Tuesday, 29 July 2014

The growing economic cost of fossil fuels

An very interesting and straightforward story from Ambrose Evans-Pritchard of the Telegraph earlier this month on the low returns on investment coming out of the traditional sources of energy:
Fossil industry is the subprime danger of this cycle - Telegraph
Futures Forum: Fracking: pros and cons considered again

This week's report on energy from the new economics foundation cites this and other stories:

News that last month was the world’s hottest June on record provided another reminder that urgent global action is needed to combat climate change. But in a backwards move this week Australia axed its carbon tax on political grounds, despite widespread criticism from analysts and the complete absence of a credible alternative strategy. Meanwhile, the EU missed the chance to show bold leadership on energy efficiency as it settled on a voluntary target of 30% by 2030 - well short of the 40% advocated by Germany. Europe’s Climate Commissioner Connie Hedegaard hailed the deal as good news for the climate and bad news for Mr Putin. But the Russian leader is unlikely to be quaking just yet: Europe's long-running failure to impose tougher sanctions stems largely from the continent’s heavy reliance on Russian gas imports.

In the UK, there was better news. Months of internal wrangling ended with the government committing to the fourth carbon budget despite treasury efforts to weaken it. This budget legally binds the country to reduce emissions in 2023-2027 by 50% compared to 1990 levels. The Climate Change Committee however warned that the first budget was met only with a combination of policy intervention and a huge economic recession, and that stronger measures will be required to meet future budgets.

The growing economic cost of fossil fuels was highlighted this week in an article by Ambrose Evans-Pritchard in the Telegraph. While the industry pours money into maintaining production of high-cost resources like tar sands, deepwater and shale, the cost of renewables is plummeting – in Denmark wind will become the cheapest option for power by 2016. Many analysts expect companies to end up sitting on reserves of fossil fuels they have paid for but cannot sell - also known as stranded assets. The industry’s problem is that cheap conventional crude oil peaked in 2005. No wonder they’re so keen to frack in Britain – they’re hanging on for dear life.

Three things you shouldn't miss this week

  1. Chart: The combined average temperature over global land and ocean surfaces for June 2014 was the highest on record for the month, at 0.72°C (1.30°F) above the 20th century average of 15.5°C (59.9°F). :

    Source: NOAA 
  2. Article: Fossil industry is the subprime danger of this cycle – The cumulative blitz on energy exploration and production over the past six years has been $5.4 trillion, yet little has come of it.
  3. Article: Wind Energy Cheapest Form of Power, According to Denmark - The Danish Energy Agency found that onshore wind plants coming online in 2016 will cost around $.05 per kilowatt hour.


Energy Transition

EU agrees to improve energy efficiency 30% by 2030 - EU climate chief says energy-saving deal is not good news for Putin, but others hoping for 40% target are disappointed.
Germany is most energy efficient major economy, study finds - Ranking places Mexico last and voices concern about the pace of efforts by the United States and Australia.
Cities 'should generate green energy', says think tank - Local authorities and customers could reap the benefits of renewable energy subsidies, a report by IPPR suggested.

Oil & Gas

Oil Demand Rising Fastest Since 2010 for IEA on China - World oil consumption will increase next year by 1.4 million barrels a day, the agency said in its first monthly report to assess 2015…
Oil and an independent Kurdistan - The map of the Middle East as we know it today is 90 years old. It is now being over written by events on the ground.
Russian oil production expected to drop - An anticipated drop in oil production by 2016 is expected to hurt the Russian economy, the Russian Finance Ministry said Monday.
U.K. Seeks Tax Advice From Oil Industry on North Sea Investments - The consultation, to be held over 12 weeks, will be aimed at maximizing the value of the U.K’s oil and gas…
U.K. Shale Regulation Inadequate for Safety, Report Says - Shale gas exploration in the U.K. lacks adequate regulation to protect public health and the environment including water shortages, according to a report by scientists.
West Sussex county council turns down shale gas exploration bid - Refusal of Celtique Energie thought to be the first time a council has rejected a planning application by a shale company.
Europe braced for any gas crisis as Russia sanctions escalate - LNG terminals in Britain and the Continent currently operating at just 20pc of full capacity.


The EU's nuclear links with Russia - There is a significant role in Europe's energy sector for Russian nuclear supplies and the potential for significant disruption in the EU.
Germany, UK and Poland top ‘dirty 30’ list of EU coal-fired power stations - Report warns policymakers against allowing extensions to the lifetimes of coal plants...


Grangemouth to clinch US shale deal with £230m Government backing - The Scottish based refinery wins loan under UK Guarantee Scheme which will ensure it can import cheap ethane from America.
A detailed look at why the future of UK energy is so hard to predict - The Guardian reported National Grid forecasting energy prices will double by the end of the decade. Other media reported the grid operator found that UK shale gas could supply much of our future needs… What’s going on?
Cabinet reshuffle: Chancellor's allies Matt Hancock and Amber Rudd join energy department - Matt Hancock replaces Michael Fallon as energy minister while Amber Rudd takes on Greg Barker's climate change brief.
New Environment Agency chairman has fracking links - The government has been criticised for appointing a former business adviser to David Cameron who has had corporate links to fracking …
Government cuts Green Deal cashback after just six weeks - The cashback available to households has been reduced from £7,600 to £5,600 following huge demand.
Government accused of setting 'meaningless targets' on fuel poverty - Critics were quick to accuse the Coalition of “setting meaningless targets” and ignoring the plight of pensioners.


Australia votes to repeal carbon tax - Australia's Senate has voted to repeal the carbon tax, a levy on the biggest polluters passed by the previous Labor government.
Climate Change Committee blames Government over slow rate of progress in reducing UK carbon emissions - The report pointed out that just 170,000 cavity walls were insulated in 2013, down from more than 600,000 in 2012.
The elephant in the atmosphere - Managers at the biggest oil firms clash with investors over climate change

Water Energy Nexus

A World Without Water - FT investigation - Water is needed for almost every aspect of energy production, from digging up fossil fuels to refining.
California Halts Injection of Fracking Waste, Warning it May Be Contaminating Aquifers - State’s drought has forced farmers to rely on groundwater…

Related Reports and Commentary

Meeting Carbon Budgets – 2014 Progress Report to Parliament – Committee on Climate Change
City energy: A new powerhouse for Britain – IPPR
2014 International Energy Efficiency Scorecard - American Council for an Energy Efficient Economy (ACEEE)
Shale gas and fracking: examining the evidence - Scientists for Global Responsibility (SGR) and Chartered Institute of Environmental Health (CIEH)
Energy Technology Perspectives 2014 – International Energy Agency

The Energy Crunch team: Simone Osborn, David Strahan, Griffin Carpenter, Stephen Devlin, Aniol Esteban, Tim Jenkins

Energy round-up: Global debate heats up | New Economics Foundation
Energy & Climate Change | New Economics Foundation

See also:

Futures Forum: "In fact, climate forecasts are actually outperforming many of the key economic forecasts cited by government departments and journalists."

Futures Forum: District heating systems run on waste... from Scandanavia
Futures Forum: Sweden, Denmark and Norway have been voted the happiest countries in the world...

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