Daddy, will the lights be on at Christmas?
Posted by Euan Mearns on December 20, 2007 - 11:30am in The Oil Drum: Europe
Topic: Supply/Production
Tags: Aleksandr Ananenkov, berr, european gas, gas exports, gas imports, gazprom, iea, norwegian gas, npd, russian gas, Vladimir Milov [list all tags]
... or is Europe running low on natural gas?
OECD Europe gas imports may grow by 295 BCM per annum by 2020. In the same time period, global LNG production is set to grow by 350 BCM per annum. So we Europeans should be OK, so long as the USA, Japan, China, South Korea, India and Taiwan are not planning to expand their LNG imports as well.
Edinburgh, the capital of Scotland, at Christmas. A wondrous site. And none of our politicians or the general public ever wonder where the energy comes from and how we will pay for it. Cutting CO2 emissions is a priority for all parties. Eliminating nuclear power is also high on the agenda. Confused? Our politicians certainly are. Visit Edinburgh while you can, it's one of Europe's finest cities.
This is a follow up to the post I had on European Gas last week. In the comments nrgyman2000 posted his forecast for Norwegian gas production that was somewhat more pessimistic than the assumptions I had made. The UK department of BERR also sent me some more reports with interesting data on Global LNG liquefaction and regasification capacity. SamuM posted a lengthy comment on Russian gas with 10 charts that is recommended reading. This post aims to pull this new information together and concludes that European gas and energy security is in a perilous situation.
Norwegian gas supplies
nrgyman2000 posted this forecast for Norwegian gas production to 2020. This forecast looks realistic and is based on official reserves estimates for Norwegian gas fields and estimated decline rates. In essence the giant Troll (in red) and Ormen Lange Fields (in white) show no decline in the forecast period since they are producing well within capacity and are facilities constrained. Other gas fields and associated gas from oil fields decline as reserves become exhausted.
I sent this to the Norwegian Petroleum Directorate (NPD) and invited comment. As always the NPD were very obliging and sent me this link to this figure saying that this was the only official gas forecast from Norway for the last five years.
I need to point out that Norway does hold large gas reserves and could produce higher volumes but this is a political issue. The Norwegian government recently refused an application to expand gas production in the Troll Field by 20 BCM per annum - in the interest of maximising oil recovery from that field. A future expansion of Troll may well take place and new field discoveries and developments may further boost Norwegian production beyond the volumes forecast by nrgyman2000.
But in the absence of any firm commitments on behalf of Norway in this regard, Europe should be planning for reduced gas imports from Norway from 2010. Given the energy predicament that Europe finds itself in, it would be helpful if the Norwegian government provided some clearer guidance as to their future gas export potential and intention. It would be a sensible strategy for Norway to impose energy rationing upon Europe and in so doing instill best practice in energy consumption, lay the ground work for sustainable energy use and lower the vast amounts of CO2 that Norway exports to the rest of the world every year.
Russian gas exports
In an excellent comment, SamuM posted this chart attributed to Aleksandr Ananenkov, Deputy CEO of Gazprom. The chart seems to come from this presentation by Vladimir Milov in Budapest in September 2007, on the Nabucco pipeline proposal. I've uploaded this presentation on the TOD server and it can be downloaded here.
This chart tends to confirm the contention I made in my European Gas post, which was that new field development in Russia would be sufficient to offset declines in the years ahead, but no more.
A revised view of OECD Europe's gas import growth
Taking into account the information posted by SamuM reinforces my view that Russia will maintain but will struggle to increase gas exports to OECD Europe in the years ahead. And taking into account the Norwegian gas forecast of nrgyman2000 suggests that Europe's indigenous production may be lower than I previously assumed. The revised forecast shows an increase in OECD gas imports of 295 BCM per annum to 2020 if consumption follows historic trends. Where will this gas come from?
For good measure I have made a similar chart for OECD Europe oil imports. Anyone wondering why world oil prices have gone up and are still rising need look no further than this chart. Where next for the oil price?
Liquefied natural gas - LNG
The UK government department for Business Enterprise and Regulatory Reform (BERR) have sent me reports on gas amounting to thousands of pages in recent weeks. More on that when I post on UK gas early in 2008. However, two tables from this report (large pdf) by Global Insight caught my eye. I have often heard that global LNG import capacity far exceeds export capacity and these tables seem to verify this contention.
The first of these tables (Exhibit 3) details how the global LNG trade is expected to develop in the period to 2025. Focus on Case A which is an optimistic scenario. At present there is 250 BCM liquefaction capacity (400-150) and 510 BCM regasification capacity (800-290). Note that liquefaction capacity equates to export capacity and regasification equates to import capacity. So, globally there is double the import capacity than export capacity for LNG.
By 2020, the timeframe for most forecasts, liquefaction capacity is forecast to grow to 600 BCM per annum and regasification capacity will grow to 1000 BCM per annum. The imbalance is redressed slightly but import capacity will still exceed export capacity by a factor of 1.7. It seems like there will be many disappointed importers and in a competitive LNG market the stage looks set for gas prices to escalate.
The other highly significant feature of these data is that they give an indication of how the international gas market will grow in the years ahead. Global Insight appear to forecast growth of 350 BCM per annum. Comparing this with the forecast growth in OECD Europe imports of 295 BCM per annum shows that Europe alone will likely have the appetite to consume most of the new global LNG supply in the period to 2020. What about the USA, Japan, China, India, South Korea, and Taiwan?
This discrepancy is so large I wrote to BERR inviting comment but have not received a satisfactory response as to how 350 BCM new global LNG export capacity is to be shared around the OECD and India and China?
Looking at the strategies of the International Oil Companies (IOC's) there is a similar picture (Exhibit 10). At present they have built 83 BCM of liquefaction capacity and 269 BCM of regasification capacity. I find this quite extraordinary that companies will happily invest in import infrastructure for non-existent product. The UK gas strategy will rely heavily upon LNG imports and there is a headlong rush to build import facilities.
Is it just me, or does anyone else sense the presence of an elephant?
Conclusion
Daddy, will the lights be on at Christmas? Most probably yes in the UK, though it is worth noting that with cold weather across continental Europe, UK gas spot prices have been running about double this year compared to last. With governments intent on pursuing market regulation of the energy sector we must wait for prices to get so high that this kills demand (the elderly freezing to death) and inflation kills our debt laden economy.
Next year I'd quite like to see the UK government commission studies on foreign gas supplies that goes beyond building import facilities and assuming the gas will be there to fill them. I'd also like to see the Norwegian government publish a clear statement of intent on their future gas production potential and strategy. It is no longer satisfactory to have national governments cite IEA reports that are built upon the incredible efforts of the United States Geological Survey.
On LNG, I recommend to regularly check BG Group's website, which always has highly informative presentations.
Presentations page
I recommend this one in particular: Natural gas – a globalising industry (September 2007, pdf)
On Russia, I would suggest that Milov is not a wholly impartial source, as he has been pushing (unsuccessfully) a hard deregulation and liberalisation agenda and has always been highly critical of Gazprom. Like Kasparov on the political side, he's a darling of the Western business press.
Jerome - thanks for the links - the world according to BG Group. There's a great quote in slide 22:
Euan,
How does the 33 GW of offshore wind planned for 2020 affect projected demand for gas in the UK? I would think that demand should be projected to decrease if this occurs.
Some new stories and TOD discussion are linked here.
Thanks,
Chris
7000 turbines in 12 years, or so we are told. Thats 11 offshore turbines brought online every week from now until 2020?
is that possible? I mean given a command economy type of deal I imagine it is.
It seems a bit of an ask. Or is it not really an issue given the right incentives?
Boris
London
That will almost offset the UK's Nuclear Cliff.
And let us not forget about the Wind's intermittency.
Actually, it more than offsets that at a 40% or greater capacity factor that might be expected for offshore wind. The UK has wisely avoided pushing refuling cycles for nuclear plants beyond reasonable limits so that their system works at about 70% capacity allowing careful attention to maintenance. In the US, pushing up the capacity factor for nuclear power has led to reliability issues owing to unscheduled outages as poorly maintained equipment fails.
As to intermitancy, it is turning out that geographically dispersed wind does a good job at providing power reliably so that, for the UK, is seems like an optimal choice.
Chris
Chris that's true, but the problem is load balancing the demand peaks at early morning and early evenning. The chances of wind following that demand profile are really slim. Storage will be needed even if only to acomadate daily demand variations.
So long as you are above the demand profile, there is no real problem, you just sell your excess. It is worth remembering that nuclear does a very poor job of tracking demand, coal a little better, gas even better and hydro the best of all. The UK has some pumped hydro storage now. I mention below that chemical storage in the form of methane might be a good fit with the UK's energy infrastructure.
Chris
To whom?
Chris, I'm a fan of wind owing to its reported high eroei, but feel there are some significant engineering and market regulatory steps need to be taken to make this truly viable. This would include pump storage and balancing against gas fired plant. I also kind of like the idea of building a parallel HVDC grid for renewables that sits along side our existing HVAC grid.
Euan
Do you think these engineering and market regulatory steps can be accomplished within the 2020 time frame as announced?
Boris
london
Euan,
Sorry to leave this unanswered. I know of at least one electrical connection between the UK and France through the Chunnel. By 2040, France may be interested in excess wind power since their renewable development is somewhat hindered by their present reliance on nuclear power. You'll likely be seeing excess at about that time that you won't want to put towards industry all the time. So, the timing may work out pretty well. There are other places where you might want to build an 8 or so GW line for export. The lines on the Risk board look like a rough draft of what might be useful.
Chris
Do you have statistics for wind farms operating at 40% or more? Real world operation, not theoretical.
I can confirm that the existing offshore windfarms in Europe operate in the vicinity of 40% or better (from real data I had access to during due diligence processes).
Let us remember that the length of the initial operating license for a nuclear power plant is not its expected life. Nearly all nuclear power plants that are approaching the end of their initial license are requesting 20 year extensions which will almost certainly be granted. After those 20 years, they will most likely get another 20 years.
That's interesting information, but if you check the comments on previous posts on Nuclear you'll see that some people claim exactly the contrary - some plants are closing due to aging and nothing else.
I think that faced with the prospect of electricity shortages those plants will either have to be refurbished or their operation will be continued despite aging.
Which makes building their replacement even higher priority that it already is.
Its interesting that when confronted with energy shortages, corporate and government attitudes to safety get deprioritised. You see the same thing happening in the oil industry, aging platforms chugging on for many years beyond initial design life. I suspect we shall start to see many more rig fires and disasters in the years ahead.
There are all kinds of claims about nuclear from the anti nuclear camp that are directly contradictory to those from the pro camp. The one we most frequently encounter here is the idea that we are running out of Uranium. This is not a split the difference situation. One side is clearly just wrong.
In the US at least, almost all of the early plants that are now coming up to the end of their initial operating licenses are filing for 20 extra years. There is no reason those plants cannot run 60-80 years. After that, they will just rebuild the reactors as they are doing right now at a major site in Canada. They might close down a few of the poorly sited early plants or ones that were really early designs that might not have worked out that well. Most sites will continue to operate as power plant indefinately.
Sterling,
I've been doing a bit of research into nuclear as I intend to make an investment in it shortly (Uranium mining company).
The main arguments from the 'anti' camp is that when the full lifecycle costs of nuclear are taken into account it is not so attractive and that Uranium is also non-renewable (the Chernoble argument seems not to be so effective as generally nuclear has a pretty good record compared to the 10,000+ deaths a year of coal for example).
The cleanup costs include everything from returning the mining 'waste' back to normal (some methods include huge quantities of rather nasty acids), disposal of UHexaflouride (Flourine itself a very potent Greenhouse gas negating some of the 'nuclear emits no CO2 argument) to the actual dismantling and storage of all the radioctive materials generated.
Uranium is abundant in nature but is only concentrated in certain ores. Therefore it is possible to extract seemingly limitless quantities 'if the price is right'. This is where the two camps can be correct at the same time. So its a bit like oil -there's a ton of the stuff left out there and if the price is right we can get at it...
There's also the issues that initial reactor core requirements are large and the US/USSR agreement to dismantle warheads has resulted in an oversupply (this agreement is due to phase out around 2012/13.) It therefore looks likely that during the next decade Uranium will be in short supply and I expect there to be something of a supply crunch around the middle of the decade. The Uranium price has already gone up almost 10 fold over the last 5 years or so. Some estimates put the number of new reactors to 2030 at between 500-1000 (this will probably depend on many factors like if we have to shut down old ones, if Peak Gas bites, when PO hits, Uranium price, etc, etc, etc.)
All in all I expect nuclear to play an important role in the next couple of decades but agree we may be literally storing up a tsunami of trouble ahead if the cleanup issues are not addressed...
Nick.
Actual measurements of full life cycle nuclear power energy inputs give an EROEI of 93. That is a lot better than any other fuel. Initial costs have been driven up by requiring safety and cleanup that are far beyond the other sources. Once coal has to pay anything near its fair share of safety and cleanup costs, nuclear will kill it. There is good reason to think coal will peak worldwide in about 15 years anyway.
Nuclear fuel costs are 4% of fully loaded costs and Uranium is about 25% of fuel costs. This means Uranium is about 1% of costs. The cost of Uranium could go up one hundred fold and only double total costs. New generation reactors, within the next 50 years, will recover as much as 30 times the energy from the fuel as the current ones. This will make it possible to economically use ores with many orders of magnitude lower concentration than we use today.
I do not agree with you on that one. Since reactors only generate about three cubic meters of spent fuel a year each, there is no reason that many decades of it cannot be easily stored at each plant. It is also too valuable to bury of otherwise dispose of. We should take the time to develop the technology to reprocess it so that it can be run through again to recover more of the available energy. In doing this, we will also be able to burn up all the elements with long lived radiation so that the true waste will be that much smaller and will be safe in a few hundred years. There is no real urgency to do anything about the spent fuel issue, except the political concerns raised by the anti nukes.
With that reasoning, we should just go on extracting the seemingly limitless quantities of oil as the price allows and forget about the uranium.
The point that seems to be missed here is that there will be a peak and decline in uranium extraction (or production, pick your term). If we went all-out, obviously peak uranium leads to peak nuclear some time down the road.
Almost all of the nuclear plants will receive license extensions, except probably the smallest and oldest ones. The 33GW of wind is a pie in the sky. Some wind will be build, but there is no way UK grid can take this much, especially with strains on NG supply (NG is the only option to balance wind in UK).
This is the only feasible path for UK electricity supply, neither the UK government nor anyone else can afford the lights to go out.
In my opinion the wind option could work if it was in parallel with a huge build-out of pumped storage capacity. We have plenty of steep enough mountains, lakes and other topographical features to do this, if we could overcome the NIMBY and environmental objections. It is NOT necessary for the UK to build pumped storage in teh same way it did at Dinowic and Ffestiniog (ie hollow out a mountain), it is possible to bury the conduit pipes near the surface and re-lanscape over them. Turbine housing a separate issue, but needs must.....
This would require govenment funding since wind plus pumped storage capital costs would far exceed the payback the market could offer in the time window used for market finance.
I would also look at building a major HV DC interconnector from Iceland to UK to baseload geothermal and/or hydro power. Same applies to this re financing.
None of this will happen since no UK political party has the balls to either cut spending or raise taxes to fund this sort of thing.
"The market will provide" is the prevailing view, and it will, just not the way they expect it to.
Iceland to UK is more than 1000km... not an option IMO. In addition Iceland has 1/200th of the UK population and similar energy production. What is it to offer?
Much more necessary is additional interconnection to the continent - this is only 50km and would allow imports of surplus nuclear electricity from France (AFAIK they are building a plant specifically for this purpose).
You are forgetting that pumped storage requires much more than just steep mountains (you are talking Scotland I assume) - it requires a river and suitable area for the two reservoirs which will be unused for other purposes. It should also be relatively near huge demand centers. I guess in theory it could be done in some not so favorable places, but in practice it will be hugely capital intensive, will require massive subsidies and will face stiff local opposition - not going to happen.
Why is 1000 km not an option? The Chinese are building a 2000 km UHVDC line!
http://www.abb.com/cawp/gad02181/c0d40da9112e6856c12573b0004490f7.aspx
1000km under sea? To export power from a country of 300,000 to a country of 60mln?!?
Of course it is a option. Hiring 1 bln.chinese to pedal their bicycles and generate our electricity is also an option. Just these options don't look good, do they?
Why is the population of Iceland an issue? It is irrelevant. The fact is that Iceland has vast geothermal and hydro resources which they cannot possibly use domestically.
As to 1000 km subsea power cables, it is really not that big a deal.
There is a 700 MW 580 km link between Norway and Holland about to come into service (http://www.statnett.no/default.aspx?ChannelID=1408)
There have been detailed plans for a 1200 MW 750 km cable from Norway to England, which failed to go ahead for financial rather than technical reasons (http://www.statnett.no/default.aspx?ChannelID=1169&DocumentID=10916)
Lastly the distance fom Iceland to Scotland is 800 km, not 1000 km (http://www.travelnet.is/ABC/about/geography.asp)
There appears to be an assumption prevalent in this thread that Wind is the UK's major non-fossil energy resource.
This is not only untrue, it is also dangerously misleading.
There are for a start a range of potentially massive resources offering power-on-demand
(without notional energy-costly storage options),
including both Geothermal and Coppice-&-Standards Forestry.
There are also major "scheduled-power" options including Tidal Barrage and Sea-bed Turbine.
In addition there is perhaps the largest near-pristine option of Offshore Wave Energy which,
with the provision of international power cables and the relatively slow decline of wind-driven waves,
could meet the majority of EU demand rather easily.
And nothing remotely serious is done about these options, despite our looming predicament.
As to why this is so, ask yourself whether, if even a couple of them were now under serious large-scale development, there would be any further discussion at all of the black farce of nuclear power ?
Walter Marshall, nuclear engineer and then head of CEGB, had the largest wind turbine yet built put on the Shetlands in the early '80s, and flew a planeload of compliant jouno.s up there for a liquid lunch at the opening.
And for decades data flowed to Whithall about the advantages of Wind power, and no other option got a look in.
And the Green movement ? That was not only neatly split between those for and against plastering the countryside with massive industrial artifacts, it was also prevented from gaining the rural landowners vote against nuclear power.
Notably the recent shift into rhetoric about Offshore Wind neatly continues the covert embargo on the serious non-fossil options.
Walter Marshall is discredited, dead & buried, but his nuclear-fossil-energy legacy still haunts the energy debate.
Until we succeed in viewing the options dispassionately, it seems likely that our position will only deteriorate.
Regards,
Backstop
I explained my population point in my answer to Chris downthread.
The whole electricity production of Iceland is 8.5 billion kwth. If they can spare to export 10% of it to UK, 850mln.kwth would cover the pathetic 0.25% of UK demand.
Now consider the costs of this equilibristics - the 580km.link to Norway costs 500mln.euro. Let's say your link costs the same (despite being twice longer). At 0.05euro/kwth times 850mln.kwth the value of the electricity transported would be euro 42.5 mln.year.
It will take 12 years for the link just to transfer as much electricity as it costed to build that power line only!! What about the cost of producing that electricity, the cost of maintaining that line (in the harsh North sea conditions), the cost of power losses etc.etc.
All these calculations would have been unnecessary if you just considered how small of a country Iceland is and how large is UK. Let's apply some common sense before starting to link any place on Earth.
See my reply below. The potential economies of scale are obvious.
Let's say the line would cost three times the Norned cost, or approximately GBP 1 billion. Let's also say it is "only" 1000 MW capacity, and runs at 95% annual capacity factor, leaving 18 days/year for maintenance.
That would equate to 8,322,000 MWh per year, creating revenues of approximately GBP 250 million per annum, using a ridiculously low price of only £30 per MWh. We are already down to a four year payback, and that discounts the fact that goeothermal energy would qualify for higher prices due to its renewable nature.
In practice, at present UK prices, each MWh would be paid at over GBP 80 over the average of the year - that's £700 million per annum - are the pieces of this particular puzzle beginning to fit yet?
Are you reading my posts?
"Let's say the line is 1000MW capacity" is nonsense.
1000MW x 365 x 24 = 8.7 billion kwth
The whole electricity production of Iceland is 8.5 bln. kwth. so you are suggesting Iceland will more than double its electricity production just to serve the UK market. Do you have the blueprints of all those extra power plants? Did you factor in their price and time frame? Did you factor in the infrastructure to interconnect them? Why not just build new plants in UK and reuse the infrastructure there?!?
What exactly is your point? Do you have one?
Last post on this
As I posted on another reply to you, Iceland has an estimated goethermal resource of 5,800 MW, of which they have developed about 1000 MW. That leaves 4,800 MW available - I am merely suggesting using just over 20% of the available remaining resource base.
That resource is available, it just hasn't been developed. Your assumption that they have developed all of what they have available is simply wrong - five minutes on Google proved that.
I have not factored in all the points you have asked (time frames, price, etc) because I have focused simply on rebutting your original claims that a 1000 MW subsea link would not be feasible and that Iceland did not have the available resource. I have proved conclusively that you are wrong on both counts.
So, in summary, yes, I am suggesting that Iceland could more than double (or triple, quadruple, etc) its electricity production just to serve the UK market. At current prices for renewable electricity in the UK, the revenue stream from 1000 MW of geothermal power exports would increase Icelandic GDP by 10%.
However, just because they could does not mean they will.....
Do you get the point now?
However, just because they could does not mean they will.....
Finally some bit of sanity here. It is so much easier to fantasize what we "could" do. We "could" build a giant solar array in space and power the Earth with it but we won't. We "could" build a bridge between London and New York and many other things.
And no, Iceland will not do what you suggest it will do. It is so much cheaper to generate and consume electricity locally or from much closer locations. It will be even cheaper for UK to export its energy intensive industries to Iceland than building new plants and so much more additional infrastructure around them.
It will be much cheaper to build wind farms in North Sea than geothermal in far away Iceland. A new nuke on the other side of the channel will beat your idea manifold and will provide much more electricity than what you suggest Iceland could ever provide. New coal power plants locally in UK will be even cheaper, despite carbon costs.
It is essential to distinguish what we 'could' from what is economical or in other words what we 'will'.
Why is population important? Just how many people do you think it takes to operate a few GW of geothermal or hydro power?
Norway manages to export lots of energy despite a small population. They manages around 2.5mbpd, at 6.1GJ per barrel that’s a steady rate of 177GW from a population of just 4.8 million. (To be fair we should divide that 177GW by three to give us 59GW of electrical equivalent energy).
It is important because it gives an idea of the energy production of the country.
I'm sorry that I was too lazy to look up the numbers before:
https://www.cia.gov/library/publications/the-world-factbook/geos/ic.html
Iceland electricity production: 8.5 bln.kwth
https://www.cia.gov/library/publications/the-world-factbook/geos/uk.html
UK electricity consumption: 348.7 bln.kwth
If we divert all electricity produced in Iceland to UK it will cover just 2.5% of UK demand. But obviously Icelanders may object the idea. As for the potential to ramp up production in Iceland, AFAIK they have already pretty much done it and are using excess electricity for energy intensive industries like aluminum smelting.
OK, I understand where your error comes from now.
The potential for geothermal development in Iceland is still enormous, they have only developed what they have demand for, for obvious reasons. This article (http://www.emagazine.com/view/?3975) estimates the total resource available at 5800 MW, of which less than 1000 MW has been developed.
Thus, in theory, Iceland has exportable availability of 42 billion KWh per year, or 12% of UK demand.