Navigant Research Blog

Alarming Energy Headlines Mask Good News

— January 30, 2014

In Davos, Switzerland, the confabbing tycoons at the World Economic Forum spent their last day fretting over climate change.  The irony of the super wealthy flying in their private jets to hang out in a luxurious resort and talk about reducing carbon emissions was, apparently, lost on the attendees.  There’s no question, though, that we are at an apparent turning point in the struggle to limit global climate change over the next 40 years.

Recent headlines out of Brussels shouted that the European Union is essentially abandoning its ambitious clean energy targets.

“The EU’s reputation as a model of environmental responsibility may soon be history,” lamented the German newsweekly Der Spiegel.  “The European Commission wants to forgo ambitious climate protection goals and pave the way for fracking, jeopardizing Germany’s touted energy revolution in the process.”

“A deep and lasting economic slowdown, persistently high prices for renewable energy sources and years of inconclusive international negotiations are giving European officials second thoughts about how aggressively to remake the Continent’s energy-production industries,” reported The New York Times.

The European Commission, the EU’s executive branch, “has lost its moral courage,” Brook Riley, a campaigner at Friends of the Earth, told Reuters.

Not Quite So

Meanwhile, cleantech investment fell in 2013 for the second straight year.  Reports from Bloomberg New Energy Finance, Cleantech Group, and Clean Energy Pipeline all trace the decline, with Bloomberg saying that total investment in smart and renewable energy companies was $254 billion worldwide, down 12% from 2012.  If you were thinking of manning the lifeboats on the clean energy ship, now would seem like a good time.

Luckily, that’s not really the case.  In fact, the alarmist headlines are at odds with the underlying trends and may, in fact, wind up being good news.  The EU, for instance, has almost achieved its carbon emissions reduction goal, set in 2007 as part of the 20-20-20 mandates, of a 20% reduction from 1990 levels by 2020.  Emissions on the Continent today are 18% lower than in 1990 – remarkable achievement by any measure (though reached, in part, because of the continentwide economic slowdown).

What’s more, the current talks are not about scrapping the 20-20-20 targets (which call, in addition to the emissions reductions, for renewables’ share of EU energy consumption to rise to 20% and a 20% improvement in continentwide energy efficiency, both by 2020).  The argument is over what happens after 2020 – and the question is not whether to institute new targets through 2030, but how ambitious and how binding they should be.

In January, the European Parliament passed, with a strong majority, a measure to reduce carbon emissions EU-wide by 40% (per 1990) by 2030.  That figure might be reduced to, say, 35%.  And countries may be given more leeway as to how to get there, with France (which gets most of its power from nuclear plants) and Germany (which is still determined to achieve its ambitious Energiewende, or energy revolution) making deep cuts while, say, Poland and Bulgaria, which are still heavily dependent on coal, progress more slowly.

Hold My Jet

It’s important to remember that the tripod of 20-20-20 includes two legs – energy efficiency and renewables – that are really just avenues to the primary goal: reducing carbon emissions.  If that can be accomplished by moving more of Europe’s coal plants to natural gas, then absolute targets for renewables’ share of the energy mix, for instance, can be more fluid.

Even the cleantech investment slowdown has an upside.  The industry is maturing and major technology players such as Google, which just paid $3.2 billion for Nest, are placing large bets on established companies with existing markets for their products.  Corporate America is rapidly waking up to not only the economic and financial risks of climate change, but also the potential upsides of energy efficiency and cleantech businesses.

Fortune 500 CEOs increasingly “see global warming as a force that contributes to lower gross domestic products, higher food and commodity costs, broken supply chains and increased financial risk,” reports The New York Times – a position “at striking odds with the longstanding argument, advanced by the coal industry and others, that policies to curb carbon emissions are more economically harmful than the impact of climate change.”

At the widest view, the shift to a less carbon-based economy is happening more and more in boardrooms, in city council meetings, and on Main Street – and less in the gilded chambers of diplomats or the posh watering holes of the rich.  That’s a good thing.  And if the plutocrats in Davos can reach some consensus about how to simultaneously promote broad prosperity, advance technology, reduce global inequality, and limit climate change, good for them.  Maybe they could save all that jet fuel and hold next year’s WEF by teleconference.


Wearable, Solar Soldier Power Nears the Battlefield

— December 31, 2013

Seeking to solve one of the most intractable challenges of 21st century low-intensity warfare – supplying power to troops laden with electronic devices and deployed to remote battlefields – the U.S. Army is developing wearable solar panels that will be integrated into uniforms.

Today’s infantryman (or, rather, infantryperson) carries around a dozen pounds of batteries, according to Chris Hurley, battery development team leader at the U.S. Army’s Communications-Electronics Research, Development and Engineering Center (CERDEC).  ”If we can cut down on the need for batteries, we’re saving fuel costs with the convoys that have to deliver these items to the field,” Hurley told Mashable.

More importantly, wearable solar could save lives: as documented in Navigant Research’s report, Renewable Energy for Military Applications, in forward operating theaters like Afghanistan, one of the most dangerous assignments is delivering fuel (and batteries) to soldiers in the field.

CERDEC is looking for other innovative, lightweight ways to provide what it calls “Soldier Power,” including kinetic energy.  Bionic Power, a Vancouver-based startup, has developed a knee brace that would capture the kinetic energy of a marching soldier and supply it to portable devices.  Called the PowerWalk M-Series, the brace could supply up to 12 watt-hours of electricity, enough to charge two or three smartphones.  The lightweight device would be another step forward for the technology movement examined in Navigant Research’s report, Energy Harvesting.

Last year Bionic Power announced that it has secured contracts with the Army, the Defense Advanced Research Projects Agency, and the Canadian Department of Defense to test the PowerWalk.

Paging Tony Stark

The eventual goal, naturally, is an Iron Man-style exoskeleton that can collect its own energy, enhance the wearer’s physical capabilities, and supply data and communications from integrated devices.  Known as the Tactical Assault Light Operator Suit, or TALOS, the superhero armor is being developed by universities and commercial labs under the direction of the Pentagon’s Special Operations Command.  TALOS was first announced by the perfectly named Admiral Bill McRaven, the commanding officer of the Special Ops branch, earlier this year.  It’s still somewhat theoretical – a prototype is not expected for at least 3 years – but it’s already spawning some potentially powerful innovations in materials research.

One of the most intriguing is a nanotech “liquid armor” that would morph on impact (i.e., when struck by a bullet) from a flexible fabric into an impenetrable shell.  “It transitions when you hit it hard,” Norman Wagner, a professor of chemical engineering at the University of Delaware, told NPR. “These particles organize themselves quickly, locally in a way that they can’t flow anymore and they become like a solid.”

On the Runway

The military, of course, is not the only field interested in wearable solar and other futuristic forms of apparel.  The fashion world is forging ahead in this area as well.  The Wearable Solar project, launched by Christiaan Holland from the HAN University of Applied Sciences, in the Netherlands, collaborating with solar energy developers and fashion designer Pauline van Dongen, has produced a line of dresses with built-in solar cells.

“Wearable Solar is about integrating solar cells into fashion, so by augmenting a garment with solar cells the body can be an extra source of energy,” Van Dongen told the online fashion magazine Dezeen at the Wearable Futures conference, in London.


Seeking Cleaner Alternatives, Lenders Pass On Coal

— December 27, 2013

It’s one thing when environmental groups, street protesters, and politicians oppose the expansion of your industry.  It’s a whole different matter when the financial community stops investing in it.

That’s what’s happening to the coal industry today, as multilateral development banks, government funding institutions, and commercial lenders cool to the idea of financing new coal power plants.  The latest signal came in mid-December, when the U.S. Export-Import Bank issued new funding guidelines that will effectively end its financing for new coal-fired plants, except in rare circumstances.  From 2010 to 2013, the Ex-Im Bank provided more than $2 billion in financing for coal plants, according to the Natural Resources Defense Council (NRDC).

In July, the Bank canceled funding for a new coal plant in Vietnam – a nearly unprecedented move.

The move will “add to the growing list of public finance institutions that will stop using public funding to support overseas coal power plants,” the NRDC’s Jake Schmidt noted in a blog. Those institutions include the World Bank, which in July announced a new policy to shift resources away from fossil fuel projects and toward renewable energy; the U.S. Treasury Department, which said in October it is “ending U.S. support for multilateral development bank (MDB) funding for new overseas coal projects except in narrowly defined circumstances;” the European Investment Bank, which in July introduced a new Emissions Performance Standard that effectively rules out coal funding; and the European Bank for Reconstruction and Development, whose board voted in December to scrap funding for most coal projects.

Risk and Reward

Commercial lenders are gradually following suit.  Private sector investment in the U.S. coal industry sank 50% from 2011-2012, according to the Coal Finance Report Card, which is produced by the Rainforest Action Network and two other environmental groups.  Wall Street firms Goldman Sachs and Citigroup have both recently released reports questioning the growth of the global coal industry, and Deutsche Bank has forecast that coal’s share of U.S. energy generation will fall to 20% by 2030, from around 45% today.

These moves reflect a broad recognition that the risks of investing in coal – from tightening government regulations, public opposition, and the long-term damage of global climate change – are eroding both the private financial return and the wider social benefits of new coal investments.

“Banks are becoming more aware of the harms caused by coal and the risks associated with an industry in decline,” Ben Collins, the lead author of the Rainforest Action Network, told Bloomberg News.

However, these shifts also include some inherent contradictions.  Almost all of the new policies from multilateral lending institutions include exceptions for countries where “no feasible economic alternative options” exist to coal-fired generation.  In practice, that is likely to include much of the developing world.  What’s more, these policy shifts, in general, do not eliminate funding for coal mining.

In China, Little Choice

Several big international lenders, including the Japanese Bank for International Cooperation and Development, Nippon Export Investment Insurance of Japan, and the Kreditanstalt für Wiederaufbau in Germany, have not announced coal funding bans, meaning that capital for these projects may still be available from other sources.

Finally, three-quarters of the 1,200 proposed coal plants in the world, according to the World Resources Institute, are in China and India – countries that have historically not relied on international funding for big new infrastructure projects and that may well not need overseas lenders to proceed with their coal plant plans.  Despite the official announcements, the world is in the midst of a coal boom that may not be slowed because First World banks turn up their noses at funding coal plants.

“China’s main resource is coal,” Zou Ji, the deputy director of China’s National Center for Climate Change Strategy, said in an interview with the website China Dialogue earlier this year.  “Moving to clean energy is a massive challenge. Meanwhile, we still need to urbanize and educate hundreds of millions of rural residents. Quality of life needs to be improved.”


The Real Prize in the Arctic Drilling Race

— November 24, 2013

In early November, Russian natural gas giant Rosneft signed a memorandum of understanding with South Korean shipbuilding giant Daewoo to join with two other Russian companies to create a giant shipbuilding cluster in Russia’s Far East.  The deal represents a big step forward in Russia’s drive to create an oil and gas drilling industry in the Arctic Ocean.

It follows an announcement from Shell that it will file a new plan with the U.S. Department of the Interior to drill for oil in the Chukchi Sea, off Alaska’s north coast.  Shell, which shut down its previous Arctic drilling efforts in 2012 after a series of mishaps, has spent around $5 billion on Arctic oil and gas exploration without recovering a single barrel.  A new era of petroleum production is apparently dawning in the Arctic, possibly setting off international conflicts.  The real prize, however, may turn out to be not oil or natural gas, but the odd, carbon-containing resource called methane hydrates.

Mind the Bubble

Since Japan announced a successful pilot program to recover methane hydrates off the island of Honshu last March, my colleagues Sam Jaffe and Dave Hurst have both written about the possibility of economically recovering methane gas from the sea floor.  Methane hydrates are ice-like solids that form under high pressure and low temperatures in sediments beneath the sea.  The amount of carbon trapped in these molecules worldwide is huge, possibly equal to the amount of all the carbon extant elsewhere in nature combined.  Methane is a greenhouse gas that is far more potent than carbon, though shorter lived in the atmosphere.  In recent years, scientists have warned of a possible methane bubble caused by the warming of Arctic waters that could emit catastrophic amounts of carbon in a short timeframe – perhaps 50 gigatons between 2015 and 2025, an amount 10 times the level of methane currently in the atmosphere.

More recently, other researchers have cast doubt on those predictions.  Meanwhile, though, a small number of technologists and companies have begun to look for ways to avert a methane crisis while mining methane hydrates for use as fuel.

“Booming energy demand in Asia, which is spurring gigantic projects to liquefy natural gas in Australia, Canada and Africa, is also giving momentum to efforts to mine the frozen clumps of methane hydrate mixed deep in seafloor sediment,” reports The Wall Street Journal.

Because It’s There

In April, the U.S. Department of Energy and the Alaska Department of Natural Resources said they will collaborate on R&D for the recovery of unconventional energy resources in the Arctic, including methane hydrates.

Recovering this material, which is buried in permafrost on the seafloor dozens or hundreds of meters underwater, in some of the harshest operating conditions on the planet, is to say the least a speculative endeavor.  One proposed method involves stretching a thin film of plastic, a square km or more across, equipped with tubes of heating fluid to melt the hydrates and release the gas.  The Japanese project actually lowered the water pressure on the seafloor in order to allow the methane to escape.  These are phenomenally expensive technologies that don’t exist today at any scale, and the risk of an inadvertent release of methane must be factored into any future project.  However, if a way can be found to scoop up the vast reservoirs of methane underlying the Arctic Ocean instead of leaving them vulnerable to a mass uncontrolled release, explorers and producers will certainly pursue it.


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