Water limitations are a problem in many areas of the US and the world. Without water, the efficiency of power plants diminishes as the folks in Washington and California have found out when converting to air cooling their facilities. Losses can be 30% of output which makes that investment in upgrading to 40% efficiency, drop back to 30. Not a good investment, unless you have no option. In water limited places in the world, cooling water will limit the ability to use water-intensive coal, nuclear and oil facilities.
Nuclear power has been argued as a green option, but it is green only with respect to carbon production. Nuclear needs copious amount of water to cool the reactor. An while it remains an ongoing option, many are wary after the Japanese experience. There are 6 licenses in the US for nuclear facilities that expire by 2020, and 27 more by 2030. That means over a third of facilities are at their useful life. Creating second generation nuclear plants is a major, challenge at a financial and political level. For the most part China, Russia and India are leading the way with the US a distant 5th in proposed next generation reactors. We just don’t see a lot of nuclear reactors on the US horizon. Why? Renewable and gas.
The power generation picture has changed significantly in 10 years with respect to large increases in wind and gas. Renewables have increased from 2.4 to 6.5% of the market in 10 years (to 266 TWh). Wind has been the largest growth area (to 167 TWh) despite ongoing environmental issues associated with migratory birds, minimum wind speeds, and lobbying against wind projects (like Bill Koch did in Cape Cod) or the tax incentives used for renewables (like the Koch brothers continue to do along with Tea Party members in Texas). Wind energy costs have dropped by 40% in 10 years and today the majority of wind energy components are built in the US as opposed to overseas. The subsidies have made this possible by limited private capital risk. Nolan County, Texas alone produced more wind than the state of California, despite the ongoing lobbying against it in Texas. Texas has the largest “wind” reserves in the US and many in the public see the need to take advantage of the high wind areas like Texas ($25 billion to date, $13 billion proposed), the Rocky Mountains and coastal areas that do not conflict with migratory birds routes, landscape views or property rights issues. The Blackfeet Nation in Montana has long known that wind is a valuable resource on the reservation. Overall the state of Montana has the second largest wind potential behind Texas. But like Texas there is conflict – in Montana from the fracking industry. Note that the upper Rocky Mountains is where NextEra installs many of its wind fields. California has also gotten into the wind market with projects proposed in the Mojave Desert, although eagle conflicts impact those permits. However, uncertainty about the ongoing tax break , caused by inaction in the House, caused new wind projects to drop 92%, with a loss of 30,000 jobs in one year which creates questions about wind power expansion in the near future.
At the smaller level, combined heat and power (CHP) generation is located at 4200 commercial and industrial facilities today. States are interested. The demand is expected to rise to 40 GW by 2020. Solar markets are often local. Some communities provide incentives for residents to put panels on the roofs. Germany did this and now 25% of their power comes from these solar projects. 2% of houses in Arizona have solar on their roofs. In Hawaii, solar power is half the cost of generated power. However local solar has run into the same issue as wind power – this time the Koch brothers-funded American Legislative Exchange Council has encouraged local power utilities in 21 states to challenge laws that permit solar installations of houses as reducing profitability of power investments by those utilities. Others, like FPL still fund such installations creating and interesting conflict in the market.
Gas has replaced coal as the dominant source, both because of less greenhouse gases and because of much higher efficiency in source-power ratios. California, Texas, Florida and New York, among the four largest power demanding states, have seen natural gas use increase significantly in the past 20 years, virtually all at the expense of coal. Fracking has been the primary reason for the expansion of gas. High quality gas can be recovered from areas through horizontal drilling, but only 3-5% of the gas in the foundation is actually removed from the initial frack. Then the returns diminish to about 10-15% of initial withdrawal within 1-3 years, and refracking must occur to increase production. 100% of the gas is unlikely to ever be achievable. Still gas reserves are likely to be producers for some time, although industry experts expect the peak of current fracking technology in 2025, much sooner than some would hope. Despite there being over 2.4 million miles of gas pipelines in the US, the biggest issue with frack gas is pipeline absence in the big fields in Pennsylvania, Ohio and North Dakota. Refineries are starting to crop up in the Midwest and Pennsylvania to address the gas needs – which may reduce the need for longer pipelines and reduce loss (currently 6%).
Fracking is also a boon to the oil industry and the ability to recovery oil from tar sands in Alberta has increased the potential supply. Like gas, the problem is pipelines, but the lack of pipelines is a boon to the railroad industry, particularly in the Bakken Fields in North Dakota where abundant rail is available via BNSF (hence Warren Buffett bought it). Tank car demands are up to meet the 400,000 tank car loads of crude oil transported in 2013. Demands are expected to climb as new generation tank cars are built to minimize risks of hauling crude oil and coal tar sand products. Tight oil recovery is expected to rise through 2019, while a slow decrease is expected thereafter based on current technology. But note the lack of pipelines create a problem in getting the gas from North Dakota to useful markets. It is estimated that $1 billion per year in gas is flared in the Bakken fields alone. Pipelines and rail are needed, but both are controversial
The pipeline solution is varied and many. North American Oil and Gas Pipelines magazine sees a high investment in pipelines by 2020, with decreasing investments through 2035 as gas recovery drops. XL pipeline has dominated smaller pipeline projects designed to bring tar sands oil to refineries in Texas and Louisiana, but there are other spurs and different pipes are planned for different purposes. The obstacles are many – political, environmental, economic through a host of forces that either benefit directly from the pipelines or that benefit from not having the pipelines (think railroads). Of course a couple of recent rail accidents have created more controversy there, but rail is the current solution for many of these remote fields.