As we enter 2012, a major political milestone is getting nearer in France, namely the presidential election, and I thought I'd try to start covering this in more detail over the next few months (as we collectively did last time round - see here). Hopefully, we can have many diaries on various issues by different people, and keep a list of these together in one place (to be created when the next opus is published!)

The campaign kind of started in Autumn, as the greens and the socialists had internal primaries to select their candidates (more on this below), but it is really heating up now, as François Hollande, the socialist candidate, published today a manifesto attacking Sarkozy forcefully and presenting the values he will build his campaign on (truth on current situation, justice for all, hope for the young), so it's worth summing up what's at stake and how it works.

The European Energy Review has an article about Europe's reluctance to embrace shale gas (free subscription probably required) which is more interesting for the number of clichés about Europeans it carries.

The article conveys the thoughts of one Frank Umbach (see a short CV here), director at a new think tank, the European Centre for Energy and Resource Security (EUCERS) in London, founded in September last year by the Department of War Studies at King's College and who seems to have a long history of being critical of Europe's dependency on Russian gas.

His point is that Europe should embrace shale gas as an attractive domestic source of gas which would allow us to snub Gazprom, but that somehow we won't, because:

• we're just whiners
  

  in Europe we always seem to be focusing on the potential problems of a new technology. In the US and Asia they look at the positive prospects.

• we're wimpy and cowardly avoiding facing  off the Russians
  

  There is a strong feeling among some companies not to upset Russia in any way. That lobby is also having an effect on government policy in some countries, like Germany.

• we're just not enterprising enough
  

  European companies are at risk of missing out on a crucial development, he says. `They believe they still have plenty of time. That's dangerous. It is now non-European companies that are most active in shale gas - grabbing the best pieces of land and obtaing first-mover advantage.

• in fact, we're basically  incompetent
  

  in addition to their strong commitment to the existing gas market structure, including their strong ties with Gazprom, the energy companies face another obstacle. `They lack technical and management expertise'

• we care too much about stupid enviro rules
  

  In Europe, he says, we have so much engineering experience and such strict environmental regulations, that these problems can be avoided. (...) `Public acceptance is going to be the main issue for future unconventional gas development' [hey, what happened to our lack of technical expertise?]

• our labor costs are too high
  

  according to estimates from the Oxford Institute of Energy Studies, production costs in Europe could be four times as high as in the US. This is because drilling costs and labour costs are much higher here than in North America.

• in fact, Europeans are just anti-progress these days
  

  in Germany there is `a general mood of cynicism among energy producers', because just about all their activities are being resisted by the public - be it shale gas exploration, nuclear power, coal-fired power, CO2-storage, or even wind power. `No investment at all seems to be able to go ahead.

Along the way, we learn that we really have no idea if the resource actually exists in Europe, even less of an idea of what it might cost to produce (in fact, it might only be viable under the very same long term pricing arrangements that are in place with Russia and cause that author so much grief) and, of course, that governments should subsidise the sector to make it take off (sorry, "establish a policy framework, with investment mechanisms to stimulate shale gas exploitation).

Let's burn more fossil fuels, let's show the Russians, and let's ignore our pampered, wimpy and overpriced populations... Sigh.

I was invited to speak in Brussels earlier last week about the financing of energy infrastructure. It was a breakfast organised by the European Energy Reviewand Interel.

I had the opportunity to make a presentation outlining some of the points I've made here on many occasions (the importance of the cost of capital, the difference between profitable and cheap, and the fact that "market-based" policies are not technology neutral) and I'm copying the slides below the fold.

Added to my Wind Power series with the usual disclosure: I advise wind developers on their financing needs

front-paged by afew

One of the trends of our times has been this creeping move towards something that looks like feudalism, ie a system where wielding uncontested power (political or economic) becomes more important than what that power is used for. A more authoritarian, more unequal, and, ultimately, poorer world.

Those at the top have decided they didn't care that they could be better off, in absolute terms, in a fairer world - they are happy that they are richer, relatively speaking, and more powerful, in the system they are slowly bringing back by corroding all the great institutions that made our prosperity in the second half of the 20th century - good government, strong unions, the rule of law for (almost) everybody and good education and healthcare for all.

Some push that ideology out of naked short term self-interest. Many support it because it is wrapped in the name of individual freedom (be entrepreneurial and successful!) or validates their life (you earn what you deserve / you deserve what you earn); many go along because they yearn for simpler days when "people knew their place" or because they think their freedom and opportunity is hampered by some evil parasitic other.

The annual World Energy Outlook has just been published by the International Energy Agency (see the Executive Summary (pdf) and the presentation slides (pdf)). And it includes some interesting notes:

Will peak oil be a guest or the spectre at the feast?

The oil price needed to balance oil markets is set to rise, reflecting the growing insensitivity of both demand and supply to price. The growing concentration of oil use in transport and a shift of demand towards subsidised markets are limiting the scope for higher prices to choke off demand through switching to alternative fuels. And constraints on investment mean that higher prices lead to only modest increases in production.

 (...)

Crude oil output reaches an undulating plateau of around 68‐69 mb/d by 2020, but never regains its all‐time peak of 70 mb/d reached in 2006, while production of natural gas liquids (NGLs) and unconventional oil grows strongly.

They repeat some concepts that have been popularised by the Serious People: that of an "undulating plateau" rather than an outright peak, and that of a reduction in production caused by a reduction in demand rather than in available supply, but the message is clear: the debate on oil production peaking or not is over, and the peakers have won.

Their note that both demand and supply are becoming less sensitive to price is spot on, even if they gloss over the inevitable consequence that oil prices are going to become even more volatile.

Their scenarios finally include a noticeable presence for renewable energy in the mix, with renewables moving from one fifth (mostly hydro) to one third of power generation, and most of the increase coming from wind power. As in previous reports, they probably still understate these trends.

Part of my series on Wind Power with the usual disclosure that my work (as an independent consultant) is to advise offshore wind projects find debt financing.

The main lessons from the European experience may be summarized as follows:

1) the regulatory process drives everything

As a new, capital-intensive industry requiring specific support to be economically attractive to private investors,  offshore wind requires an unusual level of regulatory effort to work:

• first, the economics need to make sense.

  While offshore is more expensive than onshore, on a per MWh basis, it does have other advantages (proximity to load centers, availability following demand curves more closely) which do not make its cost overwhelmingly higher. However, as a capital-intensive industry requiring minimum price levels over a very long period, it is (i) poorly suited to market-pricing mechanisms based on short term marginal costs and (ii) unusually sensitive to the cost of financing.

  The regulatory framework should thus focus on providing as much stability and certainty on prices, as well as access to the grid, in order to ensure the availability of long term funding at competitive pricing. In that context, support in the form of early investment grants (to support the cost of the grid connection, for instance) or cheaper funding, have a disproportionate impact on overall cost;

• second, the permitting process needs to be understandable and stable.

  As a new industry, offshore wind can require the input of many regulators, most of which have little or no experience with the potential issues associated with it. A centralised administrative process, where one public body takes overall responsibility for all permitting issues, and defines a comprehensive, but unique, process to follow, makes a huge difference.

  The two countries with the biggest pipeline (the UK and Germany) now both have a single body in charge of offshore wind permitting (The Crown Estate in the UK, the BSH in Germany). This allow developers to have a better grasp of the time required to get to a permitted project, as well as a better estimate of the likely cost of that process;

  If the goal is to develop an industrial supply chain, these requirements are especially important: manufacturers will commit to industrial facilities in a given market only if they see a reasonable probability that there will be stable or increasing demand for their products over several years. That means that more than a handful of projects need to make it out of the permitting process in the timeframe considered, which in turn requires that the economics are seen to work for several years in a row, and that enough projects can be expected to successfully complete the development and regulatory work. While any individual project can be hampered by a variety of internal and external factors, the likelihood of a pipeline of projects depends almost exclusively on the perceived solidity of the regulatory framework.

2) scale matters

Europe's early offshore wind projects were relatively small investments for the power industry (even if, at the time, they represented large projects for the wind industry itself) and they were built using barely adapted onshore turbines, and vessels borrowed from the marine industry on a one-off basis. Wind developers also underestimated the complexity of project management. This led to inadequate equipment, serious delays in the case of construction incidents (as there was no substitute equipment immediately available), sub-par performance of some turbines (which had to be expensively retro-fitted) and significant bills for some players.

Thankfully, these wind farms also helped the industry learn many important lessons about how to do and how not to do things, and in particular how to reduce costs through the use of specialised vessels, better designed turbines, and improved construction coordination and OM methodology.

It also became obvious that there were significant economies of scale to be gained, both on an individual project basis (where 300-500MW appears to be the optimal size today to minimize construction costs per MW) and on an industry-wide basis (with vessels specialised in the installation of certain types of foundations or certain models of turbines requiring a minimum volume of construction per annum).

Utilities, initially dragged kicking and screaming into the market by political pressure (to appear to be doing something abut climate change) are finding that multi-hundred megawatt offshore wind farms with relatively stable and predictable output are actually the kind of power plants that they like: with their size and construction risks, they are better placed than independent developers to manage the investment, while their output, in addition to fulfilling requirements to decarbonize their generation base on a scale that matters, usefully fits into their market needs and additional provides a very stable, if lowish, return on investment.

Now that the industry has reached a critical mass in Europe, it represents a significant fraction of their investment budget and it ensures that they also begin to make sure that the industrial supply chain is available in the medium and long term. Their presence also makes it quite likely that increasing improvements in operating costs will be wringed out as procedures are improved on a continued basis and on the requisite scale. In other words, having the utilities on board as willing investors makes it possible to reach the "critical mass" needed to ensure the future stability and growth of the industry.

3) offshore costs are now understood and can only go down

In Europe, the recent buildup of offshore wind has taken place at the same time as a furious debate was raging (and is continuing) on the opportunity to extend or relaunch the nuclear power industry, in the context of a slow phasing out of the coal-fired sector, and a developing gas-fired sector.

Worries about declining domestic supplies and political risks associated with Russian or other external suppliers have added political impetus to seek alternatives, and while the debate on nuclear plants is still largely inconclusive, with no expectations of construction of more than a few reactors in the coming decade, offshore wind has quickly come of age in the meantime. Current regulations provide a firm cap to the price of offshore wind electricity (a long term option which governments, acting in the public interest, can find more valuable than private players), and the build up of the industry promises to deliver a slow but steady reduction in generation costs (indeed, Germany's regulatory framework includes a regular decrease in the tariff offered to future offshore wind projects from 2015 onwards). With economics proven by current projects, and a scale sufficient to replace a good fraction of the existing coal plants, offshore wind is fast becoming a key building block of the European power sector, which further ensures that the supply chain can be built and scaled up for the long term, and it is seen as a reasonable cost route.

While many have expressed worries about the fact that the cost of offshore wind has pretty much doubled over the past 5 years, this can be discounted for several reasons:

• prices were driven up by the cost of commodities (steel, in particular, for offshore wind); this applied equally to other technologies, which have seen their prices move in the same direction for the same reason;

• prices were also pushed up by turbine (and other sub-component) shortages in the onshore market; this was a sellers' market and prices (rather than costs) went up accordingly. Today, with onshore demand much weaker, prices are tumbling down for many components of the turbines. To a good extent, these cycles are linked to regulatory hiccups (the uncertainty over the US support for wind led manufacturers to under-invest in fear that the market would collapse once again; its collapse in 2009 following the bankruptcy of major players providing funding duly led to fewer orders, empty factories and lower prices).

4) jobs, jobs, jobs

Offshore wind, on the necessary scale, provides the kind of jobs that are currently craved for: typically requiring competences which already exist in industries long in decline and/or hard hit by the recent crisis (metal work, shipbuilding, mechanical and electrical manufacturing and assembly, civil works), it provides job which are structurally difficult to send elsewhere (the size of the turbines and associated equipment means that they need to be manufactured near their sites of use, as transporting them is difficult and costly; installation, operations and maintenance can naturally only be done locally).

The industry requires a large sub-contractor ecosystem to support it and its inherent complexity, and the need for very high quality equipment to withstand the tough maritime environment ensures that it creates high-quality decently paid jobs which cannot be offshored to low cost suppliers (the experience of some suppliers in subcontracting part of the work to China, getting subpar components, and needing to bear significant cost burdens to rectify the situation is well known in the industry), and most of the jobs created today are in high-wage high-tax Germany and Denmark, thanks to their early and long term policy efforts to launch and sustain the industry.

Altogether, the industry is rapidly becoming a major industrial sector of its own, spanning activities like steel bashing, mechanical and electrical manufacturing, shipbuilding, marine works and all the associated services. It is rapidly transforming from an experimental sub-sector into one of the largest infrastructure building activities in Europe, with a soon-to-be-macro impact on energy geopolitics.

I'm usually known as one of the doomers'n'gloomers on the blogs, with diaries and comments on the economy heavily leaning towards negative views. And to a large extent, I still stand by these positions and fully expect (i) the economy to dive again and (ii) an even worse financial crisis coming our way.

I'm also part of the peak oil / peak resources crowd, and do not consider our current civilisation, especially as hundreds of millions in emerging markets rush to embrace it, to be sustainable. The Chinese and Indians and others cannot all live with the same resource consumption as we currently have in the West, and something will have to give at some point.

And this is a matter of years rather than decades, and most of us here will get to see that problem 'solve' itself. And of course, climate change adds a whole other dimension to that emergency.

But, surprisingly, I also have a number of arguments to be optimistic for the medium term, ie that let me hope that I will not spend my late years in poverty and/or in the middle of societal collapse.

Originally posted on DailyKos, where it has been astonishingly well received and spawned a largely civil, if really big, thread

The debate on whether it is more appropriate to say that Obama has done a lot or that he has done too little regularly divides DailyKos, and I'd like to tackle it from a slightly different perspective, to say that this is not really about Obama, but about the views of the different groups about our civilisation.

I would like to propose that those who think that Obama has not done enough consider that the current system is profoundly failing, and that it is time for systemic changes, instead of the tinkering they see Obama doing, whereas those that tend to focus on what Obama has done think that the system is flawed, but mendable, and that Obama is doing just that, moving things back in the right direction.

And the fact is - we don't know yet what group is right, and we may not know for a few more years.

THANET'S LAST TURBINE INSTALLED: WORLD'S LARGEST OFFSHORE WIND FARM ALMOST READY

The final turbine at the Thanet Offshore Wind Farm in the United Kingdom has been put in its place. When construction is complete at the end of the summer, Thanet will be the world's largest operating offshore wind farm.

Located 12 kilometers off the Foreness Point, the most eastern point of Kent, England, Thanet is composed 100 3-megawatt wind turbines.  When operating at full capacity, the offshore wind farm will be able to provide 240,000 English households with power.

This came on the heels of this:

Denmark Inaugurates World's Largest Offshore Wind Farm - 209 MW Horns Rev 2 (17 September 2009)

The world has a new largest offshore wind farm: The 209 MW Horns Rev 2 project, located 30 kilometers off the west coast of Jutland in the North Sea, was inaugurated today by Denmark's Crown Prince Frederik. Constructed by DONG Energy, the project consists of 91 Siemens turbines and is expected to produce about 800 GWh of electricity per year -- enough for 200,000 households.

That project replaced the Nysted wind farm as the largest offshore project; Nysted was built in 2003 as one of two demonstrator projects promoted by the Danish government (the other being Horns Rev 1), and, at 165MW, kept that title for a long time.

Part of the Wind power series

front-paged with picture edit by afew

I was somewhat affected by the ash cloud from Iceland as I was in Bremen (and nearby cities to the North, being Bremerhaven and Cuxhaven, where a good bit of the offshore wind industry is based) with 2 colleagues on Thursday and we were supposed to fly back yesterday morning. Needless to say, our plane was cancelled, and we tried to find other options.

We first ruled out driving back, as it is about 800km through busy parts of Germany or the Benelux countries, and headed for the train station. We managed, without any significant wait, to find a very helpful person at the ticket desk, but quickly discovered that most trains were already closed for reservations. Some of them still allowed tickets to be booked, but without seats reserved. So we managed to cook up an itinerary via Köln and Brussels as, for some reason, 3 seats were found on a Thalys to Paris. I was hoping to get a Thalys to the Roissy airport, as my car was still parked there, but we could not get to Brussels early enough for the train that did have seats. Departure just before 11am, arrival in Paris 8 hours later, with an hour wait in Köln and almost 2 hours in Brussels.

So far so good, and our first pleasant surprise was that we were actually able to sit down in the first leg of the train, to Köln (but the train got crowded a couple of stops later, and people were standing through that train). We could work, and even managed to have lunch in the train, at our seats, and considered ourselves lucky.

But the second leg did not turn out to be so easy, as several hundred people were waiting on the quay to board the next train, which was announced to be 45mn late. Checking the station maps, we positioned ourselves far from the crowd, which was actually not positioned where the train was planned to stop. That was a smart decision, as the rush to get into the (already full) train was quite frantic; we managed to get in, as opposed to about half the people on the quay, and took standing positions in the middle of our wagon.

After a number of minutes, an announcement was made (in German only) saying that the train was too full, and that people who board in Köln had to get down in order for the train to leave the station. Naturally enough, nothing happened; a few minutes later, a new announcement, in a wearier voice, indicated that people without reservations should leave the train. Still nothing, and a new announcement was again made, in a slightly annoyed voice, accompanied by a rather brusque version in English ("the train is full, if you have a reservation, it's good, you can stay, if you don't have a reservation, get off the train, or it won't leave"). No movement. Another announcement, yet more annoyed. No movement, several more announcements, each time more exasperated (I couldn't help thinking the voice told us "who are those rude people who can't follow simple instructions?") and, at some point, also made in French (even more brusque than in English). Still very little movement. After a few more announcements, there was the add-on that people getting off the train could go to the service point. After a few more unsuccessful announcements, another slightly helpful add-on was that people could take local trains to Aachen, then Liège, then Brussels.

A few people trickled out - probably those that had already missed out their connection, or had alternatives. A large fraction of the passengers were people trying to go to London, quite a few with Eurostar tickets, and they obviously had few alternatives to going to Brussels.

Finally, the inevitable happened (after about 1h30 of wait on the quay): the voice announced that people without reservations would be taken out of the train by the police (the English and French versions pleasantly added  that "then you will have big problems"...) Some people started going out of the train; we found seats in our wagon (where less than half the seats actually had seat-specific reservations visible) and waited, just in case. We had tickets for that train, but no seat reservations, so the DB guy said "out", and the police gently asked us to leave, like the majority of people in the train. At this point, we would not have made the connection to the Thalys (unless it was delayed) so we did not try to protest that in any way. I have no idea what happened to the train in the end...

We decided to have a go at the car rental agency, where there was surprisingly little wait - for a good reason: the only agency with cars was the one that only allowed you to drop the cars in Germany or the Netherlands... We tried on the internet to scour cars in nearby cities, but no success. Finally, a bit of luck: a guy was waiting on the last car of one of the bigger car rental networks, but hesitating over the price they were charging: 750 euros per day (instead of the usual 75-100 on a normal day). And, in a touch of luck, he was going to France. We immediately offered to share the car and the cost, and he agreed. We signed the papers, paid the car, went back to the train ticket office to have our tickets reimbursed (again, a relatively quick line, a helpful clerk, and a quick and successful resolution) and went to pick up the car.

The drive to Paris was largely uneventful, other than a massive traffic jam near Liège because of (poorly organised) road works; there was unusually heavy traffic for a Friday night towards Paris - and lots of obvious rental cars full of business people (we saw several from Denmark at a stop area, and countless German ones): at least a lot of people seem to have had the good sense of sharing vehicles. Our co-traveller was a very friendly Egyptian physical therapist trying to get to a conference in Barcelona - the organisers were obviously keen to have him as they were driving to Lyons to pick him up there for him to be down there this morning... We left him at Roissy, where I picked up my car - by then, it was 11pm, so we all got home in Paris at midnight.

So, for us, it was a somewhat inconvenient day rather than a major catastrophe, but it's obvious that in such circumstances, money matters. Being able to put up the cash to get an overpriced rental car helps; being able to pay for first class, flexible or otherwise more expensive tickets can help; even if you get reimbursed in the end, the ability to put the money upfront (having liquidity) matters when everybody is trying to grab the same thing. And while airlines seem to have behaved decently, and the train companies seem to be trying to help as much as possible (even if I'm not sure I understand how a train could be considered "too full" and not others), but some like the car rental companies are clearly taking advantage of the situation.

Ex-Dexia chief names advisory firm

Former Dexia head of energy Jerome Guillet has revealed the name of his new-Paris based financial advisory boutique.

The firm, which will be focussed on renewable energy project finance in both Europe and the US, will be called Energy Bankers à Paris. Registration with the French authorities was completed on Tuesday.

With a strong focus on the offshore wind sector, the firm will be based in central Paris and initially comprise of Guillet and three other project financiers, who are set to join at the start of April.

As IJ News reported earlier this month, Energy Bankers à Paris already has its first mandate, advising C-Power on the financing of phase 2 of its Thornton Bank offshore wind farm in Belgium.

Thanks to all of you here who have made me believe in my "brand" and helped me learn so many new things, and want to do more out there.

There will be more to come!

On the other hand, you may see me slightly less around the blog for a while as my work schedule is quite filled up with a lot of practicalities (Apple fans will be happy to know that the new company will be a Mac/iphone environment...).

Every year, energy giant ExxonMobil presents its own "Outlook for Energy", its view of the world's energy future until 2030. Although ExxonMobil's outlook is based on essentially the same historical data as similar "outlook" reports from the International Energy Agency in Paris and the Energy Information Administration (EIA) in Washington, it offers in many ways a different - and fascinating - perspective on the world. It may well be - although this is something no one can say for sure - a more realistic, anticipatory vision than the one offered by the "official" energy institutions.

The realists at ExxonMobil, unsurprisingly, see continued dominance of fossil fuels over the next 25 years - coming mainly from growth in emerging markets as rich countries. There's a lot of interesting data in the full report (6MB PDF!), but I especially like this graph:

Source: European Energy Review
In dotted lines: the price of coal- and gas-fired electricity without any carbon pricing. Note that this is based on unknown fuel price hypotheses, but given how the report writes about the abundance of natural gas, one can expect them not to be too high...
Click for larger version

In other words, wind power is already amongst the cheapest source of electricity, and if any minimal accouting for some externalities is put in place (such as a price for carbon emissions), it becomes the cheapest. Of course, as we know, "cheapest" does not necessarily translate into "most profitable."

And as an aside, they are also sayign that carbon capture will never make any kind of sense.

And it's not me saying it, but ExxonMobil.

front-paged by afew

Dash for gas-fired power stations raises concerns over future supplies

A steep increase in the number of gas-fired power stations has been approved by the government, raising fears about the growing pressure on future gas supplies.

This new "dash for gas", along with the huge investment in wind power launched by the government on Friday, reinforces concerns that Britain's infrastructure may become more vulnerable to extreme weather and supply disruption.

The article notes that "[c]ombined cycle gas-fired plants remain the preferred choice for many utilities because of their relatively low cost and how quickly they can be built" but of course fails to point out that they are relatively cheap because they bear the least burden of debt per kWh (so the higher cost of capital of the private sector is less penalising for such plants than it is for nukes, wind of coal), and, even more importantly, they are more profitable even when they are (on average) more expensive because their costs are better correlated, for technical reasons, to market prices.

But the article actually blames the large wind developments being planned for the 'dash-for-gas':

Gas-fired plants are being developed to back up the thousands of new offshore wind turbines planned by the government. The recent run of cold and still days has highlighted the risks created by a growing reliance on wind power.

At the end of last week, while gas supplies were being cut off for some large industrial users, wind farms, which account for 5 per cent of Britain's generation capacity, were providing only about 0.2 per cent of the country's electricity, enough to power a town the size of Tunbridge Wells.

The reality is that the UK has a creaky power system that needs massive investment just to replace existing plants. Nukes are old and will be decommissioned over the next decade or so, and coal plans are being phased out because of their carbon emissions and pollution. So new plants need to be built in any case, and not specifically as backup for wind.

The fact that wind is also being built means that the new plants will be used rather less than if wind were absent, but not that they do not need to be built: indeed, at times they will be all needed. But not often. Gas-fired plants are actually a good thing in the context of a massive wind build-up, as they are flexible enough to be able to come in when needed, and their lower capital requirements means that it still makes economic sense to build them even for lower use (gas-fired "peaker" plants that function as little as 3% of the time can be profitable, by running only at times of very high demand and commanding extremely high prices at such moments).

But - wind provides power, not capacity. Capacity needs to be built in the UK. If left to market forces, it will be mostly gas-fired plants. If wind is indeed built on the scale proposed, such build up will be a lesser evil, indeed a necessary one. If not, then it will be the dangerous, but inevitable consequence of the deregulating policies of our times, which favor financial returns over proper policies with collective purposes.

Front-paged by afew

The Economist's Charlemagne has outdone itself this week in a gleeful column about Europe's decline: Lessons from "The Leopard" - Is Europe becoming too accustomed to genteel decline?. It packs so many of the usual neolib AND neocon arguments in one place that it's worth looking at it in full detail...

Front-paged by afew

The IEA puts a date on peak oil production

FATIH BIROL, the chief economist of the International Energy Agency (IEA), believes that if no big new discoveries are made, "the output of conventional oil will peak in 2020 if oil demand grows on a business-as-usual basis." Coming from the band of geologists and former oil-industry hands who believe that the world is facing an imminent shortage of oil, this would be unremarkable. But coming from the IEA, the source of closely watched annual predictions about world energy markets, it is a new and striking claim.

I don't know what's most striking: the claim the Economist refers to, the fact that it's actually mentioned by the article, or the fact that it's mentioned with so little prominence.

In other words, this is like the articles about asset bubbles 4 years ago: there's enough publicly available information out there that there is little doubt about the underlying reality, the newspapers will be able to claim that they did cover the topic appropriately, and the topic can safely continue to be ignored by politicians, pundits and deciders. The topic is dismissed and neutralised and no policy conclusions need to be reached - and in particular no change to the system - and to the profits made by the incumbents and insiders need to be made.

Funnily enough:

The IEA reckons that co-ordinated action to restrict the increase in global temperatures to 2ºC will restrict global demand for oil to 89m b/d in 2030, compared with 105m b/d if no action is taken. That, Mr Birol says, "could push back the peak of production, as it would take longer to produce the lower-cost oil that remains to be developed." Action on climate change may yet save the world from an early supply crunch.

If any action or event is going to save the world from catastrophe, it's much more likely that fossil fuel scarcity will reduce carbon emissions, by reducing economic "growth" as we know it (and, possibly, but we can't put our hopes on this, because there simply won't be enough carbon around to burn). The good news is that the solutions to both problems (climate change and resource scarcity) are pretty much the same: energy efficiency, renewables, a re-definition of what economic propserity is. The bad news is that there's still a large consensus amongst serious people to do as little as possible to actually implement these.

It's hard for me to take sides in the debate between those sorely disappointed by Obama's policies and those that point out that his policies, however flawed, still represent very real progress and are so much better than the alternative. Or between those that feel betrayed by Obama's centrist behavior and those that remind us that he has to deal with a fairly conservative Congress.

The reality is that Bush was a hard-right, fundamentalist, administration, and we're now getting a centrist (but right of center) - and maybe more importantly, sane - administration. The reality is also that this is largely in line with what Obama promised. The reality is also, sadly, that, in today's political and media environment, this is probably close to the best (ie leftiest) we can get.

Thus, the questions we need to ask are - (1) why is it that the range of political discourse and policies considered possible in the US ranges from the hard right to the center right? And (2) what needs to be done to change this?

Of course, there's a third question pending: will center-right policies be enough to solve the current economic catastrophe? And if not, what happens then?

We get yet more hints of a "New Cold War" being revved up by the Wall Street Journal via the usual rhetorical flourishes (in this case, a "new Iron Curtain"):

But while at the moment Western Europe can bring this international gas into its networks, Eastern Europe can't. This divide, an affront to the idea of a single European market, is a "new iron curtain" that splits East from West, Pierre Noël of the European Council on Foreign Relations told a Brussels audience this week.

West of the divide, gas flows in two directions. East of it, the legacy of the past means that the pipelines allow gas to flow only from East to West, bringing gas from Russia but not allowing gas from the West.

In other words, Western Europe is relaxed about supposed Russian threats to cut gas deliveries, becuase it has alternatives, while Eastern Europe is stuck with that single supplier.

There is, of course, a basis in truth in such an assertion. Eastern Europe built its energy system to a good extent on the instruction of the Soviet Union, as it expanded its pipeline network and gas flowing from Siberia to these countries was one of the ties binding vassals tightly to their imperial master. Western Europe also connected itself to the Russian energy network, but on a more controlled way, and without giving Moscow a dominant place. And, as I've said enough, gas is an infrastructure business, and infrastructures cannot be changed overnight. However, as was noted rather prominently recently, it's been 20 years since the Berlin Wall fell, time enough to re-orient infrastructure.

First, an apparently legal obstacle:

One giant obstacle, however, is that Gazprom owns some of the key pipelines bringing Russia gas to the West. Why would it allow the building of so-called interconnectors that will allow competitors' gas to enter Eastern Europe from the West?

This suggests that for pipelines that are inside the territory of the relevant countries, and within the EU for those countries that are members, the local government or the EU cannot decide how such pipelines can be regulated? How much bad faith can there be? The EU Commission, prodded by the neoliberals, has been able to impose third party access on pipelines owned by the national utilities, which have rather more political power in their countries than Gazprom, and they wouldn't be able to impose anything on pipelines (partly) owned by Gazprom? And what about building other, independent, pipelines to ship gas from West to East if that's so important? Is it that these pipelines are not profitable? Or that States are not willing to subsidize them for the oh-so-important purpose of energy security? Is it because that would be a distortion of competition (the ultimate evil for neoliberals), or is it that governments cannot put a price on security of supply?

So new pipelines are vital, but both companies and States are apparently powerless to build them or control them? How can that be?

But wait:

Recently, there have been worried or outraged articles in the blogosphere (and here on dKos) about the stimulus money going to help create jobs in Canada, China, or going into the pockets of foreign multinational companies.

I'd like to make a few comments on this.

part of my series on wind power

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The Economist has yet another column moaning about more distance between Europe and the US and suggesting ominously that this is a bad thing.

But the arguments used are rather revealing - although maybe not of what the Economist would want us to focus on.

The main gripes are that (i) the Americans feel Europeans are not doing enough on Afghanistan and Iran and (ii) the Europeans are disappointed by Obama's policies on various topics.

Yesterday, Die Zeit published an article, translated by presseurop about Turkey's supposed rise as an energy superpower, and Europe's careless lack of reaction to its apparent increasing leverage.

All these pipelines put together will swell Turkey's sway over Europe. A peripheral country? An unloved aspirant to accession? "We expect to be treated with respect," says Suat Kiniklioğlu, foreign policy spokesman for the governing AKP party. Will Turkey's growing clout also open the door to the European Union? That alone probably will not suffice, but it should cement EU ties to Turkey. So we are going to have more to do with the Turks than, say, the French would like.

To which all I can say is "bah" and "bleh."

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