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IEA: Stupid, Manipulative or Corrupt?

When Parliaments decide on energy policy, they normally start with proposals from the government. Governments like to swim in the mainstream – and they get information and advice from so called experts of organizations such as the International Energy Agency (IEA) or the International Atomic Energy Agency (IAEA).

But up to now you barely find an international body who is in favour of renewables. Why is this so?

The International Energy Agency IEA is a world champion in wrong predictions, and their scenarios do not fit reality. Let’s take a closer look at the World Energy Outlook (WEO), a bi-annual publication of IEA:

The methodology of the IEA for oil and oil price prediction was revealed in the 2002 edition of WEO, page 95: "The oil supply projections of this Outlook are derived from aggregated projections of oil demand….Opec conventional oil production is assumed to fill the gap."

In the 2005 WEO the methodology was slightly modified,leading to almost identical results, though. The idea of IEA still is that you find any amount of oil in the Middle East, dependent only on investment cost, which will need to rise to $17 trillion from 2004-2030.

One could take this to mean that the necessary high investments would lead to higher prices in the oil sector. But not so in the IEA perspective. Despite high investments, oil prices are expected to follow a deep fall, soon, and to stay low for decades — so we are told in the 2005 outlook: Oil at $35 a barrrel and gas at $6 per MBtu.

But how much of this is factual? Despite a steep rise of oil prices, the IEA oil and renewables projections in 2005 are almost the same as in former years. The IEA omits the crucial questions:

• How much will the prices rise in case that oil has peaked and you will not find more than now or maybe less?
• How much must they rise to stabilize or destruct demand?
• What efficiency technologies will emerge if oil rises above $100 as predicted in a Goldman Sachs report?
• And what renewable technology will be a good bargain with such prices?

Prices are different from what IEA reports. Oil is around $60 a barrel and natural gas tends to follow oil, as can be seen every day in the US and in Europe. The IEA reports are similar to the Soviet planning fulfillment reports, and this reminds me the famous sentence by Michail Gorbatchev: “The numbers were always good".

Yes IEA numbers sound good, but it is fantasy! IEA is making up things which do not exist, and like in the Soviet Union, people might starve if they do not act, investing in efficiency and renewables for example. IEA is totally unwilling to learn, to give transparency or to adopt tested methods of oil reserve and price assumptions. The objective of this wrong reserve reporting and wrong price prediction is obvious:
• Parliaments and investors should be distracted from renewables as long as possible.
• The supposed low (and stable) oil and gas prices, and prices not corrected by externalities, renewables should stay in the cost trap for ever, they cannot advance and will not get cheaper than conventional energies.
• Only wind power in some best sites might be competitive with gas, this is the IEA message.

Fortunately – and this is the second good news – IEA is not only plain wrong on fossil fuel prices, but on renewables too. Let me show this for the case of wind power...

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
The above is a summary of a parts of a speech given by Rudolf Rechensteiner, Swiss MP entitled
'How to Create Majorities in a Hostile Environment' given at the World Assembly o­n Renewable Energy at the World Council for Renewable Energy (WCRE) in Bonn, 27. November 2005. For the the fully referenced report based on the speech please download the PDF from his website.

We present some futher extracts below:

-AF

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

You find everything and nothing in the foggy IEA report, you might even find renewables. But the report is confusing and contradictory and the main objective seems to prove that the future will be a repetition of the past.

It is difficult for IEA to accept the obvious, that most of the World’s oil has been found. IEA tries instead to blame the oil companies and producing countries with large reserves for not trying hard enough. But the real source of the IEA fantasy is not in Paris, it is in Washington, with reference to the US Geological Survey (USGS).

There is a long history of overestimation of fossil resources which started with the Hubbert/Zapp debate in 1948. Zapp from USGS estimated total US oil reserves of about 590 billion bbl when in reality it is something like 230 billion bbl.

They developed the idea of oil found per foot of drilling, and this was the basis for all high estimates on oil reserves until the mid-1970s when US production deteriorated.8

Today the USGS predictions again are plain wrong, but in the Bush Cabinet, every minister is an oil minister, and renewables do not exist, except for fun or for image.
If you go back only three years and look at the US price predictions, you can see how wrong they are.

The high price scenario in 2001 was at $25 to 29/barrel, but meanwhile we are at $58-70.

In the EIA perspective there is no decline of reserves visible – in no region of the world.

The same for IEA: It is predicting ever growing consumption and growing supply thanks to OPEC and the Persian Gulf.

To compensate the declining regions (blue area in the Graph) and regions which will fall in decline soon (yellow area in the graph) and to grow supply along growing demand (triangle on top within the red Opec production area), you need six new Saudi Arabias to satisfy overall demand!

Where will you find these six new Saudi Arabias??

Meanwhile the fantasy of these Paris based oil reserves is contested by renown analysts such as Colin Campbell (ASPO), Kenneth Deffeyes (Princeton) or Matthew Simmons
(Houston). They all criticize IEA previews since 1998
at least.

But IEA is totally unwilling to learn, to give transparency or to adopt tested methods of oil reserve and price assumptions. Take the case of British Oil production.11 Since the mid
90es a lot of people in the oil business saw the decline of British oil coming.

But still in 2001 the US-Energy Information Agency projected a peak in North Sea Production at 6 Million barrel a day, and stable continued production on this level (red line
in above graph).

Since 1999 the British oil production began to decline, and meanwhile the reduction stands at minus 37% since the peak (yellow line in the graph).

It is evident that wind power in Britain could make up for half of the energy consumption or more, when you have a well done framework with feed in tariffs, and a reasonable planning process including grid management and storage. But this is not the thinking of IEA. They counseled the UK not to adopt feed in tariffs but a quota system instead. This
system gives only reduced financial security for wind investments and makes it very difficult to develop second best sites or offshore sites, without heavy subsidies.

The main recipe seems to be more investment in the Middle East and North Africa area, which could mean: more wars in Iraq and else (Mid-East oil reserve inventories are exactly the subject of WEO 2005), to drill more anywhere in the world and to advance nuclear power, an issue recommended by the IEA for Spain too, for example, where a prospering wind industry is moving fast ahead but completely ignored by IEA, and to many other nations.

IEA view: Renewable Electricity as a permanent failure The objective of this wrong reserve reporting and wrong price prediction is obvious:
• Parliaments and investors should be distracted from renewables as long as possible.
• The supposed low (and stable) oil and gas prices, and prices not corrected by externalities, renewables should stay in the cost trap for ever, they cannot advance and will not get cheaper than conventional energies.
• Only wind power in some best sites might be competitive with gas, this is the IEA message.

But watch this graph, that shows the cost of renewables, illustrated by the successful German feed in tariffs, and the price of gas based generation, with two changes of assumptions:

• We take the real natural gas price at 11 $/MBtu
• We suppose that this price will rise, following the oil price, as gas prices do now all over the world. And you find out that all renewables are competitive or become
competitive in the foreseeable future.

FULL REPORT

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