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Jul. 12 2010 - 8:58 am | 825 views | 2 recommendations | 21 comments

Lloyd’s warns of economic energy crisis

The sun sets over an oil platform waiting to b...

The sun sets on the oil derrick. Image by AFP via @daylife

Don’t believe in global warming? There’s a backup disaster.

Even without the threat of climate change, economic disaster looms for businesses that fail to switch from fossil fuels to alternative energy sources, the insurance giant Lloyd’s of London warns.

“Companies which are able to plan for and take advantage of this new energy reality will increase both their resilience and competitiveness. Failure to do so could lead to expensive and potentially catastrophic consequences,” according to a white paper (pdf) prepared for Lloyd’s by Antony Froggatt and Glada Lahn, researchers at the London analysis firm Chatham House.

As the global economy recovers from recession, demand for fossil fuels will increase worldwide. At the same time, breakneck development in China, India, Brazil and South Africa will vastly increase the demand for fossil fuels in those rapidly developing nations.

And at the same time, the supply of fossil fuels will increasingly lag behind demand because of poor planning, the difficulty of reaching remaining oil supplies, and an increasingly hostile political atmosphere worldwide.

The increasingly hostile atmosphere derives not only from climate change but especially from the BP oil-spill disaster in the Gulf of Mexico.

“We have entered a period of deep uncertainty in how we will source energy for power, heat and mobility, and how much we will have to pay for it,” said Lloyd’s CEO Richard Ward.

“Is this any different from the normal volatility of the oil or gas markets? Yes, it is. Today, a number of pressures are combining: constraints on ‘easy to access’ oil; the environmental and political urgency of reducing carbon dioxide emissions; and a sharp rise in energy demand from the Asian economies, particularly China.

“All of this means that the current generation of business leaders – and their successors – are going to have to find a new energy paradigm.”

The cost of oil could pass $200 per barrel in coming years, Ward said. Meanwhile, alternative energy will require a $26 trillion investment by 2030, he said. That’s ten times the size of the 2010 U.S. federal budget.


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  1. collapse expand

    It is always interesting that the corporations that deniers have such affection for are most certainly taking global warming seriously (in their way).

  2. collapse expand

    The US has set a target of getting 20% of our energy from wind by 2030. We need to push that target up by 10 years, to 2020. Denmark and windy parts of Germany are already at that 20% mark. Wind turbines are a mature technology capturing 70% of the Betz Law limit of the available energy at a cost of only 5 cents/kWh when deployed in class 6 windfields, of which we have vast tracts. The environmental impacts are small, downwind drying of the land– usually pasture, and a small birdkill. They leave very little land footprint, just the access roads and the small pad. Though good windfields are generally pretty distant from population centers transmission costs are low, about 1 cent/thousand miles per kWh.
    Conservation, negawatts, is also a good source of “new” energy. In our home we get by very nicely on less than 50% of the US average.
    Solar currently is very expensive with very poor yield, far from mature. The solar installed today will be obsolete before long. We need much more R/D on solar.
    Since our society is so suburbanized I think the right mass transit system is for people to ride bikes/e-bikes to hubs and take buses to city centers where good trolleys and buses could move them about. Carpooling would quickly happen if we would simply tax carbon up into the European range, like gasoline at about $8/gallon. No one will buy a car getting less than 50-mpg if that were the case.

    • collapse expand

      I think the bird kill is a serious problem that needs to be solved and probably can be solved technologically.

      In response to another comment. See in context »
      • collapse expand

        Mr. McMahon,

        Raptors are killed by wind turbines when they perch on the necelle and use it to look for prey. If they find one and the turbine blades are in between, the birds cannot seen the rapidly moving blades and are killed (in California, this is a particular problem with Golden Eagles but other raptors are killed as well). While improvements in necelle design can reduce this, it will be impossible to eliminate. Further, many bats are killed because of the low pressures created by the turbine blades, collapsing their lungs, and killing them instantly. There is nothing that can be done about that.

        The simple fact of the matter is that there is no “magic bullet” technology out there, all of the “green technologies” have environmental costs. They are different costs than fossil fuels but they are costs nonetheless.

        If we want to switch to wind power, birds and bats will have to die. It is ugly but it is true.

        In response to another comment. See in context »
    • collapse expand

      Hello
      bobshanbrom,

      Unfortunately, demand for wind power construction is down significantly in 2010. As the American Wind Energy Associations notes: “…the U.S. wind industry539 megawatts (MW) in the first quarter of 2010, the lowest first quarter figure since 2007. While the industry worked diligently to accelerate shovel-ready projects in 2009 and installed over 10,000 MW, continued lack of long-term market signals, combined with low power demand and price, has allowed the pipeline for advanced projects to slow over the past 18 months.” The full report is here…

      http://www.awea.org/newsroom/releases/04-29-10-First_Quarter_Report_2010.html

      Unless there is serious change in how the government helps create the energy market (which it does), wind power will not meet its potential.

      In response to another comment. See in context »
  3. collapse expand

    I’ve read in a couple of places that the true cost of a gallon of gasoline (including environment, etc.) is about $15. A price like that would surely encourage mass transit. Similar prices for units of coal, diesel, natural gas and so forth would result in huge shifts, no?

    Could we afford it?

  4. collapse expand

    “All of this means that the current generation of business leaders – and their successors – are going to have to find a new energy paradigm.”

    That’s the entire problem. We’ve been looking for a “new energy paradigm” for decades. I don’t think anyone here understands how much money has been thrown at energy research in the last fifty years. And what do we have to show for it? Wind turbines, which is a centuries-old technology; the only thing we’ve done to “modernize” them is to put rare earth magnets and copper coils in them to generate electricity. And where do we get refined copper and neodymium from? The short answer is diesel fuel.

    That’s the real problem with all the so-called petroleum alternatives. There not really so much alternatives as they are derivatives. What do advanced wind turbines, solar cells and electric cars have in common? You can’t build them without oil and water. Two things we are starting to have serious supply issues with.

    • collapse expand

      Hello darthfurious,

      I think you have confused wind power with biofuels. Wind turbines use no oil (well other than lubricants for the gears) and no water. I suppose that it is true that some fossil fuels are needed to construct and install wind turbines but that is pretty minimal. Similarly, photovoltatic solar systems do not use water or fossil fuels to operate (with the same caveats as with wind).

      In response to another comment. See in context »
      • collapse expand

        Umm.. no, well, darthfurious is correct. We cannot build all these alternative sources without oil and water, whether they actually use thes things once up and running or not. A whole lot of energy goes in to creating green technologies. These must be counted as part of the cost.
        I have such a dim view of the fate of the world that I cannot see us being around long enough to recoup the costs.

        In response to another comment. See in context »
        • collapse expand

          Oh, pardon me. I see now that you accounted for fossil fuel use in construction. Still, I’m not sure how you arrived at the belief that the costs will be “minimal”.

          In response to another comment. See in context »
          • collapse expand

            Hello larryb33c,

            The fossil fuels, or fossil materials to be more precise, used in the construction of wind turbines are solids, they are not released into the atmosphere as GHGs. So even if fossilized materials are used, it does not contribute to Global Climatic Change. The fossil fuel used which are for the energy need to physical machine the equipment, transportation, and on-site for installation. These one-time releases of GHGs which are impossible to avoid.

            In response to another comment. See in context »
      • collapse expand

        Oh for god’s sake of course they don’t use petrol or water in their operation.

        “I suppose that it is true that some fossil fuels are needed to construct and install wind turbines but that is pretty minimal.”

        Well, I suppose that depends on what you mean by “minimal.” As a personal anecdote, I live near a large-scale wind farm in the midwest. I worked on an installation crew for about a month (can’t stand heights), and each one of those units required 11 delivery loads by semi. Last count they had what, like 80 up? And that’s just to deliver them, nothing else. That’s not their manufacture (which, for obvious reasons, represents the vast majority of their water consumption), that’s not their installation (also using diesel-fueled heavy equipment), and that’s definitely not including the heavy equipment-laden industrial mining operations in remote locations around the globe to acquire the raw materials that are an absolute prerequisite to the entire process.

        Of special note is that one of the technologies that make the construction of modern high power-density wind turbines possible is advanced composites (e.g., carbon fibre/epoxy), just like the systems used in the aircraft industry. These are, of course, petroleum byproducts. And I’m not even going to bother going into photovoltaics, because I’m sure I’ll need that as a talking point sometime in the future.

        I want to make myself perfectly clear. I was not arguing against wind power. I’m not against the idea of solar, or a “green” economy. But we have to be realistic about this. And that means being honest with ourselves about some very fundamental facts. Facts like what capital is. What industrialism is. What manufacturing is. What our real inventory of economically-exploitable natural resources are.

        We can’t accomplish anything if we proceed from false assumptions. We can’t chart an accurate course into the future if we are not honest about where we’ve come from, and how we got here.

        There are a lot of environmentalists who have ideologically-driven agendas, as opposed to fact-driven agendas. The problem with ideological agendas is that they usually are adopted to satisfy some emotional need. This is typical primate psychological bullshit, and the time has come for us to grow up and stop acting like emotionally-needy teenagers. There are no flying cars in our future. We will not all be living on the moon with space scooters that run on happiness. The time has come for us to abandon our collective illusions.

        For fuck sake, we’re in the middle of a global economic depression of historical proportions, we’ve peaked the physical inventories of raw materials across the board, our population is out of control, we’ve virtually depleted the globe’s fishable waters, and we’re conducting a massive unguided experiment with the planetary weather system. And all of it has been done in the name of feeding the beast.

        I’m not claiming to have all the answers. But I know that we can’t get honest answers if we don’t ask honest questions.

        In response to another comment. See in context »
  5. collapse expand

    I can’t say I buy into global warming, but if you don’t think alternative energy is the future, you are crazy. If alternative energy can bring profits, reduce harm to the environment, and limit our dependency to other nations, why the hell not?

  6. collapse expand

    Many good issues raised here. I’d like to address them with up-to-date info I got at a two-day seminar, The Woodstock of Renewable Energy, I attended two years ago, with top people in their fields and Energy Sec. Chu, then head of the Lawrence Berkeley National Lab, as keynote speaker.
    1) Bird kill, according to Robert Thresher, then director for wind tech, at the National Renewable Energy Lab is being addressed by making turbines huge and slow, also by idling turbines during migration season in some locations. Bird kill will not likely go to zero but it seems unlikely that any species will go extinct from wind turbines. I agree that it is a *relatively* small cost when compared for example to the health and environmental costs of coal or nuclear. Currently, wind kills less than 1/1000 the number killed by house cats and 1/5000 the number killed by windows.
    2) Thanks, David, for the info about turbine deployment. Yes, according to Thresher, wind turbine deployment is highly dependent on a small but critical subsidy, on the order of 1-2 cents per kWh. We should encourage our government to do this.
    3) Oil subsidy. According to a UN report that Mr. McMahon published a few days back, the worldwide subsidy for petroleum is a staggering $557 billion a year, or about $20 a barrel, or about 50 cents/gallon of gasoline. I’m not sure what the true cost embedded in a gallon of gasoline is, but it seems there is virtually no price you can put on the Gulf Coast disaster. As oil becomes harder to drill more of these disasters are inevitable.
    4) Wind turbines have very little “embedded energy”. A lifecycle analysis shows that they produce a kWh of electricity at a cost of about 14 units of ghg emissions, compared to coal at 1400 units and natural gas at 700 units and combined cycle natgas cogen at about 400 units. Nuclear and hydro are also on the order of wind, under 20 units/kWh. Solar thermal is about 40 units (not sure on this one) and photovoltaics are the highest of renewables at about 80 units/kWh.
    5) Wind is totally sustainable, having extremely low ghg, water, oil, embedded energy and other environmental costs and is completely affordable, being about twice the price of coal. It is by far the best choice at this point and should be deployed as fast as we can build out and it should be mandated and subsidized by the government. BTW, shallow waters, such as near-offshore, or bay waters, like the Chesapeake, are usually excellent windfields.
    6) Solar needs much, much more R/D before being deployed. The price needs to come down by at least a factor of four.

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    About Me

    Environmental reporting recruited me 25 years ago—on my first day as a reporter for my college newspaper, when I discovered my college was discarding radioactive waste in the regular city trash. Since then I've written hard news for dailies, including the Arizona Republic, and slanty news for alternative weeklies, including Newcity. I've written a column for New Times, stories on the Web for Forecast Earth, essays for PEN International and other magazines. I lived in an idyllic California village nestled among volcanoes and vineyards until my batteries were full of sunshine, and then I returned to my origins on the South Side of Chicago, where hope persists with no illusions about the struggle ahead. I cross the asphalt jungle by bicycle and el, mostly to get to the University of Chicago, where I teach journalism. But what matters more than any of this is a lifelong love for the natural world. We are all born with it, I believe, but some turn away.

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