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08 February 2014

Press review 08-02-2014 - German government scrambles to protect electricity suppliers from cheap PV

The past year I spent a good deal of time studying the declining costs of solar power technologies, particularly PV. This work was summed up in an article published by the Frontiers in Energy Systems and Policy journal. In it I put forward the reasons why not only the scrapping of feed-in tariffs can not stop the growth of installed PV capacity in Europe, but also that a demand decline on the electricity provided by traditional suppliers is unavoidable; all of this on purely economic grounds.

In a ditch to save these traditional electricity suppliers - large multinational companies that employ ex-ministers and ex-parliament members at large - governments are scrambling to change the rules of the game. Imagine that every time you cooked at home you would be obliged to pay McDonalds a fee - that's exactly what the Spanish and German governments are trying to impose. Note that in each of these countries the initiative is being taken by supposedly opposing parties: conservatives in Spain, social-democrats in Germany. I can't possibly see how such legislation can comply to market laws, not even speaking of human rights. I expect long and spectacular legal battles to follow.

Surcharge will cause ‘total collapse’ of German solar industry, AS Solar chief claims
Andy Colthorpe, 04-02-2014

An executive at AS Solar has strongly criticised the new Germany energy minister’s plans to reform the country’s Renewable Energy Sources Act (EEG), warning that a “total collapse” of the German solar industry can be expected under the new legislation.

Sigmar Gabriel, leader of the SPD, the political party which agreed to form a coalition with Angela Merkel’s Union of Christian Democratic Parties, was appointed head of a new German ‘superministry’ responsible for energy and the economy. His plans to reform the EEG include the controversial levying of a surcharge on self-consumed PV generated electricity, equivalent to 70% of what PV users would have paid if only using power from the grid. According to German industry association BSW Solar, this amounts to the equivalent of around €0.044 per kWh. The reforms will take effect from the beginning of August 2014.

[...] Gerd Pommerien ridiculed the idea of a charge for self-consumption and said: "What nonsense it would be if you had to pay a levy to farmers for the harvesting of fruit and vegetables from our own garden."
To understand that these initiatives have nothing to do with the intermittent nature of renewable energy is the following article. The German government continues supporting wind energy simply because it is not as scalable as PV, thus only accessible to large investors in an efficient way. Note also the price of this particular transmission line, it will cost over a period of eight years what the German government spends yearly on direct subsidies to the coal industry.
Deutsche Wella
Germany lays out plans for longest-ever power line

The new power line, called the "Suedlink" project, will run around 800 kilometers (500 miles) in length, operators TenneT and TransnetBW said on Wednesday.

Starting in 2022, it will carry wind energy from the northern state of Schleswig-Holstein to the southwestern state of Baden-Württemberg. Along the way, the line will run through Lower Saxony, North Rhine-Westphalia, and Hesse, as well as dipping into Bavaria and Rhineland-Palatinate.

"It's an electronic highway without exits," said TenneT CEO Lex Hartman.

The project is expected to cost "in the low single-digit billions."

"We are ready to start," said Hartman.

In 2016, construction permits are due to kick in.
The success of renewable energies that has caused this abhorrent behaviour by European governments is attested even by the most unlikely actors.
Goldman Sachs sees “transformational moment” in renewables investment
Giles Parkinson, 31-01-2014

Investment banking giant Goldman Sachs has declared the renewable energy sector to be one of the most compelling and attractive markets – and is backing up its talk with $US40 billion ($A46 billion) of made and planned investments.

Goldman Sachs is not the first big bank to talk up the renewable energy sector, or even “sustainable” investments. But it is one of the first to put real money behind it.

In 2012, the bank made a commitment to invest $US40 billion in renewable energy, and it has made a number of large equity investments, over and above the normal advisory and fund-raising work that is the usual bread and butter revenue for investment banks such as Goldman Sachs.
And closing off the renewable energy section, this week took place what is possibly the most important step towards electricity market liberalisation in Europe. Note that few of these member states possess a relevant solar resource (at least at this stage).
North-Western European power market coupling project launched

The coupling of the Northwest European day-ahead power markets was launched successfully Tuesday using a common day-ahead power price calculation, the project members said in a joint statement.

This will facilitate optimal utilization of interconnectors between the NWE power markets as well as Poland via the SwePol Link, covering around 75% of Europe's electricity demand, the statement said.

The day-ahead markets of Belgium, Denmark, Finland, France, Germany, Austria, Latvia, Lithuania, Luxembourg, the Netherlands, Norway, Estonia, Sweden and the UK will calculate electricity prices at the same time using the Price Coupling of Regions solution.
Iraq remains the most interesting source of news in the fossil fuel world. Although the reports of warfare have ceased, there is much to question on the reliability of this torn country.
Iraq near Implosion: The ‘Bad Years’ Are Back
Ramzy Baroud, 06-02-2014

As U.S. Secretary of State John Kerry hurried to his helicopter ready to take off at the end of a visit to Iraq last year, it was becoming clearer that the Americans have lost control of a country they wished to mold to their liking. His departure on March 24, 2013 was the conclusion of a ‘surprise’ visit meant to mark the 10th anniversary of the US invasion of Iraq. Ten years prior, the US had stormed Baghdad, unleashing one of the 20th century’s most brutal and longest conflicts. Since then, Iraq has not ceased to bleed.

Kerry offered nothing of value on that visit, save the same predictable clichés of Iraq’s supposedly successful democracy, as a testament to some imagined triumph of American values. But it was telling that a decade of war was not even enough to assure an ordinary trip for the American diplomat. It was a ‘surprise’ because no amount of coordination between the US embassy, then consisting of 16,000 staff, and the Iraqi government, could guarantee Kerry’s safety.

Yet something sinister was brewing in Iraq. Mostly Muslim Sunni tribesmen were fed up with the political paradigm imposed by the Americans almost immediately upon their arrival, which divided the country based on sectarian lines. The Sunni areas, in the center and west of the country, paid a terrible price for the US invasion that empowered political elites purported to speak on behalf of the Shia. The latter, who were mostly predisposed by Iranian interests, began to slowly diversify their allegiance. Initially, they played the game per US rules, and served as an iron fist against those who dared resist the occupation. But as years passed, the likes of current Prime Minister Nouri al-Maliki, found in Iran a more stable ally: where sect, politics and economic interests seamlessly align. Thus, Iraq was ruled over by a strange, albeit undeclared troika in which the US and Iran had great political leverage where the Shia-dominated government cleverly attempted to find balance, and survive.
Meanwhile the Kurds seem bound to use the petroleum reserves under their control at their own will. All this with the visible complicity of Turkey, a country that has been trying to make the most out of the Sunni-Shiia conflict.
Tensions rise as Iraqi Kurds' oil flows to Turkey

As Iraqi Kurdistan exports oil northward to Turkey through its own pipeline despite dire warnings from Baghdad about the consequences of such independent action, the prospect of a collision between Iraq's central government and the semiautonomous Kurds increases.

But as parliamentary elections loom in April, with Prime Minister Nouri al-Maliki seeking a third term amid a swelling al-Qaida insurgency raging in western Iraq, Baghdad may not be in a position to get tough right now or pick a fight with the restive Kurds and their new ally Turkey.

Analysts have long speculated that the likely outcome of the Kurds' defiance is that they could eventually declare their enclave across Iraq's three northern provinces an independent state.
Notwithstanding, optimism still prevails among some, that seem to take Al-Maliki's rule over the south of Iraq stout enough to justify continued investments.
Russia's Gazprom Neft sees Iraqi output start in spring
Katya Golubkova and Olesya Astakhova, 05-02-2014

Russia's Gazprom Neft plans to start commercial oil production in spring at its Badra oilfield in Iraq and hopes for an average output of 15,000 barrels per day (bpd) this year, a company official said on Wednesday.

Gazprom Neft, the oil arm of top Russian gas producer Gazprom, is targeting hydrocarbon production of 100 million tonnes of oil equivalent (2 million bpd) by 2020, up 60 percent from 62.2 million tonnes last year.

It earlier postponed initial production at Badra due to safety concerns and logistical problems.
And after years trying to link ISIL to Al Qaeda, the mainstream media was obliged to an act of contrition this week. Were the insistent reports of pairing between the two organisations simple ignorance or rather deceit?
Deutsche Wella
Al Qaeda: We don't support ISIL in Syria, Iraq

Al Qaeda has claimed no link to the militant Islamic State in Iraq and the Levant in Syria's civil war. The fight remains deadlocked, with secular rebels defending themselves against regime forces and "allied" Islamists. An ISIL fighter in an armored vehicle in the northwestern Syrian city of Maaret al-Naaman

After months of rebel infighting, al Qaeda disavowed the Islamic State in Iraq and the Levant (ISIL). The switch could help convince Islamists to redirect their efforts toward unseating President Bashar al-Assad rather than fighting other rebels, and shift the strategic balance at a time when government forces have become increasingly active on the battlefield.

In a message on jihadi websites on Monday, al Qaeda's general command announced that the syndicate "does not have an organizational relationship with (ISIL) and is not the group responsible for their actions."

ISIL has fought battles with other Islamist insurgents and secular rebel groups, often triggered by disputes over authority and territory. In January, several rebel groups announced a joint campaign against the Islamists.
Libya is also persistently in the news, with turmoil in Cyrenaica and Fezzan disturbing oil production. Again, there might not be a way out of this for a united Libya.
Libya says bandits disrupt oil from Sharara field

Libyan oil industry officials said bandits caused production from the Sharara oil field to drop by 40 percent by blocking a pipeline to downstream facilities. Field manager Hassan al-Sideek said bandits forced a valve to close from Sharara, blocking 40 percent of the delivery of crude oil to the Zawia oil refinery and terminal, the Libya Herald reported Monday. Operations at Sharara, in the western Libyan desert, were shuttered in October by regional protesters calling for more local authority. The field has the capacity to produce 350,000 barrels of oil per day.
Next door Egypt is dealing with its own energy problems, a long foreseen fossil fuel production decline that is behind the economic turmoil ravaging the country.
Egypt forecasts gas shortage next fiscal year

Egypt's energy woes are likely to worsen in the next fiscal year as gas production fails to meet surging domestic demand, according to government estimates.

The petroleum ministry has forecast that gas production will be 5.4 billion cubic feet (bcf) per day and consumption 5.57 bcf/day in the fiscal year that begins July 1.

In the current fiscal year by comparison, gas production is still estimated to exceed consumption at 5.31 bcf/day versus 4.95 bcf/day, a ministry source said.

[...] The growing population of 85 million and generous subsidies have kept energy demand increasing to the extent that it has cut into exports of liquefied natural gas (LNG) previously promised to foreign firms.
In previous editions of this review I showed some scepticism towards the outcry on propane shortages in North America. As it happens, the problem is way more serious, affecting also natural gas and wood, and spreading to the south of the US and Canada. In California things start looking rather grim for the coming summer, when electricity demand peaks over the year.
MSN Money
Natural gas shortage hits California power supply
Michael R. Blood, 06-02-2014

Californians were urged to voluntarily cut their electricity use Thursday in a rare mid-winter conservation alert, after frigid weather across the U.S. and Canada caused a shortage of natural gas at Southern California power plants.

"While the natural gas shortage is only impacting Southern California power plants, statewide electricity and gas conservation will help free up both electricity and gas supplies for Southern Californians," the California Independent System Operator, which runs the state's power grid, said in a statement.

Requests for Californians to curtail their power use typically occur in summer, when temperatures soar and air conditioners roar, especially across Southern California.
Another country dealing with fossil fuel shortages is India. These news have many similarities to those out of China in the 2007/2008 winter, when coal prices had their first big run up this century. A situation to watch closely.
The Economic Times
Gap between Coal India output and target widens further
Debjoy Sengupta, 05-20-2014

The gap between Coal India's (CIL) production and target has been ever widening, and has reached a level where the average coal stock at power plants has dipped to just around 12 days.

CIL, between April 2013 and January 2014, missed its production target by 17 million tonnes, and supply target by 15 million tonnes. Company officials were quick to blame the shortfall on strikes, law and order situation, excessive heat and rainfall, and pollution issues.

This has resulted in a fall in coal stocks and power shortage. What's alarming is that 30% of the power plants have stocks that will barely last seven days, and 18 have coal stocks that won't even last four days, according to the Central Electric Authority (CEA).
The gas shortages in the US are providing the moto for a round of articles questioning the success of hydraulic fracturation and the access it provides to resources in the source rock.
Best of Science
Is the Marcellus boom ending?
Mason Inman, 03-02-2014

The Marcellus shale is the great hope for keeping the United States’ shale gas boom going. The Marcellus has, so far, lived up to that hope, becoming the nation’s highest producing shale gas play. Natural gas production in the Marcellus, as regular news updates have pointed out, has been booming, soaring, growing faster than expected—even “reshaping America.”

So how long will it keep growing? The U.S. government’s own energy watchdogs, the Energy Information Administration (EIA), see no limits in sight. EIA director Adam Siemienski said in December: “For natural gas, EIA has no doubt at all that production can continue to grow all the way out to 2040.”

But I think we should take a skeptical look at the EIA’s forecasts, if only to try to how strongly they’re backed up. In doing the research for my upcoming book, The Oracle of Oil (the first biography of geologist M. King Hubbert, known for his forecasts for peaks of oil and gas production), I’ve seen how many forecasts—including the EIA’s—have been far off the mark.
One of the issues underpinning this scepticism is the volume of water required by these methods. At least in more arid areas of the US, water may be the main check on source rock fossil fuel production.
The Guardian
Fracking is depleting water supplies in America's driest areas, report shows
Suzanne Goldenberg, 05-02-2014

America's oil and gas rush is depleting water supplies in the driest and most drought-prone areas of the country, from Texas to California, new research has found.

Of the nearly 40,000 oil and gas wells drilled since 2011, three-quarters were located in areas where water is scarce, and 55% were in areas experiencing drought, the report by the Ceres investor network found.

Fracking those wells used 97bn gallons of water, raising new concerns about unforeseen costs of America's energy rush.

"Hydraulic fracturing is increasing competitive pressures for water in some of the country's most water-stressed and drought-ridden regions," said Mindy Lubber, president of the Ceres green investors' network.
I pondered a while before reproducing the article below. I abominate the tone and the free name calling to energy industry professionals. Nevertheless, considering the role that Forbes played in propping up hydraulic fracturation, I could not possibly let aside an article that tries to explain EROEI (cumbersomely, I know) in this same cornucopian tribune.
Why Shale Oil Boosters Are Charlatans In Disguise
James Gruber, 26-01-2014

Something has bothered me of late: why is the price of crude oil still elevated? Other commodities have taken a battering since 2011. Gold, copper and iron ore – all are way down off their peaks. But oil has seemingly defied gravity. And that’s despite increased supply from shale oil in the U.S., still soft demand particularly in the developed world and declining rates of inflation growth across the globe.

What gives? Well, shale oil proponents will say falling oil prices are just a matter of time. And that the boom in shale oil will reduce U.S. reliance on foreign oil, leading to cheaper local oil, which will free up household budgets and spur consumption as well as the broader economy. Perhaps … though I’d have thought all of that would be already reflected in prices.

On the other side, you have “peak oil” supporters who suggest high oil prices are perfectly natural when oil production has peaked, or at least the good stuff has disappeared. Yet the boom in U.S. shale oil appears to put at least a partial dent in this thesis.
Alas, that is it for this week. Hope you can survive the weather till the next time.

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