Future Energy

How Does Canada Stand in the Clean Energy Race?

Source: sustainabilitygalore.com

Although it was released March 29^th, I only got around to looking at the Pew Environment Group's latest analysis of clean energy investment over this past weekend.  Who's Winning the Clean Energy Race? 2010 Edition estimates that global clean energy investment reached US$243 billion in 2010 a 30% increase over 2009.  For the second year, the investment champion is China, which invested a total of US$54.4 billion followed by Germany (US$41.2) and the U.S. (US$34.0).

"The clean energy sector is emerging as one of the most dynamic and competitive in the world, witnessing 630 percent growth in finance and investments since 2004," said Phyllis Cuttino, director of Pew's Clean Energy Program. "Countries like China, Germany and India were attractive to financers because they have national policies that support renewable energy standards, carbon reduction targets and/or incentives for investment and production that create long-term certainty for investors."

Canada came in a lowly 7th place, investing US$5.6 billion - which is actually not bad given a population 1/10^th the sixth of that in the U.S. (and only 1/40^th that of China).  As a country we only accounted for 2.8% of the G-20 investment total.

Pew's Fact Sheet for Canada is brief but attributes most of the control over clean energy investment to the provinces - and, although, they don't break the country totals down by province, its likely that Ontario accounted for the lion's share of investment this past year.  In large part this attributable to the feed-in tariff and the Renewable Energy Standard the province has in place. 

(Interestingly, the report highlights the important role of Feed-In Tariffs (FIT's) in supporting clean energy investment.  Pew cites the US National Renewable Energy Laboratory which estimates that FIT's have led to 75% of global solar installations and 45% of global wind projects.  While Germany and Italy are the best known FIT proponents, as noted above, Ontario also has a FIT program in place - something the Ontario government has increasingly come under criticism for.)

While Canada is in 7th place for investment, the country falls to 12-13% (depending on technology) based on installed capacity, suggesting that conditions in the past one to two years have allowed investment in renewables in this country to accelerate - again, likely to Ontario's support programs.  If you are developing renewable power in this country, you are likely active in Ontario.

One thing Pew doesn't provide is any assessment of the effectiveness of the clean energy policy alternatives.  This type of review should have allowed some observations in that regard, but there is no mention of it that I saw.  Perhaps next year.

 

Integrating Renewables into the Grid - Its All About Flexibility

Source: techvert.com

Back in mid-January, Stanford's TomKat Centre for Sustainable Energy hosted the Grid Integration of Renewables Workshop, bringing together a group to examine the issues relating to grid expansion and the integration of renewables into that grid.  I came across a report on the workshop at the CleanTech blog that interested me but was unable to get much detail about the discussions. 

Sometime in the past few weeks, the TomKat Centre posted most of the presentations given at the workshop.  Collectively they provide an interesting picture of the issues at least these experts foresee as the proportion of intermittent renewables such as wind and solar that are connected to the grid becomes significant.

Keynote Speakers included U.S. Senator Jeff Bingaman (New Mexico) and Commissioner Jeffrey Byron of the California Energy Commission (CleanTech blog's report focuses on what the keynote speakers had to say in lots of detail so I won't try to add anything here).

Speakers included:

• Gregor Czisch, Transnational Renewables, Germany - The Supergrid: 100% Renewable Electricity Supply for Europe and Its Neighborhood » (ppt)
• Mark Jacobson, Stanford - Grid Integration Challenges for 100% Conversion to Wind and Solar Power » (pdf)
• Hans Henrik Lindboe, Ea Energy Analyses, Denmark - Enabling Renewable Energy Integration in Denmark » (pdf)
• V. John White, Center for Energy Efficiency and Renewable Technologies - Pulling the Pieces Together: Thinking Regionally and Cooperatively » (pdf)
• Antonio Alvarez, PG & E - Efforts and Challenges to Manage California's Expected Intermittent Renewable Additions » (pdf)
• Debbie Lew, National Renewable Energy Laboratory - Finding Flexibility in the Existing System » (pdf)
• Nick Jenkins, Cardiff University, UK - Optimizing AC and DC Transmission Networks for High Penetration of Renewables » (pdf)
• Michael Wara, Stanford - Key Regulatory Challenges for Deep Penetration of Renewables (no links provided)
• Willett Kempton, University of Delaware - Low Cost Grid Integration via Met-Smart Interconnection and Storage Inherent in End-Use Devices » (pdf)

The clearest point of agreement running through the speakers' presentations was that increased reliance on non-hydro renewables would lead to greater uncertainty of supply, which would in turn demand greater flexibility within the management of the grid if supply and demand were to be successfully balanced.  Suggested mechanisms for achieving the necessary flexibility generally fell into one of three categories, including:

Increase the Size of the Catchment

Speakers identified a range of approaches that relate to increasing the size of the area from which power can be drawn from to lessen the chance that power is available due to weather issues.  Suggested mechanisms included imports, Balancing Area cooperation and development of "asynchronous" resources (i.e. resources that are expected to be couter-cyclical in the availability).  The underlying assumption of efforts to increase the size of the catchment being that its always windy somewhere.  Needless to say, just about any approaches relying on increased catchment size demand big investments in transmission infrastructure - perhaps one of the most significant challenges facing future grid development.

Better Manage  Supply

While some of the suggestions appear to focus primarily on the need for standby conventional power sources, more creative approaches included development of asynchronous sources, as noted above, and the need for grid storage.

Better Manage Demand

Clearly an approach with a lot of future potential as Smart Grid technologies are developed, speakers focused on automatic demand response technologies, "dynamic pricing" (i.e. higher pricing during times of the day that electricity is in greater demand or less available) and curtailment or the ability to automatically cut off some customers or applications as demand increases/supply decreases.

When you say them fast, these all sound pretty simple.  But they represent significant shifts in approach, huge infrastructure investments and potentially years of regulatory and public process to put in place. 

Still an interesting collection of views on what seems the most likely future direction for electricity.

Wind Energy Siting: Will Environmental Guidelines End the Conflicts?

 

Source:Clean Technica

If you are concerned about global warming and the effects that atmospheric carbon levels are even now having, then wind energy looks like a no-brainer.  Clearly not everyone agrees.

February 1st, the first appeal of a Renewable Energy Approval certificate in Ontario began, focusing on a small wind farm being developed by Suncor Energy Inc.  The Kent Breeze wind farm, once constructed, will  have eight turbines with 20 MW total capacity.  At issue are claims that the windfarm will cause serious harm to human health as a result of exposure to to the infrasound and/or low frequency noise and shadow flicker from wind turbines.  The appeal hearing is expected to take until March 31st and involve 16 days of testimony.

Similarly, High Country News has long followed the controversy regarding wind power development in Wyoming.  On the surface the debate in Wyoming appears to be about preserving Sage Grouse and the aesthetic of undeveloped ranchland.  However, digging deeper and it becomes a conflict between oil and gas interests and wind (see Wind Resistance: Will the petrocracy - and greens - keep Wyoming from realizing its windy potential?, Deccember 2009):

"Look closer, however, and you'll find that much of the resistance to wind actually comes from the fossil fuel industry and the politics it bankrolls.  Wyoming is the largest coal producer in the nation and the third-largest producer of natural gas; at least one town is named after an oil company. Severance taxes and royalties from these industries keep the state's government, schools and other services afloat. In an indirect and sometimes convoluted way, wind threatens that old-school energy dynamic. At an August symposium on wind energy at the University of Wyoming in Laramie, Aaron Clark, an advisor to the governor, put it candidly: "We can't let wind development hurt the state's revenue stream from extractive minerals."

The Cape Wind went through a nine year of regulatory process with opposition from no less than Sentaor Ted Kennedy, who appeared to fear the impact on his holiday home's vistas over Nantucket Sound - and its still in the courts!

And its not just in North America.  Back in August 2009, Greenpeace U.K. voiced its concerns about local councils' negative stance towards onshore wind farms:

".... of the reasons Britain’s green industrial revolution is yet to take off is the lack of domestic demand for wind turbines, and a key reason for that has been the attitude of many Conservative councils ..... a key factor behind the woes is a backlash against onshore wind farms by local authorities concerned about damage to the value of citizens’ property and to the environment — including local bird populations."

Much of the negative sentiment seems to arise because some people don't like looking at the turbines (from one description of 1.5 MW turbines: "From its base to the tip of its rotor, the GE 1.5 megawatt wind turbine is 380 feet tall. Each rotor blade is 122 feet long.") or see them as a threat to their property values (although, some of the controversy appears to be driven by entrenched industries with no interest in change).  In a word, a classic case of NIMBY'ism.  And while these types of arguments always seem to be advanced in terms of environmental or human-health claims, how real are the claims?    

Earlier this month, in an effort to address the burgeoning concerns, the U.S. Fish & Wildlife Service issued voluntary Draft Land-Based Wind Energy Guidelines. These Guidelines have been a long-time coming.  The Fish & Wildlife Service introduction to the Guidelines that is on their website suggests a gestation of more than eight years:

"In July 2003, the Service released for a set of voluntary, interim guidelines for land-based, wind energy projects to assist developers in avoiding, minimizing and/or compensating for effects to fish, wildlife, and their habitats. Following an extended two-year public comment period, the Secretary of the Interior established the Wind Turbine Guidelines Advisory Committee under the auspices of the Federal Advisory Committee Act in March 2007 to provide the recommendations for the final guidelines. The Committee was comprised of a diversity of stakeholders, including federal, tribal, state, private industries and conservation organizations. After two years of deliberations, the Committee submitted their final recommendations to the Secretary on March 4, 2010.  The U.S. Fish and Wildlife Service then convened an internal working group representing several Service programs to review the Committee recommendations.  The working group used the recommendations as a basis to develop the Service’s proposed wind energy guidelines."

The Guidelines are intended to guide site-selection of land-based, wind energy projects, addressing the potential negative effects of wind energy development on fish, wildlife, and their habitats.

Briefly, the Guidelines are based on a five tiered approach to habitat and wildlife protection, including:

Tier 1 – Preliminary evaluation or screening of potential sites
Tier 2 – Site characterization
Tier 3 – Pre-construction monitoring and assessments
Tier 4 – Post-construction monitoring of effects
Tier 5 – Research

At each of the site-selection levels, users are asked to assess the risk of future impacts on wildlife and wildlife habitat based on consideration of the species available, presenece of high value habitat (including "intact habitat" - as the Fish & Wildlife Service states in the Introduction, "many of North America's native landscapes are greatly diminished or degraded from multiple causes unrelated to wind energy".  So as the dispute in Wyoming shows, wind may just be the latest layer of impacts in the cake - and probably not even the most significant.)  

Once the decision to site a wind farm has been made, the Guidelines also provide best practice mitigation and management approaches - although, not in great detail.

As someone who sits down from time to time to develop similar types of guidelines, I would say that they are well thought out and drafted. And they are complimented by guidance to address risks specific to eagles in the Draft Eagle Conservation Plan Guidance as well as by the creation of a new website which the Service is promising to maintain with new and emerging best practice as it becomes comes available.

Will this address many of the concerns around wind farms and wind turbines?  I suspect not. 

It appears to be a useful tool for addressing wildlife concerns associated wind development.  However, much of the concern around wind farms and many other kinds of development is much more visceral than the objective environmental or health concerns often cited.  It comes down to a fear of change and a desire to control the change in our own environments.  The conflicts also say something about the uneven spread of impacts and benefits.  For those living next to a wind farm the global environmental benefits of wind energy may mean little to them.

I was struck by the author's statement at the end of the article about Wyoming's wind farm conflicts:

"I slither through the fence and walk up to a turbine, until I'm directly beneath its blades. The only sound is a low-pitched sort of watery sigh, kind of like a slowed-down version of an unborn baby's heartbeat on an ultrasound. No gears grind or scream on this solitary giant, nothing spews out of it, no drill bits penetrate, and no strange fluids are shot into or sucked out of the earth. The wind blows, the arms turn, and electrons flow through cables, down the tower, under the ground, and into the power lines where they'll join up with the coal-generated electrons 13 miles away. They flow into the bloodstream of the omnipotent, tentacled organism called the grid. Somewhere, someone flips a switch. And there is light."

It says a lot about these types of conflicts - our points of comparison, our awareness of the effects of our decisions and our choices - and much too rational for most of us.

Are Sustainability Ratings Sustainable?

 

Source: dreamstime.com

Several days ago, I wrote about the strange case of the Dow Jones Sustainability Index and its puzzling choice of Haliburton for inclusion in the index for 2010/2011 to replace BP.  But the DJSI isn't the only group to release a recent update.  In recent weeks there have been a series of major ratings announcements, including from the Carbon Disclosure Project, FTSE4Good, Newsweek, CRD Analytics (Global 1000 Sustainable Performance Leaders) and Corporate Knights (Global 100 Most Sustainable Companies). 

To cap it all off, SustainAbility released Phase Two of its review of the universe of corporate sustainability ratings.  SustainAbility launched this particular research effort back in May (Phase One White Paper), in order to "better understand the universe of sustainability ratings and to influence and improve the quality and transparency of such ratings".  The review is intended to have four parts, with the most recent offering providing an inventory of more than 100 global rankings as well as the results of a survey of over 1,000 "sustainability professionals".  (Later Phases are also scheduled to benchmark an illustrative set of ratings using SustainAbility's own methodology.)

SustainAbility has launched their review just as the ratings are being taken more seriously and as their credibility and transparency are being called into question.  SustainAbility's timing is good given the comments I highlighted in my last post regarding DJSI's puzzling selection of Haliburton.  Looking beyond this one issue its also good given the growth in the number of sustainability related ratings, from 21 in 2000 to 108 today. 

Interestingly, SustainAbility highlights the discrepancies around so many ratings dropping BP in the aftermath of the Deepwater Horizon disaster and yet failing to note the conditions that preceded it (and BP's other major incidents in 2006 and 2005) - such as inadequate safety culture and poor deepwater drilling practices.  This cuts to the quick of many claims regarding sustainability ratings, i.e. that the focus on sustainability provides a leading edge look at the future prospects of the rated companies.  This clearly isn't the case with BP.

While SustainAbility says that it won't be explicitly ranking the ratings, I wanted to look at how they did compare.  I am most interested in energy companies and in those ratings that address them (and that I can access easily, so for example, FTSE4Good, which no longer appears to make its complete holdings list public, was excluded from my comparison).  I've only compared five ratings, including:

• DJSI - having picked on DJSI for one entire post, I don't need to say anything more about them here;
• Global 1000 Sustainable Performance Leaders - developed by CRD Analytics, a U.S. provider of sustainability analytics (I only concerned myself with the top 150 companies);
• Global 100 Most Sustainable Companies - developed by Corporate Knights, a Canadian magazine that looks at corporate sustainability issues, this rating has been around since 2005;
• Carbon Disclosure Leadership Index -developed by the Carbon Disclosure Project, now in its tenth year, the index highlights 104 companies (out of 760) with the highest disclosure scores;
• Newsweek's Green Company Rankings - now in its second year, Newsweek's rankings look at 500 U.S. and 100 global companies.  

These five ratings included more than 65 energy companies, including oil& gas and utilities.  Interestingly, for a list of so-called sustainability companies, only one renewable energy company - Vestas - was included (although, many of the oil & gas and utilities do have some level of renewables investment).  The following table provides a summary of the companies that were ranked by two or more ratings.  The "champions", i.e. those ranked by three or more ratings, are highlighted in green.  Only two companies, Royal Dutch Shell and PG&E, were highlighted by more than three ratings.

 

Companies	Sustainability Indices
	DJSI	Global  1000	Global 100	CDP    Leaders	Newsweek
BG Group PLC	√		29
Centrica PLC	√		31	92
Chevron				80	86
Duke Energy	√		70
Enbridge		29	16
Encana	√		25
Endesa	√	136
Energias de Portugal	√			90
E.ON AG	√				93
Enel SpA	√				91
ENI SpA	√				80
ExxonMobil		48			70
Hess Corporation		60		90
Iberdrola SA	√	37	55
Neste Oil Oyj	√		85
PG&E	√		2	90	66
Petrobras	√	89			84
Repsol	√	137		88
Royal Dutch Shell		106	20	89	88
Sasol	√	122
Spectra	√			94
Statoil	√	130	67
Suncor		74	40
Total	√				62
TransCanada	√		65
Vestas Wind Systems	√		42

Note: In most cases, numbers denote rankings within each rating.  CDP uses scores for disclosure performance rather than ranking companies. DJSI does not rank included companies.

 

A number of things strike me most about the ratings, including:

• The discrepancies between rating systems.  For example, PG&E is ranked second in the Global 100 rating but slid to 66th in Newsweek's Green Company rankings.
• How high a group of oil & gas and, in many cases, coal-fired utilities did relative to other companies in the global economy. 
• How few (only 1) renewable energy companies were among the sector's sustainability leaders????????     

So what are the ratings measuring sustainability or who has the resources and inclination to package the relevant information?  I for one will be interested to see what SustainAbility digs up as they continue their review.

 

 

How Real are Sustainability Ratings?

Its old news now, but the iconic Dow Jones Sustainability Index released the results of its latest annual review in September, and not without some controversy.

As has happened every year since the creation of the index in 1999, Dow Jones and SAM have identified those that made the grade and had been added to the list and those that had failed and were being dropped from the indexes.  Earlier in 2010, BP was dropped from the indexes in response to the Deepwater Horizon oil spill and prior incidents such as the explosion and worker deaths at the company's Texas City refinery in 2005 and failures on the Trans-Alaska pipeline in 2006.  So far not so controversial.

However, puzzlingly, to replace BP, in September DJSI chose to add Haliburton to the list.  That is the same Haliburton that was BP's partner on the Deepwater Horizon drill rig.  With responsibilities still being sorted out for the oil spill disaster the decision certainly called into question DJSI's sustainability credentials.

For example, John Collins Rudholf, writing in NYTimes Green blog .....

"Halliburton was chosen after a “thorough analysis of corporate economic, environmental and social performance, assessing issues such as corporate governance, risk management, branding, climate change mitigation, supply chain standards and labor practices,” Dow Jones said in a statement."

"Some market observers found the selection puzzling, however. Halliburton, after all, was deeply involved in the BP drilling operation that ultimately caused an estimated 4.4 million barrels of oil to spill into the Gulf of Mexico. The company remains under investigation by the Justice Department for its role in the disaster, and could still face civil or even criminal sanctions."

Writing at Social Funds website, Robert Kropp went even further, questioning how DJSI came to include a variety of companies with questionable public histories ......

"The largest companies deleted were Toyota, Royal Dutch Shell and UniCredit. Toyota, of course, has received considerable media attention this year because of multiple product quality defects in its automobiles, while Shell -- currently listed as the world's second-largest corporation in Fortune Magazines Global 500 -- is responsible, along with ExxonMobil, for much of the estimated 546 million barrels of oil that have spilled in the Niger Delta over the last 50 years.

The question of why companies with such poor environmental records would be included in a sustainability index in the first place was highlighted earlier this year, when BP was removed from the DJSI World following the Gulf of Mexico oil spill. Index rules allow for elimination of companies from the DJSI following extraordinary events."

The DJSI seem to be relatively transparent, providing relatively detailed descriptions of their methadologies.  They follow a best-in-class approach and include sustainability leaders from each industry on a global and regional level respectively. The annual review of the DJSI family is based on a thorough analysis of corporate economic, environmental and social performance, assessing issues such as corporate governance, risk management, branding, climate change mitigation,supply chain standards and labor practices. It accounts for general as well as industry specific sustainability criteria for each of the 57 sectors defined according to the Industry Classification Benchmark (ICB).

 

Dimension	Criteria	Weighting (%)
Economic	Codes of Conduct / Compliance / Corruption & Bribery	6.0
	Corporate Governance	6.0
	Risk & Crisis Management	6.0
	Industry Specific Criteria	Depends on industry
Environment	Environmental Reporting*	3.0
	Industry Specific Criteria	Depends on industry
Social	Corporate Citizenship/ Philanthropy	3.0
	Labour Practice Indicators	5.0
	Human Capital Development	5.5
	Social Reporting*	3.0
	Talent Attraction & Retention	5.5
	Industry Specific Criteria	Depends on industry

 However, as Halliburton's inclusion demonstrates some of the decisions are at best counter-intuitive and may even suggest a lack of real rigor - perhaps even lack of understanding about what "sustainability" entails.

 

Preparing the U.S. Department of Defense for a Post-Petroleum Era

Source: EVE Online

The Centre for a New American Security recently released its vision for the energy future facing the U.S. Department of Defense.   In Fueling the Future: Preparing the Department of Defense for a Post-Petroleum Era, authors Christine Parthemore and John Nagl provide a concise, pragmatic look at the risks energy poses for U.S. security .....

"Reducing dependence on petroleum will help ensure the long-term ability of the military to carry out its assigned missions — and help ensure the security of the nation ....

• Heavy dependence on large fuel supplies can increase operational vulnerabilities and make fuel supply infrastructure a more valuable target.

• Every dollar increase in the price of petroleum costs DOD up to 130 million additional dollars.  Rising global demand, for instance in China, is increasing the strategic importance of petroleum in ways that could be detrimental to U.S. interests.

• Countries such as Iran and Venezuela could have the largest remaining reserves in a few decades if current production rates hold – and will gain leverage as a result.

• High levels of petroleum consumption are contributing to the changing climate, which can bring destabilizing effects and trigger new security challenges."

...... and the challenges of moving to a non-petroleum fueled armed services.

"To ready America’s armed forces for tomorrow’s challenges, DOD should ensure that it can operate all of its systems on non-petroleum fuels by 2040.  .....  Some estimates indicate that the current global reserve-to-production (R/P) ratio – how fast the world will produce all currently known recoverable petroleum reserves at the current rate of production – is less than 50 years.  ..... Ensuring that DOD can operate on non-petroleum fuels 30 years from today is a conservative hedge against prevailing economic, political and environmental trends, conditions and constraints."

To address the challenge, they propose 12 principles:

1. Set a common energy goal of "managing a smooth transition beyond petroleum over the next 30 years".
2. Establish a clear set of guidelines that help the services and the private sector to understand what sorts of fuels, infrastructure and efficiency technologies will be needed.
3. Plan for an uncertain future.
4. Demand new fuels for old vehicles.
5. continue to increase alternative fuel use at domestic bases.
6. Invest for maximum impact - factoring distribution and infrastructure into decisions about where to invest.
7. Save energy, keep the change - addressing the incentives and dis-incentives built into current budgeting rules and norms.
8. Understand that energy is not free.
9. Promote a shared understanding of the the DOD's energy future with Congress, the Executive Branch and private companies.
10. engage allies in the energy transition.
11. streamline energy management.
12. Plan for the worst.

Whats most interesting for the principles is that they could equally be applied to the country as a whole, guiding the U.S. to a less risky future based on a substantially reduced appetite for petroleum fuels. 

The authors do not appear to even hint at a broader application of the principles they enunciate.  However, given a government even partly focused on governing for the long haul (versus whatever the focus is now - its beyond my understanding) these would be national principles.  I wonder what Tom Friedman would have to say about that?

 

McKinsey: Energy and Environmental Resource Constraints a Key Global Trend

 

"Understanding a company's full exposure to energy and environmental risks will in many cases be a - if not the the - decisive factor determining its long-term viability."

Yet another interesting bit of information I came across over the summer was some research from McKinsey & Company.

In the June edition of McKinsey Quarterly, the authors behind a survey of more than 1,400 executives around the world discussed the importance of key global trends, their impact on business and the need for pro-active trend-spotting, issues management, etc.

"The fact is, trends matter. Systematically spotting and acting on emerging ones helps companies to capture market opportunities, test risks, and spur innovation. Today, when the biggest business challenge is responding to a world in which the frame and basis of competition are always changing, any effort to set corporate strategy must consider more than traditional performance measures, such as a company’s core capabilities and the structure of the industry in which it competes. Managers must also gain an understanding of deep external forces and the narrower trends they can unleash. In our experience, if senior executives wait for the full impact of global forces to manifest themselves at an industry and company level, they will have waited too long."

McKinsey's research identified five global trends expected to define the coming era, including:

• The Great Re-balancing - the shift in the nexus of the global economy from developed to emerging economies.

• The Productivity Imperative - the need for among developed-world economies for pronounced gains in productivity.

• The Global Grid - impacts of increasing cross-border flows of capital, information, goods and people on the global economy.

• Pricing the Planet - the effects of growing resource shortages and competition.

• The Market State - the role of national entities in a globalized world.

The most interesting/relevant trend from an energy point of view is "Pricing the Planet", i.e. McKinsey's take on the role of resources and resource shortages in the future economy.

"A collision is shaping up among the rising demand for resources, constrained supplies, and changing social attitudes toward environmental protection. The next decade will see an increased focus on resource productivity, the emergence of substantial clean-tech industries, and regulatory initiatives."

McKinsey identified three forces that will affect what resources we use, how we use them and what price we will need to pay for them, including:

• Growing demand - projections for global economic growth over the next decade suggest that demand for natural resources will rise by at least a third. About 90 percent of that increase will come from growth in emerging markets.

• Constrained supply - as easy-to-tap, high-quality reserves are depleted, supply will come from harder-to-access, more costly, and more politically unstable environments.

• Increased regulatory and social scrutiny - there is an emerging global consensus focused on environmental sustainability. While climate change is the most visible battleground, other issues loom: water scarcity, pollution, food safety, and depletion of global fish stocks, among other things. For businesses, this new sensibility will lead to stricter environmental regulations and growing demands from consumers and employees that companies demonstrate greater environmental responsibility.

McKinsey's research is really a business-focused take on what has been a long line of research and opinion tattempting to understand the limits to human population growth.  Beginning with Malthus in the early 19th century, the Club of Rome in the 1970's and more recently the exploration of "planetary boundaries",  there as been a regular dialog on the limits to how much our population can growth and obtain the resources needed to support us.  McKinsey is looking at the globalizing economy and what it means for business, but it builds on a well established foundation.

McKinsey's research applies to resources in general.  However, looking specifically at energy, the authors offer two views.

One speaks for the status-quo:

"The fossil fuel consumption infrastructure is so large that, despite recent clean-energy investments, the ratio of fossil fuel to renewable and nuclear power use in 2020 will still be 80 percent, as it is today. ....... Despite huge investments in clean energy, in 2020 the ratio of fossil fuel consumption to renewable and nuclear power will remain largely as it is today—roughly 80 percent. No realistic scenario will move the needle: the embedded resource infrastructure is so large that any transition away from fossil fuels will take decades."

But the other looks at the key role clean tech will have for new energy investment:

"But the view changes dramatically when you look beneath the supply stock to the flows of new investment. Suddenly, clean tech emerges as one of the next decade’s biggest growth industries. Upward of $2 trillion will probably be invested in building clean-energy capacity globally over the next ten years. In the United States, 90 percent of this expanded capacity will be in renewable or nuclear energy—66 percent in the European Union and China. Before 2020, this investment will probably create a clean-tech industry generating well over $1 trillion a year in sales."

As these trends come to affect energy and other resource availability, McKinsey predcts a changed global economy, one in which resource productivity will be key.  To achieve that goal, the authors offer a range of prescriptions.  However, the philosophy that they are espousing seems best summarized as "in uncertain times, the need to plan for widely differing outcomes is the one clear certainty".

  

Three Polls for Sustainability

Source: Signal Environmental

It was a busy summer and some things, like this blog, just couldn't keep up.  But that's not to say I didn't come across lots  I'd like to look back at as I try to get back in the habit of posting again.  Take the three polls I came across in early August (that's when I came across them, not necessarily when they were made public).

Back in June, Pembina Institute released a survey of 5,000 "thought leaders" (whatever the heck a thought leader is - I'm not sure that academics and government middle managers are leading many in their thinking these days).  The survey was conducted by McAllister Opinion Research and was released in advance of the G8/G20 meetings in Huntsville and Toronto, respectively.  Needless to say, with the uproar over fake lakes, $1 billion in security costs and riots in T.O., this survey sank without a trace. 

In the words of the press release ......

"The federal government is out of step with leading thinkers on issues related to sustainability, energy and climate change, according to the results of a groundbreaking survey of more than 5,000 experts and government officials  ....  These results clearly illustrate that leaders within government, academia and the private sector understand the energy and sustainability challenges Canada faces, and have a high level of agreement on how best to tackle them  ....  What Canada still lacks is the political commitment to take sufficient action."

Whats most interesting for me is that 59% of the respondents work in government (and most are in Canada), suggesting a profound disconnect between the Harper government and its civil servants on energy policy, climate change and sustainability.

Shifting direction (but just a bit), Gibbs and Soell, a New York based public affairs firm released their 2010 Sense and Sustainability Study, looking at how 2,600 U.S. consumers and 300 Fortune 1000 executives view the corporate pursuit of sustainability.   Scepticism is the key word Gibbs and Soell use to describe their own study.

Again in the words of the press release ...

Corporate America has embarked on its journey toward sustainability, but still draws public skepticism. Only 29% of executives and 16% of consumers believe that a majority of businesses (“most,” “almost all,” or “all”) are committed to “going green” – defined as “improving the health of the environment by implementing more sustainable business practices, and/or offering environmentally friendly products or services.” Many executives (54%) and consumers (48%) believe only “some” businesses are committed to “going green.”

However, I don't know if I would really define the response as sceptical.  If anything, it may be incredibly optimistic for 29% of executives to believe that "most", "almost all" or "all" U.S. companies are going green.  While the press release says that "Corporate America has embarked on its journey toward sustainability ...", as someone that makes a living helping companies down this particular road I would suggest that the majority of companies display the symptoms (e.g. publishing sustainability reports) but provide only tepid support beyond what the regulations require.

Finally, the last poll, conducted by Harris Poll for the Financial Times, looked at U.S. and European support for greater regulation of oil companies in the aftermath of the BP-Deepwater Horizon disaster.  The poll, released August 12^th, found that support for more regulation ranged from 73% of Britons to 91% of the French (U.S. respondents were in between with 77% of those spoken to favoring more regulatory constraints).

"The findings underline the challenge facing the industry after the accident on April 20 when the Macondo well ruptured, killing 11 workers and spewing 4.9m barrels of oil into the sea. Although the Obama Administration's moratorium on deep-water drilling in the gulf, imposed after the spill, should be lifted earlier than it's November 30th expiry date, the industry is already bracing itself for further regulation and higher costs"

So what does it all mean?

At a minimum, I would say there is a disconnect between industry claims to be "going green", becoming sustainable, etc. and the public that is on the receiving end of the message.  It also shows what bad performance on the part of one or two companies can do to the whole sector, and even all industry.  Looking at Canada and the Pembina/McAllister survey that disconnect extends to include a government and the thought leaders that are in many cases employed by it. 

Its been a tough summer for corporate reputations in the energy sector so it would be interesting to look at similar polls again in six months.

Too Many Oil Spills

Source: solveclimate.com

In April (through July), it was BP's Macondo well in the Gulf of Mexico.  Last week, Enbridge's pipeline failed releasing one million gallons of crude into the Kalamazoo River in Michigan.  And in his blog at Solveclimate.com, David Sassoon provides a photolog of the Chinese oil spill at the Yellow Sea port-city of Dalian (see Bare Hands Clean-Up of a Horrible Oil Spill, July 29^th).

These are certainly spills that have captured the horror of press and public across much of the world.  However, a recent report by the Wildlife Federation of America makes the case that as devastating as this small number of spills might be, they are only the tip of the ice-berg.  Bradford Plumer writing in the Vine Blog (The New Republic) (see Oil Spills Everywhere, July 29^th) identified the report - Assault on America: A Decade of Petroleum Company Disaster, Pollution and Profit in which the National Wildlife Federation takes a strong stand.  In fact stronger than I would have expected from this type of NGO.

Major oil spills are really only a small part of the real story. From 2000 to 2010, the oil and gas industry accounted for hundreds of deaths, explosions, fires, seeps, and spills as well as habitat and wildlife destruction in the United States. These disasters demonstrate a pattern of feeding the addiction to oil leaving in their wake sacrifice zones that affect communities, local economies, and our landscapes.

The report provides a Map detailing thousands of petroleum company accidents, spills and other incidents (explosions, fires, etc.) in the U.S. between 2000 and 2010.  The report also highlights five or six of the more significant incidents each year. 

Finally, NWF provides a list of recommendations for ending the industry's history of spills, including:

• eliminate the cap on liability for damages caused by oil and gas disasters
• remove exemptions from the Clean Water and Safe Drinking Water Acts for oil and gas development
• implement new monitoring measures
• reform royalty structures for oil and gas leases on federal land
• pass comprehensive climate legislation in the U.S.

(In all NWF provides 13 recommendations.)

Working in the oil and gas industry obviously leaves me somewhat conflicted when I look at a report like this.  On the one hand there is no question that the incidents are unacceptable - in this regard, NWF does a good job of bringing them all together in a way that helps the industry to begin looking at the systemic causes.

On the other hand, an industry as all encompassing as the oil and gas sector and working as it does in some of the most inhospitable environments on earth will have incidents.  We and our economy are dependent on petroleum products; these incidents are the price of such dependency.  (To be fair to the NWF, many of their recommendations relate to decreasing the addiction.)

No doubt the long term answer is to reduce use of petroleum.

However, in the the short term there are several answers:

• Effective regulation that recognizes and acts on the key risks facing the industry.
• Better identification of the risks by the companies developing petroleum.
• Much better design and implementation of risk management systems to ensure that qualified people work safely to develop a volatile resource.
• Real senior management oversight of how their companies are managing the social, safety and environmental risks associated with their activities.

My understanding of NWF is that it is a relative moderate among the NGO's calling for the oil and gas sector to change.  And if they are concerned enough to use the language that appears in this report, its well worth paying attention to what they are saying and what they are trying to say.  So to close, over to NWF:

The total cost of the status quo —– in lives lost and health risks as well as social and environmental degradation —– is far too high. The sooner we move in the direction of meeting our energy needs through cleaner, safer sources.

The negative consequences for our health, our land, our climate and our children’s future are too great to continue to depend on oil to power our economy. Now is the time to put enact laws that favor and encourage safe and clean energy development and remove federal subsidies and tax advantages for oil and gas development. Now is the time to increase mitigation fees. Now is the time to create an oil and gas disaster fund paid for by industry. Now is the time to draw lines around environmentally sensitive areas that are made permanently off limits to oil and gas development.

And now is the time to cap global warming pollution from all oil and gas production —– including every aspect of the uncontrolled extraction and refining processes where methane, carbon dioxide, and other global warming gases are released into the air every day.

The BP Deepwater Horizon spill is truly a tragedy of our time. It should be used to take a closer and more comprehensive look at the full and continuing costs that the oil and gas industry continues to impose on society with its pollution, environmental degradation, habitat destruction, wildlife loss, worker and community endangerment, health effects consequences, and loss of life.

Searching for Energy Nirvana?

Source: Rock Merch Universe

Last week, writing in the Cleantech Blog, Richard Steubi asked if "In the wake of the BP oil spill in the Gulf, is this time different? Will the U.S. finally be able to change its stance on petroleum? Will the petroleum industry itself be irrevocably altered?" (See The Petroleum Industry: Past the Tipping Point?, July 5^th)

He proceeded to answer the question with a resounding no, laying the blame on "ineffective posturing and inane bickering in Washington", which he concludes is driven by the vast amounts of cash that the petroleum industry is willing to spend to defend the status quo.

[Any discussion of U.S. energy policy has to include current efforts to craft some kind of climate bill - any kind of climate bill.  Pew Center's Eileen Claussen for one seems to have accepted that the best that can now be achieved is a bill that caps only utility emissions.] 

Steubi's skepticism leads him to look for change as a result of energy prices and from their he begins to riff off of Jeff Rubin's arguments, that in a world of Peak Oil its only a matter of time before oil prices are back in the triple digits.  With the return of $150 plus oil, Rubin sees the need for a re-engineering of the global economy, driven not by policy makers in Washington (where they can't) or Ottawa (where they won't) or elsewhere, but by the micro-economic decisions that businesses and consumers will have to make to allow them to adjust to the market for declining supply.

Both Steubi and Rubin see a silver lining in the coming of Peak Oil -and the high energy prices that would accompany Peak Oil.  A silver lining based on their view of a more sustainable global economy, including:

• Reversal of the globalization of manufacturing, bringing manufacturing jobs back to North America and Europe;
• Emergence of local economies, including more farmers markets (???); and
• Greater investment in national infrastructure, particularly public transportation infrastructure.

Jeff Rubin develops this theme in his book, Why Your World is About to Get a Whole Lot Smaller: Oil and the End of Globalization.  And since I have not yet read it, I have to temper my comments.  However, a couple of thoughts do jump out at me. 

First, while I can see how a partial retrenching of globalization away from the current energy-intensive model may make for a more robust world (i.e. more resilient to spiking oil prices, reduced trade imbalances, particularly between the U.S. and China), any judgment of greater sustainability may only be from the point of view of the western economies.  A significant loss of manufacturing might not look like a sustainable path to China.

Second, how much manufacturing would really come back in the face of increased energy prices.  With dramatically lower labor costs available in China and other Asian economies such as India, Bangladesh, Burma, etc.  it might take a very large energy price differential to lead to repatriation of manufacturing jobs. 

Finally, while their arguments sound kind of plausible if you say it all fast, the transition costs to a less globalized economy could be devastating - trillions of dollars have been spent over the past few decades in China alone to build up the manufacturing capability they currently enjoy.  That would not be easily reversed.

So cycling back to Steubi's original question(s) about the effect of the BP Deepwater Horizon disaster on the petroleum industry, I would have to suggest that yes, the industry will undoubtedly be affected.  I would expect to see significant changes in operating practices and in the risks drillers are willing and/or able to take on.  However, in the face of reduced potential supply and higher costs, the real question should be whether our society, in which the petroleum industry exists, can change.

Will we be capable of developing the alternative energy infrastructure, be it efficiency, renewables, nuclear, etc. that would allow us to meet the challenge of significantly higher oil prices when they come.  If we are unable to anticipate change, then I think we will pay a high price.  Unprepared, we would enter a very painful transition period on the way to Rubin's sustainability nirvana.

I don't disagree that we could find nirvana - but I don't think we can sit back and wait for higher oil prices to take us there.  As a result, I think I am a lot less sanguine about the current inability of Washington, Ottawa, etc. to lead the energy policy changes that will be required.