Monday, November 16, 2009

Davy Jones

Now that the promise made two years ago in Bali to have a replacement for the Kyoto Protocol by the end of this year has been deep sixed, we have a budget to work with. Each delay in cutting greenhouse gas emissions means we get to do something unthinkable to compensate. We could build dikes for example or try to move species poleward or attempt some other ridiculous adaptation measure like opening our borders to refugees. Mitigation is too easy and too cheap so let's plan on breaking the bank.

But still, there are things that fall in between, not exactly smart things like saving money by switching to renewable energy but then not exactly stupid either like letting many species go extinct but they still maybe a little expensive. We can say that all adaptation is stupid since it means that mitigation was not in time. And we can say that mitigation measures that preempt more effective mitigation efforts owing to higher cost like new nuclear power or carbon capture and sequestration at coal plants is stupid since they force more stupid adaptation. They have a highly amplified opportunity cost. But there are after-the-fact mitigation methods that might compensate for missed mitigation opportunities that could avoid some even more expensive adaptation, and perhaps more importantly, the sense of failure that adaptation evokes. Things that fall into this category might include renewably powered artificial trees that collect carbon dioxide from the atmosphere or getting fuel gas from making biochar. Pumping liquid carbon dioxide into the ground or spreading char on the surface though may leave some questions open about how permanent these actions might be. But, turning carbon dioxide into calcium carbonate might last for a while since this is how the main branch of the geological carbon cycle operates. How does the natural cycle work? Largely by making coral.

Yet coral is currently being harmed by increasing sea surface temperatures which cause bleaching and cut down the productivity of coral colonies. And, even though rising sea levels should stimulate coral growth in order to keep the coral tops illuminated, we would still need to increase the active coral surface area by about a factor of 15 and have 30 cm of sea level rise to clean up the mess we've made in the atmosphere. But 30 cm of sea level rise seems like an expensive proposition. What could we do to grow coral without the sea level rise?

Reef building coral need salt water, oxygen, stable temperatures, calcium ions, carbon dioxide and light to prosper. And there is lots and lots of ocean floor that has all of these but light because it is too deep. So, why not provide the light? In tropical seas that do not suffer from cyclones, floating islands built to collect solar power may soon be available. Running a power cable to the bottom and illuminating coral starts with blue LEDs using a portion of the generated power could make these islands not just carbon neutral but carbon negative. And, one would be building a new fishery supported by the new reef.

Off the Queensland coast there is good wind power potential. Stranded wind power might similarly be used to build the deep outer portions of the Great Barrier Reef in clean water with stable temperature.

And, it may be possible to construct buoys that can simply direct sunlight down through optical fibers to greater depth. No need for wiring or LEDs.

Although a slow process, it may be worthwhile to form novel architectural elements using directed light to determine the shape of coral growth that could be raised and used on land. Decorative columns or domes might be fabricated in this manner. Perhaps even sculpture could be made by directing how the light falls on the growing coral.

Full fathoms five thy father lies
Of his bones are coral made
Those are pearls that were his eyes;
Nothing of him that doth fade
But doth suffer a sea-change
Into something rich and strange.
Sea-nymphs hourly ring his knell.

--The Tempest

Wednesday, April 22, 2009

Coal is too expensive too

The way to keep huge carbon reservoirs like tar sands and oil shale out of the atmosphere is to ensure that the world price of oil is well below the cost of production for these messes. And, we've seen that these carbon sources are horrible for our economy because they are barely energy sources at all. Oil is only useful as an energy source if it is cheap to produce.

For oil, we need to cut our consumption to match the declining availability of useful oil so that we don't encourage the development of economically harmful oil. Consumption is our lever for this because we don't control supply.

But, with coal, we do control supply. And there may be as much as 20 years of coal left of a quality not too dissimilar to what has been used in the last decade or so. To be sure, the quality of the coal supply is declining with less energy produced per miner than in the past. But, the decline is still at a fairly slow stage compared to the current decline in high quality oil.

For new power generation, wind is now the lowest cost choice so there should really be no reason to increase coal production at this point but there are reasons to cut coal production to fight global warming, end mercury pollution, end the destruction of the environment surrounding coal mines, and, most importantly, to stop the horrible toll of coal mining deaths which has ceased to reduce. How to do that?

The EPA thinks we should make carbon more expensive. But, from an economic point of view, making energy less expensive is something necessary for increased prosperity. Now, we already know that coal is not the least expensive form of new generation. What would be a way to ensure that replacing existing coal generation is done at the lowest cost so that the sunk costs associated with closing existing power plants that are still serviceable are compensated? The method to do this would be to lower the cost of generation for a period so that the sunk costs can be covered more quickly. To do this, we need to only use the coal which is the least expensive to mine, modulo environmental and safety concerns. Thus, the EPA approach of raising the price of carbon does not seem to be the best path to follow. A better approach is to place price controls on coal so that economically marginal mines are closed and the cost of coal powered generation can be cut.

Power producers will see lower fuel prices, but also lower availability. A portion of their savings on fuel prices can go into supporting conservation efforts so that less fuel will be needed and a portion can repay outstanding obligations for power plant construction faster so that the plant is ready to be shut down when the price of coal (and it availability) reach zero.

And, a zero price for coal is surely what we want in the end since this is the price of its main future competitors, wind and solar. There is not a fuel charge for these and so it should be for coal as well. A price control regime would seem to be more certainly effective and much less expensive than any method of setting a higher carbon price to discourage consumption. Price control selects the most efficient mines to continue operating into the transition and thus keeps costs down where raising the price would not. Further, coal mines shut down mine-by-mine rather than having scattered layoffs throughout the industry. With scattered layoffs, we pay for unemployment in the mining sector while mine-by-mine shut downs can be addressed with replacement employment such as polysilicon refineries.

So, if the EPA is concerned about costs, price controls for coal would be the best approach.

Monday, March 23, 2009

Out of Alaska

This is the twentieth anniversary of Exxon's 11 million gallon oil spill in Prince William Sound in Alaska. The scum got out of about $2 billion of a judgment against them last year on the argument that shipping is special and above the law. While they may be able to play fast and loose with that law, the law of just deserts might still come up and bite them.

There is a whole lot of noise about energy independence these days. And while Exxon figures it is going to be importing oil for a long time, it does not mind the possibility of getting low cost oil leases and favorable tax treatment for oil on federal land. So, they give a lot of money to the "drill booboo drill" crowd to make noise about how we could get all the oil we need if we just drilled more oil wells domestically. These people are completely wrong but they are loud because they get all that money to say these things. They are wrong because essentially no amount of effort can produce what we consume domestically. There are only three years of recoverable oil in the ground and we can't make oil wells flow fast enough to bring all that up in three years. It is very unlikely that US production will do anything but decline for the next twenty years.

So, what would it take to get energy independence? We would have to stop using oil for the most part. The promise of the Obama administration is that we will get there in ten years. That means cutting about 13 million barrels a day of imports plus whatever decline in domestic production occurs in that time. Cutting consumption at that rate should keep the price of oil fairly low during that time, perhaps around $35/barrel. But, holding the price of oil down to that level means that there is very little new domestic oil that would be worth developing since we've already developed all of the cheap oil here. Thus, in a very real way, energy independence means not drilling for oil in the US. Continuing energy independence beyond that 10 year goal implies continuing to cut consumption as domestic supplies continue to decline. but if we do that, then we extend the period over which the world price of oil remains low and there remains no incentive to develop more domestic supply. Thus, it would seem that pushing the energy independence idea yields a smaller oil business sooner than otherwise. If this means that Exxon loses a trillion dollars or so, then perhaps the punishment they avoided for their oil spill will come right back to them.

Wednesday, March 11, 2009

Hungry money

I think it might make sense to refinance our public debt to a lower interest rate. I put up a post last week about it here.

One reason we can get such a low interest rate for our public debt right now is that money is scared to take risks. It seems to me that if we can absorb this money at a low rate of return, releasing money that was earning a higher rate of return, then we may boost money's appetite for returns and thus risk. Those who were satisfied with 6% bonds may not themselves choose to invest in 2% bonds once they have received their reward for tuning in their bonds early. These investors may be a little more bold than the 2% bond customers and wish to go bargain hunting in the stock market or look to invest in banks. This hungry money may help to boost the economy by taking on a little more risk than the currently available money would do. After all, the money invested in public debt has not been burned the way the rest of the money has been so it has a right to feel more confident.

Thursday, March 5, 2009

Refinancing our debt

A portion of our government expenses is paying interest on the debt we have incurred over time. Last fiscal year it was about $450 billion or about 13% of $3 trillion in federal spending. The usual breakdown is 8% of federal spending so there is doubtless some accounting going on that apportions these numbers in some way or another.

We have also just started to spend about $800 billion is fiscal stimulus that includes some spending on renewable energy infrastructure. The last time we looked at this sort of approach, it looked like a very good investment to make. But, we are doing it now because there is a recession on and interest rates are near zero so that it would seem that only spending can help with the economy.

But, interest rates pinned near zero mean that we can free up $450 billion a year if we just refinance our debt to zero interest. If we sell treasury securities now at zero interest and use that money to buy back outstanding securities sold at a higher interest rate, we can refinance our national debt and strongly cut expenses. This makes the stimulus spending budget neutral over two years and allows further spending if needed. We really can't do anything more productive for our future prosperity than invest in renewable energy and education. Refinancing now during a window when we can borrow at zero interest would seem to be a very prudent way to assure the ability to make those investments.

Wednesday, February 25, 2009

Past, Present and Future Ghosts

There are three fossil fuels, one solid, one liquid and one gas. In the United States we have very little oil left and it is pretty much universally recognized that we are going to have to use less oil. The means to do this are not settled. Some want to see more alternative liquid fuels while others look to substitution with electricity or with natural gas. Sources for alternative liquid fuels are possibly plants including algae or coal converted to a liquid or natural gas converted to a liquid. If given a choice between electricity generated with natural gas or natural gas burned directly in a vehicle, the electricity route is more efficient since gas turbines are 60% efficient and electric cars are 80% efficient so the overall efficiency is about 48% while average performance for car engines is about 20%. So, we'd use more than twice as much gas using it directly for transportation than if we converted it to electricity first. One thing that we are settled on is that when we do use oil in transportation, we will do it with better fuel efficiency though we could do more on this.

The US has oil reserves of about 21 billion barrels and consumes about 21 million barrels a day so that is three years of oil at our current rate of use. If we were to use only our own oil, it would not make sense to buy a car because we would be out of fuel before the warranty is done. However, oil is shipped all over the world so we mainly rely on imported oil. Oil is on its way out and so should be thought of as a ghost of the past.

Usually we think of coal as the most abundant fossil fuel in the United States with something like 200 years of supply at our current rate of use. However, new work suggests that only 20 years of economically viable coal remains. How does this compare to natural gas? One set of estimates gives a range of between 88 and 118 years of supply. In terms of primary energy we use about as much gas as coal so that we seem to have 4 to 6 times more usable gas than usable coal. So, we probably need to reverse the usual assumption that coal is the most abundant fossil fuel in the US and declare coal the ghost of the present and natural gas the ghost of the future.

When we consider oil, buying a car makes no sense without oil imports but for coal and natural gas, imports don't make too much sense. With coal, shipping the stuff takes about as much energy as mining the stuff as things stand so getting coal from overseas seems counter productive. Gas travels in pipelines fairly well but it needs to be liquefied to be shipped over oceans and this cost quite a lot of energy so importing gas does not make a lot of sense. And that is pretty much how the world markets work. Most coal and gas are used on a continent scale but don't cross oceans.

So, what we have on hand is all we are going to get for coal and natural gas to a pretty good approximation. What does this mean?

If there are only 20 years of coal left, it makes absolutely no sense to build a power plant that is meant to last 40 years to burn coal. Thus, all attempts to work out carbon capture and storage methods for coal are wasted efforts. First, most plans are to build new plants with this technology but it makes no sense to build a new plant. Second, we should be using less and less coal in order to save some for future steel making so there will be limited application for existing plants.

For natural gas, we only need about two thirds of the primary energy use of coal to replace coal since gas generation is more efficient so that completely replacing coal leads to between 53 and 70 years of natural gas available. A natural gas plant built today with a design lifetime of 40 years will not run out of fuel before this time. Thus, if one is going to attempt to capture and store carbon dioxide, doing it at a natural gas plant makes much more sense. It is also a lot easier to do since the exhaust is a lot cleaner to start with.

Oil use is on its way out already. Apparently we have been mistaken about coal and we need to start it in the same direction now. Only natural gas has the potential for expanded use and so if we are going to put effort into trying to use fossil fuels without emissions, this is where we need to concentrate what we do.

Clean coal is a dirty lie but it is also a pointless one.

Friday, November 14, 2008

Oil is still too expensive

I had the following censored from what appears to be an oil industry astroturf site today:

"It seems to me that we should set a target price of $20/barrel by controlling demand. This is above the cost of production of most oil in the current supply, and there is ample future oil to maintain that price over a decade or so. All we need to do is to direct investments into cheap-to-produce oil exclusively as we cut demand to follow depletion down. This figure that rembrandt posted from the WEO 2008 shows that investments in expensive-to-produce oil is a whole other world.

We can get at least 1 trillion barrels at less than $15/barrel cost of production and that is the amount of oil that got us on to oil so it should be plenty to get us off of oil. Investing in anything more expensive than that looks to be a true waste of money and effort."

What is wrong with the sentiment expressed here? Clearly it is factually accurate. Draw a line across the figure at $15/barrel cost of production and there is plenty of oil below that cost to use to transition off of oil. That can't be the problem. The idea that demand control can control price is historically validated. There was an oil glut from 1884 to 2000 brought about by switching electricity generation off of oil and boosting efficiency in transportation. The price of oil was forced down and then kept low then. That can't be the problem. So, what is the problem?

I think that the problem is that to deal with the finite oil resource in a cost effective way, we need to start shrinking the oil industry now. And, that is not happy news for oil industry advocates. On the Internet, censorship is practiced by corporate sponsored groups or non-democratic governments. Elsewhere the ethos of freedom of expression runs too strongly to tolerate censorship. We must thus take evidence of censorship as evidence of corporate or foreign sponsorship or both. It is not unusual for the oil industry to hide its attempts to influence public opinion with false information. What strength there is in global warming denialist propaganda comes from often hidden oil industry funding. It thus appears that this must be the cause of the censorship I experienced. We are likely seeing an industry scam attempting to manipulate the price of oil.

The present price of oil, $55/barrel, is still way above the cost of production and is thus too high. None of the proposed new investments in oil supply that fall in the expensive range makes any sense compared with real energy sources like wind and solar. So, there is no reason at all not to cut the price of oil in half right now. Oil is still too expensive!