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Natural Gas Economy Is Losing Steam

Jeff Donn, Associated Press via Forbes
On the brink of the 21st century, a group of energy experts peered into the future of natural gas, and what they saw was quite rosy – and quite wrong.

To satisfy growing demand, producers could crank out a third more natural gas over the next decade at “competitive prices.” It could “power our economy” for decades beyond. Or so said the National Petroleum Council in its 1999 report.

But natural gas prices soon headed skyward, with prices charged by producers spiking late last year at nearly five times 1999 levels. This past winter, though starting off warm, saw the average gas-heating household spend a record $867, a 17 percent increase, according to federal data. As for that predicted robust supply, the country’s annual gas output has strangely slipped by 3 percent over the past six years.

Something is broken in the economics of natural gas, say people inside and outside the industry. The bright dream of an economy built squarely on clean-burning natural gas is slowly deflating. Although we still derive almost a quarter of the country’s energy from natural gas, its share will slip in coming decades, federal forecasters now say.
(29 April 2006)

Hydrogen fuel far from ready for prime time

Carl T. Hall, SF Chronicle
President Bush has pointed to hydrogen technology as the ultimate solution to the nation’s fuel supply problems, but one big question waits to be answered: Where will all the hydrogen come from?

Even if manufacturers can produce affordable hydrogen-powered vehicles that people will want to buy, energy experts say the nation’s petroleum addiction — a key source of carbon emissions contributing to global warming — won’t end until an environmentally sound hydrogen supply and distribution system is at hand.

“If we don’t generate hydrogen in an environmentally responsible way, we’d be going five steps backward, rather than forward,” said Scott Samuelsen, director of the National Fuel Cell Research Center at UC Irvine, where he is also an engineering professor.

Samuelsen calls for a comprehensive national effort, backed by the kind of resources and coordination that resulted in the first moon landing, to map out a clean and sustainable energy future. The administration’s $1.2 billion, five-year hydrogen initiative is a useful step, he added, but not nearly enough.

“We need to invest a lot more,” he said. “I think it’s doable, but it will take a unified strategy.”

…Even if a storage scheme is found, it’s still not entirely clear where all the hydrogen would come from to run any significant part of the national transportation system.

…The trouble is that it takes energy to get hydrogen in pure, usable form. That’s why it’s really not considered a fuel at all, but rather an energy carrier — a method of storing power generated any number of ways.
(1 May 2006)
Re-posted at Common Dreams

Solar surprise

Roger H. Bezdek and Robert M. Wendling, ASPO-USA Peak Oil Review via EV World
Analysis by co-author of Hirsch Report discovers surprising support for renewable energy R&D at federal level.
The federal government has historically encouraged and supported the development of domestic U.S. energy resources in many diverse ways. Federal incentives for energy production have taken the form of direct subsidies, regulation, tax incentives, market support, demonstration programs, R&D funding, procurement mandates, information generation and dissemination, technology transfer, directed purchases, and other types of actions.

…The R&D funds were not distributed evenly among technologies. Three energy technologies—nuclear energy, coal, and solar and renewable energy—have received 86 percent of all federal R&D support. These R&D programs are the subject of this analysis.

Federal involvement and intervention in energy markets has been pervasive for most of the past century, especially with respect to regulatory, price, R&D, and tax policies.

…The major conclusions derived here include:

* The common perception that federal R&D policies in recent decades have favored coal and nuclear energy at the expense of renewables is not correct. In fact, nearly the opposite is true.

* Over the past decade, federal R&D priorities have shifted in favor of renewables. By 2003 the renewable R&D budget was 75 percent the size of the coal R&D budget and nearly three times the size of the nuclear energy R&D budget.

* With respect to two electricity-producing technologies—solar PV and the light water reactor—federal R&D polices since 1976 have strongly favored the former.

* Thus far, the return to the U.S. on the large sums expended on renewables R&D has been small.

Bezdek and Wendling are the authors of “A Half Century of Federal Energy Incentives: Size, Distribution, and Policy Implications,” published in January 2006 by Management Information Services, Inc. Washington, D.C.
(1 May 2006)

Oil companies won’t fish

Jessica Holzer, Forbes
…So it is puzzling to many industry analysts that instead of using these profits to develop new sources of supply, they prefer to lavish them on their shareholders in the form of higher dividends and buy back stock. The industry protests that it has poured $106 billion into new production already this year. But though that may sound like a lot, it isn’t even enough to replace the depletion of current oil fields as well as cover the wear and tear on equipment and machinery.

“The oil companies have done a tremendous amount of investment,” says James Hamilton, an economist and energy expert at the University of California at San Diego. “But they have to just to remain in the same place.”

Several factors are making it difficult for the companies to expand production, including shortages of engineers and equipment created from years of low-priced oil. In addition, investment opportunities are scarce. Up to 75% of the world’s reserves are off-limits to private oil companies, calculates Philip Verleger, an industry expert at the Institute for International Economics in Washington. And the projects that are available aren’t always that lucrative since national governments demand most of the profits for themselves.

But another, more surprising, factor is holding back the oil companies: They simply aren’t that bullish on the oil market 10 or so years down the road, when a project started today will start to produce oil.

“My guess is virtually 90% of the oil industry is assuming that $70 oil is not going to last more than a few years,” according to Adam Sieminski, the chief energy economist at Deutsche Bank (nyse: DB – news – people ). He guesses that most oil companies are projecting crude will fetch $40 a barrel plus inflation over the long-term.

On that score, the oil companies appear to be virtually alone. Wall Street continues churning out predictions of $100 oil. Hedge fund managers are pouring millions into oil futures. And peak oil theorists, who argue that humans have produced nearly half the oil that there is to produce, and that therefore prices will shoot up enough to bring economic growth to a halt, are enjoying their heyday.
(1 May 2006)

Ethanol’s promise

Editorial, NY Times
The political scramble to find quick answers to rising oil prices has produced one useful result, which is to get people talking about substitute fuels that could make us less vulnerable to market forces, less dependent on volatile Persian Gulf oil producers and less culpable on global warming.

That, in turn, has focused attention on the fuel that seems to have the best chance of replacing gasoline — ethanol. President Bush mentioned ethanol in his State of the Union address. Entrepreneurs like Bill Gates have begun investing in it. And every blue-ribbon commission studying energy has embraced ethanol as a fuel of the future. One leading environmental group, the Natural Resources Defense Council, predicts that ethanol, combined with other strategies, could replace all of the gasoline Americans would otherwise use by mid-century.

Until recently, the only ethanol anyone had heard about was corn-based ethanol, a regional curiosity that accounts for about 3 percent of the nation’s fuel and suffers from its association with the agribusiness lobby and with presidential candidates hustling support in the Iowa primaries. What the experts are talking about now, however, is cellulosic ethanol, derived from a range of crops, native grasses like switchgrass and even the waste components of farming and forestry — in short, anything rich in cellulose.

…Ethanol will not by itself end our oil dependency or global warming. We also need far more efficient cars and more efficient transportation systems as part of a larger smart-growth strategy. But given enough financial support and political will, it could be a huge first step toward ending America’s oil addiction.
(1 May 2006)

Californians can ease energy crisis by enlightening world

Ian Hoffman, Argus via Inside Bay Area
Amid the energy crisis, state sets an example
BERKELEY — In the early 1970s, California faced a one-two punch of doubled oil prices and soaring electricity demand, with new coal and nuclear power plants projected for every eight miles of coast from San Diego to San Francisco.

The plants were never built because a motley band of physicists and state lawmakers cut energy demand down in ways as ambitious as reinventing the fluorescent light bulb and as simple as slapping energy-usage labels on refrigerators.

They also retooled the electricity market so power companies spent money helping people use less energy. Utilities were investing in selling less electricity, but they did not have to build 16 power plants andwere guaranteed payback on what they did build or buy. The state’s economy kept growing even though Californians on average consume 40 percent less energy than other U.S. citizens.

Scientists said Friday that exporting California’s energy-saving recipe to the rest of the nation, as well as to China and India, is the first, lowest-cost and sacrifice-free answer to the global problems of rising fossil energy prices and greenhouse warming.

“This was and remains the lowest-hanging fruit,” Nobel Prize-winning physicist and Lawrence Berkeley Lab director Steve Chu said Friday. “But it cannot solve it all.”

Ultimately, scientists say, the solution lies in revolutionizing the global energy supply to replace the 80 percent filled by oil, natural gas and coal with carbon-free energy sources. But the speed and size of that transformation depend on energy demand.

If nations wanted to hold the global rise in temperatures to less than 4 degrees Fahrenheit while keeping their economies growing, a half-percent increase in energy efficiency by 2050 will make the difference between replacing the equivalent of all fossil energy supplied today with carbon-free energy and having to come up with twice that amount without the extra efficiency, according to an analysis by John Holdren, a Harvard energy expert and president of the nation’s largest scientific society.

“The potential of what we could get is a whole lot bigger on the demand side than what we could get on the supply side,” Holdren said Friday at a Berkeley symposium honoring Abe Rosenfeld, a Berkeley physicist considered one of the founders of energy efficiency concepts.
(1 May 2006)