Saturday, March 24, 2012

Plug-In Power

                                       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.

Monday, February 13, 2012

Recently two writers squared off on the Op Ed page of the San Luis Obispo Tribune giving pro and con viewpoints about the present state of oil availability along with concurrent politics.  However, in both cases the emphasis was on economics and missed facts.

Not long ago I received an education in this subject from Bill Baker, editor of Gulf Oil Publication Company whose flagship publications are World Oil and Hydrocarbon Processing .  His on the scene observations and contacts in the Gulf give him impeccable credentials to speak to the matter and his information comes directly from the oil and gas industry insiders about the availability of oil for market.

Freelancing for Mechanical Engineering Magazine (American Society of Mechanical Engineers) at the time, I asked him about Gulf information and disinformation.

Baker said the Saudis’ geophysical data they’ve accumulated over the last 30-40 years has never allowed to be released.  He added they are very tightlipped about it.  In 1991 when they kicked up production to make up for the loss of Kuwaiti and Iraq oil shipments at the request of the first President Bush, the Saudi wells ran into water problems.  That means an oil well producing water will gradually continue to produce more water than oil, at which time the well would become unprofitable. 

That was unexpected because Gulf oil has been called “sweet,” a term of admiration because it rose to the surface without any water in it at all. Global engineers immediately recognized that water—now mixed with Saudi oil—indicated a “maturing” well field that was running out of oil. 
Baker pointed out that it is widely believed that current worldwide demand equals current production capacity but some of the figures normally used to determine that come from the International Energy Association, an organization that measures capacity and production.  At one point statistics and predictions became so rosy, the editor said he took exception to the information the IEA put out.  Baker knew that in the late 1990s, prices had fallen to $11-12 a barrel, and the organization claimed production was at a level so much over demand that too much oil had been pumped.  Baker had his own engineer staff do the computations and they found that global storage capacity, including shipping tankers, could not hold all the oil claimed to having been produced. 

         That incident brought home to Baker that politics and economics muddy the waters, pushing markets to be driven by speculative fear and widely claimed information that is often incorrect.

         Baker has proof that some OPEC members have ignored their quotas for years and that action is not reported in information used by investors.  Countries like Nigeria were known to be slipping in an additional few hundred thousand barrels a day, production that would cause prices to collapse if it became widely publicized. 
         Another important area to question oil capacity assumptions is the change in dealing with natural gas escaping from oil wells which until recently has been flared or simply vented into the atmosphere by Gulf oil suppliers for decades.  However, the Saudis are switching much of their country’s energy use to natural gas in order to save their oil for sale.  Natural gas has been a stepchild to oil for years but Europe and South America are also disengaging from oil and switching to gas and solar. 

Debate over the condition of oil availability can only be believable when facts are used instead of economic opinions and resulting projections.  One need only point to the fix the world got into with rosy predictions of housing and banking just prior to the Great Depression of 2008. 

I am left to wonder why American producing oil wells—closed down with the advent of cheap oil from the Gulf—are not being reopened.  While there is great expense in regenerating them, the ultimate cost is far less than trying to get crude from oil sands and shale.  More importantly, old wells regenerated might be the stopgap answer to the conversion from Gulf oil to more environmentally favorable energy generation. 

The preferable road in my opinion is getting all our energy needs from utility companies and celebrating that by burying global oil politics forever.

Sunday, January 29, 2012

It Ain’t Easy Bein’ Green

When Jim Henson’s Kermit the Frog first sang this song, it had nothing to do with the state of world ecology.  Since then the title has become a Ford Motor Company commercial and an Internet communications network for promotion of environmental awareness and action.  The idea is not new to people of the Central Coast where insulated from both Los Angeles and San Francisco by hundreds of miles, we continue to live the good green life in our own fashion.

Twenty years ago San Luis Obispo took a California state mandate to recycle some of the trash collected from homes in the area, and pushed it up a notch.  We separated our cans, bottles and paper and collection okayed by the San Luis Garbage Company ( yes, they are unafraid of disclosing the reality of that) included more of the kinds of plastic than just those the State of California told everyone to do.  The Central Coast was one of the top recyclers in the state while other areas struggled to get going.  That leadership helped build a market for recycled products to compete in the marketplace and fostered a boom in new ways to use even more of what is discarded daily.  It also fostered new equipment to sort so we can put all items to be recycled into one bin.

Not long after that success, we hit the big time with the ban on smoking in public buildings.  That one ran well in San Francisco, Peoria, and Europe once we showed conforming to the new legal standard would not shut down the business district.  Time has come to show that leadership again, this time with wise use of water. 

Living in the west is nothing like living in Sagamore Hills in Ohio, Albany New York or Spruce Pine North Carolina where water is abundant and summer means mowing the grass every week before it gets knee high to a horse’s belly. The operative word for us is a “Mediterranean climate,” meaning dry summers and (hopefully) wet winters.

Our natural open spaces cycle differently and instead of copying what others do thousands of miles away, we need to cooperate with nature by planting low water demand native plants.  To use water wisely will always be a challenge for Californians, not just another method to meet present needs. In the 1950’s the State Water project was planned to provide water for that time and forever in the future.  It is the world’s largest publicly built and operating water project and the claim to persuade voters was that we would never have to worry about water supplies again.  We believed it and passed the bond measure to fund it in 1960. 

However, it’s not enough today, and we face the need for more storage.  The elaborate system of multiple dams and forebays endow the region with water but at the cost of natural running rivers and streams, not to mention helping to decimate fish populations.  Not only is it difficult to be green, doing it right is complex and comes with a pressing need for compromises.

What does not change is that our water is limited and it is sheer folly to copy landscaping of the eastern part of the country where lawns are watered mostly with year round precipitation.  San Luis Obispo has yet another opportunity to lead and I challenge San Luis Obispo City and the Nature Conservancy to write up an ordinance banning all irrigated grass lawns.  With the savings, parks and recreation can go the professional arena route using artificial turf with a ground recycled tire base to cushion ballparks.

It’s not a monumental undertaking but it does have wide ranging effect, such as purchasing a commercial vacuum instead of artificially watering acres of lawns alien to this climate.  The changeover will require a several years to get into it gradually and give ornamental growers a chance to reorient their inventory as well as for homeowners to replant lawns with native flora.  Count on media coverage and a lot of disbelief just as it was with the smoking ban in public buildings.  Dynamic leadership attracts that kind of reaction, but we’re used to it.

How about some feedback?