AuthorTopic: US Energy Sources and Uses Show Limits of Renewable Energy Strategies  (Read 11699 times)

Offline knarf

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By Yves Smith

Yves here. In this post, Tverberg contends that renewable energy sources are not the remedy for global warming that its proponents hope they will be. Too often, “clean” energy sources have not been properly costed out in resource, and sometimes even in carbon terms.

Bear in mind that the post is written in a deductive manner, in that Tverberg first sets forth information on energy consumption and production trends, and then turns to the what this means for “clean” sources of energy. Her analysis supports an argument we’ve made, that the only viable way to reduce carbon emissions meaningfully, particularly in the near term, is conservation.

By Gail Tverberg, an actuary interested in finite world issues – oil depletion, natural gas depletion, water shortages, and climate change. Originally published at Our Finite World

On August 6, I wrote a post called Making Sense of the US Oil Story, in which I looked at US oil. In this post, I would like to look at other sources of US energy. Of course, the energy source we hear most about is natural gas. We continue to be a net natural gas importer, even as our own production rises.



US natural gas production leveled off in 2013, because of the low level of US natural gas prices. In 2013, there was growth in gas production in Pennsylvania in the Marcellus, but many other states, including Texas, saw decreases in production. In early 2014, natural gas prices have been higher, so natural gas production is rising again, roughly at a 4% annual rate.

The US-Canada-Mexican natural gas system is more or less a closed system (at least until LNG exports come online in the next few years) so whatever natural gas is produced, is used. Because of this, natural gas prices rise or fall so that demand matches supply. Natural gas producers have found this pricing situation objectionable because natural gas prices tend to settle at a low level, relative to the cost of production. This is the reason for the big push for natural gas exports. The hope, from producers’ point of view, is that exports will push US natural gas prices higher, making more natural gas production economic.

The Coal/Natural Gas Switch

If natural gas is cheap and plentiful, it tends to switch with coal for electricity production. We can see this in electricity consumption–natural gas was particularly cheap in 2012:



Coal use increased further in early 2014, because of the cold winter and higher natural gas prices. In Figure 2, there is a slight downward trend in the sum of coal and natural gas’s share of electricity, as renewables add their (rather small) effect.

If we look at total consumption of coal and natural gas (Figure 3), we find it also tends to be quite stable. Increases in natural gas consumption more or less correspond to decreases in coal consumption. New natural gas power plants should be more efficient than old coal power plants in producing electricity, putting downward pressure on total coal plus natural gas consumption. Also, we are using more efficient lighting, refrigerators, and monitors for computers, holding down electricity usage, and thus both coal and gas usage. Better insulation is also helpful in reducing home heating needs (whether by electricity or natural gas).



Another factor in the lower electricity usage (and thus lower coal and natural gas usage) is fewer household formations since 2007. Young people who continue to live with their parents don’t add as much electricity usage as ones who set up their own households do. Low household formations are related to a lack of good-paying jobs.

Coal Production/Consumption

US coal production hit its maximum level in 1998, with production tending to decline since then. US coal consumption has been dropping faster than production, so that exports (difference between production and consumption) have been rising (Figure 4).



In 2012, about 16% of coal produced was exported. This percentage dropped to about 10% in 2013, with greater US coal usage.

Coal tends to cause pollution of several types, including higher carbon dioxide levels. It also tends to be less expensive that most other fuels, so world demand remains high. Worldwide, coal use continues to grow.

Nuclear and Hydroelectric

Hydroelectric is the original extender of fossil fuels. Hydroelectricity using concrete and metals became feasible in the 1800s, when we began using coal to provide the heat necessary to make metals and concrete in quantity. The first hydroelectric power plants were put in place in the US in the 1880s.  As recently as 1940, hydroelectric provided 40% of the United States’ electrical generation.

Nuclear electric power was the next major extender of fossil fuels. The first nuclear power was added to the US energy mix in 1957, according to EIA data. The big ramp up in nuclear began in the 1970s and 1980s. Similar to hydroelectricity, nuclear requires fossil fuels to build and maintain its plants making electricity.

If we look at the US distribution of fuels, we see that in recent years, nuclear has been a much bigger source of energy than hydroelectricity.



The above comparison includes all types of energy, not just electricity. The grouping GeoBiomass is a BP grouping including geothermal and various forms of wood and other biomass energy, including sources such as landfill gas and other energy from waste. Note that GeoBiomass, Biofuels, and Solar+Wind are hard to see on Figure 5, because of their small quantities.

If we look at hydro and nuclear separately for recent years (Figure 6, below), we see that nuclear has tended to grow, while hydro has tended to fall, although both now seem to be  on close to a plateau. Hydro tends to be more variable than nuclear because it depends on rainfall and snow pack, things that vary from year to year and month to month.



The reason why hydro has tended to decrease in quantity over time is that it takes maintenance (using fossil fuels) to keep the aging power plants in operation and silt removed from near the dams. Most of the good locations for dams are already taken, so not much new capacity has been added.

Nuclear power plant electricity production has grown even since the 1986 Chernobyl accident because the United States has continued to expand the capacity of existing nuclear facilities. I do not expect this trend to continue, for a variety of reasons. Not all such capacity expansions have worked out well. The capacity expansion of the San Onofre plant in California in 2010 experienced premature wear and is now being decommissioned. Many of the nuclear plants built in the 1970s are reaching  the ends of their useful lives. Unless we add a large number of new nuclear plants in the next few years, it seems likely that US generation of nuclear electricity will be falling over the next 20 years.

Other Energy Types

It is easier to see other energy types if we look at them as a percentage of US total energy consumption. The following is a graph of “renewables” as a percentage of US energy consumption, using EIA data:



A person can see that over the long haul, hydroelectric has tended to shrink as a percentage of energy consumption, as energy needs grew and hydroelectric failed to keep up.

The GeoBiomass category is BP’s catch-all category, mentioned above.1 It (theoretically) includes everything from the wood we burn in our fireplaces to the charcoal briquettes we use to cook food outdoors, to home heating with wood or briquettes to the burning of sawdust or wood pieces in power plants. It also includes geothermal, which is about 6% as large as hydroelectric, and is increasing gradually over time. Based on EIA data, biomass isn’t growing either in absolute amount or as a percentage of total energy consumed.

Biofuels are liquid fuels made from biomass used to extend oil consumption. In the US, the major biofuel is ethanol, made from corn. It is used to extend gasoline, generally up to 10%.  A chart of production and consumption shows that US biofuel production “topped out,” once it hit the 10% of gasoline “blendwall”.



Biofuels now amount to 5.7% of US petroleum (crude oil plus natural gas liquids) consumption. In recent years, the US is a slight exporter of biofuels.

Corn ethanol currently takes about 40% of US corn production, according to the USDA (Figure 9). Greater corn plantings would put pressure on land usage for other crops.



If someone figures out how to make cellulosic ethanol cheaply (perhaps from wood), it presumably will cut into the market for corn ethanol, unless the blend wall is raised to 15%. Without additional ethanol coming from a source such as cellulosic ethanol, such an increase in the maximum blending percentage would likely be problematic.

Wind and Solar PV

Wind and Solar PV are sources of US electricity, so really need to be compared in that context. If we compare nuclear, hydroelectric, and all renewable electricity other than hydro (including electricity from wood, sawdust, and waste, and from geothermal, in addition to wind and solar) we see that in total, all other renewables are approximately equal to hydro electricity in quantity:



If we look at the pieces of other renewables separately, we see the following:



Wind energy has indeed grown in quantity. Solar/PV is growing, but from a very small base. The remainder, which includes geothermal, wood and various waste products, is growing a bit.

A major issue with wind and solar is that we badly need a “solution” to our energy problem, so these are “pushed,” whether they are really helpful or not. Some issues involved:

(a) Cost effectiveness. Studies (such as by Brookings Institution, Weissbach et al., Graham Palmer) show that wind and solar PV are not cost-effective for reducing carbon emissions. If we want to reduce carbon emissions, conservation or switching from coal to natural gas would be more cost effective.

(b) Peak supply or peak affordability (demand in economists’ language)? The peak oil “story” often seems to be that because of inadequate supply, oil and other fossil fuel prices will rise, and substitutes will suddenly become competitive. This story is used to support a switch to wind and solar PV and high priced biofuels, since the expected high prices of fossil fuels will supposedly support the high cost of renewables.

Unfortunately, the story is wrong. High prices of any fuel tend to lead to recession because wages don’t rise to match the high prices. Also, a country using the high-priced fuel tends to become less competitive compared to countries that don’t use the high-priced fuel. The net effect is that prices don’t rise very much. Instead, manufacturing moves to countries that use less-expensive fuels. Oil prices may fall so low (relative to the cost of oil production) that oil producers sell their land and increase dividends to shareholders instead; in fact, this seems to be happening already.

(c) Hoped for long-term life. If fossil fuels have problems, can “renewables” have long life-spans in spite of those problems? Not that I can see. It takes fossil fuels to maintain the electric grid and to produce any modern renewable, such as wind, or solar PV or wave energy. Wind turbines need frequent replacement of parts, and solar PV needs new “inverters.” Wood and biomass will have long lives, if not overused, but these won’t keep the electric grid operating.

(d) Apples to oranges cost comparisons. There are a few situations where wind and solar PV are used to substitute for oil–for example, on islands, where oil is used to operate electricity generation. In these cases, wind and solar PV are likely already competitive, without subsidies. In these situations, per capita use of electricity can be expected to be very low, because exports made with such high-priced electricity will be non-competitive in the world market-place.

The confusion comes elsewhere, where substitution is for natural gas, coal, or nuclear energy. Here, the savings to an electric company is primarily a savings in fuel cost, that is, the cost of the natural gas, or coal or uranium. The plant’s manpower needs and its cost of electric grid maintenance will be the same (or higher). There may be costs associated with monitoring the new sources of electricity added to the grid or additional balancing costs, and these need to be considered as well.

If we want to maintain the electric grid so we can continue to have electricity for a variety of purposes, the “correct” credit for intermittent renewables is the savings to the power companies–which is likely to be close to the savings in fuel costs, or about 3 cents per kWh on the mainland United States. This is far less than the “net metering” benefit (offering a benefit equal to the retail cost of electricity) that is often used for grid-tied solar PV. It is also generally less than the “wholesale time of day” cost of electricity, often used for wind.

Germany is known for its encouragement of wind and solar PV, using liberal funding for the renewables. This approach has adverse ramifications, including high electricity costs, less grid stability, closure of some traditional natural gas power plants, and rising carbon dioxide emissions. A recent article called Germany’s Electricity Market Out of Balance by the Institute for Energy Research summarizes these issues.

Summary

It would be great if we had a solution for our non-oil energy issues, but we really don’t. The closest we can perhaps come is scaling up natural gas consumption some, and reducing coal’s current portion of the electricity mix. We currently have a large amount of coal consumption relative to natural gas consumption (Figure 3), so we ourselves have good use for rising natural gas production, if it should actually take place.

The “catch” in scaling up natural gas consumption is a price “catch.” If the price of natural gas price rises too high relative to coal, then electricity production starts switching back to coal. If, on the other hand, natural gas prices don’t rise very much, not much of an increase in production is likely to be available. Producers would like to export (a lot of) natural gas to Europe, as a way of jacking-up US natural gas prices. This seems like a pipe dream. See my article The Absurdity of US Natural Gas Exports.

Nuclear is a big question mark. If the United States starts taking much nuclear off line, it will leave a big hole in electricity generation, especially in the Eastern part of the US. Germany and recently Belgium are starting to experience the effect of taking nuclear off line. It is hard to see how wind and solar PV can play a very big role in offsetting the nuclear loss.

Politicians need to have a “solution” they can call an energy savior, but it is hard to see that renewables will play more than a small role. Biofuels seem to have “topped out” for now. Wind and solar PV are still growing, but it is hard to justify subsidies for them, as part of the electric grid system. Solar PV does have uses off grid, if citizens want their own source of electricity, with their own inverters and back-up batteries. There are also business uses of this type–for example, to operate equipment in a remote location.

I have not tried to cover all of the various smaller items. There may also be growth possibilities for items that I have not discussed, such as solar thermal for heating hot water, particularly in warm parts of the United States.

found at: http://www.nakedcapitalism.com/2014/08/us-energy-sources-and-uses-show-limits-of-renewable-energy-strategies.html
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Offline MKing

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Re: US Energy Sources and Uses Show Limits of Renewable Energy Strategies
« Reply #1 on: August 31, 2014, 05:41:20 PM »
By Yves Smith

I have not tried to cover all of the various smaller items.

Yes. You mean like oil production. Certainly a various "smaller" item in terms of what has been happening in the US. What…did you not think we would notice?
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Offline knarf

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Re: US Energy Sources and Uses Show Limits of Renewable Energy Strategies
« Reply #2 on: September 01, 2014, 06:21:31 AM »
Mking says "Yes. You mean like oil production. Certainly a various "smaller" item in terms of what has been happening in the US. What…did you not think we would notice?"

  Well, I think the article demonstrates that we're fucked no matter what. With peak oil, and the fracking madness, solar and wind use is not going to supply all we need, nuclear power plants that are in constant need of repair and remain dangerous, and we are running out of natural gas, in 10 years tell please tell us how are we going to produce our energy needs for 9 billion people?
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Offline MKing

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Re: US Energy Sources and Uses Show Limits of Renewable Energy Strategies
« Reply #3 on: September 01, 2014, 07:46:56 AM »
  Well, I think the article demonstrates that we're fucked no matter what.

Certainly, I did not get that sense at all from the article. At all. Seems like the evidence for such isn't even in there, are you sure that is what the evidence indicates?

Quote from: knarf
With peak oil, and the fracking madness, solar and wind use is not going to supply all we need, nuclear power plants that are in constant need of repair and remain dangerous, and we are running out of natural gas, in 10 years tell please tell us how are we going to produce our energy needs for 9 billion people?

You are attaching quite a few assertions that are not in evidence in this article. For example, we certainly aren't running out of the most abundant fossil fuel on the planet, natural gas, and there was no evidence presented even mentioning the resource size, therefore you certainly can't even make the statement you did. The difference between 7 and 9 billion people in terms of energy usage is pretty insignificant in the face of the resource base humans can access over this century. A better article would reference,at the very least, the size and shape of the resource pyramid and related costs but for some reason, that is information commonly left out of these kinds of articles. Funny thing that….
Sometimes one creates a dynamic impression by saying something, and sometimes one creates as significant an impression by remaining silent.
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Offline knarf

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Re: US Energy Sources and Uses Show Limits of Renewable Energy Strategies
« Reply #4 on: September 01, 2014, 08:01:34 AM »
Here you go........

Guest post by Dr Michael Lardelli

———————————–

Cornucopians – those who believe the Earth’s resources are boundless – have a clever mental trick to avoid acknowledging that the planet is finite. It is commonly called the “resource pyramid”.

The argument goes like this. When we first begin to extract a substance from a resource we exploit that resource in which the substance is most concentrated (and so easiest to purify) and/or most accessible.

An example of this would be digging large gold nuggets out of riverbanks in the Victorian goldfields in the 1850s or mining phosphate-rich guano on the Pacific island of Nauru by simply scooping it up and bagging it. However, as you probably know, the alluvial gold of Victoria and the guano on Nauru were both mined out many years ago.

You might think that this would lead to a severe shortage of these materials but this is where the resource pyramid works it magic. As these resources begin to become scarce their price rises. The higher price now makes it economically viable to extract the substance from a less accessible and/or less concentrated source. Amazingly, the total amount of the substance present in this lower-grade resource is greater than in the original, most concentrated resource. This pattern repeats. As the less concentrated resource begins to be mined out the price of the substance rises ever higher so that extracting it from an even lower grade/less accessible source becomes economically viable.

The total amount of the substance present in the lowest grade of resource is greater than previously. By this argument we can never run out of a substance because the more we use, the more becomes economically viable to extract. Our planet truly is a magic pudding! This idea can be represented as a pyramid with the small amount of most concentrated/accessible substance at the top and successively larger amounts of the substance in lower grades of ore, and so on, as we move down:



The resource pyramid idea contains a hidden assumption – that energy is cheap and abundant. In fact, it is the price of energy that ultimately determines the base of the resource pyramid. At each step down the resource pyramid the substance sought is less pure and/or accessible and so it requires more energy to extract.

At some point the cost of the energy required to exploit the resource will equal the value of the substance obtained. It is at that moment that exploitation of the resource ends. To date, energy has been so cheap that we have rarely (if at all) been faced with having to end exploitation. (No examples spring to my mind. Maybe readers can suggest some in comments on this article.) The high price of any substance has usually resulted in substitution by something else more abundant.

When it comes to discussions of oil or other energy sources Cornucopians apply the resource pyramid argument in one form or another. The following comment by the CEO of Exxon Mobil Australia is a good example:

According to the US Geological Survey (USGS), the Earth currently has more than 3 trillion barrels of conventional recoverable resource and so far we’ve produced 1 trillion of that. Conservative estimates of heavy oil and shale oil push the total recoverable resource to over four trillion barrels.

And more recently, the chief economist of BP said:

Therefore there will never be a moment when the world runs out of oil because there will always be a price at which the last drop of oil can clear the market. And you can turn anything into oil if you are willing to pay the financial and environmental price.

This contrasts with those convinced that a peak of oil production is imminent who mostly believe that only about 1 trillion barrels of extractable conventional oil remain. (Note – it is worthwhile remembering that the peak oil concept is about the rate of oil extraction, not the total extractable reserves remaining.)

What the Cornucopians do not seem to understand is that energy must be invested to produce energy. If hydrocarbons are being mined for energy then exploration must occur, wells must be drilled, the oil or gas must be extracted and separated into various fuel grades before further distribution to vehicular fuel tanks. (The process is much more complicated than this but you get the general idea.) It is an energy intensive process.

Earlier in the Oil Age when the most easily accessible oil fields were first tapped a relatively small energy investment gave a huge energy profit – by some estimates a profit ratio of 100-fold or greater.

As oil extraction from a field proceeds the pressure drops requiring more and more energy-intensive methods to be used to continue the extraction – such as pumping down gas or water to maintain pressure and/or pumping up the oil. Also, as the Oil Age has proceeded the size/accessibility of oil fields discovered has decreased (since larger and more accessible fields are easier to find and so are found first) and the more intensive exploration and drilling required to exploit the smaller/less accessible oil fields requires more energy.

If we begin to exploit non-conventional sources of oil then the energy inputs required are greater still, meaning that the net energy produced from each energy unit invested decreases. What this means is that as we use up our highest quality/most accessible hydrocarbon resources and begin to consume lower quality/less accessible resources, the net energy produced from each unit invested decreases.

If the object of the mining activity is net energy production (i.e. the actual energy left over after the inputs to mining, processing and distributing it have been subtracted) then the volume of net energy decreases as the resource quality declines, i.e. as we move down the resource “pyramid”.

In fact, the resource pyramid for net energy resembles more a pyramid standing on its apex! This is shown in the figure below where EROEI is the acronym for Energy Returned on Energy Invested. Once net energy production from the extraction process falls to zero (i.e. EROEI = 1) then it is impossible for the activity to continue (unless the activity is subsidised with energy from another source).



It is true that the world possesses hydrocarbon resources equivalent to many trillions of barrels of oil but these will never be harvested for energy production. It may be that they will be mined, for example, for plastics production at some future date but the energy to do the mining will come from elsewhere.

Many readers may believe that technology will solve this net energy problem by providing less energy intensive methods to extract hydrocarbons from difficult resources. While technology can have a marginal impact, there are some minimum levels of energy investment that cannot be circumvented. For example, the molecular forces holding oil within its constraining rock matrix will always require a certain minimum application of energy to overcome and nothing can magically levitate oil at low pressure up from a deposit several kilometres below ground.

Even if all the low quality hydrocarbon resources could be exploited, the rate at which these difficult deposits could be mined would be low and so would be the rate at which we could obtain energy from them.

The ultimate consequence is that, at some point (“peak net energy”) the rate at which we will obtain energy from fossil sources must decline. An interesting example of this is energy production from coal in the USA. While the tonnage of coal mined in the USA is now at record levels, coal quality is declining and the total energy content of the coal has been decreasing since 1998 (PDF 534KB)!

Also, the total rate of oil production is currently on a plateau and may have peaked but we know that the best grades of oil requiring least processing for gasoline/petrol production (“light sweet crude”) peaked by 2004 and that new oil production is increasingly “heavy and sour”. This, combined with the additional energy required to exploit smaller and more remote oil fields means that we must be at, or close to, the peak rate of net energy production from oil.

The resource pyramid is an interesting concept that allows economists to argue that resources are unlimited. However, like so much economic theory, it is only an illusion supported by cheap and abundant energy.

Note: Factors influencing the resource pyramid concept are discussed in detail in a 2002 article in Geotimes. The authors place great significance on advancement of technology for increasing resource availability but they never mention net energy.

Michael Lardelli is Senior Lecturer in Genetics at The University of Adelaide. Since 2004 he has been an activist for spreading awareness on the impact of energy decline resulting from oil depletion.

found at: http://bravenewclimate.com/2008/11/02/earth-as-a-magic-pudding/
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Offline RE

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Re: US Energy Sources and Uses Show Limits of Renewable Energy Strategies
« Reply #5 on: September 01, 2014, 05:17:39 PM »
Here you go........

Moriarty figures that since energy companies can borrow Unlimited Money from Da Fed's Unlimited Laptop, they can drill unlimited holes to bring up the fossil fuels no matter how much it costs.  ::)

RE
Save As Many As You Can

Offline agelbert

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Re: US Energy Sources and Uses Show Limits of Renewable Energy Strategies
« Reply #6 on: September 01, 2014, 06:37:16 PM »
RE,
Well said. Fossil Fuelers have an incredible inability to do addition and subtraction, never mind any more advance mathematical operations. 

Consider the huge increase in Renewable Energy 24/7 global power generation if 900 BILLION DOLLARS was spent on THIS:


The above is a NO-BRAINER for logical thinking humans. The power is ENDLESS as long as the earth rotates, is available near LARGE METROPOLITAN AREAS and is built and serviced with the SAME technology developed for off shore oil platforms. There is NO EXCUSE for not building these EXCEPT you can NEVER CHARGE for fuel cost "increases" because of geopolitical fun and mayhem.  Free fuel is against fossil fueler's religion!  :evil4:


INSTEAD, the FOSSIL FUEL EROEI challenged MORONS "invested" (practically threw away because of the low profit margin! ONLY through "subsides" and other corporate welfare queen tax breaks can they make a profit on this STUPID search for more fossil fuels .)  nearly 900 BILLION BUCKS IN fossil fuel exploration. I have explained why these fossil fuelers continue to be one trick dirty energy "ponies". on the image below.  ;D

   

You just cannot fix STUPID.
« Last Edit: September 01, 2014, 06:44:00 PM by agelbert »
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Offline azozeo

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Re: US Energy Sources and Uses Show Limits of Renewable Energy Strategies
« Reply #7 on: September 02, 2014, 02:56:28 PM »
213 mpg diesel electric VW 2014.
<a href="http://www.youtube.com/v/BL4anmWOe8k#&fs=1" target="_blank" class="new_win">http://www.youtube.com/v/BL4anmWOe8k#&fs=1</a>
Our nation's railroads have run on diesel electric for 60+ years......
I know exactly what you mean. Let me tell you why you’re here. You’re here because you know something. What you know you can’t explain, but you feel it. You’ve felt it your entire life, that there’s something wrong with the world.
You don’t know what it is but its there, like a splinter in your mind

Offline azozeo

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Re: US Energy Sources and Uses Show Limits of Renewable Energy Strategies
« Reply #8 on: September 02, 2014, 03:01:01 PM »
Hovercar by VW ....
How's your Mandarin?
<a href="http://www.youtube.com/v/mEZcDHDYQXc#&fs=1" target="_blank" class="new_win">http://www.youtube.com/v/mEZcDHDYQXc#&fs=1</a>
I know exactly what you mean. Let me tell you why you’re here. You’re here because you know something. What you know you can’t explain, but you feel it. You’ve felt it your entire life, that there’s something wrong with the world.
You don’t know what it is but its there, like a splinter in your mind

Offline azozeo

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Re: US Energy Sources and Uses Show Limits of Renewable Energy Strategies
« Reply #9 on: September 02, 2014, 03:02:52 PM »
I got the visual of RE scooting around the bush in one those contraptions  ::)
I know exactly what you mean. Let me tell you why you’re here. You’re here because you know something. What you know you can’t explain, but you feel it. You’ve felt it your entire life, that there’s something wrong with the world.
You don’t know what it is but its there, like a splinter in your mind

Offline MKing

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Re: US Energy Sources and Uses Show Limits of Renewable Energy Strategies
« Reply #10 on: September 02, 2014, 03:52:13 PM »
Here you go........

Moriarty figures that since energy companies can borrow Unlimited Money from Da Fed's Unlimited Laptop, they can drill unlimited holes to bring up the fossil fuels no matter how much it costs.  ::)

RE

When some 7 trillion barrels additional…compared to 1.2 trillion used…can be had at real prices (2008$) under $150/bbl, well, "unlimited money" isn't the issue at all.

Sometimes one creates a dynamic impression by saying something, and sometimes one creates as significant an impression by remaining silent.
-Dalai Lama

Offline MKing

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Re: US Energy Sources and Uses Show Limits of Renewable Energy Strategies
« Reply #11 on: September 02, 2014, 03:54:12 PM »
213 mpg diesel electric VW 2014.
<a href="http://www.youtube.com/v/BL4anmWOe8k#&fs=1" target="_blank" class="new_win">http://www.youtube.com/v/BL4anmWOe8k#&fs=1</a>
Our nation's railroads have run on diesel electric for 60+ years......

I have already done better than that with a run of the mill Chevy. It is surprising, how few people are aware of the personal peak oil/renewable/transport solutions there are available right now, hip deep as we are in the transition already.
Sometimes one creates a dynamic impression by saying something, and sometimes one creates as significant an impression by remaining silent.
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Offline RE

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Re: US Energy Sources and Uses Show Limits of Renewable Energy Strategies
« Reply #12 on: September 02, 2014, 04:07:42 PM »
Here you go........

Moriarty figures that since energy companies can borrow Unlimited Money from Da Fed's Unlimited Laptop, they can drill unlimited holes to bring up the fossil fuels no matter how much it costs.  ::)

RE

When some 7 trillion barrels additional…compared to 1.2 trillion used…can be had at real prices (2008$) under $150/bbl, well, "unlimited money" isn't the issue at all.

You live in financial La-La Land.

RE

Wolf Richter: How Fracking Is Blowing Up Balance Sheets of Oil and Gas Companies

Posted on July 31, 2014 by

By Wolf Richter, a San Francisco based executive, entrepreneur, start up specialist, and author, with extensive international work experience. Originally published at Wolf Street.

Fracking has caused an uproar in local communities and split some in two. It has brought environmentalists to a boil. It allegedly caused tap water to go up in flames. A documentary was made in its honor. It caused earthquakes in Oklahoma and other places. It caused Wall Street to froth at the mouth. And now it is causing the balance sheets of oil and gas companies to blow up.

It always starts with a toxic mix. Now even the Energy Department’s EIA has checked into it and after crunching some numbers found:

Based on data compiled from quarterly reports, for the year ending March 31, 2014, cash from operations for 127 major oil and natural gas companies totaled $568 billion, and major uses of cash totaled $677 billion, a difference of almost $110 billion.

To fill this $110 billion hole that they’d dug in just one year, these 127 oil and gas companies went out and increased their net debt by $106 billion. But that wasn’t enough. To raise more cash, they also sold $73 billion in assets. It left them with more cash (borrowed cash, that is) on the balance sheet than before, which pleased analysts, and it left them with a pile of additional debt and fewer assets to generate revenues with in order to service this debt.

It has been going on for years. In 2010, the hole left behind by fracking was only $18 billion. During each of the last three years, the gap was over $100 billion. This is the chart of an industry with apparently steep and permanent negative free cash-flows:

US-oil-gas-drillers-cashflows_2010-2014

And those shortages in each year forced the companies to raise more debt and sell assets to fund more drilling, other capital expenditures, operational costs, dividends, and stock buybacks.

Of the three sources of cash – operations, net increase in debt, and asset sales – during the first quarters going back six years, net increases in debt accounted for over 20% of the incoming cash since 2012. For instance, In 2013, cash from operations supplied only 60% of the cash needs; most of the rest was borrowed, and some was covered by asset sales:

US-oil-gas-drillers-sources-of-cash

The EIA was quick to minimize the issue, claiming that this debt that has been spiraling out of control wasn’t “necessarily a negative indicator.” That low interest rates allowed companies to get fresh debt capital to cover their operational cash shortages. And that piling on debt “to fuel growth is a typical strategy, particularly among smaller producers.” And besides, this ballooning debt would be “met with increased production, generating more revenue to service future debt payments.”

This is where debt smacks into fracking. Fracked wells have nasty decline rates. They differ from well to well, with some estimates pegging the average declines at 50% to 78% by the end of the first year. After a few years, production might be down to less than 10% of production in the first year. In other words, the cash that has been drilled into ground has to be earned back within a terribly short time and has to be used to pay off the debt incurred in drilling the well. If not, the debt is left over, when the well is producing just a trickle.

This is exactly what is happening. It’s a horrendous treadmill. Just to maintain production, companies have to drill more and more and incur more and more debt, even as revenues are disappointing. In addition, drillers with heavy reliance on natural gas have faced prices for dry gas that  have been so low for years that most wells will never generate enough cash to cover the costs of production. And much of the capital that went into them has been destroyed.

A Bloomberg analysis of 61 companies drilling for shale oil and gas found that debt among them nearly doubled over the past four years, while revenues inched up only 5.6%. And interest payments on that ballooning debt is taking up an ever larger portion of the revenues – even at today’s record low interest rates – with 12 of the companies already paying over 10% of their revenues in interest.

The financial hype around fracking, the limitless, nearly free liquidity provided by the Fed since late 2008, and investors so desperate for yield that they’re willing to incur just about any risks in their vain battle to come out ahead have had Wall Street frothing at the mouth. The sweeps of creative destruction have broken down. Instead, the boundless stream of money has been searching for a place to go, and it went to an economic activity – fracking – where money goes to die. What’s left is debt, and wells, especially gas wells, that will never produce enough to pay off the debt that was incurred to drill them.

These binges can go on for a long time, for far longer than a sane person in normal times would think possible. But with revenues barely growing, cash flows from operations stagnant, and debt levels that are soaring, at some point, something has to give.

Fracking isn’t the only place where the Fed’s policies created havoc: homeownership hit the skids when homes became a highly leveraged asset class, flipped and laddered by speculators, rather than lived in by normal folks. Read…. Here’s the Chart that Shows Why the Housing Market Is Sick

Save As Many As You Can

Offline Surly1

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Re: US Energy Sources and Uses Show Limits of Renewable Energy Strategies
« Reply #13 on: September 02, 2014, 05:23:29 PM »
Quote from: Wold Richter
The sweeps of creative destruction have broken down. Instead, the boundless stream of money has been searching for a place to go, and it went to an economic activity – fracking – where money goes to die. What’s left is debt, and wells, especially gas wells, that will never produce enough to pay off the debt that was incurred to drill them.

Not often do you get to hear the voice of Prophecy.

There it is.
“The old world is dying, and the New World struggles to be born: now is the time of monsters.”

Offline azozeo

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Re: US Energy Sources and Uses Show Limits of Renewable Energy Strategies
« Reply #14 on: September 02, 2014, 07:09:47 PM »
213 mpg diesel electric VW 2014.
<a href="http://www.youtube.com/v/BL4anmWOe8k#&fs=1" target="_blank" class="new_win">http://www.youtube.com/v/BL4anmWOe8k#&fs=1</a>
Our nation's railroads have run on diesel electric for 60+ years......

I have already done better than that with a run of the mill Chevy. It is surprising, how few people are aware of the personal peak oil/renewable/transport solutions there are available right now, hip deep as we are in the transition already.
Run of the mill Chevy's don't get 213 mpg. Please put down the crack pipe  ::)
I know exactly what you mean. Let me tell you why you’re here. You’re here because you know something. What you know you can’t explain, but you feel it. You’ve felt it your entire life, that there’s something wrong with the world.
You don’t know what it is but its there, like a splinter in your mind

 

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