Farrell says Stay the Course on DOD Energy Diversification

With the rash of stories this past year on failures of US solar companies, the lack of speedy adoption of electric vehicles, and the boom in un-conventional natural gas and oil, occasional readers of the DOD Energy Blog might wonder whether renewables and energy efficiency have lost some of their luster for operational and facilities energy applications.

Well, the June edition of National Defense leads with a piece called "New American Oil Boom: "Will it Slow DOD's Renewable Energy Momentum?" which convincingly refutes the idea that energy leaders have taken their eye off the alternative energy strategy ball. National Defense magazine has long had a strong focus on energy matters, thanks to the leadership and insight of its President, retired USAF General Larry Farrell.

Reminding us of how tightly bound the DOD remains to oil, Farrell says:

When speaking of petroleum, independence is a myth, regardless of where it comes from. The fact is that, for transportation energy, there is no diversity of supply or source.

And looks a few years into the future:

Diversity has strengths of its own. The current positive situation of domestic supply will last a few years at best — perhaps out to 2030 or so. At some point global demand and increasing difficulties to get supplies will catch up. 

Concluding with a vote of confidence that DOD leadership is still on point on energy strategy:

We have the gift of time to address the problem. Knowledgeable leaders in the Defense Department realize this. It is unlikely that they will slacken their efforts to bring solutions to operational capability. There really is no other choice. 

I believe Farrell's observations and conclusions are correct, but Dan and I would be happy to hear if you see things the same way.  Andy Bochman

An Important Argument to Watch for DOD's Energy Future

In the energy sector, the price of a barrel of oil isn't the only thing that's highly volatile. The future is too.

Here's a LINK to a recent piece in the Wall Street Journal where energy gurus Daniel Yergin and Vinod Khosla debate how quickly cleantech will begin to substantially supplant fossil fuels in the US.

This is Yergin responding to a question about the future, starting with a look back to the very recent past:

... [T]he world was going to run out of oil. It was peak oil. And we were going to be importing so much natural gas that we would be paying $100 billion a year to import natural gas. That was five years ago. The picture changed. The picture will change in five years.

and,

[Regarding national security], we've talked a lot about natural gas today. But what is also striking is what's happening in U.S. oil, with what's called tight oil and the development of that. You look at Canadian oil sands. You look at what's happening offshore of Brazil. And you see this kind of re-balancing of world oil going on, where probably 10 years from now the Western Hemisphere will be getting a lot less oil from the Eastern Hemisphere to begin with.

In case you couldn't tell, DOD Energy Bloggers like Dan and myself have a passion for cleantech and a more sustainable energy future for the US and the US military. But more than that, we put the interests and security of the country and the armed forces well ahead of our goals for new energy sources and energy efficiency.

I think you can hear in Yergin's response a sense that the world has just shifted, and that the US has moved quickly from a net energy importer to a potential energy exporter and that this condition may hold for the near and mid-term future.

Clearly, DOD's got to keep itself fully up-to-speed on the current version of the energy future and I believe it is.  This re-balancing thing ... there's security in that. Andy Bochman

Yergin Speaks Out Again on Favorable US Energy Security Trends

Back in September we wrote a post or two on the latest thinking on US and global energy futures from energy market guru Daniel Yergin. In today's Wall Street Journal he had a bit more say re: Energy Security that I think you'll find both helpful and promising. First, the ...

Bad News

Yergin: It is true that the U.S. is still importing a larger share of its oil than it was in 1973, at the time of the first oil crisis. Even with increased domestic production and higher imports from Canada, it will still be part of the global oil market and vulnerable to disruptions and price spikes.

Again, to reinforce: the US is both a seller and a buyer of oil and gas in the global markets, and no matter what we do, that condition will remain the same. We don't set the prices, and we don't get to keep or use all that we make. We buy from many sources, ranging from very friendly to somewhat hostile, and yet there's some significant security in that diversity. 

Now for what's gotten better lately and promises to improve even further in the years ahead thanks to some new ways to get at oil and gas.

Good News

Yergin: ... the shift in oil sources means the global supply system will become more resilient, our energy supplies will become more secure, and the nation will have more flexibility in dealing with crises. It ... also means that economic benefits—in terms of jobs, manufacturing and services—will register on the ground in North America.

Click HERE for the full article, and one more thing: I'll be attending a DY lecture tomorrow afternoon at MIT. If you have a question you'd like me to ask him, please fire away fast.

Image credit: Mitra Encyclopedia

For DOD Energy Planners: MIT Scopes out a Newly Gas Abundant World

We've talked several times (see here and here) about the newly realized abundance of natural gas in the US and all over the world. Now, as it has done in the past with coal and oil, MIT has marshaled its enormous expertise on energy matters (with input from other industry and government experts) into a new report that includes predictions for the future of the natural gas industry, forecasts of its potential economic ramifications, and some clear guidance on how to make the most of this mainly good news story from an energy security point of view.

Among the findings and forecasts are: that natural gas will likely become the fuel of choice for peak power generation and overtake coal as our largest source of electricity in general. Acknowledging that economical grid-scale energy storage is still a ways off, it says that natural gas plants should be used to to fill in for intermittent renewable power sources like solar and wind.

The authors tend to focus on carbon and climate change policy as big drivers. The DOD Energy Blog acknowledges these factors but gives much more weighting to reliable access to energy sources for the country and for DOD. But from an supply security point of view, this comment from the press release highlights what's probably the most important recommendation:

Illustrating the role of natural gas as a bridge to a low carbon future, the study’s authors stressed that it would be a mistake to let natural gas crowd out research on other low- or no-carbon energy sources, but it would also be a mistake to let investments in such alternatives crowd out the expansion of natural gas resources in the near term ....

Here's the press release. The 104-page interim report is free and can be viewed in full here.

Photo credit: Patrick Denker on Flickr.com

New Global Natgas Abundance Signals Loosening of Putin and Gazprom's Grip on Europe's Energy Security

Have written before several times (usually in the dead of winter) about Europe putting itself in danger by making energy deals with the devil, usually accompanied by a frighteningly cold picture of a frozen over European city or a sinister picture picture of Vlad Putin.

But now it seems like the tables have turned and we won't be discussing that topic any more. My own awareness of the game changing nature of unconventional natural gas began one year ago with this Daniel Yergin editorial in the Wall Street Journal describing massive new amounts of gas now becoming accessible in the US and elsewhere via new recovery techniques.

There is now so much of this new-found natural gas that it's no longer helpful to call it unconventional. Then came a briefing I was fortunate to attend last month at MIT with BP's chief economist, Christof Rühl. Describing the future of global oil and gas markets, and including projections for renewable energy and nuclear, he said the whopper that's changing everything is the recently realized super-abundance of natural gas ... everywhere.

Here then, is the take-away for Gazprom and its ardent admirers:

Seldom has a giant been hit by so many big blows in one year. First, by repeatedly cutting its deliveries without prior warning, Gazprom has acquired a solid reputation as an unreliable supplier. Second, after the United States has suddenly started mass-producing cheap shale gas and become the biggest gas producer in the world, the European market is flooded with new liquefied natural gas (LNG). Third, there is plenty of shale gas in Europe, and soon production is likely to start there as well. Steadily increased European demand for gas has been replaced by a gas glut, which the International Energy Agency predicts will last for 3-5 years. Fourth, the gas surplus is naturally depressing spot gas prices.

And it gets worse. But I'll leave that to you if you're interested. The full article in European Energy Review can be found here. Depending on where you're reading from, I think you may find it a rather pleasant change of pace.

2010 DOD Energy Planning Brief: Natural Gas Looking Good

We've talked about natural gas before, primarily to point out that the world is going to have access to a lot more of the stuff in the coming years thanks mainly to new discoveries and extraction methods. Here's an early 2010 natgas intro and update from guest blogger and Navy energy contractor, Vince Marshall.

1/19/01 "There's no such thing as a free lunch" Update: In the case of one of the new New York fields, a skirmish is brewing over possible extraction-related groundwater contamination. Here's an excerpt from oil & gas newspaper, Upstream:

At issue is the controversial process of shale gas extraction known as hydraulic fracturing, or "fracking," in which a combination of chemicals, sand and water are blasted through rock to free trapped gas. Fracking is exempted from regulation under the US Clean Water Act. The natural gas industry argues that drilling poses no risk to drinking water, saying the chemicals are injected through layers of steel and concrete thousands of feet below aquifers. But opponents argue that toxic fracking chemicals are contaminating drinking water, citing numerous reports of private wells near gas installations having water that is discolored, foul tasting, or even flammable because of methane that has escaped from drilling operations.

-------Original Post Below----------

Natural gas is a preferred fuel for heating and power plant operations at many DOD locations worldwide. It is clean, comparatively simple to bring to process, and for the most part, readily accessible. As such, fluctuations in the supply and demand of this commodity severely impact operational budgets. For the next few years, there are strong market drivers that should help keep average gas prices relatively low. The first is Hydraulic Fracturing.

Hydraulic Fracturing, also referred to as “fracking”, is a process that injects high pressure fluids into shale and existing gas fields. This breaks up the underground rock and allows gas to be removed that otherwise would stay in the ground. The process increases production from fields that otherwise would be considered depleted. More on fracing here. Fracing is not a brand new technology but is increasingly being used to breathe new life into older gas fields. It does have a downside, though: groundwater contamination has prompted some local governments or prohibit its use.

Another development of note is the discovery of very large natural gas fields in Pennsylvania, Texas, Arkansas, Louisiana and elsewhere have substantially increased US gas inventories. In 2010, current gas inventories are approximately 15% higher than the rolling five year average. More on this here.

Of course, climate change legislation that would tax coal or fuel oil would drive consumers to natural gas and likely cause gas prices to increase. So far, coal and petroleum lobby groups have been effective in avoiding significant changes in their taxes and liability. From an early 2010 vantage, this is unlikely to change in the near future and will help keep natural gas prices low.

Perhaps this biggest short term driver has been the recent reduction in demand, which has increased inventories and helped keep prices low. New electrical generation from gas fired combustion turbines requires a long lead time and takes years to build and permit. It is believed that increases in demand will be more than offset by increases in gas production.

In sum, DOD personnel responsible for making long term energy decisions, like DLA's DESC, can look at today’s environment and plan with some certainty that natural gas prices will stay reasonably low over the next few years.

Photo Credit: sidewalk flying / Seth Sawyers @ Flickr

Recent Notes for DOD from the Climate Change Battle Ground (Updated)

To all that follows add this, just in from the IEA via the WSJ: "World Need for Oil Expected to Ease"

----------------------------------------

Simplicity is a wonderful thing, sometimes the most wonderful thing. When you have it, you understand more quickly, for instance, how to operate a new gadget, or what course of action is the right one in a moral/ethical/legal debate. When all you have is complexity, your next move, should you make one at all, is a difficult one. Such is the case with information coming from many different directions re: US energy strategy and energy security vis a vis the climate change question.

With the DOD increasingly signalling its interest in limiting CO2 emissions, to include obligations to comply with executive orders, I believe it's time to look anew at the still unsettled science both on the human contribution to climate changes we see around us as well as on humans' potential ability to modify the climate now in way that will be helpful (what might be helpful, too, is undecided).

In the meantime, winners are often determined by who employs the best rhetoric. Here are a handful of pieces I've read in the past week or two that do a decent job of poking on this issue, from several perspectives.

The first article comes from the International Association for Energy Economics (IAEE's) 4th quarter 2009 publication. Called "We Can Live With a Fossil Fuel Future: Oil, Gas, Coal & Shale Oil", author Gerald Westbrook attempts to tackle everything from climate change politics to the economic, scientific and engineering forces driving renewables adoption and ultimately makes a case to support his title. As a renewable energy enthusiast, I can't say I feel good about what he's saying. But I do want to understand his case, even though I disagree with parts of it.

Then there's the Wall Street Journal, which gives Cambridge Energy Research Associates' (CERA's) Daniel Yergin a platform to announce "America's Natural Gas Revolution." Seems like there may be a heck of a lot more nat gas available to us in the not-too-distant future from very local sources. Could give solar technology development some more time to advance. Nat gas, lower by car in CO2 emissions than coal, could generate electricity to power electric cars enabled by the advances in battery technology described by Westbrook, not to mention Westbrook's stated objective of reducing oil demand, even while he argues for continued use of coal.

Add to this, and to my surprise, a BBC report that says indicators of human induced climate change are showing a possible cooling trend over the next 10 to 20 years with the warmest year on record being (play drum roll here) ... 1998. It says this may or may not indicate something is amiss with current thinking on (and models of) human induced climate change. And it seems to do so in an objective way, bringing in opinions from all sides of the debate.

But as one man's pleasure is another man's pain, the concluding Examiner article focuses on the respected journal Nature's angry response to the BBC article. You may enjoy the way it goes about doing this. Note to those who carry a flag for any particular cause: if you want to enhance your persuasiveness by seeming rational and balanced, try not to use words that make you sound pissed off (even if you're pissed off).

DOD policy makers and energy planners will do well to follow these discussions closely and not be too quick to jump into one camp or another.

Havel Tells Europe to Dump Russia from its Energy Script

Former playwright turned revolutionary turned Czech President (now retired) Vaclav Havel has a history of calling out the emperor when his news clothes are lacking. Europe is facing a Devil's Bargain, with Russian entreaties to continue as its trusted supplier of natural gas on one side, balanced against the alternative of seeking new energy sources and risking Russia's wrath. As I've said on this blog previously here, here, and most recently here, it's long past time for Europe to build itself some leverage via development of credible options.

Here's Havel in Bloomberg:

Rather than buy gas from Russia, Europe should pursue projects like the Nabucco pipeline to import gas from the Caspian Sea region through Turkey, Havel said. On May 6, the European Union approved an initial investment of 200 million euros ($277 million) for the pipeline which was endorsed by Turkey two days later. It’s expected to begin operation in 2015, according to the EU. “They should have come up with that years ago,” Havel said referring to the Nabucco plan, and said Europe must wean itself from fossil fuels.

As one DOD Energy Blog reader noted, this situation mirrors in some ways the brittle grid challenge facing DOD facilities. The initial get-well path is the creation of "energy islands" so critical functions can be powered in the event of an outage. European communities reliant on Russia for heating should be doing everything they can to produce energy locally via renewables and any other resources they can find (e.g., waste to heat). Much of Western Europe has been building out renewables at a tremendous rate, but Eastern Europe lags, and both need to aggressively explore and execute every possible energy option. Full article is here.

Yet the problem of scale remains, as well as the many pitfalls that plague new pipeline projects (see excellent backgrounder on the problems facing Nabucco by DOD and European energy expert Sohbet Karbuz here.)

Natural Gas Cartel Forming?

Having an OPEC for oil is bad enough. Now, some of the primary suppliers are looking to set up the same type of system in an attempt to control the price of natural gas. Russia and Iran are doing their best to keep prices high, but so far they are being overpowered by the current global economic crisis which is driving the cost of all commodities straight down, including energy. 

And in addition to the weak economy putting pressure on gas prices, news keeps coming that the US' own supply of natural gas is stronger than expected. Poor belligerent, anti-US energy suppliers ... sometimes they just can't catch a break. :(