Peak Renewables?

The idea of “peak oil” has been around for some time. It is a simple idea. At some point, we start to deplete oil reserves faster than new reserves become available and when this occurs, the peak of available oil has been reached and its all downhill from there – we are in a terminal decline.

There are several problems with this idea, The first is that technology changes. As it does, our ability to make the oil we have go further or to extract more from known deposits increases. So the “peak” keeps moving. For example, horizontal drilling and “fracking” open new opportunities to increase supply from previously inaccessible reserves or to pursue enhanced recovery from known reserves. Similarly, carbon capture and storage is a technology being pursued in part because it enables enhanced oil recovery. Given that most drilling and production leaves 60% of the oil in the ground, new technologies could essentially double the value of reserves by securing a further 40%.

The second problem with trying to pin a date on peak oil (not necessarily with the construct itself) is that we keep finding new reserves of unconventional oil as well as conventional oil. For example, the reserves of oil sands in the Peace River area of Alberta are substantial but not yet fully accounted for in the analysis of reserves.

The third problem is that demand is also a function of other factors. For example, the price of natural gas is helping households switch from oil based heating to natural gas and oil consumption for transportation demand is affected by substantial improvements in fuel efficiency for motor vehicles.

Given all of these factors, current predictions of the timing of peak oil include the possibility that it has recently occurred, that it will occur shortly, or that a plateau of oil production will sustain supply for up to 100 years. None of these predictions dispute the peaking of oil production, but disagree only on when it will occur. How helpful is that?

But we can also apply the idea of “peaking” to the renewable energy industry – wind, solar, biomass, hydro.

Two arguments for switching to renewable energy -- the depletion of fossil fuels and national security – seem now to be less plausible. The U.S., Canada and Mexico are sitting on substantial quanities of recoverable natural gas. Shale gas is combined with recoverable oil in the Bakken "play" along the U.S.-Canadian border and the Eagle Ford play in Texas. The shale gas reserves of China turn out to be enormous, too. Other countries with now-accessible natural gas reserves, according to the U.S. government, include Australia, South Africa, Argentina, Chile, France, Poland and India.

So now the major reason for supporting a transition to renewables rests on their potential mitigation catastrophic global warming.

As governments around the world look to better manage their fiscal resources, they are changing the “rules” of the game with respect to subsidy of renewable energy. For example, Ontario has suspended all offshore wind projects indefinitely – throwing the policy for renewables into doubt. The leader of the Ontario Conservative Party, currently favoured as the next Premier, sees the subsidies for renewables and the likely impact on energy bills (a 42% rise over the next four years is predicted by the Government of Ontario), as a key election issue. He is receiving widespread support.

In the UK, which has over 2,560 wind turbines installed, the ambition has been to secure 40% of energy from renewable sources, primarily wind. A total of 7,000 turbines, on and off-shore, are either under construction, approved for building or seeking planning permission in the UK. Wind power currently provides 2.3 per cent of the UK’s energy needs – leading the Government’s target to be dismissed by most experts as unrealistic. To achieve the target, two new substantial turbines would need to be erected every day for the next twelve years.

According to government figures, the average wind turbine operates to just 27 per cent of its and there are some grounds for suggesting that even this is a significant exaggeration. Professor Michael Jefferson, of the London Metropolitan Business School, says that in 2008 less than a fifth of onshore wind farms achieved 30 per cent capacity. In that same year, the 140-turbine installation at Whitelee, near East Kilbride operated at just 7.3 per cent of its capacity.. Professor David MacKay, chief scientific adviser at the Department of Energy and Climate Change, has pointed out that in autumn/winter 2006/7 there were 17 days when output from Britain’s wind turbines was less than 10 per cent of their total capacity. On five of those days, output was below 5 per cent and on one day it was only 2 per cent.

To encourage more green energy, the Government launched the Renewables Obligation scheme. Each year, power suppliers must buy a fixed proportion of electricity from green sources. If they fail to meet the target they pay a fine to Government. That money is then split between the owners of existing wind farms. The cost of the Renewables Obligation is passed on to consumers in their fuel bills and is rising sharply each year. In 2006 it was $958 million. By 2020 it will be $4.79 billion.

The Daily Mail looked for the most useless wind-turbine in Britain. The current prize winner is near Reading. The 280ft generator located near the M4 just outside Reading worked at just 15 per cent of its capacity last year. It generated electricity valued at an estimated $159,000, it secured its owners subsidized of $207,000.

The contribution to CO2 reduction of wind power in the UK is minimal. In fact, a House of Lords study shows that wind power is at least 50 per cent more expensive per unit generated than the other main non-CO2 option, nuclear. That is, it offers less CO2 reduction for the dollar than other means of CO2 mitigation, including solar.

Solar is another renewable technology widely seen as part of the “solution” to the CO2 challenge. Yet Britain has just cut its solar subsidies for at or above 50kW solar systems 70% on the grounds of affordability and encouragement of “other technologies”. The impact on the solar panel industry will be significant. More importantly, as fewer installations occur, so the impact on CO2 will be less.

The situation with respect to solar in Spain is dire. The solar industry received subsidies in 2010 of €2.6bn ($3.66 billion), a sum neither the country – nor the utilities – can afford. The three Spanish energy utilities have paid out €20bn to subsidize solar and wind projects since 2005, and are still waiting for the government to pay them back. Credit rating agencies threatened to downgrade the companies if something was not done to address the "tariff deficit".

The Government has now cut the solar subsidy program dramatically. The former subsidies were so generous that Spain has 10 times the amount of solar capacity the government had planned for by 2010 – and a much bigger bill than it had envisioned. Given its overall economic situation, cuts were needed. Similar developments are taking place in Portugal, Ireland and Greece.

All energy sources have potentially harmful side effects. The genuine problems caused by fracking and possible large-scale future drilling of methane hydrates should be carefully monitored and dealt with by government regulation. But the environmental movement since the 1970s has been fixated religiously on a few "soft energy" panaceas -- wind, solar, and biofuels – and these too have side effects. Wind turbines and high-voltage power lines that accompany them that slaughter eagles and other birds. The ENGO’s support for blanketing desert areas with solar panels, at the cost of exterminating much of the local wildlife and vegetation is also another “side effect” Wilderness preservation, the original goal of environmentalism, is been sacrificed to the ideological whims of a few.

But more significantly, there is a public counter-reaction to “green” energy. Anti wind-farm and solar movements are springing up across the developed world, angry about energy price hikes and at the impact on the environment which these technologies have. They are also sceptical about the impact these technologies are actually having on CO2 reduction – especially given recent reports that CO2 continues to increase, despite a recession and a massive investment in these technologies.

As these industries begin to experience “subsidy-sunset” – they are driven by subsidy not market conditions – then the peak of renewable energy from wind and solar may have been reached. The fact that significant and vocal sections of the public are also speaking up and campaigning, may also be another sign that commitment to renewable energy has peaked. We shall see.

With low cost gas, significant new access to oil and an ongoing investment in clean coal we may not need to worry. We are a long way from peak energy.