Tag Archives: Peak Oil

Geothermal Talk at the Democratic Party Convention

Richard Ha writes:

On Saturday, I was on a geothermal panel at the Hawai‘i Island Democratic Party Convention, which was held at the Volcano Art Center. Brian Schatz at Hawai‘i County Democratic Party Senator Brian Schatz speaking

Also on the panel were State Senator Russell Ruderman and former Big Island Mayor Harry Kim.

It went very well and I’m very optimistic. I think most of us just want to do the best for all of us.

I made it a point to tell the audience that I went to O‘ahu on behalf of the Big Island Community Coalition and testified in favor of four
geothermal bills. What the four bills had in common is that they all contained provisions for “home rule.” I told the audience: This was so you could have a say in the geothermal issue.

My main point was that we are competing with the world for oil. And we need to seek a competitive advantage for the Big Island, and this has to do with cost.

We all know that the price of oil price rise; it’s only a matter of when, and how high. So if we can find a lowest cost solution, this will protect us from a rising oil price. It does not matter what the alternative is, so long as it gives us a competitive advantage.

Right now, it’s geothermal that has the potential for giving us that competitive advantage, assuming we don’t drive up its cost so high that we lose that advantage. Whether or not we achieve its potential is up to our leaders and to the Puna community.

Here’s what I told the Democratic Party Convention:

We are on a search for “competitive advantage” for the Big Island. Organisms, organizations and civilizations do this – it is called “survival of the fittest.” It isn’t the strongest or the smartest that survive; it’s the ones that can adapt – Charles Darwin

My name is Richard Ha. I am a farmer here on the Big Island. Together with our 70 workers, we farm 600 fee simple acres at Pepe‘ekeo. We have produced multi-millions of pounds of bananas and tomatoes over the past 35 years.

In my search to find competitive advantage for my farm’s future, I’ve now been to five Association for the Study of Peak Oil (ASPO) conferences.

Here is what I took away from these conferences:

  1. Oil price quadrupled in the last 10 years.
  2. The last 11 recessions were associated with a spiking oil price.
  3. Oil is a finite resource.
  4. The world has been using three times the oil it has been finding for many years now.
  5. The days of cheap oil are over.
    1. The cost to produce the marginal barrel of oil – the last barrel, as in shale oil and tar sands – was $92 per barrel in 2011.
  6. The U.S. mainland uses oil for only two percent of its electrical generation. Hawai‘i uses oil for more than 70 percent of its electrical generation.
    1. Anything manufactured on the mainland with cheap oil embedded makes our local producers and manufacturers less competitive. This affects Ag products.
  7. It is not the supply or demand of oil that will cause the
    greatest damage; it is the cost of oil.
  8. How much time do we have? Because it is about oil cost, we have less time than we think.

ELECTRICITY ON THE BIG ISLAND

  1. Uses 180 MW at Peak.
  2. Most of the increase in electricity bills is caused by oil pass through.
  3. Bio mass – as in wood chips – and geothermal have base power potential.
  4. Solar and wind must add storage to become useful as base power.
  5. Storage at utility scale is prohibitively expensive today.

ECONOMY

  1. Big Island electricity rates have been 25 percent higher than O‘ahu’s rates for as long as anyone can remember.
  2. The Big Island has the lowest median family income in the state.
  3. The Pahoa School Complex has, at 89 percent, the highest percent of students participating in the free/reduced lunch program in the state. Ka‘u at 87 percent and Kea‘au at 86 percent are close behind.

Education is the best predictor of family income. Yet the Big Island’s high electricity cost takes away from its education budget.

Rising electricity rates act like a giant regressive tax. The folks who are able to leave the grid for PV do so. The folks left behind pay more for the grid. Many of these folks are the ones already on the lowest rungs of the economic ladder: THE ONES THE DEMOCRATIC PARTY IS CONCERNED ABOUT.

Rising electricity rates take away discretionary income. Two-thirds of our economy is made up of consumer spending. Bottom-up economics benefit all, from the rubbah slippah folks to the shiny shoe folks.

GEOTHERMAL

  1. Cost to generate electricity from geothermal is estimated at 10 cents per kilowatt hour. This is less than half the price of electricity generated by oil, which is estimated to be 21 cents per kilowatt hour.
  2. The cost of the feedstock steam will be stable for a long time. The Big Island is estimated to be over the “hot spot” for 500,000 to a million years.
  3. Concentrating geothermal on the East Rift increases risk. Iceland mitigated the risk by keeping some oil-fired plants in operational reserve.
  4. Home Rule. The Big Island Community Coalition, myself as representative, personally voted for four of the bills that contained the Home Rule provision.
  5. Mediation vs. contested case hearing. It is a risk/benefit, cost, competitive advantage question. The lowest cost solution to accomplish the objectives is our target.
  6. How much time do we have? If cost is our primary concern, we have less time than we think.

I asked Dr. Carl Bonham: What happens if the oil price hit $200 per barrel? He replied that it would devastate our tourism industry.

I asked Dr. Bonham: What if we used geothermal as our primary base power? Wouldn’t we have a competitive advantage to the rest of the world as the oil price rose? He said, “YES.”

And, I asked, isn’t it fair to say that our standard of living would rise? He said: “YES.”

By giving the Big Island a competitive advantage in electricity rates, we can take care of all of us; not just a few of us.

WHERE ARE WE TODAY?

We are on a good track.

  1. We have 38MW of geothermal. The 25MW original contract, which is still tied to oil, is being renegotiated right now.
  2. HELCO has signed a 22MW power purchase agreement with Hu Honua. This is proven, stable and affordable technology – firewood, boil water.
  3. HELCO has issued a 50MW request for geothermal proposals.

These 110MWs of stable, affordable electricity base power represent 60 percent of the Big Island’s peak power usage.

O‘ahu has 10 percent of its base power electricity coming from stable affordable sources.

If we all work together, to take care of each other, we can be on track to have a competitive advantageover the rest of the world.

***

Some good resources on this topic:

Geothermal Assessment & Roadmap is a report compiled by the Pacific International Center For High Technology Research (PICHTR) under contract to Hawaii Natural Energy Institute, University of Hawaii in January 2013.

Peak Oil Warning From an IMF Expert: Interview with Michael Kumhof is a modeling done by the International Monetary Fund (IMF) economic team. Although it is not an official IMF document, it was done by the team that does economic analysis and modeling for the IMF.

We are dependent on air transportation, and this video, Charles Schlumberger: Out of Gas: Implications for Transportation, gives a sobering view of what we can expect in the future. Dr. Schlumberger is head of the air transport division of the World Bank.

Agreed: Local Products Shouldn’t Be More Expensive

Richard Ha writes:

Over the weekend, Scott Bosshardt of Kea‘au had an important letter to the editor of the Hawaii Tribune-Herald.

His point was that products produced and purchased locally shouldn’t be more expensive than the same product purchased abroad.

One extremely important fact that the “Think Local, Buy Local” proponents shouldn’t overlook is that local businesses need to “price local.”

Products produced and purchased locally shouldn’t be more expensive than the same product purchased abroad.

He also wrote:

“Price local” instead of as if our Big Island-grown tomatoes and coconuts were imported from half way around the world or some other planet, then people will be much more inclined to “buy local.” This holds true for everything we produce here. Think about it. When you live in Columbia, you don’t pay more for coffee than you do in San Francisco.

He’s right: Prices are higher here, and we need to lower them. It’s what I keep talking about. We need to find a way that we can lower our costs.

I first noticed our farm costs rising steadily back in 2005 and 2006. Rising costs affect every aspect of our farm, and it was very worrisome. Looking into it, I realized that the rise in price was due to the price of oil increasing.

Here in Hawai‘i, we are being squeezed extra hard. More than 70 percent of our electricity comes from oil. Compare this to the U.S. mainland –  Hawaii’s primary competitor in many produce and food manufacturing categories – which relies on oil for only about two percent of its electricity generation.

As the price of oil rises, you can see how our local farmers and food manufacturers become less and less competitive with the mainland.

Farming is very energy intensive, and farmers’ refrigeration and water pumping costs have steadily gotten more expensive. Wholesalers’ and retailer refrigeration costs have gone up, too. This means food costs more.

Oil prices have quadrupled in the last 10 years, and this has put the economy into a continuous recession. Everything has been squeezed. Government workers’ pay has been cut. Electricity costs have gone up steadily. School budgets have been squeezed. Medical costs have risen.

I have so far attended five annual Association for the Study of Peak Oil (ASPO) conferences trying to figure out how to protect our farm from the rising price of oil. I don’t have a degree in chemistry or the sciences – but I am a farmer with common sense. So I spent my time figuring out who I can trust for good information

I determined that the folks at ASPO can be trusted because they have no other agenda than to produce good information. It is up to me to decide if their studies are valid or not, or whether I agree with their conclusion. On the other hand, I thought that people whose livelihood depends on putting on a happy face would probably just put on a happy face.

I have learned that the world has been using two to three times as much oil as it has been finding, a trend that continues. I’ve learned that the oil being produced now is much more expensive than what they found 50 years ago. It takes more energy now to get the energy. The cost of producing oil from shale and oil sands was $92 per barrel in 2011, and the floor price of oil is probably not much lower than that.

The era of cheap oil is over. And the stuff produced in the future will be even more costly, setting a higher floor as time goes by. Unless we do something, it will squeeze us all even more.

Look around: It is happening right now, even with a banner tourism year. Imagine what it will be like if we have a significant downturn.

Also important to note is that the rubbah slippah folks have less and less discretionary income. Consumer spending makes up two-thirds of our economy. Our consumers will have more spending money when we can lower the cost of our electricity.

What about the happy news that the U.S. will become the largest producer of oil and gas in the future? In 2009, Art Berman, a petroleum geologist,  showed that in a study of 4,000 gas wells in the Barnett Shale, most of the production came out in the first year. Sixteen-thousand wells later, we see that 90 percent of shale gas and shale oil wells were more than 90 percent depleted within five years. And the decline rate for all the wells is more than 30 percent. We will need to drill one third as many we have now just to keep production steady.

One can reasonably conclude that the shale gas and shale oil phenomenon may not be a game changer. It probably won’t make a large dent in world oil production.

Meanwhile, the overall trend continues. Most of the world’s oil is produced by giant and supergiant oil fields, and lots of them are declining. Folks who study this estimate that the decline rate is around 4 to 6 percent annually. That is about 3 million barrels a year. This is going on all day, every day, no matter what the stock market does.

What can we do on the Big Island to lower electricity costs, and the cost of locally produced food? Biomass and geothermal can do that today. There may be other choices maturing in the next few years, too.

Producing electricity from geothermal here costs half as much as producing it from oil. And the Big Island will be over the hot spot that provides us with geothermal for 500,000 to a million years.

Iceland is pulling itself out of the largest financial crash in history because it has cheap electricity from geothermal and can export fish.

Let’s say that one wanted to payoff an oil-fired plant that produces 60MW today. That difference in price would save $6,600/hour and $158,400 /day. This is more than $50 million per year. Seems like we could be creative with writing off stranded assets.

We are very lucky to have these options here.

Read more about this:

The Farmer’s Point of View on Geothermal and Biofuels

Let’s Fight Rising Electric Rates, Not Teachers

Middle East Worries About Peak Oil

Richard Ha writes:

Qatar just held the Middle East’s first-ever Peak Oil Conference, and when Arab countries start showing concern about peak oil, we definitely need to pay attention.

Energy expert Robert Hirsch attended the Qatar conference and wrote about it at the Association for the Study of Peak Oil (ASPO) website.

By Robert L. Hirsch PhD, Senior Energy Advisor, MISI

I was fortunate to be among the few westerners invited to attend and speak at this first-of-its kind “peak oil” (PO) conference in a Middle East. The fact that a major Middle East oil exporter would hold such a conference on what has long been a verboten subject
was quite remarkable and a dramatic change from decades of PO (Peak Oil) denial. The two and a half day meeting was well attended by people from the GCC as well as other regional countries.

The going-in assumption was that “peak oil” will occur in the near future. The timing of the impending onset of world oil decline was not an issue at the conference, rather the main focus was what the GCC countries should do soon to ensure a prosperous, long-term future. To many of us who have long suffered the vociferous denial of Peak Oil by GCC-OPEC countries, this conference represented a major change. In the words of Kjell Aleklett, who summarized highlights of the conference, the meeting was “an historic event.”

A flavor of the conference can be gotten from the following loosely translated, random quotations:

  • This is a groundbreaking conference.
  • The organizers were brave to organize this conference.
  • Peak oil provides an incentive to consider important national and regional issues. The GCC is currently working new problems with old solutions.
  • Oil revenue represents about 93% of the Saudi budget. Everything is now imported — foreign expertise and most labor. Saudi can’t continue on the current track, because it would lead to a “bad future.” We need radical change.
  • After peak oil, will there be great cities, or will Middle East cities end up like the gold mining ghost towns of the old U.S. west?
  • So far we have wasted our opportunity.
  • Shale oil in the U.S. is so much foolishness and does not invalidate peak oil. We definitely must worry about peak oil.
  • Political reforms have failed to properly address our lack of democracy and accountability.
  • When people are excluded from politics, they get unruly.
  • Citizens in the Middle East prefer public sector jobs because they pay better than private sector jobs.
  • Foreigners are the majority of our populations, typically 80%.
  • Schools are teaching children “old stuff.” Schools are a disaster.
  • The current culture is one of waste….

Read the rest.

This country’s conference on peak oil is coming up in November, and Hawai‘i needs to send more people to it. We need to be smart about what we do. It’s all about cost and effect on the rubbah slippah folks.

We must base our decisions on good, verifiable data. We need to play the position on the chess board that exists in front of us, not the position we wish we had.

In the end it is about all of us, not just a few of us — in the spirit of aloha.

Can Geothermal Exist In Harmony With the Hawaiian World View?

Richard Ha writes:

On Thursday, Kalei Nu‘uhiwa and I spoke on a geothermal panel at the UH Manoa’s Richardson School of Law.

Kalei talked about Papakū Makawalu, a Hawaiian deconstruction of the universe into its basic component parts. Here is an interesting talk she gave on this topic about a year ago. (It’s about 13 minutes; well worth a watch.)

From the Edith Kanaka‘ole Foundation:

Papakū Makawalu is the ability of our kupuna to categorize and organize our natural world and all systems of existence within the universe. Papakū Makawalu is the foundation to understanding, knowing, acknowledging, becoming involved with, but most importantly, becoming the experts of the systems of this natural world.

At our panel discussion, the essential question was: “Can geothermal exist in harmony with the Hawaiian world view?”

Kalei’s answer, as I understood it, was, “Yes – If we have a full discussion ahead of time to assure that all concerns are adequately addressed. We need to understand and be comfortable in knowing what its effect on the Hawaiiian environment would be.”

I agree with this point of view. When we were asked what would we do if one of the geothermal developers did not agree to abide by this I said, “Then they need to get out of here!”

Hawaiians in pre-contact time were very successful. Here in Hawai‘i today, we are less successful.

This is why I really like Charles Hall’s EROI concept, which measures net energy. It provides empirical data that compares use of energy from ancient times to the present. It’s a way of comparing apples and apples across time.

World-Renowned Systems Ecology Expert Charles A.S. Hall Speaks in Hilo

Richard Ha writes: 

On Friday, Professor Charles A. S. Hall gave two free lectures at UH Hilo. Hall is a world-renowned systems ecology and biophysical economics expert, and is considered the father of modern day Energy Return on Investment (EROI).

Here is a video, approximately 30 minutes long, from a previous talk of Professor Hall’s.

At UHH, he talked about a systems approach to energy issues here in Hawai‘i.

A “systems approach” is a fancy way to say: Use what you have to come to a good result. It’s about using all we have available to us, in a commonsense way, to move in the right direction. It’s not rocket science.

For a long time now we have known that the resources supporting our world population are finite. Professor Hall approaches these issues from a scientific point of view, i.e., one based on data. His analysis and conclusions can be duplicated by others.

Friday night’s audience was made up of legislators, environmentalists, proponents of Hawaiian culture, University of Hawai‘i staff and students, etc. When Professor Hall advocated for a “systems approach” to our resource issues, they broke into spontaneous applause.

He was startled by the response, but the folks in the audience knew that if we do not start working on commonsense solutions, we’re going to be in deep Kim Chee in the future.

We’ve begun a conversation now about bringing together multiple disciplines, such as agriculture, engineering, energy and more. The idea is to cut to the chase and work on solutions.

For example, in food production, we know that the micronutrients that might be deficient are zinc and boron, and the macronutrients that might be limiting are nitrogen and potassium. Phosphorous
is there; it’s mainly tied up in the soil. So, as we attempt to solve energy issues, how can we simultaneously address issues of food production?

And maybe we should be teaching this to our keiki, so that by the time they are ready to run things, they have a true view of the world.

We all need to be on the same page, solving real problems for all of us—not just for a few of us.

The folks in Professor Hall’s lecture were all realists. This is why I say that I am optimistic about our future here on the Big Island.

Free UH Hilo Talk from Expert on the Economics of Energy

Richard Ha writes:

Professor Charles A.S. Hall will give a free lecture on “Peak Oil, EROI and Your Financial Future in Hawai‘i.” It will be at UH Hilo on Friday, January 4th at 6:30 p.m.

Professor Hall received the Matthew R Simmons/M. King Hubbert Award for excellence in education at the 2012 Association for the Study of Peak Oil (ASPO) conference, mostly for his work on Energy Return on Investment (EROI).

From UH Hilo Chancellor Donald Straney’s blog:

Dec.13, 2012

 


Charles A. S. Hall

The University of Hawai‘i at Hilo College of Agriculture, Forestry & Natural Resource Management and Chancellor Don Straney will sponsor a free public lecture on the economic impact of rising energy costs by New York State University Professor Charles A.S. Hall.

The address, “Peak Oil, EROI and Your Financial Future in Hawai‘i,” is scheduled for Friday, Jan. 4, 2013, at 6:30 p.m. in University Classroom Building room 100.

Hall, the author of Energy and the Wealth of Nations: Understanding the Biophysical Economy, will explain how high energy prices reduce discretionary incomes by using the concept of Energy Return on Investment (EROI).The lecture is free and open to the public. For more information, contact Alyson Kakugawa-Leong.

He will also speak on O‘ahu on January 10th; details of that free lecture to be announced.

You can read more about Professor Hall in this post Economics & a Hawaiian Way of Thinking.

Best Possible Odds & How To Determine Them

Richard Ha writes:

I just attended my fifth Association for the Study of Peak Oil (ASPO) conference, which was at the University of Texas at Austin. I attend these conferences in order to figure out how to give our farming operation the best possible odds of succeeding in this world of finite resources.

Determining this requires understanding the main drivers in the world energy situation, how it all affects the U.S., and then how it affects Hawai‘i’s unique situation. When we understand that, we can determine how we need to move our farm to be relevant in a rapidly changing future.

Presentations at the ASPO conference are data-driven. None of them are based on any predetermined philosophy. It’s all about adapting to physical change and resisting B.S. Good data and a little bit of common sense keeps everything in its proper perspective.

In one sense, this is like a chess game. There will be winners and losers. The rules of physical science determine how things operate. Warren Buffett once observed that nine women cannot each have a baby in one month.

But unlike in chess, not everything is clear.  As Robert Hirsch said about Saudi Arabian oil reserves on Friday, some of the information is unknowable, and in those situations we must operate on best available information.

This is when we must use common sense. Even small kids know that when you’re in a pasture picking guavas and you hear hoofbeats, you don’t gather and have a meeting. You run!

Stay tuned and I will be writing about what makes sense for us, living out in the middle of the Pacific, and on the Big Island in particular. 

The International Monetary Fund & Peak Oil

Richard Ha writes:

I’m at the Peak Oil Conference at the University of Texas at Austin right now.

Energy expert Kurt Cobb (you can always get to his blog, Resource Insights, from a link at right) writes for the Christian Science Monitor, among other outlets, which indicates how far the topics discussed at these ASPO conferences have moved toward the mainstream.

His article about this particular International Monetary Fund study shows some grim possibilities. We don’t have time to waste.

SUNDAY, NOVEMBER 11, 2012

Does the IMF believe we have a peak oil problem?

Does the International Monetary Fund (IMF) believe we have a peak oil problem? The precise answer is that the IMF is currently studying how constraints in world oil supplies might affect economies around the world in two so-called working papers, “The Future of Oil: Geology versus Technology” and “Oil and the World Economy: Some Possible Futures.”

We are admonished by the IMF that opinions expressed in working papers are “those of the author(s) and do not necessarily represent those of the IMF or IMF policy.” But the fact that the organization has produced two papers on the subject this year gives some indication of how seriously it is taking the issue….

Read the rest

Kurt Cobb also wrote the book Prelude, a novel about secrets, treachery and the arrival of Peak Oil.

Kurt cobb

This next picture is of Robert Rapier and me. Robert was the lead speaker on the second day of the conference.

Robert rapier & richard ha

These horse statues are at the conference center. The University of Texas at Austin is the home of the Longhorns. It has 65,000 students and is an expansive and impressive campus.

Horses

Economics & a Hawaiian Way of Thinking

Richard Ha writes:

It’s not whether or not the energy is green; it’s the price of
the energy that matters.

High price energy results in people having less
discretionary income. We know this to be true in our gut.

Professor Charles A. S. Hall explains how this works using
the concept of “Energy Return on Investment” (EROI). This concept takes the world of economics and ties it in with our physical world.

It’s a different way of understanding economics in that it
explains how things actually work, and it’s a way that Hawaiians can relate to
at a gut level.

Ancient Hawaiians had a gift economy that was land- and environment-based: The more one gave, the more one received. This traditional system is quite different from the modern market economy, where the more one receives, the more one receives.

Many modern-day Hawaiians can play in both worlds. But there
are many other Hawaiians that just don’t feel right. Me included.

Professor Hall will give a series of lectures at UH Hilo and
UH Manoa. At UH Hilo, he will speak on January 4, 2012 and at UH Manoa, on
January 9th and 10th.  Details to follow.

He is retiring soon, and we have asked him to be a guest lecturer here during the Winter/Spring semester. He has agreed. He will be using his new book Energy and the Wealth of Nations.

This video, titled Peak Oil, Declining EROI and the New Energy-Economic Reality with Dr. Charles A.S. Hall, is very much worth watching. It’s 1:38:18. Watch it straight through, or jump straight to specific topics as follows:

Minute:

4:54                    Importance of energy to economics

26:39                   Peak Oil is not the focus. Cessation of oil and energy production is the problem

27:54                   Energy Return on Investment (EROI)

33:35                   U.S. has lots of coal – in an emergency

34:30                   EROI is driving prices

38:55                   The trouble is, we need high EROI. How do we do that?

45:15                   Cheese slicer model. Higher energy price in, less discretionary income out

50:44                   Conclusions for the U.K. The principles are the same everywhere

1:32:40                Charles Hall talks about guest lecturing in Hawai‘i

What Happened to $200 Oil?

Richard Ha writes:

Whatever happened to $200 oil?

For the last few years, supply side thinking was the most prevalent way of considering the world’s oil supply. But in this last year,
something changed. Commentators started to ask about the demand side.

Specifically, they started asking, “What happens if demand goes up and prices start to rise – eventually killing demand?” In that scenario, the rising price of oil contains the seed of its own destruction.

In May of this year, Jeff Rubin, who had been the most outspoken expert warning of $200 oil, changed his mind. He calls what is happening “the end of growth.”

Whatever Happened to $200 Oil?
by Jeff Rubin on May 23rd, 2012

Four years ago, when I was still chief economist at CIBC World Markets, I forecast that global economic growth was on pace to send oil prices to $200 a barrel by 2012. In short, the argument was based on a supply-driven analysis that weighed the sources of future oil supply against the prices that would be needed to make the extraction and processing of that oil economically viable…. Read the rest  

If Jeff and many others are right, we are not looking at a rapid climb of the price of oil to $200/barrel. It may not get to that price for 20 years.

And if that’s true, HECO’s request to pay $200 per barrel for Aina Koa Pono’s biofuel will be a tremendous mistake. All that will be
accomplished is a massive transfer of wealth.

This is why I am so pleased that Kamehameha Schools (on the
recommendation of Neil Hannah, Kamehameha’s Director of the Land Assets Division) is sending two senior level management folks to the upcoming Peak Oil conference. Things are moving quickly in the world energy field, and policy makers need to be up on current information.

That HECO is betting on the high side of the 2012 AEO cost curve shows they are not aware that thinking has changed. Had they sent people to past Peak Oil conferences, they would have seen the shift.

Including myself, there are now five people from Hawai‘i going to the ASPO conference. We have the makings of a delegation. Robert Rapier will also be going, too, but I am not counting him because he is a national/international commentator and he will be presenting.

This will be my fifth ASPO conference. I cannot be happier that there are other people from Hawai‘i going, besides myself, and educating themselves on this very important subject.