The Oil Drum: Australia/New Zealand

It seems to me that there is likely to be a very short path from petroleum shortages to electricity shortages. There are a lot of issues involved, from the fact that the fuels used in electricity production are themselves dependent on petroleum for their extraction and transportation, to the current state of the US electricity infrastructure, to the impact of peak oil on debt financing. I have written about most of these issues before, but since the petroleum/electricity link is such an important one, I thought I would devote an article to putting the pieces together.

Fuels used for electricity generation

In the United States, the primary fuel used for electricity generation is coal, at 49% of electricity production. Natural gas follows at 22%; nuclear at 19%; hydroelectric at 6%, and petroleum at 1.6%. The newer renewables are all quite small: wood at 0.93%; wind at .77%; waste at .41%; and solar (for electricity generation) at 0.01%.

Figure 1. Distribution of fuel supplies used in US electricity generation, based on EIA data.

Back in January, I made a financial forecast for 2008. In this post, I will update my analysis, looking both at what has happened thus far in 2008, and refining what is likely ahead.

Most forecasts are made with an overriding assumption of infinite growth, but the analysis made in January and updated now maintains an underlying assumption of resource limitations, such as will likely accompany the advent of peak oil. Under resource limitations, debtors are likely to find it difficult to pay back loans, as resources become more and more scarce. As a result, default rates are likely to continue to rise.

One of the issues I consider important in my forecast is systemic risk. This relates to the interconnectedness of the system, and predicts that if one part fails, other parts are also likely to fail. Many other articles mention this issue, but rarely address its full ramifications.

Figure 1. An example of a system with systemic risk (Photo from homebuyerphoenix.com)

Annual production of cement by country in billions of metric tons. Click to expand. Source: USGS 2006 report (PDF) and the USGS 2008 report (PDF).

Cement is mainly used to make concrete, and is sort of the "active ingredient" in concrete - it is combined with sand and gravel in roughly fixed proportions. So cement production can be considered a rough proxy for the total amount of construction going on in a country.

This post updates Stuart's post about this two years ago (and yes, it's still a graph that will blow you away!) with two more years of USGS cement data, 2006 and 2007. The growth in China, from 1 GT to 1.3 GT in two years is mindboggling, even India and Russia are interesting...and there's more to think about under the fold.

edited to add: As a couple of folks pointed out--I have interchanged "production" and "usage" in this post incorrectly--however, China's 2007 cement exports were only 33 million tons out of 1.3 billion tons produced. So, at least for China, production is a good proxy for demand/consumption. My apologies for the mistake.

This is a guest post from Andy Hunt (solar_bud on The Oil Drum). It's an inspiring account of what can be done today with a modest property to live efficiently and maintain a degree of energy security.

Vital Statistics

Our house was built around 1900. It is an end-terrace house with 2 bedrooms, located in an inner-city area in Bury, Lancashire, UK. Our household comprises me and my partner, with no children, and we live in the property all year round. No planning restrictions are in effect in our area.

Wood burning stove with back boiler.

This is a Guest Post by Bob Everett. Bob is Lecturer in Renewable Energy at the Open University in Milton Keynes, UK.

Domestic energy is getting expensive, but what does that mean compared to the situation in our parents' or grandparents' days? Should we grumble?

In recent days a series of media articles surfaced pointing to a concerning situation in China. The New Scientist reported:

At the end of a cold and stormy winter, the country has just 12 days of coal reserves at most power stations. Some provinces, including Hebei, bordering Beijing, have less than a week's coal left. This is a record low, the state electricity regulatory commission revealed on Tuesday.

This is a guest article by Simon Ratcliffe and Jeremy Wakeford. Simon is an energy and sustainability consultant and is the Chairperson of the Association for the Study of Peak Oil South Africa (ASPO South Africa). Jeremy is an economist specializing in energy and sustainable development and is Research Director of ASPO South Africa.

South Africa has been experiencing blackouts over the last three weeks or so, and is forecast to have electricty shortages until at least 2013, see S Africa eyes rationing to end power cuts (Financial Times, 24 Jan.) for a brief overview. Here Simon and Jeremy discuss the issues in more detail.

With oil prices receding from the nineties, the energy crisis almost seems like in recess. Almost, because elsewhere there are millions of people affected by power shortages amidst an old fashioned Winter. It reminds that the energy crisis is affecting the energy sector horizontally and showing problems in an industry that not long ago seemed like our last resort safety net.

Source: Al-Jazeera.

On Thursday 10th January 2008 Business Secretary John Hutton announced to MPs that he was giving the green light for new nuclear build in the UK. He is inviting energy companies to bring forward plans to build and operate new nuclear power plants. However considering the nuclear cliff, has the decision come too late to maintain the nuclear contribution?

The nameplate capacity of the UK nuclear fleet, stacked, from the peak capacity in the late nineties and following the published decommission schedule. Three life extensions are shown in red. Source: British Energy & Nuclear Decommissioning Agency

I spent most of this week at the big conference organised every two years by EWEA (European Wind Energy Association) on offshore wind, which took place in Berlin over this week.

all photos by author

(And yes, in case there is any doubt, I work in the industry, finance it and spoke at the conference)