Category: Energy

Greenwire: Royal Dutch Shell PLC and PetroChina Co. have agreed to buy Arrow Energy Ltd., officially bringing China into Australia’s coal-seam gas industry.

The two companies offered $3.2 billion for the business, an increase from their original bid. Arrow is Australia’s largest holder of permits to extract gas from coal seams, which can be processed into liquid form for export.

The assets will be valuable for China because of the close geographical proximity and large scale of the reserves.

“Australia is a key growth center for Shell globally,” said Shell Australia Chairman Russell Caplan. Arrow “will give us scale in Australia and is underpinned by secure access to the critical Chinese market.”

Shell will open a liquefied natural gas project near the Queensland coast to produce as much as 16 million metric tons of LNG a year.

The move is the latest in a flurry of oil and gas companies trying to corner global markets in alternative gas production (Ben Sharples, Bloomberg, March 22). – JP

Share This

Financial analysts need tools to make better decisions about investments that depend on water.

As the world observes Water Day this year, a new and rather unlikely group is starting to pay more attention to issues of water risk and water quality: financial analysts. They must take into account a myriad number of factors when making decisions, adding up tiny details to look for hints of future performance. But something as basic as water can also have a huge impact on companies’ performance, and even today, water risk is missing from many investors’ calculations.

Though climate change and other environmental trends can have a major impact on companies and industrial sectors (and recently, the SEC advised publicly-held companies to inform investors of any potential risks of climate change) nearly half of global money managers are still ignoring climate change risk completely when they make their investment decisions, according to a recent survey. The same can be said for water risk. Right now, many companies are inadvertently betting on water that, in the coming decades, might no longer be available.

Investment and Environmental Risk

Environmental data, even when available, does not fit neatly into the financial models that investors commonly use. Environmental trends are complex and have a long time horizon, making them difficult to accurately quantify and predict. As one analyst put it, “If it’s going to be a problem in 2025, tell me about it in 2024.”

The World Resources Institute, with Goldman Sachs’ Center for Environmental Markets and General Electric are currently developing a Water Index to help investors and financial analysts understand various water-related risks affecting different sectors and companies. The Water Index will help financial analysts model the local nature of water -related risks and externalities, thereby allowing water risk to be included in cost of capital calculations. A better grasp of water risk can help to shift investment in water intensive industries toward areas where the impact on water ecosystems and people are more benign. At the same time the water index can inform corporations where investments in water efficiency or treatment can achieve the greatest impacts.

What is “water risk”?

From a financial perspective, Water risks are disruptions, costs, revenue losses, or growth constraints due to a lack of water. Water scarcity, water pollution, and water competition can all limit the growth of a company, and can start to hurt asset performance and investments.

There can also be a reputational cost. Companies with a brand to defend are starting to notice the intensifying competition around water. It can hurt a company’s reputation to be viewed as taking water from more deserving causes such as local people or farmers, even if a company may be completely within their legal rights for access. Take Coca-Cola, for example. They were accused of using up local water resources in India, and took a reputational hit for that.

These risks can force a cost upon a company that they may not have included in their calculations beforehand. Right now there are few financial analysts that incorporate those long term costs into their valuations. But investors are becoming savvier and are starting to demand to know about these risks in order to make better investment decisions.

Vulnerable Sectors

The food and beverage industry, the power industry, mining, and some kinds of manufacturing, like semi-conductor manufacturing, are particularly exposed to water risk because they depend on large quantities of water for production, and some of that water needs to be very high quality. Power plants, for example, depend on large quantities of water for cooling. If this water isn’t available, they have to reduce output or, in extreme cases, shut down.

Water risk can hurt these companies in different ways. It can disrupt operations, it can drive up costs, and it can reduce revenues. It can impact their assets, their performance, and their decisions about the design and location of a facility. If water supplies run low, or if the temperature rises too high for power plants to discharge cooling water, dams or power plants can be forced to reduce output.

Making a Water Index Work

Water is local, and any index has to appreciate and account for that. Risk will be different depending on the region and the sector. The Water Index will be a standard methodology that is flexible enough to be replicated in different regions and sectors, and transparent enough so that people can make sense of it. To work, it must be easy to apply to as many parts of the world as possible.

Though developing a usable Water Index will be challenging, there is a huge demand. Earlier attempts have focused mostly on quantifying water footprints and companies’ impact on the environment. A new Index would instead look at the environment’s impact on companies. This is a key paradigm shift, and could revolutionize the way investors can make decisions about the environment, and the future.

The so-called shoulder seasons can be a tricky times for natural gas players. The shoulder seasons — one in the spring, when it is not quite winter but not quite summer; and the other in the fall, when it is not quite summer, but not quite winter — usually drive demand for natural gas down.  Neither furnaces nor air conditioners are cranked up.  And with that in mind, a team of analysts at RBC Capital Markets Corp. rolled out a list of “high beta gas names [that] are at the most risk of underperformance on continued natural gas weakness.”

Chesapeake Energy Corp., Comstock Resources Inc., Carrizo Oil & Gas Inc.,  Goodrich Petroleum Corp., Quicksilver Resources Inc., and Range Resource Ltd. are all on RBC’s watch list.

A handful of companies may also roll out market-moving news at an investor conference next week, RBC predicted.  Positive news may flow from Anadarko Petroleum Corp., EQT Corp., Noble Energy Inc., Plains Exploration & Production Co., SandRidge Energy Inc., St. Mary Land & Exploration., and EXCO Resources Inc., the brokerage house said.

Carrie Tait

Until your house is beaming juice to your gadgets wirelessly, you will resolutely consider charging stuff a pain in the ass. The Idapt i4 gets where we’re coming from and offers one word of consolation: consolidation. More »

I’ve been following the Solar Roadways story at my home blog for a few months now.

To me, the idea is brilliant in that it solves several problems at one stroke. Instead of putting solar panels on thousands of square miles of wilderness or farmland or other land, why not take surfaces that are already paved and put them to work collecting solar energy, just in time for us to transition from oil to electric cars like the Chevy Volt? It also solves the issue of energy transmission loss rather nicely. One could use the roads to transmit energy from thousands of miles away, but why do that when the nearby roads, playgrounds and parking lots themselves can generate all the energy one needs without the losses inherent in long-distance transmission?

Some folks, thinking in terms of current (and fragile) glass solar panels, think it can’t be done. But other folks think the idea is worthy of an award. The US Department of Transportation is willing to give it a try, and has financed the building of the first prototype — pictures of which can be seen here as well as at the top of this post. (They didn’t have quite enough dough for the custom hardened glass they want to use, so the clear surface on the prototype is polycarbonate.)

So what do you think? Grab a cup of coffee and let’s discuss it.

Tags: solar power

Bruce V. Bigelow wrote:

As paragliders and hang gliders swooped overhead, the grandson of famed aviator Charles “Lucky Lindy” Lindbergh chose a stunning panoramic San Diego clifftop to announce the formation of a new incentive prize to recognize advancements in electric aircraft technology.

Seattle-area resident Erik Lindbergh says the Lindbergh Electric Aircraft Prize, or LEAP, is intended to stimulate the development of more environmentally friendly aviation technologies, and help the fledgling electric aircraft industry take off. Lindbergh created the prize, which actually consists of awards in four categories, through a nonprofit organization he founded, the Creative Solutions Alliance (CSA), which has partnered with the Experimental Aircraft Association (EAA). The four LEAP awards, which have yet to be funded, will be awarded annually at the EAA’s annual AirVenture “fly-in,” the popular air show held each July in Oshkosh, WI.

Organizers also have arranged for students and teachers from a Seattle-area high school to participate in the process and attend the awards ceremony in Oshkosh this summer. Lindbergh says six students and six teachers from Aviation High School, a project-based magnet school in Des Moines, WA, just south of Seattle-Tacoma International Airport, will attend in a bid to develop curriculum and stimulate student interest in science, technology, engineering, and mathematics. Lindbergh is a founding board member of the high school, which was started in 2004.

In introducing the prize, Lindbergh says it …Next Page »

Comments | Reprints | Share:  

 
 
 

I like the Tendril Vision‘s looks. And I like it even more because it’s real, even while it feels like a spare part for the Enterprise’s bridge. The clock connects to the electric grid, giving you real time consumption information. More »

A new EcoPinion report was released this week on consumer perceptions of the “Energy Star” brand for energy efficiency.

The report contends that Energy Star is one of the few credible brands in the energy efficiency space, so there is a lot riding on its continued success and relevance, not the least of which are the  nation’s short-term goals around energy efficiency and climate change.

The survey confirms that consumers have high awareness and good acceptance of the Energy Star label. However, the analysis shows that there are steps that need to be taken to maintain the viability and improve the brand. In other words, the marketers in us want to see a more segmented approach to positioning and messaging. One key recommendation, for example, is to utilize a tiered, e.g., a gold label, approach to labeling higher levels of energy efficiency.

Why should we care?  Despite the fact that there are some very real questions about Energy Star’s testing procedures and standards (today’s announcement that the EPA and DOE are going to strengthen Energy Star’s standards are good news on this front), the report argues that:

…maintaining a strong Energy Star brand is critical to the collective
success of the market and society to improve energy efficiency levels. And
given the current stalemate over climate change discussions, it may be the
only realistic alternative to achieve large-scale emission reductions in the
short-term. The focus shouldn’t solely be short term though. The question
should be: How will Energy Star evolve three, four or five years from now?
It is the flagship brand and barometer for the whole energy-efficiency space.

I have to agree that a proliferation of Energy Star rated products, despite flaws in the system, represent a viable way for small actions (improved energy efficiency) multiplied by large numbers (all the various products that will strive to achieve the ratings) to have a significant impact.

A tiered approach, like the one detailed in the report, certainly would help with some of the criticisms of lax standards. It might also help to improve perception among a key emerging consumer group in which (according to the report) there exists a big gap (over 15 points) in perceptions of the ratings’ importance.  It seems that younger Americans (18-34), when compared to older Americans (55+), do not view the Energy Star label as being “extremely important.”  That alone could derail the potential impact of the label to improve energy efficiency levels.

Jennifer Kaplan is adjunct faculty in Marketing at Marymount University, author of the new book, Greening Your Small Business and a Senior Adviser to DEFG/EcoAlign.

From Green Right Now Reports

With prices down and incentives still available, more and more individuals and businesses are looking into solar panels as a way to cut down energy costs and protect the environment. According to a poll released this week, support also is growing for solar on the utility scale.

A utility-scale solar plant in Blythe, Calif. Image: First Solar

The Solar Energy Industries Association (SEIA) unveiled statistics gathered by Gotham Research Group that show 75 percent of those surveyed advocate the development of solar energy plans on public lands. The survey also determined that solar was the first choice as best use of public land (38 percent).

Asked which energy sources the government should prioritize, respondents picked solar farms and wind (22 percent each), natural gas and nuclear (16 percent each), oil (11 percent) and coal (4 percent). Findings were based on polling conducted February 24-26, involving a sample of 500 American adults 18 years of age or older. The margin of error on the total sample of 500 is +/- 4.4 percent.

“When Americans talk about solar energy, they usually envision rooftop systems, which are great. But it’s important to also realize the significant role that utility-scale solar has to play,” said Congresswoman Gabrielle Giffords (D-AZ), who joined a conference call to announce the results.

“Large solar installations use economies of scale to achieve significant cost savings and help Americans to get the most solar ‘bang for the buck.’ It’s great to confirm that the rest of America is just as excited about utility solar as we are.”

According to the SEIA, five new pilot plants came on line in 2009 and more than 100 utility-scale solar projects are under development. The group estimates that projects represent more than 17 gigawatts of capacity, enough to provide clean power to 3.4 million households and to create more than 100,000 jobs.

The Ivanov Report presents a very critical comment on an essay about the Orange revolution by Keith Gessen in The New Yorker.

At the Green California Summit & Expo this week, I saw a strange sight: a group of greentech manufacturers hanging out in the halls, griping about environmental regulations. Their point? That a surfeit of command-and-control measures makes compliance such a lengthy and costly process that it’s hard to bring innovations to market. That’s a nice self-defeating outcome!

Consider this situation:

I was thinking of lighting, but it could be anything. Letters a-e represent technologies with different properties. The red area is banned as too toxic. The blue area is banned as too inefficient. That leaves only technology a. Maybe that’s OK, but what if a is made in Cuba, or emits harmful radiation, or doesn’t work in cold weather? That’s how regulations get really complicated and laden with exceptions. Also, if we revise our understanding of toxics, how should we update this to reflect the tradeoffs between toxics in the bulb and toxics from power generation, or using less toxic material per bulb vs. using fewer bulbs? Notice that the only feasible option here – a – is not even on the efficient frontier; a mix of e and b could provide the same light with slightly less power and toxics.

Proliferation of standards creates a situation with high compliance costs, both for manufacturers and the bureaucracy that has to administer them. That discourages small startups, leaving the market for large firms, which in turn creates the temptation for the incumbents to influence the regulations in self-serving ways. There are also big coverage issues: standards have to be defined clearly, which usually means that there are fringe applications that escape regulation. Refrigerators get covered by Energy Star, but undercounter icemakers and other cold energy hogs don’t. Even when the standards work, lack of a price signal means that some of their gains get eaten up by rebound effects. When technology moves on, today’s seemingly sensible standard becomes part of tomorrow’s “dumb laws” chain email.

The solution is obviously not total laissez faire; then the environmental goals just don’t get met. There probably are some things that are most efficient to ban outright (but not the bulb), but for most things it would be better to impose upstream prices on the problems – mercury, bisphenol A, carbon, or whatever – and let the market sort it out. Then providers can make tradeoffs the way they usually do – which package of options makes the cheapest product? -without a bunch of compliance risk involved in bringing their product to market.

Here’s the alternative scheme:

The green and orange lines represent isocost curves for two different sets of energy and toxic prices. If the unit prices of a-e were otherwise the same, you’d choose b with the green pricing scheme (cheap toxics, expensive energy) and e in the opposite circumstance (orange). If some of the technologies are uniquely valuable in some situations, pricing also permits that tradeoff – perhaps c is not especially efficient or clean, but has important medical applications.

With a system driven by prices and values, we could have very simple conversations about adaptive environmental control. Are NOx levels acceptable? If not, raise the price of emitting NOx until it is. End of discussion.

Two related tidbits:

Fed green buildings guru Kevin Kampschroer gave an interesting talk on the GSA’s greening efforts. He expressed hope that we could move from LEED (checklists) to LEEP (performance-based ratings).

I heard from a lighting manufacturer that the cost of making a CFL is under a buck, but running a recycling program (for mercury recapture) costs $1.50/bulb. There must be a lot of markup in the distribution channels to get them up to retail prices.

Windspire turbines. Image: Mariah Power

From Green Right Now Reports

Adobe Systems, Incorporated has completed installation of 20 Windspire wind turbines at its San Jose, Calif., headquarters.

“With the installation of the Windspires, we’re adding renewable energy to a long list of green measures Adobe has taken to lessen our environmental impact,” said Randall H. Knox, III, senior director, Global Workplace Solutions, Adobe. “We’ll continue to seek innovative green technology solutions to reduce our energy dependence and inspire others to go green.”

Urban Windspire installation. Image: Mariah Power

Each tower is 30 feet tall, 4 feet wide and weighs 650 pounds. The propeller-free, vertical-axis wind turbine is designed to harness wind power in urban, suburban and rural locations.

The new towers are located on Adobe’s sixth–floor patio, which doubles as a rooftop garden and recreational area above an office parking garage. Adobe’s three office towers create a wind tunnel effect from sustained winds off the Pacific Ocean.

Adobe’s green building efforts have earned the company the U.S. Green Building Council’s highest honors for green practices. Adobe is the first commercial office building to receive the Leadership in Energy and Environmental Design LEED®-EB Platinum certification for its San Jose headquarters and is the world’s first commercial enterprise to achieve a total of four Platinum certifications under the LEED program.

Since 2001, Adobe estimates it has saved approximately $6.7 million as a result of its energy and sustainability efforts. Those initiatives include energy-efficient lighting, real-time water meters for landscaping and an intelligent control system to help monitor building efficiencies.

“On March 27, Saudi Arabia will take part in Earth Hour by switching off power for an hour,” announced the SaudiEmbassyUSA on Twitter.

Greenwire: Plans for offshore drilling in Virginia have garnered an unprecedented level of support as the nation searches for alternative energy sources and looks to create new jobs and revenue during the economic slump.

Gov. Bob McDonnell and fellow elected Republicans strongly support the proposal, as do most members of the state’s congressional delegation and both of Virginia’s U.S. senators — who are Democrats.

“This is common sense. Why not use our resources so we don’t have to depend on fluctuating political realities in the Mideast to determine the cost of gasoline?” McDonnell said.

Even Virginia Beach, which relies heavily on tourism, passed a resolution recently that supports oil and gas drilling off its shore.

The General Assembly also passed a pair of bills during its annual session that underscore the Legislature’s bipartisan support for drilling — one that backs exploration, development and production 50 miles off the coast, and another that directs 70 percent of any future drilling royalties to state road improvements.

To move forward with any offshore drilling plans, Congress would still need to pass a bill to allow Virginia to receive any royalties from offshore oil or gas drilling, as it did in 2006 when it allowed Gulf Coast states to begin taking home 37.5 percent of revenue.

But environmental groups and some Democratic members of Congress still worry about possible spills from such drilling practices and new infrastructure onshore that could harm plants, animals, tourism and the naval base in Norfolk, the world’s largest.

“I think this needs to be looked at. We need to find out what’s out there,” U.S. Sen. Mark Warner (D-Va.) said of offshore drilling. But he cautioned that it is “not a silver bullet” and that any energy solution would have to be part of a “portfolio approach.”

The 25-year-old federal moratorium on energy exploration and development off the coast of Virginia and other states expired two years ago (Anita Kumar, Washington Post, March 17). – DFM

Share This

Getting aggressively long crude oil at this point probably isn’t a good idea. High prices are clearly in the long-term interest of OPEC, but the cartel would be wise to curtail any rapid rise so as to prevent any hint of an oil-driven economic slowdown that may scare off emerging economy buyers.

Indicisive economic data and see-saw moves in the value of the U.S. dollar have kept oil prices range-bound recently. This could continue for some time, with no significant breakout to the upside anytime soon, according to Marting King of FirstEnergy Capital.

One element the bullish camp may be using to defend higher oil prices is demand trends in the United States. While some improvement in petroleum demand is expected, the analyst noted that the latest weekly data seems to be shifting into neutral rather than moving higher.

What about gasoline demand? It has definitely improved off dismal lows early in 2010, but Mr. King argues that this is the result of a seasonal rebound off artificially low levels due to inclement weather – “snowmageddon” – in the eastern part of the United States.

“If anything, we expect that demand will be plateauing very shortly, as unemployment remains high, but stabilizing, while retail pump prices are nearly 50% higher than one year ago, pulling more dollars from the pockets of those unemployed workers and dampening further demand improvement.”

The analyst also suggested that a sustained move toward US$90 per barrel might be discreetly opposed by OPEC. The cartel seems to be sending the message that the current overall poor rate of quota compliance, which is barely above 50% as of February, is just fine.

“With cartel members paying lip service to getting members to tighten up on quotas, we have been of the view that cartel members are putting barrels where they need to go to satisfy demand, primarily in Asia, and that the level of quota compliance is something of a non-issue at the present time,” Mr. King told clients.

If prices look like their are making a sustained move higher, he expects compliance will actually deteriorate further. The Saudis could lead the way by putting more barrels into the market to dampen prices.

The analyst explains that spare capacity is plentiful right now, particularly in Saudi Arabia. A rapid upward price move may create an appearance or the potential for a double dip economic recession. With the U.S. dollar showing continued weakness – along with the Euro – OPEC has shown some sensitivity in the past to the basket price moving beyond €60 per barrel. These three factors help explain why the cartel would try to keep prices contained, even though high prices are good for its members.

While hungry Asian buyers would likely welcome more barrels since they are getting a price break via rising currencies, they may also grow wary of aggressive bidding if their growth in developing economies looks vulnerable – particularly as a result of surging crude oil prices. As a result, Mr. King thinks a move by OPEC to dampen prices this year would serve as a smart business decision.

Jonathan Ratner

Photo: Algerian Oil Minister and OPEC President Chakib Khelil arrives for a news conference after a meeting of OPEC oil ministers in Vienna September 10, 2008. (REUTERS/Heinz-Peter Bader)

Encana Corp.’s gutsy, and slightly out-of-character, move to double its production in five years caught the attention of the market.  Encana is not adding any new natural gas plays to its portfolio, just planning on going with the drill-baby-drill approach.

“Ordinarly, big production growth thrusts do not impress us, largely because they raise the risk profile associated with execution and/or potentially undermine margins,” Greg Pardy, a research analyst at RBC Dominion Securities Inc., wrote in a research note.  “Nonetheless, Encana’s circumstances are different in our minds given its favourable track record of low cost growth and in meeting its production targets.”

Mr. Pardy’s attitude perfectly reflects Calgary’s quasi-skeptical reaction to Encana’s lofty target: If anyone can do it, Encana can.

Carrie Tait

Eco Factor: Energy generating shock absorber generates electricity from bumps in the road.

Mechanical engineering students from the State University of New York are developing a regenerating shock absorber that recovers a vehicle’s vibrational energy and converts it into usable electricity. The researchers have built a 1:2 scale prototype that generates 2-8W of power during typical driving conditions at a speed of about 45mph. They predict that a full scale system on all four wheels of a car will be able to generate up to 256W.

(more…)

In a closed-door meeting with industry groups today, the three senators crafting climate legislation revealed the broad strokes of their bill and met with general approval. E&E News (sub. req’d.) reports:

Sens. John Kerry (D-Mass.), Lindsey Graham (R-S.C.) and Joe Lieberman (I-Conn.) shared an eight-page outline of their draft legislation that would reduce greenhouse gas emissions over the next four decades, including provisions to limit business costs while ramping up domestic production of oil, gas and nuclear power.

According to several sources in the meeting room, the bill calls for greenhouse gas curbs across multiple economic sectors, with a 2020 target of reducing emissions by 17 percent below 2005 levels and an 80 percent limit at midcentury. Power plant emissions would be regulated in 2012, with other major industrial sources being phased in starting in 2016.

Lest environmental advocates get overly excited, the bill contains some major concessions to industry. Five of its eight titles — Refining, America’s Farmers, Coal, Natural Gas and Nuclear — will make green activists a bit wary. And E&E adds this tidbit:

In a bow to industry demands, the senators’ proposal would pre-empt U.S. EPA climate regulations under the Clean Air Act and halt dozens of state climate laws and regulations now on the books.

Not surprisingly, business and industry groups were fairly encouraged by today’s presentation. Here’s what the top lobbyist for the U.S. Chamber of Commerce told The Hill:

“The fairest comment would be, directionally speaking, the way they are trying to conform and shape this bill I would suggest is largely in sync with what most people in American industry think is the direction you are going to have to go if you are going to have a successful program,” Josten said.

Kerry says the tripartisan climate team will deliver a full outline of the bill to a larger group of senators next Tuesday.

Bahama Pundit's Larry Smith wonders whether natural gas can solve the country's power problem.