FERC Aims to Decarbonize, Shoots Down Energy Security

Marlo Lewis explains the Biden regime push to undermine critical energy supply in pursuit of climate virtue in his CEI article Why FERC’s Greenhouse Gas Regulatory Policy Cannot Pass a Cost-Benefit Test.  Excerpt in italics with my bolds.

Today, the Competitive Enterprise Institute (CEI) filed comments on the Federal Energy Regulatory Commission’s (FERC) proposal to consider climate change impacts in reviews of infrastructure projects under the Natural Gas Act (NGA). The comments were jointly submitted by my CEI colleague Patrick Michaels; Heritage Foundation Chief Statistician, Data Scientist, and Senior Research Fellow Kevin Dayaratna (commenting as an independent scholar rather than as a representative of any organization); and yours truly.

We submitted comments back in January on FERC’s November 2021 technical conference on the same issues. We advised FERC to steer clear of climate policy, for three main reasons.

1.  Decarbonizing Goals Conflict with Natural Gas Act Purpose

First, the Biden administration’s NetZero agenda to decarbonize and degasify the U.S. electric power sector cannot lawfully be aligned with the Natural Gas Act. Biden’s goals conflict with the NGA’s “principal purpose,” which is to:

 “encourage the orderly development of plentiful supplies
of electricity and natural gas at reasonable prices.”

In addition, climate change is not a factor Congress authorized FERC to consider. The words “climate,” “carbon,” “greenhouse,” “global,” “warming,” “mitigate,” or any of their cognates do not occur in the Act.

2.  Infrastructure Emissions Do Not Threaten the Environment

Second, although the direct and indirect emissions of natural gas infrastructure may be “reasonably foreseeable,” the climate effects are not. FERC’s project reviews are governed by the National Environmental Policy Act (NEPA), which requires scrutiny of major federal actions “significantly affecting the human environment.” Even the emissions of the largest natural gas projects are too small to discernibly affect global climate, and no project’s “carbon footprint” is big enough to influence the fate or fortunes of any community, business, or human being anywhere in the world.

3.  Social Cost of Carbon Is Speculative and Subjective

Third, the social cost of carbon (SCC)—an estimate of the present value of the cumulative climate damages of an incremental ton of carbon dioxide equivalent (CO2e) greenhouse gas (GHG) emissions—is too speculative and subjective, and too easily manipulated for political purposes, to be weighed in the same scales with an infrastructure project’s estimated economic benefits. The Biden administration’s SCC estimates are egregiously biased in favor of climate alarm and regulatory ambition, rendering any agency action that relies on them arbitrary and capricious.

Unsurprisingly, FERC did not take our advice, and proceeded in February to adopt an “interim” policy statement on NGA project review and greenhouse gas (GHG) emissions. That stirred up controversy, including pushback by Senate Energy and Natural Resources Chairman Joe Manchin (D-WV) and Ranking Member John Barrasso (R-WY). As a result, FERC in March demoted its GHG policy statement from “interim” to “draft,” and extended the comment period until today, April 25.

Unlike several presenters at FERC’s November 2021 technical conference, the draft GHG policy statement does not advocate requiring SCC analysis in NGA determinations of public convenience and necessity. Neither, however, does FERC disavow an intent to require it in later policy statements. The Commission may simply be waiting for the Biden administration’s Interagency Working Group (IWG) to finalize its interim SCC estimates, or for courts to resolve Louisiana’s challenge to federal agencies’ use of those metrics.

The Commission’s draft GHG policy statement establishes a “rebuttable presumption that proposed projects with 100,000 metric tons per year of carbon dioxide equivalents (CO2e) emissions will be deemed to have a significant impact on climate change.” FERC also implies that it may condition project approval on the sponsor’s plans to “mitigate all or a portion of the project’s climate change impacts.”

The camel’s nose is already under the tent.

It is not hard to guess where this is going if FERC does not quickly reverse course. The usual suspects will pressure the Commission to:

(1) progressively lower climate significance thresholds,
(2) monetize undetectably small project-related climate “impacts” using agenda-driven SCC estimates, and
(3) either reject needed natural gas infrastructure projects outright or impose mitigation requirements that render them uneconomic.

This is bad policy, as Michaels, Dayaratna, and I explained in our January 7 comments. If an infrastructure project is commercially viable and helps ensure plentiful supplies of electricity and natural gas at reasonable prices (the NGA’s principal purpose), the Commission knows in advance that the project’s economic benefits far exceed its climate-related externalities. Therefore, no further investigation of the project’s GHG emissions is required, nor does it make sense to condition the certificate of public convenience and necessity on the project’s adoption of mitigation measures.

Conclusion

New research by Dayaratna (hereafter “Heritage analysis”) further confirms that conclusion. Using the U.S. government’s leading energy and climate policy models, the Heritage analysis demonstrates that banning construction of new U.S. pipelines would have a negligible effect on U.S. annual CO2 emissions through 2050 and, thus, a similarly negligible effect on global temperatures through 2100. The policy implication for FERC is clear. No level of overregulation or prohibition that regulators might apply to the development of U.S. natural gas pipelines could meaningfully affect the Earth’s climate.

Consequently, no regulation or prohibition of new natural gas pipelines could possibly be worth the economic losses imposed on construction companies, natural gas producers, and energy consumers.

See Also Seeking Climate and Energy Security

If That Tesla Battery Could Talk

Let’s imagine what an EV battery could tell us about its reality. A short story.  H/T Graeme Weber

The packed auditorium was abuzz; nobody seemed to know what to expect. The only hint was a large aluminum block sitting on a sturdy table on the stage.

When the crowd settled down, a scholarly-looking man walked out and put his hand on the shiny block, “Good evening,” he said, “I am here to introduce NMC532-X,” and he patted the block, “we call him NM for short,” and the man smiled proudly. “NM is a typical electric vehicle (EV) car battery in every way except one; we programmed him to send signals of the internal movements of his electrons when charging, discharging, and in several other conditions. We wanted to know what it feels like to be a battery. We don’t know how it happened, but NM began to talk after we downloaded the program.

“Despite this ability, we put him in a car for a year and then asked him if he’d like to do presentations about batteries. He readily agreed on the condition he could say whatever he wanted. We thought that was fine, and so, without further ado, I’ll turn the floor over to NM;” the man turned and walked off the stage.

“Good evening,” NM said. He had a slightly affected accent, and when he spoke, he lit up in different colors.

“A few days ago, at the start of my last lecture, three people walked out. But here is what I noticed about them. One was wearing a battery-powered hearing aid, one tapped on his battery-powered cell phone as he left, and a third got into his car — which would not start without a battery. So, I’d like you to think about your day for a moment; how many batteries do you rely on?”

He paused for a full minute which gave people time to count their batteries. Then he went on, “Now, it is not elementary to ask, ‘what is a battery?’ I think Mr. Tesla said it best when they called us Energy Storage Systems. That’s important. We do not make electricity — we store electricity produced elsewhere, primarily by coal, uranium, natural gas-powered plants, or diesel-fueled generators. So, to say an EV is a zero-emission vehicle is not at all valid. Also, since 40% of the electricity generated in the U.S. is from coal-fired plants, it follows that 40% of the EVs on the road are coal-powered, n’est-ce pas?”

He flashed blue again. “Einstein’s formula, E=MC2, tells us it takes the same amount of energy to move a 5,000 lb. gasoline-driven automobile a mile as it does an electric one. The only question again is, what produces the power? To reiterate, it does not come from the battery; the battery is only the storage device, like a gas tank in a car.”

He lit up red when he said that, and then he continued in blue and orange. “Mr. Elkay introduced me as NMC532. If I were the battery from your computer mouse, Elkay would introduce me as AA, if from your cell phone as CR2032, and so on. We batteries all have the same name depending on our design. By the way, the ‘X’ in my name stands for ‘experimental.’

“There are two orders of batteries: rechargeable and single use. The most common single-use batteries are A, AA, AAA, C, D, 9V, and lantern types. Those dry-cell species use zinc, manganese, lithium, silver oxide, or zinc and carbon to store electricity chemically. Please note they all contain toxic, heavy metals.

“Rechargeable batteries only differ in their internal materials, usually lithium-ion, nickel-metal oxide, and nickel-cadmium.

“The United States uses three billion of these two battery types a year, and most are not recycled; they end up in landfills. If you throw your small, used batteries in the trash, here is what happens to them.

“All batteries are self-discharging. That means even when not in use, they leak tiny amounts of energy. You have likely ruined a flashlight or two from an old, ruptured battery. When a battery runs down and can no longer power a toy or light, you think of it as dead; well, it is not. It continues to leak small amounts of electricity. As the chemicals inside it run out, pressure builds inside the battery’s metal casing, and eventually, it cracks. The metals left inside then ooze out. The ooze in your ruined flashlight is toxic, and so is the ooze that will inevitably leak from every battery in a landfill. All batteries eventually rupture; it just takes rechargeable batteries longer to end up in the landfill.

“In addition to dry-cell batteries, there are also wet-cell ones used in automobiles, boats, and motorcycles. The good thing about those is, 90% of them are recycled. Unfortunately, the cost of recycling EV batteries is more expensive than the cost of mining and creating a new battery. EV batteries that don’t have enough potency to power a vehicle can sometimes be used to power home appliances, street lights or solar panel backup until they finally lose all their energy.

“But that is not half of it. For those of you excited about electric cars and a green revolution, I want you to take a closer look at batteries and windmills and solar panels. These three technologies share what we call environmentally destructive embedded costs.”

NM got redder as he spoke. “Everything manufactured has two costs associated with it: embedded costs and operating costs. I will explain embedded costs using a can of baked beans as my subject.

“In this scenario, baked beans are on sale for $1.75 a can. As you head to the checkout, you begin to think about the embedded costs in the can of beans.

“The first cost is the diesel fuel the farmer used to plow the field, till the ground, harvest the beans, and transport them to the food processor. Not only is his diesel fuel an embedded cost, so are the costs to build the tractors, combines, and trucks. In addition, the farmer might use a nitrogen fertilizer made from natural gas.

“Next is the energy costs of cooking the beans, heating the building, transporting the workers, and paying for the vast amounts of electricity used to run the plant. The steel can holding the beans is also an embedded cost. Making the steel can requires mining taconite, shipping it by boat, extracting the iron, placing it in a coal-fired blast furnace, and adding carbon. Then it’s back on another truck to take the beans to the grocery store. Finally, add in the cost of the gasoline for your car.

“But wait — can you guess one of the highest but rarely acknowledged embedded costs? It’s the depreciation on the 5000-lb. car you used to transport one pound of canned beans!”

“But that can of beans is nothing compared to me! I am hundreds of times more complicated. My embedded costs not only come in the form of energy use; they come as environmental destruction, pollution, disease, child labor, and the cost to be recycled.”

He paused, “I weigh 1,000 pounds, and as you see, I am about the size of a travel trunk. I contain 25 pounds of lithium, 60 pounds of nickel, 44 pounds of manganese, 30 pounds cobalt, 200 pounds of copper, and 400 pounds of aluminum, steel, and plastic. Inside me are 6,831 individual lithium-ion cells.

“It should concern you that all those toxic components come from mining. For instance, to manufacture EACH auto battery like me, you must process 25,000 pounds of brine for the lithium, 30,000 pounds of ore for the cobalt, 5,000 pounds of ore for the nickel, and 25,000 pounds of ore for copper. All told, you dig up 500,000 pounds of the earth’s crust for just. one. battery.

“I mentioned disease and child labor a moment ago. Here’s why. Sixty-eight percent of the world’s cobalt, a significant part of a battery, comes from the Congo. Their mines have no pollution controls, and they employ children who die from handling this toxic material. Should we factor in these diseased kids as part of the cost of driving an electric car?”

400MW/1600MWh Moss Landing Energy Storage Facility in California Image: LG Energy Solution

“Finally, “I’d like to leave you with these thoughts. California is building the largest battery in the world near San Francisco, and they intend to power it from solar panels and windmills. They claim this is the ultimate in being ‘green,’ but it is not! This construction project is creating an environmental disaster. Let me tell you why.

“The main problem with solar arrays is the chemicals needed to process silicate into the silicon used in the panels. To make pure enough silicon requires processing it with hydrochloric acid, sulfuric acid, nitric acid, hydrogen fluoride, trichloroethane, and acetone. In addition, they also need gallium, arsenide, copper-indium-gallium-diselenide, and cadmium-telluride, which also are highly toxic. Silicon dust is a hazard to the workers, and the panels cannot be recycled.

“Windmills are the ultimate in embedded costs and environmental destruction. Each weighs 1688 tons (the equivalent of 23 houses) and contains 1300 tons of concrete, 295 tons of steel, 48 tons of iron, 24 tons of fiberglass, and the hard to extract rare earths neodymium, praseodymium, and dysprosium. Each blade weighs 81,000 pounds and will last 15 to 20 years, at which time it must be replaced. We cannot recycle used blades. Sadly, both solar arrays and windmills kill birds, bats, sea life, and migratory insects.

“There may be a place for these technologies, but you must look beyond the myth of zero emissions. I predict EVs and windmills will be abandoned once the embedded environmental costs of making and replacing them become apparent. I’m trying to do my part with these lectures.”

See Also World of Hurt from Climate Policies, Part 3 Wind and Solar Infrastructure Consumes Rare Metals Far Beyond World Supplies

Global critical metal demand for wind and solar power plants

When considering a global perspective, the critical metal demand for our future renewable electricity production is significant. This graph shows the annual metal demand for the six most critical metals, compared to the annual production. The dotted line represents present-day annual production.  

Seeking Climate and Energy Security

Europe at night from space NASA 2016

News is out that US Senators are meeting in search of (using Sen. Joe Manchin’s words)  “a bipartisan climate and energy security package.” . . .  “It’s urgent to find out if there is a pathway.”

The principals should attend to Dieter Helm’s expert March 2022 analysis of Climate and Energy Security entitled Energy policy  Some excerpts are below in italics with my bolds, suggesting the thrust of his wisdom in this regard.

Introduction

Energy policy is not rocket science. It is about achieving core objectives – security of supply and decarbonisation – and achieving them at the lowest cost. Neither will be met by purely private markets, since the former is a public good and carbon is an externality not properly integrated in competitive markets. Furthermore, energy is a primary good for citizens: not to have energy deprives people and businesses from access to the wider economy and to society. It is a core USO: a Universal Service Obligation. That is why energy cannot be treated like any other commodity, as some of the architects of the “privatisation, liberalisation and competition” paradigm believed. Citizens are more than just consumers.

Security of supply requires a capacity margin: “just in case” rather than “just in time”. Decarbonisation requires more renewables, possibly nuclear, and maybe hydrogen, carbon capture and storage (CCS) and an active demand side. Security of supply sits in this decarbonisation context, and because many of the options on the generation side are intermittent, security of supply takes on a much more demanding dimension – not just the old question of access to fuels and power, but the ability to handle large-scale intermittency.

The Policy Mess We Are In

This pressure to “do something” is most intense in a “crisis”, and what is happening right now is a classic example. Lots of interventions currently being proposed by all the lobbyists are likely to make things worse.

Complexity is a lobbyist’s utopia. Engaged in each consultation, clear about the single aims of its vested interest, able to engage in each and every consultation, able to brief MPs, the media and the ministers, and sow doubt where interests are threatened, it is no wonder that the energy sector is now close to resembling that of agriculture, captured by the core interests. Spending (and it is very large-scale spending) on lobbying keeps going up as the government is more and more engaged in the details of all the main contracts.

These lobby interests have been very successful in getting subsidies and convincing government that the transition to net zero is going to be cheap (just not yet), and that there is no threat to security. Just go for net zero, they argue – on a territorial carbon production basis – sign up for lots and lots of targets and then, once the fish is hooked, play in the threat of failures and hence the case for more and more subsidies. (If it was all so cheap, we could of course abolish the subsidies – but no vested interest is demanding the end to subsidies.)

The facts –not only that decarbonisation is essential, but it is going to cost a lot – remain, and they are increasingly emerging. Each time they do, the lobbyists turn to the Treasury and ask the taxpayer to bail them out.

At its simplest, the government has been pursuing decarbonisation without addressing in parallel the security of supply implications. The failures are multiple. It is not just the gas price and the collapse of suppliers; it is also about the balancing market, and the distribution companies.

Behind all of these is the lack of a coherent market design
fit for the decarbonising purposes.

Exposure to the spot markets, with no storage and no special relationship to North Sea producers, is only one reason why the gas price increases hit the UK particularly hard. A second reason is that the UK has built a lot of intermittent wind capacity without thinking through how to manage the intermittency. In the UK (for good reasons) there is very little coal generation capacity left – except DRAX. For all the hype about batteries and smart demand management, the fact is that gas (and small diesel generators) is almost all that is currently left to do the heavy lifting.

In a renewables energy system, there needs to be a lot more capacity
to meet any given demand.

In theory, if there was no wind, then there would need to be another complete system to be on standby. As demand keeps going down – in part because of de-industrialisation (industry demand is down 20% since 2000) – capacity has been going up towards the 100GW mark, an increased requirement of over 20GW for a significantly lower total demand. It will need to go up a lot more with 40GW of offshore wind as planned. It seems to have escaped the notice of all those projecting that the costs of the transition would be very low, and claiming that renewables are cost-competitive with fossil fuels, that all this capacity has to earn a reasonable rate of return. It is a cost of renewables.

Needing the gas capacity is only one dimension of the problem. The other is how to deliver it, given that the wind has a marginal cost close to zero. Whereas a conventional gas power station could rely on running most of the time when first built, now it is itself intermittent, depending on whether the wind is blowing. This breaks the conventional back of the economics of gas investment. Hence there is no merchant gas investment. Gas shifts from being driven by a normal wholesale market towards a strategic reserve of capacity. The market design has not caught up with this. Gas now needs a capacity payment to make its reasonable return, and hence a capacity contract, which only the government can underpin.

Back to Basics

The very concept of a competitive retail energy supply market cuts across the basic idea that energy is a USO. Some think that goes beyond the pure commodity to an essential service necessary for a citizen to participate in society. Without electricity and gas, citizens can die of hyperthermia (quite a lot do each winter), they cannot access the internet, phones may not work, and the freezer thaws out. Any decent society recognises that energy cannot be simply about price, supply and demand. Yet that is precisely what the architects of the privatisation and liberalisation paradigm thought they were doing. The current crisis is not just about whether people can or will pay: it is also about all those voluntary actions to stop using the heating and the electricity, with all the consequences for the poor that this implies. Paying the electricity bill can be a trade-off with food.

The supply market is now broken, and it is unlikely that many customers will now want to switch – especially amongst the poorer ones. The government has had to step in to bail out Bulb. All electricity customers are now going to pay more than £60 each in their bills to pick up the tab for the costs of sorting out all the company failures. We have come full circle, back to an oligopoly again, and one that will need proper regulation.

The right way to address supply is to start with what customers want, to ensure that the companies serve the customers, not that the customers serve the interests of the suppliers.

How It Could Be Different

Though it is true that we are where we are, it is worth considering how it could be different by looking at what is happening elsewhere. Recall the reasons why the gas price increases have hit so hard are that the UK has lots of intermittent wind, and the electricity price is determined by the (marginal) wholesale price. Intermittency reads across to greater demand for gas, and that translates straight into the electricity price. The gas and electricity price paths match each other remarkably closely in the UK.

To see how it could be different, consider what is happening in France. It is around 70% nuclear and has a lot of hydropower. As the gas prices have shot up, the cost of nuclear and hydropower has not changed at all. Similarly in the UK, the cost of wind, solar and nuclear generation has not gone up. But now the difference. In France, the price increases are being limited to 4%. This reflects the costs. EDF understandably protests that this will lose it money (around €8 billion), because it could have sold its power into the EU markets at the spot price.

But the €8 billion is not a loss, but rather an additional profit that would go to EDF. Since EDF is largely owned by the French state, the €8 billion would be a taxpayer gain, and stands against a customer gain if the benefits of a stable nuclear power supply go to the French citizens and industry. Quite why Germans should benefit from French nuclear at this point of the gas price crisis, when it has closed its own nuclear fleet, is hard to fathom.

The building blocks of a sensible energy policy

Energy policy is all about setting a system framework within which markets operate to deliver what citizens and customers want. It starts with setting the objectives, and then ensures that these are met by a set of institutions, interventions, regulations, licences and auctions and so on.

The objectives

There are two primary objectives: security of supply and decarbonisation. Unless these are clearly and appropriately specified, no amount of ingenuity about the development of policies will be anything other than inefficient.

Security of supply includes price and costs, as does decarbonisation. Setting either independently of prices and costs make them unlikely to be attainable. In both cases higher prices have an impact on demand and hence the required supply-side infrastructure, reserves, capacity margins and the total envelope of investments. For example, gas security is always possible if the price is high enough. Supply equals demand at a clearing price. Security of supply has to be at reasonable costs, as must decarbonisation.

Both objectives are currently set as if they are independent of prices and costs. Hence they are in doubt: market participants need to try to guess the reaction function of government if and when customers and voters rebel or are simply unable to pay. In particular, there is an assumption as noted above that decarbonisation will be very low cost (perhaps 1% GDP per annum), but this is hopelessly unrealistic – it assumes as noted, for example, not only that the costs of renewables and low-carbon technologies will keep falling, but also that government policy will be perfect. There will be no government failure.

This is nonsense. Pretending that the costs are low to get governments signed up is a classic NGO trick, but the unfortunate reality is that the costs do not go away by assumption. In the current circumstances, few can bank on getting the net zero for the electricity sector by 2035. The uncertainty raises risk and hence the cost of capital.

The security of supply objective is also ill-defined, if defined at all. How much risk does the government want the economy and its companies and citizens to take that they will face price shocks? It is easy to be very secure, provided the economy can withstand the costs of a range of policies, including strategic stocks, reinforced networks and large capacity margins. We could, for example, agree to pay whatever it takes to secure LNG cargoes by agreeing to outbid every other country in the world. The costs of all of this would be beyond those that the economy could withstand.

The task of government in general, and BEIS in particular, is to set out serious and sensible objectives, and then delegate their achievement in a credible way.

Stakes in the ground

There are a number of decisions which cannot be taken by the private sector, or at least not without a very high cost of capital. The government is already the central buyer for almost everything in the electricity sector – directly or indirectly. Almost all new generation comes with a government-backed contract: a capacity contract or a CfD or a RAB. All the networks are regulated, and the regulator has a duty to finance functions in one form or another. The government controls the North Sea licences for oil and gas, and The Crown Estate runs the seabed licences.

The first stake in the ground concerns nuclear.

It can never be a purely private investment, for multiple reasons. Waste is an intergenerational liability. The political nature of nuclear means that investors always face the risk that government performs the sorts of U-turns made in Germany. Limited liability of private sector firms leaves the government with the unlimited liabilities. These considerations trump the further worries about the length of the project, cost and construction overruns, and changing regulatory requirements. Every major incident globally at a nuclear facility leads to a review of safety regulators, and safety regulators usually come up with new tighter regulations as a result.

Having a nuclear capability is part and parcel of having a robust nuclear programme, as it is of a military nuclear deterrence. Looking ahead, it is possible to envisage a joint UK– France nuclear programme, adding France’s six to say four to six in the UK, making a programme of at least ten. This would yield a supply chain. But it would need a UK company as part of the deal and a joint political framework. All of this, in the current context, is fantasy. If the UK does nuclear, it will be far less ambitious, less joined-up, and probably much more costly.

The conclusion that follows is that it is very hard to think of any worse way of taking nuclear decisions than the recent past in Britain. It maximises the cost of capital without complete risk transfer, and it minimises the supply chain efficiencies. Opting for more nuclear now as part of a security and decarbonising strategy requires the ambition to be matched by a more coherent and joined-up commitment, sustained over more than a decade.

A second stake in the ground is offshore and onshore wind.

The key point about wind is its difficult economics: it is low-density, disaggregated, intermittent and remote from consumers. Nevertheless, its lobbyists claim that wind is the cheapest form of electricity generation. Sadly this is not true once the full costs are taken into account, and that means that it is government that has to decide how much offshore and onshore wind and has to provide the subsidies to the full costs to make it happen. The regulator has to instruct the network companies to build an interconnected system between the offshore wind farms and then between the wind farms and the mainland grids. Offshore wind – the main play – differs from nuclear in all the above respects. It also differs in having shorter lead times and its components can be manufactured, currently primarily in China.

The stake in the ground decisions about the volume of offshore and onshore wind are conditional on deciding about the system infrastructure to collect and distribute the energy, and how to deal with the intermittency.

This is a system question that depends not only on the quantity in GWs of offshore wind in particular, but also on what else is on the system at the same time. It is rarely observed that the decision about wind needs to be taken in conjunction with the decision about gas – at least until there is a largescale alternative storage technology that can cope with longer periods of low wind, notably in winter (but increasingly in summer, too, as the air conditioning loads grow). Given the 2035 target for decarbonising electricity, the gas decision depends in turn on the CCS decision, since more wind means more gas, which means more CCS if the gas is to meet the net zero requirement by 2035.

This leads to the third stake in the ground – CCS.

Successive governments have stalled on CCS (Carbon Capture and Storage) investments and decisions. As noted, a Treasury paper in 2007 promised £1 billion of support to develop CCS. Fifteen years later, and despite there being even a competition for the £1 billion, CCS remains largely on the drawing board. It requires a regulatory and licences framework, a liability insurance regime, a pipeline system, and a price of carbon sequestrated.

Though all of this is reasonably straightforward, these ancillary stakes in the ground are not yet in place, and the clock is ticking both as the offshore wind develops and the 2035 deadline gets ever closer.

The fourth stake is the new kid on the block – hydrogen and green ammonia.

It is unlikely to be the last “new kid”. The promise of hydrogen is that it can be manufactured by using excess wind and perhaps even solar, thereby being truly “green”. (Nuclear could do this too, though it is unlikely to be surplus unless on a French scale.) In the meantime, hydrogen is “blue”, made from natural gas, which brings us back to CCS. Blue hydrogen is inconsistent with the net zero targets without CCS. The hydrogen decision differs from the nuclear and wind stakes in the ground because it is very much at the R&D and demonstration stage. R&D is a public good and hence there is an obvious role here for government support.

There are several other stakes in the ground, though they tend to be more about the frameworks and less the technology per se. Solar falls into this category, and targets are particularly inappropriate given the major differences between rooftop, household, farmland and other variants. In an ideal world with perfect foresight, governments might want to go further, but there are corollary dangers as the lobbyists get their teeth into government and regulators, and getting the really big decisions right on the above stakes in the ground would be a major achievement. All of the above are decisions which cannot be taken by markets.

Governments should resist the temptation to do everything. Just doing a few things well would be a massive improvement on the current policy mess described above.

Delivering the plan – guidance and the system operator and regional system operators

Government can and indeed has to take the decisions about the major stakes in the ground. What then is required is a plan to deliver the energy system within which these stakes are embedded.

These objectives will not be achieved without a plan. If, for example, the government seriously intends to get to net zero for the electricity sector by 2035, then with 13 years to go, it needs to radically up its game and set out a plan to get from here to there. To give some examples, if part of the plan is to build lots more offshore wind and to increase electricity capacity to tackle transport and some heating, then as noted it will need a lot of gas capacity to back it all up. That in turn will need CCS, since electricity will not be net zero if there is a lot of gas on the system unless the gas is net zero and the only plausible way of doing this is to use very large-scale CCS. Similarly, it makes a lot of difference to the networks and the capacity requirement whether there is more nuclear or not. To get more nuclear in just 13 years on the system requires a lot of actions now. The stakes in the ground are for government: the delivery of the system to meet these is an evolving and detailed matter. Things will change. Nuclear might be late, wind costs may increase, and so on.

Someone has to manage this process, and whilst the government and BEIS can and should issue guidance – notably in respect of the overall objectives and the stakes in the ground – there need to be a system architect. The obvious place to start is with the SOs at the national and also at the regional level too. The Cost of Energy Review sets out how these should be separated from National Grid and the distribution network operators (DNOs) and details some of the consequences for Ofgem and system regulation. Five years later, the government is still prevaricating about how to do this. Every year means that the system plan remains incomplete, which means that it is harder and harder to meet the 2035 target and the costs of doing so goes up. It has an impact on the generation investment decisions, notably because without a network system in place, uncertainty increases and hence the costs of capital goes up.

Creating a market fit for the purposes of the twenty-first century

Critical to rebasing energy policy now is a series of decisions – stakes in the ground – that have been fudged in recent years. Either do nuclear properly or not at all. Recognise the security implications of lots of intermittent wind on the system and plan the system architecture to deal with this. Integrate the offshore and onshore electricity grids. Do not ignore the gas that will be a part of the back-up for at least a decade to come. Do not pretend that stopping new gas production in the North Sea solves the problem of UK consumers consuming a lot of gas by importing it instead.

Get on with separating out the regional SOs and the national SO. Evolve quickly to an EFP market to supersede the fossil-fuel-driven wholesale markets of the twentieth century. Take longer term contracts seriously rather than relying overwhelmingly on spot markets, and extend the price cap periods to a year. Get on with designing and implementing an integrated CCS system offshore.

Do these things, and spend less on perverse subsidies, and the UK can have secure energy at a reasonable cost and decarbonise at the same time. Ignore all these, and not only will the UK lack security, but it will pay higher prices and the 2035 target will fade, and possibly with it the willingness of the public to support the vital objective of decarbonisation.

See also World of Energy Infographics

 

 

#1 Security Threat: Net Zero Asset Managers

Rupert Darwall writes at Real Clear Energy Woke Investors Threaten the West’s Security.  Excerpts in italics with my bolds and added images.

In an era of rising geopolitical tensions, it is folly
to let Wall Street determine the nation’s energy policy.

As the West grapples with the energy implications of a hostile Sino-Russian alliance, the steering group of the Net-Zero Asset Owner Alliance, whose members manage over $10.4 trillion of assets, issued a statement urging Western governments not to sacrifice climate goals for energy security. “The world is still heading for an excess of fossil fuel-based energy use that will vastly exceed the carbon budget needed to meet the 1.5° Celsius Paris agreement goal. This trend must be halted,” the United Nations-backed alliance said in its April 8 statement, arguing that “the national security argument for accelerating the net-zero transition has strengthened considerably.”

What, one might ask, is the standing of asset managers to opine on national security matters? They have no expertise in this domain. It turns out that their understanding of the economics of energy policy is defective, too.

The Net-Zero Asset Owner Alliance claims that development of new oil and gas reserves will lock in fossil fuel subsidies, exacerbating market distortions. In fact, the International Energy Agency (IEA) in its 2021 net-zero report states that under its net-zero pathway, tax revenues from oil and gas retail sales fall by about 40% over the next twenty years. “Managing this decline will require long-term fiscal planning and budget reforms,” the IEA warns. Similarly, Britain’s Office of Budget Responsibility estimates that net zero policies will result in the loss of tax receipts representing 1.6% of GDP. So much for the fossil fuel subsidy myth.

If fossil fuels were heavily subsidized, eliminating them would mean fossil fuel subsidies disappear. Instead, it’s tax revenues that would melt away to zero.

The net-zero investors cite figures for the decline in solar and wind energy costs. These numbers are based on so-called levelized cost of energy (LCOE), a metric that aims to measure a plant’s lifetime costs. Wind and solar power are intermittent, but LCOE metrics exclude the costs of intermittency, which increase the more wind and solar are put on the grid. Because wind and solar output responds to weather and not to demand, the value of this output declines the more installed wind and solar capacity is available. It was for these reasons that MIT professor of economics Paul Joskow concluded in a foundational 2011 paper that using LCOE metrics to compare intermittent and dispatchable generating technologies, such as coal and natural gas, is a “meaningless exercise.”  [ See proper energy costing here: Cutting Through the Fog of Renewable Power Costs ]

Wind and solar investors don’t need to understand the economics of the grid to make money – they are shielded from the intermittency costs their investments inflict on the rest of the grid, which is one reason why their views on energy policy can be taken with a pinch of salt. Their economic illiteracy does, however, make it easy for them to subscribe to the green fairy tale of 100% renewables. They’re not responsible for keeping the lights on – that depends on traditional power plants staying fueled up and ready to spin, which is what Germany can’t do without Russian gas. Adopt the net-zero alliance’s call for no new fossil-fuel investment, and the cost of energy is bound to spiral. And if the lights go out, politicians – not woke investors – get the blame.

Investors’ opinions on energy and national security would matter less if they didn’t have political power. Bloomberg opinion writer Matt Levine argues that asset managers of giant funds form a parallel system of government that exercises overlapping legislative powers with those of governments. These government-by-asset-managers, as Levine calls them, tell companies to do things they think are good for society as a whole, “making big collective decisions about how society should be run, not just business decisions but also decisions about the environment and workers’ rights and racial inequality and other controversial political topics.”

Foremost among these areas is climate policy. Although the Biden administration has set a net-zero goal, Congress has not legislated it, and it lacks the force of law. The absence of legislation passed by democratically accountable legislators, however, presents no barrier to government-by-asset-managers legislating climate policy for the companies in which they invest. “Investors are making net zero commitments for themselves and demanding that companies issue greenhouse gas reduction targets and transition plans for meeting those targets,” says the Reverend Kirsten Snow Spalding of the not-for-profit Ceres Investor Network on Climate Risk and Sustainability.

Neither Spalding nor the Net-Zero Asset Owner Alliance make a case that forcing net-zero targets on companies will boost investor returns, demonstrating that this is not about investors’ traditional concerns – making money – but about pursuing politics by other means. In this, the Securities and Exchange Commission (SEC) is working hand in glove with woke climate investors. Commenting on the SEC’s newly proposed rule on climate-risk disclosure, Spalding says that for investors who have committed zero emissions by 2050, “this draft rule is absolutely critical.”

Unlike elected politicians, woke climate investors are not accountable for the effects of their climate policies: They exercise power without responsibility. This arrangement weakens America’s ability to respond to the geopolitical challenges of a revanchist Russia and an expansionist China. “We are on a war footing – an emergency,” Energy Secretary Jennifer Granholm declared at the CERA energy conference in Houston last month. “We have to responsibly increase short-term supply where we can right now to stabilize the market and to minimize harm to American families.” Addressing oil executives in the audience, Granholm told them: “I hope your investors are saying these words to you as well: In this moment of crisis, we need more supply . . . right now, we need oil and gas production to rise to meet current demand.”

As Granholm suggested, woke investors have been trying to do the opposite. Despite the war in Ukraine, there has been no let-up in investor pressure on oil and gas companies to scale down their operations. Whatever criticisms might be made of the Biden administration’s handling of the war in Ukraine, it is responsible for taking the awesome decisions that war involves. Investors, by contrast, have no responsibility for the nation’s security and America’s ability to lead the West. By helping investors impose their desired energy policies on American oil and gas companies, the SEC is undermining the national security prerogatives of the Biden administration and eroding America’s ability to meet the challenges of a dangerous world. The SEC is playing in a domain that it has no business being in.

Fuel Efficiency Rule De Facto EV Mandate

Kevin Stone explains at Heartland Daily News. Fuel Producers, States Challenge New EPA Rule Effectively Mandating Electric Vehicles.  Excerpts in italics with my bolds.  H/T John Ray

An unlikely coalition is challenging the U.S. Environmental Protection Agency’s (EPA) revised fuel economy rules.

At issue is a revised fleetwide. corporate average fuel economy (CAFE) standard of 55 miles per gallon in model year 2026. The shortened timeline for the much higher fuel economy forces automakers to reduce their fleets’ carbon dioxide emissions by 22.6 percent more than previous rules required.

Sixteen states, plus groups representing the fossil fuel and ethanol industries in 15 states, are challenging the Biden EPA’s emissions rules. They argue the EPA’s new standards effectively mandate a national transition from internal combustion powered vehicles to electric vehicles starting in 2026.

Farmers, Drillers, Attorneys General

A mix of corn and soybean growers associations from the states of Illinois, Indiana, Iowa, Michigan, Minnesota, North Dakota, Ohio, and South Dakota joined with Diamond Alternative Energy in one of the lawsuits filed to block the EPA’s new rules.

In addition, Texas Attorney General Ken Paxton filed a lawsuit on behalf of Texas, joined by the states of Alabama, Alaska, Arkansas, Indiana, Kentucky, Louisiana, Mississippi, Missouri, Montana, Nebraska, Ohio, Oklahoma, South Carolina, and Utah. Arizona filed a separate lawsuit to block the rules.

The Competitive Enterprise Institute (CEI), along with additional petitioners such as the Domestic Energy Producers Alliance, a nationwide coalition of 39 associations representing the oil and gas industry, also filed a lawsuit to block the new standards.

Essentially an EV Mandate

The lawsuit filed by representatives of various states’ biofuel associations argues the new standard is an unauthorized de facto mandate forcing people to use electric vehicles.

“Through the final rule, EPA seeks to unilaterally alter the transportation mix in the United States, without congressional authorization and without adequately considering the vast greenhouse gas reduction benefits provided by renewable fuels,” the complaint states.

CEI and its co-petitioners make a similar argument in their filing by lead attorney Devin Watkins, saying the rules exceed the agency’s authority.

“EPA is trying to transform the motor vehicle market from gas-powered to electric vehicles by making gas-powered cars more expensive,” Watkins’ petition states.

Ambitious or Unworkable?

The EPA’s new standard and timeline are unrealistic because the mass adoption of electric vehicles and construction of the infrastructure needed to support and power them won’t magically appear overnight, says Paul Driessen, a senior policy advisor with the Committee For A Constructive Tomorrow, which co-publishes Environment & Climate News.

“It’s vital to remember that President Joe Biden, Rep. Alexandria Ocasio-Cortez (D-NY), and other climate-focused activists aren’t talking about just replacing current fossil fuel vehicle use or electricity generation,” said Driessen. “They also want to convert home and office heating, cooking, and water heating to electricity; convert factories from coal and gas to running on wind- and solar-generated electricity; and have massive battery modules as backup power for windless, sunless days.

“That means nearly doubling existing U.S. electricity generation, and doing all of it with intermittent, unreliable, weather-dependent power generation systems,” said Driessen. “It means millions of onshore and offshore wind turbines, billions of solar panels, billions of 1,000-pound battery modules, and thousands of new transformers, covering tens of millions of acres, all powered by wind and sunshine, and all connected via thousands of miles of new transmission lines to power users all across America.”

‘It Is a Pipedream’

Electrifying the transportation system and in fact the entire U.S. economy is a fool’s errand, doomed to fail while placing an unnecessary burden on the public, says Driessen.

“They expect, hope, and fantasize this will somehow work, that a massively stressed power grid never built or tested before will be able to handle huge, sudden electricity surges and cutoffs due to wind and sunlight cooperating with demand only incidentally, failing minutes, hours, or days at a time and crashing repeatedly and catastrophically,” said Driessen.

“It is a pipedream that has failed everywhere it’s been tried on much tinier scales than what they intend to impose on us,” said Driessen. “Think of Texas two winters ago, and South Australia a few years ago, multiplied a thousand times over. We’re going to be asked to accept having electricity for every aspect of our industry, hospitals, and lives, when it’s available instead of when we need it.”

It’s ‘MAGIC’

There is no way the United States can get the needed raw materials and do the infrastructure transformation required by the EPA’s and other agencies’ new rules implementing Biden’s “whole of government approach” to fighting climate change, says Driessen.

“Just getting the metals, minerals, plastics, concrete, and other raw materials to create this system will take mining at scales unprecedented in human history,” said Driessen. “Team Biden seems to think this will just happen, under a government-mandated program you could call Materials Acquisition for Global Industrial Change, abbreviated MAGIC.

“This new, unworkable system would totally bankrupt America,” said Driessen. “Energy analyst David Wojick, Ph.D. calculates that building a battery system to back up just New York City’s current peak electricity needs, not counting new electric cars or future growth, for one week of no wind or sunshine would cost $3 trillion! For all of New York State, it would cost $8 trillion. And that’s just New York.”

 

 

Pipe Dreams: How America Is Energized

Kite and Key Media provides a primer on America’s Energy supply in the above video and transcript below in italics with my bolds.

Pipe Dreams: How America Gets Energy.
The Backbone of America’s Energy Infrastructure

In the winter of 2022, the world watched in horror as Russian forces invaded Ukraine.  The question on everyone’s mind: “How did they think they could get away with this?”

One very good answer to that question: Because over 40% of the natural gas Europe relies on to keep itself warm during the winter … comes from Russia.  And standing up to the people who are keeping you from freezing … is a tall order.

Now, if you’re an American, this scenario might seem unthinkable. After all, the U.S. produces more natural gas than any other nation in the world.   We’d never have to rely on a hostile nation to keep ourselves warm.

Or at least that’s what you’d think…
…unless you were there the day that Russian gas pulled into Boston harbor.

Here’s a simple test to determine whether you live in a prosperous society: Do you ever worry about where you’re going to get the necessities of life?

Do you ever pull up to the gas station and worry that the pumps might be empty? Do you ever go to switch on the lights and worry that nothing will happen?

Most of the time, the answer is ‘no’ … which is why it’s so terrifying when the answer is ‘yes.’

Blackouts in Texas in early 2021. Over 10,000 gas stations running dry after a cyberattack only a few months later.   What do those incidents have in common?

They demonstrate what happens when pipelines aren’t working.

If America’s energy supplies are the lifeblood of our economy, then we can think of pipelines as something like the nation’s circulatory system.

In the U.S., pipelines are used to bring us about 90% of our petroleum and virtually all of our natural gas — which is pretty significant, given that those two power sources alone make up about 70% of the country’s entire energy use.

That’s why America has over 2.6 million miles worth of pipelines. Because without them … the whole country gets very Amish very fast.

But, as you may have noticed … not everyone is thrilled about this. In recent years, legal challenges have led to the cancellation of several major pipelines and delays for many others. From 2009 to 2018, the time it takes to get pipelines approved increased by more than 50%. 

So, what’s happening here? The objections to pipelines rest primarily on two critiques. The first is that they’ll contribute to carbon emissions. The second is that pipeline accidents could lead to oil spills.

And both of those claims … really require context to understand.

When it comes to carbon emissions, it’s important to know that the pipelines themselves aren’t really the issue. They’re just a mode of transportation.

The carbon emissions come from the petroleum and natural gas that flow through the pipelines. But here’s the catch: Getting rid of the pipelines … doesn’t mean getting rid of the emissions.

Cancelling the Keystone XL pipeline, for instance, may have felt like a win for the environment — but it’s not like that oil is gonna stay in the ground as a result. In fact, much of it is likely to be shipped to China — which isn’t exactly a low-emissions trip.

And we can probably expect to see more of that. Current government projections are that, even with a steep increase in the use of renewable fuels, we’ll still be getting about 2/3 of our energy from natural gas and petroleum … 30 years from now.

Refusing to build pipelines won’t change that reality …
but it will make the system we actually have much harder to operate.

Which gets to those concerns about safety. Do accidents occur with pipelines? Yes. It happens. However, accidents occur with all forms of energy transportation. So, the real question is what’s safest among the available options.

And on that front … pipelines do pretty well. Because if you’re not going to move fuel through the ground, you only have three other options: put it on trains, put it on trucks, or put it on boats.

Now, none of those methods is especially dangerous, but pipelines spill a lower percentage of the oil they transport than any method except boats.  And boats have … limited utility on this front. Because they still need fuel in Nebraska … and America’s 26 other land-locked states. 

So, what does a world without pipelines look like?
We already sorta know the answer.

The reason that Boston was getting gas from Russia, for instance, was because the state of Massachusetts refused to allow a pipeline to bring it from Pennsylvania. That’s the same reason, by the way, that, in January of 2022, the citizens of Boston … were paying 400% more for natural gas than those Pennsylvanians only 200 miles away — in the middle of a New England winter.

Here’s the reality: None of us are willing to live in a world where the lights don’t reliably come on or gas doesn’t reliably come out of the pump. We can aspire to a future powered by cleaner energy sources, but until that day comes … we’re going to be relying on fuel sources like petroleum and natural gas.

Which means we either rely on pipelines…

…or rely on places like Moscow…

…or get very comfortable with horses.

 

High Cost of Green Wishful Thinking

Rep. Alexandria Ocasio-Cortez (left) admits, “We’re in Trouble,” as President Joe Biden (center) struggles to respond to the worst energy crisis in 50 years, and as California Gov. Gavin Newsom (right) makes homelessness worse.

Michael Shellenberger explains at his substack page Why Wishful Liberal Thinking Led to Disasters in Ukraine, Homelessness, And Climate.  Excerpts in italics with my bolds and some headers. H/T Tyler Durden

The good news is that everything is changing — and fast

In the three decades since the collapse of the Soviet Union, liberals in the West have denounced their political opponents as deniers of climate change, science, and reality in general. Progressives and neoliberals alike argued that they alone could see the shape of the new world being born. It would be increasingly globalized, democratic, and focused on new threats, like climate change.

It’s now clear that all of that was a delusion.

Neither China nor Russia is democratizing and both have become more autocratic and totalitarian. Neither nation views climate change as a major threat. On the contrary. Russia views climate change as an opportunity to expand agriculture and shipping through its newly ice-free waters. Where both Putin and Chinese Premier Xi used to give lip service to climate change, neither even bothered to attend last fall’s United Nations climate talks.

It’s true that the West has imposed sanctions on Russia, and the Ukranian people are battling the Russians fiercely and admirably. A few days ago, Russians retreated from the capital city of Kyiv. Western nations froze bank accounts of Russian oligarchs, hammering the ruble. And European governments are calling on their citizens to reduce energy consumption.

But those are hiccups on the way to a rapidly changed world. Consider that:

♦  China aided Russia’s invasion of Ukraine through a massive cyberattack on Ukraine’s military and nuclear facilities, according to intelligence memos obtained by The Times of London.

♦  Europe continues to import Russian energy while China and India are buying Russian oil at a steep discount. There is little reason to believe conservation measures by Western consumers will make much of a dent in energy consumption.

♦  And Russia’s retreat from Kyiv appears to be temporary and strategic.

Russia’s invasion of Ukraine comes at the very same time as: the collapse of the West’s climate and renewables agenda; an energy crisis triggered by climate activists; and a worsening drug, crime, and homeless crisis in America’s cities.

What do all these events have in common?
They all point to the grave dangers of irrational liberal optimism.

Western Leftists Soft in Defending Civil Freedoms

When it comes to the West’s failure to deter an increasingly totalitarian and violent Russia and China, the growing scarcity and unreliability of energy, and the destruction of America’s cities by open air drug scenes, the fault lies squarely with people on the Left end of the political spectrum.

Western leaders, including President Joe Biden, French President Emanuel Macron, and former German Chancellor Angela Merkel, all denied to themselves, and to others, what was plainly obvious to many analysts for years: Putin intended to invade Ukraine.

Even as Russian forces prepared for war games last fall, Biden’s national security adviser Jake Sullivan wondered “why Russia would take such a military action at that time,” according to a reconstruction of the events leading up to Putin’s invasion by the Wall Street Journal.

Western Leftists Indulged in Renewables Delusion

On climate change, center-Left parties around the world deluded themselves into thinking their high-energy economies could be powered by renewables, which energy historians have known for centuries had to be abandoned for fossil fuels in order for the industrial revolution to happen. And around the world it was liberals not conservatives who fought to shut down nuclear plants and block natural gas pipelines and infrastructure.

Liberals and progressives could have embraced a climate and energy strategy focused on domestically-produced natural gas and nuclear, as I have urged them to do for over a decade, and which Putin did, allowing him to gain a stranglehold over Europe’s energy supplies.

Such a strategy was the only one that ever made any sense from an environmental point of view. Nuclear and natural gas are the two technologies that are most responsible for declining emissions by the US and Europe since the 1970s.

Instead, the Left in Europe opted for importing fossil fuels from Russia and the Left in the US for importing solar panels made by enslaved Muslims in China.

Leftist Cities Governed into Ruin

On crime, liberal cities have gradually reduced consequences for breaking laws, whether from addiction or malevolence, resulting in rising homicides, burglaries, and open air drug scenes. Relatedly, on homelessness, progressives have funneled hundreds of billions into “Housing First,” which gives away apartments to homeless drug addicts without requiring sobriety.

The result is that, today, well over 50 percent of the people on the streets of San Francisco and Los Angeles are from out of town, according to expert insiders, homeless outreach workers, and the homeless themselves.

Why do liberals keep making the same mistake over and over again?

Leftists Projecting Own Mindset, Ignoring Reality

In part, it’s because of what cognitive psychologists call “theory of mind.” Liberals tend to think that other people think like they do. Western liberal leaders thought Putin was one of them, a liberal democrat committed to rule of law, even though he repeatedly said he wanted to reconstruct the Soviet empire.

Similarly, leading liberal leaders think homeless drug addicts are seeking a better life, and just need their own apartment to quit drugs, get a job, and re-connect with family and friends. In truth, many if not most homeless addicts maintain their addiction until they are forced to quit.

On energy and climate change, progressives indulged in the fantasy that we could power the world with energy sources that have no negative consequences. They convinced themselves that renewables were better in every way than either fossil fuels and nuclear, even as they demanded massive subsidies for, and the right to kill endangered species in, their deployment.

And liberals engaged in wishful thinking that high standards of living can be maintained with much lower levels of energy consumption, and that poor and working people will accept low standards of living.

There were financial rewards for such wishful thinking. Politicians like Newsom can raise much more money from homeless housing developers than from homeless shelter providers. Center Left parties take money from renewable energy companies all over the world. And it’s now clear that climate activists in Europe, and perhaps the United States, took, took money from the Russian government to fight fracking and natural gas production.

Stunning Failure of Leftist Governance 

The good news is that the failure of elites to govern at local, national, and international levels points to a coming change of leadership, triggered by covid, but ultimately resulting from the exhaustion of post-Cold War ideologies and institutions.

It will gradually become clear that the West must defend itself more vigorously against resurgent illiberal regimes, particularly Russia and China, which could well invade Taiwan, or even attempt to take a Japanese island, in the coming months or years.

And major political changes are afoot. Republicans will likely take one or more house of Congress, and President Joe Biden is unlikely to run again in 2024. The result will be major changes within both parties. California, long a leader of change, for good or ill, will likely see the recall of district attorneys in San Francisco and Los Angeles, the election of a new attorney general, and the election of a new, more moderate, governor.

In this context, it becomes clear that the claims of reality denial by progressives were a kind of psychological projection. It was progressives who denied the realities of climate change and energy, the intentions of Vladimir Putin, and homelessness. The good news is that people are waking up, and quickly.

The trend toward the dismantling of civilization could soon reverse itself.
But, ultimately, what happens next is up to us.

 

 

Vexing Truths About Energy

Philip Dick’s insight has a corollary:  Reality is also that which doesn’t happen no matter how much you want it to.  Chris Wright explains the contradictions with energy fantasies in his Denver Gazette article Inconvenient truths about energy.  Excerpts in italics with my bolds and added images.

The energy transition is not happening. Or not nearly at the pace that everyone believes or wishes. At current rates the “transition” is set to finish in the mid-2600s. The U.N. Rio Convention and subsequent Kyoto Protocol launched the energy transition drive in 1992. Global energy consumption from hydrocarbons has grown massively since then, with market share only declining by four percentage points over the last 30 years from 87% in 1992 to 83% today. I am not celebrating this fact as I have spent years working on energy transition technologies.

The energy transition isn’t failing for lack of earnest effort. It is failing because energy is hard, and 3 billion people living in energy poverty are desperate for reliable and scalable energy sources. Meanwhile, 1 billion energy-rich people are resistant to diminishing their standard of living with higher cost and an increasingly unreliable energy diet.

There is no “climate crisis” either. If there is a term more at odds with the exhaustive literature surveys of the Intergovernmental Panel on Climate Change (IPCC) than “climate crisis,” I have not heard it.

Climate change is a real global challenge that is extensively studied. Unfortunately, the facts and rational dialogue about the myriad tradeoffs aren’t reaching policy makers, the media, or activist groups. Or are they are simply ignoring these inconvenient truths?

For example, we hear endlessly about the rise in frequency and intensity of extreme weather. This narrative is highly effective at scaring people and driving political action. It is also false. The reality is detailed in countless publications and summarized in the IPCC reports. Deaths from extreme weather have plunged over the last century, reaching new all-time lows last year, an outcome to be celebrated. This is not because extreme weather has declined. In fact, extreme weather shows no meaningful trend at all.

Deaths from extreme weather events have declined because highly energized, wealthier societies are much better prepared to survive nature’s wrath.

My Mind is Made Up, Don’t Confuse Me with the Facts. H/T Bjorn Lomborg, WUWT

Recognizing reality

You are not supposed to say out loud that there is no climate crisis or that the energy transition is proceeding at a glacial pace. These are unfashionable and, to many, offensive facts. But let’s be honest. Energy transition ambitions must recognize reality. Otherwise, poor investment decisions and regulatory frameworks will lead to surging global-energy and food prices. This is exactly what is happening. We are here today in large part because energy transition efforts that previously encompassed solely aggressive support of alternative energy policies, economics be damned, have recently supplemented this strategy with growing efforts to obstruct fossil fuel development.

Fossil fuels make the modern world possible.

The real crisis today is an energy crisis. It began to reveal itself last fall with a severe shortage in globally traded Liquified Natural Gas (LNG). The LNG crisis has not abated and it gives Russia’s Vladimir Putin tremendous leverage over Europe. Without Russian gas, the lights in Europe go out. Amid war, public outrage, and intense sanctions, Russian gas flows to Europe remain unchanged. Russian oil exports have continued with minimal interruption. The world can talk tough about sanctioning Russian energy exports, but those exports are vitally needed; hence they continue. Energy security equals national security.

The world energy system, critical to human wellbeing, requires meaningful spare capacity to handle inevitable bumps in the road. In the electricity sector, which represents only 20% of global energy but 40% in wealthy countries, this is called reserve capacity. In the oil market, spare production capacity today is shrinking and concentrated in OPEC nations like Saudi Arabia and the United Arab Emirates. Also, there is a massive global storage network in both surface tanks and underground caverns. In natural gas markets, there are both extensive underground storage reservoirs and typically spare export capacity through pipelines and large industrial LNG export and import facilities.

The last several years have seen this spare capacity whittled away due partly to lower commodity prices and poor corporate returns shrinking the appetite to invest.

Excess capacity has also shrunk due to regulatory blockage of critical energy infrastructure like pipelines and export terminals. Roadblocks for well permitting and leasing on federal lands, together with a mass public miseducation campaign on energy and climate alarmism, are also stymieing hydrocarbon development. Investment capital is further constrained by a corporate Environment, Social and Governance (ESG) movement, and divestment campaigns. These factors are shrinking hydrocarbon investment below what it otherwise would be in response to price signals and outlook for supply and demand.

The net result is a constrained supply of oil, natural gas, and coal, which means higher prices and greater risk of market dislocations like the one unfolding today.

High energy and food price inflation is the cruelest form of tax on the poor. After a few specific examples, I’ll return to what we should do now to reverse these damaging and deeply inequitable trends.

In denial about demand

Why does the world today suffer from a severe shortage of LNG? Demand for natural gas has been growing strongly for decades. It provides a much cleaner substitute for coal in electricity production, home heating, and a myriad of industrial and petrochemical uses. Rising displacement of coal by natural gas has been the largest source of GHG emission reductions. Unfortunately, the aforementioned factors have prevented supply from keeping pace with rising demand. Energy shortages drive rapid prices rises and have cascading impacts on everything else. Energy is foundational to everything humans do. Everything.

Perhaps the most critical use of natural gas is nitrogen fertilizer production. Roughly a century ago, two German chemists, both subsequently awarded Nobel Prizes, developed a process to produce nitrogen fertilizer on an industrial scale. Before the Haber-Bosch process innovation, nitrogen content in soil was a major constraint on crop productivity. Existing nitrogen sources from bird guano, manure, and rotating cultivation of pea crops were limited. Today, elimination of natural gas-synthesized nitrogen fertilizer would cut global food production in half.

The now six-months-long LNG crisis translates into a worldwide food crisis as skyrocketing fertilizer prices are cascading into much higher food prices. Wheat prices are already at a record high and will likely head higher as spring plantings suffer from under fertilization.

Global LNG markets are tight because rising demand has outrun the growth in LNG export capacity in the United States, now the largest LNG exporter. We have an abundance of natural gas in the United States. Unfortunately, we have a shortage of pipelines to transport this gas and LNG export terminals, preventing us from relieving the energy crisis in Europe and around the world. These pipeline and export terminal shortages are due in large part to regulatory blockage. The result is that natural gas prices in the United States and Canada are five to ten times lower than in Asia and Europe. This deeply disadvantages consumers and factories (like fertilizer factories) in Europe and Asia that rely on LNG imports to fulfill their needs.

Failed energy policies

Russia’s invasion of Ukraine did not cause today’s energy crisis. Quite the reverse. Today’s energy crisis is likely an important factor in why Russia chose to invade Ukraine now. Europe’s energy situation is both tenuous and highly dependent on Russian imports. Russia is the second-largest oil and natural gas producer after the United States. Russia is the largest exporter of natural gas, supplying over 40% of Europe’s total demand. Additionally, Russia is the largest source of imported oil and coal to Europe. Europe put itself in this unenviable position by pursuing unrealistic, politically-driven policies attempting to rapidly transition its energy sources to combat climate change.

Europe’s energy pivot has been a massive failure on all fronts: higher energy costs, grave energy insecurity, and negligible climate impacts.

Germany is the poster child of this failure. In 2000, Germany set out to decarbonize its energy system, spending hundreds of billions of dollars on this effort over the last 20 years. Germany only marginally reduced its dependence on hydrocarbons from 84% in 2000 to 78% today. The United States matched this 6% decline in hydrocarbon market share from 86% in 2000 to 80% today. Unlike in the US, Germany more than doubled its electricity prices — before the recent massive additional price increases — by creating a second electric grid. This second grid is comprised of massive wind and solar electric generating sources that only deliver 20% of nameplate capacity on average, and often less than 5% for days at a time. The sun doesn’t always shine and the wind doesn’t always blow. Hence, Germany could only shrink legacy coal, gas and nuclear capacity by 15%. It now must pay to maintain both grids. The legacy grid must always be flexing up and down in a wildly inefficient manner to keep the lights on, hospitals functioning, homes heated, and factories powered. Outside of the electricity sector, Germany’s energy system is largely unchanged. It has long had high taxes on gasoline and diesel for transportation, and lower energy taxes on industry. Germany subsidizes industrial energy prices attempting to avoid the near-complete deindustrialization that the UK has suffered due to expensive energy policies across the board.

Over the last 20 years, the United States has seen two shale revolutions, first in natural gas and then in oil.

The net result has been the U.S. producing greater total energy than consumed in 2019 and 2020 for the first time since the 1950s. The U.S. went from the largest importer of natural gas to the second-largest exporter in less than fifteen years, all with private capital and innovation. The shale revolution lowered domestic and global energy prices due to surging growth in U.S. production. Surging US propane exports are reducing the cost and raising the availability of clean cooking and heating fuels for those in dire energy poverty still burning wood, dung, and agricultural waste to cook their daily meals. U.S. GHG emissions also plunged to the lowest level on a per capita basis since 1960. Imagine the world’s energy situation today with the American shale revolution.

We are starting to hamstring and squander the enormous benefits of the shale revolution. The same misinformed anti-hydrocarbon crusade that impoverished Europe and made it heavily dependent on Russia is now sweeping the US. California and New England had already adopted European-style energy policies driving up electricity prices, reducing grid reliability, and driving manufacturing and other energy-intensive, blue-collar jobs out of their states. Colorado is not far behind.

California, a state with a plentitude of blessings, managed to create the highest adjusted poverty rate in the nation with an expensive, unstable power grid increasingly reliant on coal-powered electricity imports from Nevada and Utah.

New England’s proximity to Pennsylvania’s clean low-cost natural gas resources was a stroke of luck. But it refused to expand the natural gas pipelines running from Pennsylvania, leaving it chronically short of natural gas, its largest source of electricity and cleanest option for home heating. Instead, it remains heavily reliant on fuel oil for home heating and occasionally imports LNG from Russia to keep the lights on. Last winter New England burned copious amounts of fuel oil to produce electricity which went out of fashion in the 1970s elsewhere in the US.

Texas has not been immune from energy illiteracy and collateral damage. Texas’ poorly designed electric grid, structured to encourage investment in renewables, led to hundreds dying last year in the Uri cold spell. No one would pay the same price for an Uber that showed up whenever convenient for the driver and dropped you off wherever they desired. But that is what Texas does with electricity: paying the same price for reliable electricity that balances the grid as they do for unreliable, unpredictable electricity. No wonder the reliability of the Texas grid has declined and is headed for more trouble.

Misplaced faith

The common thread in these cases is unrealistic beliefs in how rapidly new energy systems can replace demand for hydrocarbons, currently at all-time highs. Political intervention and miscalculation have led to over-investment in unreliable energy sources and, far worse, under-investment in reliable energy sources and infrastructure. The full costs of this colossal malinvestment have been somewhat hidden from view as spare capacity in the global energy network has mostly kept the train on the tracks. Now that excess capacity has shrunk to a critically low level, more impacts are hitting home.

Like the disease itself, the cure takes years to run its course. But that longer time frame is no excuse not to act now in a thoughtful fashion to begin rectifying historical blunders.

Steel, cement, plastics and fertilizer are the four building blocks of the modern world and all are highly reliant on hydrocarbons.

Most critically this means removing the growing myriad obstacles to hydrocarbon development, justified in the name of fighting climate change. This is nonsense. Overly cumbersome hurdles to hydrocarbon development in the U.S. do nothing to change oil and gas demand. They simply displace U.S. production overseas where production practices are less stringent and less ethical. Resulting in increased GHG emissions and other air pollutants, reduced economic opportunities for Americans, and increased geopolitical leverage of Russia and OPEC — see the invasion of Ukraine.

Climate change is a long-term problem best addressed with technologies cost-effective today like natural gas, energy efficiency, and nuclear. The solution requires combining today’s commercial low-carbon energy sources with research and technology development in carbon sequestration, next-generation geothermal, and economical energy storage to make solar and wind more viable.

Today the price mechanism must destroy energy demand to bring it in line with short-term supply. This reduces the quality of living, especially for low-income families. The price mechanism will also incent new supply to the extent possible in the face of growing regulatory hurdles, infrastructure shortages, and capital starvation. A revaluation of all three of these factors is urgently needed.

♦  Is the overarching goal “energy transition” at all costs?
♦  Or is it humane policies that better human lives and expand opportunities for all?

We need to replace the former mindset with the latter.

Chris Wright is chairman and CEO of Liberty Energy, a Denver-based hydraulic fracturing company. Read “Bettering Human Lives”, a report released last year for more information on the above issues.

 

 

Hubris is Spelled N-E-T-Z-E-R-O

William Watson explains in his Financial Post article  How does Ottawa spell hubris? N-E-T-Z-E-R-O.  Excerpts in italics with my bolds and added images.

Tough question: If you think central planning is disastrous for economies, and it is, do you want your central planners to be competent and efficient or do you want them to be jokers, engaged in barely concealed fraud?

The projections included in the government’s “2030 emissions reduction plan” released this week show that in the 14 years between 2005 and 2019 total Canadian emissions of carbon dioxide equivalents fell by just nine megatonnes (Mt), from 739 to 730. Yet from 2019 to 2030, the plan would have us believe, they will fall by 287 Mt — more than 30 times the 2005-19 change.

Take buildings. From 2005 to 2019 emissions from buildings actually rose by six Mt, from 84 to 91. But “where we could be in 2030,” according to Ottawa’s chart, is 53 Mt. The chart explains: “A whole-of-government and whole-of-economy effort focusing on regulatory, policy, investment and innovation levers is needed to drive decarbonization of the buildings sector. To this end, the Government will develop a national strategy for net-zero and resilient buildings …”

That load of yet-to-be-delivered national strategy supposedly will eliminate 38 Mt of emissions when all the housing efficiency programs from 2005-19, and there have been lots, enabled an “improvement” of minus seven Mt? You’ve got to know a “whole-of-government” effort to operate the “investment and innovation levers” will not be speedy or efficient.

And even more impressive 2020s miracles apparently are on order.

In the electricity sector, emissions fell 61 Mt from 2005-2019, thanks largely to the elimination of coal. From 2019-2030 they supposedly will fall another 47 Mt, even though coal can’t be eliminated again. In heavy industry, the reduction was 10 Mt; it’s now going to be another 25 Mt. In transportation, emissions actually rose 26 Mt over the last 14 years but by 2030 they supposedly will fall 43 Mt.

This page has no sympathy for central planners. Central planning does not work, whether of the Soviet or the Trudeau-Guilbeault kind. And it wouldn’t be a good idea even if it did. On the other hand, we have immense sympathy for central plan-ees — the people who are subject to central plans. Elsewhere on this page is a plea from Francis Bradley of Electricity Canada, an association of the people who run the country’s electricity grids. All net-zero plans involve a big expansion of electricity use: all those electric vehicles, including electric trucks not yet invented, have to be charged somehow. But, Bradley warns, the clock is ticking. If the government is serious, it needs to make critical decisions now about such things as whether it will allow generation with natural gas, how much financial assistance it will provide for re-fitting and new building of transmission lines and whether it will override burdensome and lengthy approvals processes.

What does this week’s “plan” provide in the way of detail?
Aspiration, aspiration, aspiration.

It is, as Elizabeth May noted, a lovely document, with attractively coloured charts and diagrams. But if you assumed an emissions reduction plan would provide a detailed checklist of policy actions the government would be taking, you assumed wrong.

Each of a series of chapters, one per major sector of the economy, is structured the same way: a few paragraphs outlining “Current sector emissions”; another few on “(Industry X) in context: key drivers”; even more on “What have we done so far?”; a word or two about “What was heard from the 2030 engagement process”; and, then, finally, “What’s next?” Apart from “What’s next?” it’s all filler.

I copied and pasted all the “What’s next?” passages into a single file. They total a little over 8,600 words, about 10 times the length of this column. Google tells me 8,600 words would take an average adult roughly half an hour to read. Yet this is a document that purports to plan major changes in how a 40-million person, $2.5-trillion economy operates.

The “What’s next?” section for electricity is just 482 words, which I doubt will satisfy Bradley’s plea for detail. And much of it is filler — for instance, 182 words describing the “clean electricity standard” consultations processes: “Establishing a net-zero-emitting electricity sector will require substantial effort from provinces and territories, and a CES will provide the regulatory signal to support decision-making at all levels of government to achieve this goal.” No doubt that’s all true. But tell us something that’s not obvious — like what the regulatory signal actually is going to be, not just that there will be one.

Apart from filler, the detailed actions are that the feds will provide $25 million for planning “regional strategic initiatives,” will “lead engagement” on the Atlantic electric loop, and will “support de-risking and accelerating the development of transformational nation-building inter-provincial transmission lines.”  All clear now? I doubt the grid people will think so.

An institution — the federal government — that has struggled for 15 years to replace just a few dozen obsolete fighter jets supposedly is going to oversee the radical transformation of a modern economy in just eight years.

It would be laughable if it weren’t also so frightening.

There is a big opening and an urgent need for a political party that would impose a meaningful carbon tax, use the revenues to reduce other taxes and then retire from the emissions business and let markets figure out what happens next.

 

Trudeau’s War on Canadian Energy

David Staples reports on the latest Trudeau attack on Canadian energy in his Edmonton Journal article If Trudeau’s new climate plan is excellent, why does Rachel Notley blast it? Excerpts in italics with my bolds.

My own fear is that such policies will hammer Canada’s biggest energy sector
and hobble our most promising one.

The prime minister has now proposed a new direction on energy policy. Of particular concern is his government’s call for a 42 per cent emissions cut for Canada’s oil and gas sector by 2030 and its growing opposition to nuclear power.

But watching Trudeau in Vancouver on Tuesday promoting his new emissions policy, I also can’t help but fear the worst. Of course, feel free to write off my critique as a fear of change or as partisan blather. Even I question myself. I acknowledge I could be wrong. Things could turn out fine for all kinds of reasons I don’t now comprehend. Who can predict the future?

But I’m not the only Albertan with major reservations today. NDP Leader Rachel Notley (Alberta Premier 2015-2019) just gave a persuasive critique of Trudeau’s plan.

“Based on what we are hearing from folks in the oil and gas sector, the 42 per cent (emissions cut) by 2030 is not just ambitious, it’s beyond ambitious,” Notley said. “It’s a fantasy.”

Notley isn’t in the habit of calling out Trudeau every day of the week. In the past, when she was Alberta premier, she worked well with Trudeau, coming together to push for carbon taxes, the phasing out of coal, and the federal government’s purchase of the TMX pipeline project.

But now comes this 42 per cent non-solution.

It’s clear that the Trudeau Liberals failed to listen to the oil and gas sector, Notley said, because this reductions plan simply can’t be done in just seven years. As she put it, “There are practical, physical limits on how quickly facilities can be constructed or upgraded, or projects even approved.” .

Notley also pointed out of the unfairness of Trudeau’s scheme, that while the oil and gas sector produces 26 per cent of emissions and the transportation sector produces 25 per cent, oil and gas have been hit with a 42 per cent cut while it’s just 11 per cent for transportation. “This is manifestly unfair and it will have serious economic consequences for Alberta and for Canada.”

In his own speech, Trudeau appeared to be gunning hard for oil and gas. It was the first thing out of his mouth that needed cutting. He then went on to say things that raised far more questions than they answered, such as: “Other elements of our plan include our plan to create jobs and keep air clean by making life more easier and affordable for the middle class.”

How are those things at all related? If we move away from oil and gas and nuclear — which create all kinds of well-paying jobs in Canada — how will importing solar panels from China and wind turbines from Europe and elsewhere create a windfall of great jobs in Canada?

And how does adding an ever-escalating carbon tax make life more affordable?

Does it not drive inflation? Does it not make us less competitive compared to countries without a carbon tax, like our neighbours in the United States?

Trudeau also talked about “mandatory” sales targets for zero-emission vehicles, 20 per cent fo 2026 and 60 per cent by 2030. But do we have the grid in place to power a nation of electric vehicles? And if we fail to get behind natural gas and nuclear, will we have a reliable supply of low carbon power?  And do we really want to force car dealers to sell us a product that may or may not work well for our needs?

Trudeau took a “not to worry” stance.  “Canadians,” he said with his customary wild-eyed certainty, “are united in knowing this is where the future is going and that we can get there together.”

But we’re not united. I say that with certainty. Trudeau has lost even Notley this time.

Once the high cost, economic hardship and heavy-handed government overreach of his new climate plan sinks in, I suspect he’ll lose many more.