Study: Tesla car battery production releases as much CO2 as 8 years of driving on gas

Enormous hopes are linked to electric cars as the solution to the automotive industry’s climate problems. However, electric car batteries are eco-villains during their manufacturing. Several tons of carbon dioxide (CO2) are generated even before the batteries leave the factory.

IVL The Swedish Environment Institute has, on behalf of the Swedish Transport Administration and the Swedish Energy Agency, investigated the climate impact of lithium-ion batteries from a life-cycle perspective. The batteries for electric cars were included in the study. The two authors—Lisbeth Dahllöf and Mia Romare—have done a meta-study, that is, reviewed and compiled existing studies.

The report shows that battery manufacturing leads to high emissions. For each kilowatt-hour of storage capacity in the battery, emissions of 150 to 200 kilograms of carbon dioxide are generated in the factory. The researchers have not studied the individual car brand batteries, just how they were produced or what electrical mix they used. But to understand the importance of battery size, two standard electric cars on the market, Nissan Leaf and Tesla Model S, have batteries of approximately 30 kWh and 100 kWh respectively.

Even before you buy the car, CO2 emissions equivalent to 5.3 tons and 17.5 tons, respectively, gets produced. The numbers can be difficult to put in context. By way of comparison, a trip for a person returning from Stockholm to New York by air emits more than 600 kilograms of CO2, according to the UN organization ICAO’s calculation model.

Another conclusion of the study is that about half the emissions come from producing the raw materials and the other half from the battery factory. The mining accounts for only a small proportion of between 10-20 percent.

Read more: “The potential of electric cars’ main advantage”

The calculation is based on the assumption that the electricity mix used by the battery factory consists of energy generated by more than 50% fossil fuels. In Sweden, the power production is mainly from fossil fuels, nuclear, and hydropower and why lower emissions had been achieved.

The study also concluded that emissions grow almost linearly with the size of the battery, even if it is pinched by the data in that field. It means that a battery of the Tesla-size contributes more than three times as much emissions as the Nissan Leaf size. It is a result that surprised Mia Romare.


Mats-Ola Larsson at IVL has calculated how long you need to drive a gasoline or diesel car before it released as much CO2 as the battery manufacturing produced. The result was 2.7 years of CO2 emissions for a battery the same size as a Nissan Leaf and 8.2 years for a Tesla-sized battery, based on a series of assumptions.

“It’s great for companies and government to embark on ambitious environmental policies and to buy climate-smart cars. But these results show that one should not think of choosing an electric car with a larger battery than is necessary,” he says, pointing out that manufacturers should also address this in the design of instruments.

Cobalt, nickel, and copper are recycled but not the energy required to manufacture the electrodes, says Mia Romare, pointing out that recycling is a resource-saving point rather than a reduction of CO2 emissions.

Peter Kasche from The Energy Agency highlights the close relationship between the battery size and CO2 emissions are important.

In some way, one must really make sure that you optimize the batteries. You should not drive around with a lot of kilowatt hours unnecessarily.

H/T TallBloke TalkShop


Endeavour Energy Focuses On Micro-Grids As Industry Takes “360° Turn”

Australijskie spółki energetyczne inwestują w mikrosieci – w tym baterie akumulatorów

The newly partially privatised NSW network owner Endeavour Energy has flagged a “360 degree” turn in network control and ownership as the energy industry returns to its roots and focuses on localised, renewable energy-based micro-grids.

In announcing a tender for a trial “micro-grid”, Endeavour says new technology means the industry is about to take a “360 degree turn and bring the energy industry back to the days where councils owned and operated” their own networks.

“The modern-day twist is that the councils can be many different entities, such as communities, corporations, developers, councils and network providers,” it says.

“The other major change is the method of generation changing from power stations to renewables such as (solar) PV and wind with the integration of energy storage.”

Endeavour, which supplies electricity to 2.4 million people in Sydney’s Greater West, the Blue Mountains, Southern Highlands, the Illawarra and the South Coast, is taking its first step into micro-grids with a trial to develop cost-effective alternatives to the current model.

Endeavour Energy has been in discussion with various developers within the Endeavour Energy distribution area, who are prepared to work with stakeholders to a successful trial,” it says.

The exact location of the trial is not yet known, but it will be a new development. It will likely include about 200 homes, all of them to be fitted with between 3kW and 5kW of rooftop solar PV (half facing north and half facing west) and a centralised battery storage unit. It did not specify the size for the storage.

It follows another Endeavour tender earlier this year for  a large-scale battery storage array to reduce network costs for a new housing development west of Illawarra.

The 1MWh battery system is set to be installed at the proposed West Dapto Zone Substation, with the network operator believing it could reduce network capital costs by $1 million a year.

Endeavour is just the latest to consider micro-grids as an alternative to the long-established model of centralised generation and elongated networks, particularly as the cost of renewables and storage fall below the cost of network supply, and because they actually increase security, particularly in regards to storms and bushfires.

Western Power has talked of a new “modular” network design (see image right) that would create isolated micro-grids and other micro-grids with a “thin wire” connection to a main grid.

Western Power recognises that renewable-based micro-grids will provide cheaper, cleaner and more secure electricity supply, a view shared by Ergon Energy in Queensland, and by Horizon Energy in regional WA, which is looking at replacing fossil fuels with local renewable and storage.

Other network operators in South Australia, Victoria and NSW are also looking at micro-grid opportunity and “embedded networks”, where a local supply of solar and storage meets the needs of consumers in aged care communities, gated communities and shopping centres and the like..

Once the trial for the new development is complete, Endeavour is looking at how it might be applied in existing suburbs and communities – hence the prospect of returning ownership of networks to councils, communities or businesses.

“The projected growth within the embedded networks extends beyond micro-grids and can expand into brownfield areas and existing apartment blocks,” Endeavour says, noting that it would reduce the requirement for new zone substations and other network infrastructure.

The Endeavour tender closes on June 20.

Reprinted with permission.

W 2050 roku cena emisji dwutlenku węgla może być równa zero!

Marek Zaborowski

W ostatnim raporcie energetycznego think tanku insightenergy o

publikowały został niniejszy wykres:


Z wykresu wynika, że niewiele będzie się działo do roku 2025, ale za to po roku 2025 to jak się już zacznie, to na serio. Można ten wykres jeszcze inaczej interpretować – nie wierzymy, że cokolwiek istotnego się wydarzy w ciągu najbliższych 10 lat, ale mamy nadzieję, że potem coś się jednak stanie. Ktoś coś może wymyśli.

Otóż wiara, że coś się za dziesięć lat wydarzy jest bardzo uzasadniona, ale nie jestem przekonany, czy kierunek nakreślony przez autorów jest właściwy.  Chociażby technologia fuzji jądrowej – niby wciąż wydaje się odległa, ale ze świata nadchodzą coraz pozytywniejsze wieści.

Załóżmy, że w ciągu kolejnych 10 lat fuzja się uda – wtedy prawdopodobnie cena dwutlenku węgla będzie spadać.

Warto zwrócić uwagę na obecne trendy, np. udział ropy w gólnym światowym zużyciu ropy:


Ceny ropy:


Kolejna sprawa to sprawność i dostępność odnawialnych źródeł energii – wydaje się, że sprawa jest przesądzona – kontynenty, które najbardziej potrzebują obecnie energii (Azja i Afryka) mogą przestawiać się na energetykę słoneczną. W tym roku okazało się, że spadek cen na ogniwa słoneczne nie zwolnił, i  cena energii z ogniw słonecznych w USA spadła o kolejne 20 procent (to naprawdę bardzo dużo).


IEEFA Update: Coming Soon to a Grid Near You, Cost-Competitive Solar

Należy podkreślić, że spadkowi cen energii z ogniw fotowoltaicznych towarzyszy spadek cen magazynowania energii.

Zatem za kilka lat może okazać się, że paliwa kopalne będą wykorzystywane tylko w ostateczności, bo energia pochodząca z innych źródeł będzie tańsza. Jeżeli taki scenariusz się spełni, to bardzo prawdopodobne, że cena emisji dwutlenku węgla nie tylko nie wzrośnie ale znacznie spadnie.

No i zapytam retorycznie – który scenariusz jest bardziej prawdopodobny i w który bardziej wierzymy?

Co z tego wynika?

1. Los węgla jest przesądzony – i jego koniec nie wynika jedynie z prognozowanej ceny dwutlenku węgla, ale nawet w większym stopniu z perspektyw rozwoju innych źródeł.

2. Niestety prognozy długoterminowe, w obecnej sytuacji, w energetyce nie mają większego sensu – co oczywiście zdecydowanie komplikuje decyzje inwestycyjne. Nie sposób zabezpieczyć długoterminowych kontraktów, choćby ze względu na potencjalny rozwój energetyki rozproszonej.

3. W dobie globalizacji i zwiększonej roli Azji i Afryki, ceny będą kształtowane przede wszystkim przez te dwa regiony – a one, właśnie ze względu na długoterminową konkurencyjność, z coraz większym zaufaniem spoglądają na odnawialne źródła, w tym przede wszystkim energię pozyskiwaną ze słońca.

Will ‘energy union’ help the EU deliver its climate commitments?

The EU’s plans to revolutionise its energy system need to overcome major hurdles, write David Buchan and Malcolm Keay

The European Commission needs its Energy Union plans to work to raise the share of renewables in Europe (Image by European Parliament)

Six months after the Paris Agreement was drafted and the administrative capacity and political will of some of the major players to fulfil their commitments is being called into question.
For instance, the US has the capacity, but in the event that Donald Trump wins the presidency, the willingness to deliver carbon cutting policies may be lacking. India may have neither the capacity nor the will to seriously curb its emissions, while China has considerable capacity and will but, as by far the biggest carbon emitter, it faces a huge task.
By contrast, the European Union (EU) has already shown capacity and will by being the only major bloc to sign up to the Kyoto Protocol and to meet its emission reduction targets under the protocol. Moreover, the EU’s new project to form its 28 member states into a low-carbon ‘energy union’ might seem to cement Europe’s position as the most dependable of partners in the fight against climate change.
It is highly probable that the EU will be able to meet its headline climate commitment at Paris of achieving a 40% reduction (below 1990 levels) in emissions by 2030.
The EU has already virtually met its 2020 goal of a 20% cut, largely due to slow economic growth, a trend that does not look like changing. In addition, some EU emitters, such as Germany and the UK, have national legislation on emission reduction that is more ambitious than EU targets, even though there may be some backsliding.
However, as we point out in a new book, Europe’s Long Energy Journey: Towards an Energy Union?, there are design flaws in the Energy Union project that will limit its achievements.

Some of the flaws relate to the EU’s unique structure and currently difficult internal politics, but other flaws carry lessons for other countries seeking to follow the EU in marrying the subsidisation of renewable energy with the operation of a normal energy market.
In terms of the politics, the European Commission’s Energy Union project is as much about preventing the bloc’s 28 governments from sliding further backwards into national mechanisms and instruments and from retreating from collective EU climate goals, as it is about forward leaps in the Europeanisation of energy policy.
This is evident from the provisions for governance, or lack of it. After 2020, the current system of individual (and therefore enforceable) renewable targets for EU states will be replaced by a collective (and therefore unenforceable on any particular state) renewable target for the whole EU.
This is a step backward but a sensible step backward, in the view of the UK and some east European countries which successfully lobbied to have the flexibility to pursue low carbon energy by other means (even though the low carbon alternative of nuclear power is, if anything, more expensive than renewables).
But it is clearly not a step towards the sort of central coordination usually associated with the idea of ‘union’. The result could be not much more binding on EU states than the Intended Nationally Determined Contributions (INDCs) that are the building blocks of the Paris agreement.
It is the vague nature of these INDCs that may have been key to getting a global consensus, but for the EU it would be an institutional retreat.
So there seems to be some weakening of the political will of some EU states in the fight against climate change, at least as pursued primarily by developing renewables.
At the same time, there are doubts about Europe’s capacity or capability to achieve radical emission reductions over the longer term, because this depends on the EU having the right policy instruments – that are not clear.
In particular, the EU – meaning in this case, its executive body, the European Commission – has no power to harmonise the different national renewable energy subsidy programmes so as to prevent them distorting the internal energy market.
The Commission’s legal authority to control national state aids to industry is a blunt instrument, which can be used in a negative sense to block or modify individual state aid programmes but not positively to create a harmonised subsidy system EU-wide.
EU governments have resisted any such harmonisation, and on their side they have the EU treaty, which upholds member states’ sovereign right to decide their own energy mix.
A further problem is that, even if EU renewable subsidies were harmonised, they would still disrupt the energy market, because they inject a form of energy that does not respond to or reflect normal energy market price signals.
Despite static or falling electricity demand in Europe, subsidies keep pumping more renewable energy on to the European grid, which is killing the commercial prospects of conventional generation that is still needed as intermittent back-up when wind and solar generation drops off.
Exit strategy?
The official line in the EU is that these subsidies are only temporary and will be phased out as renewables achieve grid parity and become competitive with fossil fuels.
In fact, as we argue in our book, Europe has no clear exit strategy from renewable subsidies.
Until reasonably cheap large scale electricity storage is developed – renewables will always tend to cut their commercial throat because of the way they flood on to the grid and depress the wholesale price, which only rises in the absence of renewables.
In other words, there is no exit strategy for wind and solar to cover their capital costs from the market alone.
Muddled markets
There is a market-friendly instrument that could, in theory, promote low-carbon energy in a way that not only does not distort the market but which is also neutral between all technologies – and this is the EU Emissions Trading Scheme (ETS).
But it is worth pointing out, especially as China eyes a national carbon trading scheme following its pilot emission trading schemes, that in practice Europe’s ETS does not incentivise low-carbon investment at the moment because the ETS price is too low.
More to the point, even if the ETS carbon price rises, it never will provide sufficient incentive because as the product of market forces it will always lack the predictability and stability to underpin long term investment.
In short, it is not ‘bankable’. We suggest a better alternative would be for the EU to create a carbon intensity standard (so many grams of carbon per kilowatt hour) which power generators would have to meet, either by reducing their own carbon intensity or by buying tradable carbon intensity reduction certificates.
Europe’s Energy Union plan is useful in trying to provide new political impetus to reforms in several dimensions of energy policy, including the somewhat neglected areas of energy research and development, and of energy security.
But Europe’s partners should be aware of the plan’s limitations, particularly in integrating renewables into the traditional energy market, and take heed when drawing up their own plans. 

India, China investing more in renewable technologies: Kerry

John Kerry said for the first time in history, despite the low price of coal, oil, and gas more of the world’s money was spent fostering renewable energy technologies than was spent on new fossil fuel plants.

Emerging economies like India, China and Brazil invested more in renewable technologies last year than the developed world, US Secretary of State John Kerry has said.

John Kerry said for the first time in history, despite the low price of coal, oil, and gas more of the world’s money was spent fostering renewable energy technologies than was spent on new fossil fuel plants.

"Over the past decade, the global renewable energy market has expanded more than six fold. Last year, investment in renewable energy was at an all-time high nearly USD 330 billion," Kerry said in his remarks at the Bloomberg New Energy Finance Summit here yesterday.

"That’s a revolution. And make no mistake: This is not only happening in industrialised countries. In fact, emerging economies like China, India and Brazil invested even more in renewable technologies last year than the developed world," he said, adding that China alone invested more than USD 100 billion.

Kerry also underscored the economic opportunities presented for American companies by India’s plans to get almost half of its power capacity from non-fossil-based sources by 2030.

India plans to get 40 percent of its power capacity from non-fossil-based sources by 2030, he said, adding that this will require bringing 200 gigawatts of additional renewable power online.

"Let me just add that American companies are already bidding on those projects – and frankly, winning large and lucrative deals," Kerry said.

China too has set a target that will require the country to add between 800 and 1,000 gigawatts of non-fossil energy, he said.

Kerry said that the cost of investing in clean energy was now far cheaper than paying for the consequences of climate change later and this is leading nations around the world to set their own ambitious emissions-target reductions.

"Countries are now working to turn those pledges into real, on-the-ground action and concrete projects, and foster new directions for economic growth in a low-carbon future. And as we work together to achieve our targets, those betting on renewable energy are going to win big," Kerry said.

Noting that the pledges being made by countries in renewable technologies is not "conjecture", Kerry said it was written right into the targets that even the world’s largest developing and fossil fuel-dependent economies have already announced.

"We are seeing a global surge, and as a result, in many places, clean energy has already reached cost parity with fossil fuels. And more and more people are directly reaping the economic benefits of this boom," Kerry said.

"7.7 million people around the world are currently employed by the renewable energy industry – and more than a million of those jobs have been added since 2014," he added.

A United Nations-backed report released last month had said that India and China led the developing nations in investments made in renewable energy last year.

Global Renewable Energy Capacity Soared In 2015

Global renewable energy capacity surged to new heights in 2015, recording the largest annual growth rate ever according to a new report from the International Renewable Energy Agency (IRENA).

IRENA’s “Renewable Capacity Statistics 2016” shows generation capacity from renewables grew by 152 GW worldwide – a rate of 8.3 percent – during 2015, with the majority of growth coming from new installations of wind and solar power.

The report finds that as of the end of 2015, a remarkable 1,985 GW of renewable capacity is installed globally.

“Renewable energy deployment continues to surge in markets around the globe, even in an era of low oil and gas prices. Falling costs for renewable energy technologies, and a host of economic, social and environmental drivers are favouring renewables over conventional power sources,” said IRENA Director-General Adnan Z. Amin.

Sustained declines in the price of installing wind and solar energy contributed to a record year for both technologies. Wind capacity grew by 63 GW last year – 17 percent – thanks in part to a drop of 45 percent in the cost of onshore wind turbines since 2010. The price of solar PV has fallen by around 80 percent in the same period, helping solar power in 2015 add a record 47 GW of capacity – an increase of 26 percent.

Overall renewable capacity has increased by around one-third in the past five years, according to the report, with solar and wind the major contributors.

Climate confusion among U.S. teachers


Although more than 95% of active climate scientists attribute recent global warming to human causes (1, 2) and most of the general public accepts that climate change is occurring, only about half of U.S. adults believe that human activity is the predominant cause (3), which is the lowest among 20 nations polled in 2014 (4). We examine how this societal debate affects science classrooms and find that, whereas most U.S. science teachers include climate science in their courses, their insufficient grasp of the science may hinder effective teaching. Mirroring some actors in the societal debate over climate change, many teachers repeat scientifically unsupported claims in class. Greater attention to teachers’ knowledge, but also values, is critical.

Prior surveys [e.g., (5, 6)] suggest that many teachers devote class time to climate change. Although these surveys are suggestive, their use of nonprobability sampling undermines the validity of their results. None quantified the amount of class time or the specific topics covered in class. We undertook the first nationally representative survey of science teachers focused on climate change. Working from a commercial database of 3.9 million teachers, we drew a stratified probability sample of 5000 names and implemented a multiple-contact paper and Web survey protocol during academic year 2014–15. We collected data from 1500 public middle- and high-school science teachers from all 50 U.S. states, representative of the population of science teachers in terms of school size, student socioeconomic status, and community economic and political characteristics. See supplemental materials (SM) for details.

INTRODUCING THE BASICS. Three in four science teachers allocate at least an hour to discussing recent global warming in their formal lesson plans, including 70% of middle-school science teachers and 87% of highschool biology teachers (table S7). Because virtually all students take middle-school science and 97% enroll in a general biology class (7, 8), the likelihood of any student missing instruction in climate change altogether is low—on the order of 3 to 4%. Most teachers reported covering the greenhouse effect (66%), the carbon cycle (63%), and four or more observable consequences, such as sea-level rise, or changes in seasonal patterns, like the flowering of plants and animal migrations. Teachers also discuss responses to climate change and careers addressing the challenges it poses.

Although most students will hear something about climate change in a science class, the median teacher devotes only 1 to 2 hours to the topic (table S7), inconsistent with guidance from leading science and education bodies [e.g., (9)]. Of course, quality of instruction is more important than quantity, so we turn to how students are introduced to climate change science.

MIXING MESSAGES. Notably, 30% of teachers emphasize that recent global warming “is likely due to natural causes,” and 12% do not emphasize human causes (half of whom do not emphasize any explanation and thereby avoid the topic altogether). Of teachers who teach climate change, 31% report sending explicitly contradictory messages, emphasizing both the scientific consensus that recent global warming is due to human activity and that many scientists believe recent increases in temperature are due to natural causes (see the first chart). Why might this be the case? Some teachers may wish to teach “both sides” to accommodate values and perspectives that students bring to the classroom (6, 10). Beyond that, the survey data allow us to evaluate three explanations.

Teachers’ emphasis.

Teachers reported emphasis on causes of global warming, among those devoting an hour or more to the topic (see SM for details on calculation).


First, teachers might experience overt pressure from parents, community leaders, or school administrators not to teach climate change. Only 4.4% of teachers reported such pressure (6.1% reported pressure to teach it, mostly from fellow teachers). This is less than the 15% reporting pressure in Wise’s pioneering study (6), and far less than biology teachers reported in a survey on teaching evolution (10).

Second, teachers also may not be very knowledgeable about a wide range of evidence—e.g., CO2 measurements from ice cores and from direct measures at Mauna Loa—and how climate models work. Given the relative novelty of the topic in classrooms, instructional materials, and preservice training, this would not be surprising, and nearly 50% said that they would prioritize one or more unrelated topics (e.g., pesticides, ozone layer, or impacts of rocket launches).

Teacher’s views.

Teachers’ perceptions of scientific consensus, by their personal opinion about the causes of recent global warming. (Numbers in parentheses are the percentage of teachers selecting each statement as the one coming closest to their views).


Third, many teachers are unaware of the extent of scientific agreement. This is critical because we might expect that, with limited technical mastery, teachers may defer to scientific expertise. Yet, when asked “what proportion of climate scientists think that global warming is caused mostly by human activities?”—only 30% of middle-school and 45% of high-school science teachers selected the correct option of “81 to 100%.” Even among teachers who agree that human activities are the main cause of global warming (a large majority of all science teachers), only 52% know the percentage of scientists who share their view. If a majority of science teachers believe that more than 20% of climate scientist disagree that human activities are the primary cause, it is understandable that many would teach “both sides,” by conveying to students that there is legitimate scientific debate instead of deep consensus.

The combination of limited training and uncertainty about the scientific consensus affects teachers’ acceptance of anthropogenic climate change. Although only 2% of teachers personally denied that recent global warming is happening, almost one-sixth (15%) believe that it is mostly driven by natural causes, and another one-sixth thought that human and natural causes are equally important. Indeed, teachers’ assessment of the scientific consensus is intertwined with their personal conclusions about global warming and its causes (see the second chart).

IMPROVING TEACHERS’ KNOWLEDGE. Advances in climate science and consolidation of scientific consensus have outpaced textbooks and teachers’ training. Fewer than half of the teachers report any formal instruction in climate science in college. Two-thirds of teachers (including 50% of those who believe that natural causes drive global warming) said they would be interested in continuing education “entirely focused on climate change.” Provision of such continuing education (11) and development of networks of support to provide ongoing and connected professional education opportunities (12) would be helpful.

Continued development and dissemination of teacher-tested, standards-aligned educational materials that document the basis for the scientific consensus about human-caused climate change would also be valuable. High-quality, vetted, and up-to-date online instructional resources [e.g., (1315)] provide examples for teachers and science communicators.

The aim of such efforts would be to improve teachers’ knowledge of climate science, so as to distinguish what is scientifically uncertain (e.g., exactly how quickly sea levels will rise) from what is well supported (e.g., that sea levels have risen and are rising more quickly owing to human-caused climate change). Teachers must expect, and be equipped to counter, specific misinformation and misconceptions about climate change likely to be voiced by students. Teachers prepared for such challenges are more likely to have confidence to provide scientifically sound instruction.

POLITICS AND IDENTITY THREAT. Content knowledge is not the only area in need of attention. Rejection of sound scientific conclusions is often rooted in value commitments rather than ignorance (16), and science teachers are not immune from this tendency. A question measuring political ideology was a more powerful predictor of teachers’ classroom approach than any measure of education or content knowledge, with those leaning toward “It’s not the government’s business to protect people from themselves” most willing to teach “both sides” (table S8).

Our data suggest that, especially for political or cultural conservatives, simply offering teachers more traditional science education may not lead to better classroom practice. Education efforts will need to draw on science communication research and acknowledge resistance to accepting the science and addressing its root causes (17, 18). College and university instructors will need help reaching teachers and teachers-in-training who bring diverse political and value commitments to the classroom—particularly in avoiding “boomerang effects,” in which attempts to promote a particular view can instead harden opposition. This may entail acknowledging and addressing conflicts that teachers (and their students) may feel between their values and the science. Such instruction will promote understanding of the science as well as the pedagogy that future teachers will need to promote climate science literacy.

Step on it

The Economist, Jan 30th 2016 | From the print edition

It will take time, but a fragmented market is on the verge of going global

THE Singapore Sling is a cocktail with such a variety of ingredients that few ever taste exactly alike. So it may seem an odd name to apply to a contract to help standardise the global trade in gas. That has not deterred the Singapore Exchange, a market for stocks, bonds and derivatives. Last year, as part of the city-state’s push to become a global trading hub for liquefied natural gas (LNG), it developed the slightly laboured SLInG, a spot-price index for Asian LNG. On January 25th it complemented this with a derivatives contract. There is a long way to go though. As yet the spot market accounts for only about 5% of volumes traded in Asia, executives say.

Instead, the international gas market is dominated by long-term contracts linked to the price of oil, both for gas delivered via pipeline and as LNG. This is an anomaly that dates back to the 1960s, when European suppliers developing their first gasfields had no price on which to base long-term contracts, so used oil instead. Since then, supply and demand for these commodities have diverged; oil indexation increasingly fails to reflect the disparities.

Analysts believe that, as a result, the pricing mechanism for natural gas is on the verge of change, and that a real global market will start to emerge, adding Asian trading hubs to those in America and Europe. This should spur the spread of natural gas, the cleanest fossil fuel and one that should be in the vanguard of the battle against global warming. But producers, who fear any change will lead to a drop in prices, are set to resist. They say long-term oil-linked contracts are still needed to offset the risk of their huge investments in LNG. (Gazprom, a Russian producer, has made the same argument in Europe about pipelines.)

Long-term and cyclical shifts explain why the gap between the two fossil fuels has widened. The LNG trade has grown massively in the past decade (see map). Adrian Lunt of the Singapore Exchange says LNG now rivals iron ore as the world’s second-biggest traded commodity, after oil. In the past 40 years natural gas’s share of the energy mix has grown from 16% to more than 21%. Oil’s has shrunk. Gas generates 22% of the world’s electricity; oil only 4%. It might make more sense to tie the price of natural gas to coal, against which it competes as a power source.

Moreover, during the current decade, the outlook for gas prices has become even more bearish than for oil. Sanford C. Bernstein, a research firm, reckons global LNG supply will increase by about a third over the next three years, pushing overcapacity to about 10%. (There is far less spare capacity in the oil market.) At least $130 billion of this investment in supply is in Australia, which within a few years will overtake Qatar as the world’s largest LNG producer. America will also add to the surplus. Its first, much-delayed LNG exports are due to be shipped from the Gulf Coast in weeks.

Investment in the liquefaction trains, tankers, regasification terminals and other paraphernalia needed to ship natural gas was boosted by a surge in demand from Asia. Japan and South Korea scrambled for LNG after Japan’s Fukushima disaster in 2011 forced them to shut down nuclear reactors. China saw LNG as a way to diversify its energy sources and curb pollution from coal. Last year, however, those countries, which account for more than half of global LNG consumption, unexpectedly slammed on the brakes.

The subsequent supply glut means that the spot price of gas in Asia has plunged. Those buyers who took out long-term oil-indexed contracts when crude was much higher are suffering. Mel Ydreos of the International Gas Union, an industry body, says that Chinese firms saddled with such contracts are urging suppliers to renegotiate them. He notes that a Qatari company recently agreed to renegotiate a long-term contract with an Indian buyer, cutting the price by half.

The drop in Asian prices has brought the cost of natural gas traded in different parts of the world closer to each other. America is an outlier. Thanks to the vast supplies unleashed by the shale revolution, its Henry Hub benchmark is by far the world’s cheapest, at just over $2 per million British thermal units (MBTU). But add liquefaction and transport costs, and American LNG prices rise above $4 per MBTU. In Europe and Asia they are a dollar or two higher. A few years ago the range would have been much wider, from $5 at Henry Hub to $19 in Asia. More homogenous prices are an important step towards a globalised market, says Trevor Sikorski of Energy Aspects, a consultancy.

But to get there several more hurdles must be overcome. First, traded markets must become deeper, with a mix of piped gas and LNG, to provide more reliable prices. Asia, in particular, lacks infrastructure and international interconnections. Second, derivatives markets are needed to allow producers to hedge against price swings when investing in expensive new capacity. Third, end-users need deregulated energy markets to encourage competition for the best sources of supply. These, too, are scarce in Asia. Japan is only just starting to free its electricity and gas markets. (In the meantime the likely flood of American LNG into Asia may make Henry Hub a useful reference price.)

The strongest impetus for reform may be the fear of what happens without it. Few expect the overcapacity in oil markets to last much more than a year or two, after which prices of crude may spike. Yet the glut in the LNG market could last into the 2020s, in which case the disparity between spot and oil-indexed prices could balloon and buyers would rebel.

Other commodities have gone through similar upheavals when spot prices diverged from long-term contracts. The system of “posted prices” for oil fell apart in the 1970s. The spot iron-ore market got a boost as a result of the collapse in demand during the 2008-09 financial crisis.

Producers and consumers appear to be lining up for battle. On January 27th shareholders of Royal Dutch Shell, an Anglo-Dutch oil major, gave their approval to the $35 billion purchase of BG (formerly British Gas). The deal will create the undisputed world leader in LNG. On the other side, TEPCO and Chubu Electric, two Japanese utilities, have teamed up to create the world’s biggest LNG buyer, to demand better terms from suppliers, including spot contracts. It will be a long, hard fight. But the days of oil-linked contracts seem to be numbered.

Correction: an earlier version of this article incorrectly identified Adrian Lunt of the Singapore Exchange. This has been amended.

Graph of the Day: Why solar power is taking over the world

or anyone who is in any doubt about the incredible journey that solar power has been on over the past decade the graph below – sourced via this story on Treehugger – offers a stunning reminder.

As the graph shows, the cost of solar PV – the orange part – 40 years ago was up around $US100 per Watt, and a global total of only 2MW was installed.

Of course the cost of the promising technology falls rapidly from there, but global solar installations – the blue bit – barely register until that magic moment somewhere between 2000 and 2005, when price per Watt reaches a tipping point and the blue bit soars to a total of just under 65,000MW in 2015.


© Earth Policy Institute/Bloomberg

And as Treehugger’s Michael Graham Richard notes, “the beauty of having exponential growth on your side is that very quickly, even the current blue spike will look tiny. In 2020 or 2030 we’ll look back on 2015 and it’ll barely register as the beginning of the curve on the chart.”

India willing to consider long term fixed price contracts for the Supply of Gas: Piyush Goyal

India Infoline News Service | Mumbai | February 09, 2016 00:17 IST

Goyal further stated that additionally, opportunities to control the entire value chain right from gas production, liquefaction, shipping, re-gasification and power generation can be evaluated at the current historic low prices of many of these activities.



Piyush Goyal Union Minister of State(IC) for Coal, Power and New and Renewable Energy has said that the Government of India is willing to consider long term fixed price contracts for the supply of gas which will enable power producer to enter into a power supply contract at an affordable price. Shri Goyal was addressing a roundtable in Brisbane, Australia today on the business opportunities for LNG (Liquefied Natural Gas) and Coal Bed Methane.
Goyal further stated that additionally, opportunities to control the entire value chain right from gas production, liquefaction, shipping, re-gasification and power generation can be evaluated at the current historic low prices of many of these activities. The Minister is leading a delegation for the 3rd India-Australia Energy Security dialogue in Australia.

Piyush Goyal highlighted that India is running one of the world’s largest renewable energy programme which aims to increase the capacity 5 times to 175 GW over the next seven years. This will require gas based plants which can act as spinning reserve and supply power during deficit times of day (like evenings) when renewable energy production reduces while stabilizing the grid. He also stressed that since coal based power is available in India at less than 5 cents per unit, the LNG providers should consider supplying gas to India at a price that is comparable.

Pointing out that India is the fourth largest energy consumer in the world Shri A.K. Jana, Executive Director, GAIL stated that India has also developed sufficient infrastructure in pipeline transportation, regasification facilities as well as end consumers facilities such as gas based power plants. These facilities enable the consumption of around 300 MMSCMD, whereas the present consumption is less than 50% of the same. This provides good opportunities to countries which have a surplus of Natural Gas provided it is available at affordable prices.

In order to explore the opportunities to affordably supply Australian LNG to India, an LNG sub-group has been created under the joint leadership of a Joint Secretary, Ministry of Petroleum and Natural Gas and a senior Australian official. They will be further supported by an operating team as well as representatives from NTPC, GAIL, Petronet LNG and shipping companies. The sub-group will create a roadmap for the collaboration over the next two months.

The Australian Companies highlighted how technologies have been highlighted to reduce cost of producing natural gas and clear shipping routes between Australia and India provide ample opportunities to provide LNG to India at competitive rates. Additionally, with large increase in coal exploration and production in India, Australian companies can provide Coal Bed Methane (CBM) technologies to India.

With Australian collaboration, India aims to meet its objective to providing affordable and clean energy for all. The collaboration on LNG and CBM is a big outcome focused step towards achieving this objective.