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2006 Nuclear Issues v28 07 |
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Written by Nuclear Issues
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Saturday, 01 July 2006 |
Nuclear Issues is also available as a pdf download
Are we pleased?
Many people have said recently that we – Nuclear Issues – must be
pleased at the latest developments on nuclear power. Well we are not.
It’s ten to fifteen years too late. There is nothing in the Energy
Review that we were not saying ten to fifteen years ago except that
high gas prices are even higher than we suggested and may rise further.
If we had started ten or fifteen years ago with the basic planning for new nuclear we could today be seeing the first plants coming on line and this would do much to halt the rises in oil and gas prices.
Where are we now? There is talk of about 6 GWe of new nuclear capacity being available around 2015.
First there has to be a further White Paper with all the requirements for public consultation. There has to be a review of potential sites though existing Magnox and AGR sites are the obvious choice. There has to be a proposal from a private investment organization to build a new station. There must be a regulatory review of the basic reactor design. And there must be a public inquiry into site specific considerations. Nearly all of these could have been underway for years. But no, we have not even begun.
The most depressing development is that we now have no nuclear industry left to build a new station or to supply fuel over a possible60 year life. Our best hope is that EDF Energy – which now supplies about one quarter of the country – and the French company Ariva might propose an EPR (European Pressurized Water Reactor) like the one they are building in Finland and one they are shortly to start building in France.
They can certainly put up the necessary funds to build and operate profitably such a station. But are they prepared to put up with likely UK bureaucracy? The alternative of an AP 1000 is now dependent upon the Japanese to whom we foolishly sold Westinghouse.
Tony Blair in the introduction to the Review says: “It is clear that we must significantly increase investment in, and support for, renewable energy…”.
What does he think we have been doing for the past twenty years. Then he says: “We need, as well, to put a much greater emphasis on the efficient use of energy.” Again something we have been doing. But he states the obvious: “.. neither renewable energy nor greater energy efficiency can provide the complete solution ..” Only then does he mention: “.. new nuclear power stations to replace those becoming obsolete.” Hardly the resounding support for new nuclear that we need to secure our future electricity supply which would otherwise be increasingly dependent on imported gas. And in any case, is anybody listening to Tony Blair these days?
A Triumph of Hope
The Energy Review (Mark 2), now published as The Energy Challenge, shows itself to be little more than a wish list, setting out what the Government hopes may happen without itself getting too involved or taking responsibility for direct action. Even the much-trailed recognition of a future role for nuclear energy is left entirely to the initiatives of private companies; all the Government will do is ease some delays of long drawnout public inquiries and offer some reassurance that they will not intervene in the electricity market in the way which drove British Energy from a highly profitable company into making heavy short-term losses and to fall under government control. For the rest it seems that the setting of future targets is sufficient in itself to ensure that these will somehow be met. The possibility, or indeed in some cases probability, that these targets may not be achieved is not considered or discussed.
Peak oil
This reluctance to consider an adverse future is nowhere more potentially damaging than in the consideration of the UK dependence on oil and gas and in the last resort coal. “Today around 90% of the UK’s energy needs is met by fossil fuels, and they will continue to be the predominant source of energy for decades to come.” At the same time it is accepted that by 2010 imports of gas will meet 40% of demand and these will rise to 80-90% of demand by 2020. The UK will also be a net importer of oil by 2010, and is already a net importer of coal. On all of this the Review takes a relaxed view. It lists reliable supply countries and has faith in effective markets “Global energy resources are still plentiful, and markets are well-developed to deal with increased trade.” But this optimistic assessment is now disputed by a growing body of informed opinion which argues that world oil production has already or may soon reach a peak and then enter a slow decline when unsatisfied demand will push prices ever higher. (see for instance Twilight in the Desert).
It is always possible that new discoveries may be made or that improvements in technology will enable more of the 30-40% of oil left behind in existing oil fields to be extracted. But these developments and the exploitation of oil tar sands etc will prove costly, both in terms of money and the energy used. Most of the world’s cheap oil has already been extracted. Any increases in world production of oil and gas that may be realised will come up against an ever-increasing world demand. Figures quoted from the IEA forecast a growth in oil demand of some 55 % over 2000 by 2030 with an even bigger increase for demand for gas and coal of around 70 %.
There is no direct discussion in the Review of whether world production will be sufficient to meet this demand or of the effect of any shortages, perceived or real, on the energy price, and how this may affect UK energy policy. The only risks considered in the Review are second order events – constraints on investment in exploration, production and transport; limited access to national supplies; unrest, corruption terrorism leading to supply disruptions; accidents and extreme natural phenomena such as hurricane Katrina - which might interrupt supply. The real problem that oil production will peak and then slowly decline is ignored despite recording that as world oil demand grew by 4.2% in 2004, oil prices more than doubled and gas prices increased by more than 50%.
We also have the clear example of oil and gas production from the UK continental shelf (UKCS) which peaked in 1999 after 40 years of production and is now declining at a rate of 9 percent/year, although this decline might be reduced to 4 percent /year if higher investment levels are maintained. Production by 2030 will then fall to between 1/10th and 1/3 of peak output at a time of increasing oil and gas demand It is said that the UKCS still provides the equivalent of about three quarters of UK energy, but in 2004 the UK imported 90 million tonnes of oil and 14 million tonnes of oil equivalent of gas. A footnote shows that at the same time the UK also exported 93 million tonnes of oil and petroleum products and 7 million tonnes of oil equivalent in gas. (the UK is the 10th ranking oil supplier to the US).
The notion that oil reserves will continue to be sufficient to meet world demand through to 2020 or even 2050 is deeply engrained. In a House of Lords debate on 16th February 2006 a Government minister.
Lord Davies, explaining why the new Energy Review was required, admitted that “all experts, including all those who advised the Government were taken by surprise at the very rapid rundown of North Sea gas stocks.” Are we going to be taken by surprise again if world production of oil peaks and then slowly declines? The Energy Review policy on oil and gas is based on hope.
Coal
Coal as the energy of last resort will increasingly be used as the price of oil and gas continues to rise or supplies are limited. The share of electricity generation taken by coal rose during the winter of 2005/2006 from around one-third to about half in response to higher gas prices, to give an immediate increase in UK carbon emissions.
Coal is the most carbon intensive of the fossil fuels and to reduce carbon emissions from burning coal efforts are now being made to develop what is referred to as clean coal technology. This follows a two-pronged approach; to continue to improve the efficiency of coal burning in electricity generating plants, so that each tonne burnt generates more kWh; and more ambitiously to remove the carbon dioxide from flue gases and bury it underground – carbon capture and storage (CCS). The review gives figures for the emissions from a 500MW electricity generating plant in million tonnes/year as 0.9 mtonnes/year for a conventional plant, reducing to 0.69-0.74 mtonnes/ year for a more efficient plant but to less than 0.10 mtonnes/year for CCS - which could also be used to reduce carbon emissions from gas-fired stations.
As fossil fuel based generation accounts for about 70% of UK electricity supply and about 30% of the UK’s carbon emissions CCS, if it proved to be economically and technically feasible on a large scale, would have a major impact in reducing carbon dioxide emissions. But as the Review admits, although each of the components of CCS is in operation in different countries the whole CCS process in conjunction with electricity generation has not yet been demonstrated on a commercial scale. There are uncertainties about some technical, environmental and economic aspects.
In addition if it were to be adopted on a large scale the quantities and costs would be daunting. Burning 1 tonne of carbon produces 3.66 tonnes of carbon dioxide. With electricity generation now burning about 60 million tonnes of coal per year a CCS programme to reduce UK carbon emissions by 30 percent would have to process and dispose of over 200 million tonnes of carbon dioxide every year. (with perhaps up to half as much again if CCS is applied to gas-fired generation) Whether this can be achieved at an acceptable cost, or even at all, can be questioned. In addition CCS imposes a significant reduction in the efficiency of the electricity generating process.
Despite these freely admitted doubts the Review outlines the steps being taken to overcome the problems of CCS. It is also working closely with Norway, and the now rapidly industrialising countries of India and China and seeking international agreement on the environmental aspects of carbon dioxide disposal for instance under the sea bed. Here again the Energy Review is based on the hope of a successful outcome.
Electricity
The Review explains that the UK currently benefits from a diverse electricity generation mix; 37% is generated by gas-fired power stations, 34% from coal, 20% from nuclear, 5% from renewables and the remainder from other sources. But with closures of some coal stations on environmental grounds and a retirement of aging nuclear stations the UK is likely to need around 25 GWe of new electricity generation capacity by 2025, equivalent to more than 30% of today’s existing capacity. The Government’s latest energy projection show that the percentage of the UK’s electricity supplied by gas-fired power stations could then rise from 37% today to around 55% by 2020. This increased dependency on gas for electricity generation would occur at the very time the UK becomes increasingly reliant on imports for its gas supplies at a time of a probable growing world shortage, but the Review fails to consider the steep increase in gas prices that might then be expected. Without a successful CCS programme this reliance on gas would also increase UK carbon emissions over the next 20-40 years of the expected operating life of these gas stations. The Review also warns of the possibility of power shortages if the new stations are not brought on stream in time; but this is then dismissed – with its unshakeable belief in market forces the Review believes that companies would “respond with new investment in a timely manner.” And ever-optimistic it says that the risk of having unserved electricity demand is unlikely to become substantively higher than today until around 2015.
Even then, it is comfortingly suggested that the amounts of ‘shortfall’ between demand and supply would likely be small and could therefore potentially be resolved by some companies voluntarily shifting their use from peak to off-peak times in response to price signals.” This enables the Review to conclude that “the case for intervention on grounds of security of supply has not been made.” On these optimistic assumptions the Review argues that all that is then needed is for the Government to “clarify the policy position on renewables and nuclear, the commitment to a long-term carbon market and to improve the planning regime” this would enable companies to respond with new investment in a timely manner. By reducing policy and regulatory uncertainty and sending a strong signal about the value of low carbon investment it is also hoped that carbon emissions would reduce with an increase in renewable and nuclear generation, but it is left to the companies to make the investments.
Renewables
In the 2003 Energy White Paper the Government set a target of 10% of electricity supply from renewable energy by 2010, subject to the costs being acceptable to the consumer, (has the consumer ever been consulted on whether the large subsidy they are forced to pay under the Renewable Obligation, estimated by OFGEM to add two percent to the averge domestic bill, is acceptable,?) with a further ‘aspiration’ to derive 20% of our electricity from renewable sources by 2020.
The Review shows that total generation from all RO eligible sources was around 4% (actually 3.47%) of total electricity supplied to UK consumers in 2005, up from 1.8% in 2002. RO renewables include biofuels which accounted for 61 percent of the RO electricity, wind 22 percent, small hydro 16 percent, and solar photovoltaic 0.02 percent. In the usual attempt to boost the perception of windpower the Review claims that “About 1.7 GWe of wind power is now connected to the grid, enough to supply power to almost one million homes.” DTI statistics however show that in 2005 wind power generated only 0.766 percent of total UK generation, of which 86 percent was from land based, and 14 percent from offshore turbines. The Review admits that offshore wind, which was expected to make a substantial contribution to the Government’s 10% target and 20% aspiration, is currently proving more expensive than anticipated.
Again relying on an optimistic outcome the Review sets out a wish list “If we are to achieve 20% of electricity from renewable sources by 2020, then both onshore and offshore wind will need to make a significant contribution. We will also need to maximise the potential contribution from other technologies, established and emerging alike, such as landfill gas, biomass, hydroelectric power and wave and tidal stream.” To achieve this the Review proposes to strengthen and modify the Renewables Obligation to provide longer-term certainty and create a greater incentive for investment into those technologies that are further from the market: (i.e. increase the subsidy paid by consumers for the more impracticable schemes): to attempt to accelerate access to the electricity grid for renewable electricity generators; and to tackle planning barriers to reduce delays and uncertainty for developers.
The possibility that these measures may not achieve the desired aim is not even considered. Yet the evidence so far from the trivial amount of electricity generated despite the very expensive subsidies from the Renewable Obligation suggests that renewable sources will fail to meet the 10% target for 2010 and fall far short of the 20% aspiration of 2020.
Energy Efficiency
The Review discusses at length the ways in which increasing energy efficiency could reduce energy consumption and thus reduce carbon emissions. The aim is for reductions in emissions of over 7 percent from the 1990 level by 2020. Many of the measures proposed it is said will pay for themselves by reducing energy bills. Nowhere in this is there any consideration of the effect that the money saved on energy expenditure will inevitably be spent on other goods and services and thus increase GNP. There is also the multiplier effect whereby the injection of these savings into the economy will engender an even greater economic growth and thereby increase energy consumption.
The original consultation paper issued in January in advance of the Review did at least refer to a possible rebound effect whereby “energy users who invest in efficiency tend to spend at least some of their savings on more energy rather than on lower bills..” and it went on to say that a better understanding by the EEIR (Energy Efficiency Innovation Review) “will inform our assessment of the long term potential of energy efficiency measures...”. But the question remains – What if the energy efficiency measures outlined in the Review actually lead to increases in energy usage?
So what happens next?
The Government’s abdication of responsibility for energy and electricity supply policy is disastrous. As Lord Tombs said in a House of Lords debate “the electricity supply industry, since privatisation, has been without leadership, reacting only to external stimuli which masquerade as the discipline of a free market.” The immediate response of short-term markets will be to build more gas-fired stations. But the recent price increases announced by British Gas are only a foretaste of what is to come. Higher gas prices are already driving a switch to coal-fired generation, to wreck any hopes of meeting carbon emission reduction targets. CCS, if it is successful, will take time before it can be introduced on a sufficient scale to make any difference, and only at a cost which could double the price of electricity.
Renewables will again only add to the costs passed onto the consumer without making much significant contribution to the security of electricity supply. Moves to promote energy efficiency will lead to increases in GNP and hence in energy consumption. A policy of denial, deliberately choosing to use less energy, is a negative response.
This only leaves nuclear power. If British Energy’s campaign of five or six years ago to replace nuclear with nuclear, vigourously promoted by the then chairman Robin Jeffrey had been adopted we would be that much nearer bringing inthe much needed nuclear.
The inevitable consequence will be increases in interruptions in electricity supply and longer term shortages. The recent supply blackouts in London are likley to become more widespread and of longer duration if there are reductions in available generating capacity with dramatic disruptions to social and economic life and falls in GNP. We are in this mess not only through Government incompetence but through a deliberate anti-nuclear policy pursued principally by the DTI and DEFRA. The vacuous Energy Review will do little to remedy the situation.
Twilight in the Desert
The challenging assessment of this book is that, contrary to the widely held belief that Saudi Arabia – the swing producer – has sufficient oil reserve to supply any shortfalls that may arise in the ever-increasing world demand as long as is necessary; Saudi Arabian oil production is nearing or already at its peak output and could soon begin to decline. “There is only a small probability that Saudi Arabia will ever deliver the quantities of oil that are assigned to it in all the major forecasts of world oil production. Saudi Arabian production is at or very near its peak sustainable volume... and it is likely to go into decline in the very foreseeable future”.
The author Mathew Simmons is Chairman and CEO of Simmons and Company International, a Houstonbased investment bank specializing in the energy sector. Faced with the close secrecy of the Saudi authorities and the operating company Saudi Aramco, he bases his conclusion on a detailed assessment of over 200 technical papers presented to the Society of Petroleum Engineers from the early 1960s onwards.
While no single SPE paper provides enough information for a clear picture of Saudi oil and gas Simmons claims to have assembled items from individual papers into a giant jigsaw puzzle from which a coherent picture emerges. The technology they describe is that which is required in major world-class giant oilfields to deal with the problems and challenges that occur when they reach maturity and begin to decline into old age.
The greater part of Saudi oil, about 90 percent, comes from six giant fields concentrated in one corner of the kingdom on the eastern side of the Persian Gulf, or offshore in the Gulf. All six of these fields were found forty to sixty years ago and have been producing for almost as long. An inescapable fact is that all giant oilfields ultimately peak and thereafter face production decline. This point is illustrated by the production profiles of eight giant or super-giant oilfields in other parts of the world. All achieved peak production rather quickly and then either plateaued or began to decline; none had a plateau period of more than 10 years. Is it reasonable to argue that the largest Saudi field Ghawar is an exception by virtue of its size? Discovered in the 1940’s and producing since 1951 Ghawar is the world’s largest oilfield and throughout the last half of the twentieth century has accounted for 5.5-6.5 percent of Saudi oil, Simmons suggests that Ghawar’s longevity is at the heart of the debate over the sustainability of Saudi-Arabia’s oil output, and then goes on to discuss the problems now arising from water – either injected to maintain reservoir pressure or encroaching from below - both signs of aging.
There is still a large amount of oil left in place after the peak – or rather a plateau of maximum extraction – has passed, as much as 30-40 percent of the original oil - but the driving force is lost and as pressure decreases gas dissolved in the oil separates to form a gas cap at the top of the reservoir and the flow of oil decreases.
The enormous volume of oil left starts to commingle with the underlying water. It can still be produced but a high percentage of fluid lifted is water not oil.
Secondary recovery can be assisted with water injection or now more promisingly with carbon dioxide which should become available in large quantity if the Carbon Capture and Storage technology is successfully implemented on a large scale.
The significant point is that the rate at which the oil produced by these secondary or tertiary recovery processes is less than that of peak output and while much remains production will not keep up with demand.
Simmons fears that Aramco has been over-producing to meet growing world demand, and this may not be sustainable. ”Once Saudi Arabia’s output does start to fall, when ever that may happen, it will signal definitely that the world’s supply of oil has peaked. (The peaking of the world’s oil supply could, of course, come before the onset of the decline in Saudi Arabia, but that may not be apparent until Saudi production begins to slip.) He concludes that “To ignore the risks posed by this event any longer is folly”.
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Last Updated ( Monday, 11 September 2006 )
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