Tag Archives: climate change

EIA: Natural Gas Fuels Cleaner Power Sector – 1/26/17

Full EIA articles on natural gas and its effect on the power sector: first, second

For the first time since the late 1970s, U.S. CO2 emissions from the transportation sector exceeded electric power sector CO2 emissions on a 12-month rolling total basis, measured from October 2015 through September 2016. Electric power sector emissions are now regularly below those of the transportation sector  despite making up a larger share of total U.S. energy consumption.

The reason for this is a significant decline in carbon intensity for the power sector as natural gas replaces coal as the preferred fuel of electricity generators. On average, emissions associated with combusting coal (~206 to 229 lbs CO2/MMBtu) are higher than those associated with combusting natural gas (~117 lbs CO2/MMBtu). Natural gas electric generators also tend to be more efficient than coal generators, because they require less fuel to generate the same output.

In the 12 months from October 2015 through September 2016, coal and gas accounted for 31% and 34% of electric power generation, respectively. However, their shares of electric power sector emissions were 61% and 31%, respectively, as coal is much more carbon-intensive. Overall power sector carbon intensity has also decreased as generation share of fuels such as wind and solar has grown.

Emissions from the transportation sector are primarily from fuels which have carbon intensities lower than coal but higher than natural gas. For example, gasoline emits an average of 157 lbs of CO2/MMBtu. In the months observed, motor gasoline represented 60% of the total emissions from the transportation sector, while 23% was from distillate fuel oil and 12% was from jet fuel.

Falling prices for natural gas have helped fuel the shift from coal to natural gas in the power sector.

Natural gas spot prices in 2016 averaged $2.49 per million British thermal units (MMBtu) at the national benchmark Henry Hub, the lowest annual average price since 1999. Warmer-than-normal temperatures for most of the year and changing natural gas demand were the main drivers of natural gas prices in 2016.

In the first quarter of the year, much warmer-than-normal winter temperatures and large amounts of natural gas in storage caused prices to decrease. Prices began to gradually increase in late spring, with increasing demand and decreasing production, before sharply increasing at the end of the year with the onset of cold temperatures in mid-December.

Because of warm weather, natural gas consumption in the residential and commercial sectors in 2016 declined 7% and 4%, respectively, from the previous year. As a result, natural gas storage inventories were at or near record levels throughout most of the year.

In November 2016, the United States became a net exporter of natural gas on a monthly basis for the first time since 1957, based on data from PointLogic.

U.S. pipeline exports to Mexico continued to grow throughout 2016, making up 87% of all U.S. natural gas exports and, in May 2016, the Sabine Pass terminal began commercial operations in the Gulf Coast to export liquefied natural gas.

Despite growing demand, low prices resulted in lower natural gas production in 2016. Based on preliminary data, the EIA estimates natural gas marketed production to face its first annual decline since 2005. The number of active natural gas drill rigs is down 19% from the year-ago count, however, production has not fallen as sharply as the number of active rigs, as producers have continued to make gains in drilling efficiency.

Green Businesses – 1/25/17

The markets decide risk and return, not the federal government. That’s good news for businesses still interested in going green.

More than 530 companies and 100 investors signed the Low Carbon USA letter to support policies to curb climate change, invest in the low carbon economy, and continue U.S. participation in the Paris Agreement.

“All parts of society have a role to play in tackling climate change, but policy and business leadership is crucial,” said Lars Petersson, president of IKEA U.S. “The Paris Agreement was a bold step towards a cleaner, brighter future, and must be protected.”

The list of signatories to the Low Carbon USA letter has doubled since November, and includes DuPont USA, General Mills, HP Enterprises, Pacific Gas & Electric, Salesforce.com, Unilever, and more.

In recent decades, global economic development has increasingly been impacted by sustainability considerations. Be it legislation or consumer demand, companies are acting more and more with the environment in mind.

  • Investors controlling more than $5 trillion in assets have committed to dropping fossil fuel stocks from their portfolios, according to a new report on the trend.
  • Climate change criteria shape the investment of $1.42 trillion in assets under management, a more than fivefold increase since 2014.
  • Microsoft-founder Bill Gates and over two dozen other business leaders launched a $1-billion fund to finance energy innovations.
  • Google has pledged to operate on 100% renewable energy in 2017.
  • Microsoft announced a massive wind power purchase agreement in a deal to buy 237MW of capacity from projects in Wyoming and Kansas.
  • Smithfield Farms, the largest pork producer in the world, promised to reduce greenhouse gas emissions 25% by 2025.
  • Walmart has committed to removing a gigaton of emissions from its global supply chain by 2030.
  • Over 2.5 million Americans now work in the clean energy industry, making above average wages.

Prices are dropping, making green power sources like solar and wind competitive even without subsidiesSolar energy is already the lowest-cost option in some parts of the world and expected to offer a better global average return on investment than coal by 2025.

Risks associated with stranded assets and weak future performance are also steering investors away from fossil fuels, especially coal, and towards green investments.

Funding coal mining operations in the U.S. is only becoming harder as credit ratings for coal companies deteriorate. Credit downgrades have outnumbered upgrades among coal mining companies this year by about eight to one, Bloomberg data show.

Climate Change Talk Fills the Room at Davos – 1/24/17

Despite the shift in political weather in Washington, the captains of business and finance gathered in Davos are talking a lot about climate change.

The World Economic Forum is devoting 15 sessions of its 2017 annual meeting to climate change, and nine more to clean energy.

“The good thing is that the Paris agreement raised the bar for everyone,” said Ben van Beurden, the head of Royal Dutch Shell Plc, Europe’s largest oil group. “Everybody feels the obligation to act.”

Achieving the ambitions set out in Paris may require $13.5 trillion of spending through to 2030, according International Energy Agency (IEA) data that show the scale of the opportunity for business. Only last year, clean energy investment stood at $287.5 billion, data compiled by Bloomberg New Energy Finance indicate.

“The scale and scope of the investment flows on renewables shows it’s mainstream,” said David Turk, head of climate change at the IEA in Paris and a former senior U.S. climate diplomat.

A survey of 750 participants at this year’s meeting shows that extreme weather is considered the biggest global risk, outstripping migrations, natural catastrophe and terrorism.

In November’s follow-up meeting to the Paris agreement, nearly 200 nations, including China, vowed to step up their efforts to fight global warming.

China, which historically fought against climate change efforts, is now pushing the importance of the issue.

Chinese President Xi Jinping urged the U.S. to remain in the “hard won” Paris agreement during a Davos speech that touted the world’s largest polluter as a leader in the fight against global warming.

“Walking away” from the pact would endanger future generations, he said.

Earlier this month, China pledged to invest 2.5 trillion yuan ($360 billion) in renewable energy through 2020 to reduce greenhouse gases that cause global warming and China’s government has recently suspended 101 coal-power projects across 11 provinces as it moves toward cutting CO2 emissions.

China already spent almost $88 billion in 2016, according to Bloomberg New Energy Finance, about a third more than the U.S. And China’s investment has already created 3.5 million renewable energy jobs that could grow to 13 million by 2020, according to the International Renewable Energy Agency.

Corporations Respond to Climate Change – 12/23/16

While the political debate on climate change continues, many big corporations are acting as if transition to less carbon-intensive energy is inevitable and doubling down on their commitment to reducing carbon emissions.

Many executives say they are locked into a lower-emissions trajectory driven in part by market forces, such as cheaper prices for natural gas and wind power, as well as pressure from investors, customers, and regulators at the state-level or in other countries. More than 350 companies, including Intel Corp., DuPont Co.and Monsanto Co. signed a pledge shortly after the presidential election expressing support for the Paris climate agreement and U.S. efforts to cut carbon emissions.

“Part of our plan to invest in renewables is to diversify our generation portfolio,” said Melissa McHenry, a spokeswoman for utility American Electric Power Co. “All of those investments don’t change with a change in administration, it’s a long-term strategy.”

AEP Chief Executive Nick Akins has previously cited cheap natural gas and falling prices for renewable power as factors in utility’s plans to reduce its carbon emissions.

Days after the presidential U.S. election, Suzanne McCarron, Exxon’s VP of public and government affairs, said on Twitter that the Paris Climate agreement was “an important step forward by governments in addressing the serious risks of #ClimateChange.”

In 2016, Exxon lobbied other energy companies to support a carbon tax and many  large European oil companies have also pushed for a global price on carbon.

GM set a goal last September to get all its power from renewable sources world-wide by 2050.

Wal-Mart plans by 2025 to power half its operations with renewable energy and cut its greenhouse gases 18%.

Google said recently it would reach its goal of buying enough renewable energy to match 100% of the amount of power that it uses in 2017.

Andrew Mackenzie, chief executive of BHP Billiton Ltd., the world’s largest miner, told shareholders that he too hoped Mr. Trump would stand by the U.S. commitment to the Paris accord.

“More needs to be done” to achieve the agreement’s goal of limiting global temperature increases to 2 degrees Celsius, said BHP sustainability and climate change vice president Fiona Wild.

India: The Next Driver of Energy Demand – 12/9/16

Access to electricity can vastly improve quality of life and promote economic prosperity, but supplying electricity has its own costs as natural resources, infrastructure, and the environment can be strained when trying to meet increasing demand. Balancing the costs and benefits of adding new capacity is vital as energy demand increases in developing nations. Two nations facing especially large opportunities and challenges as they try to maintain that balance: India and China.

In the case of China, the government is already facing the aftermath of industrialization as air pollution has become a major concern for the country’s growing urban middle class(5). Their concerns about air quality come in direct conflict with the need to create more electricity generation capacity while coal remains a popular fuel in power plants. And India will face similar issues in the near future. According to the IEA, India is likely to become the new driver of global growth in energy demand by the mid-2020’s as the nation’s economic growth surpasses China’s and it becomes the most populous nation in the world(3).

Both nations use coal for a majority of their electricity generation. However, only India’s use of coal is expected to increase substantially in the future. The U.S. Energy Information Administration (EIA) projects that India will account for nearly 50% of the increase in global coal consumption from 2012 to 2040(4). By comparison, the EIA projections show coal consumption in China peaking in 2025 before steadily declining through 2040.

The Indian government has expressed plans to address its coal use in a variety of ways. Indian Prime Minister Narendra Modi has set a solar power target of 100 GW of capacity by 2022 with a capital subsidy of around $2.51 billion provided to develop rooftop solar projects across India, according to an official press release from the Ministry of New and Renewable Energy(7). His government also promised to double the share of natural gas from 7% to 15% in electricity generation(8). Emissions associated with combusting coal (206 to 229 lbs CO2/MMBtu) are higher than those associated with combusting natural gas (117 lbs CO2/MMBtu) helping to reduce air pollution without relying on intermittent power supplies(2).

The Chinese government has made similar promises saying it hopes to boost the share of natural gas in its energy mix to 10% by 2020 through favorable policies like an adjustment of pipeline fees to stimulate use(1). It has also aggressively promoted wind and solar power though its utilities now struggle to integrate the intermittent power supplies into the power system where distribution infrastructure cannot keep up. As a result of overbuilding, the country’s energy authority slashed wind and solar targets through 2020 in November of 2016(6). In its newly issued five-year plan for power, China’s government set new targets in which total installed solar capacity was revised to 110 GW by 2020, down from an earlier target of 150 GW. For wind power, the government now aims for 210 GW of installed capacity, down from 250 GW.

China’s Coal Headache Continues – 12/5/16

China’s coal reforms are have its markets, miners, and power generators unsure what to do next.

Coal prices have spiked more than 60% in local-currency terms since the end of July after Beijing moved to limit production, according to analysis from Morgan Stanley.

While most economists agree that reducing excess capacity, particularly in state-owned enterprises (SOEs), is key to a more sustainable growth trajectory, China’s supply side reforms are receiving poor reviews.

Morgan Stanley’s Chief China Economist Robin Xing details two key ways in which supply-side reforms with Chinese characteristics have been ill-designed.

First, restricting the number of working days in the sector to 276 from 330 creates a misallocation of production that builds on the existing misallocation of credit favoring SOEs.

The second problem is the policy makes responding to demand spikes difficult, which made the recent rally in coal prices possible.

As a result of the demand spike, Beijing was forced to allow firms to meet the pick-up in demand and undercutting the intended reduction in capacity and emissions.

A similar problem appears in the Chinese power sector. A study from think tank Carbon Tracker Initiative indicates that over $490 billion will be spent building coal power plants made unnecessary by slowing power demand growth. The study echoed findings of an IEA study that also showed China may be investing too much in coal power despite government ambitions to scale back.

As of July, the country had 895 GW of operating coal capacity being utilized less than half the time, with another 205 GW under construction.

Additional coal capacity beyond existing plants is only required by 2020 if power generation growth exceeds 4% per year and coal plants are run at a utilization rate of 45% or less, Carbon Tracker said. Even existing capacity may come under financial pressure by 2020 from power market reforms and carbon pricing.

Possible Evolution of the Oil Industry – 12/2/16

Companies in the oil industry are weighing their options as pessimism about traditional business models grows.

In the short-term, the collapse of crude oil prices has led to massive cuts in exploration budgets needed to find new fields. Some believe prices could rise one more time because investment in finding new supplies is so weak, but many firms like Goldman Sachs and Wood Mackenzie expect prices to stay between $50 and $60 a barrel — a level where few fields are profitable — in the short-term.

The U.S. Energy Information Administration (EIA) projects that a recovery in non-OPEC production, primarily from U.S. shale drillers in mid- to late-2017, will offset OPEC actions and limit price increases throughout the year.


At low prices producers invest in the lowest cost per barrel sources like the Middle East, America’s Permian basin, Brazil’s pre-salt fields, and not much else. But even a boom for those areas could be short-lived if demand continues to decline in the long-term due to stricter fuel efficiency standards or widespread adoption of electric cars.

Concerns about reaching peak oil demand in the near future are rising as well. The IEA has projected that European consumption will fall from 11.7 million b/d to 10.8 million b/d between 2015 and 2020. Most, if not all, major oil players are prepping for the shift in demand. Shell finance chief Simon Henry has said the company sees oil demand peaking in 5 to 15 years. In China, China National Petroleum Corp. issued a report over the summer predicting oil consumption will begin to fall by 2030, if not sooner.

Others, though doubting peak demand will come quickly, are still preparing for it.

European oil companies are already shifting investment to sectors like petrochemicals or clean power that have better growth prospects. French oil supermajor Total SA has said it wants 20% of its portfolio to consist of low-carbon businesses before 2040.

Saudi Arabia, the world’s largest exporter of oil, is diversifying away from oil by investing in petrochemical plants and publicly listing state oil company Aramco, to raise money for other industries.

Meanwhile, Exxon and others are pouring money into natural gas as Chinese energy giants are aggressively embracing natural gas as a fuel for power generation and transportation.

For the companies supporting the oil industry there will be plenty of work decommissioning aging and unprofitable rigs at first. Next would come projects like Statoil, the Norwegian state oil company, and its floating wind farm where they could leverage experience with offshore oil rigs. Statoil also operates two carbon capture and storage (CCS) projects, technology which many fossil fuel companies support as a solution to emissions.

Climate Action and the President-Elect – 11/23/16

The president-elect has expressed doubts about the potential impact of climate change, but what steps will he actually take once he’s in office?

In 2009, he signed a public letter calling for a reduction in greenhouse-gas emissions. In 2012, he dismissed climate change as a Chinese hoax. As a candidate, he said he would “cancel” the Paris Climate pact and “focus on real environmental challenges.” But in a recent interview with the New York Times, he said he would “keep an open mind” about the climate change accord. Such disparate opinions make it difficult to guess what position he will eventually settle on.

Acting with an “America First” mentality probably won’t mean favoring or rejecting globally-minded climate agreements so much as leaving other nations to lead them instead while taking each on its benefits for the U.S.

Should the U.S. ignore the agreement’s goals or renounce the treaty that established the talks, it would certainly be a blow to climate change mitigation efforts. However, the loss of the U.S. wouldn’t necessarily change much in the grand scheme of things. The Paris Agreement is already criticized as being not nearly enough to prevent cataclysmic climate change and many experts believe it would have fallen short one way or another.

With over 170 countries already signed on to the agreement, it is unlikely to fall apart completely anyway. The other signatories seem committed to lowering carbon emissions with or without U.S. leadership. Envoys from Europe to China have called the shift to a low-carbon economy inevitable and warned that to ignore it could mean missing out on business opportunities in clean power and energy-efficient technologies. Ironically, China has also vowed to step up as an environmental leader if the U.S. abandons the role.

China, India, and other developing nations have strong incentives to embrace cleaner technologies. Unlike rich countries, where energy demand is stagnant and efficiency is rising, many poorer countries still have many citizens whose lives would be vastly improved with access to cheap energy. To minimize environmental and health costs associated with extreme weather and air pollution from fossil fuels, these nations are seeking out any alternatives they can.

Even just in the U.S., there are limits to what a presidential embrace of fossil fuels could actually do.

Opening up federal lands to fracking means nothing if it is unprofitable to do so under oil prices that are stubbornly close to half of what they were at their 2014 peak. Coal, too, has been displaced by cheap shale gas, which burns with roughly half the CO2 emissions of coal. Besides, energy investments like oil rigs or coal power plants last for decades so firms may hesitate to risk their money turning into stranded assets as soon as the next president takes office.

In the end, there is no telling what the president-elect will do once he takes office or how the world will react.

Oil’s Future – 11/22/16

OPEC has raised its forecast for global oil demand through the end of the decade on oil’s lower for longer prices spurring consumption.

The group put crude at about $40 a barrel in 2016, increasing by $5 a barrel through 2020.


As far as the future for oil prices, the IEA has suggested that an oil price surge triggered by a successful OPEC agreement could start faltering again within nine months to a year on revived U.S. drilling.


U.S. crude output peaked in June last year, when the country produced an average of 9.61 million barrels a day. It’s fallen about 10 percent to 8.69 million barrels since then, according to Bloomberg.

Exploration for new crude deposits has declined substantially on low prices raising concerns about future supplies not meeting demand; however, many companies are predicting the opposite. Royal Dutch Shell Plc, the world’s second-biggest energy company by market value, predicts demand for oil could peak in as little as five years.

“We’ve long been of the opinion that demand will peak before supply,” Shell Chief Financial Officer Simon Henry said on a conference call on Nov. 1.


Oil output is most at risk of a shift in investment away from discovery to finding alternatives to it. Fuel efficiency standards are already putting downward pressure on demand as air pollution concerns push developing countries to get stricter and even favor alternative fuels. In addition, most major car makers have plans for mass producing more affordable $30,000 electric cars.

Fueling the pressure on oil, shareholders in both America and Europe are putting pressure on oil companies to explain how climate-change regulation could affect their business models. Shifts in public opinion and agreements to fight climate change only serve to discourage long-term investment in fossil fuels, oil included. Should oil use in transportation lose its price advantage over electricity and natural gas as the costs of batteries and gas fall, such a transition would accelerate rapidly.

Large Oil Companies Consider An Uncertain Future – 11/14/16

Falling prices, rising fuel efficiency standards, increasing fleets of electric vehicles in China and other important markets, and near universal agreement of world leaders on climate change are forcing large oil companies to consider changing in their business models.

Few energy experts believe the existential threat will come in the immediate future. But change is coming so many oil executives are hedging their bets. Some of the largest of the large oil companies, including Royal Dutch Shell, BP and Saudi Aramco, pledged last week to jointly invest $1 billion over the next decade to develop systems to capture and store emissions of greenhouse gases and improve energy efficiency. Exxon Mobil has also financed research into carbon capture and sequestration and lobbied for a carbon tax.

Jeremy Bentham, Royal Dutch Shell’s vice president for global business environment, said Shell and other oil companies could adapt and prosper to meet the world’s energy needs, which should continue to grow.

“Our portfolio mix would adjust over time,” he said, “such that the level of the demand for oil would be met and the level of demand for overall energy would be met… To have a demand at a much lower level you need a significant restructuring of mobility systems with more compact cities and with more public transport that can be electrified… a whole restructuring that isn’t driven by energy production.”

Still, changes in the global energy system are slow going. The electric car market has only shown signs of a breakthrough in the United States recently due to improvements in battery technology after years of promises. The effects of higher fuel efficiency standards have been more consistent though regulatory uncertainty surrounding them has spiked with Republican control of Congress and the White House.

The most pressing concern for large oil companies continues to be the low price of oil. With prices stagnant around half of their level in 2014, many investments in the Arctic or other difficult to reach areas have lost their luster for companies. The glut has also hampered shale drilling as many of the U.S. firms whose surging output created the oversupply have gone into bankruptcy, or at least slashed budgets. Combined with pressure from environmentally conscious shareholders, the low prices are encouraging U.S. oil firms to diversify their energy holdings though they continue to resist assessing possible climate change risks.

In comparison to U.S. firms, European companies have been more open to acknowledging climate change as a threat to their current operations. Be it national companies like Norway’s Statoil, or multinationals like Total S.A., the French oil supermajor, European firms are accelerating their investments in renewable energy. Statoil alone has announced new investment decisions totaling more than $1 billion including an offshore wind farm.

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