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Grant Cooke: Big Oil’s endgame: While fossil fuel costs keep rising, renewable costs fall

Repost from The Benicia Herald
[Editor: Benicia’s own Grant Cooke has written a highly significant three-part series for The Benicia Herald, outlining the impending fall of the fossil fuel industry and concluding with good advice for the City of Benicia and other cities dependent on refineries for a major portion of their local revenue stream.  This is the second of three parts.  Read part one by CLICKING HERE and part three by CLICKING HERE.  – RS]

Grant Cooke: Big Oil’s endgame: While fossil fuel costs keep rising, renewable costs fall

October 4, 2014, by Grant Cooke

Grant Cooke, Benicia, California“The Stone Age came to an end, not because we had a lack of stones, and the oil age will come to an end not because we have a lack of oil.” — Sheikh Ahmed-Zaki Yamani

THREE KEY FACTORS WILL PUT TO REST the fossil fuel industry and make the good Sheikh Yamani’s prediction come true. Two of them are discussed here.

The first is that the carbon emitters will be held accountable and made to pay for using the atmosphere as a garbage can. While still struggling to price the cost of pollution, most nations, as well as California, have come to realize that the heavy carbon emitters need to pay for the damage they have done. A cap-and-trade process is the first method to hold the emitters accountable. While imperfect and not nearly as effective as a straight carbon tax, this system is growing throughout the world. The European Union’s program, which started several years ago and was described by the fossil fuel interests as failing, is now deemed a success. It has become an established part of European culture and corporate practice. Various nations such as Australia, New Zealand, Canada, Korea and China have developed cap-and-trade programs as well.

California’s own program continues to grow, and our carbon offsets are tradable in parts of Canada as well. As it gains momentum, other states are watching California’s program and thinking about adopting their own. Impoverished state governments see cap-and-trade programs as a boon to their environment and a way to garner vital tax revenues. Since increases in personal income tax are so unpopular, cap-and-trade is seen as a way to bring new money into state treasuries without risking voter rebellions.

The pressure to make the major carbon emitters pay for their pollution is coming from the agreements made at the 2012 UN Conference on Climate Change in Doha, Qatar. At this conference world governments consolidated the gains of the last three years of international climate change negotiations and opened a gateway to greater ambition and action. Among the decisions was to concentrate on a universal climate agreement by 2015, which would come into effect in 2020. The 2015 conference will be held in Paris, and world governments are expecting much greater cooperation and agreement on carbon-reduction policies from the U.S. and other major emitters.

The world is slowly accepting the reality that the mitigation of climate change is a massive problem. A 2012 report by Climate Vulnerable Forum estimated that more than 100 million people will die and the international economy will lose out on more than 3 percent of GDP ($1.2 trillion) by 2030 if the world fails to tackle climate change. But because governments don’t want to use their funds for environmental cleanup and climate change mitigation, it will be the heavy emitters like the oil, coal and utility companies that will pay.

This cost for carbon cleanup, added to the increasing costs of extracting hard-to-get fossil fuel resources, will hit the oil industry hard. A 2013 Harvard University report showed that the cost externalities from coal were about 18 cents per kilowatt hour. Most U.S. end-users who rely on coal-generated electricity pay about 10 cents per kWh. If the external costs were added, those users would pay closer to 30 cents per kWh — which would severely impact those users’ lifestyles.

Grid parity

The second major factor hastening the end of today’s megalithic fossil fuel industries is “grid parity.” Grid parity is a technical term meaning that the cost to a consumer for electricity from a renewable source (without subsidies) is about equal to the cost from a traditional source — be it fossil fuel or nuclear. The Germans used grid parity to price their feed-in-tariff program, or FiT, that launched Energiewende.

Simply put, with PGE’s 2014 rate increase a Benicia resident or small commercial consumer pays about 20 (19.9) cents per kWh for electricity from traditional sources. If that same kWh came from a renewable source and cost the consumer an equal 20 cents, then the renewable source would be at “parity,” or equal to the cost of the traditional generation source.

However, the cost of traditional energy is rising, driven by higher extracting costs, increasing maintenance costs for natural gas pipelines and increases in operating cost at nuclear power plants. At the same time the costs for renewable energy — wind, solar photovoltaic and biowaste fuels — are declining.

The costs for wind generation have been and still are the lowest. However, the costs for solar are declining rapidly as its use spreads. Deutsche Bank reported in January 2014 that there were 19 regions around the world where unsubsidized PV solar power costs were competitive with other forms of generation. In fact, PV competes directly in price with oil, diesel and liquefied natural gas in much of Asia. This equality of costs with fossil fuel and natural gas is creating a worldwide solar boom in 2014-15.

In the U.S., almost 30 percent of last year’s added electricity capacity came from solar. In Vermont and Massachusetts, almost 100 percent added capacity came from solar. According to the U.S. Solar Energy Industries Association, more solar was installed in the U.S. in the past 18 months than in the last 30 years. Solar PV technology, which has been helped by the U.S. military, is improving so fast that it has achieved a virtuous circle.

As described by New York’s Sanford and Bernstein investment bank, we have entered an era of “global energy deflation.” This ratcheting down of energy costs may be slow to start, but as they argue, the fossil fuel-dominated energy market will experience a major decline in costs over the next decade. The market is entering a new order that will erode the viability of oil, gas and the fossil fuel continuum.

The report argues that the adoption of solar in developing markets will translate into less demand for kerosene and diesel oil. The adoption of solar in the Middle East means less oil demand, and the adoption of solar in China and developing Asia means less liquefied natural gas demand. Further, distributed solar in the U.S., Europe and Australia will likely reduce demand for natural gas.

They reason that while solar has a fractional share of the current market, within a decade solar PV and related battery storage may have such a large market share that it becomes a trigger for energy price deflation, with huge consequences for the massive fossil fuel industry that is dependent on continued growth.

Even the Saudis are betting on solar, investing more than $100 billion in 41 gigawatts of capacity, enough to cover 30 percent of their power needs by 2030. Most of the other Gulf states have similar plans.

Grant Cooke is a long-time Benicia resident and CEO of Sustainable Energy Associates. He is co-author, with Nobel Peace Prize winner Woodrow Clark, of “The Green Industrial Revolution: Energy, Engineering and Economics,” to be released in October by Elsevier.

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    Grant Cooke: Big Oil’s endgame has begun

    Repost from The Benicia Herald
    [Editor: Benicia’s own Grant Cooke has written a highly significant three-part series for The Benicia Herald, outlining the impending fall of the fossil fuel industry and concluding with good advice for the City of Benicia and other cities dependent on refineries for a major portion of their local revenue stream.  This is the first of three parts.  Read part part two by CLICKING HERE and part three by CLICKING HERE and .  – RS]

    Grant Cooke: Big Oil’s endgame has begun

    September 28, 2014 by Grant Cooke

    Editor’s note: First of three parts to run on consecutive Sundays.

    P1010301“THE STONE AGE CAME TO AN END, not because we had a lack of stones, and the oil age will come to an end not because we have a lack of oil,” said Sheikh Ahmed-Zaki Yamani. The former Saudi oil minister is arguably the world’s foremost expert on the oil industry. In 2000, he introduced this extraordinary observation with an even more prescient one — to wit, “Thirty years from now there will be a huge amount of oil — and no buyers. Oil will be left in the ground,” he told the UK’s Telegraph.

    A decade and half later, we are coming to the end of Big Oil, and the domination of the world’s geopolitics and economy by the fossil-fuel interests for the past century. Correspondingly, the carbon- and nuclear-powered centralized utility industry that was started by Thomas Edison in 1882 when he flipped the switch at the Pearl Street substation in Manhattan has begun its decline.

    Over the years, Big Oil and its related industries and supporters have disrupted the way humans manage their affairs, and wreaked havoc on our environmentally fragile planet. Today, the loss of a major section of the West Antarctic Ice Sheet from global warming caused by excessive carbon-generated heat appears unstoppable.

    That hasn’t stopped the dead-enders from fighting on. In February, North Carolina’s Republican governor turned his administration into a joke with a clumsy attempt to help Duke Energy, the nation’s largest utility, avoid cleaning up 39,000 tons of coal ash that was spilled into the Dan River. The Duke ash coal spill came a month after 10,000 gallons of 4-methylcyclohexane methanols, or MCHM, spilled into West Virginia’s Elk River, ruining the water supply of Charleston, the state’s capital. A second chemical, a mix of polyglycol ethers known as PPH, was part of the leak, the company involved, Freedom Industries, told federal regulators. The company uses the chemicals to wash coal prior to shipping for coal-powered utilities. More than 300,000 West Virginians were impacted and several hundred residents were hospitalized with various symptoms.

    Closer to home in Northern California, we had the massive 2012 Chevron fire that sent toxic chemicals billowing into the air and caused respiratory problems for 15,000 Richmond residents. Chevron admitted to negligence as the cause of the fire. In 2010, PG&E’s neglect led to the horrific San Bruno gas pipeline explosion that killed eight, injured 66 and destroyed 38 homes. The California Public Utilities Commission fined PG&E $2.5 billion, the largest fine in U.S. utility history. PG&E now faces federal charges that it violated the U.S. Pipeline Safety Act.

    For several years, U.S. oil oligarchs Charles and David Koch have made a mockery of American democracy by pouring hundreds of millions of dollars into smear campaigns against scientists, environmentalists and liberal politicians. More than any others in recent memory, the Koch brothers have manage to replace consensus and compromise with vitriol and dysfunction in U.S. politics.

    Oil madness is not a strictly U.S. disease. Vladimir Putin, channeling the ghost of Joseph Stalin, recently swept up a huge chunk of Ukraine and threatened an astonished Europe that if it opposed him, the result would be a shutdown of the Russian natural gas that many see as vital to the EU’s economic recovery. And the world seems to have grown accustomed to Mideast mayhem, where the biggest transfer of wealth in world history — from the oil users to the oil suppliers — has led to social and political chaos, repression, suffering and death.

    * * *

    EVEN AFTER A CENTURY OF SUPPORT, the U.S. federal government grants the oil industry, the world’s richest, with about $4 billion a year in tax subsidies, and Exxon Mobil Corporation (the largest grossing company in the world) minimizes the taxes it pays by using 20 wholly owned subsidiaries in the Bahamas, Bermuda and the Cayman Islands to legally shelter cash from its operations in Angola, Azerbaijan and Abu Dhabi.

    The coal industry is also favored with tax breaks, public land loopholes and subsidized railroads. A 2013 Harvard University study concluded that the total real economic costs from U.S. coal amounted to $345.3 billion, adding close to 17.8 cents per kilowatt hour to the cost of electricity generated from coal. Called “external costs, or externalities,” these costs are borne by the U.S. public.

    Now the carbon-based industries, which include coal, oil, natural gas and related industries like centralized utilities and transmission line companies, are coming to the end of their socially useful cycle. Their resources are aging beyond economic justification and their business models are too inflexible to adapt to a new industrial era with a different energy model.

    This new era of energy generation, storage and sharing is upon us. We call it the Green Industrial Revolution, and it is emerging as the next significant political, social and economic era in world history. As it takes hold, it will result in a complete restructuring of the way energy is generated, supplied and used. It will be a revolutionary time of extraordinary potential and opportunity, with remarkable innovations in science and energy that will lead to new ones in sustainable, smart and carbon-less economies powered by nonpolluting technologies like wind, geothermal, wave, river and solar, with their advanced technologies like flywheels, regenerative and maglev systems, and hydrogen fuel cells.

    Community-based and on-site renewable energy generation will replace massive fossil fuel and nuclear-powered central plant utilities. New advances in efficient recyclable batteries and fuel cells will store energy for when it is needed. Smart green grids will share electricity effortlessly. Additive manufacturing will minimize wasted resources, and new sciences like nanotechnology will have a profound impact on business, careers, human health and the global economy.

    This new era encompasses changes in technology, economics, business, manufacturing, jobs and consumer lifestyles. The transition will be as complete as when the steam-driven First Industrial Revolution gave way to the fossil fuel-driven Second Industrial Revolution. It is a monumental shift that is already under way and spreading rapidly around the world.

    Industrial revolutions occur when a new energy source intersects with a new form of communication. In the First Industrial Revolution, steam was the energy source and the printing press provided the means to disseminate new ideas that accelerated scientific breakthroughs and the adoption of inventions. In the Second Industrial Revolution, the fossil fuel-driven internal combustion engine was the power source and analog communication provided the channel for new ideas and technologies.

    Today, the digital age, with Internet access to almost all scientific knowledge and Facebook and Twitter-led social media, has intersected with renewable energy generation, hydrogen storage and smart grids. While vast fortunes were made in the fossil-fuel era by extracting natural resources and despoiling the environment, wealth in this new green era will come from digital and IT breakthroughs, intelligent machines and a host of environmentally sensitive inventions.

    Many factors are coming together to hasten the Green Industrial Revolution. Putin’s march on Ukraine shocked Europe and stirred the region’s efforts to generate more renewable energy and cut ties to fossil fuel. Forty percent of Scotland’s domestic electricity generation comes from renewable sources, mostly tidal and wind. Denmark and other Nordic nations intend to generate 100 percent of their energy by mid-century. Germany’s Energiewende (Energy Transformation), which aims to power the country almost entirely on renewables by 2050, is accelerating.

    Almost daily, scientists in university and national research laboratories are making breakthroughs in developing non-carbon energy sources. The chemistry department of the University of California-Davis recently figured out how to make carbon-less gasoline from straw. Advancements in nanotechnology are making electricity usage much more efficient.

    China is considering a ban on new cars that run on fossil fuels, and major cities across the globe have limited the use of autos in downtown areas. Several nations — and California, too — are creating hydrogen highways. Norway, Sweden and Germany have them; California will open its hydrogen highway in 2016. Daimler, Honda, Chevrolet and most other major automobile manufacturers have hydrogen-powered fuel cell cars ready to go.

    Grant Cooke is a long-time Benicia resident and CEO of Sustainable Energy Associates. He is co-author, with Nobel Peace Prize winner Woodrow Clark, of “The Green Industrial Revolution: Energy, Engineering and Economics,” to be released in October by Elsevier, of which this column is excerpted.

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