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A little context is useful here. The purpose of this new FiT is to blunt the tremendous increase in the use of natural gas for electric following the nuclear shutdown.  The latest IEA figures are for 2009.  Then nuclear produced 279750 GWh.  Dividing that by 8760 (365 days * 24 hours) you get roughly 32 GW.

Some nuclear reactors are already back on, but let's just simplify and say that we are looking to replace 25 GW of capacity.  Simplifying again, let's look at that in light of average capacity factors. PV solar is about 20%, so that means you need 125 GW of solar to replace that lost nuclear.  Wind is going to float around 33% (actually a little higher, but I'm simplifying the math) so that's 75 GW.

Because there is a short term rush, solar rates are so high, and there is a serious global overproduction of PV solar I suspect that there is going to be a bubble here that will solve the short term power shortage, but seriously harm the FiT regime in the long term. Particularly once LNG exports from the US start in two-three years.

And I'll give my consent to any government that does not deny a man a living wage-Billy Bragg

by ManfromMiddletown (manfrommiddletown at lycos dot com) on Fri Jun 22nd, 2012 at 08:04:17 PM EST
[ Parent ]
The purpose of this new FiT is to blunt the tremendous increase in the use of natural gas for electric following the nuclear shutdown.

More precisely, that's one main purpose of the high rates for the first three years. And in three years, I don't expect more than a blunt (that is much less than say 60 GW of solar and 40 GW of wind): the growth speed of an industry and the amount of capital that can be drawn isn't infinite even if profitability will be stellar.

The latest IEA figures are for 2009.

You can get more current figures here. Based on Q1 figures, we are indeed looking at a combustible fuel use increase vs. Q1/2010 by a bit more than a third or about 75 TWh. Some other interesting points:

  • Overall production is back to 2010 levels.
  • In Japan, in month resolution, the summer peak appears to be barely above the winter peak (though the latter might be more concentrated in time to the festivities).
  • In 2011, for some reason, production was as much below normal in February as in the worst months after Fukushima.

I suspect that there is going to be a bubble here that will solve the short term power shortage, but seriously harm the FiT regime in the long term

Your word choice makes me curious: by the "FiT regime" that may be harmed, do you mean the institutional framework or the plants working under the FiT taken together, or the whole renewables sector (including suppliers)? Either way IMO the danger is in the collapse of the manufacturing and installation industry if degression sets in too hard. But I don't think enough renewables will be installed in three years to seriously impact electricity prices and thus give a valid justification to destroy the institutional framework; and the way the rates are set, producers who install their plants in the next three years will be unaffected by future degression, not to mention conventional fuel competition.

*Lunatic*, n.
One whose delusions are out of fashion.

by DoDo on Sat Jun 23rd, 2012 at 04:40:13 AM EST
[ Parent ]
I expect that the bulk of world production of photovoltaics will head to Japan, and that the resultant profit taking from homeowners will delegimtise the very idea of FiTs quite badly (in Japan) Even as a crash Money-is-little-object programme, this is badly designed policy.

Just flat out purchasing enormous quantities of panels and then hireing people to put them up would have been much more economically efficient, far less inequitable and have the same virtue of market making and upscaling of production used to justify FiT's.

by Thomas on Sat Jun 23rd, 2012 at 05:27:02 AM EST
[ Parent ]
the resultant profit taking from homeowners will delegimtise the very idea of FiTs quite badly (in Japan)

I still don't get why you think the (intended) profit-taking by renewables installers is supposed to be delegitimizing, nor do I understand why you focus on PV-installing homeowners only when Japan's feed-in law disfavours them (with the 10-year guarantee in place of the general 20-year one while the rate is the same, see upthread).

Regarding the explicit intention to give renewables installers good profits:

New feed-in tariff system a rush to get renewables in play | The Japan Times Online

There is a specific section in the new tariff law that calls on METI to aim for large-scale renewable energy use over the first three years of the new tariff. To accomplish this goal, the law adds, METI is supposed to give special consideration to the profits of renewable energy suppliers.

Thus it is hoped high tariffs will encourage large-scale investment by current and new players in the renewable energy field, especially since the internal rates of return under the new system range from 4 percent for some biomass forms to 13 percent for geothermal, 8 percent for wind farms over 20 kw, and between 3.2 and 6 percent for solar.



*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Sat Jun 23rd, 2012 at 05:38:00 AM EST
[ Parent ]
Because the profits come out of the pockets of consumers? Massive electricity rate hikes are not going to be popular. If this doesnt happen because the government decides to run the utilities at an ongoing loss, then sure, massively popular policy!
by Thomas on Sat Jun 23rd, 2012 at 05:39:53 AM EST
[ Parent ]
Because the profits come out of the pockets of consumers?

So what? On the other hand, I read of no similar exceptions for industrial consumers as in Germany.

Massive electricity rate hikes

Again with the strawmen...

*Lunatic*, n.
One whose delusions are out of fashion.

by DoDo on Sat Jun 23rd, 2012 at 05:47:22 AM EST
[ Parent ]
I think I see the problem. I am clearly expecting something along the lines of a full order of magnitude more solar to get installed as a result of this policy than you are. Thus I am expecting far larger impacts on electricity prices and so on. Should really put some numbers on this, I suppose. Try to get that done by tonight.
by Thomas on Sat Jun 23rd, 2012 at 05:50:09 AM EST
[ Parent ]
[Re-calculation after checking some figures]

I expect something in the order of 50 GW at most (and 20 GW more realistically) until 30 June 2015. Last year, when installed capacity jumped from 3.6 to 4.7 GW, 2.15 TWh was fed back (and 2.25 TWh produced). Not an awfully high capacity factor, and indeed IEA-PVPS claims 1,000-1,1000 kWh per kW is "typical" (I guess clouds plax a role). Going with that, I would expect at most 55 TWh and more realistically 20 TWh annual production from what gets installed under the launch feed-in rates, that would be c. 5% resp. 1.8% of total production. For a significant price effect of a ¥42/kwh feed-in rate vs. retail prices in the ¥11.5-23.1/kwh range (from winter high-voltage industrial to large-consumption household, 2008 TEPCO figures quoted by IEA-PVPS) that negates the benefits via marginal pricing (which should be substantial due to the "peak-shaving" daily power curve), I think something well above 10% of annual production would be needed.

*Lunatic*, n.
One whose delusions are out of fashion.

by DoDo on Sat Jun 23rd, 2012 at 10:14:15 AM EST
[ Parent ]
Global annual production capacity for solar cell production is currently somewhere in the region of 60 gw/year, (Google hits cannot seem to agree on an exact figure)  which was an overcapacity of about 100 %.

 Given Japanese household savings levels, and the impressive return on investment, that the islands of japan not could buy the entire 30 gw of potential production currently going without customers, but outbid other markets for the lion share of the entire global output and cause expansion of productive capacity. And I think they will. Further, given a market, said manufacturing capacity has increased by over 100% year-on-year before.
 so.. eh, might very well hit 50 gw rated capacity by year end. If this doesnt cause the government to slam on the breakes somewhere in the region of 400 GW (rated) at law expiry would not shatter the supply chain, nor exceed what japanese construction firms can manage to put up. This is just solar, mind.

by Thomas on Sat Jun 23rd, 2012 at 12:35:05 PM EST
[ Parent ]
Ugh. That was horrible. Where the heck is the edit button?

Cleaner:

Global production capacity for solar volatic elements is currently around 60 gw (rated). About half of this productive capacity is in search of buyers.

The japanese government just gave them a market for the entirety of this potential output, and the average japanese household can make this investment without having to loan the money. I expect them to do so, because the return is so very high. Further, productive capacity in this sector has doubled year-on-year to meet new demands before. It is not a strech to suppose this will happen again. Thus, by the time the law expires, it within the realm of physical and engineering possibility that over 400 gw (Rated) of solar has been put up in japan. And as long as the law is on the books, financial incentives make this maximalist scenario quite likely. This is just the solar sector - sales of windmills and so on to Japan are also likely to be extremely strong.

by Thomas on Sat Jun 23rd, 2012 at 12:49:22 PM EST
[ Parent ]
If such an extreme boom could be kicked off, I guess (1) degression would be imposed sooner than 3 years, (2) it would again speed up economies-of-scale cost reductions in the industry with global effect. However, I still don't think willing investors and the supply industry will grow from 1 GW/year to a 100 GW/year level overnight. Even if it's just about installing technicians: if German conditions are instructive (34,000 technicians among the 128,000 solar industry employees and 7.5 GW installed last year), that would require the training of 450,000 people.

What's more, I repeat that if we think of the specific investor circle of homeowners wanting rooftop solar, ¥42/kWh for just ten years (equivalent to c. €0.21/kWh over 20 years, ignoring maintenance costs and cell degradation) is not that stellar an offer, even with the somewhat higher annual yield per kW capacity than in Germany.

*Lunatic*, n.
One whose delusions are out of fashion.

by DoDo on Sat Jun 23rd, 2012 at 02:23:08 PM EST
[ Parent ]
Forgot to add: downthread I gave a ministry estimate of 150 GW as the PV potential of Japan on suitable surfaces. I think that cap translates into another istallation speed constraint, but assuming all these surfaces can be filled in three years, we are speaking about a ceiling of 165 TWh a year or c. 15% of consumption.

*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Sun Jun 24th, 2012 at 06:23:13 AM EST
[ Parent ]
Popular? As in Fukushima popular? Are nuke plants popular anywhere?
People will see panels everywhere and they'll get a whole new level of popular when they do the math and realise what a myth it is that we will always remain in peonage to utility companies for ever amen.

Quantities of energy fall unharvested that are vastly greater than our present consumption even with our hoggish and wasteful (ab)use patterns at this time.

We are standing thirsty in a clean river and being conned into buying dirty water to slake our needs.

There is zero need for further Fuku-traumatisation of entire regions with anachronistic technology now the cat is out of the bag.

Who ever regretted installing solar panels? Compare with Chernobyl survivors.

QED...

Worrying about who gets rich off of this is an unaffordable luxury. They should be in car rooves, bus stops, malls, hospitals, industrial areas, land too poisoned by our little 'experiments' for growing food or living on.
Sadly that's a Lot. Of. Land.

The new combination PV/greenhouse combos coming out of China look like a great step forward to diminishing the transport costs of food and other vittles.

The wonder if the internet is how robust it is, through distributed nodes of data. It's a great metaphor for PV too. The more people do it the less the strain on the grid.

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty

by melo (melometa4(at)gmail.com) on Sat Jun 23rd, 2012 at 06:52:27 AM EST
[ Parent ]
The best case senario is that FiT payments bankrupt the utilities, they get nationalized, and fit payments are maintained by printing the money, and this thus turns out to be a way to boost the purchasing power of the average Japanese family. This is kind of an implausible chain of events, tough, and still screws people who do not happen to own a roof.
by Thomas on Sat Jun 23rd, 2012 at 05:38:04 AM EST
[ Parent ]
Come on, no way enough reneables will be installed in three years to significantly impact electricity proces, not to mention that utilities would only go bankrupt if there are price controls...

*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Sat Jun 23rd, 2012 at 05:42:58 AM EST
[ Parent ]
Just flat out purchasing enormous quantities of panels and then hireing people to put them up would have been much more economically efficient

No, that would eliminate competition between producers and thus development and thus limit economic efficiency. Also, it would be in a higher danger of a future government undoing it.

*Lunatic*, n.
One whose delusions are out of fashion.

by DoDo on Sat Jun 23rd, 2012 at 05:41:30 AM EST
[ Parent ]
Given the serious overcapacity at PV solar producers, I think that that is unlikely.

Also, there are a number of variations here that could have been used that would limit this even more.  

While PV isn't competitive with other sources in terms of generation costs, its generation costs are competitive for self consumption because this type of production avoids the distribution charge.  Noting this, why not focus on that strength as the basis for a campaign.  For example, installing solar street lights not only saves cities the cost of generation+distribution charges, they limit the need for building and maintaining infrastructure for this purpose. Again because self-supply evades the distribution charge, another good policy might would be to cover the roofs government buildings, schools, etc with panels to limit the amount of power they draw from the grid.  The focus has to be on the margin.

The costs of distribution + infrastructure construction/upkeep mean that for isolated communities taking them off the grid might actually make economic sense because dropping these areas where the marginal costs of distribution are particularly high can lower distribution costs throughout the rest of the grid.  While it may seem to be a step backwards to take rural areas off the electrical grid, it could very well be that because the marginal costs of delivering electricity to these areas is so high that it would actually save utilities money to remove them from the grid while maintaining a duty of service, albeit through local systems.

And I'll give my consent to any government that does not deny a man a living wage-Billy Bragg

by ManfromMiddletown (manfrommiddletown at lycos dot com) on Sun Jun 24th, 2012 at 02:16:17 AM EST
[ Parent ]
What is unlikely and is limited even more?

PV can be competitive with other sources in terms of generation costs during daily peaks, just when it gives most (the market effect currently observed in Germany), but good point about saving the distribution charge with self-consumption. On one hand, self-consumption can be enhanced by focusing on rooftop solar (both rsidential and industrial), though the Japanese feed-in law doesn't focus on that. On the other hand, if surplus cannot be fed into the grid, then generated electricity will be wasted or needs storage, and in both cases real generation costs will increase, so grid connection is a key. I have nothing against solar streetlights, but they are beans compared to total consumption, hardly something to be the main focus.

*Lunatic*, n.
One whose delusions are out of fashion.

by DoDo on Sun Jun 24th, 2012 at 05:08:24 AM EST
[ Parent ]
Aging battery packs from electric vehicles could provide useful service as storage for daytime peak loads of home solar systems - provided there were adequate safety measures taken.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sun Jun 24th, 2012 at 09:30:39 AM EST
[ Parent ]
More precisely, that's one main purpose of the high rates for the first three years. And in three years, I don't expect more than a blunt (that is much less than say 60 GW of solar and 40 GW of wind): the growth speed of an industry and the amount of capital that can be drawn isn't infinite even if profitability will be stellar.

I'll be honest, I haven't taken the time to read through the law in detail.  I was only responding to usurious solar FiT rates.  Good FiT policy should be designed to foster economies of scale. The problem with solar PV is that it doesn't exhibit these.  The net effect of growth is mathematical not geometrical. Doubling the manufacturing capacity of a panel plant doubles the output of the end product.  Money poured into wind turbine production will help fuel increases in the size of wind turbines, mathematical increases in their radius result in geometric increases in their swept area, and electrical generation.

Your word choice makes me curious: by the "FiT regime" that may be harmed, do you mean the institutional framework or the plants working under the FiT taken together, or the whole renewables sector (including suppliers)? Either way IMO the danger is in the collapse of the manufacturing and installation industry if degression sets in too hard. But I don't think enough renewables will be installed in three years to seriously impact electricity prices and thus give a valid justification to destroy the institutional framework; and the way the rates are set, producers who install their plants in the next three years will be unaffected by future degression, not to mention conventional fuel competition.

I'd repeat Thomas's comments below, with a caveat.  In the short term, given the tremendous expense of natural gas in Japan, this program probably will help to drive down consumer prices. Again, I haven't taken the time to read the law in detail, so I am interested in what you have to say about the rates being high for three years.  The question I'd ask is how this plays out.  First, what is the rate after the three years?  Second, will panels installed in the first three years receive the full rate for the 20 year term?

As Germany and Spain have shown, two to three years of mania can produced a PV solar sector dominated by rooftop installations which consume the majority of FiT budgets while producing a small fraction of the renewable power in a country. Japanese interest rates are extremely low, which suggests that you're going to have a repeat of what happened in Europe.

Finally, you talk about the manufacturing and installation industry.  This is really quite simple. There will be no manufacturing industry in Japan spurred on by this policy, instead what will happen is that Japan will suck up the excess capacity of Chinese suppliers for a few years. PV solar production is driven by the cost, not the quality, of labor. Moreover, the 2015-2020 period is likely to be one in which natural gas prices in Japan plummet as LNG imports from the US resume, at much increased scale, and China/India experiment with shale gas. It won't last, but that won't matter.

FiTs are a poor fit for solar PV.  Panels can make sense for individual consumption, but they simply aren't efficient enough to warrant their integration into the grid. As such, policies targeting their installation should focus on financing instead of production incentives. Moreover, as a matter of decreasing CO2 emissions, and creating fuel price declines, support for solar water heaters is probably a much better choice.  

PS, thanks for the link to more recent IEA stats.

And I'll give my consent to any government that does not deny a man a living wage-Billy Bragg

by ManfromMiddletown (manfrommiddletown at lycos dot com) on Sun Jun 24th, 2012 at 01:11:08 AM EST
[ Parent ]
Doubling the manufacturing capacity of a panel plant doubles the output of the end product.

Obviously, but economies of scale are about costs, not capacity. A plant with double the capacity costs less than twice, especially if development costs (of both the product and the machinery) are taken into account. The part of the spread of mass production in the PV price cuts in recent years is generally recognised.

Money poured into wind turbine production will help fuel increases in the size of wind turbines

As well as their price, and also the distance between two neighbouring turbines in a wind farm. It's not that easy to evaluate whether unit costs reduce. (You also confused the economies of scale from the increase of manufacturing capacity and the economies of scale from the increase of the output of a single plant.)

*Lunatic*, n.
One whose delusions are out of fashion.

by DoDo on Sun Jun 24th, 2012 at 05:21:26 AM EST
[ Parent ]
I haven't taken the time to read the law in detail

Me neither as I haven't seen a link to a full English translation, but you could have read my short summary of rates upthread.

what is the rate after the three years?

First, the Japanese FiT seems to be like the German one, that is, producers get a fixed rate set at the time of grid connection and guaranteed for 20 years (with sub-10-kW, that is residential rooftop PV being the exception, getting it for 10 years only). Second, this rate for new installations can be revised by future governments. The current law wants to maintain the current level for three years, and as far as I know the degression thereafter is not set.

As Germany and Spain have shown, two to three years of mania can produced a PV solar sector dominated by rooftop installations

Yawn. We have been through this before: no, the Spanish and German solar booms were quite different, with on-ground solar dominating in Spain (due to a lack of differentiation of rates; Japan's 10/20-year running time differentiation will further enhance the effect). What has been similar in both countries however is that legislators wanted to curtail on-ground installations (because of conflict with agriculture), not rooftop.

consume the majority of FiT budgets while producing a small fraction of the renewable power in a country

We have been through this, too.

  • There is no such thing as a "FiT budget", that is a bucket of money different modes would need to compete for: the (open-ended) costs are spread to utilities and via them to customers.
  • The difference between market price and feed-in tariff is not constant, nor power plant portfolio independent due to marginal pricing, and due to the correlation between the daily peaks of PV production and demand, there is a significant effect.
  • It is not a goal of feed-in laws to somehow balance the income of different renewables. The main goal is to create a sufficiently large market for the development of each. You could make a point about the relative profitability of investing in different renewables, but the total amount of FiT reinbursements is no measure of that.
  • Last year electricity generated by PV in Germany (19.0 TWh was already in the same order of magnitude as hydro and wind (19.5 resp. 46.5 TWh).

There will be no manufacturing industry in Japan spurred on by this policy

The development of domestic industry (with cheap foreign competitors as a given) doesn't depend on the feed-in law alone, but tariffs, industrial subsidies and quality control, too (low-quality solar cells don't produce as much for as long, a reason Chinese producers haven't killed European ones off completely). But my point was not restricted to new manufacturing (what you speak about) or even just manufacturing.

the 2015-2020 period is likely to be one in which natural gas prices in Japan plummet as LNG imports from the US resume

You said his before, but didn't explain what it effects will be (hence my question "by the "FiT regime" that may be harmed, do you mean the institutional framework or the plants working under the FiT taken together, or the whole renewables sector (including suppliers)?").

they simply aren't efficient enough to warrant their integration into the grid

What meaning of "efficient" is this now? I think a contribution like below is rather efficient, however:

as a matter of decreasing CO2 emissions, and creating fuel price declines, support for solar water heaters is probably a much better choice.

You make it an either-or... Germany has both. (And the neolib anti-solar lobbyists in the federal government attacked both, not just PV.)

*Lunatic*, n.
One whose delusions are out of fashion.

by DoDo on Sun Jun 24th, 2012 at 06:06:35 AM EST
[ Parent ]
The interesting thing about that graph is that implies that unlike wind, solar synergises well with fission

eh.. one second.

Hmm. Okay, the japanses government is correct and solar gets hardcapped by running out of suitable spaces at 15%, and the reactors all get turned back on, natural gas imports will fall off a cliff. There is enough hydro in the islands to produce a nearly completely flat demand curve for baseload, assuming 15% solar. Still going to have to build at least a dozen new reactors to get to a completly carbon free power sector. Substantial wind build will wreck havoc with this logic since wind is far more wedded to gas.

by Thomas on Sun Jun 24th, 2012 at 12:59:44 PM EST
[ Parent ]
the 2015-2020 period is likely to be one in which natural gas prices in Japan plummet as LNG imports from the US resume

What amounts are we speaking about? I tried to look, and found these figures:

  • There is one US LNG terminal project connected to Japan with a planned capacity of 8 million tons a year,
  • one billion cubic feet of natural gas generates 0.1 TWh,
  • 1 million tonnes of LNG is 48.7 billion cubic feet,
  • if I calculated right, these LNG imports would give Japan 40 TWh of electricity annually.


*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Sun Jun 24th, 2012 at 06:43:11 AM EST
[ Parent ]
The base issue is that the cost of gas fired  electricity generation in Japan is much higher than in Europe and particularly the US.  Oil is generally sold at roughly the same price globally.  Gas prices differ greatly As of May 2012, $2.44/mmbtu in the US, $11.64/mmbtu in Europe, and $16.75/mmbtu in Japan. There's a huge incentive to export gas from North America to Europe and Asia.

And the rush is on. There are 18 bcfd of export projects here.  On the West Coast alone there are 4.1 bcfd of proposed project, which are likely going to go to Asian markets. Using your conversion factor, that's 0.41 TWh daily. Divided by 24, you get something 17,000 MW of capacity. Or ~15% of total electrical generation.

Even if the Japan isn't supplied entirely from North America, this is going to seriously drive down costs.



And I'll give my consent to any government that does not deny a man a living wage-Billy Bragg

by ManfromMiddletown (manfrommiddletown at lycos dot com) on Sun Jun 24th, 2012 at 04:00:15 PM EST
[ Parent ]
If this could be realised, that would be some impressive development. However, there are some other factors:

  • Some of the above projects are rivals.
  • Export potential should be limited by domestic consumption. Even moreso if the export possibility leads to rising domestic prices and with that a backlash, as is happening now:

Who's Winning The Natural Gas Game? - Domestic Critics Slow Potential LNG Export Boom - US Business News - CNBC
Heated debate over the impact of liquefied natural gas exports on domestic prices is threatening to derail them at a crucial time for the U.S. industry.

...Massachusetts Rep. Edward Markey, a top Democrat on the House Natural Resources Committee, is pulling out the stops to slow exports.

He began worrying about the impact of liquefied natural gas (LNG) exports on U.S. prices, when he saw permit applications piling up at the Department of Energy.

So, Markey and Sen. Ron Wyden, D-Ore., another key voice on U.S. energy policy, introduced bills requesting a timeout on LNG permit approvals until 2025.

...As a result, only one U.S. terminal has been given the go-ahead. A dozen-plus others are on hold, any regulatory action delayed until an Energy Department study on the economic impact is completed later this the year.

  • For the effect on Japan, one also has to assume that Japan's current LNG suppliers will be able to maintain their export volumes until the US projects go on-line. (It's still rising though: Japan imported 78.5 million tonnes last year, that would be 10.5 bcfd on average; and this February it was 7.67 million tonnes or 12.9 bcfd.)
  • US LNG export terminals seek permanent agreements with importing countries, so instead of summing up projects on the Atlantic coast, I searced for these planned agreements. There is Cove Point, MD (11 on map) for 2.3 million tonnes/year from 2017; Hackberry, LA (8 on map) for 8 million tonnes/year from 2016 [I omitted the link for this earlier]; Sabine Pass, LA (not on the map as it is the one already approved) with some portion of 5.5 million tonnes/year from 2015; and Lake Charles is mentioned in relation to Japan in news articles but with nothing specific. Further agreements are certainly possible, but I think imports on the basis of those would start at a later date.


*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Mon Jun 25th, 2012 at 05:45:23 AM EST
[ Parent ]
If critics are correct investment in shale gas may be about to be revealed as a giant Ponzi scheme.

Shale Gas Reality Begins to Dawn  SUNDAY, JUNE 24, 2012  The Automatic Earth

It has long been our position at The Automatic Earth that North America is collectively dreaming with regard to unconventional natural gas. While gas is undeniably there, the Energy Returned On Energy Invested (EROEI) is dramatically lower than for conventional supplies. The critical nature of EROEI has been widely ignored, but will ultimately determine what is and is not an energy source, and shale gas is going to fail the test.



"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Tue Jun 26th, 2012 at 08:10:53 AM EST
[ Parent ]
Based on prices, rig counts and production levels, shenanigans with future hedging and land leaves, and internal emails contradicting the official optimism, the article and its sources make a pretty good case that the current boom is a bubble. However, IMO that doesn't exclude the possibility that there could be another boom (bubble) fuelled by foreign investors willing to pay higher prices in long-term agreements. The key issue then is, it appears to me, that of depletion rates: if it is exponential on the long term like critics claim, it will be another short bubble; if depletion flattens out over a period of decades like advocates claim, then the price will decide.

By the way, the New York Times article with the internal memos is here (the article at The Automatic Earth only links to the document viewer itself).

*Lunatic*, n.
One whose delusions are out of fashion.

by DoDo on Tue Jun 26th, 2012 at 01:24:04 PM EST
[ Parent ]
but LNG exports from the US are going to remain marginal, or will suffer fro ma massive political backlash as they lead to increased prices domestically.

Prices for gas in the US have been exceptionally low lately, due to a combination of really weak demand from the recession and a burst of production from fields where investment took place during the high price years and which are selling gas at marginal cost today (which are largely unsustainable in the medium term). The volumes from shale gas are not so big as to allow for a lot of exports before you run into serious price hikes.

So the early LNG export projects will make a killing, but not many will be built in the end. The people really making money are those that had contracts to export LNG to the US and have the physical capacity to turn these cargo to Europe or Asia (i.e. the contractual right to send the gas elsewhere on a spot basis and share the profits with the US importer, and the availability of LNG tankers to do so).

Wind power

by Jerome a Paris (etg@eurotrib.com) on Sun Jul 1st, 2012 at 06:23:24 AM EST
[ Parent ]

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