Ultimately, we need energy. Lots of energy. Cheap energy. It's the thing at the core of everything from food & basic materials, to the manufacture of stuff (like houses & shoes) from those materials, energy is a big piece of what goes into it and ultimately the limiting factor. It's also important to remember that there is a negative correlation between wealth in an industrialized economy and sensitivity to energy costs. IE, the poorer you are, the more sensitive your purchasing power is to energy prices.
The effect runs up and down the value chains. Steel & concrete are mostly energy. Cheap enough energy opens up the possibility of desalination and improves the productive value of land. Deserts become viable places.
A 10X improvement in energy availability (the supply curve) would have an economic effect that permeates everything.
We're remarkably close. Solar is already cheaper than oil and more geographically available. It's just not temporary as available -- that's the energy storage problem, and that's what we're working on.
It is very difficult in many respects however. The biggest problem is that public funds, bonds, and internet companies attract most of the financing. Our best strategy to avoid this is to work with group for whom it would be strategic, and also for people who are already rich (e.g. Bill Gates, Peter Thiel) and thus are able to weather the development period and take on more long term projects.
My father in laws ranch is surrounded by wind farms. I asked him why they were suddenly cropping up all around his land, and he told me 2 reasons:
1) TAX BREAKS AND/OR
2) Huge government subsidies
The folks that lease these things get huge tax breaks for allowing them on their land, and there is massive government incentives out to build these things. That would signal to me that they are not yet economically viable. When people start building them on prospect(similar to wildcatting an oil well) then I will believe the economics work out. Until then, its a bad business to be in.
There are three relevant regions in cost/benefit space here; call them A, B, and C.
Region A, producing energy by way of wind/solar costs sufficiently less than the price of that energy to make the capital expenditures a good use of money for individual market participants.
Region C, producing energy by way of wind/solar costs more energy to make than we get out of it. This is allegedly the case for ethanol.
Region B, the dollar cost of building and maintaining wind and solar might too high, while the energy cost might not be.
In region A, subsidies are unnecessary - people will build anyway.
In region C, subsidies actually raise energy prices.
In region B, subsidies could make energy cheaper.
If you believe the government doesn't do anything unnecessary, then the existence of subsidies shows we're not in region A. If you believe the government doesn't do anything harmful, then the existence of subsidies shows we're not in region C. Honestly, I'm not sure the existence of subsidies shows us much of anything. There is a world where they might be helpful, though.
Perhaps those who make the counters are shills, but I've seen quite effective counters to this belief.
1) Energy is an industrial activity. So it gets industrial tax treatment.
2) Depletion allowances exist. These are at least mostly the same for any mining activity. Oil may be a bit different because the case law and policies surrounding it grew up differently than, say coal.
There's no "third column" for subsidies. Those are it.
This being said, the article makes a good case for negative environmental externalities not being part of the price of tar sands production. That would be a subsidy.
True, bot on the other hand there are also the OPEC caps keeping prices up and excise taxes in most places on oil derived fuels. If you're looking for where the market would be in a free state, you will have a hard tome finding it.
Of the top three purported oil subsidies in the link:
1) Foreign tax credit: everyone gets that to avoid double taxation.
3) Deduction of exploration costs: deduction of expenses is typical and again something everyone does when you're being taxed on profits. This is better understood as "the tax code explicitly recognizes this as an expense, just as it does for hiring workers or warehousing unsold inventory".
Would you mind articulating what you think the oil subsidies are? The alternative fuels subsidy (2) seems like a legit case but only gets you 14 of the 370 billion claimed.
(I get that there are environmental costs but that's not what people have in mind with the vague "oil subsidies" I keep hearing about.)
In the United States, the federal government has paid US$74 billion for energy subsidies to support R&D for nuclear power ($50 billion) and fossil fuels ($24 billion) from 1973 to 2003. During this same timeframe, renewable energy technologies and energy efficiency received a total of US$26 billion.
convincing of what? Someone said that renewables aren't viable because they are subsidized. I said that fossil fuels are also subsidized so that is an odd argument to make. I've shown that fossil fuels do get subsidies. I'm not sure what you are going on about.
You asserted that they get subsidies. The subsidies turned out to be largely a) (1) not double taxing them, and b) (3) a tax code clarification that exploration costs are valid expenses.
If you want to establish that oil gets subsidies, please be specific about what they are so that I can learn more about them and confirm it is not simply a case of "something everyone gets".
The thread started with you giving a link that I had to digest before realizing it didn't say what you claimed. Now you're giving another link to a less neutral source.
Suggestion: learn legit example of oil subsidies and describe them in your own words so that I can first vet whether that would count as a subsidy before reading further.
It did say what I claimed, fossil fuels are subsidized. You want to add a qualification that isolates special subsidies that the fossil fuel industry gets which aren't stanfard for all businesses. That's a useful distinction and my second link breaks down some of the specific subsidies. You can read it or not, it's up to you. I'm not your personal summarizer.
I'm confident tab intelligent people reading this will agree that the fossil fuel industry is subsidized.
Yes: when someone tells me X is subsidized, I expect to hear about something the X industry gets that others don't. Because that's what the term means.
It's not enough to tell me "X makers get to deduct expenses! Clutch the pearls!"
In addition to the explicit subsidies mentioned in the sibling comment, also keep in mind the implicit subsidies of allowing people to pollute without paying the costs. Environmental regulations have diminished this substantially, but it's still pretty big. Pollution amounts to a subsidy of billions of dollars a year for fossil fuels, only we pay with our lungs instead of our wallets.
And in addition to the externalities that are not borne by the producers, how bout factoring in the portion of the US military budget that is devoted to ensuring access to oil around the world?
I'm not sure about counting that. My guess is that even if we were fully energy independent somehow, we'd still have an equally large military budget and probably find some other excuse for having various "adventures" in remote parts of the world.
That was once true, but not any more; solar and wind are way cheaper than oil based power today, and have been since about 2004.
The tax breaks help of course, but there's still more than 50 GW of electrical capacity worldwide that would be better served economically by renewables than oil
I'm not sure how to interpret statements like this, at least not without acquiring a good business understanding of these energy businesses. A lot of funding has gone into green energy in various forms over the last 10 years, in lot of countries. None if it seems to have the kind of cascading effect that I would expect from the kind of runaway success I often hear claimed.
If solar and/or wind is so great, why aren't high energy activities moving near those places or developing their own renewable power source? Where are the solar desalination plants or mineral processing facilities?
The technology needs/needed to progress to a point where the price of implementation would be low enough to appeal to businesses.
As the parent comment notes, the issue is now mostly one of availability. The sun doesn't shine 24/7, the wind doesn't blow 24/7, etc... so large scale power storage is needed to smooth the energy grid provided by renewable sources. We need to be able to harness the sun/wind when it is available, pack away the energy, then trickle it out on demand. We just aren't there yet but we're getting close.
There are some of activities where cost per joule could trump everything else. If you want to desalinate sea water you don't need to store energy. You just need to store desalinated water. If you want to desalinate water in Saudi Arabia, you can forecast weather 10 years in advance.
If the underlying economics were there now, and the cost per energy (which is remarkably hard to reliably estimate, but that's an said) really was that much better there would be implementations in places with an established market for desalinated water.
Saudi Arabia has immense oil subsidies domestically, and burns 750,000 barrels of oil a day for electricity generation in the peak air conditioning season. They have vaguely talked about solar but need market prices for oil first...
Your assuming it's cost effective to turn off your desalination plant for 1/2 the day. It's not. Further, oil is a tiny fraction of total electrical power. It just used for vary expensive peaking power. Or in a small number of countries that heavily subsidize oil.
Consider those little gas generators people buy cost ~1$ / kwh. At utility scale it can be worth ~40c/w to cover the tip of the peak of power demand to prevent brownouts, but base load power is far cheaper and your base load power is still operating during peak demand reducing average costs.
This is where it starts to get to the point where I don't understand the economy of energy enough to really judge. My understanding is that with some desalination methods, energy costs represent over 50% of total cost which suggests that irregular production shouldn't be too much of a problem if energy costs are that different.
Let's say you could generate your water for 100$. With 50$ from building the plant and 50$ from energy. Now, if you operate it half the time you need to build 2 power-plants at 50$ a pop = 100$ so if you pay even 1cent for energy your worse off.
That's assuming energy is the only marginal/variable cost. But, I guess we are playing with contrived examples either way.
Anyway, if inconsistency is an inherent cost of solar it needs to be treated as such in comparisons. Even if storage gets "solved" it won't be free. There will be energy costs to it and other costs. To have consistent capacity of X, you will need a peak capacity of several times X. If peak grid usage is completely covered by solar, there will be wasted capacity at the coal plants at this times.
Storage an issue based on the % of solar adoption. At say 1% solar you don't need any storage and it's cost effective in most countries today. At say 80%+ you’re going to need a lot of storage.
Worst case is basically 100% solar which is how many home systems are designed. At which point storage basically doubles your costs now and it only gets worse as solar gets cheaper. Granted there are low cost utility scale solutions, but PV is still at low enough levels in most areas that it's cheaper to simply store nothing and vary occasionally let excess power go to waste.
PS: The important thing to note is solar is cheap enough that even without any subsides the market is going to stick with a solar component anyway simply because that's what's cost effective. And solar is only getting cheaper so that % is going to slowly rise over time without any intervention. The issue is people want solar to make a large percentage of the grid power and that's where there are problems.
This is highly unlikely, based on my research. It's all a question of ROI. If it took one barrel of oil to extract another barrel of oil out of the ground, would we still be extracting oil? The answer is no, but for some reason we don't apply the same logic to solar power.
Solar is strongly subsidized here in the United States, so there is currently a financial incentive for homeowners to install solar panels on their roof. But if it takes x years to generate enough electricity to pay off the solar panels, and the solar panels only last on average x*2 years, there could be a problem with the ROI. And we haven't even started talking about the energy storage problem yet.
So unless you can provide some references, I find it very difficult to believe that solar is cheaper than oil at this point in time.
Edit: Removed the erroneous part about solar panels only lasting on average 12 years.
Putting solar panels on roofs is dumb. Panels run about 1/3 the cost of home installations. Utility scale solar on the other hand is far cheaper.
PS: Solar is cheap enough it's changing the cost of energy over the day. Subsides actually prevent it from being cost effective because they lower the cost of electricity reducing the value of solar power. aka producing 5% of a countries power with solar can be vary cost effective producing 100% is not and subsidies push adoption past the point of profitability.
> Utility scale solar on the other hand is far cheaper.
I guess it all depends on your definition of "far cheaper." The DOE reported this year [1] that the price of electricity generated by utility scale photovoltaic power plants is higher than every other plant type, except offshore wind.
Also from your chart PV = 130 which is between Conventional Combustion Turbine = 128 and IGCC with CCS = 147.4. But that's "U.S. Average Levelized" so some solar is well below that number.
In the end it's a complex subject where for example building solar power plants reduces the value of solar power.
Edit: Further down the page you find the minimum cost for PV solar = 101.4 which is below the max cost of Conventional Coal = 114.4 or Advanced Nuclear = 102.0 and close to the average cost of coal 95.6. So there is quite a bit of overlap.
You're absolutely right about it being a complex subject. In addition, some energy "costs" simply can't be calculated, such as the environmental damage and the human toll documented in this article. But at the end of the day, most people just want their gas and electric bills to be as low as possible. So I think there is a conflict here between low energy prices and "doing the right thing," for lack of a better way of saying it. At this point in time, the high cost of solar electricity (whatever the cause) relative to other sources is a huge barrier to adoption.
A fossil fuel based plant is still extremely expensive to build, and has inefficiencies due to heat loss and transport losses. And after all that you still have to buy fuel and address externalities such as health problems caused by pollution.
So how is Solar close when such a major undertaking such as that one isn't working out? Better yet, not only did they get a loan from the DOE they want the public to pay for the loan by trying to use one program to pay for another.
I've been following what Lightsail is doing for a while. Would you say the problems you face are more technical or deal-making in nature? In other words, is it more an issue of getting high enough efficiency in the energy recovery, or an issue of getting the technology into use? Or is it cost (since low enough cost makes deal-making easy)?
Apologies if I am asking for too much information.
>> A 10X improvement in energy availability (the supply curve) would have an economic effect that permeates everything.
It is a bit like bandwidth. Everyone agrees that having gigabit internet to every device in the country would be benficial bur we can't agree on who should provide that.
As a society we pour most of the money into large providers who have a vested interest in highly centralised systems. What we really need is thousands of small provders who optimise for efficienct delivery of the actual product. Society needs to invest in energy and constantly spending such vast amounts on single projects seems risky. It may deliver energy but in the long run prices will still go up.
Food is a good case to examine in thinking about energy problem from a consumption or supply point of view, because on one hand we are really splurging energy and land area in food production - all that meat production requires 2-3x crop production, not to mention untold animal suffering, for our luxury munchies.
I don't think it's a product of inequalities. I think it's a matter of preferences. People value luxuries. Food may not be efficient in the resources/calories sense, but it is nonetheless the food people are eating and a big part of its cost is its energy cost.
In industrialized countries, less/more expensive energy will lead to an increase in inequality as the basic items that everyone (including the poor) consume a lot of are very energy dependent. Transport, heating & home electricity are easy enough examples. Richer people might use slightly more energy for these (bigger houses, cars, etc.) but not much, energy consumption of this kind does not track income.
Steel, concrete and other building materials are very energy intensive. Being heavy means there is a tradeoff between manufacture near high energy sources and high cost transport.
Lets leave aside the carbon effects and/or other externalities. It seems to be bad for the quality of the debate to mix the discussion about the cost of reducing energy consumption and the necessity of doing so. I don't personally have very strong opinions about the carbon-climate debate. I do think the "reduce energy consumption" side of the debate underestimate the cost of drastic cuts especially on below median economic strata.
I'm currently working in the industry in the Permian Basin area (Texas/New Mexico) and can say that my main concern is environmental. With the fracking operations, you get a huge load of oil, saltwater, and sand/crud/junk/chemicals. They truck them to a SWD disposal facility (my company does PLC's and controls etc for these) which then separate the oil out. The problem is that, at most of the SWD disposal places I have been too, disposal consists of pumping the junk/crud/chemical water straight back into the ground.
They say they drill below the Ogillalah aquifer, but what if they don't? Having actually been a contractor for one of the bigger public oil companies, I can just say I don't really trust them to do things like that properly, and my guess is that within a few years we will find out, oh shit,
"Someone poisoned the water hole".
That's when T. Boone Pickens will unleash his high-priced water. I don't thing people realize how close the south is to major water shortages and is vulnerable to a drought. Hopefully this upcoming winter will help offset some of that.
Maybe you are referring to aquifers other than the Ogallala in terms of poisoning? Since Pickens seemed to have been trying to sell Ogallala water, it'd be strange time to unleash it.
The Ogallala (thanks for the correction, I don't spell it out very often), is a huge aquifer. T Boone's well is up North and not technically in the Permian Basin area.
I watched a German / French documentary [1] about the Yamala peninsula [2], and the impact Russian gas drilling has on the native inhabitants of the peninsula, the Nenets people [3] - It is absolutely jarring to see how the homeland of these last nomads and their reindeer herds is being cut up by ultra-modern, gargantuan Gazprom operations. Vast road networks are being constructed across the Tundra, entire gas cities are being built, there are even futuristic drilling rigs that travel on rail roads, a fast and cheap way to lay gas taps across the landscape.
I'll be honest. I much prefer these oil sands operations that ruin sparsely populated bits of remote wilderness in the Canadian Arctic to other operations that destroy pristine wilderness near somewhere livable to more than ~300 people or contaminates water supplies for hundreds of thousands of people.
In other country like Indonesia, they actually "ask" local people to destroy their house for drilling spot without good compensation for the house they destroyed.
Even if those kind of graph are bringing hope, we have to remember that oil is both a source of energy (by burning it) and a compact and cheap way to store energy. A solar panel is only the former. So comparing the cost of energy production is only half the story.
They will never stop drilling because oil is an amazingly useful resource - using it as a source of energy is about the least useful thing you can do with it.
Fertilizer is oil based? I thought plants got almost all of their carbon from the air. Are you talking about the hydrogen feeding into the Haber process? Because most of that comes from gas-shifted water and IIRC the energy and carbon for gas-shifting water comes from natural gas. The nitrogen itself comes from air, of course.
And yet, the majority of petrol is used on energy[1]. Replacing its use for energy will reduce drilling. Other uses will adjust to a smaller supply through adjustments to the cracking operations that will shift the remaining petrol to making chemicals.
The effect runs up and down the value chains. Steel & concrete are mostly energy. Cheap enough energy opens up the possibility of desalination and improves the productive value of land. Deserts become viable places.
A 10X improvement in energy availability (the supply curve) would have an economic effect that permeates everything.