Triple Crunch Log Jeremy Leggett

12.5.09. The CCS global market was worth £13.2bn in 2007-8 (around 1% of the international low-carbon tech sector), of which the UK share was £468m, according to a report for BERR. Only two small demonstration projects are in operation, Schwarze Pumpe in Germany and Lacq in the French Pyrenees, both based on post-combustion technology. Alstom, Siemens and Mitsubishi heavy Industries, Fluor and BASF all have designs for post-combustion technology. Siemens, GE and Shell all have designs for pre-combustion technology. The third type of CCS is oxyfuel, where coal is burned in almost pure oxygen, with almost pure CO2 as the exhaust gas. Alstom and Doosan Babcock Energy lead here.¹¹⁹²

Drax will not become a demonstration plant for CCS, CEO says. Dorothy Thompson clearly has her doubts it will work: “CCS may not prove to be the answer we are all looking for and, even if it does, it remains a long way off. CCS is unlikely to make much contribution to the UK’s target of cutting greenhouse emissions by 34% by 2020, and even if it does it will be expensive. A modern coal-fired power station will need to generate 25% more electricity just to power the equipment that will remove the increased carbon it is emitting.”¹¹⁹³

BP CEO says solar PV won’t compete with traditional energy without a breakthrough. Tony Hayward tells a conference in California that “I think solar is probably the most challenged of all of BP’s alternative energy interests. It is not going to make the transition to be competitive with more conventional power, the gap is too big.” There needs to be a step-change in technology, he says. BP has cut investment in all alternative energies from $1.4bn last year to $1bn this year. BP no longer has been shutting solar factories around the world and no longer sets a target for solar sales.¹¹⁹⁴ Hayward thinks the second half of the century will be “the solarcentury.”¹¹⁹⁵

13.5.09. UK PV Manufacturers Association predicts residential solar grid parity in the UK by 2013. Costs per watt peak, approaching £4 installed now and below £2 per Wp installed by 2020, are falling rapidly today as recent constraints in the upstream PV supply chain unwind. Domestic retail electricity prices reached 14p per kWh in 2008. At the time, a typical UK householder with a solar roof was paying approximately 23p per unit for their PV-generated electricity. But this gap is closing rapidly as retail electricity prices rise (UK electricity price rises have averaged 5% per year over the last 10 years) and PV costs fall. Assuming modest increases in grid electricity inflation and significant cost reductions (as widely predicted) for solar technology, grid parity for domestic PV customers could be reached as early as 2013. Residential grid parity, therefore, could be close even in cloudy Britain. Even for commercial, non-domestic customers in the UK, parity could arrive before 2020.¹¹⁹⁶

14.5.09. Biggest solar contract in history signed. Brightsource Energy and PG&E enter into a contract for 1.31 GW of solar thermal spanning 7 projects.

US climate bill takes shape with 17% GHG cuts from 2005 levels by 2020, after oil, coal and rustbelt Democrats support it against expectations. Pundits predict this will be enough to get the Chinese onboard for Copenhagen.

IEA says oil demand will fall by 2.56 mbd to 83.2mbd in 2009, its lowest level since 1981. The IEA’s April forecast was a 2.4 mbd fall. It also reports Opec’s resolve to cut output is fraying – raised production by 270,000 barrels a day last month, reversing 7 months of cuts, a move likely to depress price. Success – a return to $60 - has led to temptation to cheat, analysts say. Of the 11 active members, Saudi is still down but Iran and Angola are well up on quota.

Heads roll in the UK parliamentary expenses scandal. Labour MP Eliot Morley is suspended for claiming £16,000 mortgage relief on a mortgage that didn’t exist. He claims it is an honest mistake. Cameron advisor Andrew Mackay is forced to resign after claiming £170,000 a year second residence allowance for years, the same as a wife, another Conservative MP, with whom he lives. Two Labour peers are suspended from the Lords – the first suspensions for more than 400 years – for taking money in return for amending legislation. Lord Truscott, former energy minister, is one. Many other MPs are guilty of “flipping” between two homes – declaring first one as the first home and then the second, depending on allowances sought. Flipping is in the rules – hitherto deemed secret by MPs – but now a Freedom of Information request has led to compilation, and the discs have been leaked to the Daily Telegraph, the public are drawing their own conclusions. Lord Naseby, a former Commons Deputy Speaker, says the crisis is so damaging that Parliament might have to be dissolved.

Riot police in gas masks guard a company’s AGM, looking like something from a science fiction horror story. In Luxembourg, workers at steel maker ArcelorMittal disrupted the AGM with smoke bombs. Meanwhile, at Allied irish Bank’s annual meeting an investor pelted directors with eggs, saying they representing his nest egg that they had destroyed.

15.5.09. The London array - largest wind project in the world - is out of the starting blocks, thanks to UK government support for wind in the recent budget. 630MW should be generating by 2012, in a first phase. A second phase would lift the total to 1 GW, enough for 750,000 homes or a quarter of Greater London’s electricity. Currently only 2.2GW of the UK’s 75GW of power is from wind.¹¹⁹⁷

Only three smart meter firms are certified by Ofgem. Yet the government says every one of 26 million homes will have one by 2020, and they will cost £29 each (optimistic). (NB that would mean £750 m of sales ….over ten years say, would mean £74m each. The equipment is not the money maker here). One of the three is Remote Energy Monitoring, whose chairman is John Roberts.

Biosolar aims for plant-based polymers to replace petroleum-based plastics in most PV modules today, enabling PV to be both cheaper and a “truly green” energy source. The Californian firm wants to replace mylar and tedlar back sheets at half the price. Their BioBacksheet product is expected to be in within the year. The first generation is for crystalline cells. Thin film comes next.¹¹⁹⁸

16.5.09. Annual renewable energy investment was $120 billion in 2008, a fourfold increase in five years. In the four years from end-2004 to end-2008, total power capacity from new renewables increased 75 percent to 280 GW, including a sixfold increase in solar photovoltaic (PV) capacity to more than 16 GW, a 250 percent increase in wind power capacity to 121 GW, and significant gains in small hydro, geothermal, and biomass power generation. Solar heating capacity doubled to 145 gigawatts-thermal (GWth) in the same period. In 2008, a tough year, wind power grew by 29 percent, grid-tied solar PV by 70 percent, and the capacity of utility-scale solar PV plants (larger than 200 kilowatts) tripled, to 3 GW. Global solar PV production increased by 90 percent to 6.9 GW. The United States was the leader in new capacity investment with $24 billion invested, or 20 percent of global total investment. The United States overtook Germany to lead in added and total wind power capacity. China doubled its wind power capacity for the fifth year in a row, moving up to fourth place globally. The wind industry is building ever-larger turbines, with models of 3 MW now common. For the first time in 2008, both the United States and the European Union added more power capacity from renewables than from conventional sources (including gas, coal, oil, and nuclear). At least 64 countries have policies to promote renewable power generation, and renewables policy targets have been set in at least 73 countries, including 45 countries and 18 states/provinces/territories with feed-in tariffs.¹¹⁹⁹

17.5.08. New nuclear scares threaten UK nuclear sites. A radioactive leak, undiscovered for 14 months, was found in January at Sellafield the day before a vist by the PM. So Nuclear Management Partners (who run the site) have recently confessed. At “level two”, this was the worst since a 2005 leak for which BNFL was fined £500,000. A board of enquiry concludes the leak went un-noticed because “managerial controls over the line were insufficient and there was inadequate inspection.” Meanwhile, elsewhere on the site two containers of highly radioactive material have gone missing. NMP says it is most likely that “the anomaly lies within the accounting procedures”, and the lost containers are still somewhere on site. “Environmental and public safety has not been compromised,” they say.¹²⁰⁰

18.5.09. Two more radiation leaks revealed today in British nuclear submarines, making nine in 12 years. So the MoD admits. One was at Devonport two months ago.¹²⁰¹

UK government is under growing pressure to hold public inquiry about nuclear new build. The current system of “justification”, a process required by the EU to ensure benefits outweigh detriments, has been challenged in the UK by a group of academics and others – the Nuclear Consultation Group - as insufficiently transparent. They have written to DECC calling for an inquiry, and some are considering legal action.¹²⁰²

“Should we stop worrying so much about economic growth?” Guardian editorial wonders. The Sustainable Development Commission has written an interesting report, Prosperity Without Growth, suggesting we should. GDP measures many things that do not necessary create value. Just before the bust in 2007, finance and business services accounted for almost half British GDP. We can’t decarbonise and grow GDP. Ideas about going slower and having more time for social activity and interests are not new. “Such debates must be revisited while there is still time,” the paper concludes.¹²⁰³

UK Automobile Association says government’s car-scrappage scheme is a “dog’s dinner” after Honda and Ford pull out on the day of the launch, unsure who will pay the £2,000 supposedly on offer in the cash-for-old-bangers scheme. The scheme is designed to restart moribund auto sales.¹²⁰⁴

19.5.09. Thorp will probably have to be mothballed for four years, operating company admits. Sellafield Ltd admits its £1.8bn nuclear reprocessing plant cannot meet NII orders for operation as a result of continuing technical problems. This will cost millions of pounds. When it began operating in 1997, then owners BNFL said Thorp would reprocess 7,000 tonnes of spent fuel in its first ten years. It has managed 6,000, but now because of three broken evaporator plants is down to 200 tonnes a year, around a sixth of the original design capacity. Two of the plants have been breaking down repeatedly, and the third has been closed after a rise in radiation levels. Work has started on a new £100m evaporator, but it is behind schedule, and probably won’t come on stream before 2013. Germany may sue when spent fuel is not returned reprocessed. Closure of the plant would slow decommissioning of British nuclear plants, and remove much of the £70bn needed for that process, which reprocessing was supposed to raise a good deal of.¹²⁰⁵

US and China has held secret bilateral climate talks …..and made good progress, the Guardian is told. A senior delegation of Republicans and Democrats went for two visits in the final Bush months. John Holdren was a part of the delegation. The first, in the autumn of 2007, was at the suggestion of the Chinese. During the second, a MoU was drawn up around three points: first, using existing technologies to cut carbon emissions by 20%; second, co-operating in CCS and fuel-efficient cars; third, signing up to a deal in Copenhagen. The talks are continuing.¹²⁰⁶

Publication of pollution records is forcing Chinese companies to clean up their activities, the director of the Chinese Institute for Public and Environmental Affairs (IPE) writes. Environmental transparency is expanding in China, he says, as the negative impacts of pollution become ever clearer, and multinational companies such as GE and WalMart endeavour to apply supply chain management by monitoring suppliers’ environmental performance. A pollution source map published by the IPE, showing thousands of sources, has increased pressure on Chinese companies.¹²⁰⁷

Obama announces industry average 35.5 mpg CAFÉ standard for US autos by 2016. (Hitherto the target was 35mpg by 2020). Automakers, legistlators and environmentalists all profess themselves pleased with the tightened rule – the carmakers have to. Compex state by state rules are now a thing of the past. But critics point out that a gasoline tax would be better: CAFÉ standards affect what cars we buy; taxes affect that, plus how much we drive them. (But it wouldn’t have passed by Congress). The five year programme will save 1.8 billion barrels of oil over the period, the Obama administration calculates. Each automaker must achieve the average across its fleet. Standards will also be set for each size of vehicle, and a limit set for overall greenhouse emissions from each car. The aministration calculates this will be equivalent to taking 177m cars off the roads, or shutting 194 coal-fired power plants (NB this doesn’t sound right wrt the 1.8 bb oil calculation).¹²⁰⁸

Shell under more pressure on carbon intensity of operations. Greenpeace and others release a study showing the company’s carbon intensity will rise 85% in coming years because of Canadian tar sands and Nigerian gas, well ahead of rivals. Shell itself admits that its carbon intensity has risen by more than a quarter since 2001.¹²⁰⁹

Shell investors rebel over executive pay at AGM: 59% reject the bonus awards to van der Veer and other executives, made despite missing targets. van der Veer received a bonus of €a.35m for 2006-8, and total remuneration of €10.3m in 2008. This was the second biggest no vote this year, beaten only by the RBS one. Such votes are non binding.¹²¹⁰

Italian solar energy gold rush risks overheating, PV industry warns. Anton Milner of Q-cells says grid parity is due next year, but the Italians must eradicate the abuses arising from the feed-in tariff as seen in Spain. The tariffs are 68-75 cents a watt, around double the German rate. Amid the flood of applications for solar frams are suspected Mafia front organizations. Regional governments in the south are taking their time with approvals, trying to screen as they go. Prices of suitable agricultural land have risen as much as sixfold in the past two years as developers pile in.¹²¹¹

20.5.09. Russia is spending a large part of its oil fund - $143bn at its peak - as economic gloom spreads. The relatively high current oil price, around $56, is the “worst it could be”, according to one economist: too low to allow the free spending of the boom, and too high to force real reform in public spending. Unemployment stands at 10% and public discontent is growing.¹²¹²

Recovery in oil price is ignoring the fundamentals, FT observes. Now above $60, the oil price is 85% up on February’s low of $32.7. Traders are saying this is more about long-term bets on supply and demand than short-term factors, with record inventories and weak demand.

The financial crisis is “not capitalism’s 1989,” Martin Wolf argues: it won’t be a defiining watershed. Capitalism seems sure will survive, albeit much amended. Countries will adapt the market economy to their own needs. “A world with many capitalisms will be tricky, but fun.” He is less sure about the survival of globalisation. The stimulus programmes have partially deglobalised finance, and few political leaders have shown willingness to go out on a limb for free trade. The state is back, albeit mostly near-brankrupt. “The effort to consolidate public finances will dominate politics for years.”¹²¹³

21.5.09. China sets out a tough climate position ahead of next set of pre-Copenhagen climate talks which begin 1 June in Bonn: 40% emissions cuts by rich states by 2020, and 1% of GDP to help pay for emissions reduction schemes in developing countries including China.

22.5.09. IEA forecasts that electricity will fall in 2009 for the first time since 1945, by 3.5%. Three quarters of the fall is due to industrial consumption. In a report last year, the IEA forecast a rise in global electricity consumption of 32.5% between 2006 and 2015: 3.25% per year. It grew 4.7% in 2007 and 2.5% in 2008. The IEA will tell G8 energy ministers this news at the weekend. It will also say they need to invest 6 times more on renewables if they are to hit greenhouse targets, and that they face the risk of an oil supply squeeze in 2012. At least 2 mbd of capacity has been cancelled and another 4.5 mbd delayed by at least 18 months.¹²¹⁴

Spain provided almost 30% of total power consumption with renewables as of end 2008: 39 GW comprising 81% wind, 11.8% mini-hydro, 6% biomass and 1.3% solar.¹²¹⁵ (L)

Norwegian life insurers ask for a rule change so they can invest more in renewables. The three biggest companies, including Storebrand, want to be allowed in things other than bonds, shares and property to provision stable and secure pension plans. Renewable power generation has what they want, they say: long-term stable returns. In part, this situation arises because oil-rich Norway does not need to issue bonds. The finance ministry is considering the proposal.¹²¹⁶

24.5.09. Leading writers, actors and journalists launch campaign for PR in UK in a letter to the Observer. They call for a referendum on the day of the election. Some Labour politicians, notably Alan Johnson, have also come out in favour of PR.

Shell directors told to pay back their bonuses by institutional investors. Abigail Herron of Co-operative Asset Management: “Legally, Shell can do what it wants on this one, but on moral grounds, the bonuses should be paid back to shareholders.” Alan MacDougall, MD of investor activist group PIRC, agrees and says the non-exec chairman of the remuneration committee, Sir Peter Job, should step down. He has been on other remuneration committees that have handed out huge bonuses, notably at GSK.¹²¹⁷

735 empty tankers ride high in the water off Singapore, one of the largest fleets ever gathered, “marooned by the receding tide of global trade.”¹²¹⁸

25.5.09. Saudi oil minister Ali Naimi warns of oil price spike in 2-3 years, worse than the 2008 one, because of underinvestment in new capacity.¹²¹⁹

Russia cannot guarantee the EU that there will be no further dusruptions to gas supplies, President Dmitry Medvedev says in a speech at an EU-Russia summit in Khabarovsk. Neither, relatedly, will it be lending any more money to Ukraine, because it has concerns about Kiev’s solvency. Ukraine should be filling its storage facilities around now ready for winter, and isn’t. This itself impacts smooth transit to Europe.¹²²⁰

Militants resume pipeline attacks in the Niger delta in retaliation to an Army push that began 10 days ago, with an attack on a militant base. A significant Chevron pipeline is blown up. Such attacks have reduced output to around half the country’s c. 3.2 mbd capacity in the past few years.¹²²¹

The UK economy crisis worsens, though displaced from the headlines by the MP expenses scandal. It is the worst slump since 1931. Unemployment rose faster in the first quarter than at any time since modern records began in 1971, housebuilding is at its lowest since 1953, real incomes have fallen for the poorest 20%. New data shows the long phase of above-average growth Brown used to boast about was bankrolled by people raiding their savings. In the mid 1990s, savings as a percentage of take home pay was around 5%. At the time the crisis broke in 2007 it was minus 9%.¹²²²

CERA study concludes that tar sands boost greenhouse-gas emissions 5-15%. But that figure is for “well to wheels.” Well-to-retail-pump shows twice the emissions of Saudi light.¹²²³

26.5.09. EDF CEO says no nuclear building the UK without subsidies. Vincent de Riyaz has yet to persuade his owners, (85% the French government) that his plan to build 4 reactors at €5bn (£4.4bn) each makes commercial sense. He wants a “level playing field” with wind, and a floor price for carbon in the EU ETS. he is also concerned that high levels of wind construction will require the nuclear plants to be shut down when the wind output is high.¹²²⁴

Gulf faces gas shortfall: only Qatar and Iran have enough supplies for their own needs, FT reports. The cumulative gas shortfall for the 6 GCC nations may be at least 7 trillion cubic feet by 2015. Neither Qatar or Iran can necessarily help their neighbours. Qatar’s moratorium on new North Field projects extends to at least 2013, as things stand. In Iran, the problem is global and regional politics. Saudi Arabia, Kuwait and the UAE are already burning oil for power and expected increasingly to do so. The UAE is turning to nuclear, after concluding they will need to add more than 40GW by 2020. They estimate not much more than half of that can feasibly come from gas. An un-named official from the Abu Dhabi National Oil Company: “Most people don’t recognize it, but the Middle East has one of the world’s fastest growing rates of [power] demand….and the the net effect is a lot of crude oil is getting diverted to the electricity sector.”¹²²⁵ (L)

Oil rises to a six month high of $63 on news that Opec sees signs of demand recovery. Opec is not expected to cut its production quotas further.

Oil and gas executives worry that price volatility is making billion-dollar projects difficult. Schlumberger couldn’t hire fast enough a year ago. Now 10,000 are being laid off. Tar sands projects need a minimum $40 price. Opec has delayed as many as 150 oil projects.¹²²⁶ (L) Special energy supplement.

BP seeks to appoint a Russian as TNK-BP CEO to solve the long-running impasse. Pavel Skitovich is a financier reporting to an oligarch and has no oil experience.

JL FT article: Battle lines are being drawn in the war over renewables. “What EDF and E.On may really be saying is that there might not be the money available for both renewables programmes and a nuclear renaissance. Oil giants have also been owning up to an aversion to large-scale renewables. Both Shell and BP have decided wind and solar power are ‘not economic’. The UK PV Manufacturers Association – including my company Solarcentury – predicts residential grid parity between solar and conventional electricity, even in cloudy Britain, within five years. We will find out who is right – and rather soon. Two visions of the future are being offered. One side proposes accelerating use of fossil-fuel and nuclear for many years, with or without carbon capture. The other proposes falling clean energy costs and expanding renewables mass-markets that will humble many supposed energy pundits and eventually displace most if not all unsequestered fossil-fuel and nuclear generation. Governments and investors will be paying their money and taking their choice; a liveable future on the planet may rest on their decisions.”¹²²⁷