Is Alternative Energy Dead? 20 comments
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It’s almost axiomatic to say that we all care about the effects of global warming (hi Mr. Gore!). Nobody wants to swim down 5th avenue. But it really wasn’t until last year’s phenomenal oil spike that people started talking about alternative energy with any kind of practical fervor – and that brought investment dollars.
Oh, how times have changed
NYMEX Crude oil closed at $37.51 on Friday. Inventories at the Cushing, OK deliver point were pushed almost to the limits. Gasoline nation-wide averaged $1.94 (though I paid $2.09 a gallon locally) and while not great, it’s better than the nation-wide average of $2.96 this time last year, and a lot better than the crazy $4 gas we bought at the peak in June.
The bonus of those high gas prices last spring and summer was that the pain was so great that drivers actually drove a little less. Consumption actually declined, and some of that behavior shift has extended into last fall and this winter. The global economy hasn’t helped fuel any fuel consumption either.
But that could be changing. The latest Energy Department’s Weekly Petroleum report showed gasoline demand for the four weeks ending Feb. 6 was up 0.1% from the previous year. OK, it’s not much, but it’s a little. But for alternative energy, it’s probably too little, because gasoline demand impacts directly on ethanol demand.
Agriculture Secretary Tom Vilsack said last Tuesday that the EPA “should raise the amount of ethanol it requires to be blended with gasoline in order to help the U.S. ethanol industry.” Currently, the government only allows a 10% ethanol-gasoline blend. More ethanol has become an economic argument, not an environmental one, because the ethanol industry is in need of help of some serious help.
Ethanol giant VeraSun Energy Corp filed for bankruptcy back in October, and it has been shopping around for buyers for essentially all of its plants. Other companies are feeling the pain as well. Corn prices are still relatively high, and gasoline demand has stayed low (along with prices) – which means for ethanol, margins are squeezing ethanol companies right out of business. No margin. No ethanol supply.
Currently, the federal government’s renewable fuels standard requires 11.1 billion gallons of renewable fuels to be used in 2009, with 10.5 billion gallons of that coming from corn ethanol. That target climbs to 36 billion gallons of renewable fuels by 2022 (15 billion gallons of corn-based ethanol & 21 billion gallons from advanced biofuels). The chances that those targets will be met are in serious doubt. ADM recently estimated that 21% of U.S. ethanol capacity has shut down due to low margins and weak demand.
But there is more to alternative energy than ethanol, it just happens to be the one you can most directly trade as a commodity investor.
Alternative Alternative Energy
I’d love to say it’s different elsewhere on the green planet, but even T. Boone Pickens’ favorite alternative energy option – wind power – is in dire straits. Like most other projects that are looking for financing right now, wind and solar projects are finding it tough to get cash. Back in December, Mr. Pickens admitted to being “a little anxious” about where the money for his big Mesa Power project was going to come from, and he has said in the past that in order for wind to be competitive, natural gas needs to be around $9/mm Btu, a long, long way from the $4.68 the EIA reported in last week’s natural gas update. The EIA Short Term Energy Outlook from last week forecasts total natural gas consumption to decrease 1.3% in 2009, with the loss stemming from a 5.1% drop on industrial gas consumption due to the economic downturn.
Not exactly great news if you’re a fan of the Pickens Plan. Not great news if you’re interested in alternatives at all. Companies in both solar and wind industries are laying off workers and seeing demand for their products go down, as consumers and businesses tighten their belts.
Not only are alternatives competing with cheaper fossil fuel energy (and coal, as well) the industry itself has become a victim of the economic downturn – both in terms of tighter credit markets and falling sales.
Stimulus Package to the Rescue?
With the U.S. Economic Stimulus package soon to be signed by President Obama, let's take a look at some of the line-items designed to help the alternative energy industry.
As far as direct investment goes, I count roughly $38.7 billion dollars going toward energy related items – from the largest piece of the pie ($11 billion) earmarked for the updating of the U.S. electricity grid to $2.5 billion dollars going to energy efficiency and renewable energy research. But this isn’t all about alternatives – that fancy new electrical grid, while obviously green, just moves generic energy demand (cars, heating) from other sources to coal, the source of most of this nation’s electricity.
And fossil fuels aren’t left out of the plan anyway – there is a provision for $3.4 billion for research and development of fossil energy. There is some good news though for wind and solar projects. The plan sets aside $6 billion for loan guarantees for renewable energy projects, such as wind or solar – guarantees that might make it easier for projects such as Mr. Pickens' Mesa development to receive financing from the private sector. The rest of the energy allocations go primarily towards conservation efforts.
Beyond direct investment, there are important tax breaks directed at alternative energy. The plan extends existing tax breaks for wind and other renewable energy facilities, along with providing new tax incentives for those facilities. There is authorization for $1.6 billion of new clean renewable energy bonds and $2.4 billion for energy conservation bonds for state and local government projects aimed at reducing greenhouse gas emissions.
Consumers can get in on the tax breaks too, with tax credits for energy-efficient improvements on existing homes being extended. And, for those early adopters – tax credits of at least $2,500 when you purchase a “plug-in” electric car.
Honestly, it’s doubtful any of these stimulus line-items really do much to make the life of an ethanol plant owner any easier, and the plan doesn’t change the game. And the name of the game is still fossil fuels. Basic economics always wins, and if Oil or Natural Gas remain just plain cheaper than the alternatives – after any and all incentives, investments, or incantations – well, they’re just not much of an alternative.
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Aside from ethanol, however, there is still a lot of pressure on policymakers to create incentives to promote alternative energy. The downturn and the precipitious decline in gas prices has certainly dampened the outlook for some of these technologies, but I don't think they'll go away; especially with state mandates for alternative energy out there. However, I leave open the possibility that some of these technologies might get filtered out. Right now, I think geothermal power is being very underrated --- it's base-load and becoming more economically viable.
I'm also not-so-sure that $35/barrel crude oil is sustainable long-term. Even if demand stays suppressed, the "cheap oil" available in the world is rapidly being used up. I think oil goes back up towards at least $50-60/barrel and probably more like $70 long-term even if we continue to have depressed demand. If we have another boom, who knows how high it can go. One way or another, there's a pretty good case for expanding alternative energy infrastructure and I don't think that will be lost on governments across the world in nations overly dependent on coal and gas.
www.peakoilassociates....
survivingpeakoil.blogs.../
I worked on the same "alternative energies" in college in the 70's. I also bought gasohol.
I totally agree, however, we will have change our NIMBY attitudes toward domestic exploration. The transition from fossil to alternatives will still require mad amounts of fossil. There has to be a solid gameplan to make that happen. Just wishing for energy independence won't make it happen and taxing fossil so heavily to force our conversion is anti-productive. There has to be a well thought out progression, but, I haven't heard any thing like that coming from the new administration.
On Feb 19 09:33 AM bluesmoke wrote:
> Another dimension of alternative energy is to prevent the US from
> having to buy oil from the middle east. Any momentum in that direction,
> regardless of the fuel source, is a positive step.
The only alternative energy that makes any economic sense is nuclear. And it is being suppressed by the U.S. government.
Porkulus spending on wind, solar, biomass is like the rest of Porkulus spending -- wasted money. Buy those stocks if you want, but be ready to exit quickly when the subsidies stop.
Long before 2022 comes along, we will have wised up to the fact that corn ethanol is an economic and environmental loser. Corn is about the worst source of feedstock imaginable.
"Mr. Pickens admitted to being “a little anxious” about where the money for his big Mesa Power project was going to come from, and he has said in the past that in order for wind to be competitive, natural gas needs to be around $9/mm Btu, a long, long way from the $4.68 the EIA reported in last week’s natural gas update"
This is hogwash. Wind is already cheap power.
And T. Boone Pickens plan for using NG in cars makes little sense, since it's about twice as efficient to burn the gas in power plants than in cars.
Secondly, it is coal power plants that need to be phased out, not gas. Gas is the cleanest fossil fuel and would be phased out last. Coal with carbon capture and sequestration will cost twice as much as wind power, and in ten years won't be able to compete with solar thermal, and certainly not with wind. And who knows? With advances in PV in the next ten years, it may end up as cheap as solar thermal will be.
New nuclear plants will generate expensive electricity as well. When the first new one comes online in a decade it won't be able to compete with solar or wind either.
"But this isn’t all about alternatives – that fancy new electrical grid, while obviously green, just moves generic energy demand (cars, heating) from other sources to coal, the source of most of this nation’s electricity."
No, it's the source of about half our electricity.
And most of the plants are old. Older plants aren't even candidates for carbon capture and sequestration.
And cars aren't magically going to all be plugged into the grid. It will take time to retire the existing fleet and replace it with plug ins.
We don't all buy a new car every year.
When Americans wake up to the fact that the scientists are right about climate change, and stop being fooled by the disinformation PR campaign funded by big fossil fuel, there will be marches on Washington demanding alternative energy. It's largely about perceptions. Right now we have half the country thinking they are smarter than the 97% of climate scientists who agree with the IPCC. Eventually most Americans will understand that all the long lists of supposed skeptic scientists they hear about are all phony padded lists with very few climate scientists. The time of Senator Inhofe making such claims on the Senate floor are over. The lying will no longer be sanctioned by the party and administration in power. The science won't be censored by the govt anymore.
And our tax dollars, $49 billon annually, given to the fossil fuel industry in subsidies, is actually funding the disinformation campaign. We are paying them to fool us.
Taking into consideration the capacity factor of about 35% for wind, that's the equivalent of 3 new nuclear plants running 24/7 or about 5 or 6 coal plants. In one year! And the growth is just starting. Ever hear of 3 nuclear plants getting built in one year? More like a decade each. And nuclear will cost twice as much as wind.
Jobs in wind energy grew by 70% to 85,000 in 2008 - more than employed in coal mining.
Electric prices for coal with CCS are estimated at at least 16 cents/kWh.
New Nuclear estimated at 12-17 cents/kWh with one estimate of 22-30 cents.
Solar thermal can beat or meet both of those right now, and prices will fall to 5-8 cents/kWh in a decade.
Wind is already in that price range.
internal combustion engines are inherently inefficient.
Insanity: doing the same thing over and over again and expecting different results. Albert Einstein
Do you really think we will be using gas 50 or 100 years from now?
This question is already in the courts and will be for years.
I soon will have my own wind generator on my property, but won't break even until after I am dead.
loopy - there once was an executive from IBM who said that no-one will ever want to have a computer in his home. he was right at the time (1957), the air conditioning load was enormous & the reliability was poor.
> jack
Coal does.
But coal, particularly the Desert Rock project in New Mexico, may have other problems.
"Our conclusion, based on is statements in this letter to you is that EPA in the case of Desert Rock EPA has violated its charter by failing to render "enforcement activities related to pollution abatement and control to provide for the treatment of the environment as a single interrelated system" by not considering possible damage caused to the environment as result of possible new construction in Arizona which may be unserviceable for electric energy and water shortages reasons in the future.
Appearance has been created by this violation of charter that EPA has, in fact, improperly favored Arizona new construction industry by initially permitting Desert Rock and then by issuing a Prevention of Significant Deterioration permit (AZP 04-01) authorizing construction of the Desert Rock Energy Facility (Desert Rock) without explanation of why the new electricity is needed or the damage done to the environment, both in New Mexico and Arizona, by possible new construction.
EPA's failure, in the case of Desert Rock, to follow its own rules, we feel, have voided the permitting process.
Therefore, we ask that EPA deny Desert Rock permit for failure of EPA to follow its own rules and possible EPA collusion with Arizona new construction industry for an attempt to improperly obtain that permit.
If EPA does not grant this request, then please inform us of any appeals processes as well as procedures for filing complaints against those at EPA may have been improperly involved with Arizona new construction interests in the permitting process.
Please respond by March 2, 2009."
www.prosefights.org/co...
So far not one young persons life has been thrown away in this manner.
May it always be so.
This article, published 2/19/09, tells a different story from Al Gore's. The evidence here does not come from Hollywood, but from real scientists. the context is the alleged melting of Antartica:
"Scare mongering appears to be the case, according to reports from the U.S. National Oceanic and Atmospheric Administration (NOAA) that reveal that almost all the allegedly “lost” ice has come back. A NOAA report shows that ice levels which had shrunk from 5 million square miles in January 2007 to just 1.5 million square miles in October, are almost back to their original levels.
Moreover, a Feb. 18 report in the London Daily Express showed that there is nearly a third more ice in Antarctica than usual, challenging the global warming crusaders and buttressing arguments of skeptics who deny that the world is undergoing global warming. "
for the full story go here: www.newsmax.com/newsfr...
Global warming is a watermelon issue - green on the outside but red on th einside. You peel back the layers of concern for environment and you get to the real goal of state control of economies. If there were so much concern for the environment, Al Gore would spend his time in Chindia where there is real pollution. But no. No, he & his pals spend their energy tearing down the United States. Not a perfect country by any means, but the best hope for mankind to break the bonds of poverty and slavery to dictatorial tyrants and tyrannical regimes.
Economics always wins, coal is king for now. For alternatives to compete you have to change the way the US prices the externalities of fossil fuel generation. Subsidies can be discounted as both renewables and fossil fuels are subsidised equally in historic real terms.
Carbon at $50 a tonne should make it interesting, but if the chat of the US joining the EU system are correct you can forget that. We in the EU don’t have the fortitude to allocate credits correctly to sustain a market.
Let all support electric cars and public transport systems. The good coal mining folk in the US must be rubbing their hands together and deciding which mountain top to blast next!
The implications are huge and will transform... for the better... the way we live our lives.
The era of hiding the truth of science has ended with Bush.