I've been wondering recently what the technical limitations are on running a NG plant on pure Hydrogen. Assuming there was no problem with creating hydrogen, is there any reason why such a set up couldn't work?

Same thing happening in New Zealand. The government has opened up the great southern basin for oil and gas production. (The oil was proven to be there in the 1980s but at the time not worth dodging icebergs, mountainous seas and frequent gales to produce it.) Since the fields are too far offshore for pipelines, the oil is going to end up on tankers, and the tankers won't be coming here.

when you say "going north" do you mean it is literally going to be transported north ? or is that a play on the term here in the northern hemisphere for "going south" (going downhill) ?

Oz will live off coal, until and unwhen the world gets serious about CO2 emissions.

Your gas is really too valuable on world LNG markets to use it internally for power generation (except CHP and peaking power).

Nuclear is a possibility but I am sceptical of the subsidy levels necessary. An additional point is that you need cooling water, and given where you are on a drought, that means you have to put the stations on a sea coast. Bondi Beach, anyone?

(the heat waves in France killed power production because the water levels got too low on a lot of lakes and rivers).

Slightly different.

Most of the world's gas comes via pipeline, so the 'spot' market is far less important.

LNG is 8% of the world's gas, I think. Even if that doubles to 15% as it probably will in the next 10-15 years, it's still not the majority of the gas out there.

Also there is no gas producer cartel, whereas OPEC has Saudi Arabia, which serves as the 'swing' producer, increasing production to lower prices, and cutting it to raise prices (yes TOD readers understand why this may be coming to an end).

By contrast, even with LNG, there is a 'supply chain' between producer, transporter, and consumer, which is much more integrated and long term. Everyone is making huge capital commitments to get the chain up and running. Even LNG is mostly on long term contract, I believe, there is a very limited 'spot' market, and the price paid by most consumers is not the 'spot' price. This is completely different from oil.

In electricity generation there are substitutes for gas. UK coal consumption has gone up sharply, due to the gas price rise last winter.

If anything restarts Europe's nuclear ambitions it will have been that spat between Gazprom and the Ukraine government last winter-- scared the willies out of any number of European politicians.

Not really: gas is really an infrastructure business, with most costs upfront. Oil is easier to break into smaller bits that allow you to go round the problem (you do not need the whole chain to be in place to sell oil that you produce, or to find supplies you need). Gas is significantly more integrated from upstream to downstream.

- the use of gas in electricity generation means the 2 markets are linked in a way they never were previously

This is particularly true in Italy and the UK where gas is an ever increasing fraction of total electricity production.

I think that is what he means.

As for oil and gas markets, it looks to me, as an outsider, that the price of natural gas and the price of oil correlate quite closely. This despite them being very different markets, with different suppliers, with long term 'captive' relationships between supplier and consumer in the case of gas.

There is limited substitutability between the two (primarily in the petrochemical sector, also to some extent in power generation and industrial power applications). At the margin, I don't think it is possible to trade off more than 10% of oil consumption against natural gas, say.

Yet the market price of gas seems to follow the market price of oil, with something of a time lag.

I think part of what is going on is there are long term supply contracts for gas, but these are at 'indexed' prices, which over time are adjusted to reflect the price of oil, or the current market prices for gas.

Therefore, where as in the case of oil probably close to 100% of consumers are paying the market price (WTI or Brent, etc. +/- transport costs and adjustments for grade), in the case of gas this could be much less than 50% of market participants.

you believe the logical opposite - that the linkage between oil pricing and gas pricing is breaking. Or more subtly that gas/electricity pricing is driving oil rather than oil being the driving price for gas.

In the case of Europe, we clearly see oil prices driving gas prices and thus electricity prices (and thus EDF shares have become the ultimate way to profit form higher oil prices...)

in the US, gas prices are mostly independent from oil, and are driven by the North American gas balance (LNG is to small to fully arbitrage price differences with Europe).

Economists talk about 'menu costs' which are the costs that consumers face gathering information and making decisions.

I have seen this again and again with telecom deregulation, broadband, mobile phones etc.

It's not possible for the average consumer to consider more than about 3 options. The cost, uncertainty, and agony of getting it wrong just causes most consumers to throw up their hands.

I have heard so many horror stories about switching gas and electricity suppliers that I am still with my (high cost) original suppliers.

When you get to the level of something that is a basic necessity (light and heat) what the consumer wants is a reasonable cost service that he or she understands, that is totally reliable (reliable in the sense of not a lot of price volatility, as well as constancy of service).

The optimal way to benefit the French consumer is to look at EDF's cost base, say, "right you will cut that by 3% pa, down to a 20% total cut", and pass 80% of that through to the consumer. Let management and the unions sort out how.

In the case of an energy security cost, eg to build new nuclear power plants, you explicitly break that out as a charge on each customer's bill.

Anyone who thinks that nuclear power is the answer to our energy
problems should take the time to read the UN report (published about
a decade ago) on the problems we are facing in dealing with the disposal of high level radioactive waste.
Absolutely horrendous, and this is with so called advanced countries
such as the USA and members of the EU.
Heaven help the environment when third world countries turn to nuclear
power on a large scale.
In the early 1970's my wife worked in the main UK environmental agency
(she was P.A. to the chairman who had previously been B.P.'s chief
geologist and director of exploration, and my own interest in oil
depletion dates to that time), and all the problems that the world
is now facing were forecast at that time, but of course nothing has
been done.
I have been most interested in reading the comments on this site,and
feel that West Texas is almost certainly right about the depletion in
Saudi Arabia. During my banking career (now retired) I had very many
clients from the Middle East, and would say that their culture leads
them to consider it polite to only tell you what you want to hear,
(I remember that an Israeli diplomat said something similar a year or
so ago and upset the PC crowd).
Regarding reducing oil exports from the main producers, Colin Campbell
predicted some years back that increasing amounts of oil would be
retained for use by their own burgeoning populations.
Both Hothgar and Freddy bring additional breadth to the debate and
should be welcomed for this, and with Hothgar I am pleased to find a
fellow railway enthusiast.

You definitely have a point here. At this moment, the single most important factor behind mergers and acquisitions in the energy sector is the wish to create more monopsony power in markets for inputs like coal and gas. Something else that creates value for energy service providers is vertical integration, because it reduces the need to buy the electricity that is sold to end-customers from competing energy service providers.

In the near future German company E.ON will almost certainly take over Spanish Endesa. This will make E.ON the largest European energy service provider. At this moment EDF is still slightly larger in terms of market share.
In my own country, the Netherlands, there will be a merger between the first and second largest energy service providers Essent and Nuon. This merger was announced two days ago. The CEO's of both companies told on national television that the creation of extra monopsony power in input markets was the most important reason for the merger.

With renewable energy this problem does not exist, because there are no natural resources that have to be bought before electricity can be generated. The problem is that these technologies are often very capital intensive and not yet fully developed to be able to compete with current fossil fuel based technologies. This is were national governments and the EU have to step in. They should increase their subsidies on the development and production of different alternative energy sources, so that a level playing field between different technologies is created. A higher carbon tax and a better system for trade in CO2-emission rights would also help to create this level playing field. Finally, in my opinion, it's very important that one Pan-European energy network is created. This would make countries less dependent on their own generation facilities only. Grid systems should also create space for decentralised generation of electricity. I believe that this would make the entire energy system much more flexible and reliable.

I expect that the volatility of power prices will be noxious, politically speaking; I agree that full transparency to the retail market would do wonders to lower demand at the right time and smooth over both prices and production, but I'm not sure it will be implemented.

Technology will probably allow it pretty soon, but it's by no means certain that it will happen. And there are good reasons to it. Electricity being such a vital commodity, allocating it (even for short periods) on the basis of who can afford it is a terrible social policy. As soon as you have a sick person dying because it could not afford power for whatever equipement it needed, the idea will be dead (and sure, there are fixes, technicla and political around this, but you know that it just takes one freak accident to kill the idea).

South East England's railines (over 50% of the nation's rail traffic) are already running above capacity. The companies are ripping out seats to carry more people. There is literally not enough platform and track to take more trains coming into/out of London on many of the mainline stations.

This is likely to persist for at least 20 years, even on current investment programmes.

Eventually the Treasury will do what it has always done in the past. Raise fares enough to choke off demand.

Freight is of course being squeezed off the key lines by the demands of passenger traffic.

Virgin Rail is charging nearly £200 return for a *standard* class morning ticket London to Coventry (don't tell me about APEX-- the decision to go is often made less than 24 hours before. When the client calls...). And they run *4* first class carriages (ie double) with the result it is standing room only in standard class.

There is actually (good grief!) a plan to close uneconomic branch lines. The tactics are always the same-- first they reduce the frequency of service, then they note the traffic has dropped, then they drop the service.

The proposal is buses will replace them, which of course it won't. The bus service won't get the traffic, and more buses on Britain's crowded roads is a non starter.

A better solution would be to spin the lines off to low cost operators, who would use lighter trains (less safe, but on branch lines that is less important-- they won't be going at 100mph!).

But instead once again the system is being truncated, because the level of subsidy is now 6 times what it was when BR was privatised.

The legacy of underinvestment, government tampering and wilful destructiveness continues.

I cannot recommend Ian Jack's book, Christian Wolmar's book, and the David Hare play 'The Permanent Way' more highly.

http://www.christianwolmar.co.uk/books/wrong_line.shtml

http://www.amazon.com/Crash-That-Stopped-Britain/dp/1862074682

http://www.nationaltheatre.org.uk/?lid=6805

The Permanent Way (Cottesloe)

a new play by David Hare

A co-production between the National Theatre & Out of Joint

Why aren’t people angry? They were robbed. What belonged to them was taken from them by a bunch of bankers and incompetent politicians. What was theirs was given away. What was foredoomed to fail failed. And they aren’t angry.

In 1991, before an election they did not expect to win, the Conservative government made a fateful decision to privatise the railways. Now, 12 years later, we subsidise the industry more lavishly than ever before. David Hare tells the compelling story through the powerful first-hand accounts of those most intimately involved. From passengers to government ministers, their voices bear witness to an extraordinary parable of British mismanagement.