RE: Research Topics

["Weststeijn, Andries" <Andries.Weststeijn@essent.nl>]

Dear Kevin,

You write:
	"Affordable" is a very relative term..... I can "afford" gasoline at
$C.75
	per litre now, but my current perception is that I could not
"afford" $C1.50
	per litre that most Europeans are paying. However, over a period of
time, I
	would switch to energy efficient cars, and only drive where
necessary. Then
	I could "afford" the higher gasoline prices. As prices increased
further,
	then it would be more economical to not drive a petroleum powered
vehicle.

Fully agree as to the adaptation mechanism. And it doesn't just work on an
individual level, but on a wider level as well (call it society).

Next to adaptation, I expect my elected representatives to support national
programs and international cooperation to look beyond the short term and
think and plan ahead. What's more, I expect their positive stimulance for
programs going beyond the political whim of the day (the 4-year cycle). I
believe a pro-active attitude is called for, without dramatizing the
situation. The long term effects of the energy+emissions picture (might as
well change that out for the world fresh water supply) are very much key to
the living conditions of  next generations. 

There is a rule-of-thumb by experience that every major technology takes a
minimum of 30 years to reach maturity.
The energy transition from fossil to renewable is probably as major a
technology change as has been seen since the start of the industrial
revolution.
Let's give that not 30 but 50 years to take hold on a somewhat meaningful
scale world wide of perhaps 15-20% of the fossil energy (the other 85% being
the less easy to replace percentages of energy, of course)
Given the time scale required to reach meaningful percentages of replaced
fossil fuels world wide, it is a good thing that a serious start was made
last decade to gear up for this transition.
The current greenhouse debate helps in speeding up the development work
required as well. So, the pressures from the greenhouse debate -putting the
screws on CO2 emissions- will help in providing for a smoother transition,
by starting earlier and smoothing it out over a longer period.

(I am not sure Anouk is really helped by all this in terms of concrete R&D
subjects....but alas)  

You write
	I presently heat with electricity, even though it is about twice as
	expensive as furnace oil. I have done a study in the past where I
found that
	when the price of "convenience fuels", such as oil or electricity,
is
	greater than about 2.5 times the cost of a solid fuel, coal or wood,
then
	people will switch to the solid fuel. I am an exception to my own
rule,
	simply because I live in a very small home.

I don't know if city dwellers on our planet really have the option to switch
back to solid fuels....
In 50 years time half of the worlds population might live in city
environments where individual use of solid fuel is not permitted any longer
due to air pollution restrictions.
But coal in central heating/power plants might be a possibility, but is
considered already less than desirable right now!
Perhaps coal can be gasified in situ and piped in?
Wood in smaller rural communities remains an option (compare Kermit
Schlansker on this List) 
But wood to heat a city of a million and more?

	At the present, fuel oil is so cheap that it is hardly worth saving.
As
	prices increase, then it becomes financially attractive to spend
money to
	save energy. At the present, businesses will spend money on energy
cost
	reduction projects having a 3 to 4 year simple payback. There is
enormous
	"oil saving potential" in the projects now having a 4 to 8 year
payback. A
	doubling of oil prices will make them economic, by present
investment
	standards.

That "enormous savings" will not so big on a world wide basis, since it only
applies to 25% of current world usage. The other 75% already tightened up
due to economic constraints (taxes etc). Projects with longer payback will
only make a few decades difference at best. 
 
	 These alternative energy sources are presently not in wide use
	because of the present low cost of petroleum, or societal wishes. As
the
	cost increases, then they become economic and then the pressure is
taken off
	oil consumption.

Problem is, we still have an expanding world population as well as expanding
economies in the 2nd and 3rd world.
Even if their per capita energy use will lags behind 1st world use, the need
in barrels of oil will increase over the years.
So, I don't think the pressure is taken of as such, it will just be a
balance at a higher price level but under constant demand pressure!.
Leaving a gap to be filled with cheaper energy sources. 

	In addition to its fossil carbon content, it also has a significant
sulphur
	and ash disposal cost. This is just a wild guess on my part, but the
guess
	is that the price of natural gas in large quantities is very close
to the
	cost of coal energy plus the cost of sulphur and ash disposal.

Coal plants can be operated at close to zero sulphur and ash costs by
turning it into gypsum and concrete (with a positive commercial value). But
it takes technology to reach the quality level to operate that way.
I presume dumping will increasingly be considered "the easy way out" and
will depend on "permission" of authorities for "dated" coal plants only.

On gas versus coal:
The price of bulk natl gas is up to 3 times that of coal on a Btu basis.
However, the conversion efficiency in gas turbines can be 50% better than a
state of the art coal plant.
A GT plant has about half the investment charges per kWh as a modern coal
plant with emission controls installed 
The sulphur/ash removal costs in a modern coal plant are around zero.
A GT plant has half the O&M charges from a coal plant.
Altogether works out, very roughly, to a 15-20% cost advantage for a coal
plant. 

Why, then, are so many gas plants built, you ask?
(perhaps another thread)

	If the "general perception" changes to "the Greenhouse Effect is
real and it
	is serious", then there should be a significant conversion to
uranium, and
	to renewables..

This is exactly how we viewed it when I went to school!
We were convinced that the available emissions window for CO2
emissions-from-fossils would be transferred to the 2nd and 3rd world, and
that the 1st world would mainly switch to nuclear power to make that CO2
window available.
As it turns out, the only place where nuclear is currently expanding is
where we didn't expect it to go in the first place, and over here in the 1st
world we are head over heels in biomass and renewables to compensate for
fossil fuel power we expected to be mainly transferred by now....
Talk about scenario's..........

	It is so cheap now, we are consuming it
	indiscriminately, at a very serious rate, but that when the price
starts to
	rise, then the consumption will fall off, and that there will always
be an
	availability of it for higher value purposes.

As for the higher value purpose....agreed.
But there is a lot of energy used for plain bulk, which is nevertheless
still necessary to keep society running.
That's what needs to be covered as well, i.e. the lower value purposes. 

	That time has come for some alternative energy sources, in some
	places, but it has not come for all alternative energy sources in
all
	places.

Right. That's why I propose to free the discussion re desired R&D topics
from the time line (the planning axis where externalities provide fitting
overall economics at a certain point in time). And separate the costs of the
technological options. 

	In general, I don't see renewables getting much cheaper than they
are now.
	The major increases in renewables consumption will come when the
fossil
	energy costs rise to the point where renewables are economic.

Depends on the technology, perhaps?.
Solar might get quite a lot cheaper now mass production is on the way.
Wind in fact went through an industrialization phase already this past
decade, but the jump from 1.5 MWe turbines to 2 to 3 MWe turbines will still
bring generation costs per kWh down further. 
Biomass is such a variety of options, is hard to label in one go.
Personally, I believe in cofiring of biomass in coal plants given the
enormous potential of that world wide.
(by comparison, annually 1050 million tons of coal in the US alone!)
Many ways to have that biomass fed to coal plants.
And a very direct replacement of long-cycled CO2 from coal to short-cycled
CO2 from biomass.

	The NET pricing basis that you propose will certainly give results
which
	will be "safe". However, they will give very conservative results,
and can
	lead to missed opportunities through understatement of true
potential..

My idea is to undo the opportunities from politically set economic
conditions, since these vary so much from region to region. What's left is
true cost.
Don't think that is leading to overly safe or conservative results, just to
insight in the real cost picture as stripped from externalities.
Why miss opportunities if you know the true costs? 
Of course, WHEN an opportunity can "go" will remain being determined by
regional financial conditions (from interest to taxation to subsidies of all
kinds).
However, doing the financial arithmetic under regional financial conditions
in itself is not hard  (getting the desired conditions is hard, the
arithmetic is not).

Re Club of Rome
	Well, they were right as far as they went, but they did not go far
enough to
	give correct answers. They predicted we would be out of copper, but
we still
	have loads of it readily available. They were wrong, even though
they did
	indeed have some neat concepts.

Their answers were as good as their assumptions.
For instance, they assumed a much higher rate of electrification with a lot
higher use of cabling.
Since lots more aluminum was used for overhead lines and communications
became glass fiber oriented rather than copper, such predictions were too
linear.

	Their problem was that they did indeed have some neat concepts, and
if they
	had stuck with them as concepts, nobody could have faulted them for
their
	errors. This was sloppy thinking on their part. Similarly it is
sloppy
	thinking to state that "we will run out of oil" We will NEVER run
out of
	oil.
	What we will indeed run out of is CHEAP oil. But nobody seems to be
making
	the connection between price and consumption. We have already run
out of $2
	oil, but we presently have lots of $20 oil. AS time, and consumption
go on,
	then we will indeed get to the point where the $20 oil is all gone,
but
	there will still be $30 oil

You end the example at $30 oil, I recall in 1982 the break-even price for
the Canadian oil sands to be $40/barrel. In the meantime it came down, but
even oil sands will be final.
We will not only run out of CHEAP oil, but eventually run out of ALL oil and
gas which can be produced for prices to allow it to be used on the scale and
for the purposes it is used for now!!!!!. That calls for alternatives and
that is what is at stake here: WHAT alternatives and WHEN and for what
PRICES.
That there always will be some sewing machine lube oil left (I love your
example!), is very true, and is probably not debated by many.
What is meant by "running out", I think, is the bulk of oil+gas as used for
bulk fueling as applied today.
Correct?

	Getting back to oil pricing.... the OPEC cartel is one slick and
well oiled
	machine. They know that they can charge $20 to $25 per barrel for
"the
	foreseeable future", and that the World Economy will continue to
function.
	If they tried $25 to $30 on a sustained basis, their overall sales
would
	drop, and they would have less money per year in their pockets. As
the oil
	supplies of some of the Members start to dry up, then oil prices can
be
	safely increased somewhat. However, they still have to be careful
with their
	increases, in that there will definitely come a price where
renewables will
	become economic, and they will lose market share.

Let's be glad OPEC only can manipulate the price, and not manipulate and
destroy the actual supplies to up that price!!!
Remember what is done to up the price of apples?
Fortunately, if the oil price is too high to our liking, we'll be able to
enjoy it a little while longer :-)
Unfortunately, also the natl gas price I pay for home heating is linked to
that OPEC price, although no OPEC country is involved. So, who can I blame?

best,
Andries

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