Debt Ceiling Impasse Could Hit Clean Energy Hard

The Nicholas Institute for Environmental Policy Solutions at Duke University

Clean energy could be among the hardest-hit sectors if the U.S. government does not raise the debt ceiling and then defaults on the national debt.

If there is a default, it could hurt in direct ways, by stopping payments for cash grants and loan guarantees that support many renewables projects. It could also hit innovation, by putting the Department of Energy program for cutting-edge energy technologies, ARPA-E, at risk.

A default could also hit indirectly, by pushing down the value of the U.S. dollar, as well as pushing up interest rates, which would affect financing for renewables projects that require large up-front investment.

Leaving Energy Subsidies, Credits Behind

Any kind of budget deal will have to include large spending cuts. According to a survey of experts by the National Journal, most energy subsidies and tax breaks could be cut back. Subsidies for wind and solar may fly under the radar and survive cuts—at least for a little while.

Corn ethanol subsidies are likely to face big cutbacks, following a Senate vote in June. Any plan to raise the debt ceiling would most likely include slashing the 45-cent-per-gallon credit for gasoline blended with ethanol. “We don’t need the excise tax credit,” said Chuck Woodside, chairman of the national Renewable Fuels Association, because ethanol is now cheaper than gasoline.

The tariff on imported ethanol is likely to go soon as well, reported Ethanol Producer—either at the end of the year when current legislation expires, or sooner, if that legislation is repealed by a deal on the debt ceiling.

Making Oil Go Further

Problems with the debt ceiling could have mixed effects on the price of oil, which has been rising again in recent weeks. A default would likely push down demand, but also push down the value of the dollar—which would have opposite effects on the price of oil. Lately, though, traders have been betting prices will continue to go up.

The oil the U.S. buys would go further under new auto efficiency standards Obama is expected to announce on Friday, which would require cars by 2025 to average 54.5 miles per gallon, compared with current requirements of 30.2 mpg.

During the first half of 2011, Detroit’s Big Three automakers—General Motors, Ford and Chrysler—boosted their lobbying to more than $10 million to try and shape the efficiency standards. Now, Platts reported, the major automakers have agreed to the plan.

Renewables Boost in U.K., Germany

The U.K. is dominating the offshore wind market lately, installing, in the first half of 2011, the most offshore turbines of any country—101 around the U.K., compared with seven across the rest of Europe.

But Germany is looking to catch up. Both houses of Parliament have now passed a new energy bill, which has more aggressive targets for expanding renewable energy, and includes higher tariffs for biomass, geothermal energy and offshore wind. But according to an analysis by Rhenish-Westphalian Institute for Economic Research, the transition to renewable energy is likely to be more expensive than the government has said.

A Warm Cloud

Server farms—which store and process huge amounts of data that zing around via the internet—eat up a lot of electricity, but the heat they spit out could be put to use, argued scientists at Microsoft Research and the University of Virginia. They propose putting servers in buildings, where the waste heat could heat the buildings, to save ­on energy—and it could also create faster, more secure networks.

The Climate Post offers a rundown of the week in climate and energy news. It is produced each Thursday by Duke University’s Nicholas Institute for Environmental Policy Solutions.

Japan, Germany Struggle With Nuclear Power Slowdown

The Nicholas Institute for Environmental Policy Solutions at Duke University

With a large share of their nuclear power plants down at the moment, both Japan and Germany are scrambling to meet energy demand and figure out how to get by without nuclear in the future.

Two-thirds of Japan’s 54 nuclear reactors are currently down, most of them for maintenance and testing. To cope with the power shortfall, Japan’s central government asked consumers to cut back on electricity use. But by spring of next year, all reactors currently running in the country would need to shut down to go through scheduled check-ups. If they fail, or if local opposition prevents them from restarting, it could lead to “a once unthinkable scenario,” the Japan Times reports, with the country losing all its nuclear power generation.

After Japan’s nuclear disaster, Germany temporarily shut down seven of its oldest nuclear reactors, and later decided to keep them shut. Not long after, the country’s parliament voted to phase out all of the country’s nuclear power plants by 2022. But Germany’s Federal Network Agency said last week one of the old reactors may need to be restarted to meet energy demand.

Less Nuclear Means More Coal, Gas

While Germany has voted for an “energy revolution” based on renewables, the country is slated to boost its reliance on fossil fuels in the short run. Germany plans to build new coal and natural gas power plants, subsidized by revenues from selling emissions credits—money previously slated for energy efficiency efforts.

Germany also signed a deal with Russia to boost cooperation between the countries. Germany is already Russia’s biggest natural gas customer, and their purchases will likely increase once a new pipeline under the Baltic Sea opens in October.

In Japan, if all the nuclear plants did go offline, in the short term the country would be unable to fill the gap with fossil fuels, according to a study by the Japan Center for Economic Research. Nonetheless, Japan will boost its use of fossil fuels this year, raising its greenhouse gas emissions significantly, which could potentially throw the country off its targets under the Kyoto Protocol. Morgan Stanley estimated Japan would use more coal, liquefied natural gas, and oil—including, in the worst-case scenario, an additional 540,000 barrels a day for the rest of the year.

Oil Addiction Leaves Few Options

If terrorists were to attack the world’s largest oil production facility in Saudi Arabia, the U.S. would have few options to deal with the resulting massive oil shortfall, according to a “war game” run by Securing America’s Future Energy, a coalition of retired military leaders and business officials.

Global oil markets are well-enough supplied for the moment, concluded the International Energy Agency in a 30-day review of its release of emergency oil stocks in June, so it will not coordinate release of more stocks right now. The agency is still waiting to see the effects of its release of 60 million barrels—less than one day’s worth of global consumption—which is still in process.

One reason for the agency outlook is some members of the Organization of Petroleum Exporting Countries have boosted production—in particular Saudi Arabia. That country’s own oil consumption has reached a record high, and is set to continue rising—meaning in the longer term their exports will probably dive.

Green Helmets

The United Nations Security Council heard arguments for the creation of a peacekeeping force to deal with climate change-related conflicts. The President of Nauru, a small island nation in the Pacific, pushed for the new force, and also wrote an editorial for the New York Times, arguing his own country’s unsustainable reliance on phosphate deposits, now largely depleted, is a cautionary tale about ecological limits and the threat of climate change.

However, the U.N. failed to agree on whether climate change poses a security threat.

Carmageddon’s Unforeseen Benefit

Americans are willing to avoid gridlock traffic, at least for a few days, as Los Angeles found. The city closed its most heavily used freeway for roadwork to add a carpool lane. Los Angeles Mayor Antonio Villaraigosa warned residents to “stay home. Or go on vacation. Walk. Go on a bike. But do not get in your car … It’s going to be a mess.” The feared traffic jams were quickly dubbed “carmageddon.”

What actually happened was anti-climactic, as people heeded the warnings and stayed off the roads, leading to a dramatic drop in smog levels. County Supervisor Zev Yaroslavsky said locals “turned Carmageddon into Carmaheaven.” He added, “Why can’t we take some chunk of L.A. and shut it down to traffic on certain days or weekends, as they do in Italy?”

The Climate Post offers a rundown of the week in climate and energy news. It is produced each Thursday by Duke University’s Nicholas Institute for Environmental Policy Solutions.

Australia’s Ambitious Scheme Sets World’s Highest Price on Emissions

The Nicholas Institute for Environmental Policy Solutions at Duke University

Australia, with the highest per capita greenhouse emissions of any large developed country, will soon take on one of the most ambitious schemes to tackle climate change, with a new carbon-trading system.

The planned carbon tax will start in 2012 and apply first to the 500 worst polluting companies responsible for about 60 percent of the country’s emissions, making it the largest carbon market outside of Europe. Rates will start at 23 Australian dollars per tonne of carbon (US$24.20 per ton), higher than prices have been on the European emissions market for the past couple of years.

The carbon prices would gradually rise, and then the government would transition in 2015 into a cap-and-trade system, aiming for emission cuts by 2050 of 80 percent compared with 2000 levels.

Taxes Redefined

Australia’s plan was generally hailed by environmentalists and those working on renewable energy, and economists generally support it. But it was panned by many in big industry, and Prime Minister Julia Gillard’s administration, already suffering low approval ratings, saw ratings drop further after announcement of the new plan.

To avoid the carbon tax penalizing the poor, about half of the new revenues will be returned to citizens in the form of tax breaks for the lowest earners, part of an effort toward “reducing taxes on desirable things (work and income) … and replacing them with a charge on something undesirable (carbon pollution).”

The carbon tax is part of a package of new policies on climate and energy, which also include the creation of a new Australian Renewable Energy Agency, which will oversee more than $3 billion in funding, primarily for solar, wind, and geothermal energy. The funding boost will put “solar on steroids,” said John Grimes, chief executive of the Australian Solar Energy Society, aiding large-scale solar installations.

Nuclear Power Continues to Polarize

Meanwhile, the U.K. is embarking on a huge restructuring of its electricity market, which is outlined in a new white paper. The Guardian’s Damian Carrington argues the “sprawling and complex maze of measures … has the central aim of getting new nuclear power stations built.”

Since Japan’s Fukushima disaster, the U.K.’s Secretary of State for Energy and Climate Change, Chris Huhne, and others in the U.K. government have supported expanding the country’s nuclear power. Within days of Japan’s disaster, the U.K. government began drawing up a public relations strategy to downplay the disaster, according to a recent report on a leak of government e-mails.

The restructuring proposed in the new white paper would require spending £200 billion ($320 billion) on new infrastructure, but this won’t necessarily lead to higher electricity prices than customers would face otherwise, argues Huhne, since customers now are vulnerable to rising oil and gas prices.

Elsewhere, there are a growing number of countries planning or weighing a nuclear retrenchment. Most recently, Kuwait’s Deputy Prime Minister said the country is no longer interested in developing nuclear energy, and Japan’s Prime Minister urged his country to phase out nuclear.

France, the most nuclear-reliant country, is embarking on a new study of the country’s future energy mix that will consider the possibility of phasing out nuclear by 2040 or 2050.

Saudi Oil Peak?

After the announcement by the International Energy Agency that the world’s richer countries would tap into their emergency oil reserves, oil prices initially fell. For the U.S. portion of the release, many bidders vied for the oil, offering about $105 to $110 a barrel—which would raise more than $3 billion for the government.

The high number of bidders “shows there are concerns in the marketplace over just how much oil is going to be out there,” said David Pumphrey, deputy director of energy and national security for the Center for Strategic and International Studies.

After an acrimonious meeting of the Organization of Petroleum Exporting Countries in which members disagreed about whether to boost production, some countries decided to go it alone. The most significant is Saudi Arabia, which raised its output to about 9.5 million barrels a day—the same rate as before the global recession.

Meanwhile, major Wall Street firms warned of rising oil prices over the rest of this year and into 2012. Goldman Sachs, for one, raised its forecast prices, and said “it is only a matter of time before inventories and OPEC spare capacity become effectively exhausted” and prices soar. A major reason for the gloomier outlook, Goldman Sachs said, is Saudi Arabia won’t be able to pump as much oil as many had expected.

Solar Purchasing

The company Groupon offers big discounts as long as a bunch of people will sign up to a particular deal, and now San Francisco is emulating this model to boost solar power installations. By forming buyers’ groups, they hope to get around some of the barriers to small-scale solar, such as high transaction costs and availability of credit.

In another effort to finance small-scale solar, some firms are emulating Wall Street’s bundling of mortgages, by creating “asset-backed securities”—bundles of leases on residential solar panels.

The Climate Post offers a rundown of the week in climate and energy news. It is produced each Thursday by Duke University’s Nicholas Institute for Environmental Policy Solutions.

Worldwide Energy Shortages Triggered by Drought, Subsidies

The Nicholas Institute for Environmental Policy Solutions at Duke University

As the summer heats up, energy shortages are striking around the world—including the oil-rich Middle East.

Dubai, part of the United Arab Emirates (UAE), stopped supplying gasoline to the other emirates, because the government can’t afford to continue subsidizing gasoline, which it currently sells at far below global market rates. Now a UAE company has hashed out a deal to turn fast-food fryer oil into biodiesel to fuel vehicles. In Iran, one of the world’s largest natural gas producers, many power plants have run out of natural gas, and are instead burning oil to keep the lights on.

Pakistan’s main export is textiles, but with power outages of 12 hours or more a day in many cities, the sector is ailing, forcing an estimated 400,000 people out of jobs. Many businesses in Pakistan are turning to diesel generators, but this is a major drain on the economy.

With only 19 of 54 nuclear reactors running, Japan is facing electricity shortages, and the government has instituted a 15 percent cut in electricity use by large users in eastern Japan. Temperatures are high in Japan, and the country may suffer the hottest summer on record, raising fears of heat stroke deaths.

South America’s second-largest economy, Argentina, is rationing natural gas through the cold months (it’s winter there). And Tanzania, east Africa’s second-largest economy, is facing indefinite power outages as a result of fuel shortages as well as drought—which has cut power output from the hydroelectric dams that supply more than half its power. Business leaders in the country have called on the government to work out emergency plans to save the economy from collapse.

End in Sight?

Power outages are likely to continue, says the International Energy Agency (IEA), because the world will find it difficult to raise the global investment of $16.6 trillion needed over the next 25 years to keep electricity production growing at 2 percent a year. But there are many ways countries can save energy in a hurry, according to a new IEA report drawing on case studies of nations that faced shortages.

As in Pakistan, many countries are falling back on diesel-fueled generators, the IEA points out—and this has been a boon for companies deploying generators and portable power plants, in particular to developing countries.

Many countries could face a similar problem as Tanzania, said a report by the New America Foundation, which indicates use of water in energy production is rising—both for fossil fuels, such as shale gas fracking, and for renewables. Another report, from the Institute for Development Studies, echoed similar concerns, saying climate change threatens the world’s electricity systems.

Attack of the Jellyfish

An unexpected complication at power plants—which may be related to greenhouse gases—have been plagues of jellyfish clogging up water pipes. In late June, jellyfish clogged a cooling pipe at a Japanese nuclear power plant—the first time that had happened in 14 years of operation. In Israel, jellyfish likewise clogged a cooling pipe at another power plant—requiring construction equipment to scoop up many dumpsters’ worth of the creatures.

Jellyfish numbers are likely booming in part because of overfishing, but also because of warming waters as well as ocean acidification, both caused by rising carbon dioxide levels.

The Long and Short of China’s Coal

A new study suggests pollution from China’s coal-fired power plants has stalled global warming—for the short run. It’s long been known burning coal produces sulfur dioxide, an aerosol that has a cooling effect, but which also contributes to acid rain, one reason the U.S. created the Clean Air Act requiring scrubbers on coal plants.

China’s coal consumption has more than doubled in the past decade, and the country is now responsible for about half the world’s annual coal use. Their coal plants are largely without scrubbers, although they’re now starting to install these.

French Fry Flights?

U.S. commercial flights can now use blends of biofuels made from plants and organic waste, after winning approval from a U.S. standards group. On June 29, Dutch airline KLM made the first commercial biofueled flight, from Amsterdam to Paris, and the airline plans to expand use of a 50-50 blend of jet fuel and HEFA—hydro-processed esters and fatty acids made from used cooking oil.

The Climate Post offers a rundown of the week in climate and energy news. It is produced each Thursday by Duke University’s Nicholas Institute for Environmental Policy Solutions.