With oil
prices being cut, the
energy policy scene is getting increasingly fraught. Keeping OPEC oil production levels high has forced prices
down as oil seeks to see off the boom in coal use. That in part has been due to
the shale gas boom in the USA- which has been able to export more cheap
coal. But these market
manipulations are set in the context of climate change polices which seek to reduce fossil fuel
use (coal especially) and promote the use of renewables. That has had a big impact in Germany, where, with the Feed In Tariff system
supporting renewables, gas plants
find it hard to compete and coal plants are frowned on- though still used. And
nuclear is on the way out. One results has been that, following the lead of RWE
and Siemens, who exited nuclear some while back, E.ON, the largest utility, is
to back away from nuclear and fossil fuels- hiving them off into a separate new
company, the rump company then focusing on renewables and smart grid management
systems: www.businessgreen.com/bg/news/2384209/eon-unveils-bold-plan-to-focus-on-renewables-and-ditch-fossil-fuels
There was speculation that this might be an
attempt to abandon uneconomic nuclear plants and their associated
decommissioning debts, but more likely it was just a case of following the
market. Nuclear and fossil plants
had no long-term future, although the question does arise, who will provide the
power input for grid-balancing services for variable renewables? Some just saw
it cynically as an exercise in chasing green energy subsidies- although equally
it may be that operating marginal cost renewables will be much more lucrative
than trying to rely on capacity market balancing payments.
http://www.renewableenergyworld.com/rea/news/article/2014/12/german-fossil-fuel-giant-jumps-on-renewables-bandwagon
Nevertheless, not everyone likes this trend
anti-fossil trend. And fossil fuels are clearly far from dead. Indeed they make
stage a comeback. In this context it is interesting that the competition to
replace Maria van der Hoeven as head of the International Energy Agency (IEA) has heated up, with Fatih Birol, a former Opec oil
technocrat, emerging as a potential candidate. van der Hoeven has overseen a
what some see as a radical shift in the IEAs views, with renewables and energy
efficiency heavily promoted, but it still backs nuclear and has strong links to
oil. Will those be strengthened, given current oil issues?
There are certainly worries. It was bad
enough Russia playing market and geopolitical games with gas exports,
threatening European energy security, but oil price cuts can have major impacts
on all economies- beneficial for most in the short-term, but no so welcome long
term, especially for oil and gas exporting countries. Russia has been hit hard
for example. More worryingly, they could impact on renewables. Peter Atherton,
utility analyst at Liberum Capital, says a prolonged period of $60 oil could
drive down UK electricity prices below £45/MWh, which ‘would destroy value
on existing renewable energy projects and make it difficult to raise financing
for future projects’. But this may all also be the
last straw for nuclear..as well as undermining the case for shale gas.
Meanwhile there are those who worry about
relying on renewables, and want to see gas and
even coal used, along with nuclear, instead. In the UK, the Civitas think tank
has made this sort of case yet again. http://t.co/y9mQzt58Qj In the USA, Forbes
warned that superficially attractive comparisons of renewables and fossil fuel
costs, based on using Levelised costings, disguised the cost of dealing with
variable renewables: www.forbes.com/sites/williampentland/2014/11/29/levelized-cost-of-electricity-renewable-energys-ticking-time-bomb/
By
contrast it is often taken as a matter of faith that shale gas will carry all before it.
Certainly shale gas continues to flourish in the USA, with shale gas overtaking
conventional natural gas production, a big change from 2007 when it only produced 8% of the total. And the U.S.
Energy Information Administration says that new technology has enabled producers to lower the
market price of natural gas: www.eia.gov/todayinenergy/detail.cfm?id=18951 Whether this will be a short lived speculative bubble remains to be
see: well productivity falls off quickly so more wells have to be drilled. It’s also unclear if the same thing
will happen elsewhere. Gas was always expensive in the USA, unlike in the EU,
and the geology is different. And population densities are generally much
higher. But as noted above, the economic impact of cheap US shale gas has
spread widely. Optimist may see
shale gas as offering a lowish carbon interim option while renewables are
ramped up, pessimists will see it as delaying just that, and environmentalists
worry about local and global impacts.
Overall
then there’s a bundle of conflicting beliefs, pressures and concerns, although
the fossil lobby’s power remains strong…stronger maybe than the multifaceted
climate lobby.
