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26 April 2014

Press review 26-04-2014 - The IPCC Cornucopia

These past weeks the release of the seventh IPCC assessment report has pretty much dominated energy discussions. There is nothing really new about it, relying on the same old energy galore forecasts. After two decades of failed forecasts the panel relies now more than ever on extraordinary coal reserves that no one has ever seen. Interestingly, this cornucopian stance on energy resources extends even to non-fossil energies.

Nebojsa Nakicenovic was present at the 2012 ASPO conference in Viena. He is responsible for the forecasts produced at the IIASA to be used by the IPCC and IEA. The Q&A after his presentation was remarkable, not all that different from talking to a rock. He kept insisting the reserves figures he uses are backed by peer review literature and as soon as his session ended left the building in haste. With this latest report it becomes obvious that the IIASA (and the IPCC) are in fact ignoring the growing number of peer reviewed studies with realistic fossil fuel reserves assessments.

The persistent failure of the IIASA forecasts have forced the IEA to use alternative scenarios for the short term, but long term they are still used for CO2 emissions. These are also the scenarios used by pretty much every government of OECD. They are, unfortunately, the best example of demand side energy modelling, brilliantly exposed by Steven Kopits some months ago.

Energy Matters
Coal and the IPCC
Dave Rutledge, 22-04-2014

[...] On the other hand, for coal the pattern has been that countries produce only a small fraction of their early reserves, and then late in the production cycle the reserves drop to match the coal at the last working mines. This pattern is seen in the UK (cumulative production of 19% of early reserves), Pennsylvania anthracite (42%), the Ruhr Valley (14%), France and Belgium (23%), and Japan and South Korea (21%). This means that the reserves criteria have been too optimistic, but it also means that world coal reserves are a good upper bound on future production. An IPCC scenario that burns two times or seven times the reserves is utterly at odds with the historical experience.

Peer-reviewed estimates of future world coal production have been available. One example is my 2011 paper in the Journal of Coal Geology, “Estimating Long-Term World Coal Production with Logit and Probit Transforms“. This paper includes references to other peer-reviewed studies led by Tad Patzek, Chair of the Petroleum and Geosystems Engineering Department at the University of Texas at Austin, and Steve Mohr, at the Sydney University of Technology. All three papers use production histories to make an independent estimate of future production that is less than reserves, but consistent with the historical experience of mining coal.
There are many more studies pointing in similar direction, especially those led by the Natural Resources and Sustainable Development group at the Uppsala University.

One important aspect ignored by the demand side forecasters is the declining quality of the coal being used today. The industry is ever more reliant on sub-bituminous resources that yield far less energy per unit volume that higher quality coal. When the IIASA forecasts a 400% increase in coal consumption, it might be actually forecasting a 500% increase in mined volumes. Where can such amounts of coal be found? And at what price?
Peak Coal
Ronald R. Cooke, 15-04-2014

In terms of Peak Coal, we actually will have two peaks: one measured by heat content, and one measured by maximum tons produced. Considering the decline of our anthracite resources, and the increasing production of sub-bituminous and lignite coals, there are those who believe we have already passed Peak Coal based on heat (energy) content.

After we take all of these factors into consideration, and make our assumptions about resource availability, production, consumption, price escalation, consumer behavior, government response, and so on.... we can (with some apprehension) calculate the date of Peak Coal. Between 2012 and 2035 annual coal production will increase by ~47 percent. Production begins to stall around 2030, and the curve flattens through the year of peak production - 2035. Thereafter it declines rather quickly because the remaining reserves are more difficult and costly to exploit. Please note there is a lot of production after 2035. But annual average production decreases with each passing year. We will probably be into the next century before the last nugget is pulled from the ground, and that - of course - is what people think they mean when they say... "We have enough coal to last 110 years". We will have some coal left, but not enough to satisfy demand. Not even close.
If this cornucopian view is more that evident with coal, it also affects the forecasts published by the IPCC on other energy sources. The projected production of bio-fuels is a good example of plain demand side modelling, without any consideration for supply constraints, much less price.
Carbon Counter
Why The IPCC Is Wrong About Bio-Energy
Robert Wilson, 13-04-2014

The table on page 18 informs us that if we only use a “limited” amount of “modern” bio-energy then the costs of keeping things to 450 ppm CO2-equivalent will increase by 64%. [...]

What is limited? 100 EJ of “modern” bio-energy per year. For context we consume around 450 EJ of fossil fuels each year. So “limited” bio-energy means that we will get the equivalent of 20% of current global primary energy consumption from “modern” bio-energy.

This is not “limited” in any sense, and it is easy to see why.

100 EJ per year corresponds to an average power of around 3.2 TW, that is 3.2 trillion watts. How much land would we need for this to come from bio-energy? Well, a lot.

Typical bio-energy plantations provide a power density of less than 0.5 watts per square metre, and this is after significant fossil fuel inputs through nitrogen based fertilizers etc.

So to get 3.2 TW from bio-energy we will need something like 6 million square kilometres of land to be converted to bio-energy plantation. This is roughly two times larger than India.
Now for some insight on the Ukraine crisis. Rare voices are still heard in the press warning against an escalation of economical confrontation; not even the US and the UK are safe from a cut of trade ties with Russia.
The Telegraph
US financial showdown with Russia is more dangerous than it looks, for both sides
Ambrose Evans-Pritchard, 16-04-2014

[...] The US Treasury faces a more formidable prey with Russia, the world's biggest producer of energy with a $2 trillion economy, superb scientists and a first-strike nuclear arsenal. It is also tightly linked to the German and east European economies. The US risks endangering its own alliance system if it runs roughshod over friends. It is in much the same situation as Britain in the mid-19th century when it enforced naval supremacy, boarding alleged slave ships anywhere in the world, under any flag, ruffling everybody's feathers.

[...] This will graduate to sanctions on Russian defence firms, mineral exports and energy - trying not to hurt BP assets in Russia too much, he adds tactfully - culminating in a squeeze on Gazprom should all else fail. Whether you are for or against such action, be under no illusion as to what it means. We would be living in a different world, and Wall Street's S&P 500 would not be trading anywhere near 1,850.
Despite the propaganda from NATO, Russia is everything but isolated in this conflict. Circumventing economic sanctions may be considerably easier for Russia than for Europe.
Deutsche Wella
B(R)ICS states stick together in Crimea crisis
Dirk Kaufmann, 06-04-2014

For Monica Herz, a professor at the Catholic University of Rio de Janeiro, the union is not just a loose confederation based only on economic commonalities: "It is political. There has been a common view that these countries, though different, can present a barrier to Western policies."

Do the BRICS states have a common position in the current Russia-Ukraine conflict? Yes they do, Monica Herz told DW. "There is a common position that there needs to be containment of the conflict." But she added that "when we look at Russian policy, we find that these countries have divergent positions."
In recent weeks the press has pointed several clues on what Russia is doing to detach its foreign economic relations from international institutions controlled by NATO; one of such moves is the creation of an alternative to the VISA international payment system. But perhaps the most relevant is the creation of an alternative to the IMF, a move that has been greatly helped by the stalemate at the US Congress.
International Business Times
G20 Warns of Other Options If US Fails to Enact IMF Reforms by Year-end
Jerin Mathew, 12-04-2014

Finance chiefs from the group of 20 prominent economies in the world have given the US until the year-end to enact long-delayed reforms at the International Monetary Fund (IMF).

The group added that it will look for alternative measures if the US Congress fails to meet the demand.

The reforms agreed in 2010 would double the IMF's resources and provide more voting power to the BRICS countries – Brazil, Russia, India, China and South Africa.

The US Congress has refused to ratify the reforms, as some members opposed them citing high costs at a time when the country is facing huge budget deficits.
From Iraq there have been news of attacks on petroleum infrastructure, something that so far had not been in the press since the start of the civil war.
World Bulletin
Militants blow up oil, gas pipelines in N. Iraq

Militants on Thursday blew up two oil and gas pipelines in Iraq's northern Saladin province, a security official said.

"Militants detonated an explosive device near an oil pipeline and another near a gas pipeline in the town of Biji," Saladin Police Captain Omar al-Juburi told Anadolu Agency.

The explosions left thick black smoke in the air and oil spilling into the Tigris River, al-Juburi added, which prompted the local water authorities to cut off water supplies to the area's purification plants.

A water station was also completely burned down after local residents set fire to oil patches in the river, according to eyewitnesses.
In fact, these attacks have been "persistent" and taking place even in Kurdish territories. This is the first concrete evidence of the civil war is reaching the northern regions of Iraq.
Iraqi pipeline 'unusable'
Steve Marshall, 21-04-2014

An oil pipeline carrying crude from Iraq's Kirkuk oilfields to Turkey's Mediterranean port of Ceyhan is “unusable” because of persistent militant attacks, Turkey's energy minister was reported as saying on Monday.

The key export pipeline has been pumping way below its 1.5 million barrels per day of capacity, while Kurdistan has been sending crude through a new independent route from the semi-autonomous Iraqi region to the Turkish port.

“The pipeline on the Iraqi side is in unusable shape. This is a loss for Iraq,” Turkish Energy Minister Taner Yildiz was quoted as saying by Reuters.
Ending a note on the continued fallout of low cost photo-voltaics in Europe. In spite of the efforts by the German government to curb the growth of this indigenous energy source, the woes of traditional electricity suppliers mount. It might take more than taxes on the Sun to preserve the share of imported fossil energies in the German (and European) electricity mix.
European Power Prices Fell 8.4% in March as German Solar Ramped Up

Day-ahead electricity prices in continental Europe recorded a fifth consecutive monthly decline in March as surging German solar and wind output helped chase prices lower in neighboring countries, according to data just released by Platts, a leading global energy, petrochemicals and metals information provider.

The Platts Continental Power Index* (CONTI) fell 8.4% in March to €35.06 per megawatt hour (/MWh) compared to the February level of €38.28/MWh. The index is down more than 39% since peaking at €50.50/MWh in November last year.

“A mid-March surge in German wind output followed seven days of peak solar output, which rose above 20 gigawatts (GW) to a new monthly record of 23 GW on March 20,” said Andreas Franke, Platts managing editor, European power and gas.
Have a nice weekend.

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