Wells, Wires, and Wheels – EROCI and the Tough Road Ahead for Oil

Post with image

New research, led by Mark Lewis, our Global Head of our Sustainability Research, shows that oil needs a long-term breakeven price of USD 10 – 20/barrel to remain competitive in mobility.

    • The economics of renewables are impossible for oil to compete with when looked at over the cycle
    • Renewable electricity has a short-run marginal cost of zero, is cleaner environmentally, could readily replace up to 40% of global oil demand
    • The oil industry should remember the fate of utilities

In a white paper, published this week, Mark introduces the concept of the Energy Return on Capital Invested (EROCI), focusing on the energy return on a USD 100 bn outlay on oil and renewables where the energy is being used to power cars and other light-duty vehicles (LDVs).

For a given capital outlay on oil and renewables, how much useful energy at the wheel do we get?

Our analysis indicates that for the same capital outlay today, new wind and solar-energy projects in tandem with battery electric vehicles will produce 6x – 7x more useful energy at the wheels than will oil at USD 60/barrel for gasoline powered light-duty vehicles, and 3x – 4x more than will oil at USD 60/barrel for light-duty vehicles running on diesel.

Accordingly, the research calculates that the long-term break-even oil price for gasoline to remain competitive as a source of mobility is USD 9 – 10/barrel, and for diesel USD 17 – 19/barrel.

Oil has a massive flow-rate advantage, but this is time limited

The oil industry is so massive that the amounts available for purchase on the spot market can provide very large and effectively instantaneous flows of energy. By contrast, new wind and solar projects deliver their energy over a 25-year operating life. Nonetheless, we think the economics of renewables are impossible for oil to compete with when looked at over the cycle. MORE

What Alberta’s new UCP majority government means for the environment

Oilsands emissions cap? What oilsands emissions cap? Kenney has promised he will “absolutely” scrap the cap. Canada’s climate commitments include an 80 per cent reduction of greenhouse gas emissions below 2005 levels by 2050. This means cutting total emissions to 150 megatonnes — across the entire country — in three decades. Projects that have already received approvals add up to 131 megatonnes, according to the Pembina Institute. 

Image result for the narwhal: What Alberta’s new UCP majority government means for the environment
Incoming Alberta Premier Jason Kenney and federal Conservative Party leader Andrew Scheer greet one another at the UCP convention in Red Deer, Alta. Photo: Andrew Scheer / Flickr

Regulations and renewables are on the outs and battles with environmental groups are in, as Kenney promises to accelerate approvals of energy projects, scrap efficiency measures and fund an ‘energy war room’ to fight anyone who criticizes the province’s energy sector

Welcome to a new world — a world of “war rooms,” red-tape reductions and some rapid-fire repeals of existing programs and legislation.

1. Regulation? Let’s cut it.

Kenney has made it clear that a UCP government will be all about “streamlining” and “efficiencies.”

As part of that plan, the UCP government will ramp up approvals for new energy projects. Kenney described his plan as a “rapid acceleration of approvals.”

At the same time, his “red tape reduction action plan” will “cut red tape by a third.” There will be a new so-called “one-in, one-out” rule that will require that every new regulation created is offset by the elimination of an existing regulation.

He’ll even appoint a “Minister for Red Tape Reduction.”

Red tape, according to the UCP, is a “costly and growing burden” that “kills jobs.”

2. Parks: privatized services and more booze!

Given the heated backlash over the province’s Bighorn Country proposal earlier this year, it won’t come as a surprise if the UCP doesn’t pursue the planned parks and recreation areas.

Kenney had previously described the NDP’s Bighorn land-use plans as “an extreme approach to land use which cuts out local residents and legitimate economical and recreational use.”

The UCP has, however, pledged to provide $10 million to support the creation of a new urban provincial park within Edmonton city limits.

It has also pledged that “major environmental protection proposals” will be subject to a review of their economic impacts to ensure they are not harmful to the economy — a “balance,” the party says, to current environmental impact assessments of industrial projects.

The party’s platform outlines an increased emphasis of partnerships with park societies, and suggests the UCP will support increased volunteer activities to maintain parks.

An initial pilot project will determine if nearly all park services could be privatized, by examining “whether park societies could effectively be contracted to assume all park management responsibilities from [Alberta Environment and Parks], with the exception of enforcement.”

But, hey — soon we’ll be able to relax with a glass of wine after a long day of trail maintenance. The UCP has pledged to “relax liquor constraints in a number of provincial parks” as well as loosening liquor laws in municipal parks MORE

RELATED:

Canada’s Tar Sands Province Elects a Combative New Leader Promising Oil & Pipeline Revival
 

Global economy would save up to $160 trillion by shifting to renewables, electric cars

“Every dollar spent on energy transition would pay off up to seven times.”


AERIAL VIEW OF BLOOMING RAPESEED FLOWERS NEXT TO A PHOTOVOLTAIC POWER STATION AT LIANGYUAN TOWN ON MARCH 29, 2019 IN HEFEI, ANHUI PROVINCE OF CHINA. (PHOTO BY WANG WEN/VCG VIA GETTY IMAGES)

Imagine a world where 85% of all electricity comes from renewable sources, there are over one billion electric vehicles on the road, and we are on track to preserve a livable climate for our children and future generations.

The International Renewable Energy Agency (IRENA) reported this week that such a future is not merely possible by 2050, but thanks to plummeting prices in key clean energy technologies, the cost of saving the climate has dropped dramatically.

In fact, according to IRENA’s new report, the most cost-effective strategy to achieve a “climate-safe future” — keeping global warming below 2 degrees Celsius (3.6 degrees Fahrenheit) — is an accelerated energy transition to renewables and energy efficiency coupled with electrification of key sectors like transportation.

This Renewable Energy Roadmap (REmap) scenario “would also save the global economy up to USD 160 trillion cumulatively over the next 30 years in avoided health costs, energy subsidies and climate damages.” MORE

Energy democracy: taking back power

Energy democracy: Coal to wind

Executive summary

Electric utility (re)municipalization is gaining popularity as a strategy to shift away from a reliance on fossil fuel extraction in the context of combating climate change. Across the world—from Berlin to Boulder—communities have initiated campaigns to take back their power from investor-owned (private) utilities and create publicly owned and operated utilities. Moreover, such efforts are increasingly taking on the perspective and language of energy democracy.

Energy democracy seeks not only to solve climate change, but to also address entrenched systemic inequalities. It is a vision to restructure the energy future based on inclusive engagement, where genuine participation in democratic processes provides community control and renewable energy generates local, equitably distributed wealth (Angel, 2016; Giancatarino, 2013a; Yenneti & Day, 2015). By transitioning from a privately- to a publicly owned utility, proponents of energy democracy hope to democratize the decision-making process, eliminate the overriding goal of profit maximization, and quickly transition away from fossil fuels.

Utilities are traditionally profit-oriented corporations whose structures are based on a paradigm of extraction. Following the path of least resistance, they often burden communities who do not have the political or financial capital to object to the impacts of their fossil fuel infrastructure. Residents living within three miles of a coal plant, for instance, are more likely to earn a below-average annual income and be a person of color (Patterson et al., 2011); similar statistics have been recorded for natural gas infrastructure (Bienkowski, 2015).

These utilities are in a moment of existential crisis with the rise of renewables. From gas pipelines to coal power plants, their investments are turning into stranded assets, as political leaders and investors realize that eliminating fossil fuels from the energy mix is paramount to creating healthy communities and stemming climate change. MORE

The False Choice Between Economic Growth and Combatting Climate Change

Last year, the U.S.’s carbon-dioxide emissions increased by an estimated 3.4 per cent, the second-largest gain in the past two decades.  Photograph by Fernando Moleres / Panos Pictures / Redux
In 1974, the economist William Nordhaus described the transition from a “cowboy economy” to a “spaceship economy.” In the former, he wrote, “we could afford to use our resources profligately,” and “the environment could be used as a sink without becoming fouled.” But, in the spaceship economy, “great attention must be paid to the sources of life and to the dumps where our refuse is piled.” He added, “Things which have traditionally been treated as free goods—air, water, quiet, natural beauty—must now be treated with the same care as other scarce goods.”
 “It’s absolutely the case that emissions and growth can be decoupled,” Marshall Burke, an assistant professor in Stanford University’s Department of Earth System Science, told me.
“But the switch to nuclear and renewables needs to happen more rapidly. “It takes policy. It won’t happen through markets alone.”
As a small but growing coalition of congressional Democrats, led by Representative Alexandria Ocasio-Cortez, have outlined as part of their Green New Deal, transforming the energy sector—and, really, the entire economy, in a just and more equitable way—will require some sort of carbon tax (preferably a “fee and dividend” approach, which distributes tax revenues as rebates directly to citizens), and also new regulations and huge investments. “We can decarbonize the electric sector at a fairly low cost….That’s where some of the cheapest emissions reductions are to be found. Extensive government subsidies could hasten the spread of renewables—specifically, solar, wind, and batteries—and offset any rise in emissions elsewhere….There are ways to reduce the use of fossil fuels in heating; utilities, for instance, can create incentive programs so that homeowners have a motivation to replace their boilers with electric heat pumps. MORE

Mark Your Calendars: 2035 Will Be Renewable Energy Tipping Point

renewable energy in Germany
Encavis hybrid solar and wind energy installation in Germany

Global  consulting firm Wood Mackenzie has released a new report with the snappy title “Thinking global energy transitions: The what, if, how and when.” It claims 2035 will be the year when the world’s transition to renewable energy reaches critical mass. That year will be the “point of singularity,” the time when the world moves away from oil and gas to enter the age of renewables.

In an interview with PV Magazine, Christian Breyer, professor of solar economy at Lappeenranta University of Technology in Finland, puts the need for urgency in stark terms.

“We already have no other appropriate options than this 100% renewables pathway. This is not science fiction but a real world scenario that must be taken into serious consideration, unless we don’t want to commit a collective suicide. But this is not only a matter of survival, it is also the cheapest way to shape our energy future, as solar and renewables have the potential to reduce the LCOE of global power supply from €70/MWh in 2015 to between 50 and €55/MWh by 2050.

“The easiest part of this trajectory will be the switch to renewables of the power sector, while the hard job will have to be done for the transport, industry and chemical sectors. In the transport sector, marine and aviation will also have to go through electrification, as economically they only work with low-cost electricity, and this will come mainly from renewables in the future, particularly from solar.”

Professor Breyer concludes his interview with this thought. “A world energy system based exclusively on renewable energies and an almost fully electrified world are our only chances to avoid further disasters. This is absolutely doable, and at lower costs than today.”  MORE

Yet Another Benefit of Renewable Energy: It Uses Practically No Water Compared to Fossil Fuels

The Energy Information Administration (EIA) recently highlighted a little-discussed benefit of using renewables like wind and solar to produce electricity: Unlike most power sources, they require “almost no water.”

According to the latest U.S. Geological Survey (USGS) data from 2015, 41 percent of the water used in America is for power generation. The next highest use is irrigation for agriculture, accounting for 37 percent of U.S. water use (and close to two-thirds of that is consumptive).

The Union of Concerned Scientists was raising this alarm in 2012 when the nonprofit created an infographic focused on the “energy-water collision,” which “refers to the range of issues that can crop up where our water resources and our power sector interact.” That can include increased competition for dwindling water sources and problems when the water going into or out of power plants is too warm. MORE