Belgium this week has become the latest country to reject nuclear and will shut down its 3 oldest plants down in 2015 and the other 4 by 2025 if alternate energy sources are available. Belgium has 5.7 GW which outputs 90% of its domestic electricity production although half of its electricity is imported.

This is another country to reject nuclear alongside Germany and Switzerland. This has the potential to lead to a capacity crunch in Europe alongside Britain. European Transmission System Operators have warned of potential “countermeasures” this winter:

“TSOs presently expect that generation adequacy is maintained in Europe in case of average weather conditions, [but] the security of supply of key areas in Europe cannot be ensured under extreme conditions. Extended cold spells and lower-than-average temperatures could require significant countermeasures.”

Britain is also looking at a capacity crunch in the next few years. Keeping nuclear power plants running is one way to avoid this self-exacerbated capacity crunch.

With significant portions of the cost of wind energy already mature technologies, innovation and economies of scale in those that can be reduced, such as the tower, rotor blades and gearbox is important (http://www.windenergyupdate.com/offshore-supply-chain/content-view-report.shtml). How much further wind costs have to drop is a function of location, wind turbine type, gas/coal costs, and last but certainly not least the assumptions when doing the Levelised Cost of Energy Calculation. However Bloomberg New Energy Finance was quite chipper earlier this year (http://bnef.com/PressReleases/view/139):

“Global turbine contracts signed in late 2010 for delivery in H1 2011 and H2 2011 display very aggressive pricing, with average values at €0.98m/MW ($1.33m/MW). This is a 7% decrease compared to contracts signed in 2009 (€1.06m/MW) and 19% down from peak values in 2007-08 (€1.21m/MW).

The cost of electricity generated from wind is now at record lows: several projects in high resource areas (US, Brazil, Sweden, Mexico) display a levelised cost of energy – excluding the impact of subsidies but after including the cost of capital and maintenance – below EUR 50/MWh ($68/MWh). This compares to current estimated average costs of $67 per MWh for coal-fired power and $56 per MWh for gas-fired power.”

Here’s an interesting graph from a recent EPRI report on EVs contrasting the cost of driving a conventional vehicle vs. an EV. The increase in gasoline price volatility over the past ten years or so looks set to continue. While for the EU the volatility of the petrol price will be reduced by the much higher proportion of tax, the oil price volatility is still likely to be higher than the corresponding electricity price volatility. This should be true for Ireland also, even if domestic prices have increased significantly over the past ten years, as this graph from Constantin Gurdgiev shows:

It would appear the arse has fallen out of Irish oil demand:

Down 25% since 2009, this is an even bigger drop than Greece (http://omrpublic.iea.org/demand/ct_tp_ov.pdf). All else equal this is a good thing, improving balance of payments and reducing carbon emissions. On the negative side it indicates a further reduction in domestic activity in 2011 after stabilizing in 2010, with people having to ration travel expenditure.

In which I briefly chronicle the context surrounding today’s momentous release of an app by Dublin Bus with (not quite) realtime bus arrival times using GPS.

• June 1950 Coras Iompar Eireann (CIE) was formed, combining the company running Dublin buses & trams and one running Irish railroads. It was charged with providing “an efficient, economical, convenient and fully integrated transport system” (lol).
• May 1957 An independent report into the loss making CIE recommended “that more than half the [rail] system and approximately three-quarters of the stations and halts be closed and that there be a much greater degree of co-ordination between road and rail services.”
• 1965 World’s first integrated ticket and transport system: “One ticket, one timetable: Use any HVV public transport service you like – we’ll take you around Hamburg and many parts of the metropolitan region. It’s been that way ever since 1965.”
• 1970 – 1980 “Despite these cutbacks and changes in operating practices, the net deficit on the railway’s working account had exceeded £3 million by 1969. The Government, in response, commissioned yet another report into the activities of CIÉ, the 1970 McKinsey Report…..All through the 1970s, the deficit continued to rise reaching £39.8 million in 1979 and leading to the Government once again calling in McKinsey to examine CIÉ.”
• 1984 Dublin Area Rapid Transit (DART) is launched and, 4 years after McKinsey’s second report, CIE was split up “the three operating companies (rail, Dublin Bus services and provincial bus) were to be established, but with C I É as a holding company”
• 1989 Under Minister for Transport Seamus Brennan (career politician and General Secretary of Fianna Fail at the ripe age of 25), an integrated transport plan named the Operating Programme for Peripherality (wtf?) is rolled out. An opposition spokesperson asks incredulously “Is it not the case that the EC transport commission turned back the first submission because it was not an integrated transport plan as it had no reference to any thing other than roads in the first instance?”
• 1991 The Dublin Transport Initiative study recommends integrated ticketing and real time passenger information across transport modes and Seamus Brennan, TD, vows to implement this “within 18 months” (hehe).
• 2001 The Dublin Transport Office releases its report entitled “An integrated transportation strategy for the Greater Dublin Area 2000 to 2016″. The Transportation Bill is passed which has provisions for implementing “integrated ticketing”. Real time passenger information is also trialled on some Dublin buses.
• 2002 Seamus Brennan is made Minister for Transport, again, I sh*t you not. He tells the Dáil “I intend to give further and urgent attention to examining how best to expedite this project.” He aims to have it ready by the launch of the LUAS in early 2004…. seems doable.
• 2006 Overtime, overbudget, and several reports later, the Comptroller and Auditor General’s 2005 Annual Report is scathing. CIE has shown stubbornness in implementing the project, with the rail and bus companies each pursuing different ticketing systems in parallel rather than facilitating the new ticketing system. Ministerial leadership is nowhere to be seen, despite the fact that these are companies owned by the government and receive a large part of their revenue as an annual subvention from the government giving ample leverage if any was needed. Dublin Bus seemed territorial in its 2000 Annual Report “The cross-city network [of buses].. has proved very popular.. avoiding the need for transfer [to other transport modes] in the city.
• June 2011 Minister for Transport Leo Varadkar says integrated ticketing is “expected” by end of August 2011.
• September 26 2011 Dublin bus real time mobile phone app released, for iphone only. The android app is to be available by November (don’t hold your breath). Fortunately in April someone put an android app together “over the weekend” from the data stream Dublin Bus has made available for the past few months.
• September 26 2011 The Minister for Transport expects integrated ticketing “to be available in 2012″ and that cash fares will be increased by “a good bit” to encourage people to switch.
• September 26 2011 Almost 50 years after Hamburg implemented its integrated transport system, the Chief Executive of the Transport Authority vows “We will bring all strands of public transport information together into one readily accessible system whereby everyone nationwide will be able to access and plan their journeys, including real-time arrival information, through a single site: TransportforIreland.ie.”

And there you have it. What, if anything, does this saga say about Ireland?

Attracting private finance to renewable energy without public subsidies is the only way to achieve a resilient low carbon industry. Regrettably, for the vast majority of cases, renewable energy like wind and solar cost more over their lifetime than their fossil fuel counterparts. For a snapshot of the health of wind and solar companies, the index of share prices are shown below. The recent bankruptcy of Solyndra, a large solar manufacturer which got a $535m loan from the US government, highlights the risks associated with public financing of renewable energy projects. The current political environment for further subsidies for renewable energy in America is toxic, and feed-in-tariffs are being scaled back in some European countries. This is why the share prices of wind and solar companies are at multi-year lows, despite resurgent natural gas prices.

Given this backdrop, there is still hope that innovative wind and solar companies can reduce the cost of their products to compete without government backing. One such company is Boulder Wind Power which secured $8m in private financing in 2011 and aims to have a new design of wind turbine on the market by 2013, which will have a higher efficiency at low wind speeds than other designs, and if one believes the company’s figures, could produce electricity at a levelised cost of €40/MWh, or cheaper than natural gas.

A few interesting (or not) excerpts from a recent wind turbine maintenance report, and the section on gearboxes (imagine these as bullet points, for some reason they’re not appearing as such):

• “Engineers are still scratching their heads when it comes to gearboxes. Even though gearboxes are certified to operate for 20 years, none of them on today’s market lasts more than 8 years.”

• 66%: the percentage of offshore O+M costs that are caused by unscheduled corrective maintenance

• 2-6 times higher – how much amount offshore wind turbines O+M costs are than on-shore wind turbine costs

• 10% – the loss in revenue due to the effect of spattered debris accumulation on the blade’s leading edge

• €100,000 to €300,000 per year – the costs of keeping offshore turbines online vs. an allocation of €45,000 per turbine for onshore wind

• 79% of wind turbines were still under warranty at the end of 2010

• A significant amount of R&D is currently going into gearbox reliability. Many gearboxes, designed for a 20-year life, are failing after 6 to 8 years of operation.

• “We have the data on O+M costs, but we don’t even share it with the manufacturers. I’ve seen their data, and it is all wrong. The problems are way, way worse than they realize. If you keep a turbine long enough, it will fail.”

“A wind turbine drive train, and particularly the gearbox, has many rotating parts. There is, therefore, a need for testing its structural and vibrational behavior. Due to its plurality of shafts and gears, it has several frequencies under operation that possess distinctive vibrational signatures. This is particularly true for the high-speed shaft and the tooth meshing of each gearbox stages. Several harmonics can thus be attributed to each component and detailed analysis of is crucial to determine the vibrational behavior of the system.”

An example of the damage is shown below.

This helps explain why the latest issue of Renewable Energy Focus had an article which prescribed direct drive wind turbines, which have no gearbox:

“Present trends suggest that direct drive turbines with permanent magnet generators are the way of the future, particularly offshore but also onshore. Siemens, Enercon and Goldwind are among several manufacturers to have launched direct drive turbines recently while Vestas has favoured the ‘half-way house’ of a geared permanent magnet solution for its latest 3 MW model and its planned medium-speed geared V164 7 MW offshore wind turbine. Former NREL Chief Engineer Sandy Butterfield, now CEO of Boulder Wind Power, believes that by 2015 most utility-scale turbines will be direct drive because of their superior energy capture, gearbox-free reliability and availability”

Further, there is this from Nordex’s CEO on the benefits of direct drive permanent magnet designs:

“Nordex says it has reduced the weight of the turbine per megawatt by 30 percent. Like Siemens, GE, and Alstom, the German firm has opted for direct drives in its offshore turbines. CEO Thomas Richterich believes that the benefits are obvious: “The heat that builds up in the gearbox represents a loss of 3 to 4 percent of the energy produced.”

There is one issue, with changing to direct drive permanent magnets, though, because they rely on the rare earth neodymium (it is possible for direct drive machines to produce the magnetic field electrically, like Enercon does, however these designs are bulkier and heavier). The price of neodymium has increased 1293% since January 2010 due to a production clamp down in China and a decrease in China’s export quota – China at present has a monopoly on production. While a number of companies outside of China are in the running to produce by 2015, the lack of a secure supply of neodymium will be a key concern for those committed to a direct drive permanent magnet design. Wind turbine manufacturers should continue to refine their gearbox designs as a hedge against possible supply chain disruption.

The unexpected jump in energy-related carbon emissions to 30.6 Gt CO2 eq in 2010 (up 1.6 Gt CO2 from 2009) makes reaching the carbon concentration limit of 450 ppm all but impossible. A cap of 32 Gt CO2 by 2020 would be necessary to stop overshooting this emissions limit. Further bad news out today was that Germany will retire its entire nuclear fleet by 2022, rescinding the earlier extension to 2036. With 2008 power sector emissions of 11.9 Gt CO2, and 80% of 2020 power plant emissions considered “locked in” barring early infrastructure retirements, dramatic improvements on the demand side of the electricity equation are required to limit the overshoot.

As outlined in a recent report by the IEA, huge, cost-effective savings are indeed possible. Figure 1 shows the estimated breakdown of global electricity be end use in 2006.

Fully 65% of of global electricity use is in two very inefficient sectors – lighting and motors. The IEA report focuses on motors. The key finding is that if all motor systems were optimised to provide the lowest life-cycle cost (LLCC), a 30% improvement in efficiency is possible, which would reduce global electricity demand by 10%.

There are three layers of savings. The first is the motor itself. Savings here are largest for small, sub-kW motors at part load. At 25% load, a new state of the art 0.75 kW motor which adheres to IE3 standards can be up to 30% more efficient than a comparable IE1 motor. The motors from 0.01 to 0.75 kW account for 90% of the global motor stock found in white goods, however only consume 9% of the total electricity consumed by motors. However significant savings in fridges, freezers and other appliances can be made by using, for example, more copper wiring in the stator, a higher slot fill, a lower loss premium steel core or by using a brushless permanent magnet design.

However the bulk of electricity – 68% – is used by medium size 0.75 – 375 kW motors. The savings from using premium motors in these cases is typically 5%. The other 25% comes from optimising the motor system. In variable industrial processes such as production lines, the use of a variable speed drive can yield large savings. These and other savings are summarised in Figure 2.

Realising these savings is difficult. Even though electricity comprises roughly 95% of the life cycle costs of a motor, people still  will opt for the cheaper up front motor. Legislation mandating more efficient appliances and motors will come into effect in the coming years. The more difficult savings to capture will be those outside of the motor – proper motor sizing, variable speed drives etc. Here the usual suite of barriers to energy efficiency need to be tackled e.g. imperfect information, adverse selection, principal-agent relationships, split incentives, hidden costs, access to capital, bounded rationality and so on. Given the difficulty with carbon savings on the supply side, however, efforts to get around these barriers should be redoubled.

On RTE’s Green is Gold programme, Richard Tol suggested that Ireland should not be a first mover in Electric Vehicles. Instead, our comparative advantage lies in agriculture and we should focus on cellulosic ethanol and algae biofuels if we desire to have an impact on future transport energy systems.

Last year, Ireland consumed some 8 Mtoe of oil, or 53% of our TPER. Eight large toes equates to an import requirement of 155,000 barrels of oil each day and an import bill of $4.9 bn per year @ $87/bbl (€3.7 bn at time of pixel). In simpler terms, this means a per capita requirement of 5.5 litres of oil each day, which is 40% above the EU average and 175% above the global average. Irish oil demand fell off a cliff last year as Figure 1 shows, but recent data reveals that it is growing again (there is a slight discrepancy between IEA data and SEAI data, with SEAI showing slightly lower consumption).

The global recession gave temporary respite to the oil market, however that may change, as the IEA’s World Energy Outlook 2010 states:

“The oil price needed to balance oil markets is set to rise, reflecting the growing insensitivity of both demand and supply to price. The growing concentration of oil use in transport and a shift of demand towards subsidised markets are limiting the scope for higher prices to choke off demand through switching to alternative fuels. And constraints on investment mean that higher prices lead to only modest increases in production.”

As the IEA chief economist, Fatih Birol, has stated, it would be wise to “Leave oil before it leaves us”. Governments, including Ireland, are providing funding to jump-start the transition to EVs. Clearly the investment in EVs is risky – consumers may not warm to them due to price and range anxiety. This investment may be all the more misallocated if there are credible alternatives to electric vehicles. The money could be better spent in R&D on some of these alternatives. So could algae biofuels contribute to future needs?

The short answer is not bloody likely, and I’ll try to briefly discuss the reasons for this.

Algae Biofuels

“It is quite easy to make asphalts and crude oil from algae, seaweed and other sea plants.” - New York Times – September 1940

From 1978-1995, the Aquatic Species Program, run by NREL, studied algae biofuels. It was wound up under President Clinton due to budget cuts and the low oil prices of the ’90s. In its final report, it stated: ”The high cost of algae production remains an obstacle.”

In October this year,  a comprehensive report by the Lawrence Berkeley National Laboratory was released entitled “A Realistic Technology and Engineering Assessment of  Algae Biofuel Production”. It concludes “Even with low capital charges, it is not possible to produce microalgae biofuels cost-competitively with fossil fuels, or even with other biofuels, without major advances in technology.” Assuming a 5% cost of capital, a breakeven point of $300/bbl is calculated.

To meet 1% of current global oil demand from algae would require capital investment of $640 bn. This is 40% above the entire 2010 global oil and gas investment budget. Given that output from currently producing oil fields is declining at the rate of 8.3% per year, while demand this year grew by 2.7%, vast investment in algae is required to fill any part of that gap. The report suggests there is limited scope (perhaps 25%) to reduce costs.

It’s cold maths like this that made Solazyme abandon using algae to photosynthesize biofuels after two years: “For the first couple of years there were six employees happily at work, investigating strains, experimenting with growing conditions, and attempting to optimize the development of algae biofuel. But then one day a terrible thing happened. After closely analyzing their current and projected best case production costs, they realized the oil they could produce was coming in at over $1000 a gallon. This put the co-founders into a panic, not knowing what they could to do about this harsh reality, only that they certainly could not continue down that path.”

This chimes with an SEAI report into marine biodiesel from last year which stated “A reduction [of costs] by at least a factor of five is necessary” to produce oil from algae. The Lawrence Berkeley report located the algae facility in California, with an excellent solar resource. Even there, though, with the 12C temperatures in winter, winter production was assumed to be stopped due to the “poor economics and negative energy balances”. Algae are finicky critters which require just the right temperatures to grow. In Ireland you’d be lucky to get 6 months of production and as such it’s highly unlikely you’ll ever see commercial microalgae production here.

The reality is that despite several headlines and gimmicky test flights by airlines, almost no algae oil is being produced at present – perhaps 500 barrels a year, or enough to meet global oil demand for half a second. The likelihood of algae providing a meaningful part of the global energy mix should be heavily discounted. Unlike algae, electric vehicles are here and now. Trying to accelerate volume production and movement down the cost curve is prudent given the oil market backdrop. A cost benefit analysis of the Irish government investment of some tens of millions of euro will only be clear in hindsight. It is small considering the annual oil import bill.

In the past couple of weeks China has shown a disconcerting trigger happiness to enter into resource diplomacy. On September 8th Japan detained a Chinese fishing boat captain after the boat strayed into disputed waters in the East China Sea and rammed a Japanese patrol boat. China demanded his release and threw the toys out of the pram when he was detained for two weeks. When Japan refused to release him, they cut off shipments of rare earth elements, which are used in many aspects of Japanese industry. Japan promptly released the captain.

Then, on Monday, the New York Times reported that China has embargoed the export of rare earth elements to the US and Europe. The ostensible catalyst was when American trade officials announced on Friday that they would investigate whether China was violating World Trade Organisation rules by subsidising its clean energy exports and limiting clean energy imports.

The bans on exports are unofficial because unofficial embargoes are more difficult to prosecute in front of the WTO. The China representative of the US Chamber of Commerce said “If it’s true, it’s disturbing news to say the least”.

Rare earth elements comprise 17 chemically similar metals, of which about 97% come from China. China did not always have a monopoly on their production, as Figure 1 shows. The US was a major producer, however due to China flooding the market with cheap rare earths (due to low wages and environmental standards), US mines shut down.

China has for many years implemented a quota on the export of raw REEs. It seeks to have technology companies, which often require REEs, to locate in China so that (i) it can gain access to IP by mandating Chinese partners with foreign companies and (ii) it can gain the value add and jobs which such technology offers. The export quota was dramatically lowered this year, and the recent embargo comes on top of that. The current embargoes do not limit the export of products containing REE which are produced in China.

The 17 REEs can be divided into ‘light’ and ‘heavy’ elements. The heavy REEs dysprosium and terbium are the most resource constrained and apply to the following green technologies: EVs, Wind turbines and CFLs.

Neodymium Magnets: Wind and EVs

EVs

Most EVs and hybrids, including the Prius and Leaf use neodymium-iron-boron magnets  in their brushless motors. Dysprosium is added to increase the resistance to demagnetisation at high temperatures (intrinsic coercivity). Placing about 5% by weight Dy in the grain boundaries of the magnet can raise the allowable in-service temperatures from around 80C to 200C, which is necessary for use in EVs. Japanese researchers have recently come up with a way to increase the coercivity of neo magnets without dysprosium.

Furthermore, despite what almost all articles on REEs suggest, neodymium magnets are not “essential” for EVs. They are more compact and more efficient than their induction or ferrite motor counterparts. But if an REE (also known as lanthanides) shortage arises, however, they are not going to stop EVs:

“GM’s Bly said access to lanthanides is not a zero-sum issue.

“There are other materials available, but you might lose a couple percent of efficiency,” Bly said. “It’s not as though if you don’t get this, you get nothing. A couple points of efficiency are measurable, but it will not hamper the ability of electric machines or motors to propagate very rapidly.”

Neodymium Magnets: Wind

Using gearless wind turbines allow manufacturers to dispense with the gearbox and reduce the number of parts by up to 50%. This leads to much reduced maintenance and installation costs, which are important for offshore wind turbines where weather service windows are often narrow. The UK testing of offshore DFIGs revealed that about 10% of the LCOE can be attributed just to servicing the gearbox of offshore wind turbines. This has led the CTO of Siemens to state that wind with neo magnets are “the future”. Nearly all manufacturers plan to offer gearless wind turbines in the coming years, however at present only a tiny fraction employ neodymium magnets.

While it’s unclear if Siemens’ turbines contain dysprosium, Vestas’ upcoming turbines are said to by the NYT. The difficulty with dysprosium for both wind turbines and EVs is that it’s very rarely found in appreciable concentrations. Annual production is some 1,400 tonnes, 99% of which comes from China, and the prospects for large dysprosium deposits outside of China are not great. If wind manufacturers move their production to China, they will be forced to hand over valuable manufacturing know-how to Chinese companies, something they are loth to do.

CFLs: Rare Earth Phosphors

CFLs generate light by passing an electric current through mercury. The resulting UV radiation strikes REE phosphors which absorb the UV and emit the visible light we see. Terbium is required for the red phosphor. Global terbium production last year was around 300 tonnes, all from China, and prospects for which outside of China are not great. CFLs do not have to contain rare earths, they can use halophosphors instead. An efficiency penalty of about 18% is incurred along with a significant decrease in the quality of the light.

There isn’t an IEA for rare earths, however some mining companies and consultants have projected the supply and demand balance for the rare earths in 2014. Figure 3 shows that they nearly all think dysprosium and terbium will be in significantly short supply:

The result isn’t going to be TEOTWAWKI, but it may require some retooling of production lines to utilise, as one REE consultant calls them, “old technologies”.

I’ve posted a longer (20 pages) review of REEs here. As Figure 1 shows, there are certainly REE accumulations outside China. There are some 190 REE mining companies outside China at various stages of development. However REE mining is dirty and requires lots of capital. Only a few mines have gathered that capital. With this latest kerfuffle, that should be easier to access, especially if governments step in with loan guarantees or if tech companies recognise their vulnerability and buyout junior miners to “secure their upstream”. Indeed, one Irish guy, James Kenny, is about to IPO on the Toronto stock exchange to get money to develop a large (15% of current supply/year) mine in South Africa. In addition, Germany has just announced that they will be raising the issue of REEs at the G8 and G20 summits.