First peak oil, now peak coal, says former Cal prof

This story from Mason Inman of National Geographic News warns that we’re perched on the brink of peak production of one of the world’s crucial energy sources, coal.

For folks here in Berkeley, the name of researcher who’s work Inman relies on will strike a familiar chord. It’s Tad Patzek, formerly of UC Berkeley, where he was one of the most outspoken of the critics of the university’s $500 million contract with BP.

Patzek, who has warned that peak oil will force major changes in American lifestyles, now cautions that the fuel we rely on for much of our electricity and most of the world’s steel production:

No matter how bad coal might be for the planet, the conventional wisdom is that there is so much of it underground that the world’s leading fuel for electricity will continue to dominate the energy scene unless global action is taken on climate change.

But what if conventional wisdom is wrong?

A new study seeks to shake up the assumption that use of coal, the most carbon-intensive fossil fuel, is bound to continue its inexorable rise. In fact, the authors predict that world coal production may reach its peak as early as next year, and then begin a permanent decline.

The study, led by Tad Patzek, chairman of the Department of Petroleum and Geosystems Engineering at the University of Texas at Austin, and published in the August issue of Energy, predicts that by mid-century, the world’s coal mining will supply only half as much energy as today.

The idea that the world will face “peak coal” as soon as 2011 flies in the face of most earlier estimates and analysis.

The London-based World Coal Institute, an industry group including the largest international coal producers, says “the use of coal will rise 60 percent over the next 20 years,” and that “coal will last us for at least 119 years.” And the U.S. Energy Information Administration, in its most recent international outlook, projects that coal consumption for electricity will grow more than 50 percent by 2035 unless policies are put in place to stop the growth of greenhouse gas emissions.

However, the Patzek study paints a far different picture — and not because people will use up the last of the coal in the ground. Rather, the world will finish off the coal that is easy to reach and high-quality — the coal that produces a large amount of energy per ton, the new study says. What remains will often be of lower quality, and progressively harder to dig up and bring to where it is used.

The study’s prediction for the time of the peak — actually a peak in the energy produced by global coal production — may not turn out to be exactly right, Patzek said. “I’m not saying that on July 1, 2011, there will be a peak.”

But the main thrust of the study is stark: “We are near or at the peak right now,” he said.

If true, this could have a vast impact on the world economy.

Coal-fired power plants supply 40 percent of the world’s electricity, and energy for two-thirds of the world’s steel production.

“If we are right,” Patzek’s study said, “major restructuring and shrinking of the global economy will follow.”

Many countries are counting on coal to continue powering their economies for decades to come.

“The United States is the Saudi Arabia of coal,” said President Barack Obama earlier this year, referring to estimates that the United States has the largest coal reserves of any country. Citing the huge stores and the need for clean energy, Obama made the remark at the launch of a task force to study how to deploy technology to “clean up” coal, through carbon capture and storage technology, in the next 10 years.

However, Patzek argues that the reserves estimates of the United States and other countries overstate how much coal is actually practical to mine and use.

“In my study, I disregard completely these [reserve] estimates,” Patzek said. “They’re not credible.”

“The only estimate that’s credible,” he argued, “is what actually comes out of the mines, and how you project that into the future.”
Link -
http://richardbrenneman.wordpress.com/2010/09/14/first-peak-oil-now-it%E2%80%99s...
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So, there may well be a lot of Coal left, but at what quality, what is it's Energy producing capacity and at what cost?

Coal's days numbered as power fuel

COAL is becoming the dinosaur among fuel sources, irrespective of future political decisions about a carbon price or an emissions trading scheme.
The economics of electricity -- with the coal price skyrocketing, tighter regulations on coal-fired power, and uncertainty around future emissions laws -- have put gas in the driver's seat.

The proportion of power generated by coal is dropping rapidly, and state governments and industry alike regard the emergence of new coal-fired baseload power station proposals as unlikely.

A recent report by the Australian Bureau of Agricultural and Resource Economics showed that, among electricity projects that are advanced but not yet on line, only 9 per cent of capacity will be coal-generated. The report predicts coal's share of power generation will drop from 72 per cent to 43 per cent between now and 2030, while the share contributed by gas will almost double to 37 per cent.

None of the states have issued outright bans on coal, but NSW and Queensland have introduced tight rules, adding significantly to the cost of coal-fired stations.

The rules resemble those projected by Prime Minister Julia Gillard during the election campaign. They deem that any coal-fired stations must use low-emissions technology and be able to be retrofitted with carbon-capture technology, when it becomes available.

South Australian Energy Minister Pat Conlon told The Australian yesterday the best way to deal with the issue of fuel was to introduce an emissions trading scheme.

"The sooner we have an ETS or some clear understandable method of pricing carbon, the sooner we will see the next stage of investment in baseload," Mr Conlon said. "On present indications, we would believe that gas would be the most likely fuel used in new baseload."

Western Australia does not currently have a plan for its future baseload power generation and the role coal will play in that.

In Victoria, Premier John Brumby has committed to cutting greenhouse emissions by at least 20 per cent on year 2000 levels by 2020, driven by a focus on solar.
Link -
http://www.theaustralian.com.au/business/mining-energy/coals-days-numbered-as-po...
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If Australia does start to transition away from Coal, it will be taking an opposite tack to China & the USA, which are busy building old style Coal power stations.

One very good reason to move away from Coal, is that we are faced with higher costs, as the higher grades of Coal Peak and we are forced to shift to lower grades, which produce less Energy & more CO2.

Western Australia appears to be waiting & hoping that things will change? And that may happen, as Babcock & Brown, the owners of Alinta Gas, who are the sole supplier of Gas to WA & also supply about a third of South Australia's gas, are reportedly nearing receivership, as they struggle to find agreement with the lenders.

Finally, I repeat again, an ETS is not the answer. I suggest that legislated, mandatory cuts in GHG emissions, backed by tax carrots & sticks would be a better option!

EROI, Insidious Feedbacks, and the End of Economic Growth (Cont)

Due to the depletion of high EROI oil (and hence cheap oil), the current economic situation can be described by the following feedbacks (Figure 6): 1) economic growth increases oil demand, 2) higher oil demand increases oil production from lower EROI resources, 3) increasing extraction costs leads to higher oil prices, 4) higher oil prices stall economic growth or cause economic contractions, 5) economic contraction leads to lower oil demand, 6) lower oil demand leads to lower oil prices which spur another short bout of economic growth until this cycle repeats itself.



This system of insidious feedbacks is aptly described as a growth paradox: maintaining business as usual economic growth will require the production of new sources of oil, yet the only sources of oil remaining require high oil prices, thus hampering economic growth.

The growth paradox leads to a highly volatile economy that oscillates frequently between expansion and contraction periods, and as a result, there may appear to be numerous peaks in oil production (a so-called "undulating plateau"). In terms of business cycles, the main difference between economic models of the past and the this model is that in the past business cycles appeared as oscillations around an increasing trend whereas in this model they appear as oscillations around a flat trend. In other words, our baseline economic models may be switching from an implicit 1 or 2 percent growth to a steady-state, or dare I say, declining trend.

So arguments that cite vast oil reserves 10,000 leagues under the sea or in the poles as evidence that peak oil will not matter need to realize that in terms of economic growth, oil per se isn’t enough. Cheap oil is needed for economic growth, and we are simply running out of the good, cheap crude.
Link -
http://www.theoildrum.com/node/6961
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Whilst I agree with the basic trust of what the author is saying, I would also say that Oil & Energy do not exist in isolation.

Oil & Energy per se, are part of an interlocking whole, in which humanity integrates Population issues, such as Aging, over-population & decline, other major factors include Debt, Climate Change & human interaction with ourselves.

The human condition itself is a source of major conflict, as some want to retain what they have, whilst others see what is available and seek it for themselves!

You talk of a flat trend, a steady state and possibly dare to say, declining trend.

I would observe that you have rightly pointed out regarding Oil & Energy and that the other major factors of Aging (Baby Boomer Bust), an actual declining population starting within 20-30 years, Global Debt oveflowing & Climate Change, are all conspiring to prevent the usual Economic remedies!

Given the broad thrust of all major influencing factors, I would suggest that there can be no flat trend and no steady state.

Global Economics is now set on that growth paradox, which leads to a highly volatile economy, which oscillates frequently between expansion and contraction, but now the new trend line is down and it is set to continuing reversing until probably the end of this century or longer.

As usual, there is a possible way out and that depends on whether a cheap and abundant replacement for Fossil Fuels is found, in terms of Power generation, Liquid Transport Fuels & the many others uses, as well as a quick agreement can be found thru the human condition, to implement that new Energy source, with a Manhattan project urgency, on a Global basis!

One of the comments to this article also included the following useful charts -


I draw your attention to the similar trajectory followed by growth in Human Population & growth in Fossil Fuels usage and I also draw attention to the expected Fossil Fuel Peak Production dates -
2012 - Oil
2024 - Coal
2029 - Gas  

2018 - Peak All Fossil Fuels

Dr Albert Bartlett

(Part 1 of 8)


(Part 2 of 8)


(Part 3 of 8)


(Part 4 of 8)


(Part 5 of 8)


(Part 6 of 8)


(Part 7 of 8)


(Part 8 of 8)


The Bacteria comparison in Chapter 3, is apt!

But, there are a few other apt observations –
1) Technology Optimists will always be able to solve all of our Population Growth, Food, Energy & Resources problems?
2) Thinking is upsetting, it tells us things, we’d rather not know!
3) The chief source of problems, is solutions!
4) Facts do not cease to exist, simply because they are ignored1
5) The 1st Law of Sustainability, is that Population growth &/or growth in the rates of Consumption of Resources
CAN NOT BE SUSTAINED!
6) The greatest shortcoming of the human race, is OUR INABILITY TO UNDERSTAND THE EXPONENTIAL FUNCTION!

The Biggest Systemic Risk For The Financial System Is Limited Oil

It seems to me that if we are in fact reaching limits with respect to oil supply, this should be of considerable concern. We have a financial system that demands economic growth, for reasons that will be discussed later in this paper. At the same time, as we approach limits with respect to oil production, the ability of the world’s economy to grow becomes constrained, because in order for economic growth to occur, we will need to do more and more, with less and less oil.

The conflict of these two forces – a need for economic growth in a world that can no longer provide growing oil supply – sets the financial system up for a systemic risk of collapse. Furthermore, there is significant evidence that the financial problems of 2008 were early signs of this systemic risk affecting the financial system. If oil supply should actually begin to decline in the future, we can expect financial problems of 2008 to return and worsen.

Oil’s Connection to the Economy

Oil is used for a huge number of purposes—transportation fuel, heating fuel, fuel for extracting minerals of all types, lubricant, and raw material for asphalt for road paving, plastics, synthetic cloth, medicines, fertilizer, pesticides, and herbicides, to name a few things. A declining oil supply, or even a level supply, should be a serious concern, with the world’s rising population.

In recent years, there have been many attempts to try to find substitutes for oil, but with very limited success.


Other so-called replacements for oil are only very partial replacements, and are still very far away from being full-scale solutions. Biofuel from algae is being investigated, but it is still very expensive, and not yet scalable. Electric cars are being developed, but they still are many years from being ready to replace our huge fleet of cars with internal combustion engines.

It should noted that the problem with oil supply is really an economic one.
At some point, limits are reached in the amount people can afford to pay for oil, and we may already approaching those limits.

Timing
Many observers would like us to believe that limits on oil and other resources are still a long way off, but this is not really true. World crude oil production has already stopped rising. Oil production has been essentially flat from 2005 to 2010,6 meaning that more and more cars and trucks must compete for the same fuel supply.



Impacts

While crude oil supply has not yet begun declining, it had been essentially flat since 2005, and this lack of growth is putting tremendous pressure on the world’s financial system, since we now must do more and more with essentially the same oil supply. Oil prices have risen, and this is one source of financial problems, because higher oil prices have a disruptive impact on balance of payments, and can also cause a reduction in profits of companies.

But higher oil prices can also lead to recession and debt defaults.
High oil prices don’t give ordinary citizens more salary to spend, so they have to cut back on something else. One possibility is a cutback in discretionary spending, which will tend to lead to recession. If the cutback is in buying new homes, the price of new homes can be expected to drop. James Hamilton wrote a paper called, “Causes and Consequences of the Oil Shock of 2007-2008” showing that the run up in oil prices in the years prior to 2008 was sufficient to cause the major recession we have recently experienced.9

Economic System’s Need for Growth
Our current economic system includes a huge amount of debt. Money is loaned into existence. Debt is used to finance many business expansions. Governments rely heavily on debt.

The US economy has been growing for many years, with only brief interruptions, so nearly all of our experience with borrowing money, and paying it back with interest, has been during periods of economic growth.

Borrowing from the future is relatively easy when the economy is growing, because when the time comes to pay back the debt, the debtor’s economic condition is likely to be as good as it was when the loan was taken out, and may even be better. So defaults are relatively uncommon, and the growth in the economy between the time the loan was taken out and the time it is repaid provides some contribution toward the interest payments.

But what if we start encountering a very different kind of world, one with a decline in oil supplies? If oil resources constrain economic growth, debt defaults can be expected to rise, and the whole debt system underlying our financial system is at risk. Insurance companies are very much at risk too, because many of their assets are bonds. In the past, these bonds would have been repaid with interest, but in a world with little economic growth, and perhaps economic decline, the risk of default becomes much higher.

Even if we should discover a way around our problems—say a new technology, which permits more oil extraction at lower cost, or a better substitute for oil, financial institutions--including insurance companies--are still likely to encounter substantial systemic risk related to debt defaults in the next few years.
Link -
http://www.businessinsider.com/peak-oil-systemic-risk-financial-system-2010-9

SA is nearing peak coal, say scientists

South Africa has more coal than it can ever burn, right? If you think this, as many of us do, think again.

Research by international and local scientists has shown that coal, like other resources, is finite and can be expected to comply with peak resources theory. The theory shows that production in commodities such as oil grows until a peak is reached, whereafter production declines.



"It is commonly believed that South Africa has abundant coal reserves which will last 200 years or more," says Jeremy Wakeford, chair of the Association for the Study of Peak Oil (Aspo) in South Africa, in the organisation’s latest newsletter.

"But recent research [from] three scientific journals suggests that usable reserves are much smaller than previously thought, and that annual production could reach a peak and begin to decline within a decade -- or might even have peaked already."

Wakeford says that "given the country’s overwhelming dependence on coal, this issue has huge ramifications for our future development path".

Coal provides 70% of the country’s energy supply, supports 90% of electricity generation, is used to make a quarter of the country’s liquid fuels using the Sasol process and is a big earner of foreign exchange through exports to foreign users.

Geologist Chris Hartnady, in a paper to be published in the SA Journal of Science, has forecast peak production in 2020 at about 285-million tonnes a year.

This compares with total production last year of 242-million tonnes. This was mostly used by Eskom (123-million tonnes), Sasol (40-million tonnes) and export (66-million tonnes). Eskom’s current expansion programme could use an additional 50-million tonnes, and if the Sasol Mafutha project goes ahead it will need another 20-million tonnes annually, says Wakeford.



"They further contend that future mines are unlikely to reverse the trend since the economics of mining dictates that most accessible reserves are mined earlier on, so that the net energy return from the coal mining declines while the production costs rise over time," says Wakeford.

Eskom chief executive Brian Dames bemoaned the poor quality of coal Eskom is receiving in a briefing to parliamentarians earlier this month.

Link -
http://www.mg.co.za/article/2010-09-24-sa-is-nearing-peak-coal-say-scientists
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Do we wait for the scientists to tell us (OZ) that our Coal Production has Peaked?

Or, has it already and that is the real reason for increasing power costs?

It's not that people who are concerned about the depletion of natural resources don't understand economics, it's that they don't understand what economics is. Economics is how we appropriate or ration out limited resources. The most successful way we've ever figured out of doing that is the price system. The price system is simply a way of measuring demand so you can appropriate supply more efficiently. You have milk, you make ice-cream and yoghurt out of it, heaps of of people buy your ice-cream but not your yoghurt, so you appropriate more of your milk to ice-cream so as not to waste it on yoghurt. Like milk, crude oil is used for more than just petrol. But the reason most of it used for petrol and not wasted on too much kerosene or asphalt is because we let the supply of oil be determined by a price system.

The price system also tells us just how scarce a resource is. Beach houses are expensive because there's not enough beachfront property to go around. But a beachfront property is highly desirable. So the high prices of beach houses reflect their high demand and limited supply. As a result of the high price of owning beach front property, only a few can purchase it. As oil reserves deplete, the price of oil will rise to reflect its scarcity. The higher the price of oil, the less people will be able to afford it which will create a huge demand for alternative sources of energy. The more you understand these economic mechanism, the less worried you are that oil is going to run out and we're going to have an energy crisis.

Amadd wrote on Sep 27^th, 2010 at 4:43pm:

See, that's the thing. It's not reliant on the abundance of oil but the scarcity of oil.