Autonomous Vehicle Consultant

At a minimum, a super power requires two assets to maintain its position, both economically and geopolitically. These are money and energy. As for the former, the United States is broke, and in the latter case, there are several unresolved issues that require large-scale cooperative efforts involving the Government, industry, universities and banking:

• Dwindling supply of indigenous crude oil
• Limited growth of renewable energy technologies due to cost
• Domination of renewable technologies by countries with national energy development plans
• Aging electric grid
• Potentially unsafe nuclear power plants operating beyond their expected lifetimes
• Limited indigenous uranium reserves
• Questionable supply of natural gas from shale
• Potentially unsafe hydraulic fracturing methods to produce shale gas
• Lobbying by oil and gas companies for their own interests

So far, the Obama administration has failed to recognize these issues and propose a comprehensive plan.

This post presents two different estimates on the extent of U.S. shale gas reserves. One estimate is from the Department of Energy and the other is from Arthur Berman, well known petroleum geologist and consultant.

Department of Energy

“According to the EIA Annual Energy Outlook 2011, the United States possesses 2,543 trillion cubic feet (Tcf) of potential natural gas resources. Natural gas from shale resources, considered uneconomical just a few years ago, accounts for 862 Tcf of this resource estimate, more than double the estimate published last year. At the 2010 rate of U.S. consumption (about 24.1 Tcf per year), 2,543 Tcf of natural gas is enough to supply over 100 years of use. Shale gas resource and production estimates increased significantly between the 2010 and 2011 Outlook  reports and are likely to increase further in the future.”

Arthur Berman

“Shale gas has become an important and permanent feature of U.S. energy supply. Daily production has increased from less than 1 billion cubic feet of gas per day (bcfd) in 2003, when the first modern horizontal drilling and fracture stimulation was used, to almost 20 (bcfd) by mid-2011.”

“Despite impressive production growth, it is not yet clear that these plays are commercial at current prices because of the high capital costs of land and drilling and completion. Our analysis indicates that industry reserves are over-stated by at least 100 percent based on detailed review of both individual well and group decline profiles for the Barnett, Fayetteville and Haynesville shale plays. The contraction of extensive geographic play regions into relatively small core areas greatly reduces the commercially recoverable reserves of the plays that we have studied.”

Renewable energy technologies, such as wind and solar, are expensive compared to their fossil fuel counterparts, and are therefore supported by numerous federal, state and local incentives. The Database of State Incentives for Renewables and Efficiency (DSIRE) provides a detailed compilation of these subsidies.

Policy analyst might ask, “When will these subsidies cease so that renewable energy technologies can stand on their own in the market place?” An answer to that question can be framed in terms of levelized cost of electricity (LCOE).

The LCOE is a significant benchmark to compare electricity generation technologies. “Levelized cost represents the present value of the total cost of building and operating a generating plant over an assumed financial life and duty cycle, converted to equal annual payments and expressed in terms of real dollars to remove the impact of inflation. Levelized cost reflects overnight capital cost, fuel cost, fixed and variable operation/maintenance cost, financing costs, and an assumed utilization rate for each plant type.”

By supporting R&D cost reduction technologies, the Department of Energy (DOE) projects that LCOE for large-scale solar installations to about (5-6) cents/kWh by the end of this decade and without subsidies. Current unsubsidized LCOEs for  renewables in 2009 are:

•  Photovoltaic (single axis, public utility): 32cents/kilowatt hour (kWh)
• Solar parabolic trough: 27cents/kWh
• Onshore wind: 8 cents/kWh

The average retail price of electricity in the United States in 2010 was 9.88 cents/kWh.

The following figure depicts the unsubsidized LCOE for several generation technologies in 2016 based on a comprehensive model from the Department of Energy. This figure shows that offshore wind, solar PV and solar thermal are substantially more costly than other technologies and greatly exceed the DOE goal ranging from (5-6 )cents/kWh by 2020 for unsubsidized LCOE. It is notable that onshore wind at 10 cents/kWh is close to the average retail price of 9.88 cents/kWh in 2010.

Conclusions: In the case of solar PV and solar thermal, game-changing R&D must occur in four years from 2016 to 2020 to achieve DOE aspirations for affordable electricity from solar installations. Similar comments apply to offshore wind if that technology is to become free of subsidies. Meanwhile, what happens to these renewable technologies if state and federal governments can no longer afford subsidies? Do the Chinese win? They have cash and patience in abundance to outlast the United States.

The question of subsidies for renewable energy production technologies versus other competing generation technologies is a constant theme. Recently, I found a source that sheds new light on that issue.

“The Institute for Energy Research decided to calculate the federal subsidies and support per unit of electricity production from the information provided in Energy Information Administrations report and the generation data in its Monthly Energy Review. The ratio of dollars to production is given in the following figure. As can be seen by the figure, solar is being subsidized by over 1200 times more than coal and oil and natural gas electricity production, and wind is being subsidized over 80 times more than the more conventional fossil fuels on a unit of production basis.”

According to The Interstate Renewable Energy Council (1), “Solar markets are booming in the United States due to strong consumer demand and financial incentives from the federal government, states and utilities. Over 124,000 new solar heating, cooling, and solar electric installations were completed in 2010, an increase of 22% compared to the number of systems installed in 2009.” Similar upbeat announcements on the explosive growth of solar technology are reported by Green Tech Media (2), Fox Business (3) , Solar Energy Industries Association (4).

Solar energy growth is seemingly remarkable compared unto itself based on yearly percentage increases. However, the larger question is, “How much has solar technology contributed to national energy consumption?” The answer to that question can be seen from the pie chart (Fig. 1) showing percentage contributions from coal, oil, natural gas, nuclear and renewable energies during 2010. Renewable energy provided only 8 percent of the total national energy consumed and of that 8 percent, solar yielded only 1 percent. The dual pie chart (Fig. 2) illustration indicates that solar’s national level, energy consumption remained flat from 2006 to 2010, although the size of the pie increased somewhat during those 5 years.

Conclusion: in spite of news media hype and generous federal/state level support for solar technologies, solar energy consumption growth was not impressive when viewed from a national perspective.