The Power and the Money

Japan’s methane hydrates should not be developed, and likely won’t be, huzzah

I am in Panama! It is an awesome place. (Including the traffic at 5pm on a Monday. And the lack of sidewalks.) So, of course, I will talk about Japan.

A Japanese drilling ship, the Chikyu, recently extracted methane from hydrates 1,000 feet down in the Eastern Nankai Trough. Methane hydrates, aka clathrates, are deposits of natural gas trapped in ice. (OK, it’s not really ice, but what else would you call it?) They are not easy to extract. A good primer is here at Wonkblog.

How not easy to extract? Seriously not easy to extract. This blog likes cost numbers, and fortunately the Japanese consortium running the process provided them in 2008:

	¥ per m3	$ per MCF
Present construction costs	¥ 92	$ 33.98
Assumed conditions	¥ 46	$ 16.99
Volume 25% lower than expected	¥ 174	$ 64.27

“Assumed conditions” means a threefold drop in construction costs. Worse yet, costs are extremely sensitive to volumes; produce less than expected, and profits go out the window. The low price of $16.99, meanwhile, is more than Japan currently pays for liquified natural gas (LNG).

Still, breakthroughs happen. Maybe Japanese engineers can move beyond proof-of-concept tests to cost-effective methane extraction. What then?

Well, do not worry about the amount of methane that can be extracted and burned. That is entirely a red herring. The world has plenty of cheap conventional natural gas to burn between now and 2100. Unless the hydrates drop in price way more than anyone expects — say, down below $6 per MCF — then commercial exploitation will not cause the world to burn natural gas any faster than it would have otherwise. I very much fear global warming, and once natural gas has killed coal dead then natural gas will become the problem, but the hydrates won’t make a damned bit of difference unless you believe that we will be burning methane for power into the 22nd and 23rd centuries.

OK, so no worries in burning methane from hydrates. (More specifically: no additional worries than we currently have.) But do worry! I have been talking about this with my friend Will Baird out in California. The problem is that not all of that methane will be burned. Maybe not even most. Maybe even catastrophically little.

The Department of Energy reports that the Nankai Trough has 16 to 27 trillion cubic meters of methane hydrates. Methane is approximately 21 times more potent as a green house gas as CO2. If you were to dump all of the Nakai Trough's hydrates into the air at once, it would the equivalent 20 years worth of U.S. methane emissions all at once.

The good thing is that methane falls out of the atmosphere quickly. The bad thing is in the middle sentence of the above paragraph. A catastrophic emission of the Nankai hydrates would cause a short painful spike in temperatures ... and given how close the Earth is to climatological tipping points, it could push us over.

That probably won’t happen, but you’d be crazy not to think about it. What most likely would happen is that commercial exploitation would destabilize the deposits. The Japanese want to remove ice from under sediment. In a geologically inactive zone, that is mildly annoying, but, well, Japan is not in a geologically inactive zone. Even without the effect of quakes, if the Japanese use warm(er) water to melt and separate the gas from the ice, then surrounding ice could be destabilized. A catastrophic release may be unlikely, but the probability of large-scale methane releases is too high for comfort.

And some degree of methane release is inevitable. So far, we do not know what the capture ratio will be ... and we probably won’t until there is a commercial test.

But let me finish with two pieces of good news. First, the process is not likely to be economically competitive; we will probably therefore never have to worry about the environmental effects. Second, this is a government-funded project, so even if it is competitive there will be fewer vested interests insisting on development.

In short, the hydrates are scary if you want to leave this world to your grandchildren ... but the obstacles to development are high enough that they will likely not be developed.

From space, everyone can see you flare

Bakken oil development requires a lot of use of trucks and railroads. A typical horizontal well in North Dakota requires 1,100 inbound truck trips. Then you gotta move the stuff out. It is possible to build gathering facilities, of course, but trucks remain viable for short hauls. Over longer distances, railroads can be competitive. In short, you can have fast oil development without making much investment in specialized infrastructure.

The above is not true for natural gas. For natural gas, pipelines are the only game in town. You build gathering pipelines and processing plants or you don’t produce. No one will build a gathering infrastructure, of course, until they have some idea of how much gas it will carry.

Tight oil wells in the Bakken also produce associated natural gas. The problem, of course, is that you cannot know how much associated gas will be produced from a group of wells until oil production starts. So you need to start oil production before a gas infrastructure is in place.

Of course, if you have wells producing oil, you still need to do something with the associated gas. You could just vent it, but methane is nasty stuff on both the local and global level. So you set it on fire. That gives you CO2 –fine locally, but bad globally, albeit less bad than just venting methane.

In short, there is a chicken-and-egg problem: in an oil play, you need to waste a lot of natural gas before anyone will build the infrastructure needed to use it. In Texas, there is a lot of new drilling, but it is in places that have been drilled before and where a gas infrastructure exists. Texan oil producers, therefore, flare only 0.5% of their associated gas. (It is, however, getting bad in the Eagle Ford.)

In North Dakota, they flare 32% of the gas. That is why it suddenly looks from space as if a major new megalopolis has sprouted in North Dakota.

How big a problem is this? In economic terms, not that much. Losses from Bakken flaring came to $196 million in 2011, or 1.4% of the value of production.(In Texas the economic losses are even less, although you can also see the flaring in that arc running along the south of Texas below the San Antonio-Austin double plex.)

The CO2 problem is more serious, but as you can see below, the Financial Times estimates that Bakken oil is no worse than oil imported from Saudi Arabia:

In short, the flaring problem looks more dramatic than it is, in both economic and environmental terms. That is not a brief for doing nothing, either by private industry or government regulation ... there is money being left around on the table and this is a source of CO2 that is easy to fix. It is a brief for stating that compared to the Canadian tar sands there is nothing to see here. Well, there is ... but only from space. From Washington, not so much.

Pay no attention to the FBI cloud; solar has a sunny future

 The FBI just raided Solyndra, the bankrupt solar-cell company. What’s that about, and what does the bankruptcy and raid say about the future of solar power?

The answer: not very much, and not very much. The FBI is probing the company because it went bankrupt. Why, you ask? Well, Solyndra received a pledge of $535 million in loans from federal government. (The contract can be found here.) The company actually took out $527.8 million from the feds, and an additional $256 million from private creditors, including a $69.3 million loan from Argonaut Capital that had a higher priority than the federal loans. (See here for the details. The bankruptcy filing itself is here.) I should note here that Solyndra received its loan under a long-standing program that far predated the Recovery Act.) On paper the company has more than enough assets to make creditors whole; in reality, most of that consists of specialized capital goods designed to make cylindrical rooftop arrays. Since there isn’t a big market for cylindrical rooftop array-making machinery, the stuff is going to sell at a hefty discount.

Why did it go bankrupt? Well, solar modules have fallen 70% in price over the last few years. Solyndra targeted a cost of $2 per watt ... when prices already hit $1.50. That’s great for the industry (it’s even good for the American industry) but not-so-great for Solyndra’s risky gamble on cylindrical modules. The company turned out to need some incremental capital, and when it went to the markets said capital was not available. Bankruptcy resulted.

Here is the company’s statement. Note the bullshit about “regulatory uncertainty.” Why is it bullshit? It’s complete egregious embarrassing bullshit because the same sentence blames excess capacity and FALLING PRICES on regulatory uncertainty. Real regulatory uncertainty holds back investment, thereby reducing capacity, which reduces supply, and drives up prices. Sometimes, CEOs can really embarrass themselves, but I suppose it is an attempt at dog-whistling that the company likes the GOP too.

The new GOP-controlled Congress then went on a fishing expedition to look for wrongdoing with which they could embarrass the Obama administration. (In this particular case, I don’t blame them at all. If I were a congressperson of either stripe, I’d also want to investigate.) The FBI has gotten involved because Congress has accused Solyndra’s CEO, Brian Harrison, of failing to mention the company’s precarious state when he went for the funding. In fact, Harrison told reporters in March 2011 that the company would need no new financing, but that isn’t actionable.

Since this blog likes predictions, we predict that nothing will come of the criminal charges. Loan guarantees have a long history, start-ups have a long history of going bankrupt, and entrepreneurs have a long record of starry-eyed optimism until the very end. (Or even beyond.) The biggest risk is that other ventures will shun federal loans or loan guarantees out of fear of politicized criminal probes: in fact, Solar Millenium has already turned down a $2.1 billion guarantee.

What does the Solyndra collapse say about the future of the solar power industry? Nothing! First, the U.S. is a massive net exporter of solar power systems. In 2010, we had a net surplus of $1.8 billion in the sector, up from $723 million in 2009. We even retained a $539 million surplus with China. Basically, what we lose on the modules we make on module-making machinery and, surprisingly, ancilliary equipment. (E.g., everything from switches to water tanks.) The sector is growing fast, and I hate to say it, but federal financing has helped, what with the private capital markets still broken.

Solar power does face three problems. First and foremost, the weather. (And the fact that the Earth, you know, rotates.) This limits its use, unless somebody cracks the cheap storage problem. Second, NIMBY. They drive me nuts. Maybe the Californians can be justified — my co-blogger makes a case in comments — but not the people in New Jersey. Finally, Chinese subsidies. So far we’re hanging on, and China’s costs are increasing. But wow, they subsidize a lot. 

 

In the presence of increasing returns, those subsidies could have long-term welfare impacts: good in China, bad in the United States. It’s something to think about, and something to which this blog will likely return.

But right now, solar is doing fine, and Solyndra is interesting only in-and-of itself. Move along, nothing to see here.

Why Oh Why Can’t We Have a Better Press Corps? New York Times Edition

 Credit for the post title to Brad Delong.

Far be it from me to say bad things about the natural gas industry. But I can say bad things about people who shill for the natural gas industry. Today in the New York Times the paper publishes something that it never ought to have allowed to see print (or screens): this op-ed by Robert Bryce. It is the worst sort of cant: rhetoric designed to mislead by sleight-of-hand.

The basic argument is as follows. Renewables should be free to be green. Renewables are not free. Therefore, we should build more CCGT plants and nuclear reactors.

That’s really the argument. There’s this bizarre red herring implying (falsely) that it takes so much energy to build the steel in a solar installation as to make it as carbon-emitting as a natural gas turbine. Then there’s a second implication that it would be possible to greatly expand the number of nuclear power plants in the country without building high-power lines. Followed by a completely bizarro-world claim that the U.S. is short of empty land, or that 129 square miles is a lot of territory. (I have written about this elsewhere, although Doug makes a good case in comments that normal EPA review should still apply. But that is nothing compared to Bryce, who claims that they should not be built at all.) There is, of course, no attempt at either cost or carbon accounting.

I should add, of course, that he misrepresents the environmentalist position on nuclear fission. Only in Germany are greens universally opposed to it. Straw man, there, and irrelevant to his argument, inasmuch as he has one.

If he were calling for conservation and downsizing of energy use, he would at least be consistent, if IMHO incorrect. (I think the costs of photoelectric, solar-thermal and wind are worth the benefits, but there are costs.) Thing is, he’s not calling for conservation. He’s calling for more gas-fired plants. WTF?

Disingenuous, at best.

A primer on radiation poisoning

 Radiation at the Fukushima Daiichi plant peaked around 400 millisieverts an hour, before falling back to 0.6. How bad was that?

The question turns out to be hard to answer. Why? Well, the total dose matters, but so does the rate. After all, DNA repairs itself, so getting exposure over a year and over a day are very different things. That said, there are some general rules about acute exposure that all radiologists know, and since I happen to be married to one, I figure I’ll put them up.

400 millisieverts an hour is enough to cause a transient sunburn over a period of 4-5 hours, although that won’t happen to everyone. (If you got 2,000 millisieverts in a matter of minutes, then you would start to burn.) After 10 hours, you might have some hair fall out 2 or 3 weeks later, but you’d have to sit out in it the radiation for almost a full day to lose the hair permanently.

The threshold for radiation-induced cataracts is about 12 hours at 400 millisieverts per hour, although symptoms might not show up for as long as 8 years. On the other hand, men would go sterile after 8 hours, and sperm counts would start to fall (definitely temporarily, but possibly permanently) after only 30 minutes exposure. (This is why men in careers that involve a lot of flying should probably consider freezing their sperm.)

Now, in theory an acute dose of 10,000 millisieverts is enough to kill you within a few weeks, by destroying the epithelial lining of the gastrointestinal tract. In practice, you’d need to get that dose very quickly: 25 hours unprotected inside the Fukushima Daiichi facility at current levels probably won’t be enough to kill you. But it is not something that you would want to try.

Cancer, well, that’s probabilistic, but your long-term risk would start rising after about five hours or so.

Whether this relieves or concerns is, I think, a matter of temperment. Given that the Yokosuka Naval Base appears to have detected a radiation level of less than a fiftieth of a millisievert per hour, redirecting naval vessels seems like a bit of an overreaction.

Robert Moses and solar power in California

 Americans of a certain age and predilection often like to say things just to be provocative. I am about to say something provocative, and I want to reassure you that it is not because I am trying to be provocative. It is because I am, at the end of the day, very old-fashioned.

So here it is: I love Robert Moses. I think neighborhoods like the one above, the ones he got built, are awesome. I know, I grew up in ‘em. It was a muscly ambitious society what threw up these buildings 5 years before I was born. It is a sad thing for the environment that we no longer build stuff like this.

Robert Moses, he got stuff built.

Which brings us to California and the future of the planet. The great state of California recently approved no less than nine solar-thermal power plants. They would produce collectively 4.2 gigawatts of power, or 4% of the state’s total generating capacity. Keep that up for twenty years, in a place that gets as much sun as regularly as the Mohave desert, and you could shove aside a big chunk of natural gas. I am a fan of natural gas when the alternative is coal or freezing in the dark; in the Golden State, the alternative is sunpower. The Schwarzenegger Administration set the stage with its energy laws, and the Bush Administration helped the goal along when it opened federal lands to development on 2006. (When the opposition does good things, I give credit, and the energy policy of the second Bush Administration was nothing less than a big improvement on the status quo.)

But ... now come the lawsuits. Protection of protected species. “Impacts to Native American culture.” The Sierra Club and the Cuña de Aztlán Sacred Sites Protection Circle Advisory Committee united with the Tea Party people to keep pumping CO2 into the atmosphere. The Sierra Club worries about Calico project and the desert tortoise. La Cuña de Aztlán fears for the impact of the Imperial Valley project on the Quechan tribe’s origin story. The Tea Party all the projects because they hate subsidies. There are reasonable worries over the Genesis Project’s diversion of Colorado River water ... or they would be reasonable if the way we currently use the river made any damn sense.

I cannot sum up my hostile reaction to the anti-solar opposition inside the American political spectrum. Where is our Robert Moses? Anyway, attempts to talk me down would be very welcome. Tell me why I shouldn’t be angry at these people.

U.S. ♥ Canada, Earth not so much

  Thoughts on cost overruns in the oil sands will be coming up quickly.  Right now, just the (belated) news that the U.S. government has approved the Alberta Clipper, a pipeline that will move crude from Hardisty, Alberta, to Superior, Wisconsin.   

So what is the environmental problem?  Well, aside from the problems with tailings pools and the like within Alberta, the oil sands release a boatload of carbon.  After all, in order to make the stuff you need to inject steam right into the ground.  That takes a lot of energy.  In other words, you need to burn a lot of stuff in order to get stuff you can burn. 

Dealing with that carbon will be Canada's problem.  If Waxman-Markey passes, it is quite possible that the U.S. will tax Canadian oil exports.  Even if that doesn't happen, the adjustment burden will fall north of the border, unless Canada and the U.S. get together on a combined cap-and-trade system.  Unless ... well ... unless both countries decide that it is just more important to have a big and growing share of North American oil consumption produced in North America, with the rents (such as they are) going mostly to the Province of Alberta. 

One reason why oil sands project run overbudget below the fold.  Full explanation still forthcoming, with the preview that the comment thread pretty much nailed the reasons. 

Expansion!

  In 2006, the Panamanian electorate voted in favor of a plan to expand the Panama Canal.  The reason was not that the Canal had reached full capacity:  in fact, by a back-of-envelop calculation done by myself and a fellow named Andrew Baldwin, the Panama Canal is at roughly half its maximum throughput in terms of the number of ships.  (The ACP, I should add, does not agree with us.)  Rather, the reason is that 35% of the planet’s commercial shipping consists of ships too large to fit through the current locks, and Panama wants a piece of that business.

The current locks measure 1,050 feet by 110 feet.  They can accomodate ships meausring up to 965 and 106 feet.  An expansion project started by the Americans in 1939 and abandoned in 1942 would have built a third set of locks measuring 1,200 feet by 140 feet, with 45 feet of depth.  The abandonment turns out to have been a great thing for the Panamanian economy:  the new project will build locks measuring 1,400 × 180 × 60, capable of accomodating ships up to 1,200 × 160.  (And to be honest, I suspect that will eventually be pushed up to 1,315 × 176.) 

How large is that?  Pretty f----n’ large.  The new notional Panamax will be 1,200 × 160.  The real new Panamax will be closer to 1,315 × 176.  Well, Malaccamax is 1,543 × 197.  Still not big enough for supertankers, but big enough to capture a lot of the new traffic.  (And Nimitz-class aircraft carriers, should it ever come to that.)  The plan is for the expansion to be finished by 2014.  (Uh huh.) 

The abandonment of the American project also turns out to be a great thing for the Panamanian ecology.  Every time one of the current lock chambers is filled, it drains 26.7 million gallons of fresh water from Lake Gatún.  The problem is that rainfall has been falling in Panama.  The American new locks would have increased that number to 40.8 million gallons for every ship to head through the new passages. 

So the new locks will recycle the water, pumping it out of the locks into reservoirs.  It should allow the Canal to use only 10.7 million gallons per lock crossing, despite the larger size of the locks.  

  

Questions or comments?