John Mauldin is in dire need of an editor. He writes like three of these a week and they're ALL long (potkettle, I know). But this one is worth reading. Some choice tidbits:
- Add in the further complication that shale oil fields, by their nature, are easy to turn on and off. If your oil costs $40 a barrel to produce and you can sell it for only $35, you can cap your wells and wait for higher prices. But here we hit another problem.
If you borrowed the money to drill your wells in the first place, you need cash flow to service your debt. So you might keep pumping even if you only break even or run a small loss. That seems to be what many small US producers are doing. The alternative is to default on their bank loans or high-yield bonds.
Indeed, the high-yield bond market seems to have calculated that more defaults are coming. Bond prices have collapsed as low oil prices make it hard to stay current on debt payments.
(mk)
- According to scientists’ computer models, the US could reduce its carbon emissions up to 78% below 1990 levels by switching to mostly wind and solar energy and modernizing the electric grid’s architecture. We would still need natural gas and hydroelectric and nuclear power for times when the weather was uncooperative, but the need for them would be sharply lower.
This particular study might or might not be flawed; but the point is that oil, gas, and coal face serious competition from other energy sources. Meeting electricity demand with renewable sources might be closer than we think. That still leaves transportation, though.
(b_b)
- ’m in a hedge fund conference in the Cayman Islands today. I was talking with some rather large (think tens of billions) managers last night. When you look at the really long term, as in 40–50 years, these guys think the price of oil goes to almost nothing, as we will have so many substitutes for fossil fuels, and we’ll find lots of oil that can be brought up for not all that much money.
How can that happen? If I buy producing wells out of bankruptcy at $.10 on the dollar, then my cost of production just dropped by 90%. I know, I know, it can’t happen, right? Think Global Crossing. They laid thousands of miles of fiber optic under the oceans at immense cost, which auctioned off for pennies on the dollar. We should all be grateful to those unlucky investors, because they are why you and I can now enjoy cheap Internet and telecommunication prices. Why should oil be any different?
Mmm... a Texan financier writes about oil, but there are some severe omissions. One absolutely no mention of the climate crisis as a driver of change. Which it is. Paris wasn't a random, soon to be forgotten wake up call. It was a seismic shift in the energy equation long (or maybe medium?) term. This sentence - "Western oil companies and OPEC member states aren’t so worried about oil reserves in the ground..." shows that lack of understanding of this point. Google 'stranded assets' and you will see what I mean. There is a LOT of attention being paid to renewables and their effect on oil, and you could argue (and many do) that this is the main reason the Saudis are refusing to cut production to increase prices (that and the fact that historically no-one else in OPEC usually plays fair and does the same). To meet our global carbon budget we need to keep a lot of fossil fuel in the ground. Coal is the first corpse we're going to see, and fossil fuel seems destined to follow, especially if we see the expected uptake in the production and use of hybrid transportation. Interesting times.
I think there's a political explanation to this - I mean, we're talking about Texas republicans and oil, and if there's one thing the Bush years taught us it's that "fuck the environment, let's make money" is one change in administration away. But then, the US isn't seeing smog riots like China.One absolutely no mention of the climate crisis as a driver of change. Which it is.
Although I've considered the prisoner's dilemma of producers, I hadn't considered that servicing their debt would leave them with no option. I also don't think it's appreciated enough how normal $30 oil is: Just because China starts eating Big Macs, doesn't mean that the price of Big Macs is going to double and remain there. Actually wasoxygen, I wonder what the demand curve for Big Macs over the last 10 years looks like.
The major problem is not the unreliable timing of wind and sun. The major problem is that renewable energy sources are so diffuse. David MacKay made this point in an excellent free book I recommended to WanderingEng: Sustainable Energy – Without the Hot Air. Some time ago I complained privately to b_b about a comment observing that a square solar panel 100 miles on a side could power the U.S. It wasn't meant as a feasible proposal, but it didn't sound utterly unfeasible either, and a math error in a followup comment reduced the area needed by 99%. I told b_b that we don't even have a 10,000 square mile patch of empty land in Nevada. The feasibility challenges are formidable, even in the empty Sahara. How do you rinse dust off the panels, in the desert? How do you maintain the installation, when would take hours just to drive past it? MacKay is supportive of renewables, but he is insistent on making the numbers add up. I got the impression that photovoltaic panels will not practical for more than a small fraction of consumption anytime soon.Author Sarah Zielinski discusses the major problem with solar and wind-generated electricity: relying on it puts you at the mercy of weather and daylight.
To make a difference, renewable facilities have to be country-sized.
Figure 25.5. The celebrated little square. This map shows a square of size 600 km by 600 km in Africa, and another in Saudi Arabia, Jordan, and Iraq. Concentrating solar power facilities completely filling one such square would provide enough power to give 1 billion people the average European’s consumption of 125 kWh/d. The area of one square is the same as the area of Germany, and 16 times the area of Wales. Within each big square is a smaller 145 km by 145 km square showing the area required in the Sahara – one Wales – to supply all British power consumption.
The comment you complained privately about was mine. And since you're still snarking about it, let's run the numbers: US energy consumption, 2013: 25,451TWh. Let's crack that down into hours, rather than spreading it across the year and we're at 2.9 terawatts constant capacity. Average solar energy per square foot, 2015: 13.8W What we wanna use for daylight? They've got about 10 hours right now, and it's a couple months past solstice. Six months from now they've got 14 hours. Let's put the duty cycle at half a day. That puts a solar panel at 7 watts per square foot. Cracking it down to square miles to get rid of some of the decimality (2.8e7 feet per square mile; 1,000,000 watts per megawatt) and we're at 27.88 megawatts per square mile. 2.9 terawatts/27.88 megawatts = 10,401 square miles. There's some dickering in there - solar panels weren't quite as efficient in 1995 but power usage wasn't quite as high. By the way: the Nevada Test & Training Range is 4500 square miles. This is land that we use to drop explosives on, primarily, and it's not quite halfway to your disingenuous square. I read Mackay's book, by the way. Or part of it, anyway. He's condescending. And my flippant comment was exactly that - flippant. No one is advocating dropping ten thousand square miles of solar panels in the middle of Nevada ("How do you rinse dust off the panels, in the desert? "). The whole point of the argument is that yes, typo, 200 square miles of solar panels feeds a state. And yes. 200 square miles of solar panels is a bajillion dollars. And yes. there are probably better ways to do sustainable energy. And yes. There are formidable challenges. But snarking about it instructs no one. And snarking about it behind my back is cowardly.
I think our energy needs can be more robust going forward with a mixture of sources. So long as there's natural gas in the ground, we'll burn it. But we'd be in a stronger position if gas was supplemented by large amounts of solar and wind, as system and price stability is greater when diversity is high, I believe. I know if I were building a house from scratch, I'd definitely have solar panels on it. Unfortunately, the gable on my roof isn't well suited for them, as my hose was built back when not even Jimmy Carter was considering solar. I still think that delivery is a bigger problem than production. Solar on a rooftop is convenient, because you don't have to worry about transmission lines. Even if we could block a 10,000 sq mi tract in NV, we couldn't deliver the energy to NY, because line resistance is too high right now. Someday, someone is going to become a billionaire many times over by inventing a high temp super conductor (remember Airbus's electric plane that's predicated on a high temp super conductor, lol?). That would be a game changer, if it's not a fantasy.
In my opinion, photovoltaics haven't crawled up Moore's Law to the point where they make sense for individual investment. SolarCity is arbitraging renewable energy law to externalize the cost of solar ownership to the government which, really, is worth doing. The grid's a mess and has been. HVDC may clean up some of it but local power production is a better solution. Frankly, energy efficiency is the solution.
I would have preferred to respond in public earlier, but was muted at the time. Thank you for including me in this conversation. You take issue with my tone, and with MacKay's. I take issue with using the words "very little land" and "tiny" to describe the space requirements of solar. But physics, not sentiments, will decide whether solar is viable. So I enthusiastically support running the numbers. MacKay gives a peak solar energy of 1000 W per square meter, over 90 W per square foot. So we can hope that the 7 watts of today's panels will continue improving. Seven watts per square foot gives 195 MW per square mile. So 2.9 terawatts / 195 megawatts per square mile = 14,871 square miles. How big is that? It depends on what you compare it to. I find it disingenuous to compare it to the continental United States. A test range is also simply a shape drawn on a map. A solar installation would be an engineering megaproject; we should compare it to other engineering megaprojects. Small towns are mere dots on the Nevada map, the Hoover Dam is invisible. The floor space of the Pentagon is a fraction of a square mile. Fresh Kills landfill is four square miles. No one thinks Elon Musk actually wants to build a solar facility the size of New Jersey in the desert. But he is definitely advocating when he characterizes solar as realistic for more than a small portion of our energy needs. If he wants to spend his own money on energy innovation, I salute him, but he is clearly willing to spend other people's money.
I'm starting to remember why. Here's crescent dunes. It's 1700 acres of mirrors, 2.6 square miles, in the middle of thousands of square miles of nothing. It's good for 500 GWh and cost about a billion dollars. 500GWh is a long road from 25,000 TWh. We'd need 50,000 of them to meet our yearly power requirements. That's a 50 trillion dollar investment. Nobody thinks we're going to do that. Nobody thinks we're going to build a photovoltaic array a hundred miles on a side, either. Not you, not me, not Bob Mackay. Not anyone who has ever so much as paid $12 for a Radio Shack solar panel capable of generating half a watt. Those of us who have worked on solar-electric hybrids have a pretty firm grasp on the disappointments of solar. But 25 thousand TERAWATTS is a staggering number. It's Doc Brown's "Two point twenty one jigawatts!" with four more zeroes. It's the kind of math that makes you lose hope. Hundred miles on a side? You can wrap your head around that. You'll never build it - it's 3,000 times the size of that very-impressive heliostat out in the middle of the Nevada desert. But fuckin' A, we can build a few. And at the cost of the Iraq War, we could have built 1700 of them for a power generation of 850TWh. STILL a long goddamn way from 25 thousand terawatts but you know what? It's a percentage. It's a start. And it's in human numbers, broken down to size that people who haven't read Bob Mackay can understand. And that's my beef - I threw out a flippant comment to make a point that renewable energy is within the realm of contemplation. You're going to the mattresses to argue that people aren't allowed to be flippant because you read a book. "How big is that?" About as big as I said. Is it "simply a shape drawn on a map?" Fuck yes. Because without drawing a shape on a map it's all a bunch of fuzzy numbers. How fuzzy? Well, according to MIT there is more surface area of the United States covered by parking spaces than there is covered by Puerto Rico - 3500 square miles in fact. Fuck Nevada - let's put a panel on top of every garage and cut our energy needs in half. And now we're back to your buddy Elon and realistic goals and nobody even had to call anybody else an asshole.I would have preferred to respond in public earlier, but was muted at the time.
We agree on this. And I think we agree that drawing a square on a map can help people wrap their heads around what that number represents. When I draw the square, I say "Golly! I have to zoom in three clicks before I can see the speck that is the Hoover Dam. Maybe solar is not yet ready for prime time, even if we could overcome the storage and transmission challenges." When Elon Musk draws the square, he says "actually very little land is needed to get rid of all fossil fuel electricity generation in the United States" and his map has the title "Surface area of solar panels required to power entire U.S." He would make a Dyson sphere look small by drawing it next to the Milky Way. Elon Musk is a visionary, a dreamer, and a savvy marketer. Attracting investment is his game, and he does it well. If his reality distortion field gets private investors to sign up, and the result is cool luxury cars and awesome rockets and better solar power, I am all for it. When he dips into the same public funds that brought us Solyndra and Fisker, I have reservations. I want to see reality as it is. The numbers show that, for now, the words "solar" and "power entire U.S." should not appear in the same sentence. There is a niche for solar. Pilot projects are useful. More research and development is warranted. I didn't interpret your flippant comment as a serious policy proposal. But the "tiny" typo gives the reader the wrong idea, I think. b_b appears to have anticipated that readers would conclude that "it's such a small area." Renewable energy takes a staggeringly large amount of area. 100% solar would require about as much as there is paved road in the lower 48. Hmm. If "more worthwhile than war" is the standard, then sure, we should build giant pyramids covered in solar panels. If "making responsible use of resources" is the standard, then I don't see solar contributing more than 1% of consumption anytime soon.25 thousand TERAWATTS is a staggering number.
Elon Musk expresses a similar view of what constitutes a small amount of land.
The problem in my eyes is that we can power 100% solar, and with a bit of a push I can see us doing that in 10 years if we had a dedicated national project like the Apollo Program and the political will to make it happen. This in of itself is not the problem; the problem is energy storage. I was really interested in molten salt batteries as they are being used in places with spotty power delivery and far rural areas. I know there is a town in Texas that is using a molten salt buffer, but my google-fu is not up to task this late. The Solar City in home battery, if they can scale them up is going to do crazy amazing things that I cannot wait to watch happen. I've already got friends out here putting up solar to take advantage of the 10kW system with the hope of buying and installing two power walls to eventually charge a car and run the house for a week when they lose power in the next snowstorm, thunderstorm or brisk wind. The neat thing about these molten salt, molten metal etc batteries to store energy is that it looks like they scale well. Making a battery in a four story building looks very feasible as a way to even out the energy demands of the grid. Ideally, in my mind, if I could wave a magic wand, we would have Thorium MSR's for the base power of the grid, solar and wind for the demand power and molten salt batteries to assist in the demand spikes. The bad thing about this idea is that our power grid sucks and is an embarrassment. We'd need to invest heavily in transmission lines, smart meters, and the other tech to make the grid more of a modern delivery system and not a kludge of stuff slapped together over the last half century. Solar keeps getting cheaper, and there are now serious groups investing in Thorium plant research along with the Chinese who see Thorium power as the way to stop burning coal and not depend on places like Russia for power. Global Crossing, man, what a boondoggle that was. My dad lost a ton on those guys; I bailed as I saw the writing on the wall and did slightly better than break even. Then Nortel tanked me; I figured they would be able to weather the storm and be there as all that fibre was lit up. Good times.
A question I've never heard adequately addressed is how we will (if we do) transition to an electric transportation system. The total energy usage by the transportation sector is on the order of the total energy used to generate electricity (less but not by a wide margin). When you consider the energy transfer losses (electric cars have a conversion loss waaaay higher than having the power plant on demand), we'll likely have to more than double our electrical grid capacity. This isn't impossible by any stretch from a technical POV, but from a political POV it might be a different story. I'm not a huge Sanders supporter, but the thing that he is making an issue that shouldn't even be a left wing issue is a giant infrastructure investment. He's talking about $3 trillion I think. There aren't many things I would vote to raise my own taxes to fund, but that would be one. Our electrical grid is shitty even for our current needs, let alone future. Our highways have been crumbling for years. We refuse to even provide clean drinking water in a lot of places. It's pathetic. A huge infrastructure push could help to address some of these issue while hopefully also providing an economic stimulus. We should see some ROI on infrastructure upgrades, especially now while money is still cheap. Won't be that way forever. People are fucked though; they see taxes and the run for the hills without considering how the money is to be spent. Here in MI we just went through a multi year clusterfuck to try to fund our disintegrating roads. Even our right wing governor lost patience with the Tea party jackoffs in the legislature (who wanted to fund it by a combination of raising the sales tax and cutting education). It's easy in that climate to understand how the Flint thing happened.
Democrats always do big infrastructure pushes. Republicans always wait for democrats to do big infrastructure pushes. It makes democrats look good because public works and increased jobs and obvious tax dollar benefit. It makes republicans look bad because tax dollars and socialism. It shouldn't be an issue but red staters (and red countiers) always lose their shit about public works projects that they don't physically drive over every single day and when you point out that even Ayn Rand drove on a public freeway from time to time they grumble and change the subject. It shouldn't be an issue, but it will always be an issue.
While I don't entirely disagree, this seems so over simplified I question its usefulness. Coal is the easiest one here: coal doesn't face competition from other energy sources, it faces political and regulatory blocks. It's dirt cheap to dig up a rock and burn it. But it gives off a lot of horrible stuff. Oil is so useful because it's easily transported and very energy dense. Batteries are the only alternative that comes close, and they're still and order of magnitude or two away from oil's energy density. They gain some ground back on the cost of energy; electricity is so much cheaper than oil. Gas is really beyond me to speculate. Gas is so cheap right now, and gas fired power plants cheap and fast to build. But I also understand gas is seen as a byproduct of fracking for oil. If oil dries up, if fracked dies off, is gas screwed? I remember when gas prices shot up in the early to mid 2000s. For all of this, storage remains the holy grail. A ton of coal has about 8000 kWh of energy. By the time we burn it and boil some water, we're left with about 2400 kWh. Coal power plants have stockpiles of hundreds of thousands of tons of coal. Replacing that kind of flexibility with batteries will require a materials and cost breakthrough we haven't seen yet. While the technology exists, it's so far off on cost that it isn't achievable at the scale necessary. All the gains we've had in reducing carbon and coal have been paid for by fracking and natural gas.point is that oil, gas, and coal face serious competition from other energy sources
If coal and oil were not so heavily subsidized by the American government, there would at least be a level playing field upon which to measure all of the options. (And let the market choose the winner(s).) Storage isn't really an engineering problem, either, when you talk about a level playing field. There are oodles of ways to store energy for later use, including distributed batteries. The real interesting work right now in alternative energy is how to use all the batteries in the customer network (electric cars, powerwalls, etc) to pull from during peak use times, and charge them at off-peak times. Hell... just a decade ago the thought of broadband to your home was kinda silly, because nobody was gonna run fiber into neighborhoods... but now they are talking about it as a "basic need". So things change quickly when the market is allowed to operate without bias. And as far as gas goes, check out the "Pickens' Plan" from T. Boone Pickens. He wants to kill oil with natural gas (because he's heavily invested in natural gas), and has a complete, national plan, for how to do it. He's been pushing it for years, and it seems people are starting to listen.