December 9, 2016
The great US energy "winter package" (forget Trump, here's what's going on)
December 9, 2016
Everyone has been so fixated on the US presidential elections – and its impact on US energy and climate policy – that we are forgetting that there is a US Congress which actually makes legislation. And the US Congress has been preparing a major overhaul of energy policy for a long time!
This has resulted in the Energy Policy Modernization Act 2016, which will be introduced into the new Congress in January 2017. And since this Act has bipartisan support, it is likely to move very quickly. It could become law in April or May next year.
So what it’s in this new law? Brussels-based journalist Clare Taylor asked Barry Worthington, Executive Director of the US Energy Association, which is the US Member Committee of the World Energy Council, an association of public and private energy companies and institutions. As it turns out, the Act is a US version of the European Commission’s “Winter Package”, covering a broad range of issues. The major difference is that, unlike Brussels’ Clean Energy Package, the US legislation intends to promote oil and gas drilling as well as LNG exports.
Thus, for example, the Act makes LNG exports easier by streamlining the permitting process. Exporters will no longer have to get special permission from the US Department of Energy to export gas to countries not under a Free Trade agreement. “We’re expecting a boost in construction of new LNG terminals”, notes Worthington. Exports of LNG will most likely go to Japan and China first.
But that doesn’t mean the legislation is against renewables or energy efficiency. Far from it. For example, the bill will promote renewable energy by requiring operators of electricity lines, transformers, and other parts of the electrical grid to upgrade the system, with a focus on the creation of large-scale storage systems for electricity to accommodate the expanding production of wind and solar power.
Worthington also notes that under the new administration: “I would expect other support for renewable energy projects, for example in expediting the permitting process and allowing windfarm development on federal property.”
In addition, the bill’s provisions to improve energy efficiency by re-authorising state energy programs and promoting investment in improved technologies such as smart buildings and smart grids have been welcomed by the American Council for an Energy Efficient Economy (ACEEE). According to the ACEEE, this could enable a market opportunity for the US to become a world leader in “smart” technologies including smart buildings, manufacturing, transportation, cities, and the grid.
To be sure, Trump has made clear his intention to remove barriers to fossil fuel production, so the news is mixed – but Worthington believes that the US will continue to decarbonise its energy system. This will be driven by business rather than policy, however. “Fuel-switching from coal-fired to natural gas will continue, with or without the Environmental Protection Agency, the Clean Power Plan or the Paris agreement,” he says. “Our corporations are majorly motivated to reduce greenhouse gas emissions, and this is due to pressure from shareholders.”
Nevertheless, Worthington is also euphoric about the prospects of the US gas and oil sector: “In 1985, we thought we had a 30-year supply of natural gas and we were making plans for gas importation up to 2008… now we reckon we have at least a 100-year supply of natural gas, even likely that it’s a 200-year supply. So we have the confidence of a huge supply base combined with low prices. And don’t forget, it’s not just shale gas, it’s shale oil too. With new policies in place to remove barriers to exploration, we see the pathway towards the US becoming a major energy exporter. This could happen within a few years, if not by 2020, certainly by 2025.”
What this means for US climate efforts? Good question.
Full article: US energy Indepence Day dawns
The great UK fracking debate: slave labour versus climate chaos
December 9, 2016
Of all European countries, the UK is probably the furthest ahead when it comes to allowing fracking for shale gas to go ahead. The current government certainly intends to go ahead with it, despite strong public resistance.
In a fascinating debate at the Houses of Parliament on 29 November, fierce shale gas opponent professor Peter Strachan of Robert Gordon University in Scotland, faced off against shale gas supporter and independent consultant Stephen Tindale. The latter is a somewhat surprising shale gas defender, inasmuch as he was Executive Director of Greenpeace UK from 2000 to 2006. The two men held their debate for the All Parliamentary Group on unconventional gas and oil.
Their arguments were interesting and surely relevant for all countries in Europe that are considering whether to allow shale gas exploitation or not.
Tindale argued that
- importing gas from countries like Qatar (a “slave labour” economy) is bad from a human rights perspective, domestic gas production is better
- gas (gas with CCS) is needed in the heating sector and for heating processes in industry; this cannot be all done with electricity
- shale is a necessary part of decarbonisation; renewables and energy efficiency are ideal but it is going to take a long time to get to 100% renewable energy
- whether shale gas is “economic” is for private companies to decide – no public money should be spent on it
- shale gas exploitation can be done safely without harm to the environment if well regulated
Strachan argued that
- it’s not about the choice to import gas or to produce it domestically, but whether we need gas at all in the first place
- shale gas production would be inconsistent with climate change targets in Scotland; exploiting more fossil fuels to stop global warming doesn’t make sense
- fracking economics don’t add up
- fracking threatens the renewable energy industry, and will negatively impact other sectors such as tourism and agriculture
- shale gas production cannot be scaled up quickly enough to address the 2020 energy crisis the UK is facing
- fracking is a danger to the environment and public health
I am sure you have your own opinion on whose arguments are the most convincing!
The great Dutch energy transition: from windmills to windmills
December 9, 2016
Although Energy Post is based in the Netherlands, we don’t focus particularly on Dutch news. We are a solidly international publication.
This week’s news from the Netherlands was very significant, however. The Dutch government presented a plan for a transition of the Dutch economy away from fossil fuels towards an almost-zero carbon economy by 2050.
Some might say – about time. Germany has had its Energiewende for a long time of course, and a country like Denmark has also been on the road to renewable energy for many years. They are both far ahead when it comes to the percentage of energy derived from renewables.
Nevertheless, the Dutch plan is quite unique and sends a very important message internationally – for various reasons.
First of all, unlike Germany and Denmark, it focuses heavily on transport and heating, in addition to electricity. That’s crucial because electricity represents only some 20% of energy use.
Secondly, it gives for the first time a specific date at which the sale of new cars with combustion engines would be banned: 2035. This could have a huge impact on the car market in the Netherlands and internationally. Just think of what this could mean for the second-hand car market. It also sends a powerful message to car producing nations like Germany and France.
Thirdly, the new “energy agenda” contains a hugely ambitious plan to completely overhaul the existing gas distribution grid. New houses will not be connected to the gas grid anymore and existing houses will gradually be disconnected. Part of the gas distribution network will be replaced by a new waste heat infrastructure.
The “energy agenda” is all the more significant because of where the Netherlands is coming from. Countries like Germany and Denmark are not fossil fuel producers. The Netherlands, by contrast, has been the largest natural gas producer in the EU for 50 years and has the most extensive gas distribution network anywhere in the world. It is also home to Shell, Europe’s largest oil and gas company. So the Dutch transition, if it is carried out, goes very far indeed. It would be like Germany finally announcing the end of its coal power production …
The Dutch economy won’t be entirely zero carbon by 2050: industry will still use gas, but the government wants to develop CCS in combination with this. Note that the new energy plan enjoys broad parliamentary support. Indeed, many parties feel it does not go far enough. With one exception: the nationalist right-wing party of Geert Wilders, the PVV, calls it “downright insane”.
As to where the zero-carbon electricity is to come from for the electric cars: the plan foresees a continued very large expansion of offshore wind in the North Sea. Windmills are an old Dutch specialty of course. But the “agenda” does not present any precise calculations on how much wind power it expects the North Sea to produce.
The great Dutch coal cock-up
December 9, 2016
It was interesting for me personally to see the story turn up about what I have entitled the big Dutch coal cock-up. Because I was there when it happened.
The story, as told by independent energy analyst (ex-Reuters journalist) Gerard Wynn, is that three major European utilities – RWE, Uniper (formerly Eon) and Engie (ex-GdF-Suez/Electrabel) – all built brand-new coal power stations in the Netherlands over the last few years – and have all had to write off hundreds of millions of euros on them.
Wynn wrote a report on this for the Institute for Energy Economics and Financial Analysis (IEEFA) published last month. He wrote an article about his report which we published on Energy Post.
Wynn’s report shows that the companies have collectively written off half of the construction costs of their plants. What is more, this won’t be the end of it, says Wynn: “using a discounted cash flow model, and applying very generous assumptions to coal power, we see net a present value in the range of €400 million for comparative 1100 MW plants. The discrepancy between our valuation and the book values of these three plants suggests that RWE, Uniper and ENGIE will have to take another look at their valuations.”
The main reason for the impairments – which are not unique in Europe, as everyone knows – is a dramatic fall in oil and gas prices, as well as a fall in wholesale electricity market prices, in combination with (partly as a result of) a dramatic rise in renewable energy with low marginal cost.
Nor does it look as if things will get better for coal power. Coal-fired power “appears to be especially vulnerable to increasingly ambitious climate action targets”, notes Wynn.
So why did the companies not see this coming? That’s where I have some personal experience. I was a journalist working for the Dutch financial newspaper Financieele Dagblad in the early 2000s when the electricity market was liberalised. The old Dutch power production companies, which were then owned by provinces and towns, were quickly scooped up by big foreign players: Electrabel, RWE, Eon, Vattenfall.
They then started building new capacity – all of them at once! There was no central planning anymore after all, so they were all eager to corner the market with their own production capacity behind them. Everyone realised that this building frenzy was going to result in huge overcapacity, but they ignored that risk. As to the competition from renewables, I never heard anyone even discuss this!
Before you put all the blame on the free market, note that the companies were all (in some cases still are) state-owned. In addition, the Dutch government actively encouraged building of new capacity, because the Dutch energy-intensive industry had for years complained about high power prices compared to what their German rivals had to pay.
So much for the past. As to the future, Wynn notes that this recent Dutch experience means any new investment in new coal-fired power plants will be off the agenda, at least in Western Europe.
However, the story is different for existing coal fired power plants, he adds. These assets are sunk costs for their owners, so they will continue to “sweat” them for what they are worth. The only way existing coal plants could be taken out of the picture, writes Wynn, as “a new round of standards … outlining best practice for large combustion plants. Stiffer, more costly pollution limits might be the final straw …”