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05Mar
five technologies set to transform the energy industry
Energy

http://www.itproportal.com/2016/03/05/five-technologies-set-to-transform-the-energy-industry/

 

Five technologies set to transform the energy industry

The energy sector has been hit by a new wave of technology and we must now maximise the opportunities presented by the onset of big data and smart systems. The creation of smart infrastructure with in-built digital intelligence is transforming the way energy is generated, distributed, managed, and stored. Smart solutions are driving efficiency and have resulted in the creation of the ‘prosumer model’: where customers both produce and consume energy.

The future of energy will increasingly rely on digital intelligence and the use of data analysis, which will serve to produce a more efficient use of resources. Intelligent sensing technology reacts and communicates with the environment, optimising performance and improving efficiency. There are five smart solutions which are transforming the energy industry and driving the opportunities for innovation:

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Smart grids and demand response models

Smart grids demonstrate in practice how digital intelligence is transforming the industry and driving energy efficiency. Smart grids are powered by demand response (DR) models, which enable a real-time analysis of customer demand trends. The digital intelligence integrated into these models allows them to autonomously react to energy demand and adjust distribution accordingly.

For example, if at a certain point of the day, the DR model detects a low demand for energy, it will lower the amount it is distributing. DR models enable smart grids to control demand more efficiently and distribute energy more effectively. The ability of this model to adapt to our needs demonstrates how big data can contribute to energy savings. DR models are set to transform how we manage our electricity, with an expected investment of $10 billion (£7 billion) in DR programs by 2020, as they help countries reach their emission targets whilst contributing to providing cleaner and more efficient energy during peak times.

Prosumers and microgrids

People are increasingly producing more of their own energy via renewable means, such as solar panels and wind turbines. he creation of microgrids is enabling people to disconnect themselves from the power grid and operate autonomously off their own local energy generation, offering them more independence. The installation of solar panels, for example, gives the home owner exclusive control over their home-generated solar energy and the power to decide whether to consume it or feed it back into the grid. Smart grids and microgrids reduce costs whilst being more environmentally friendly. The points of power generation and consumption are set to grow even closer, with 20 million residential prosumers predicted in North America alone by 2020.

Smart meters

Smart meters allow a two way communication between the points of generation and consumption. Wireless technology enables smart meters to commute information about energy consumption, such as meter readings, to the supplier. The supplier can then react to these and optimise generation. This will reduce costs and also be good for the environment as less energy is unnecessarily wasted. The vast global growth in smart meters is evident of their potential and how they are driving energy efficiency. At the start of 2015, there were 510 million smart meters installed globally; this number is set to increase to 980 million by the end of 2020 and 450 million of these will be in China.

Virtual Power Plants

Virtual Power Plants (VPPs) allow different energy sources to be integrated into a centrally controlled network. The digital intelligence of this central network can monitor and control energy distribution. It allows the VPPs to deliver energy from more than one power source when demand is at its peak. This is essential due to the rise of renewable energy, which does not necessarily generate electricity twenty-four hours a day; for example, solar energy can only be captured during the day and so another power resource is needed to balance this out. VPP solutions are taking power aggregation to a new level as well as taking pressure off vulnerable networks, increasing the reliability of grids to satisfy our energy needs.

The Internet of Buildings

The concept of the ‘Internet of Buildings’ demonstrates how innovative energy solutions will ultimately be able to be deployed across a whole smart city. Digital solutions will enable energy to be shared across buildings in the grid, which will optimise energy distribution, usage, and efficiency. The integration of IT into smart energy infrastructure will demonstrate how distribution and consumption will be optimised through interactive grids.

Enabled by the digital transformation of the energy sector, we will see a future where social innovation will integrate renewables into smart grids and create reliable and clean energy. Social innovation provides huge opportunities for businesses, consumers, and society. It will encourage all three to invest in sustainable solutions which will reduce costs and enhance their control over their energy usage, whilst helping the environment and making the world a more sustainable place.

Read more: http://www.itproportal.com/2016/03/05/five-technologies-set-to-transform-the-energy-industry/#ixzz424ixvKRT

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28Feb
New “Super Battery” Energy Storage Breakthrough
Energy

New “Super Battery” Energy Storage Breakthrough Aims At $54 per kWh

 

Just a couple of years ago, researchers in the energy storage field were hungrily eyeballing a goal of $100 per kWh for the next generation of low cost, high capacity batteries that could enable electric vehicles to compete with gasmobiles, and it looks like a company called BioSolar is set to blow right past it with a new “super battery” that could achieve $54 per kWh in commercial development. What else did you expect from a company that has a Nobel Prize under its hood?

energy storage battery breakthrough

BioSolar And The Nobel Prize

Before we dig into the new energy storage news, here’s a brief rundown on one of BioSolar’s three scientific advisers, Alan Heeger, who a Nobel Prize in Chemistry in 2000:

Widely known for his pioneering research in and the co-founding of the field of semiconducting and metallic polymers, Professor Heeger is also the recipient of numerous awards, including the Nobel Prize in Chemistry (2000), the Oliver E. Buckley Prize for Condensed Matter Physics, the Balzan Prize for the Science of New Materials, the President’s Medal for Distinguished Achievement from the University of Pennsylvania, the Chancellor’s Medal from the University of California, Santa Barbara, and honorary doctorates from universities in the United States, Europe and Asia…Prof. Heeger has more than 900 publications in scientific journals and more than 50 patents…

Okay, so on to the energy storage news. BioSolar has a research agreement with the University of California, Santa Barbara, and earlier this week the company and the school reinforced a previous international patent application by jointly filing applications in the US, Canada, and Japan for something called a “multicomponent-approach to enhance stability and capacitance in polymer-hybrid supercapacitors.”

Biomimicry Secrets Of The Super Battery

The new patent milestone is critical because it involves the nut of the new energy storage breakthrough. Here is BioSolar CEO David Lee enthusing over the possibilities:

Rarely does one technology exhibit such potential across so many energy sectors spanning solar, electric vehicles, and traditional charging applications for personal technology use…

The BioSolar energy storage approach solves two core problems of conventional lithium-ion battery technology. One is the cost of materials, and the other is the limited capacity of the cathode compared to the anode (the cathode and anode are the parts of the battery that receive and discharge the current).

BioSolar has solved the cost and capacity problem in one blow, by developing an inexpensive polymer for the cathode:

Our novel high capacity cathode is engineered from a polymer, similar to that of low-cost plastics used in the household. Through a smart chemical design, we are able to make the polymer hold an enormous amount of electrons.

[snip]

…The estimated raw materials cost of our cathode is similar to that of inexpensive plastics, with a very high possible energy density of 1,000 Wh/kg.

BioSolar’s research also indicates that the new polymer enables batteries to charge and discharge rapidly while far outlasting the lifecycle of conventional lithium-ion energy storage.

According to the company, conventional batteries drop down to 80 percent of their storage capacity after 1,000 charge/discharge cycles. When the new polymer is used in a supercapacitor, BioSolar’s labwork has demonstrated a lifespan of 50,000 cycles without degradation (a supercapacitor is a type of energy storage device that discharges quickly).

It looks like BioSolar has some more work to do before it is ready to publish some definitive conclusions about its energy storage solution for EV batteries, utility scale storage, and other applications that require slower, steadier discharge. However, the company is confident that it is heading down the right track.

Beyond The $100 Energy Storage Mark

BioSolar also seems to be on the right track with its manufacturing model. According to the company, the cathode is manufactured using an energy efficient, non-toxic system, and it is designed as a drop-in solution for existing battery manufacturers, so no retooling is needed. Factoring in the lower cost of the new cathode, BioSolar anticipates a new EV battery, for example, that has double the capacity of a Tesla Model S battery while costing four times less.

The bottom line: BioSolar estimates that if you combine its “Super Cathode” in a full battery with a typical graphite anode, you’ll arrive at $54 per kWh. Here’s the comparison BioSolar developed based on a combination of its internal work, published data, and a model used by Samsung’s Energy Laboratory:

BioSolar energy storage

A couple of years ago, CleanTechnica noted that the new Tesla battery gigafactory was on track to reach the $100 mark, so if the BioSolar R&D bears fruit you might see some retooling going on over there (side note for Tesla fans: the company recently announced that it isdiscontinuing its 85 kWh battery for the model S).

And…if you’re wondering why the “Solar” is in BioSolar’s name, the company first crossed theCleanTechnica radar back in 2010 for its work in bio-based backing materials for solar panels, made partly from castor bean resin of all things.

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27Feb
Energy savings to eclipse EU fossil imports by 2030
Energy

Energy savings to eclipse EU fossil imports by 2030

More than a million UK households now have solar panels installed to produce electricity or hot water

 

 By 2030, more energy will be saved from 2015 levels than the amount of energy consumed deriving from oil, according to a report by the European Joint Research Centre.

Energy savings can be considered as “an energy source in its own right” in line with the European Commission (EC) strategy for a resilient energy union, the report states.

In 2015, the EU took a new approach to energy policy with the creation of the ‘Energy Union’. The union was a roadmap established by the EC that aims to make Europe’s energy system affordable whilst meeting the requirements for a climate policy focused around reducing greenhouse gas emissions.

A target agreed in Paris in December by over 190 nations of keeping global temperature rises to 2 degrees Celsius from pre-industrial levels with efforts to keep this to 1.5 has further increased the need to maximise energy efficiency.

With Europe likely to miss an intermediary target of 20 per cent energy savings by 2020, the report recommends scaling up private investments and introducing a guarantee fund to remove the perceived risk by investors.

If Europe manages to increase its energy efficiency by 40 per cent by 2030, the sum of energy savings and renewables would overtake the sum of energy from imported fossil fuels altogether, the report states. This would also allow member states not to increase their dependency on fossil fuel imports, thus benefiting their energy security.

Lord Stern of Brentford, who has long campaigned over climate issues, said the report represented “the growth story of the future”.

“While we have increased our level of ambition, we can do much more,” he said.

“The technologies and techniques exist, but the political will, commitment and ability to act is sometimes weak. Strong examples and clear demonstrations of ways forward can galvanise action.

“The report showcases the benefits of a more ambitious energy saving target for 2030. Energy efficiency is not only a cost-effective means to mitigate climate change, but improved energy efficiency combined with stringent renewable energy targets reduces Europe’s energy dependency.”

While the UK government has received criticism for cutting renewable energy policies that will make it difficult to meet climate change targets, the Solar Trade Association (STA) recently announced that the country now has more than a million ‘solar homes’ that get electricity or hot water from the sun.

Almost 800,000 domestic solar power schemes registered under the ‘feed in tariff’ subsidy scheme by January, figures from the Department of Energy and Climate Change show.

The STA estimates there are now 775,000 square metres of solar thermal hot water panels in operation in the UK, equating to around 258,000 homes.

New government figures have also shown that the amount of solar power overall in the UK has risen 66 per cent in a year to more than nine gigawatts of capacity across more than 860,000 installations by January of this year.

Around half (51 per cent) of the capacity is in large-scale solar farms, while just over a quarter (26 per cent) is on homes, the data shows.

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26Feb
UK energy supply forecasts ‘into the red’
Energy

UK energy supply forecasts ‘into the red’ for first time next winter

Britain will be forced to rely on imports and costly emergency measures to prevent blackouts, official data suggests

The sun rises behind Fiddlers Ferry coal fired power station near Liverpool, northern England

Recent announcements of power plant closures have worsened the outlook. Photo: REUTERS

Britain’s energy supply forecasts have plunged “into the red” next winter for the first time on record, suggesting the country will be forced to rely on imports and costly emergency interventions to prevent blackouts.

Figures from National Grid show that on current plans there will not be enough power plants operating in the UK market to keep the lights on for most of December, January and February.

A separate, “last resort” reserve of back-up power plants is highly likely to be called upon to bolster supplies through much of the winter, adding tens of millions of pounds to consumer energy bills, experts have warned.

National Grid data displaying the surplus – or shortfall – in the UK energy market in megawatts for each week of the year, as of 26/02/2016. The figures exclude interconnector flows and reserve back-up capacity that is held outside the market.  Photo: BMreports.com

National Grid confirmed that next winter is the first time since the published data system began in 2001 that it has not forecast a surplus margin of spare power plants in the UK market, and has instead forecast “negative margins”.

In mid-December and early January the figures show a shortfall of more than two gigawatts (GW) – roughly equivalent to the electricity needs of two million homes.

The forecasts exclude power imported on undersea cables, which can bolster supplies if the UK is willing to pay a higher price than the continent.

However, they also assume only average weather conditions, while a cold spell could further increase demand.

The forecasts also assume that UK wind farms will be generating more than 3GW of power, despite the fact they could produce almost nothing on a still day.

Jon Ferris, of energy consultants Utilitywise, warned it was a “leap of faith” to assume that level of wind power would be available when needed.

He said he believed National Grid would be forced to call upon its emergency measures “for much of December and January” in what would be its “most challenging winter for decades”.

Wind power could not deliver energy security, a new report suggests
The forecasts assume more than 3GW of wind power – but output could be far lower on a still day.  Photo: ALAMY

Lisa Nandy, Labour’s shadow energy secretary, said the forecast figures showed “Britain’s power supply going into the red”.

“These shocking figures show Britain could be reliant upon emergency measures and using power from abroad to prevent blackouts this winter – and all because of the government’s failure to get new power stations built,” she said.

Ms Nandy, who is pushing for policy changes to get more gas plants built, warned that Britain “could be left paying a very high price” for its energy.

Lisa Nandy, Labour’s shadow energy secretary

National Grid has already agreed to pay £122 million to keep a total of 3.6GW of power plants in the emergency reserve for next winter.

It will be forced to make further payments whenever it calls on the back-up plants to generate.

The National Grid projections have worsened significantly in recent weeks following announcements that two more coal-fired power plants will shut in coming months.

It is understood to be considering whether it may need to secure even more power plants for the emergency reserve in light of the closures.

A spokesman for National Grid said its forecasts were “not an indication that there will be supply problems next year” and stressed that they did not include the 3.6GW of reserve plants or imports.

She said the data was published so that “suppliers and generators can make decisions and respond accordingly”, adding: “This is a moving picture with figures for nearly a year from now and a lot can happen between now and then.”

SSE recently announced it planned to close most of Fiddler’s Ferry coal plant before next winter.

A Department of Energy and Climate Change spokesman said the data “does not reflect the situation for next winter as it fails to include extra capacity secured by National Grid or the contribution of interconnectors”.

“We’re clear that our families and businesses having access to secure, affordable energy supplies they can rely on now and in the future is non-negotiable and we are working closely with National Grid and Ofgem to ensure that,” she added.

“As part of our plan for long-term energy security, we are committed to tackling a legacy of under-investment and building a system of energy infrastructure fit for the 21st century.”

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26Feb
U.S. Shale Oil Drillers Buckling
Energy

U.S. Shale Oil Drillers are Finally Buckling

Updated on

U.S. oil drillers are finally beginning to buckle.

For more than a year, American oil producers found a way to keep pumping despite a worldwide slide in crude prices. Like cartoon character Wile E. Coyote, U.S. drillers dashed off the cliff and somehow kept running in midair, maintaining volumes even as revenue plummeted.

The companies’ latest projections, released in earnings reports in recent days, suggest gravity is finally taking hold.

Apache Corp. expects oil and natural gas production to fall as much as 11 percent in 2016, the company said Thursday, a day after Continental Resources Inc. projected a 10 percent cut and Whiting Petroleum Corp., a 15 percent reduction. Devon Energy Corp. forecast a 10 percent decline earlier in the month. EOG Resources Inc. is predicting a 5 percent cut.

With crude prices near a 12-year low, drillers are deciding it’s best to keep their barrels in the ground, heeding the advice this week of Saudi Arabia’s Ali al-Naimi. In comments at the IHS CERAWeek energy conference in Houston, Naimi told U.S. producers their only choices were to “lower costs, borrow cash or liquidate” to survive the downturn.

West Texas Intermediate, the U.S. benchmark crude, rose 1.2 percent to $33.46 at 12:11 p.m. in New York.

“This is the fork in the road,” Subash Chandra, a Guggenheim Securities analyst in New York, said in a telephone interview. “We know which direction we’re going — we’re going down — in terms of volumes. The only question is at what velocity we’re going down that path.”

 

Shale Resistance

The surprising resilience of U.S. producers has been a key contributor to the 70 percent slide in crude prices over the past two years, with operators cutting costs and squeezing more petroleum out of fewer wells to stave off the reckoning. Saudi Arabia, the biggest producer in the Organization of Petroleum Exporting Countries, has ruled out a cut in its own output, according to Naimi, leaving U.S. shale to carry the burden of balancing the market.

QuickTakeFracking

While sales of new shares and income from hedging contracts that temporarily locked in higher prices helped keep the shale industry afloat in 2015, the piper is calling, Scott Sheffield, chief executive officer at Pioneer Natural Resources Co., told the conference. The industry is in “hunker down, hunker down,” mode, he said.

Output from the Eagle Ford shale region in Texas is likely to fall to 1 million barrels a day, Sheffield said. That’s a 9 percent decline from the 1.1 million a day produced in 2015, according to Railroad Commission of Texas data.

Pioneer is one of the few outliers, forecasting its volumes will grow by 10 percent this year. Others are pulling back and slashing capital spending budgets in an attempt to hoard cash and ensure they can meet debt payments.

Preserving Cash

“We’ve decided to slow down and preserve our cash on hand,” Cimarex Energy Co.’s Tom Jorden told analysts on a Feb. 17 conference call. “Production growth will have to take a backseat to flexibility and balance sheet preservation.” Cimarex has forecast a decline of more than 5 percent in 2016 output.

Anadarko Petroleum Corp. expects its production to fall as much as 4 percent. With oil priced at $30 a barrel, “we’re just not getting the returns that we would want to get,” Executive Vice-President Robert Daniels told a Credit Suisse conference Wednesday.

All that’s still not enough to dispel an oil glut expected to last well into 2017, said Guggenheim’s Chandra. Other U.S. producers have said they plan to hold volumes steady and many “are hoping the weaker hands in the industry can absorb all the declines,” he said.

“The changes that have to occur industrywide to deal with what we see coming are going to be dramatic,” he said.

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26Feb
Electric cars ‘will be cheaper’
Energy

Analysis predicts that the total cost of ownership of electric cars will dip below those with internal combustion engines in 2022

 Detail of the charging point of the Nissan Leaf is displayed at an exhibition in Sydney, Australia.
Detail of the charging point of the Nissan Leaf is displayed at an exhibition in Sydney, Australia. Photograph: Cameron Spencer/Getty Images for Nissan

Electric cars will be cheaper to own than conventional cars by 2022, according to a new report.

The plummeting cost of batteries is key in leading to the tipping point, which would kickstart a mass market for electric vehicles, Bloomberg New Energy Finance (BNEF) analysts predict.

The large-scale roll-out of electric vehicles (EVs) is seen as vital in both cutting the carbon emissions that drive climate change and in dealing with urban air pollution, which leads to many premature deaths every year. But, despite subsidies in many countries, EVs remain more expensive than conventional cars and the limited range of battery-only cars is still a concern. Currently, just 1% of new cars sold are electric.

However, the analysis published by BNEF on Thursday predicts that the total cost of ownership – combining purchase price and running costs – of battery-only cars will dip below those with internal combustion engines in 2022, even if the conventional cars improve their fuel efficiency by 3.5% a year.

The analysis uses the US government’s projected oil price of $50-$70 (£36-£50) a barrel in the 2020s. If the price is $20, the tipping point is pushed back by between three and nine years.

Bloomberg NEF prediction of electric vehicle take-up
Pinterest
Bloomberg NEF prediction of electric vehicle take-up. Photograph: Bloomberg NEF

Salim Morsy, senior analyst at BNEF, said: “In the next few years, the cost-of-ownership advantage will continue to lie with conventional cars, and we therefore don’t expect EVs to exceed 5% of sales in most markets – except where subsidies make up the difference. However, that cost comparison is set to change radically in the 2020s.”

Colin McKerracher, lead analyst at BNEF, added: “At the core of this forecast is the work we have done on EV battery prices. Lithium-ion battery costs have already dropped by 65% since 2010, reaching $350 per kWh in 2015. We expect EV battery costs to be well below $120 per kWh by 2030, and to fall further after that as new chemistries come in.”

The report projects that 35% of global new car sales – 41m a year – will be EVs in 2040, with one in four of all cars being an EV by then. This would have a knock-on effect on global energy use, cutting oil consumption by 14% and using 8% of all electricity. New EV sales could be as high as 50% in 2040 if they become widespread in fleets and ride-sharing schemes or as low as 25% if oil prices remain very low for many years.

Previous predictions for EV sales have been overly optimistic. President Barack Obama predicted 1m electric cars in the US by 2015: in January that year the total was 280,000. But McKerracher said past predictions were based on very limited data on actual sales and on falling battery costs, while air pollution and fuel efficiency policies are getting tougher.

The best-selling battery-only EV since 2009 is the Nissan Leaf (186,000 sold) followed by the Tesla model S (79,000), according to BNEF. The best-selling plug-in hybrid EV – which has both electric and conventional engines – is the Chevrolet Volt (87,000). BNEF predict sales of plug-in hybrids will fall after 2030 as battery-only cars get cheaper and have longer range.

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The UK’s government’s official advisers, the Committee on Climate Change, say 60% of new car sales in the UK should be electric by 2030 to deliver the nation’s carbon cuts at the least cost.

That is “very aggressive”, according to McKerracher, but he said EV sales will rise faster in countries that invest early in charging infrastructure or crack down on air pollution in cities. Climate change policies also will be important, he said: “If anyone takes the commitments made at the UN summit in Paris with any degree of seriousness, you have to decarbonise transport.”

UK motorists appear to be warming to the idea of EVs, according to a new survey of 2000 drivers commissioned by BMW. It found 20% said their next new car would be electric, although 59% were unaware of the £5,000 subsidy currently on offer from the government. However, those wishing to take advantage will have to hurry, as the subsidy falls from April to £2,500-£4,500 depending on the model bought.

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26Feb
Energy price war spreads
Energy

Energy price war spreads to gas as US shale storms global market, stalks Russia

BG Group’s LNG shipping experience dates back to 1959 when the UK’s Gas Council pioneered the first international LNG shipment on a trial transatlantic voyage
The emergence of the US as a gas superpower is a geopolitical earthquake, said the US energy secretary

 

The US has exported its first shipment of natural gas in a historic move that shifts the balance of power in the global energy market and kicks off a struggle with Russia for market share.

Surging US supply over the next five years threatens to break the Kremlin’s dominance over Europe’s gas market, and is already provoking talk of a “Saudi-style” counter attack by Moscow to drive US shale gas frackers out of business before they gain a footing.

At the very least, it sharpens a global price war as liquefied natural gas (LNG) bursts onto the scene, and closes the chapter on the 20th century system of pipeline monopolies. Gas is starting to resemble the spot market for crude oil, with the same wild swings in prices and boom-bust cycles.

gas ring

 

A seven-year, $11.5bn project by Cheniere Energy finally came to fruition this week as the first LNG cargo left Sabine Pass in Louisiana – in a special molybdenum-hulled ship at -160 degrees Centigrade – destined for Petrobras in Brazil. “It is a big day for our natural gas revolution,” said Ernest Moniz, the US energy secretary.

Speaking at the IHS CERAWeek summit in Texas, he said the emergence of the US as a gas superpower is a geopolitical earthquake, though he has always been coy about the exact intention. “It is a change in the energy security picture,” he said.

The US is ramping up LNG exports to almost 130bn cubic metres a day (BCM) by the end of the decade, roughly equal to Russia’s gas exports to Europe. This may rise to 200 BCM and possibly beyond as the shale industry keeps finding once unthinkable volumes of gas.

Natural Gas Spot Prices
Natural gas spot prices

 

Mr Moniz said the world had been expecting the US to be a huge importer of LNG before the shale shock. The mere fact that this is no longer the case turns the market upside-down, and is a key reason why LNG prices have been in free-fall across the world.

The shift to net exports is something that almost nobody expected. Mr Moniz predicted that the US will match Qatar, and possibly exceed it to become the world’s biggest exporter of LNG by 2020.

The US is still a net importer of natural gas but that is because Canadian pipelines supply New York and Detroit. However, it does not alter the overall picture.

Martin Houston, chairman of Parallax Energy, said the US may account for a quarter of the world’s LNG market within a decade, and is so efficient that it can deliver gas to Europe for as little as $5 per million British thermal unit (Btu) despite the high cost of liquefaction and shipping.

Shale production

 

The Americans are now in a race for leadership with Australia as its offshore Gorgon field cranks into gear, but the two countries feed different markets.

The US shipments are aimed directly at Europe, where there is a large and unused infrastructure of LNG terminals, including Lithuania’s new “Independence” plant designed to end reliance on Russian pipelines. The mere prospect of American LNG deprives Russia of its pricing power and political leverage in Europe, spoiling its gas cash cow.

Just as US shale oil has turned global crude markets upside-down, LNG from shale is now doing the same to the gas markets – beaching countless projects around the world launched in the pre-shale era.

Alexander Medvedev, deputy chairman of Gazprom’s management committee, made light of the US challenge. “There is room enough for all in this gas market. Europe needs another 70 BCM of gas by 2020,” he said at the CERAWeek forum.

Gas sales

 

The COP21 climate accords in Paris have made gas an imperative, giving it a clear edge over coal as the fossil fuel of choice, since its CO2 emissions are half as much.

But Mr Medvedev hinted that Russia will fight back, warning that its gas deliveries will be “competitively priced”.

Russia faces a dilemma. Gazprom can easily undercut LNG from the US, able to deliver gas for just $3.50. It has 100 BCM of idle capacity in west Siberia, according to the Oxford Institute for Energy Studies (OIES).

James Henderson, a senior research fellow at the OIES, said it is tempting for Russia to “crater” the price until it falls below the break-even cost of shale frackers, much as Saudi Arabia is doing to oil frackers. “There may be some logic for Gazprom in adopting a Saudi-like strategy in order to reinforce its long-term competitive advantage,” he said.

Gazprom
A Gazprom worker

 

Russian gas prices in Europe have already fallen so far – to $5.80 today from $11.20 in 2013 – that it may be worth the pain of pushing it a little lower to defend Moscow’s 30pc share of the market.

The OIES said Gazprom could lose $25bn to $40bn in revenues over the next five years if it fails to act. The question is whether to strike a pre-emptive blow now while the first US cargoes are still modest. America’s huge ramp-up occurs after 2018.

Bud Coote, a former chief energy analyst at the US Central Intelligence Agency and now a senior fellow at the Atlantic Council, said the Kremlin may try to knock out America’s LNG industry but that too would be very costly. “There’s no question that the Russians could underprice LNG [but] it’s hard to see them robbing themselves of so much revenue,” he said.

pipeline

For the US, the start of LNG exports is a bitter-sweet victory. The first cargoes come just as the market crumbles. The price of LNG in Europe has dropped from $12 to $5.35 over the past three years.

In Asia it has dropped from $17 to $6 as Japan’s nuclear power plants restart after the 2011 Fukushima crisis, and discounted Indonesian LNG is currently selling for $4.50. The glut has undermined the whole calculus behind the dash for LNG, at least for now.

Mr Houston, from Parallax, said the short-term ups and downs are meaningless in an industry with a horizon of 20 years or more, and COP21 is a gift to gas. “Coal may not be dead but it is on a respirator. The future for LNG in the US is absolutely great,” he said.

 

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