Clean and Green Investment Forum

On December 3 and 4 I attended Opal Financial's 2012 Clean and Green Investment Forum. I was invited to moderate a panel on "Market Outlook for Renewables vs Fossil Fuels". Forum participants included many investors and strategists with an interest in energy issues as well as a few entrepreneurs and others with a more academic interest. I had conversations with an interesting mix of people in both the oil and gas industry as well as alternative energy. This post consolidates my notes to give you a sense of some of the dominant themes in energy investing today.

Rather than give a blow-by-blow recap of the meeting, I'll organize the information into several topics that capture the mood of the forum:

  1. Government regulation and incentives
  2. Utility scale solar & wind
  3. Resiliency and distributed solar
  4. New technology
  5. The fracking revolution

The conference also included a few presentations that put energy investing into a much broader context. Ripudaman Malhorta, co-author of A Cubic Mile of Oil: Realities and Options for Averting the Looming Global Energy Crisis, painted a sober picture of the global energy situation as well as global climate change. He also emphasized the role of energy consumption in raising the living standards of hundreds of millions in China and India. Dr. Malhorta encouraged listeners to address our energy needs in ways that do not leave out the two billion or more who are still striving to rise above abject poverty. Other speakers reiterated the challenges and opportunities facing society (and investors) as we are forced to move from fossil fuels to renewables in the decades ahead.

1) Government regulation and incentives

Tyson Slocum, director of Public Citizen's Energy Program, is based in Washington, D.C. and gave some updates on regulations affecting energy at the national level.  He believes the most important agency in the next 4 years is going to be the EPA.  This is in large part because legal challenges to EPA's regulation of greenhouse gas emissions were largely removed when a federal appeals court backed the EPA over emissions limits to reduce global warming. This ruling gives the EPA permission to mandate mileage standards and power plant emissions. Not knowing how the EPA will move forward with this mandate is one of the big wildcards in federal regulations concerning energy.  Slocum expects to see more movement in the near future on energy efficiency initiatives as well as a short term extension of the wind tax credit on the order of 3-3.5 billion/year. He noted that some of the beneficiaries of this credit are in "red" states.

Jeff Vice, director of local government relations at municipally owned Austin Energy, talked about government support for renewable energy within Texas.  He reminded us that Rick Perry is the longest running governor Texas has ever had and that Perry, wanting Texas to stay relevant in the energy business, is a big advocate of wind energy.  In 2005 the state of Texas established a renewable energy program with five separate Competitive Renewable Energy Zones (CREZ) with the goal of enabling up to 18.5 GW of wind generation capacity.  A huge part of this effort was the buildout of transmission capacity from the generating regions in the high plains to load centers further east.  To date, Texas has spent over $2 billion on transmission capacity enabling a total of 10 GW of wind capacity to be installed.

Within Austin, "the little blueberry floating on the big red bowl of tomato soup", the city council recently passed an Energy Conservation Audit and Disclosure ordinance requiring an energy audit whenever a home is sold.  Austin also has it's own climate protection plan with three primary goals for 2020:  1) be 35% renewable; 2) reduce current electric demand by 800 MW; 3) reduce CO2 emissions to 20% below 2005 levels.  They would like to meet these targets in large part through wind power which they can purchase at $35-$40 per MWH.  Unfortunately, west Texas winds blow mostly at night so coastal wind and energy storage are key.  At the moment, the city utility is very interested in the possibility of using electric vehicles as batteries that could be charged at night.

Bert Haskell of the Pecan Street Project discussed this collaborative research project between the city of Austin and the University of Texas.  From the web site:

The over-arching vision of Pecan Street Inc. was to re-imagine Austin’s energy distribution system in a way that could support and accelerate the installation and management of smarter and cleaner electricity services. This included the integration of clean distributed generation, storage, demand response, energy efficiency, new pricing/rate models and other technical and economic issues.

According to Haskell, solar energy production and electric storage experience curves mean that solar will be the cheapest form of energy 20 years from now.  It is important to engage in research with real people to demonstrate how technology can make a less energy intensive lifestyle an improvement rather than a sacrifice

Overall, my impression is that many people within Texas government are well aware of the importance of alternative energy going forward and are keen to ensure that Texas does not miss out on business opportunities associated with wind and solar power.

2) Utility scale solar & wind

Neil Stein is a portfolio manager for Levin Capital with a responsibility for utilities investments.  He sees the utilities as the ultimate gatekeepers for renewable energy because they own the grid.  He anticipates a slowdown in the deployment of utility scale solar and wind power because many states are already approaching the RPS (Renewable Portfolio Standards) mandated by state government.  The DOE maintains a Database of State Incentives for Renewables & Efficiency (DSIRE) with an excellent compilation of resources on state RPS including this summary map:


Stein reminded us that utilities have a unique model -- their return on investment is regulated and cost increases are passed through to consumers. Given that wind and solar installations are currently more expensive than natural gas fired power plants there is little incentive for utilities to make further investments in renewables. There have been cases in the past where cost recovery by utilities was prohibited by regulators. Natural gas plants are simply lower risk for utilities.  Solar and wind are not competitive at wholesale prices for electricity given that the market is currently oversupplied.  Stein does see new EPA regulations on coal plants closing many of them between now and 2016.  But with power demand flat, this may not affect prices.

Helen Tocco of Reznick Think Energy is a project manager for solar PV and wind installations. She sees continued interest in solar PV over other green technologies because the prices keep dropping while wind power has the benefits of being low cost, quick to install and easier to site in agricultural areas.  They are finding that Caribbean Islands are among the hottest markets for solar and wind right now as these economies often import all of their fuels.  The islands also have to deal with the intermittency of wind and solar and many solar PV providers are being asked to include backup generation in their PPAs (Power Purchase Agreement).

Given the need and the locally high cost of electricity, it seems like islands might be excellent place to try out different storage alternatives.

Troy Helming of Pristine Sun is focused on small scale utility solar PV.  He described the DOE SunShot Initiative which is working to make the cost of installed solar competitive with other forms of energy.  One of their goals is to have single axis solar tracking systems down to $1.20/W.  There are already, today, single axis tracking projects that cost $1.90/W.  Helming presented the following table of IRR (Internal Rates of Return) for various solar and wind projects:

utility wind 6-8%
community wind 7-10%
utility solar 6-8%
small utility solar 6-10%
distributed generation utility solar (<3MW) 7-12%
household solar (<10MW) 12-20%

Helming sees an important role for utilities to play in the adoption of solar by acting as investors, buyers, and providers of transmission and distribution. Utilities can also provide "frequency and voltage support" with their existing generation. He sees financing as the biggest obstacle to wider adoption of small scale utility solar and describes these projects as very low risk well suited to smaller, especially publicly owned utilities. He pointed out the recent moves by Marin County and Boulder, CO to "municipalize" their electric utilities as encouraging developments. Citizen owned utilities will be more motivated to harness increasing levels of DG (distributed generation) as rooftop solar spreads.

Martin Hermann of 8MinuteEnergy Renewables focuses entirely on solar PV in the Western US. By his reckoning, ground mounted solar costs $2/W installed while rooftop solar costs $5-$8/W installed. He pointed out that the increasing number of decommissioned coal plants is actually a valuable resource for utility scale solar.  These plants already have transmission lines in place; they are already zoned for utilities and, at least in the desert SW, they have excellent insolation with few trees or buildings. Given the longevity of solar panels, a new solar farm should have a working lifetime of 50+ years.  Utility solar in desert locations also gives "textbook" production that utilities like because it is predictable. Clouds cause headaches due to power spikes.

3) Resiliency & distributed solar

Several speakers brought up "resiliency" during discussions of DG (rooftop solar). Cogeneration during hurricane Sandy was key in keeping several individual buildings powered up and isolated from the city-wide grid failure. Erin Geegan of Zam Energy described how they are providing solutions for EV charging using solar PV and batteries. These independent "micro grids" are resilient, off-grid and cyber secure and should be popular with airports, hospitals, universities and other campus settings.  The value proposition of this resiliency can help solar compete with the current low price of natural gas. Deep Chakrabothy of CentroSolar described "grid parity events" in India. India has high energy costs and high insolation with at least a 10% deficit between electric supply and demand. Indeed, only half of homes have power. In rural areas with no grid, distributed solar is already at grid parity! But in some urban areas as well, PV is very near grid parity and when the price drops a little further, distributed solar will take off in those areas.

Regarding intermittency, panelists admitted that batteries aren't cost effective yet.  But there is hope that, as EV's become popular, they will provide more storage. In Hawaii, clouds cause instantaneous changes in solar output and local utilities are trying out capacitive factors and modeling to ramp up and down more slowly. Solar works very well in the desert SW where some solar and wind plants have natural gas plants right along side for backup.

4) New technology

One interesting new technology was presented by Ali Baghaei of OceanLinx. This technology traps incoming waves in a box like a piston which creates a surge of air pressure.  This air pressure then goes through a bi-directional turbine to generate electricity. Between the wave forecasting software and the turbine technology this is definitely a "high tech" device. The 15 year old Australian company developing this technology believes it is well suited to certain coastal environments, especially in remote locations.

5) The fracking revolution

T Boone Pickens was the keynote speaker at this conference and provided plenty of entertainment with his blunt, plain-spoken style. The man is plenty sharp and does not hesitate to call a spade a spade -- he went into a longish tirade about the futility and waste of American involvement in Iraq and Afghanistan. He was interviewed about his life in the oil business, his opinions about current politics and then entertained some questions from the audience. Despite having been a "peak oiler" -- Matt Simmons was a strong influence -- he now believes that the current situation is truly a sea change in US production. He sees petro-chemical and manufacturing plants returning to the US because we currently have and will retain the cheapest energy in the world. He is still pushing the idea that we could cut our use of Middle East oil entirely by switching trucks to compressed natural gas. When asked about the break even cost for natural gas he said that $4/mmcf would bring additional drilling to wet gas plays such as the Marcellus and that at $5/mmcf you would see drilling in most shale plays.

The panel that I participated in was also devoted to oil and gas. I presented some charts from the Energy Export databrowser and tried to make the point that oil is a globally traded commodity whose price will continue to trend higher of the years ahead. In contrast to oil, natural gas is pretty much land locked in the US. I reviewed some historical data on natural gas storage and described how we are closer to running out of spare underground storage than we are to running out of gas-in-storage. In my estimation, this puts significant downward pressure on the prices energy companies can expect for US natural gas.
Jeff Gordon of Texas Coastal Energy described his company's success in turning a profit drilling new, conventional oil wells in old fields in Texas and Kansas. When asked about the decline rates for shale oil wells he said that the initial decline was indeed steep but that the curve then levels out and wells remain profitable for ... "well, we don't even know for how long yet." Many of these oil wells also produce copious amounts of natural gas that is currently being flared for lack of piping. It is his understanding that we are producing enough natural gas today that we could even make it through the winter without storage.

Brian Spector of BP North America was also of the opinion that a tremendous amount of natural gas could be produced at prices above $5/mmcf, concurring with Pickens' estimate.  He also reminded us that BP is an "energy company", not just an "oil company".  BP is, in fact, the largest investor in PV and biofuels in the US.  These large energy companies will invest in alternative energy if and when they see potential profit.


By the end of this conference I came away with two major impressions. First, the solar PV people see their progress as unstoppable as panel prices continue to decline and begin to reach grid parity, especially in developing nations and anywhere with high electricity prices. There is huge room for advancement in efficiency and demand management and an increasing awareness in the value of resiliency and micro-grids. Increasing numbers of EVs will provide interesting challenges and opportunities for an increasingly intelligent grid. While still happy to see government incentives for solar PV, I got the sense that many no longer see incentives as a requirement for success. Indeed, some PV projects are competing against natural gas without incentives. Also, new regulations on coal plants are having much the same effect as incentives for PV.

The second impression I came away with is that the oil and gas folks at this forum are utterly convinced that the United States (and also Canada) is going to have cheap and abundant natural gas at least for the next few years.  I saw nothing to convince me that natural gas will solve all of our energy problems over decades.  But I am now of the opinion that there will be no shortage of natural gas over the next 2-5 years and that prices will eventually stabilize at around $5-$6/mmcf.  This abundant supply of natural gas seems especially likely given the associated gas produced while drilling for oil. And drilling for oil is definitely going to continue given current oil prices.  For the near term (2-5 years) it seems the US price of crude oil and natural gas are destined to be inversely related.  Any increase in the price of oil will increase the number of oil rigs drilling in US shale plays which will in turn worsen the current glut of natural gas.   If true, that is a novel and very interesting development.

Thank you Jonathan. One of the most interesting posts.
A couple of points.
Was there any mention of UHVDC long distance connection, particularly between large hydro remote from AC grids when the latter are in need of stability, especially those coping with wind intermediacy? China has installed massive interconnection between both hydro and remote wind (and increasingly also coal) sources and major centres of demand.

Similarly, did anybody mention in-situ NG electricity generation as an alternative way of collecting NG energy rather trying for the apparently difficult and financially risky pipeline connections to existing retail NG networks?



No mention of UHVDC at this investment forum. Which only means that no one close to that technology attended. But now that you bring it up, a quick google on "texas crez hvdc" turns up numerous links including this Feb 2012 presentation from Pattern Energy:

HVDC Transmission Line for Wind Energy Delivery

This document describes the "Southern Cross" project which has a goal of bringing Texas wind energy to the Southeast over a 500 kV DC line from the Texas-Louisiana border all the way to Northeastern Mississippi where it will be converted for the local grid.

The driving force behind this is increased interest in renewables procurement on the part of power providers TVA and Southern Company.

A top post on HVDC projects would be quite interesting.


On existing projects, new projects, or current technology? Actually, I know a guy who might be interested in an oil drum article. Other than that, you can get a lot of quite good information from:

ABB, Siemens, and Alstom are the three big players in HVDC. I would say the ABB website, while cheerleading their product, is really quite informative.

Bonneville Power Administration has recently approved a project to upgrade the Pacific DC Intertie.
Trans-West Express is the only other credible bulk HVDC project out there for long distance transmission in the US, at least to my knowledge. They have not gotten into the bid stage yet though.

There is "Tres Amigas" which is a southwest kind of 3-way back-to-back that seems fairly far along.

South America has a couple of long bulk power lines in process in Brazil (Alstom and ABB).

Well, if their is interest at The Oil Drum, I will ask the consultant I know who is hooked into new projects world wide. Some kind of description of what folks are interested in would be required.

Jeff Barton
HVDC/FACTS engineer
Bonneville Power Administration


I'd love to be put in contact with your contact who might be interested in an Oil Drum article.

I also have some questions about BPA wind power data that you might help me find answers to.

You can find my email address at the website.




The USA has been in existence for 236 years as a nation. A 5 year surplus(?!) of natural gas is not abundance for a nation with a future. It is a race to the bottom of the barrel!

I have been asking in this forum what we are going to tell our grandchildren. The fuse keeps getting shorter. The question now is, what are we going to do in our dotage?

To use oil and natural gas for anything but constructing (bootstraping) a non-fossil fuel based economy is joy-riding. We gotta get out of the stone-burning age.

That said, it's good to hear what people are thinking. We have a long road ahead.

Thanks for the informative report.


"The USA has been in existence for 236 years as a nation."

Ron, I guess you're wondering about the *next* 236 years? Just on US population (approx figs)...

1812 was 7 million
1912 was 95 million
2012 (is) 313 million

2112 will be... ??? More than 313m? Less? And 2212? Or damn, best not to think about that (stuff the grandkids, their problem).

Ron, a race to the bottom? I hope you're wrong, but 236 years, who's planning *that* far ahead? Damn. :(


but 236 years, who's planning *that* far ahead? Damn. :(

We are!

The USA has been in existence for 236 years as a nation

2013-236 = 1777

The Articles of Confederation were drafted in 1776. Eventually that Government failed and was replaced on March 4th 1789 with the US Constitution.

a nation with a future

The Nation was formed then dissolved and reformed. Who's to say there won't be another round of dissolve/reform in an attempt to form a more perfect Union? And if there is a new, more perfect Union sought - how does one treat a State like Minnesota with little oil/gas VS say Texas or Virginia? Or say New Hampshire VS Nevada if the energy resource comes from PV panels given the difference in land mass and the even more obvious solar influx?

New Hampshire VS Nevada

I'd say precipitation is more important to life than insolation. I know which state I'd pick.


Can you elaborate on this passage and the related chart?

You wrote: I reviewed some historical data on natural gas storage and described how we are closer to running out of spare underground storage than we are to running out of gas-in-storage. In my estimation, this puts significant downward pressure on the prices energy companies can expect for US natural gas.

I'm curious about the dynamic you describe here, and how it works.


On solar, I'm a fan. Prices are dropping, and additional reductions are in the offing.

But the industry is still--until 2016--getting a 30% federal tax credit on every installation, and the prices you quote for installed costs
are, I assume, accounting for that. Thus $2 solar installed has a real cost of $3. So, grid parity, in most places, is still some distance off.

You wrote: I reviewed some historical data on natural gas storage and described how we are closer to running out of spare underground storage than we are to running out of gas-in-storage. In my estimation, this puts significant downward pressure on the prices energy companies can expect for US natural gas.

I'm curious about the dynamic you describe here, and how it works.

Gas wells are difficult to turn off and on - you basically tap them and then get gas out of them until it stops coming. Therefore, a production surplus is difficult to prevent by "turning down" wells. You have to wait for decline to run its course. This means that, when demand is no longer sufficient to absorb production at the current price, the gas has to be either put into storage or sold at a discount. The discount has to be large enough to find new customers or to encourage existing customers to increase their consumption. If you store it, you have to pay the storage charge while you wait for prices to recover.

If you can't put natural gas into storage because existing space is all committed, the choice facing producers is to sell it for whatever price they can get, or flare it. Therefore, the lower boundary for natural gas prices is the cost of putting it through the pipeline to reach the users.

Gas wells are quite easy to turn off. You close the wellhead valve and the gas stops flowing. I used to write software to adjust them automatically. The gas plant would get a nomination from the pipeline company, the operator would type it into the computer, and the computer would adjust all the wellhead chokes to match the demand. The penalties for over or under delivering on a nomination were severe, so it was important fo the gas plant to meet the nomination as closely as possible.

Gas associated with oil production and liquids rich gas are more difficult because you don't want to stop producing oil and liquids just because there is no demand for the gas. The solution there is to reinfect the dry gas back into the producing formation, which has the advantage that it maintains reservoir pressure. This usually requires regulations forbidding flaring, though, because companies don't like to spend so much money on injection equipment.

The biggest problem, however, is financial. Companies have bills to pay, interest on their loans, and stockholders who want a return on their money, so they don't like to throttle back production just because demand is low. In fact they would like to increase production to maintain their cash flow. If they all do it at once, it can be disastrous for them all because prices will crash.

This is how the Texas Railroad Commission ended up regulating oil production in Texas. Competition got so intense and prices got so low that producers started shooting at each other. The State stepped in and put the TRRC in charge of setting allowable oil production levels for all producers. The rules still exist, although the TRRC has set the allowable at 100% of maximum for about the last 40-odd years.

However nobody is regulating NG production in the US at this point in time.

My biggest question is just how much "associated gas" is being produced from drilling for "tight oil" and "wet gas" where sales of the gas produced are not integral to the bottom line. There are currently three times as many rigs drilling for oil than drilling for gas. Given how slowly natural gas production has tapered off in the face of a drastic reduction in rigs "drilling for gas", I suspect that "associated gas" forms a significant percentage (>20%?) of our current gas supply.

Jon - Here's how the USGS lays it out. First, the definitions: (1) non-associated gas that occurs in conventional gas fields, (2) associated-dissolved gas that occurs in conventional oil fields, and (3) continuous (or unconventional) gas that occurs as basin-centered gas, coal-bed gas, shale gas, fractured-reservoir gas, and tight-reservoir gas.

The split (from 1999 data unfortunately): conventional non-associated gas 64%; conventional associated-dissolved gas 30%; continuous gas 6%.

OTOH this may not be as accurate given the increase in the shale plays. But unconventional gas probably still represents a much smaller percentage than conventional production. OTOOH a few years ago when they turned on the Independence Deep Water Gas Hub about 360 bcf/year of conventional NG was added to the supply chain.

Fascinating info! Thanks.

I had no idea that, in 1999, 30% of our natural gas came from oil fields. I suppose nowadays, given the number of unconventional wells being drilled, they would have to differentiate between unconventional, non-associated and unconventional associated-dissolved.

Jon - I suspect much of the high casing gas comes from S. La and the upper Texas coast. Many of those fields are deep and thus discovered late in the game. And being deep many are on the borderline between being an oil field with a lot of csg head gas and a gas field with high condensate yields. In fact many NG fields in one state might be classified as an oil field in the other. And visa versa.

Same reason we've been seeing more discusions about NGL's: they also tend to increase in that oil/NG transition window.


Do you think, as we begin to "scrape the barrel" for oil, that deeper wells with more casing head gas will be an ongoing trend? And how can one find out what the gas fraction is in tight oil plays like the Bakken and Eagle Ford where so much gas is being flared?

My working theory is that the wells we drill at the tail end of US oil production will have a lot of associated gas. The more wells we drill and the more unconventional they become, the higher the gas ratio.

Does that sound plausible?


Jon - Like Texas and La I'm sure ND requires operators to submit a full test before getting approval to produce. This will include the GOR (gas/oil ratio) for that well. That can give a stat for the flare volume if you have the oil volume. But the GOR can change over time as the reservoir pressure declines.

As far as more csg head from deeper wells (in conventional plays) I think we're getting close to being tapped out. My company has been drilling right at the edge of the technology. That program was paying out modestly until NG prices fell. The only thing that kept us in that game so long was the condensate yield from those wells. Even more important: 30 years ago I was drilling 12,000' wells to test 2,000 acre targets. Today I've been drilling 16,000' wells testing 100 acre targets. So even when I was successful it typical produced a one well field. Deplete that one well and the field no longer exists. Excluding the DW GOM there just aren't much conventional NG reserves left to develop IMHO.

Your theory about increase GOR's in future unconventional plays may be accurate for some but not for others. Think about the reservoir drive in most shale plays: pressure depletion. That pressure (and the associated NG in the oil) accounts for those high initial rates. One of the more efficient systems for lifting oil out of a well is "gas lift": NG is pumped down the annulus between the csg and the production tubing. There are gas lift valves at various depths That allow the injected NG to enter the tubing, mix with the produced oil and thus lighten the head and allows the oil to flow more easily out of the well. The NG is separated from the oil, compressed and then recycled through the system back down the csg. But what helps drive the oil out of the rock in the first place is the expansion of the associated NG as the reservoir pressure reservoir pressure falls the oil can hold only so much NG. But there are limits: drop the pressure low enough and all the NG in solution pops out and you lose that assist.

So drilling any fractured shale reservoir with little or no NG in solution and you're probably not going to be very productive...maybe not even commercial. As companies evaluated the various shale plays the GOR was an important consideration.

Thanks again. You are an incredible font of knowledge about these technical details.

Thanks Rock---
Mt literacy, while minimal, is increasing because of your insight.

OK. I stand corrected on the technicalities of closing off a gas well. If you don't close it off, however, the economics follows.

A - Easy to physically shut in a NG well but very difficult from a managerial standpoint. My is one of the very few companies I know of that reduced rates due to low prices. I know a number of operators who are selling their NG for less than it cost them to develop those reserves but since the wells still generate positive cash flows they keep producing. In fact, it's more common to see operators try to increase production in the face of falling prices then decrease.

Re: Pickens

"Despite having been a "peak oiler" -- Matt Simmons was a strong influence -- he now believes that the current situation is truly a sea change in US production."

Shale and fracking may delay the inevitable,
but it IS still inevitable.

Doesn't the US have any restrictions on flaring? The transport cost only puts a floor on gas prices if flaring is unrestricted, otherwise paying someone to take the associated gas away becomes profitable if oil prices are high enough.

I've been reading TOD posts on and off for a while now and a question always comes to mind when people mention switching to sources of energy other than fossil fuels.

To convert to another source of energy surely there will be a massive overhead of investment to do so. If we were to rely heavily on wind or solar for example then a far larger supply of rare earths would be required than we currently produce. If we were to switch to biofuels or electric vehicles then a large proportion of the current vehicles in use worldwide would need to be scrapped and replaced. I personally feel that such a massive overhaul would be beyond most developing economies and would severely tax the developed economies.

I live in Peru, the average car is 10-15 years old and if it was required that these were upgraded or replaced due to a lack of petrol then you'd probably find that most people would simply not have the finances to do so. In the UK where I'm originally from I'd imagine a lot of people would find themselves in a similar situation.

This element of a switch to alternative energy sources doesn't seem to be discussed but would be a major factor.

Sorry if this isn't in the normal theme of things or has been addressed before.


Inglorius. At least in the case of Peru, I doubt the volumes consumed are all that great compared to the global scale. That should mean that a slow transition ought to be acceptable to the global community. I don't expect many cars to be scrapped, because of a rush to electric vehicles (unless the cost of oil become extremely high).

Issues, of rare elements from an expansion of wind/PV are in my mind not really a serious problem. The reason I say that is that these are relatively minor parts of the generating platforms, which have been optimized for the current price (or near trem expected price) of various commodities. So for instance a windturbine could use fancy rare-earth magnets in order to have a smaller and more efficient generator, or a larger and slightly less efficient generator using no rare earths. For solar Silver has been touted as a potential limiting factor, as it is currently used for conductors within Pv cells. However, other solutions not involving Silver are possible, and recent cell designs have drastically reduced the amount needed.

A slow transition may not be possible. The reason I say this is not because of just the issue of oil prices but the general economic situation - which I know in a cyclical manner comes back to oil prices but also relies on many other factors.

The current situation is at best not good - in the UK I know of several people who have gone from 2 cars in a household back to one or who have decided that they will use public transport and sell their car completely. In Peru where most people use taxis instead of privately owning a vehicle the average price of a ride went up between 30-50% last year(depending on the city).

I don't expect to see large scale investment in alternative sources because they are simply not viable in our current situation. In the E.U they have been trying to entice business to invest in carbon capture projects but the private companies withdrew from all the suggested projects. The E.U also tried something similar with a large scale solar project in North Africa but again the private companies pulled out. Electric vehicles are equally doing badly because of the much higher initial costs required.

The cost of switching to an alternative source of energy is simply untenable in the current situation, as you mentioned the only reason anyone would do so is because the price of oil makes doing so seem economic. However considering that oil is already proving to be uneconomic in many individual cases then a world where the currently more expensive alternatives actually look good is not good at all.

And getting back to why a slow transition may not be possible is because the parts of the world that the developed world depends on to keep itself happy will be the first to suffer the full effects of the problem. If supply chains are damaged it will push up the prices of everything worldwide and so cause even greater problems.

That's just my opinion though.

Just my opinion, but those less developed parts of the world contain people with lower expectations, unlike the pampered members of the rich nations, whose spoiled citizens will riot if they think they gotta go back from three cars to two. I'm not sure which society will fare better?

> The cost of switching to an alternative source of energy is simply untenable in the current situation...

The alternative to alternative energy, continuing this race to the bottom of the barrel, is untenable, and it isn't so simple. It handicaps our progeny beyond our imagination. We postpone the inevitable shift to renewables at our -- and their -- grave peril.

Doing nothing is the risky course at this late date. To demonstrate, you have to look no further than your own back yard, where the hayday of Margaret Thatcher has already devolved Into a dead end of oil dependence, imports generating debt rather than productive assets, and impending social chaos on a small rock holding 60 m people with not even enough land to grow their own food. Add to that the rising seas and Perú starts to look a lot more attractive than London!

Your concern about rare materials is overshadowed by the limited supply of current energy sources to construct (bootstrap) our lifeboat which is the renewable solution.

To motivate the sustainable outcome, we must begin with much higher leverage than EVs offer. EVs are not affordable but the Solarevolution in transport is 10X more efficient, safe, economical. By abandoning the obsolete artifacts of the age of fossil fuels, we can create forms which leverage renewables. As soon as this retooling for our future begins in earnest, politicians will discover it is an economy booster, an employment opportunity unparalleled in modern times.

It's true that people in developing countries have lower aspirations than in the developed world which you'd imagine would make them less likely to protest. Unfortunately due to poor social cohesion the people actually far more disposed to protest than in the developed world. In the last year in Peru there have been ongoing violent protests with various causes including a 2 U.S cent increase in bus fares and a requirement that buses over 30 years old be scrapped to name the most relevant. If people were to face a worsening of their situation it would not be a big step for them to escalate many of these protests.

Having said that I've still opted for Peru over the UK as a safer bet in the long run. Essex where I lived had the highest point at 20m above sea level, Peru though is expected to lose it's glaciers within 20 years though so fresh water will be an issue.

I would agree that if we don't shift away from fossil fuels then we're pretty much signing our own death warrant. I don't think the economic side of oil will be the biggest problem, it will be a hindrance to dealing with all the other problems that are building steam.

I don't think a switch to alternative energy sources will really be a game changer in the long run - everyone is convinced that we will always experience economic growth which will make more expensive options more affordable in the future. Even in the developed world the finance and will to make such sweeping changes simply isn't there. History teaches us one thing and that is that everything changes.

I'm no economist but I can't see us crawling out of this economic mess in any serious fashion anytime soon. Growth may continue in developed nations at 2-3% but this won't be enough and will cause increased social unrest which will just bog everything down. I'm a bit of a pessimist when it comes to humans digging themselves out of the hole we've made.

I had dinner last night with my Peruvian friend who last year carried down our proposal for a major solar project there. The prospective customer was non-plussed because the government offered him a tap into the new natural gas line. Since the cost to extract the gas is only what it takes to steal from future generations who are unable to defend themselves and apparently have very few friends in court, the customer opted for gas. So his own children get a ten year fossil fuel solution for their major food operation instead of a 50+ year solar solution. Pity. It was a slam dunk for solar.

The Camisea gas field is never going to cause a revolution for the country. One issue is that the government can see more profit exporting the oil than selling it to the population, the other issue is connectivity. Cusco where I live is the closest city to Camisea but is not directly connected to receive the gas, this means that prices here are actually more expensive than the cities on the coast.

As you can imagine this causes more than a little bit of resentment, there are active terrorist groups operating in the region who only last year kidnapped 40 workers from the field.

The other issue is the reserves that Camisea offers - there have been various surveys with differing results. Sorry but I don't have any links regarding the reserves but I remember them being anything from a 10 year supply for Peru to something like a 100 year supply - obviously at current usage levels.

Peru has about 50 years of proven natural gas reserves at current rates of production, plus massive amounts of shale gas resources, which accounts for the government's enthusiasm for using domestic natural gas for generating electricity rather than importing expensive solar panels.

Currently about 25% of the gas is being exported, but since the country is a net oil importer, it would be better to substitute domestic NG for imported oil wherever possible.

I would imagine a lot of the gas here is conveniently located under the rainforest just as camisea is. One of the problems Peru has is that they explore the rainforest which is damaging but not overly so, but having opened up roads it then allows other people to do a hell of a lot more damage.

I don't know for sure but I thought Peru's main supply of energy was Hydro. Peru has massive potential (unfortunately again for the rainforest) to produce Hydroelectricity, there are several large projects being developed. Peru I think is actually fairly energy independent at the moment, the reason I make this assumption is because the new Hydro projects are so they can sell electricity to Brazil and are not set for domestic consumption.

In addition to having large natural gas reserves, Peru also has huge hydroelectric capacity. Since it has to import much of its oil, one would think the smart thing to do would be to reduce oil consumption and replace it with natural gas and hydroelectricity.

I don't know why they haven't brought natural gas into Cusco (the old Inca capital) but they should do so ASAP.

However, I think the best thing they could do is bring electric rail and trolleybus transit in the major cities as rapidly as possible. I doubt that the average Peruvian could afford to buy an EV, but an LRT or trollebus ticket should be well within the price range of the average person - particularly if the systems are built as cheaply as possible.

Peru's oil and gas in pictures from the Energy Export databrowser:

Peru was an oil exporter for a while during the 1980's but production fell steadily until 2004. It has been on a rising trend since then. Unfortunately for their energy balance, consumption has also risen recently and they are no closer to oil independence than they were a decade ago. (Note that Peru is a fine example of a country where the Hubbert Linearization technique would have failed miserably at predicting future production levels.)

But look at how much gas they have been extracting lately! The case for substituting their own, cheap natural gas for expensive imported oil is very strong indeed.

What did the future generation ever do for me!

They did not pollute your environment. Can you say the same?

First, the solar PV people see their progress as unstoppable as panel prices continue to decline and begin to reach grid parity, especially in developing nations and anywhere with high electricity prices.

I look forward to the next few years to see solar PV gain an increasing portion of the electricity generation.

It has been two weeks shy of 1 year since I last posted here, but it might as well have been a full decade, such is the changed world I live in. I am almost a full year out from a serious stroke (following a heart attack and open heart surgery). I now see before us a coming tidal wave of oil and gas production so large as to release a carbon cloud so great it's effects will be profound and irrefutable. This is now the cutting edge of the knife of crisis. The release of carbon is a greater threat than the shortage of available fuel, and thus creates the paradox: The energy is there in such volume as to insure our destruction if we use it. Can we see the full candy dish of affordable enrgy on the table beckoning us without succumbing to it's temptation? I don't think so...

Thanks for coming back. Always liked your attitude.
I think this site is like the island I live on - not quite an intentional community, but not quite accidental either.
Tolerating others because we share the same space. And inside a shared space you can't beggar your neighbour.
As for things getting worse with emissions - yes they are. Huge forces driving consumption.

But if individuals can change, then groups can too.


Glad you came out OK! A local friend died of a stroke yesterday. He was about 77 and was still splitting wood and all that good stuff. His brain wasn't functioning so the good docs (and I mean this seriously) helped him along with a lot of morphine.

There are other TODers who have health problems or are old farts like me and I wish all of us well.


Todd, Thank you for the kind wishes. I learned alot. I spent 90 days in a nursing home and saw first hand the aging crisis coming at the U.S., Japan and especially Europe. It is big, and then those most advanced nations will begin to empty out. Even with no major emergencies we will have the biggest die off in the shortest period of time since the "black death". Our children and grandchildren will see this, but us boomers will be gone. What can we say but "one day at a time".


"..the United States (and also Canada) is going to have cheap and abundant natural gas at least for the next few years."

I would say "oh happy days" but that does not quite capture the mood.

CalGuy - Statements like that just tickle the heck out of me. I wonder if that person noticed my post in the last two weeks where I pointed out the volitility of NG prices in just the last dozen years: lows down to $2/mcf and highs above $12/mcf. And huge swings every 2 to 3 years: down 50% and then up 300%. But of course it will obviously hold current prices for the next 15 to 20 years. Sure it will...look how many rigs are still drilling NG wells even at these low prices...not. LOL

It's not a very hiqh quality blog post. It's not clear how they picked the companies on the list, but Johnson Controls is doing just fine.

It seems to follow the usual Fox talking points on solar power companies.