
The outlook reflects an acceptance by corporate executives that they will have to contend with the pandemic and its economic fallout for a more extended period than they had hoped. The US economy shrank at an alarming annual rate of 31.7 percent during the April-June quarter. It was the sharpest quarterly drop on record. One of the most successful elements of the government’s response to the coronavirus — protecting people on the margins from falling into poverty — is faltering as the safety net shrinks and federal benefits expire. Now, data show that those protections are eroding as federal inaction deprives Americans of additional financial support.
The Dow Jones Industrial Average’s removal of Exxon Mobil is the latest sign of America’s energy sector’s waning influence. When trading begins this week, the blue-chip benchmark will include only one energy stock, Chevron, representing just 2.1 percent of the price-weighted index.
China: Senior US and Chinese officials said they were committed to carrying out the phase-one trade deal after the two sides discussed the pact. The videoconference brought together US Trade Representative Robert Lighthizer, Treasury Secretary Steven Mnuchin, and Chinese Vice Premier Liu He for a formal review of the trade deal signed in January. A statement published by China’s official Xinhua News Agency said the two sides had “a constructive dialogue on strengthening bilateral coordination of macroeconomic policies and implementing the phase-one trade agreement.”
China is set to buy a record amount of American soybeans this year as lower prices help Beijing boost purchases pledged under the phase-one trade deal. The total buy from the US will probably reach about 40 million tons in 2020. That would be around 25 percent more than in 2017, the baseline year for the trade deal, and roughly 10 percent more than the record set in 2016.
China’s July crude imports from the US surged 524.4 percent from June to a fresh high of 867,000 b/d, propelling America to become China’s fifth-largest supplier last month. The US’ crude oil imports to China were last highest in January 2018 when inflows hit 474,000 b/d. The flow then slowed and dried up for a few months amid the China-US trade tensions. In the second half of 2020, China is expected to receive about 80 million barrels over July-December based at the current buying pace, as Beijing steps up efforts to comply with the Phase 1 trade deal.
However, China will likely pull back on spot purchases of liquefied natural gas before the peak demand season as a flurry of earlier bargain buying nearly maxed out storage space. Seaborne and pipeline deliveries deferred during the worst of the Covid-19 pandemic are expected to arrive, further weakening China’s need for supplies from the open market.
European Union: Coronavirus cases are surging again in Europe after months of relative calm, but the second wave looks different from the first: Fewer people are dying. The newest and mostly younger victims of the pandemic need less medical treatment. Unlike the initial days of the epidemic in the spring, which overwhelmed hospitals, the recent European resurgence has not forced as many people into medical wards.
Leaders are eager to avoid reimposing drastic controls on freedom of movement because they want to allow economies to recover from the deepest recession since World War II. And with almost every European country planning a return to in-person schooling, many starting next week, public health officials are holding their breaths for the impact.
India: The increase in coronavirus cases is unlikely to ebb anytime soon, experts say, as the outbreak spreads to new parts of the country and political leaders continue to reopen the economy. This week, India recorded the highest one-day jump in new cases — more than 77,000 — anywhere in the world since the pandemic began. A biostatistician at the University of Michigan who developed a model to predict India’s outbreak said the country would shortly overtake Brazil, putting it second to the US in total cases.
The virus has now spread throughout the world’s second-most-populous country, reaching even isolated indigenous tribes in far-flung Indian territory. The pandemic has also crippled economic activity — experts believe the economy contracted by 20 percent in the three months to June — with only anemic signs of recovery.
Government officials regularly highlight India’s comparatively low rate of deaths as a percentage of cases to indicate their efforts are working. India has a predominantly youthful population, something that experts say may be helping to hold down deaths. Some also speculate the disease may be less severe here for as-yet unproven reasons, although concerns remain that many fatalities are missing from the official count.
India must stop building coal infrastructure and focus on renewable power generation to aid the global fight against climate change and lift its citizens out of poverty, United Nations Secretary-General Antonio Guterres said. After China, the biggest coal consumer, the nation must invest in a “clean, green transition” as it recovers from the Covid-19 pandemic, Guterres said at an event organized by New Delhi-based environment advocacy group TERI. He said it must also end fossil-fuel subsidies, which are about seven times as high as those for clean energy.
Indian refiners have stopped buying crude oil from Chinese sellers. The move comes from new legislation that aims to restrict imports from China after bilateral relations deteriorated following a border clash that involved fatalities on the Indian side. Earlier this month, Indian refiners stopped chartering Chinese-owned or China-flagged tankers for oil and fuels. Vessels owned or registered by China were prohibited from taking part in tenders for oil tankers that import crude oil into India or export refined petroleum products out of India.
5. Renewables and new technologies
Announcements of plans and projects for hydrogen-based energy appear with ever grander scale and ambition in Europe and Asia. The US is making modest progress and laying the basis for what could soon emerge as a national strategy for hydrogen energy.
The US Department of Energy’s H2@Scale program, a ‘multi-year initiative to fully realize hydrogen’s benefits across the economy,’ is a four-year-old effort that is beginning to show results. During the past year, DOE has channeled more than $100 million in grants to some 50 projects to further the H2@Scale initiative.
Six of these projects are for research and development on fuel cell technology and the manufacturing of heavy-duty fuel cell trucks. There is support for R & D on electrolyzer manufacturing as well as corporate and academic research on high-strength carbon fiber for hydrogen storage tanks. There are two projects to spur demonstrations of large-scale hydrogen utilization at ports and data centers plus theoretical research on the application of hydrogen to produce ‘green steel.’ One project is devoted to a training program for a future hydrogen and fuel cell workforce.
Dozens of scientific projects have tried for decades to make commercial nuclear fusion a reality. None have succeeded. However, in 2021, an ambitious European-funded project in the UK will switch on for the first time in 23 years, and it could be a vital step on the road to fusion. In many ways, this project is a miniature model of the massive ITER tokamak project in France. “Inside a reactor shaped like a giant doughnut, scientists from the Joint European Torus (or JET) project will smash hydrogen atoms together at high speed, releasing a huge amount of energy and heat in the form of plasma. Temperatures will reach a level ten times hotter than the Sun as the plasma swirls around,” the article details. ITER, Wired writes, is relying on the smaller-scale experiments currently underway at JET to fast-track nuclear fusion for commercialization by “[cutting] down the amount of time required to take fusion power out of the lab and into our homes.”
New England for Offshore Wind is a regional coalition that supports offshore power development, which is set to launch later this month. The group will argue that offshore wind is necessary to address growing energy demands, as more fossil-fueled power plants go offline in the coming years.
The federal Bureau of Ocean Energy Management is currently weighing concerns from commercial fishers, environmentalists, coastal communities, and other stakeholders before deciding where leases on the Outer Continental Shelf in the Gulf of Maine might be allocated and where they wouldn’t be allowed. The first offshore wind farm is still six to 10 years from operation.
6. The Briefs (date of the article in the Peak Oil News is in parentheses)
Shifting shares of fossil fuels [see Graphic of the Week]: Coal’s percentage of total energy supply increased between 1973 and 2018, while the share of oil shrunk as the share of energy supply from China surged at the expense of supply in developed economies, the IEA said in its new report Key World Energy Statistics 2020. In 1973, when the total global energy supply was just over half the current supply, coal held a share of 24.5 percent of global energy supply, while oil accounted for the largest percentage at 46.2 percent. In 2018, coal’s share increased to 26.9 percent, while oil’s share of global energy supply dropped to 31.6 percent. The share of natural gas rose from 16 percent in 1973 to 22.8 percent in 2018. (8/28)
Orders for new ships plunged to a 20-year low due to a potent combination of uncertainty over environmental regulations, the economic fallout from the coronavirus pandemic, and a lack of financing. (8/27)
In Syria, ISIS is believed to have been behind a significant attack on energy infrastructure last week that caused a nationwide blackout following an explosion at the Arab Gas Pipeline. (8/29)
Asian plastics: As the age of hydrocarbon enters its final era, the action increasingly moves to Asia, and plastics take center stage. With demand for transport fuels set to tail off in the years ahead, a new breed of processing plants sprouts up across the region. These integrated refineries convert oil into petrochemicals, the building blocks for everything from food packaging to car interiors, and produce fewer fuels like gasoline. (8/27)
Africa is the next great oil frontier, where small-cap companies are staking large-cap claims of the kind that generously reward investors with a bigger risk appetite. This could be the final, underexplored frontier for oil; is there anywhere else to go? (8/25)
In South Sudan’s oil patch, China is losing influence. The newly independent country has said it will allow CNPC’s contract to operate several oilfields to expire. At that point, the state-run Nile Petroleum company will take over operations to keep more revenues. The transition won’t occur until 2027. (8/29)
Mozambique could potentially become a chief LNG supplier to China. However, for this to become a reality, President Nyusi will need to guarantee security to all the companies investing in a region where Islamic State-linked insurgents have lately intensified attacks against security forces and civilians. The government will be charged with the task of not only halting the attacks but also addressing the critical drivers of the insurgency, including unemployment, poverty, and a general lack of economic opportunities. (8/25)
In Mozambique, France’s Total has signed a pact with the government to bolster security for a $20-billion liquefied natural gas (LNG) development the energy group leads in the African country, which has seen renewed militant attacks in recent weeks. Total’s $20 billion Mozambique LNG Project is on track to deliver LNG in 2024. (8/25)
The US oil rig count declined by three to 180 while the gas rig count increased by three to 72, Baker-Hughes reported. The US offshore rig count this past week was 13, down by 50 percent from last year (8/29)
New Jersey’s gasoline tax will rise 22 percent, to 50.7 cents per gallon, to maintain a revenue stream for road and rail projects amid a massive drop in fuel consumption. Diesel will go up 19 percent to 57.7 cents. 8/29)
The so-called “natural gas power burn”—the natural gas consumed by power plants—hit a daily record of 47.2 billion cubic feet (Bcf) on July 27th this year. Before that date, the previous daily record for natural gas power burn in the US was set on August 6th, 2019, when power plants consumed 45.4 Bcf. This year, natural gas power burn exceeded 45.4 Bcf per day on seven days in July 2020 and August. EIA attributed the records to the heatwave, lower gas prices than the summer of 2019, and growing natural gas-fired capacity across the country. (8/27)
US coal-fired power generation totaled 65.5 TWh in June, up 40.8 percent from May, EIA data showed. It was the highest level of coal-fired generation since December 2019, and it produced 18.6 percent of total US power generation in July, the highest level since January. Year on year, generation declined 16.7 percent. (8/26)
Coal slide continues: Illinois Basin second-quarter deliveries to coal-fired power plants are down 36 percent from the year-ago quarter, EIA data showed August 27th. (8/29) According to EIA estimates, in the US a total of 103 coal-fired power plants have been converted to natural gas or replaced by wild gas-fired plants since 2011. (8/28)
A nuclear energy venture founded by Bill Gates said Thursday it hopes to build small advanced atomic power stations that can store electricity to supplement grids increasingly supplied by intermittent sources like solar and wind power. The effort is part of the billionaire philanthropist’s push to help fight climate change. It is targeted at assisting utilities to slash their emissions of planet-warming gases without undermining grid reliability. (8/28)
French nuclear operator EDF extended a low river level warning on the Rhone River in southern France through the coming weekend as output across the reactor fleet fell below 30 GW overnight. Production restrictions were likely to affect one 1.3 GW reactor at the Saint Alban nuclear plant on August 29th and August 30th due to low flow forecasts on the Rhone river. (8/26)
Benchmark UK offshore wind load factors are seen rising to 57 percent in 2030 and 63 percent in 2040 by the Department of Business, Energy, and Industrial Strategy. The UK has a target of 40 GW of offshore wind capacity by 2030, which, using BEIS’s current assumed offshore load factor of 47.3%, would generate 166 TWh/year. (8/26)
India will propose a World Solar Bank at the World Solar Technology Summit organized in September. The likely capital size of the World Solar Bank would be US $10 billion. ISA officials said the country that would request to host the bank’s headquarters would have to contribute 30 percent of the proposed capital. (8/28)
India’s battery hope: A team of researchers in India has introduced an eco-friendly and energy-efficient battery that is being touted as “the future” of batteries — not only for the automobile world but for drones and other tech gadgets, too. Researchers claim the new batteries are three times more energy-efficient and cost-effective than currently used Li-S batteries. (8/29)
Germany’s battery hope: Researchers at Germany’s Karlsruhe Institute of Technology have developed an environmentally friendly process to extract lithium from the salty thermal water reservoirs located in the Upper Rhine Trench. The German scientists want to recover the white metal using minimally invasive techniques. The mechanism they have come up with consists of filtering out lithium ions from the thermal water and then further concentrating them until lithium can be precipitated as a salt. (8/25)
Elon Musk hinted on Monday that Tesla might be able to mass-produce EV batteries with 50 percent more energy density within three to four years. Although Musk’s track record for bold statements has been suspect, the market is all abuzz. The battery, Musk suggests, might be used to power an electric airplane. (8/27)
CA’s battery boost: the world’s most powerful lithium-ion battery (250 MW) was unveiled outside San Diego, showcasing a technology that could cut the risk of blackouts and aid the state’s climate goals. LS Power’s Gateway battery has far more wattage than the Tesla built Hornsdale Power Reserve (100 MW) in Australia, the previous record holder. Yet Gateway will soon be surpassed by even bigger projects in California. Batteries could help the state reach zero-carbon energy targets that were called into question over the past two weeks as furious demand for air-conditioning forced grid managers to make brief power cuts. (8/26)
E-ships: Making large ships electric faces the same problem as the main challenge for electric cars: range. The solution to the challenge has been relatively simple: bigger batteries. According to a recent report by market research firm IDTechEx, electric ships feature the biggest batteries out there. They are only going to get bigger because range remains a top priority. Japan’s e5 project should be completed in early 2022 and, according to IDTechEx, will have a battery of 4,000 kWh and a range of 80 miles. (8/28)
Hydrogen in WA: The Douglas County Public Utility District, in East Wenatchee, Washington, is purchasing a 5-MW Proton Exchange Membrane electrolyzer built by Cummins that it hopes to have operational by late fall or early next year. The electrolyzer will produce hydrogen using excess hydropower. (8/29)
Hydrogen in Denmark: Siemens Gamesa Renewable Energy plans to start a pilot project in Denmark to test how one of its 3-megawatt wind machines could power production of hydrogen fuel seen as key to reducing carbon emissions from transportation and heavy industries. The test project will include a 3-megawatt wind turbine that will power a small 400-kilowatt electrolyzer, a machine that separates the hydrogen atoms in water from oxygen atoms. (8/29)
Hydrogen planes? Paul Eremenko, a 41-old former chief technology officer for Airbus SE and United Technologies Corp., thinks he has a solution—hydrogen-powered airplanes—to concerns about the aviation industry’s immense carbon emissions. (Air travel accounts for roughly 2.5 percent of global greenhouse gas emissions.) He well understands, of course, that his idea conjures up visions of the flaming Hindenburg airship. (8/27)
Climate divestment: Storebrand Asset Management, a unit of Storebrand ASA with around $91 billion under management, said Monday it sold off more than $47 million in 21 companies and excluded another six from future investments. Storebrand’s decision comes as more investors in Europe and abroad have called for polluting companies to align their lobbying and businesses with the Paris Agreement on climate change, with some threatening to divest. Under its new policy, Storebrand said it would no longer invest in companies that earn more than 5 percent of revenue from coal or oil sands or that lobby against the Paris Agreement, among other criteria. (8/25)
When oil drillers descended on North Dakota en masse a decade ago, state officials and residents generally welcomed them with open arms. A new form of hydraulic fracturing, or “fracking” for short, would allow an estimated 3 to 4 billion barrels of so-called shale oil to be extracted from the Bakken Formation, some 2 miles below the surface.
The collapse of oil demand in 2020 due to a huge contraction in the world economy associated with the pandemic has increased the pace of bankruptcies. Oil output has also collapsed as the number of new wells needed to keep total production from these short-lived wells from shrinking has declined dramatically as well. Operating rotary rigs in North Dakota plummeted from an average of 48 in August 2019 to just 11 this month.
In that piece, I cited a former EPA engineer who said that within 100 years most of the country’s underground drinking water will be contaminated. What has happened in North Dakota (and is still happening at a somewhat reduced rate) has likely sped up that timetable considerably for the state. Even with the waning oil industry, the state still has considerable oil to produce and so the damage will only continue to mount.
North Dakota may now experience a long, slow withdrawal from what is called the resource curse. This is the paradoxical notion that natural resource-rich jurisdictions often fail to prosper partly due to the huge swings in prices of their principal products, swings which destabilize their societies. This is because disproportionate amounts of wealth (including labor) are devoted to the natural resource sector and therefore unavailable for other more stable forms of commerce and industry.
In addition, the enormous wealth and influence of those in the natural resource sector are used to thwart environmental protections necessary for the long-term well-being of the population. This influence also keeps taxes on the industry low, depriving the people in the state of the full fruits of the resource boom (and of investments necessary for the day when the resource will be depleted).
Beyond this, governments tend to rely on resource sectors too much for their revenue. This causes them to overspend during booms and face austerity during downturns.
All of the negative effects of the resource curse are now on display in North Dakota and may well get worse. Of course, what North Dakota is experiencing, many resource-rich places around the world are also experiencing in one form or another. The worst thing the state can do now is live by the hope that the oil industry will revive and save North Dakota from its woes. Now is the time to plan a new path to a more stable and sustainable economy.
The oil, gas, and petrochemical industries have taken a massive financial blow from the COVID-19 pandemic, a new report from the Center for International Environmental Law (CIEL) concludes, but its financial troubles preexisted the emergence of the novel coronavirus and are likely to extend far into the future, past the end to measures aimed at curbing the spread of the disease.
“Oil and gas are among the industries hardest hit by the current economic crisis, with leading companies losing an average of 45 percent of their value since the start of 2020,” the report finds. “These declines touch on nearly every facet of the oil and gas sector’s business, including the petrochemical sector that has been touted in recent years as the primary driver of the industry’s future growth.” That’s to some degree because of the abrupt plunge in demand for oil resulting from shelter-in-place and quarantine measures that, as of early April, applied to over 3 billion of the world’s 7.8 billion people — including 90 percent of the United States. And the United States uses an outsize amount of gasoline — in 2017, the U.S. consumed one fifth of the gasoline used globally, the report notes. Nearly 70 percent of petroleum products are consumed for transportation, the report adds — meaning that the impact on demand resulting from quarantines is enormous.
But, before the pandemic, oil, gas, and petrochemical firms “showed clear signs of systemic weakness,” CIEL’s report says, listing factors like the industries’ poor stock market performance, high levels of debt, competition from cheaper renewable energy, slowing growth in demand for plastics, and growing awareness among investors of the impacts that action to slow climate change will have on the sector. “The crash that we’re seeing in the oil and gas and petrochemicals industry is a recent intensification of what has been a very long-term trend,” said Carroll Muffett, president of CIEL. “If you look back over the last 5 years or more, we’ve seen the oil and gas industries significantly underperforming the broader Dow Jones on a long-term basis.”
Revenue Problems Predate Pandemic
The report includes recommendations that result from the industries’ prolonged struggles to satisfy investors. “Public officials taking policy action to respond to COVID-19 and the economic collapse should not waste limited response and recovery resources on bailouts, debt relief, or similar supports for oil, gas, and petrochemical companies,” it concludes. “These efforts may succeed in diverting significant public resources to the sector and delaying the clean-energy transition; however, they are very unlikely to reverse the underlying trends driving the long-term decline of the oil, gas, and petrochemical industries.”
CIEL also noted that pension plan managers and other institutional investors have legal duties that may force them to keep an especially close eye on any oil, gas, or petrochemical projects in their portfolios. “Because many investors, including pension funds, which are the largest category of equity investors globally, have fiduciary duties to their beneficiaries, they have legal obligations on top of the financial incentives to maximize profits: they must also reduce risk,” the report says. “As the risks of investing in the oil and gas sector become ever more apparent, more and more investors subject to fiduciary duties will likely choose to steer clear of these companies.”
The report notes that even before the pandemic began, global oil production was outpacing demand at a striking rate. “The International Energy Agency estimates that the oil industry had 2.9 billion barrels of oil in storage by the end of January 2020, just slightly below its all-time peak,” CIEL reported. “With government stockpiles holding an additional 1.5 billion barrels, roughly 4.4 billion barrels of oil were sitting in storage even before the first shutdowns of large sections of the economy began.”
“What is really critical to recognize is that that supply glut pre-existed the current crisis,” said Muffett. That glut comes in part from the past decade’s rush to drill for shale oil and gas, which left many drillers deep in debt at the end of 2019. Oil giants wrote down billions of dollars in assets at the end of last year, the report notes, including an $11 billion write-down by Chevron, much of it tied to the company’s Appalachian-region shale gas acreage, which left the oil giant with a $6.6 billion loss for the quarter.
“Critically, fracking isn’t profitable,” said Steven Feit, a CIEL staff attorney. “It has been a gigantic money pit kept afloat by external financing.”
High Yield Junk
By 2025, over $200 billion of debts amassed by the oil and gas industry are scheduled to come due — including $40 billion that the industry must repay this year alone. Much of that debt already looked risky going into the crisis.
A new Friends of the Earth (FOE) report, titled “The Big Oil Money Pit,” highlighted the ways that the federal bailout of the high-yield market could allow energy companies “to benefit disproportionately” from efforts by the Federal Reserve to use $75 billion of a “$500 billion corporate slush fund” to buy corporate debt.
“High-yield” debts generally offer investors higher returns because of the higher risks associated with that debt.
FOE’s report identifies a dozen shale drillers that might qualify for that federal bailout, including Apache, Devon Energy, EOG Resources, and Pioneer Natural Resources, estimating that the 12 firms might qualify for over $24 billion in benefits a piece. ExxonMobil, Chevron, and Conoco, it estimates, could qualify for an additional $19.4 billion. The report notes that some of the fine print in the bailout plan makes Continental Resources — the company founded by Trump advisor and confidant Howard Hamm — eligible for federal support despite the fact that S&P downgraded its debt to junk-grade on March 27, 2020. Even companies that don’t qualify for that federal support could receive help from another piece of the bailout plan, FOE adds. “Because the junk bond market is now 11 percent energy companies (predominantly oil and gas), any attempt to bolster the entire sector is going to benefit heavily indebted frackers,” the report predicts. “The thing to keep in mind is that in the world of high-yield debt, the oil and gas industry is actually the single largest issuer of junk debt,” said Lukas Ross, senior policy analyst at FOE.
FOE pointed to $6.9 million in bonds issued by Chesapeake Energy and $37.4 million in bonds issued by Range Resources as examples of debts that could benefit from what it termed “a back-door bailout for the accumulated bad debts of the fracking industry.”
“The big question is, can the oil and gas industry convert its political power into economic survival,” Ross added.
Pollution and the Pandemic
Oil, gas, and petrochemical lobbyists have sought a broad array of other government responses to the pandemic, as highlighted by a third report, recently released by UK think tank InfluenceMap. “It’s not just financial bailouts that are underway, there’s regulatory intervention,” said Dylan Tanner of InfluenceMap. “The rules of the game in many ways are changing.”
The industries have sought the rollback of pollution controls in many countries as a part of the response to the COVID-19 pandemic, the report notes, including requests to curtail or delay programs designed to cut climate changing pollution.
The temporary shutting in of wells is the one thing that oil companies are trying to avoid at all costs. That’s because restarting production is expensive and wells are not guaranteed to return to their flow rate. The doubts are so great that some experts wonder whether the current round of shut downs, far from preserving the resource, won’t accelerate oil depletion instead. Some Russian engineers are even considering burning excess oil, rather than downsizing production. The COVID-19 crisis resulted in a quick and dramatic drop in demand for oil, estimated to be in the 25 to 30 per cent range in April. Much of this decline is expected to be reversed by the end of the year, but faced with a massive drop in oil prices and a lack of storage tanks, oil companies face a difficult dilemma: should they ride out this unprofitable streak or should they decrease production to cut their losses? To the lay person, the option to cut production seems obvious. But an oil well is not a tap with a flow that can be adjusted as needed. Either it operates at full capacity or not at all. Valves are installed, but they’re only used during brief maintenance periods or emergency stops. Oil companies know that the decision to shut down for an extended period has three serious consequences: reopened wells may never return to their previous production rate pumping equipment must be repaired and refitted at great cost other facilities, such as refineries and pipelines, cannot be kept in operation without some minimal level of production. Impact on wells An oil field is a complex structure, where different grades of oil have settled over time in a porous type of rock such as sandstone. Drilling and pumping releases this mixture of oil and gas. Any cessation of the extraction process may result in the clogging of this porous rock with sediment or paraffin, which means that production may permanently be reduced by half, or even stop completely, when pumping resumes. This loss of productivity does not always occur and it is sometimes possible to repair part of the damage by injecting chemicals into the well. But it’s easy to understand why oil companies would seek to avoid damage to their property and costly remediation work. In addition to the geological constraints, the shut down process is risky in and of itself. To close a well, a special drilling rig is used to inject a thick mud at the well head to block the flow of oil and gas. This blocks the pores of the rock to a lesser degree, alters the pressure inside the well and inevitably complicates any attempt to resume production. The well itself is also plugged by pouring cement into it. To restart production, it is necessary to bring a new rig, drill the cement plug, and pump the sludge blocking the well head. The hope is that oil will start to flow again. If this fails, you have to drill a new well, inject chemicals or even perform hydraulic fracturation (fracking). These steps are costly and labour intensive. If all oil companies try to resume operations at the same time, there aren’t enough work teams around to handle the workload. At the end of the last similar crisis, some restoration work had to wait up to two years. The Alberta oil sands are fraught with comparable challenges. The bitumen is separated from the sand by injecting steam into the ground. The heat and pressure levels must remain constant, otherwise the bitumen may clog in the underground reservoir and in collection pipes. At best, resuming production may require months of work, at worst, shutdown can permanently diminish the throughput of the facility. Offshore drilling platforms have their own challenges. When pumping ceases, the pressure builds up quickly, causing methane hydrates to form and to clog pipes. Underwater pipelines that transport oil to the coast are particularly at risk. Relaunching production at offshore facilities is so difficult that it is considered to be the very last option for oil companies. An enormous price tag Decommissioning a well is expensive. In the case of a high-flow well, simply removing the submersible electronic pump costs about $150,000. For a medium-flow well, the bill is around $75,000. The underground environment is corrosive and a chemical treatment costing $2,000-$5,000 must also be applied to protect equipment that cannot be removed from the well. Resuming production is also tremendously expensive. Cleaning the well of accumulated water costs anywhere from $10,000 to $20,000. In a high-flow well, repairing the submersible pump costs about $150,000 and replacing it costs double, just for equipment. The bill can reach up to $400,000 or $500,000 when you include labour costs. Even in a low-throughput well, repairing the equipment costs at least $50,000. The bill for the chemicals used to restore a conventional well that has lost some flow ranges from $50,000 to $100,000. If the hydraulic fracturing of a shale oil well has to be redone, you’ll have to dish out an additional $3-$5 million. Bear in mind that the fate of thousands of wells is currently at stake. In North Dakota, 6,200 wells are already closed, most of them with moderate flow and dependent on hydraulic fracturing. Given the high restart costs, the bill could reach up to a billion dollars. In Louisiana, nearly 17,000 wells will probably be shut down because of the crisis. In Texas, the numbers are even higher. The cost is difficult enough to justify for wells with an average throughput. It cannot be justified at all for old wells reaching the end of their life, which often produce less than 10 barrels per day. These wells must continue producing or simply cease operating forever. Since there are so many of them, amounting to almost 11 per cent of US oil production, the loss could be significant for the industry. Other considerations Most refineries cannot operate below 60 or 70 per cent of their baseline capacity. A few select ones can go as low as 50 per cent, but no less. If oil production keeps decreasing, some refineries will have to close, temporarily or permanently. Production at US refineries has already fallen by 30 per cent, which means that they’ve already almost reached the shutdown point. The risk is all the greater as the demand for oil in the U.S. has declined from 18 to 5 million barrels per day during the COVID crisis. Here again, we are talking about equipment which must continue operating as it will fall into disrepair when not in use. For some old and marginally profitable refineries it may therefore be financially impossible to resume operations after a shut down. It is estimated that the United States could permanently lose one to two million barrels per day of refining capacity after the crisis. Another worrying piece of infrastructure is the Trans-Alaska pipeline. If a throughput of at least 400,000 barrels per day cannot be maintained, the oil flows so slowly that the surrounding permafrost generates a cooling effect. Under these conditions, ice crystals and paraffin are likely to form, which can block the pipes and damage the pumps. Oil production has been declining for years in Alaska and the pipeline is already used at minimum capacity. A moderate drop in production would therefore lead to a pipeline shut down, making any further oil production impossible for lack of transportation. In short, all of Alaska’s oil production could dry up at once. Decisions, decisions In this context, it is understandable that oil companies are so reluctant to decrease production, even when they are in debt or bankrupt and even when oil is so cheap that they have to sell below the break even price. Resuming production is expensive and there is a risk of a permanent drop in production on startup, making the investment less attractive. Some Russian producers even say they would prefer burning unsold oil to shutting down wells. In addition, certain land use contracts require oil companies to pump the oil, under penalty of seeing their drilling rights transferred to their competitors! Some analysts believe that the oil industry will emerge from the crisis in such bad shape that it won’t be able to finance the restart of the closed wells. As no sufficient alternative to oil will be deployed by the time the crisis is over, some are starting to suggest that a partial nationalization of the US oil industry might be in order. What about peak oil? When the crisis began, some observers believed that COVID-19 would delay peak oil (or its effects, as some analysts suggest it was reached in October 2018) due to diminishing oil demand. It now seems the opposite could be true and that we could actually be moving closer to peak oil. Some wells will be permanently closed and others will never return to their former production level. In addition, financially unsound oil companies will find it difficult to launch new projects. We can therefore expect the current glut of oil to give way gradually to an increasing shortage. Gas station pumps are not going to dry up overnight, but prices are likely to rise again and oil might become too scarce and too expensive to fuel significant economic growth. Activists will welcome this fall in fossil fuels production, but we must bear in mind that a low intensity energy crisis could also hamper our ability to carry out an efficient energy transition.
Impacts are felt across the energy world, from fuel and power supply to efficiency, with serious implications for energy security and clean energy transitions
The Covid-19 pandemic has set in motion the largest drop in global energy investment in history, with spending expected to plunge in every major sector this year – from fossil fuels to renewables and efficiency – the International Energy Agency said in a new report released today.
The unparalleled decline is staggering in both its scale and swiftness, with serious potential implications for energy security and clean energy transitions. At the start of 2020, global energy investment was on track for growth of around 2%, which would have been the largest annual rise in spending in six years. But after the Covid-19 crisis brought large swathes of the world economy to a standstill in a matter of months, global investment is now expected to plummet by 20%, or almost $400 billion, compared with last year, according to the IEA’s World Energy Investment 2020 report.
“The historic plunge in global energy investment is deeply troubling for many reasons,” said Dr Fatih Birol, the IEA’s Executive Director. “It means lost jobs and economic opportunities today, as well as lost energy supply that we might well need tomorrow once the economy recovers. The slowdown in spending on key clean energy technologies also risks undermining the much-needed transition to more resilient and sustainable energy systems.”
The World Energy Investment 2020 report’s assessment of trends so far this year is based on the latest available investment data and announcements by governments and companies as of mid-May, tracking of progress on individual projects, interviews with leading industry figures and investors, and the most recent analysis from across the IEA. The estimates for 2020 then quantify the possible implications for full-year spending, based on assumptions about the duration of lockdowns and the shape of the eventual recovery.
A combination of falling demand, lower prices and a rise in cases of non-payment of bills means that energy revenues going to governments and industry are set to fall by well over $1 trillion in 2020, according to the report. Oil accounts for most of this decline as, for the first time, global consumer spending on oil is set to fall below the amount spent on electricity.
Companies with weakened balance sheets and more uncertain demand outlooks are cutting back on investment while projects are also being hampered by lockdowns and disrupted supply chains. In the longer-term, a post-crisis legacy of higher debt will present lasting risks to investment. This could be particularly detrimental to the outlook in some developing countries, where financing options and the range of investors can be more limited. New analysis in this year’s report highlights that state-owned enterprises account for well over half of energy investments in developing economies.
Global investment in oil and gas is expected to fall by almost one-third in 2020. The shale industry was already under pressure, and investor confidence and access to capital has now dried up: investment in shale is anticipated to fall by 50% in 2020. At the same time, many national oil companies are now desperately short of funding. For oil markets, if investment stays at 2020 levels then this would reduce the previously-expected level of supply in 2025 by almost 9 million barrels a day, creating a clear risk of tighter markets if demand starts to move back towards its pre-crisis trajectory.
Power sector spending is on course to decrease by 10% in 2020, with worrying signals for the development of more secure and sustainable power systems. Renewables investment has been more resilient during the crisis than fossil fuels, but spending on rooftop solar installations by households and businesses has been strongly affected and final investment decisions in the first quarter of 2020 for new utility-scale wind and solar projects fell back to the levels of three years ago. An expected 9% decline in investment in electricity networks this year compounds a large fall in 2019, and spending on important sources of power system flexibility has also stalled, with investment in natural gas plants stagnating and spending on battery storage levelling off.
“Electricity grids have been a vital underpinning of the emergency response to the health crisis – and of economic and social activities that have been able to continue under lockdown,” Dr Birol said. “These networks have to be resilient and smart to ward against future shocks but also to accommodate rising shares of wind and solar power. Today’s investment trends are clear warning signs for future electricity security.”
Energy efficiency, another central pillar of clean energy transitions, is suffering too. Estimated investment in efficiency and end-use applications is set to fall by an estimated 10-15% as vehicle sales and construction activity weaken and spending on more efficient appliances and equipment is dialled back.
The overall share of global energy spending that goes to clean energy technologies – including renewables, efficiency, nuclear and carbon capture, utilisation and storage – has been stuck at around one-third in recent years. In 2020, it will jump towards 40%, but only because fossil fuels are taking such a heavy hit. In absolute terms, it remains far below the levels that would be required to accelerate energy transitions.
“The crisis has brought lower emissions but for all the wrong reasons. If we are to achieve a lasting reduction in global emissions, then we will need to see a rapid increase in clean energy investment,” said Dr Birol. “The response of policy makers – and the extent to which energy and sustainability concerns are integrated into their recovery strategies – will be critical. The IEA’s upcoming World Energy Outlook Special Report on Sustainable Recovery will provide clear recommendations for how governments can quickly create jobs and spur economic activity by building cleaner and more resilient energy systems that will benefit their countries for decades to come.”
The Covid-19 crisis is hurting the coal industry – with investment in coal supply set to fall by one-quarter this year – but does not pose an existential threat. Although decisions to go ahead with new coal-fired plants have come down by more than 80% since 2015, the global coal fleet continues to grow. Based on available data and announced projects, approvals of new coal plants in the first quarter of 2020, mainly in China, were running at twice the rate observed over 2019 as a whole.
The US Energy Information Agency said this week that it expects 42 gigawatts of new electricity generating capacity to start commercial operation in 2020.
Solar and wind will account for almost 32 GW of the new capacity. Wind will account for the largest share of these additions at 44%, followed by solar at 32%, and natural gas at 22%. The remaining 2% will come from hydroelectric generators and battery storage.
Several countries – including France, Norway and the UK – have plans to phase out cars powered by fossil fuel before 2050, to reduce air pollution and fight climate change. The idea is to replace all conventional vehicles with electric vehicles (EVs). But this is unlikely to help the environment, as long as EVs are charged using electricity generated from the same old dirty fossil fuels.
Global electricity consumption from EVs is estimated to grow to 1,800TWh by 2040 – that’s roughly five times the current annual electricity use of UK. Using data from the UK as a benchmark, this would amount to an extra 510 megatonnes of carbon emissions coming from the electricity sector worldwide. But this massive impact could be drastically reduced if electricity is generated entirely from renewable energy sources, instead of fossil fuels.
A growing problem
To put things into perspective, 510 megatonnes is about 1.6% of the global carbon emissions in 2018. And while this may not seem like a big amount, the Intergovernmental Panel on Climate Change (IPCC) recommended that carbon emissions are reduced to net zero by 2050, to limit the average global temperature rise to 1.5°C above the pre-industrial era. So a 1.6% increase in carbon emissions is significant, and possibly catastrophic.
Perhaps this increase would be negated by the decrease in emissions, which results from phasing out polluting vehicles. But reducing global carbon emissions is not easy – in fact, emissions reached an all time high in 2018, despite the highest ever uptake of renewable energy.
Another major issue with EVs is their impact on the availability, production and supply of rare earth metals and other scarce natural elements. EVs and their batteries contain precious metals such as lithium and cobalt. Scarcity of cobalt is already threatening the production of EVs, and alternative designs that don’t rely on scarce elements are currently being explored by car manufacturers.
This means that it’s critical to expand recycling plants dedicated to processing metals and other scarce elements for reuse. Also, detailed plans on retrofitting of conventional vehicles to turn them into EVs are needed – it’s simply not feasible to dump all conventional vehicles into landfill sites, in a scenario where they are replaced by EVs.
There are further issues with EVs that must be dealt with, if they’re to help reduce global emissions and prevent climate disaster. People are likely to charge their EVs during evening hours, after they come home from work. As more people start to use EVs, the load on the energy grid is likely to peak in the evening. And this could cause problems for electricity distribution and transmission systems, at a community or city level.
These systems may need an upgrade. Or, energy suppliers could introduce a time-of-use tariff, which is higher during peak hours and lower during off-peak times, when there’s less demand for electricity. This would encourage consumers to charge their EVs during off-peak hours.
Smart charging is another possible solution: the idea is to charge more vehicles when local electricity production through renewables such as wind and solar is high, and reduce the charging when local renewables aren’t producing enough electricity. EVs charging time can be matched with peak renewable power production using smart systems and artificial intelligence to balance the local electrical grid.
The high cost of EVs and the lack of available charging stations are further obstacles that the Oxford Institute for Energy Studies has identified for the mass uptake of EVs. This could create a chicken and egg scenario: the cost of EVs may not go down unless they are mass produced, and they may not be mass produced unless the costs go down. The same goes for the installation of charging stations – authorities will need foresight to recognise that extra charging stations should be built for when EV uptake increases.
Governments can help prevent these issues by subsidising EVs or providing financial incentives for clean transportation – as has already been done in China. Even on a city level, authorities can encourage people to use less polluting vehicles such as EVs through taxes or special clean air zones, as is currently being done in London.
EVs have great potential to reduce pollution and give people a more sustainable way to get around – but electricity production must also be clean. It’s not wise to rely completely on scarce natural elements required for producing EVs and alternatives have to be explored. More recycling plants are needed to make the most out of rare elements and governments need to explore ways to ensure a smooth transition to cleaner transportation.
A national stockpile of crude oil and fuel would be created if Federal Labor won the next election, Bill Shorten has said.
Australia only has 18 days’ worth of car petrol and 22 days’ worth of diesel in reserve
Under an international agreement, importers of fuel should have 90 days’ worth stockpiled
Stocks have fallen over recent years, coinciding with oil refinery closures
Australia imports most of its crude oil and refined petrol, and only has a few weeks’ worth of fuel in reserve.
Stocks have been below mandated levels since 2012, raising fears of severe shortages in the event of conflict.
Opposition Leader Bill Shorten said creating a government-owned reserve was “an important national security measure”.
“It’s simple — to increase our national fuel security, we need to increase our national fuel stocks,” he said.
“As we’ve become more reliant on the global fuel market, we’ve also become more vulnerable to international risks and uncertainty.”
Major oil companies in Australia currently hold stocks, as do some large consumers, but there are no laws forcing them to do this.
At the end of December, Australia had 18 days’ worth of car petrol, 24 days’ worth of crude oil, 22 days’ worth of diesel and 107 days’ worth of aviation gas.
It is unclear which refined fuels would be held in reserve.
Mr Shorten said a consultation process would be established before the measure was introduced.
“We will consult with industry, oil and gas importers, refineries and with national security experts on the implementation of the government national fuel reserve.”
A number of domestic fuel refineries have closed over recent years.
Peter Jennings from the Australian Strategic Policy Institute previously said a lack of refineries and fuel farms meant Australia currently did not have the capacity to store large quantities of fuel.
“We would not be able to actually keep much in-country stock, because our fuel farms are now so decrepit and falling out of service that we wouldn’t have the capacity to store it all,” he said.
Energy Minister Angus Taylor said the policy could cost “tens of billions of dollars” and Labor needed to explain how it would be funded.
“Will it be a tax on all of us through the tax system, or will they slug us at the fuel bowser?” he said.
“We are not going to increase the price of fuel at the bowser when it seems clear Labor wants to do that one way or another.”
Liberal Senator Jim Molan has previously raised concerns about the situation, and the Coalition last year announced an inquiry into fuel reserves.
Earlier this week, Labor announced it would create a strategic fleet of merchant ships to help secure crucial supplies if a crisis emerged.
The vessels would be commercially operated but could be repurposed by the government in an emergency.