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.