Portable Power and the Plug-In World
A list of the world’s greatest inventions includes the printing press, aircraft and computers, but the one making all others possible is conspicuously missing. It is the generation, distribution and availability of electricity. Nothing moves, is created or puts food on the table without access to stationary power for homes and buildings or in conjunction with portable energy on the road. The next great development for this basic necessity is likely to be the way energy is made available for both kinds of delivery.
Emerging economies, terrorism and global politics require a momentum to close the gap between stationary and portable power. Utilities could be the world’s source for all needs electrical, with buildings and homes becoming locations for plug-ins to recharge batteries. When NASA contracted for battery driven drills to use in space decades ago, few people predicted the plethora of tools now used in all phases of construction, assembly, service, repair and even home crafts. The next logical step is to move toward mobile machines and battery-driven vehicles plugged in at home, the office or factory.
The volatile oil market is the leading factor in the increased demand for self-powered residences and businesses. Investment in new technology to produce electricity on-site is an investment to reduce the use of electricity coming from the grid which ultimately reduces dependence on imported oil. It helps that payback is usually within five to eight years, providing generous reductions in operating costs after that.
Few people recognize or remember that US power companies determined they would never be held hostage again to foreign oil interests following two embargoes in the 1970’s designed to punish the US and Holland for supporting Israel in the Six Day War. Utility companies made a concerted effort to wean their plants from foreign oil dependency and did it very successfully. From a high of fifty-five percent oil use at that time, utility use has dropped to less than five percent. Aging oil-fired plants were replaced with more efficient natural gas and more economical coal operations along with a variety of alternative energy installations.
If the utilities had not drastically weaned their operations from oil, the present fuel crisis with prices of a barrel of crude nearly a hundred dollars would likely have happened more than twenty years ago. More importantly, if the vehicle industry cultivated the same insight and vision that the utility industry did in the late 1970s following the OPEC oil embargoes, there would be no global oil crisis today.
Until recently changes to the energy/fuel market have been moderate. However, political tensions, the war on terrorism and global economic shifts have created a demand for new ways to power buildings and vehicles. The market mandate is get on board or get out of the way.
Several economic factors already in motion are pushing the world toward a plug-in hybrid, wired and wireless life. In the process, the marketplace is replacing oil dominance with distributed power that varies according to the assets available to a specific region—solar, wind, geothermic, natural gas, coal, nuclear, biomass. The move mirrors the way electricity came into use a century ago when alternatives ruled and grids were small, local networks.
Questioning oil supplies and reserves is appropriate. British Petroleum CEO John Browne says in the September 2005 issue of SmartMoney he does not subscribe to theories of declining overall reserves in the world. He states there are forty years of proven oil reserves and sixty of natural gas. This view is widely shared in the oil industry but is not supported by science undiluted by politics.
With American interests closely tied to the Mideast, it is necessary to take a look at what reserves really mean and how they are calculated. Geological and geophysical data result from a study of underground layers of strata where domes of oil or gas may be trapped. Using core samples or test wells, engineers look for porosity and permeability because oil does not lie in deep pools like artesian water. Rather it is mixed among the earth’s layers. It is under some pressure from natural gas and migrates toward small domes where it can be pumped out.
“Proven” reserves are estimates reached by drilling a series of wells in a field and measuring the accumulated strata data from them. That information is then extended for as far as the same geology extends in the rest of the field. There is nothing certain about the data. It is an educated guess. These questionable estimates have enormous financial impact because the size of the field determines the size of financial investment and dictates the financial futures market as well. The domino effect of that information on the cost of living results in Wall Street fluctuations and is a real hit to the wallet when news is negative.
The Saudis have never allowed outsiders to view their records of reserves. In 1979 senior management of Aramco, which operates the Saudi fields, told the US Senate Foreign Relations Committee if the major field there produced 9.8 million barrels a day it would be in irreversible decline by the early 1990’s. Eight years later without a single additional finding, figures for Saudi proven, possible and probable reserves estimates inexplicably increased from 245 billion barrels to 260 despite continued heavy extraction in the interim.
In the last decade, Mideast nations quietly followed American utilities by shifting to natural gas installations in their countries. Since natural gas was previously characterized as a step-child of oil, this news bears watching. Where the Saudis previously flared off the gas or simply vented it into the air from oil wells as a nuisance, it has become the energy producer of choice. Americans may be surprised, but apparently the Saudis are not. A new saying is making the rounds: “My father rode a camel, I drive a car. My son flies a jet plane and his son will ride a camel.”
Royal Dutch Shell Company shocked the financial world in 2005 by announcing a write-down of their previous estimates of oil reserves. The event was called the British Enron by media in the British Isles. Wall Street was rocked by the news. For the first time a major financial institution agreed: Bank of Montreal analyst Don Coxe said Saudi Arabia’s Gharwar, the world’s largest field, was in irreversible decline. In addition, glowing reports of oil in Kazakhstan now appear to be overblown and three of the original major partners holding thirty percent of the investment in that venture opted out of the development.
Oil engineers are not surprised at these events. When Saudi Arabia pledged to increase oil production in the early 1990’s to make up for the loss in war-torn Kuwait following the first Gulf War, they pumped out more water than oil—another sign of a maturing oil field. It had been a source of pride that the “sweet” crude in that country was the purest ever pumped and without any water mixed in.
Oil investors have long been accustomed to working without competition, other than companies in the same field, making alternative energy production the first real competition they have had to face. Most consider new electric generation technology a passing fad in a mistaken belief oil will never be replaced. A common practice used to denigrate what is called “experimental power” compared to oil, is to cite an economic figure double the cost of a barrel of oil.
Following the Arab embargoes nearly forty years ago, oil industry spokesmen said the price of oil would have to be $24 a barrel to make solar power competitive. At the time oil was selling for $12. In the 1980’s the comparison was the same—oil was selling for $20-30 a barrel and the comparative for solar was $40-60. In the historic high of $70 a barrel in recent months, oil executives said solar power would be a viable alternative when oil was $140 a barrel. In the same period the cost of Solar power installations dropped by more than 50%.
The advancement of new power sources is often stymied by poor representation in the media and sometimes by deliberate misinformation. It has taken forty years for the solar industry to get comparable costs that fairly reflect the payback instead of merely using construction costs. If a ten year cost of fuel is added to the amortization, solar comes out ahead but analysts insist the cost of construction weighs heavily in favor of oil. In addition, the oil industry still rails against alternative energy rebates as unfair while receiving much greater tax breaks from the same government entities. Despite the debate, solar sales continue to grow, spurred by sales at marketing giants Costco and Home Depot.
Entrepreneurs continue to find creative ways to take market share away from oil. Dow and Cargill Companies produce a corn plastic already used in the fresh food industry. Newman’s Own embraces the new technology for the fresh salad market and is particularly interested because the containers are composted in a month compared to an estimated hundred years for petroleum products. Cargill is developing corn plastic for fabrics and a broad spectrum of containers. At present six percent of oil production is used for production of plastics and fabric. Six percent does not appear to be much of a market share but it took less production loss than that to put the oil industry into global turmoil during the Arab embargoes.
In addition to competition with new products from grains and grasses, oil is faced with an enormous potential liability for lawsuits. Widespread pressure from well funded environmental groups and government requirements for cleanup is leading to lawsuits around the world. A tiny beach town in central California took Unocal to court for the half million gallon underground spill of crude oil and gasoline beneath the business district. It is estimated the company spent a half billion dollars cleaning up the town, buying homes to be razed and lots to be cleaned up, plus disposing of thousands of truckloads of contaminated soil. The same company which has since been bought up by Exxon, is cleaning up an even larger spill of diluent, a toxic chemical used to thin western crude to help it move through pipelines. That delivery system’s leaks released millions of gallons of the petroleum product beneath the Guadalupe Dunes about thirty miles south of Avila Beach. The spill is greater than the Exxon Valedez disaster and will take longer to clean up while it threatens an enormous aquifer in the Santa Maria basin where a substantial amount food is grown year round and sold across the entire country.
A major suit in South Africa resulted in Shell Oil being ordered to pay $1.5 billion to the Ijaw tribe for polluting their land. The problem of leaking underground lines is an elephant in the parlor. With 160,000 miles of underground pipes in the US alone, the probability of future litigation is staggering.
To complicate matters, closed oil wells continue to cause problems as pressure builds up underground. Huntington Beach, California had an explosion that sprayed 360 homes with an estimated 300 gallons of oil. In Orcutt, California thirty-eight upscale homes built on an abandoned field were purchased by Unocal because of oil seepage bubbling up in yards. The houses were torn down and the soil cleaned. Two more homes in a heavily built-up area of Santa Maria, California were destroyed for the same reason. The tax rolls of communities throughout the United States show many parcels and buildings owned by oil companies because of the underground contamination from oil drilling.
That same environmental climate keeps oil companies from regenerating old wells in the US closed down since the low cost of Mideast oil made them unprofitable. It is not a question of simply opening the well head and start pumping again. Over time, oil in the strata congeals after being exposed to air from the well head, which effectively seals the seepage lines. An old well must be steam cleaned or scoured with oil penetrating chemicals before it can be profitable again. Some companies redrill new wells alongside old ones to get at that oil. Moreover, in some places the gas pressure which makes oil available to pumping is gone. A proven reserve might have billions of barrels of oil underground, but it can’t be brought to the surface without pressure from below. That means in a field with twenty billion barrels of oil, a substantial portion will never be available, using today’s technology. It is the yin and yang of wells that some may build pressure and spray homes and farms while others will lose the necessary pressure to bring the oil to the surface.
Market change is a wild stallion ridden but never broken. Alternative electrical power is in the saddle with projects like those in Ohio. American Municipal Power-Ohio (AMP-Ohio) is a joint agency providing electricity and related services to municipality run power companies in Ohio, West Virginia, Pennsylvania and Michigan. The organization has several hydroelectric systems functioning both with dams and without, as well as a wind farm. Local utilities bring projects to AMP-Ohio to take advantage of available resources. That leadership stems from member municipality’s need with electrical power generated from a variety of systems, both traditional and alternative.
New York state has made a commitment to new technology by adopting a policy to require twenty-five percent of electricity in the state coming from alternatives in six years. California generates more than thirty percent of all electricity from environmentally clean systems and with several major solar installations going up in the deserts east of San Luis Obispo, that number will take a huge jump upward in five years.
In spite of notable progress, some in the power industry say new energy development will not happen without strong support from government. While much technological advancement comes through the pressure of war and space exploration, the Internet was used for twenty years by the military and ten additional years by the National Science Foundation in conjunction with a number of colleges and universities, before it was adapted for commercial use. When the open market finally was able to find ways to make it pay, growth was exponential.
Government is already promoting alternative energy by installing alternative systems on their own buildings. It is easier to find money for capital improvements than to increase maintenance budgets, and cities, counties, states and schools are going self-electric in hundreds of small systems. No cumulative statistics show the volume of systems producing less than a kilowatt but thousands of them are functioning at locations throughout the country.
The Department of Energy’s annual Outlook 2005 reported energy use was expected to increase 2.7 percent but shows no actual increase in central facilities by utilities because of onsite generation. This is not the first year onsite or self generation kept increased energy use at zero. The report states, “With growing electricity demand and the retirement of 43 gigawatts of inefficient, older generating capacity, 281 gigawatts of new capacity will be needed by 2025.” This is where alternative energy is already making a difference and will continue do so in the coming years.
The oil industry is not entirely blind to the changes it faces and is making some unusual strides in testing the waters of the future. Shell and British Petroleum, as well as other oil companies, have alternative energy interests but Chevron’s Energy Solutions subsidiary of the company exhibits the most visible moves toward change in the US. The company installed the largest solar power installation in the country at a US Post Office mail center in Oakland, California. This 910 kilowatt power system covers a rooftop area the size of two football fields and is part of a contract the company has with the federal government to do the same kind of construction in dozens of other post office locations.
Since 2000 Chevron has spent $1.5 billion in alternative energy projects. That represents less than 25% of what the company earns in one day, but it is promising. Perhaps competition between utilities and oil companies to usher in a plug-in world for stationary and portable power will make it a win-win race for everyone.