The “Dominant Energy” landscape has been, as forecast, active, multi-dimensional and moving fast across a spectrum of energy sources and delivery systems that will redefine how energy is marketed, priced, delivered and used.
New drilling still favors gas, with US production up seven percent during the first six months of 2015. Exports of liquefied natural gas still will play an increasingly important role in gas producers’ futures because US shale gas can be produced and shipped more cheaply than gas from most other nations that may have the reserves but lack the technology, infrastructure and transport facilities to be competitive.
Shale-oil producers are segmented into sites that make drilling profitable when oil is trading at different price points. For example, West Texas Crude futures are trading below $50 as we go to press. If, or until, prices fluctuate between $80 and $100, rig counts will continue to decline as will profit margins. However, oil companies that have drilled new wells when prices are low and capped the holes will profit should oil prices rebound from their one-year slump.
Oil producers, however, may have a long wait. Millions of barrels of crude fill the supply chain as the global economy slows, demand declines and prices soften. And now, with prospects for normalization of relations with Iran and the lifting of sanctions, some two million more barrels of oil a day will be dumped on the already oversaturated markets. Therefore, oil, as with the broad basket of commodities hitting 2002 lows, will continue to trade in its current range until domestic and global economies rise.
With US drilling and production costs lower than in many other parts of the world, American shale oil and gas are becoming part of the world’s baseload production. Some nations lack the expertise and infrastructure to exploit their own shale reserves; the longer low prices last, the longer that gap will endure. Low prices also force high-cost producers of oil and gas to leave their resources in the ground, giving more market space to US “frack oil” and “frack gas.”
FRACKING BANS SLOW GROWTH
But there’s the rub: the US energy wave still depends on hydraulic fracturing — shattering underground rock formations with water and chemicals under high pressure — and fracking still depends on water, sucking down millions of gallons in every new well. New York State already has banned fracking; other states are considering restrictions under pressure from ever-thirstier municipalities and farmers.
Feeling that pressure, the industry is testing ways to clean and recycle the contaminated backwash from fracked wells and even trying waterless fracking. (The Calgary-based GASFRAC Energy Services offers a method that uses liquid propane and nitrogen in a gel that replaces water.) These and similar water-wise methods will make their way across the North American oil patch over the next five years. That will raise the costs to produce oil and gas, but petroleum prices should rise in tandem in response to increasing global demand.
CLEAN COAL IS THE NEXT WAVE
Fighting a losing battle against natural gas and renewable energy, the coal industry is urgently adopting “clean coal” technologies. The Texas Clean Energy Project, breaking ground this summer west of Odessa, Texas, will be the first US project to combine two techniques on which coal has staked high hopes: gasification and carbon capture.
Gasification involves heating the coal to make a vapor, then drawing off impurities — sulfur, mercury and others — from the gas to sell as commodity products. (The Texas project will market sulfuric acid and urea, an ingredient in fertilizer, among others.)
Carbon capture diverts waste-carbon gases into a tank or pipeline instead of venting them through a smokestack. The Texas venture, in the heart of Lone Star oil country, will sell its carbon dioxide gas to oil producers to pump into flagging oil-bearing rock formations to squeeze out the last bits of stubborn crude. Carbon capture and sequestration are the rage in coal research, with specialty companies such as Clean Energy Systems already springing up that offer technologies that create zero-emissions power plants. The effort even has its own trade group, called the Carbon Capture and Storage Association, and, by 2020, the field will establish itself as a new specialty within the fossil-fuel industry.
The Texas project also is an “integrated combined cycle” system: Heat from burning the cleaned-up coal is used to make steam that drives a turbine, deriving two streams of energy from the same fuel. Duke Energy’s Edwardsport Generating Station in Knox County, Indiana, replaced an antiquated coal-fired plant with a combined-cycle array that makes 10 times the power of the old boilers while producing 70 percent fewer emissions.
But impurities can be extracted from coal before it’s burned, using chemical cleaning or even turning bacteria loose that eat sulfur out of the rock. Clean Coal Technologies, Inc., or CCT (Trends Journal, Winter 2015) is making headway with its “vapor deposition process,” which removes many impurities and pollutants from raw coal and dehydrates it without increasing the risk of spontaneous combustion. This spring, the company completed a round of financing that will fund the completion of a small-scale demonstration plant near Tulsa, Oklahoma. It should fire up this fall. The firm has also licensed its technology to Jindal Power and Steel, a New Delhi company that will build a CCT module in Indonesia as early as the first quarter of 2017.
NUKES REQUIRE NEW DIRECTION
The nuclear industry, recognizing the world’s irreversible move-away from massive, centralized, power generation, is hoping to reinvent itself by creating smaller, cleaner, safer reactors. Recently, governments have taken steps to accommodate these “small modular reactors,” or SMRs. Oregon-based NuScale Power is using a $217 million grant from the US Department of Energy to underwrite its work to have its 50-megawatt-power module design approved, which the company hopes will be complete before the decade is over.
The 50-megawatt steel tube can be built in a factory to control quality and to capture efficiencies of mass production and economies of scale. The modules can be used individually by small operations such as mines or military staging areas, or ganged together to make a power plant that starts small and adds modules as demand grows. In February, Nu-Scale successfully tested its technology in an Italian generating plant, bringing it one step closer to regulatory approval and reportedly to a planned commercial plant in Utah no later than 2023.
Perhaps hoping to lure NuScale northward
, Washington state’s legislature passed a bill in March requiring the state to draft siting regulations for SMR factories. That month, President Barack Obama issued an executive order requiring federal agencies to draw a quarter of their energy from “alternative” sources by 2025. The order specifies SMRs, among permissible power providers.
British inventor Ian Scott’s “stable salt reactor” design, a gigawatt-scale reactor that would operate much more simply than conventional nukes, uses fuel slurried in a molten salt as a coolant. This spring, an analysis by Atkins Ltd., a major British engineering and design consulting firm, put the cost per kilowatt of Scott’s design at £700, compared to about £5,000 for a conventional nuclear generating plant.
Within weeks, the private, nonprofit Energy Process Developments will release a report funded by the British government that will compare the cost of existing liquid-fuel reactor designs. If Scott’s concept finishes near the front of the pack, some development money could begin flowing his way.
Meanwhile, nuclear engineers from Norway to China continue their quest to develop thorium as reactor fuel in place of uranium or plutonium. Easier to find and far cleaner than conventional nuclear fuels, thorium has inspired full-scale research efforts in India, which may have the world’s richest thorium deposits; and China, which has yoked hundreds of scientists to the project and vowed to produce a working thorium reactor before 2025.
RENEWABLE ENERGY COSTS SINK
Last fall, analysts forecast the cost of solar-powered electricity would fall 40 percent in two years; match or beat the cost of conventionally generated electricity in all states before 2016; and be competitive with grid power in 80 percent of the world’s markets by 2018. Those predictions may be conservative. In January, ACWA, the Saudi Arabian power company, contracted to build a 200-megawatt solar generating plant in Dubai that would cost less than 6 cents a kilowatt-hour — lower than fossil-fired electricity in the region and then a world-record low price. The Dubai buyer noted that the second-place bid would have set the world record had the first not been submitted.
That was just the beginning. Austin Energy, the utility owned by the Texas city, released bids for new supplies in July that brought another world-record low of 4 cents per kwh. A few days later, NV Energy, a Nevada utility owned by Warren Buffett, contracted with First Solar’s 100-megawatt Playa Solar 2 project to buy electricity at 3.87 cents per kwh, probably the lowest electricity price in the US. Without the attached government subsidies, the Austin and Nevada projects would still deliver electricity at under 6 cents per kwh, about 25 percent cheaper than the current average US electric price.
Innovation is one reason. The Swedish company Ripasso Energy has unveiled a solar collection dish that claims 34 percent efficiency, far outstripping typical solar panels that struggle to make their way out of the teens. The advent of so-called “yieldco’s” — investment vehicles that bundle private capital to fund giant solar-energy farms while guaranteeing investors reliable dividends — has delivered large, commercial solar installations in the US southwest and elsewhere in the world. Meanwhile, a host of small companies are fashioning individual refinements to tweak efficiencies and cut fabrication costs. For example, 1366 Technologies in Boston is testing ways to melt pure silicon and cast it in thin wafers, potentially reducing the cost of silicon for solar panels by as much as 20 percent. The company hopes to begin mass production next year.
Action attracts capital. Buffett has pledged to pump at least $30 billion into renewable-energy ventures; Denmark-based Copenhagen Infrastructure Partners has raised €2 billion from pension funds and other conservative institutional investors to buy into renewable power projects across Europe; and two Canadian pension funds have partnered with Banco Santander to pool $2 billion that will bankroll renewable energy projects in Europe and South America.
Wind power is similarly cheap. Worldwide, the average cost of wind power generated onshore in 2014 was the same as electricity from gas-fired utility plants. The gains chalk up to longer rotor blades that capture more energy (and masts and turbines able to cope with them); sleeker blade shapes; and lighter, sturdier materials such as carbon fibers. Also, a new design — horizontal blade arrays set low to the water that spin like a merry-go-round — may take the wind out of the sails of opponents of offshore wind farms.
HYDROGEN-POWERED VEHICLES DEBUT
True to their word, Hyundai and Toyota debuted hydrogen-powered fuel-cell vehicles in the US in 2015 after test-marketing them in Asia during 2013 and 2014. (Honda has delayed its version, perhaps until as late as 2018.) More are coming. Ford, Daimler and Nissan have partnered to produce “affordable” fuel-cell cars by 2017. General Motors has invested millions of dollars and years of work in developing fuel-cell designs; California has committed $100 million to setting up at least 100 hydrogen fuel stops in the state by 2020, a project that automakers are helping fund.
We still expect one of two exotic hydrogen technologies to tease the general public later this year: either Andrea Rossi and his Energy Catalyzer or E-Cat (Trends Journal, Autumn 2010) or BlackLight Power (Trends Journal, Summer 2012). Both companies have been quiet of late — Rossi uncharacteristically so, and BlackLight even more than usual. Rossi’s silence may be a result of lessons learned after promising major events that weren’t delivered; BlackLight could be finalizing a business plan that may begin with a public demonstration this fall.
Marginally less exotic: Scientists are mimicking plants’ metabolism to split water into oxygen and hydrogen, then capturing the latter to use as fuel or even as more complex chemical compounds. (See “A New Leaf” in this issue.) TJ