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Published on March 30th, 2014 | by Guest Contributor

31

Why The Oil & Gas Industry Makes Such A Big Deal Of The Shale (Retirement) Party

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March 30th, 2014 by
 

Originally posted on EnergyPost and Oilprice.com.
By James Stafford

retirement-party-photo-Cseeman

Photo Credit: Cseeman

How much faith can we put in our ability to decipher all the numbers out there telling us the US will soon be cornering the global oil market? There’s another side to the story of the relentless US shale boom, one that says that some of the numbers are misunderstood, while others are simply preposterous. According to energy expert Arthur Berman, a geological consultant with thirty-four years of experience in petroleum exploration and production, the truth of the matter is that the industry has to make a big deal out of shale because it’s all that’s left. “Shale is not a revolution, it’s a retirement party”. Interview by James Stafford of Oilprice.com.

Oilprice.com: Almost on a daily basis we have figures thrown at us to demonstrate how the shale boom is only getting started. Mostly recently, there are statements to the effect that Texas shale formations will produce up to one-third of the global oil supply over the next 10 years. Is there another story behind these figures?

Arthur Berman: First, we have to distinguish between shale gas and liquids plays. On the gas side, all shale gas plays except the Marcellus are in decline or flat. The growth of US supply rests solely on the Marcellus and it is unlikely that its growth can continue at present rates. On the oil side, the Bakken has a considerable commercial area that is perhaps only one-third developed so we see Bakken production continuing for several years before peaking. The Eagle Ford also has significant commercial area but is showing signs that production may be flattening. Nevertheless, we see 5 or so more years of continuing Eagle Ford production activity before peaking. The EIA has is about right for the liquids plays–slower increases until later in the decade, and then decline.

The idea that Texas shales will produce one-third of global oil supply is preposterous. The Eagle Ford and the Bakken comprise 80% of all the US liquids growth. The Permian basin has notable oil reserves left but mostly from very small accumulations and low-rate wells. EOG CEO Bill Thomas said the same thing about 10 days ago on EOG’s earnings call. There have been some truly outrageous claims made by some executives about the Permian basin in recent months that I suspect have their general counsels looking for a defibrillator.

Recently, the CEO of a major oil company told The Houston Chronicle that the shale revolution is only in the “first inning of a nine-inning game”. I guess he must have lost track of the score while waiting in line for hot dogs because production growth in U.S. shale gas plays excluding the Marcellus is approaching zero; growth in the Bakken and Eagle Ford has fallen from 33% in mid-2011 to 7% in late 2013.

Oil companies have to make a big deal about shale plays because that is all that is left in the world. Let’s face it: these are truly awful reservoir rocks and that is why we waited until all more attractive opportunities were exhausted before developing them. It is completely unreasonable to expect better performance from bad reservoirs than from better reservoirs.

The majors have shown that they cannot replace reserves. They talk about return on capital employed (ROCE) these days instead of reserve replacement and production growth because there is nothing to talk about there. Shale plays are part of the ROCE story–shale wells can be drilled and brought on production fairly quickly and this masks or smoothes out the non-productive capital languishing in big projects around the world like Kashagan and Gorgon, which are going sideways whilst eating up billions of dollars.

None of this is meant to be negative. I’m all for shale plays but let’s be honest about things, after all! Production from shale is not a revolution; it’s a retirement party.

That’s my whole point about shale plays–they’re expensive and need high oil and gas prices to work

OP: Is the shale “boom” sustainable?

Arthur Berman: The shale gas boom is not sustainable except at higher gas prices in the US. There is lots of gas–just not that much that is commercial at current prices. Analysts that say there are trillions of cubic feet of commercial gas at $4 need their cost assumptions audited. If they are not counting overhead (G&A) and many operating costs, then of course things look good. If Walmart were evaluated solely on the difference between wholesale and retail prices, they would look fantastic. But they need stores, employees, gas and electricity, advertising and distribution. So do gas producers. I don’t know where these guys get their reserves either, but that needs to be audited as well.

There was a report recently that said large areas of the Barnett Shale are commercial at $4 gas prices and that the play will continue to produce lots of gas for decades. Some people get so intrigued with how much gas has been produced and could be in the future, that they don’t seem to understand that this is a business. A business must be commercial to be successful over the long term, although many public companies in the US seem to challenge that concept.

Investors have tolerated a lot of cheerleading about shale gas over the years, but I don’t think this is going to last. Investors are starting to ask questions, such as: Where are the earnings and the free cash flow. Shale companies are spending a lot more than they are earning, and that has not changed. They are claiming all sorts of efficiency gains on the drilling side that has distracted inquiring investors for a while. I was looking through some investor presentations from 2007 and 2008 and the same companies were making the same efficiency claims then as they are now. The problem is that these impressive gains never show up in the balance sheets, so I guess they must not be very important after all.

The reason that the shale gas boom is not sustainable at current prices is that shale gas is not the whole story. Conventional gas accounts for almost 60% of US gas and it is declining at about 20% per year and no one is drilling more wells in these plays. The unconventional gas plays decline at more than 30% each year. Taken together, the US needs to replace 19 billion cubic feet per day each year to maintain production at flat levels. That’s almost four Barnett shale plays at full production each year! So you can see how hard it will be to sustain gas production. Then there are all the efforts to use it up faster–natural gas vehicles, exports to Mexico, LNG exports, closing coal and nuclear plants–so it only gets harder.

This winter, things have begun to unravel. Comparative gas storage inventories are near their 2003 low. Sure, weather is the main factor but that’s always the case. The simple truth is that supply has not been able to adequately meet winter demand this year, period. Say what you will about why but it’s a fact that is inconsistent with the fairy tales we continue to hear about cheap, abundant gas forever.

I sat across the table from industry experts just a year ago or so who were adamant that natural gas prices would never get above $4 again. Prices have been above $4 for almost three months. Maybe “never” has a different meaning for those people that doesn’t include when they are wrong.

Resource estimates can be hugely misleading because they are guesses and have nothing to do with economics

OP: Do you foresee any new technology on the shelf in the next 10-20 years that would shape another boom, whether it be fossil fuels or renewables?

Arthur Berman: I get asked about new technology that could make things different all the time. I’m a technology enthusiast but I see the big breakthroughs in new industries, not old extractive businesses like oil and gas. Technology has made many things possible in my lifetime including shale and deep-water production, but it hasn’t made these things cheaper.

That’s my whole point about shale plays–they’re expensive and need high oil and gas prices to work. We’ve got the high prices for oil and the oil plays are fine; we don’t have high prices for the gas plays and they aren’t working. There are some areas of the Marcellus that actually work at $4 gas price and that’s great, but it really takes $6 gas prices before things open up even there.

OP: In Europe, where do you see the most potential for shale gas exploitation, with Ukraine engulfed in political chaos, companies withdrawing from Poland, and a flurry of shale activity in the UK?

Arthur Berman: Shale plays will eventually spread to Europe but it will take a longer time than it did in North America. The biggest reason is the lack of private mineral ownership in most of Europe so there is no incentive for local people to get on board. In fact, there are only the negative factors of industrial development for them to look forward to with no pay check. It’s also a lot more expensive to drill and produce gas in Europe.

There are a few promising shale plays on the international horizon: the Bazherov in Russia, the Vaca Muerte in Argentina and the Duvernay in Canada look best to me because they are liquid-prone and in countries where acceptable fiscal terms and necessary infrastructure are feasible. At the same time, we have learned that not all plays work even though they look good on paper, and that the potentially commercial areas are always quite small compared to the total resource. Also, we know that these plays do not last forever and that once the drilling treadmill starts, it never ends. Because of high decline rates, new wells must constantly be drilled to maintain production. Shale plays will last years, not decades.

Recent developments in Poland demonstrate some of the problems with international shale plays. Everyone got excited a few years ago because resource estimates were enormous. Later, these estimates were cut but many companies moved forward and wells have been drilled. Most international companies have abandoned the project including ExxonMobil, ENI, Marathon and Talisman. Some players exited because they don’t think that the geology is right but the government has created many regulatory obstacles that have caused a lack of confidence in the fiscal environment in Poland.

The UK could really use the gas from the Bowland Shale and, while it’s not a huge play, there is enough there to make a difference. I expect there will be plenty of opposition because people in the UK are very sensitive about the environment and there is just no way to hide the fact that shale development has a big footprint despite pad drilling and industry efforts to make it less invasive.

Let me say a few things about resource estimates while we are on the subject. The public and politicians do not understand the difference between resources and reserves. The only think that they have in common is that they both begin with “res.” Reserves are a tiny subset of resources that can be produced commercially. Both are always wrong but resource estimates can be hugely misleading because they are guesses and have nothing to do with economics.

Someone recently sent me a new report by the CSIS that said U.S. shale gas resource estimates are too conservative and are much larger than previously believed. I wrote him back that I think that resource estimates for U.S. shale gas plays are irrelevant because now we have robust production data to work with. Most of those enormous resources are in plays that we already know are not going to be economic. Resource estimates have become part of the shale gas cheerleading squad’s standard tricks to drum up enthusiasm for plays that clearly don’t work except at higher gas prices. It’s really unfortunate when supposedly objective policy organizations and research groups get in on the hype in order to attract funding for their work.

I fear putting climate change policy in the hands of bureaucrats and politicians more than I fear climate change (which I fear).

OP: The ban on most US crude exports in place since the Arab oil embargo of 1973 is now being challenged by lobbyists, with media opining that this could be the biggest energy debate of the year in the US. How do you foresee this debate shaping up by the end of this year?

Arthur Berman: The debate over oil and gas exports will be silly.

I do not favor regulation of either oil or gas exports from the US. On the other hand, I think that a little discipline by the E&P companies might be in order so they don’t have to beg the American people to bail them out of the over-production mess that they have created knowingly for themselves. Any business that over-produces whatever it makes has to live with lower prices. Why should oil and gas producers get a pass from the free-market laws of supply and demand?

I expect that by the time all the construction is completed to allow gas export, the domestic price will be high enough not to bother. It amazes me that the geniuses behind gas export assume that the business conditions that resulted in a price benefit overseas will remain static until they finish building export facilities, and that the competition will simply stand by when the awesome Americans bring gas to their markets. Just last week, Ken Medlock described how some schemes to send gas to Asia may find that there will be a lot of price competition in the future because a lot of gas has been discovered elsewhere in the world.

The US acts like we are some kind of natural gas superstar because of shale gas. Has anyone looked at how the US stacks up next to Russia, Iran and Qatar for natural gas reserves?

Whatever outcome results from the debate over petroleum exports, it will result in higher prices for American consumers. There are experts who argue that it won’t increase prices much and that the economic benefits will outweigh higher costs. That may be but I doubt that anyone knows for sure. Everyone agrees that oil and gas will cost more if we allow exports.

OP: Is the US indeed close to hitting the “crude wall”—the point at which production could slow due to infrastructure and regulatory restraints?

Arthur Berman: No matter how much or little regulation there is, people will always argue that it is still either too much or too little. We have one of the most unfriendly administrations toward oil and gas ever and yet production has boomed. I already said that I oppose most regulation so you know where I stand. That said, once a bureaucracy is started, it seldom gets smaller or weaker. I don’t see any walls out there, just uncomfortable price increases because of unnecessary regulations.

We use and need too much oil and gas to hit a wall. I see most of the focus on health care regulation for now. If there is no success at modifying the most objectionable parts of the Affordable Care Act, I don’t suppose there is much hope for fewer oil and gas regulations. The petroleum business isn’t exactly the darling of the people.

OP: What is the realistic future of methane hydrates, or “fire ice”, particularly with regard to Japanese efforts at extraction?

Arthur Berman: Japan is desperate for energy especially since they cut back their nuclear program so maybe hydrates make some sense at least as a science project for them. Their pilot is in thousands of feet of water about 30 miles offshore so it’s going to be very expensive no matter how successful it is.

OP: Globally, where should we look for the next potential “shale boom” from a geological perspective as well as a commercial viability perspective?

Arthur Berman: Not all shale is equal or appropriate for oil and gas development. Once we remove all the shale that is not at or somewhat above peak oil generation today, most of it goes away. Some shale plays that meet these and other criteria didn’t work so we have a lot to learn. But shale development is both inevitable and necessary. It will take a longer time than many believe outside of North America.

OP: We’ve spoken about Japan’s nuclear energy crossroads before, and now we see that issue climaxing, with the country’s nuclear future taking center-stage in an election period. Do you still believe it is too early for Japan to pull the plug on nuclear energy entirely?

Climate-change activism is a train that has left the station. If you’ve missed it, too bad. If you’re on board, good luck.

Arthur Berman: Japan and Germany have made certain decisions about nuclear energy that I find remarkable but I don’t live there and, obviously, don’t think like them.

More generally, environmental enthusiasts simply don’t see the obstacles to short-term conversion of a fossil fuel economy to one based on renewable energy. I don’t see that there is a rational basis for dialogue in this arena. I’m all in favor of renewable energy but I don’t see going from a few percent of our primary energy consumption to even 20% in less than a few decades no matter how much we may want to.

OP: What have we learned over the past year about Japan’s alternatives to nuclear energy?

Arthur Berman: We have learned that it takes a lot of coal to replace nuclear energy when countries like Japan and Germany made bold decisions to close nuclear capacity. We also learned that energy got very expensive in a hurry. I say that we learned. I mean that the past year confirmed what many of us anticipated.

OP: Back in the US, we have closely followed the blowback from the Environmental Protection Agency’s (EPA) proposed new carbon emissions standards for power plants, which would make it impossible for new coal-fired plants to be built without the implementation of carbon capture and sequestration technology, or “clean-coal” tech. Is this a feasible strategy in your opinion?

Arthur Berman: I’m not an expert on clean coal technology either but I am confident that almost anything is possible if cost doesn’t matter. This is as true about carbon capture from coal as it is about shale gas production. Energy is an incredibly complex topic and decisions are being made by bureaucrats and politicians with little background in energy or the energy business. I don’t see any possibility of a good outcome under these circumstances.

OP: Is CCS far enough along to serve as a sound basis for a national climate change policy?

Arthur Berman: Climate-change activism is a train that has left the station. If you’ve missed it, too bad. If you’re on board, good luck.

The good news is that the US does not have an energy policy and is equally unlikely to get a climate change policy for all of the same reasons. I fear putting climate change policy in the hands of bureaucrats and politicians more than I fear climate change (which I fear).

Who is Arthur Berman? 

Arthur Berman is a geological consultant with thirty-four years of experience in petroleum exploration and production. He is currently consulting for several E&P companies and capital groups in the energy sector. He frequently gives keynote addresses for investment conferences and is interviewed about energy topics on television, radio, and national print and web publications including CNBC, CNN, Platt’s Energy Week, BNN, Bloomberg, Platt’s, Financial Times, and New York Times. You can find out more about Arthur by visiting his website: http://petroleumtruthreport.blogspot.com 

Source: http://oilprice.com/Interviews/Shale-the-Last-Oil-and-Gas-Train-Interview-with-Arthur-Berman.html

By James Stafford of Oilprice.com
Republished with permission. All rights reserved.

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  • Rockne O’Bannon

    I like his Climate Change Activism comment. The more I think about it, the more I like it. The guy would be a great politician.

  • Bob_Wallace

    “I’m all in favor of renewable energy but I don’t see going from a few percent of our primary energy consumption to even 20% in less than a few decades no matter how much we may want to.”

    It’s too bad that Berman doesn’t know more about renewable energy. At the end of 2013 we were at 6.7%, not counting hydro. With hydro we’re at 14%.

    We converted more than 1% to non-hydro renewables in 2012 (as evidenced by 2013 growth). Converting 2% per year is where we will soon be. We may be close to 20% non-hydro renewables by 2020, almost certainly there by 2025.

    What he is saying is that the financials of oil and gas are going to help us out. We’re having to spend more to keep the supply flowing. The higher fossil fuel prices get, the faster we’ll turn to renewables.

    • Ronald Brakels

      I’d have to actually look stuff up to get the exact figures, but South Australia has gone from next to no renewables to getting about 15% of primary energy from them in under a decade. And we weren’t really trying, it was just that wind was a good deal compared to gas. And that’s the problem. Renewables are a good deal compared to gas everywhere. This means reduced demand for gas everywhere. Japan is certainly rapidly rolling out its renewable capacity to cut down on gas imports. Chinese demand may stay strong for a while but even that’s only temporary. Hopefully for now they will replace some coal use with gas, but they will get around to replacing gas use with cheaper renewables and it may not take that long.

      So exports don’t look like they will save the US fracking industry. Even in Australia where the export infrastructure is almost all ready to come online the investment looks to me like a massive economic disaster about to happen, so if the US wants to come in late to the disaster party the disaster might be considerably larger for them.

  • http://electrobatics.wordpress.com/ arne-nl

    “The way to speed that transition up is to make fossil fuels more expensive. The way to make that happen is to mine it at a slower pace, and to keep larger reserves. As it happens, such a course of action would be highly profitable for everyone who owns fossil fuel reserves.”

    I’m not sure how to understand this, but that doesn’t seem logical to me.

    Expensive fossil fuels means the transition to non-fossil energy will be quicker and fossil fuels will become obsolete earlier and more of those reserves become a stranded asset, causing incalculable loss to everyone who owns fossil fuel reserves.

    • Omega Centauri

      It would depend upon how and why the extraction slowed down. If it was by government fiat (presumable climate change related, but concievably could be due to a desire to make them last longer), prices might not go up, that depends upon demand. If extraction rates go down because of a steep carbon tax, then demand will go down, and that could tank wellhead (pre-tax) prices. If instead production is held down by either/or a cartel (remember OPEC), or simple scarcity), then if demand remains high prices could skyrocket.

  • Banned by Bob

    Berman has been singing the same tune for over 5 years now, and has been continually proven wrong.

    • Bob_Wallace

      In what way has Berman been proven wrong?

      Have the non-Marcellus fields turned around and started producing large flow multi-year wells?

      • Banned by Bob

        Not sure what you mean by “turned around”. Production has increased every year for the past few years from the Bakken, the Eagleford, the multiple formations in the. Permian, the Fayetteville, etc.. The only formation that appears to have peaked is the Barnett! and we’ll see how it performs when the newest technology is applied.

        And this technology is now being applied offshore, and production offshore is now increasing for the first time in forever.

        Berman has been calling for Shale peak for years.

    • JamesWimberley

      “The unconventional gas plays decline at more than 30% each year.” Is that assertion of Berman’s wrong? I’ve seen much higher numbers per well. Shale gas is a bubble and it will pop.

      • Bob_Wallace

        Shale gas takes a lot of drilling to keep the supply coming.

        http://stevemaley.com/2012/07/03/natural-gas-economics-a-look-under-the-hood/

      • Banned by Bob

        The average conventional gas well declined by 61%/yr pre shale. All wells decline from initial production rates as the reservoir pressure declines. All wells eventually become uneconomic, but we appeàr to be a long way from that happening here.

        Should give us a stable $4-5 natural gas market that will help us buy time until economic renewables grow to be a significant contribution to our energy mix.

        • Bob_Wallace

          Gas has to be priced high enough to bring new drilling into the fields. http://www.businessweek.com/articles/2012-04-17/is-natural-gas-too-cheap-to-drill

          • Banned by Bob

            Other than a few weeks this winter, nat gas has traded below $5 for the past 2 years since this article was written, and yet production has continued to grow. Most of this is associated gas coming from new oil wells.

            Industry consensus these days is that no one will need to drill for dry gas for another 3 years due to the growth of shale oil and it’s associated gas production.

  • Will E

    totally agree

    When i want Solar pv, say 6000 Kwh on the roof,
    I phone tomorrow, today is sunday
    and within two weeks I have electricity production. clean and easy.
    I put some 12000 Kwh on the roof and garage for heat pump EV car.
    endlesss supply. Whats the problem?

    • Rockne O’Bannon

      I think units are the problem. And math. And day length.

      You must have a helluva roof and garage to support 12 megawatts of panels.

      • Ronald Brakels

        I think Will E is saying a 6,000 kilowatt-hour a year system which where I am is under 3.5 kilowatts of solar panels.

  • Offgridmanpolktn

    Interesting to hear the opinions from someone knowledgeable in the fossil fuel industry. But with that as his admitted specialty not so sure that his doubts (opinions) on how quickly alternative energy can be implemented should be considered. Wasn’t it just in another of today’s postings that California was able to provide more than twenty or twenty-five percent of one days electrical needs from PV? Granted that this was an individual daily occurrence due to favorable weather, but it demonstrates the possibilities. Let’s leave fossil fuel forecasts to this gentleman, and get our forecasts on alternative energy usage and implementation from someone knowledgeable in that field.

    • Rick Kargaard

      I think he was talking “primary energy consumption” which is a lot different ballgame than electical generation. There may come a day when most of our energy needs can be met with clean electricity but I am even less optimistic than Mr. Berman.

      • JamesWimberley

        In the EU, Austria, Latvia, Finland and Sweden all already have a renewable share of gross final energy consumption (not just electricity) over 30%. (http://epp.eurostat.ec.europa.eu/statistics_explained/index.php/Renewable_energy_statistics).

        You are not optimistic that we (humans? Americans?) can ever meet “most of our energy needs … with clean electricity.” The alternative is the end of civilisation and billions dying (http://www.slideshare.net/DFID/professor-kevin-anderson-climate-change-going-beyond-dangerous). Maybe our chances are slim. But isn’t it time to start fighting anyway?

        • Rick Kargaard

          Well, it remains to be seen, but it appears that I am more optimistic than you. Things are going to change but that doesn’t mean the end. That has been predicted by many experts, many times. It has never played out yet. I tried your link but got a blank page?

          • A Real Libertarian
          • Rick Kargaard

            Okay, that link worked for eurostats.
            However I got a different read. sweden and a few others get 30% or more of their ELECTRICITY from renewables.
            The telling paragraph is this one (At the end of 2008, the EU agreed to set a target for each Member State, such that renewable energy sources (including biofuels, hydrogen or ‘green’ electricity) should account for at least 10 % of all fuel used within the transport sector by 2020. The average share of renewable energy sources across the EU-27 was 4.7 % in 2010, ranging from highs of 7.8 % in Slovakia and 7.7 % in Sweden to 1 % or less in Bulgaria, Denmark, Malta and Estonia (see Figure 4).)
            You do the math.

          • Rick Kargaard

            This gets more confusing. If you believe other stats I have found then Sweden gets almost all its electricity from non carbon sources. Over 50 % from hydro which is not a new initiative. Apparently they got about 50% from nuclear until recently when they began to decommission the nuclear plants. It appears that wind is being used to replace nuclear but that really does not give a net reduction in emissions. Efforts towards GHG reductions seem to be concentrated on improving building efficiency. A transition to electric transportation would seem to make more sense there than in most places, but they seem to be behind Norway in this effort.

          • Tobias Schönherr

            Yes Sweden and and some other countries got more than 30% electricity from renewables. (Figure 2: Proportion of electricity generated from renewable sources, 2010
            (% of gross electricity consumption) )

            Austria, Latvia, Finland and Sweden did, however, indeed, get more than 30% from their “gross final energy consumption” from renewables. (Figure 1: Share of renewables in gross final energy consumption, 2010 and 2020 ) and more detailed ( http://epp.eurostat.ec.europa.eu/tgm/table.do?tab=table&plugin=1&language=en&pcode=t2020_31 )

            As for Figure 4 note it’s just about transport, as is the sentence you referred to, under the Transport heading.

            The EU got 12.5% from renewables in 2010 in “gross final energy consumption” as Eurostat calls it witch is “the total energy consumed by end users, such as households, industry and agriculture. It is the energy which reaches the final consumer’s door and excludes that which is used by the energy sector itself. [etc.] “.

            In 2012 that was 14.1%

            (source eurostat websites spelled out above and glossary at http://epp.eurostat.ec.europa.eu/statistics_explained/index.php/Glossary:Final_energy_consumption )

          • Tobias Schönherr

            Note that “gross final energy consumption” is not the same as “primary energy consumption”

    • Omega Centauri

      I think the California example was probably for instantaneous usage during the most favorable time of the day. Not that it isn’t growing quickly, such penetration factors should soon become routine and not exceptional. The “experts” always seem to assume that the exponential growth phase of wind/solar is over, and deployments rates will plateau and decline. That keeps not happeneing, and I doubt it will happen until the demand for more energy from clean sources is nearly met (i.e. when there isn’t any one left to buy more solar/wind power because they already have enough).

      • Bob_Wallace

        We are, I think, still in the exponential growth phase for onshore wind and solar. It will be a few years before we reach linear growth, if it does slow down that much.

        Offshore and tidal haven’t even started yet. Geothermal is starting to pick up.

        The money that has been going into NG wells is likely to start flowing into renewables and storage over the next five or so years. (My guess.)

        • Omega Centauri

          My thoughts as well. The “experts” keep predicting the immediate end of renewables growth. I suspect a combination of intellectual inertia (it had been the mark of a serious analyst that they dismised renewables), now that they renewables are growing up they think it was only due to heroic actions and they we are going to run out of heroes. I also think they are trying to remain on favorable terms with the big oil and gas money, and for the big money, having the “experts” diss renewables (they hope) deflates any excitement surrounding them and -they hope slows or stops them.

          • Bob_Wallace

            If one looks at things from the point of view of a utility manager who needs power and fewer headaches wouldn’t one be happy to nail down some 20 year PPAs for wind at 4 cents and solar at 5 cents?

            No more getting jerked around by fuel prices. No worry that the US might have a reactor melt down and over night the public demand all reactors shut down. No worry about coal emissions.

            Figure that NG will stay somewhat affordable (at worst) for the next several years and new storage will start to take its place, especially if the cost rises. Storage = more long term fixed contracts.

            Buy some 4 and 5 cent wind/solar contracts now. Add some more next year at a lower price. And keep adding them as legacy thermal plants fade away.

          • Omega Centauri

            I think your hypothetical utility manager may be more sensitive to grid stability issues than price. Even if the price is high, he still expects to be paid. But as variable renewables rise as a percentage of total production the gris stresses of dealing with that variability do as well. If he wants his job to be easy, he might seek to throttle back renewables.

            I think this is what happened in Germany, the amount of variable solar was getting large too quickly, and incentives were cut back in order to slow the rate of deployment (which is now about half of the peak rate). I wouldn’t be surprised if some of the hotter PV regions in the US (like Hawaii and California), start to experience similar pressures to slow down within just a few more years. Obviously viable storage could help immensly here, but I think the currently proposed storage solutions look good for smoothing short term fluctations -voltage support, and ramping support, and maybe a bit of load shifting by a few hours. But covering long periods of unfavorable weather (say a week or so of low sun and/or low wind), or even worse seasonal variations will be a lot tougher to crack.

    • Larry

      Absolutely correct! I’ll put more faith in clean energy production forecasts by Elon Musk

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