Archive | Retail

Sinclair Oil to Bow out of Retail

SALT LAKE CITY, Nov. 11 (UPI) — U.S. oil corporation Sinclair said it would exit the retail gasoline business, by early 2010 with the sale of its final 29 gas stations.

The company “already sold approximately 60 locations to and through our jobber network,” Sinclair senior vice president of marketing and supply told The (Oklahoma City) Oklahoman.

Vance McSpadden, executive director of the Oklahoma Petroleum Marketers and Convenience Store Association, said Sinclair’s 70-year-old logo, the green brontosaurus, was not going to become extinct.

“We’re still going to see the dinosaur. For right now, it’s not going to be any different than it always has been,” he said.

The brand is still available through stores the company does not own. Sinclair currently distributes to 2,600 company and distributor operated outlets, the firm’s Web site says.

The gas stations up for grabs in Colorado, Iowa, Minnesota, Montana, Nebraska and Oklahoma, will be sold through either a 10-year Sinclair brand and fuel agreement, without a fuel agreement or for a separate use with a restriction on petroleum sales, the newspaper said.

Copyright 2009 by United Press International

Posted in Energy & Fuels, Retail0 Comments

How To Shop For Green Cleaning Supplies

The push to go green becomes more evident as it begins to take residence on our retail shelves and becomes more and more affordable. Many people are jumping on the bang wagon by using green products in hopes of curbing their toxic emissions, waste disposal, and carbon footprint, which will result in a much healthier environment.

The problem is shopping for eco friendly products that are truly green products and not just conventional retail items with misleading rhetoric or advertising.

These are a few things you can do to ensure your purchase is a green one:

  • Avoid cleaners that contain toxins and corrosives
  • Choose products that have minimal or biodegradable packaging
  • Be sure to check all ingredients listed on the packaging
  • Steer clear of products that contain artificial or synthetic components

Using green products is important and knowing how to purchase them is equally important. These are just a few simple things that will help you become a greener consumer.

Find more information about becoming a greener consumer here.

Posted in Consumer Products, Packaging, People, Retail, Waste Disposal0 Comments

Wal-Mart Measures Green Sustainability

Wal-Mart Stores, Inc. are planning to roll out a program that easily identifies at a glance the sustainability of green products being placed on shelves. This program is a step in the right direction for Wal-Mart to become more ecofriendly and to better appeal to it’s green customer base. The retail giant hopes that it can push it’s suppliers to fully comply with the sustainability index and start a major trend in reMatail across the Nation.

“One of the issues consumers have is even if you want to be green, trying to navigate that is challenging,” said Neil Stern, senior partner at McMillan Doolittle LLP in Chicago and co-author of the book “Greentailing.” “There are all these labels out there, and it’s really difficult for consumers to understand what’s going on.”

Many eco-experts do admire what Wal-Mart is trying to accomplish, but also believe it is a difficult thing to accomplish simply, because it is hard to truly have green products. An article of clothing could be made from all natural, organic fibers, but if it comes from a facility that is high in emissions and power consumption, than that negatively impacts it’s status as a truly green product.

Read the full article for more information regardign Wal-Mart’s efforts to easily label products as green and reduce it’s own carbon foot print.

Posted in Consumer Products, Consumption, Retail0 Comments

Epic Correction Leads to Depressed Solar Sector

How epic has this correction been? The answer is worse than the 1987 programmatic crash (S&P -32%) but not as bad, to-date, as the 1973 oil crisis (S&P -48%) or the dot-com bubble (S&P -49%). For an excellent graphic of these events and the current housing bubble (S&P -45%) visit Calculated Risk. In this graph each of the indices starts at the same point on the top of the vertical axis, which represents the percentage amount of drop in index value. With the horizontal axis representing time, it can be seen that while the percentage drop of the S&P 500 is not quite as severe as in the case of the corrections of ’73 or ’00, those corrections took 2-3 years to hit bottom. We are less than one year into this correction and the S&P is down 44%.

For sustainable energy the correction to-date has been even more severe. Our graph from the October 7, 2007 S&P 500 peak to the end of October 2008 shows the changes to the four sectors we have been tracking since the S&P peak. At their minimums the four indices were down between 65 – 80%.

Camino Renewable Energy Indices vs. S&P 500 for the period
9-07 through 10-31-08. Camino’s solar index is down 60%.
(Copyright: Camino Energy)

The month of October was particularly bad for sustainable energy where 100% of the companies in our indices had negative returns.

Down 32-85% in one month, Camino Renewable Energy Indices
performance for the period Oct. 1st, 2008 through Oct. 31st, 2008
(Copyright: Camino Energy)

So what am I optimistic about? Simple, I’m optimistic the sustainable energy industry will continue to exist and at some point prices get so low that the stocks represent attactive buys. I think this is particularly true for solar as the statistics below show for 10 of the US traded companies I track in the Camino SOLAR index (detail here).

Earnings growth would have to fall dramatically
for Caminos’s top ten solar stocks to not be good buys.
(Copyright: Camino Energy)

SOLAR growth rates would have to slow dramatically to make the companies overpriced at current levels. Even if their earnings growth slows by a factor of 4 these ten companies would still be fairly priced. And I don’t see many reasons to expect such a slowing. Modules prices are expected to fall which should boast sales and improve customer ROI. Retail electric prices are virtually unaffected by oil prices in many economies so the basic economic benefit of solar isn’t going away. Subsidies are locked in in the US. Financing should be available with the massive governmental pushes to create liquidity while lowering rates. And the technology continues to improve further driving down costs and improving solar’s competitive position.

There may be other bargins in the sustainable energy sector but the solar sector is a good place to start with plenty of potential investment targets.

Mark Henwood is the founder of Camino Energy, an information provider specializing in globally traded sustainable energy stocks. Disclaimer: Henwood has positions in JASO, SOL, CSIQ, STP, SOLF, and LDK.

Posted in Business & Economics, Energy, Energy Industry, Other, Retail, Science, Space, & Technology, Solar0 Comments

Blending & Retailing Ethanol

Today the American Coalition for Ethanol (ACE), along with the Ethanol Promotion & Information Council (EPIC) presented a webinar that dealt with several of the key challenges facing ethanol retailers as they begin to offer increasing quantities of E85 (85% ethanol). Although the presentation was targeted at gasoline retailers, the information was of interest to anyone watching the emergence of ethanol in the U.S. as a significant transportation fuel. The presenter was Ron Lamberty, VP of Market Development for ACE, and himself an owner of gasoline retail establishments.

Currently there are just over 1,500 retail refueling stations offering E85 ethanol (85% ethanol), not quite 1% of the 160,000 total stations throughout the U.S. About 70% of the retail refueling stations in the U.S. offer ethanol blends, usually E10 (10% ethanol). There are 171 ethanol plants with a capacity of 10.4 billion gallons per year, and there are 28 plants under construction with the capacity to produce another 2.8 billion gallons per year. Ethanol now supplies 7% of the fuel for used in the U.S. for light vehicles.

The first topic covered regarded the question of food vs. fuel. This is a broad topic, of course, but Lamberty made the point that in the case of corn grown in the U.S., even though the corn allocated to ethanol distillation rose from 2.3 billion bushels in 2007 to 3.1 billion bushels in 2008, an increase of 35%, the total corn crop in the U.S. rose from 10.5 billion bushels to 12.9 billion bushels, an increase of 24%. Put another way, the quantity of corn grown for fuel in the U.S. between 2007 and 2008 increased by 800 million bushels, but the quantity of corn grown for food during those same two years increased by 1.7 billion bushels, more than twice as much.

In some respects the question of food vs. fuel is going to go away pretty soon anyway, both because crop yields continue to increase worldwide faster now than human population increase, and also because cellulosic ethanol is on the verge of being produced in commercial quantities. In the table below, it can be seen that the federal renewable fuel standard calls for corn ethanol production to peak at under 15 billion barrels per year, which they are fast approaching. The rest of the targeted 35 billion barrels, nearly 20 million barrels, is mandated to come from cellulosic feedstock. As we document in our feature “Cellulosic Ethanol,” there is feedstock in the U.S. sufficient to supply many times this 20 million barrel annual target.
post resumes below image

The U.S. renewable fuel standard calls for 35 billion gallons per year
by 2022, with cellulosic ethanol taking over the primary share by then.
(Source: American Coalition for Ethanol)

One of the most interesting challenges to blending and retailing ethanol relates to the so-called “blend wall,” which refers to the gap between how much E10 consumers can absorb, and the supply of ethanol. Basically if the supply of vehicles who can utilize E85 doesn’t increase fast enough, too much of the ethanol being produced has nowhere to go but into the E10 mixes, and at current annual production of 10+ billion barrels per year, ethanol is already being mixed into 70% of all gasoline sold.

The table below shows the gap projected between the rise of E85 capable vehicles who can use up 8.5 times as much ethanol with every gallon they purchase, and the projected supply of ethanol. As can be seen, in the period beginning around 2010 and lasting about six years, there is a gap between line that depicts total supply of ethanol, and the solid light (E85) and dark (E10) green area that depicts the total consumption capacity of ethanol.
post resumes below image

Beginning in 2010 there is a projected gap where the supply of
ethanol could exceed the capacity of the U.S. vehicle fleet to aborb it.
(Source: American Coalition for Ethanol)

The solution to the challenge faced by the projected blend wall is to put more E85 flexfuel vehicles onto the road. But the U.S. automotive fleet only turns over once every 17 years, and out of 240 million cars on the road, only 7 million are currently E85 capable. U.S. automakers are moving quickly towards offering 50% of all new models in flexfuel mode, but it will take several more years before enough of these cars are on the road.

Along with flexfuel vehicles that are explicitly designed to run on E85, however, there is another solution to the blend wall, which is to adjust upwards what percentage of ethanol can be mixed into regular gasoline. Currently E10, 10% ethanol, 90% gasoline, is considered a safe fuel blend for any vehicle. But “mid-blend” fuels, such as E15, E20 and E30, containing 15%, 20%, and 30% ethanol respectively, according to Lamberty, can also run reliably in regular vehicles. Just moving the blend wall standard from E10 to E15 would solve the blend wall problem, and allow ethanol production to continue to increase without disruption.

There are studies now in progress that were noted by Lamberty, including a DOE Oak Ridge finding that E20 is fine in regular engines. Lamberty also cited recent University of North Dakota study which he said indicated non flexfuel cars can run well on E20 and E30 and even on E40. Lamberty also noted the retail stations who have been offering mid-blends have yet to receive a complaint or damage claim from a vehicle owner. Currently the question appears not whether or not a mid-blend ethanol fuel will immediately damage a regular vehicle, but what the long-term impact may be. One of the commenters during the presentation stated they had been fueling their car with E20 and E30 for 70,000 miles – on a car that already had over 200,000 miles logged – and had no problems to-date. Additional study of the long-term impact is going to be needed before, for example, major automakers are going to be comfortable providing warranty protection for regular cars that use mid-blend fuel.

Another barrier to adoption of ethanol fuel is the cost of the pumping systems at the retail outlets. To install a new tank, pipes, pumps, wiring, island, canopy, etc., in order to sell E85 can cost a retailer $100,000 or more. A terrific innovation that can greatly reduce this cost is to use what is called “blender pump” technology, where existing tanks are used. Since retailers offering E85 typically use the same underground tank they previously used to store premium gasoline, the blender pump can draw from an E85 tank as well as from an unleaded tank, and mix the fuel to whatever specification the retailer chooses.
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A blending pump can utilize two tanks, one with either E85 or E100,
one with unleaded gasoline, and blend any mixture the owner specifies.
(Source: American Coalition for Ethanol)

Blender pumps have a variety of benefits. Because they cost between $10,000 and $20,000, but take away the need to install a new underground tank, they greatly reduce the costs for a station to begin to offer E85. They also can blend E85 on demand, meaning the retailer can purchase 100% ethanol directly from the refinery if they wish. They also make it possible to vary the blend of E85 onsite – allowing the retailier to comply with state regulations that actually vary the percentage of ethanol in E85 from between 75% to 85% depending on the region and the time of year. Finally, blender pumps make it possible for retailers to use the same equipment to offer mid-blends whenever they choose.

The future of ethanol in the U.S. appears promising from several perspectives: If vehicles indeed can run on mid-blends, there is less pressure to precipitously introduce flexfuel vehicles. Using blender pump technology, retailers may be able to begin introducing ethanol at their stations at far less expense. It is already clear there is cellulosic feedstock in the U.S. – in the form of forest slash, municipal waste, flue gas, crop residue, as well as energy crops – to supply raw material for 100+ billion gallons of ethanol per year. The real remaining question is how fast cellulosic ethanol refining technologies can be commercialized and brought into production.

Posted in Cars, Consumption, Energy, Energy & Fuels, Retail, Science, Space, & Technology, Transportation1 Comment

Both Sides of California Proposition 7

It is difficult to put both sides of any initiative into a few words and capture all the nuances, but here are some observations for voters to consider as we go into the last days before the election. The points made here are based on very recent conversations with people intimately involved with the campaigns both for and against Prop 7. While everything revealed here was on the record, sources will not be disclosed. Here is the Legislative Analyst analysis of Proposition 7. If you wish to view for yourself the areas in the bill cited below, click here for full text of Proposition 7 (this is a .pdf and will not accommodate text searches, if you prefer to keyword search the text, please click here for the full text in a format that permits text search):

The question as to whether or not Proposition 7 excludes producers of electricity under 30 megawatts is hotly disputed. The NRDC has put out a talking points memo that states “Prop 7 could exclude smaller renewable energy providers from participating in California’s energy markets; it excludes renewable power facilities smaller than 30 megawatts from counting toward the measure’s new requirements.” And if you read the text of the measure it appears this is true. You can read for yourself section 14, which states “Section 25137 is added to the Public Resources Code, to read: 25137. “Solar and clean energy plant” means any electrical generating facility using wind, solar photovoltaic, solar thermal, biomass, biogas, geothermal, fuel cells using renewable fuels, digester gas, municipal solid waste conversion, landfill gas, ocean wave, ocean thermal, or tidal current technologies, with a generating capacity of 30 megawatts or more…” But proponents of Prop. 7 claim this is a misinterpretation, noting that the amendments to the Public Resources Code only refer to the projects that are eligible for expedited siting permits. If you skip through each section’s preamble, you will see the amendments to the Public Utilities code only go through Section 11 of the initiative, then beginning with Section 12 the amendments to the Public Resources code begin. According to the proponents, they are not connected, and therefore no change is being made to the existing renewable portfolio standard in terms of what would be a qualifying project.

According to one source, the reasons the big solar companies are against Proposition 7: have more to do with the fact the initiative would require them to use union labor, ref. Section 24 “All solar and clean energy plants receiving certification pursuant to this section shall be considered a public works project subject to the provisions of Chapter 1 (commencing with Section 1720) of Part 7 of Division 2 of the Labor Code, and the Department of Industrial Relations shall have the same authority and responsibility to enforce those provisions as it has under the Labor Code.” Our position here is unequivocal – the government should normalize taxpayer-supported (or rate-payer supported) benefits so all workers get the same deal, upgraded social security and universal opt-in medicare (available to anyone at any age who wants to buy it and competing with private sector insurance); collective bargaining in America has become an anachronism that preserves special treatment for those folks lucky enough to work in heavily regulated and subsidized, relatively noncompetitive industries such as government and public works. Normalizing taxpayer and rate-payer funded benefits to benefit all workers might reduce some union worker benefits, particularly in the public sector, but would render most unionized workers in the totally competitive private sector better off, make America more competitive, make municipalities and large manufacturers solvent again, and would use our taxes to protect ALL American workers according to one set of rules.

Several reasons were thrown around as to why the environmental groups oppose Proposition 7: those in favor of Prop. 7 have suggested the 30 MW reason is not their true concern. The expedited siting provisions of this bill – which we believe are absolutely necessary if utility scale renewable energy is ever going to get built – will trample many cherished prerogatives of the environmental community. Another reason cited is the environmental community objects to the mandatory 10% cap on the premium the utility will be directed to pay renewable energy producers. But it should be noted this is a cap, not a floor, and if there is sufficient supply of renewable energy, the renewables producers will begin to compete under the cap to win contracts. As for the 10% cap not being sufficient to incentivize renewable energy construction, this is possible but completely dependent on the future price of fossil fuel, natural gas in particular. The notion that environmental groups oppose Prop. 7 because the penalties to the utilities for not achieving RPS targets have been slashed to $.01/kWh vs. the current $.05/kWh don’t really make sense, when you consider the initiative also removes the $25 million cap on these penalties. Under Prop. 7, renewable electricity production will need to increase to about 500 gigawatt-hours per day, more than five times what it is today. At $.01 per kilowatt-hour, you have $10,000 per gigawatt-hour, which implies if the 2030 standards were imposed today, the utilities would be paying about $40 million per day in fines. Not much of an objection there.

At the end of the day – why would the utilities oppose Proposition 7? They are investor owned, but publicly regulated. They earn a return for their investors according to a strictly managed set of pricing and cost recovery formulas. They will make money with or without renewables – why wouldn’t they be renewable agnostic? Proposition 7 appears to have flaws, but not necessarily the flaws that are being made most public. Actually moving this fast – installing well over 100 gigawatts of renewable energy generating stations (full output) is a logistical challenge that may simply be impossible. It is also important to consider what better technologies may emerge, rather than quickly build large scale projects based on current or near-term technological solutions.


Can California go from about 10% to 50% renewables in under 20
years? If sunny California can do it, can the rest of the U.S. follow?
(Source: U.S. DOE)

The most significant potential problem with Proposition 7 may be how to facilitate the level of investment necessary to build this much capacity. We stand by our analysis of Prop. 7′s costs as reflected in our posts “Costing California Proposition 7″ and “California Proposition 7″ published earlier this year: It will cost a minimum of $330 billion to install this much renewable generating capacity – that is based on $2.5 billion per gigawatt, a 17.5% yield, and a need to increase renewables output to 500 gigawatt-hours per day (forget about electrification of the car at anything less than this). Adding to amortization of capital the costs for interest, return to investors, operating costs, and transmission infrastructure, it is likely adding this capacity will result in deliverable renewable electricity priced at about $.20 per kilowatt-hour to the consumer. Can renewables deliver electricity for less than this? It is certainly possible, but it would be helpful to see the numbers. Big solar – big wind – can you show us your assumptions? How do you arrive at projections of wholesale prices of $.04/kWh (wind) or $.07/kWh (solar), and what price does that translate into for the retail consumer?

And of course we would need a crystal ball to know the future cost of natural gas. Anyone who doesn’t think the price equilibrium of fossil fuel remains volatile hasn’t been following the news of the past few weeks.

Posted in Business & Economics, Electricity, Energy, Fuel Cells, Geothermal, Infrastructure, Natural Gas, People, Retail, Solar, Tidal, Wind3 Comments

Lumens vs. Energy

There is a group in the USA (and elsewhere) known as the International Dark Sky Association who, since 1988, have been advocating not carbon reduction, but lumen reduction. With over 11,000 members – over 1,500 in California – the International Dark Sky Association has some clout.

Nonetheless, “glare bombs” are still available in bulk and can still be easily and inexpensively purchased (by anyone with an exterior wall on their dwelling) at the nearest big box retail outlet, and when deployed these always-on security lights, especially using flourescents, consume minimal energy and produce extremely maximal lumens. In fact, in spite of their energy sipping ways, just one of these security lighting fixtures could, if placed on the surface of the moon, be visible with a 20x telescope from earth. At least in a sufficiently dark location on earth.

But dark skies are only part of the mission of the International Dark Sky Association. They also lobby for smarter lumen management on the part of cities and other entities. After all, if excessive lumens from a “glare bomb” actually creates dark shadows, where unauthorized intruders can hide while surveying in full light the night surroundings, why have more lumens? Why would anyone want side-mounted always-on visible-from-the-moon night security lighting – who knows how many lumens – when a 10 watt incandescent would be more than enough to light the way?

If excess lumens temporarily blinds the rods (night vision receptors) in our retina, and creates no real benefit other than countering other excess lumens, why not have smarter lumen related laws and ordinances in our cities? Such a perspective applied – and even if incandescent / fluorescent indifferent would still reduce energy usage – would also help in creating night spaces that are inviting as well as secure. Light pollution is here, it is real, it is now, and the International Dark Sky Association intends to continue to do something about it.

Posted in Energy, Homes & Buildings, Light Pollution, Other, Retail1 Comment

Democracy & Debate

Last week Bill Moyers interviewed FCC Commissioner Michael J. Copps, and throughout the interview, Copps decried the consolidation that is occurring in media, and insisted that preserving debate is essential if we are to preserve democracy.

There are a lot of changes today – on the internet there are literally billions of new sources of media – not just extensions of every traditional media source already out there – print media, television and radio, but additional hundreds of millions of websites that are little more than personal diaries, additional millions of video clips on YouTube, and millions more that are venues for commercial endeavors. Where is the genuine media? How do you cut through the noise?

It’s no secret that traditional media is dying. The only place in-depth investigations and reporting ever were feasible were in newspapers. For over a century, newspapers held a special place in media – monopolies only barely encroached upon by radio and television. Supported by local merchants, classified ads, and subscription payments, local newspapers were highly profitable enterprises, and the journalists who they could afford to pay were able to spend months, even years, on investigative quests for truth. Back then, there were tens of thousands of people in the USA and elsewhere whose profession was based on in-depth investigative reporting, and nothing else. Not only was there debate, there was depth.

Those days are gone. Today only a handful of newspapers can still afford to employ such reporting staff. Consolidation of the retail advertisers, proliferation of free print material containing advertiser-sponsored content, the advent of cable TV, and now the internet, has shrunk the advertising base for newspapers at the same time as it has shrunk the audience for newspapers. And nothing has replaced them.

Laws to prevent consolidation of media ownership exist for good reason, but they are in conflict with an even greater imperative – without consolidation, media properties can’t survive financially. So what great debates are not being met? What information is not getting out?

For starters, the conventional wisdom of mainstream environmentalists. Here are three examples:

We should continue the debate as to whether or not anthropogenic CO2 emissions is actually the primary cause of runaway global warming. But if you scan today’s mainstream media, we must reduce CO2 emissions at any cost.

We should debate as to whether or not our energy and water supplies should be deliberately constricted and rationed, in order to reduce our “carbon footprint,” even though energy remains abundant in the world, and the cure may be worse than the disease.

We should debate as to whether or not we need to restrict nearly all development into the “footprint” of existing cities, which causes congestion, nurtures crime, and drives housing prices into the stratosphere. If you scan today’s mainstream media – open space at any cost is an article of faith. So we blithely destroy every suburb in America with ultra high-density “infill.” This “smart growth” is more than simply ridiculous, it is a hideous crime that is destroying our American way of life.

How debate on this unassailed conventional wisdom will ever be joined is the distressing question. Only here? On one, small website, indistinguishable in the noise from just another MySpace page? It is hard to imagine how that might matter or make a difference, but it is equally difficult to suggest the alternative. How will credibility and influence be acquired by new media, and will it be enough to restore debate – which in-turn is necessary to preserve a functioning, healthy democracy?

Posted in Causes, Energy, Journalists, Policy, Law, & Government, Retail, Television1 Comment

China's Renewable Energy

Aerial View of the Three Gorges Dam
With output up to 17.5 gigawatts
China’s Three Gorges Dam is the most powerful
hydroelectric power complex ever built.

Editor’s Note: As we reported in China, Canals & Coal, if the Chinese wish to develop their economy to the level of the major industrialized nations, they will have to build as many power plants and water diversion projects as they possibly can, and that is exactly what they are doing. The question is just how much of this energy and water will be green, and the prognosis is daunting.

In this assessment of China’s renewable energy initiatives, the unprecedented attention the Chinese government is giving to green energy is only half the story. It is true they now intend to derive 15% of their energy from renewable sources by 2020, but 15% isn’t very much, and within this total is hydroelectric power, and in any case the 15% target may be ambitious.

If one correlates energy production to GNP, even assuming China achieves western levels of energy intensity (units of energy per dollar of GNP), China is going to have to increase their energy production from 50 quadrillion BTU’s per year to over 250 quads. This means that while production of renewable energy in China is set to increase by staggering amounts, the amount of fossil fuel derived energy consumption in China, in absolute terms, is going to quintuple in the next few decades.

This is the message the anti-CO2 crowd doesn’t get. Even if the billion people in the developed world stopped emitting all their CO2 tomorrow, and they won’t, there are over a billion people in China, and another billion people in India, and another few billion elsewhere in the world, who are going to burn quantities of CO2 in the coming decades that easily surpass what the global north burns today. More realistic solutions to global warming, such as releasing benign aerosols in the Arctic spring and summer, had better be considered. It is inspiring to imagine how innovation and global investment will help China and India accelerate their adoption of green energy technology, but a close reading of this report underscores the challenges and complexity of this calling. – Ed “Redwood” Ring

China’s Renewable Energy – Can clean renewables increase their share of China’s rapidly expanding energy sector?
by Gordon Feller, January 30, 2007
A Clear Day in Shanghai
A clear day in Shanghai.

China’s government plans for renewable energy generation to meet 15% of the country’s growing energy needs by 2020.

Renewable energy and energy efficiency look set for a boost as Beijing authorities have now outlined plans to diversify their energy resources in the face of continued price rises, pollution concerns and China’s unquenchable fuel and electricity demands.

In its “alternative oil strategy,” which is part of the China’s 2006-2010 Five-Year Plan, Beijing has called for a doubling in renewable energy generation to 15% of the country’s needs by 2020.

The target is in line with a new renewable energy law requiring grid operators to purchase resources from renewable energy producers. The law, which came into effect in January, also offers financial incentives to foster renewable energy development, including discounted lending and a range of tax breaks.

Tsinghua University Logo

Of the main renewables, wind power is tipped to have the most potential. Professor Wang Weichang, an energy expert at Tsinghua University in Beijing, predicted wind was on course to supplant hydro as the country’s second-largest electricity source, behind coal. Wang said China has the ability to generate up to 100 gigawatts, or 20% of current national capacity.

Beijing also plans to use other alternative energy sources as part of a drive to cut coal dependence from 73% of total generation today to 68% by 2010 and 60% by 2020. Vast investments in new technologies to turn coal into synthetic oil have been announced, and ethanol production will be boosted to create hybrid fuel by mixing it with regular gasoline. With China nearing a deal with Australia on uranium supply, nuclear power is also in the picture, with generation expected to rise 400% by 2020.

But a report released last month by consultants at Capgemini suggests China has underestimated future demand, putting its target at risk. The report estimated an additional 280GW of electricity will be required by 2020 on top of the 950GW already planned, meaning coal-fired power plants would still provide 71% of China’s electricity needs by 2010 and 65% by 2020.

This is good news for energy efficiency proponents, as a reduction in demand will help the government meet its targets. Beijing has said it is looking to relax its tightly controlled energy-pricing system to encourage conservation and energy efficiency plans have also been put in place. The construction ministry announced pans to increase energy-efficient floor space by 2.16 billion square meters by 2010, saving 101 million tonnes of coal.

China is increasing international cooperation with the world’s heavyweight energy producers to address growing demands. The country’s top oil refiner, Sinopec, signed a memorandum of understanding last month with India’s second biggest state-run oil company, Hindustan Petroleum Corp, for energy projects in China, India and other countries. Meanwhile, China National Petroleum Corp (CNPC) was also expected to sign a gas supply agreement with the world’s biggest gas producer, Russia’s monopolist Gazprom. In the US, the chairman of the Senate Foreign Relations Committee said there needed to be greater international co-ordination on energy issues, especially with China and India, to address concerns about growing global competition for energy resources.

The powerful National Development and Reform Commission said that filling of China’s strategic oil reserves at its 16-tank Zhenhai facility in the eastern province of Zhejiang was on schedule to begin by the end of this year. It is the first of four strategic oil reserves to be completed. Reserve facilities in Daishan, Zhejiang province, Huangdao, in Shandong province southeast of Beijing, and Xingang, in northeastern Liaoning province, are due to be completed in 2007 and 2008. Beijing plans to stockpile up to 100 million barrels of petroleum, or the equivalent of almost a month’s national consumption, to cushion against possible disruptions to supplies coming from abroad.

The country’s power-generating capacity will reach a record high this year when new generators producing an additional 75 million kilowatts come on line in 2006. But China Electricity Council secretary-general Wang Yonggan said shortages would still persist in the first half of 2006. Power shortages affected seven provinces at the end of 2005, down from 26 at the beginning of the year, as China’s power supply increased by 66.02 million kW to more than 500 million kW.

China’s rapidly growing economy is pushing energy consumption to new highs as the increasingly affluent populous plugs in and turns on more appliances than ever, adding to the high-voltage factory hum that has long characterized the country’s modernization efforts.

The chief means of meeting this insatiable demand is the domestic coal reserve, which accounts for 74% of China’s 360-gigawatt total annual power output. Oil is a distant second on 13.5%, followed by domestic hydro-power at 8.2%, nuclear energy at 1.1% and natural gas at 0.3%.

But coal presents several problems. Around 70% of the country’s coal is transported by rail from the coal-rich north to the energy-hungry coastal regions. While China accounts for 24% of global rail traffic, it only has 6% of the world’s rail tracks, resulting in bottlenecks in the transport network followed by regional power shortages. Despite US$248 billion being committed to rail expansion over the next 15 years, historical underinvestment means there is much ground to be made up.

A potentially more serious concern is environmental pollution and the related healthcare and clean-up costs, which are adding ever more weight to calls for a diversification away from coal.

Although China’s thirst for fuel means that consumption will still increase in absolute terms, there are plans to reduce coal’s contribution to the power supply to around 60% by 2020, with increased output from gas, nuclear and renewable options.

To this end, official muscle has been put behind alternative power sources. China’s Renewable Energy Law, which came into effect in January, decreed 20% of total national energy consumption should come from renewable sources by 2020.

China is set to spend US$200 billion over the next 15 years to achieve this goal, which would make it the world’s largest consumer of renewable energy.

In solar power, China already leads the world, with a total of 52 million square meters of solar energy heating panels in China representing 40% of the global total. Wind power appears to have incredible growth prospects. Installed capacity was just 1.3GW in 2005, but China aims to increase that to a world-leading 30GW by 2020. Potential installed capacity stands at 250GW onshore and 750GW offshore.

Nuclear power, and the foreign players queuing up to build the 30 new atomic power stations planned over the next 15 years, could also win big as China targets a 400% increase in capacity by 2020.

However, alternative energy sources do not yet produce nearly enough power to replace fossil fuels. It is generally thought within China’s expert community that not only do these sources provide negligible power, but the power they do produce is still prohibitively expensive.

While renewables may be the holy grail for China, oil is increasingly becoming the focus of its geopolitical maneuvrings.

Once a net exporter of oil, China imported 47.3% of its crude in the first half of 2006. Oil will fall as a proportion of total energy consumption with greater efficiency in coal delivery and the growing emphasis on renewables and nuclear power. But – just like coal – actual oil demand will continue to rise, principally through imports.

The US Department of Energy predicts China’s crude imports will represent 75% of national oil consumption by 2025, and domestic oil producers are busy buying foreign assets to meet this need. Beijing’s diplomatic tentacles have spread to Africa, Asia, Australia, the Middle East and the Americas in search of the black stuff.

China National Petroleum Corp (CNPC) acquired PetroKazakhstan for US$4.2 billion, teamed up with an Indian group to buy a stake in Syrian oil assets and secured drilling rights in Sudan in a joint bid with China Petrochemical Corp. It has also struck exploration and supply deals in Venezuela and Peru, and took a 4% stake in Rosneft for US$500 million when the Russian oil giant went public in July.

China Petrochemical has also snared a slice of the Russian pie by forming a 25.1% owned joint venture last year with Rosneft to explore the eastern seaboard of Russia for oil and natural gas. Not to be outdone, China National Offshore Oil Corp (CNOOC) paid US$2.7 billion in April for a 45% stake in a Nigerian oil field.

Escalating consumption has made conservation measures commonplace in China. Factor in an energy market that is becoming ever more volatile in the current geopolitical landscape and the only certainty for China is that as demand keeps rising so will the priority attached to securing energy resources.

But such acquisitions will not be used exclusively to serve the home market, unless Beijing further deregulates energy pricing. China’s retail prices remain among the lowest in the world as authorities seek to protect vulnerable sectors.

Sinopec, the listed arm of China Petrochemical, received a one-off state handout of US$1.17 billion in January to compensate for losses incurred due to caps on domestic oil-product prices. This was a sweetener to stop the company from putting profits before domestic needs – last year’s diesel and gasoline shortages in southern China and Shanghai were created by Sinopec re-exporting refined products to Korea and Japan to maximize profits.

Unless there is a substantial rise in domestic prices, companies will continue to siphon off some of their newly acquired foreign oil assets to use as a source of foreign exchange.

For every tonne that is traded, swapped or sold abroad, another question mark will be placed against China’s energy security.

What is the future of China’s use of fuel ethanol? It is already used in five provinces and Beijing seems ready to bankroll a nationwide roll-out. But is biofuel a viable alternative to gasoline?

China’s oil demands are already the stuff of legend. Urbanization, industrialization and a six-fold increase in private vehicle ownership over a decade have left the country dependant on foreign sources for 40% of its oil. This figure is expected to pass 60% in 2010 and 76% in 2020 as imports go from 4.6 million to 8.5 million barrels per day.

The price is not just financial – the International Energy Agency predicts China will account for 18% of global carbon dioxide emissions by 2025, up from 12% in 2000.

Beijing is taking action. Measures outlined in the 11th Five-Year Plan for 2006-2010 won’t end the dependency on foreign oil and dirty coal, but they should see wind, water, sunlight and nuclear power keeping the lights on for significantly more people than before. Those same people could also be filling their gas tanks with ethanol fuels.

“China needs to import a lot of oil so the government is looking at alternative fuels,” said Christine Pu, energy and chemicals analyst at Deutsche Securities Asia. “The advantage of ethanol is it’s good for the environment.”

Launched in 2000, China’s fuel ethanol industry is still in its infancy. According to GTZ, a German company that advises on energy management on behalf of the German government, total bio-ethanol production is around 4 million tonnes. Three quarters of it is edible ethanol and the remainder fuel ethanol.

“At present it’s largely limited to research institutions and there has yet to be much spillover from the labs into the marketplace,” said Frank Haugwitz of GTZ-China. By the end of 2005, Heilongjiang, Jilin, Liaoning, Henan and Anhui Provinces were wholly dependant on 10% ethanol-90% gasoline fuels (E10), with certain regions in Hubei, Shandong, Hebei and Jiangsu following suit. Studies have shown that using E10 reduces carbon dioxide emissions by up to 3.9%.

GTZ has calculated that a nationwide roll-out of E10 could see fuel ethanol demand reach 8.5 million tonnes per year by 2020.

The government appears ready to meet its goal. Four bio-ethanol plants, with production capacities ranging from 200,000-500,000 million tonnes per year, are under development. In the Jilin Fuel Ethanol plant, China already possesses what is believed to be the world’s largest fuel ethanol facility with a capacity of 600,000 tonnes per annum.

The vice-minister for finance said in July that China is committed to a long-term bio-fuel development program, noted Professor Liu Dehua of Tsinghua University’s chemical engineering department, who has been involved in China’s fuel ethanol program since its inception.

“By 2020, liquid bio-fuel production will be 20 million tonnes a year – comprising 15 million tonnes of ethanol and 5 million tonnes of bio-diesel.”

China has also cast its net wide in search of the key to success with fuel ethanol. Professor Liu has been to Brazil twice – most recently in April, accompanying officials from the National Development and Reform Commission and the Ministry of Science and Technology – to study a system under which all vehicles must run on fuel comprising at least 20% ethanol.

China’s 11th Five Year Plan
Never before has the environment
been such a high priority.

“China wants to learn from Brazil’s experiences in promoting fuel ethanol production and find out what impact using ethanol has on the environment,” said Liu. The officials were also keen to see Brazil’s flex-fuel vehicles that run on varying combinations of gasoline and ethanol.

Thirty years ago, Brazil faced some of the energy challenges that now confront China. It imported 75% of its oil in 1975 and received a series of economic body blows as the price of oil fluctuated during the course of the decade.

The development of fuel ethanol has greatly reduced this vulnerability.

However, experts warn against viewing the two countries as being at separate points on the same developmental path.

“Brazil used to import a lot of crude oil as China does now,” said Deutsche Securities Asia’s Pu. “But the big difference is that Brazil is a large producer of sugar cane while China uses corn for its ethanol.”

The situation is complicated by the high priority China attaches to food security. If it’s a choice between corn for food and corn for ethanol, the food need wins hands down. Three of the four large scale ethanol facilities under development will use sugar-based energy crops or sorghum – not only does this resolve the food-or-energy dilemma, but ethanol can be created more efficiently from these crops.

Based on their extensive work in China’s energy economy, Germany’s premier technical cooperation organization, GTZ, identified potential planting areas in southern provinces such as Guangdong and Guangxi, where the climate is more conducive to growing sugar and sorghum.

“China has multiple choices,” said Professor Liu. “It wants to diversify and can grown corn in the north and sugar cane in the south.”

Mount Tianshan in the highlands of Xinjiang. Will China
preserve the breathtaking beauty of her vast country
as she becomes the world’s leading energy producer?

But the mounting pressure being placed on China’s deteriorating farmland by the growing food demands of an increasingly affluent population means that land use is a sensitive issue. China will be a net grain exporter this year on the back of bumper crops but in the long-term, imports will grow and grow. Despite the food supply pressures, Liu believes farmers will benefit from the fuel ethanol development whether they diversify into sorghum and sugar or stick with corn.

“When the government first started the ethanol program, the price of oil was not high and the attention given to the pollution situation was not great. The reason ethanol production was important was the impact it would have on farmers’ incomes.”

For Beijing-based independent energy analyst Jim Brock, fuel ethanol in China can serve the same purpose it does in the US as far as farmers are concerned – a means of insurance.

Surplus corn that decays before it can be transported elsewhere, or grain that fails to make the grade for human consumption or cattle feed suddenly has an end-use.

“There is not really any conflict between food supply and energy supply,” he said. “In almost all cases, the production value for food is much more. It all comes down to having a supply valve so the corn that cannot be used for food is used for energy.”

Ultimately, the rise of ethanol as a viable alternative fuel hinges on the price of oil. A GTZ price comparison earlier this year put fuel ethanol in the region of US$460 per tonne, although this included a US$175 subsidy per tonne of ethanol. Production costs can be as much as US$617 per tonne, 70% of it spent on raw materials. Gasoline was priced at US$616-654 per tonne, although this too included a state subsidy.

Deutsche Securities Asia’s Pu points to a rise in global oil prices, together with oil price liberalization in China and technological improvements in ethanol production, as factors that could drive the fuel ethanol bandwagon onwards. It would take a sizeable spike in crude prices to make fuel ethanol truly competitive; otherwise, it is a question of how much Beijing is willing to spend to find the key to cost-effective ethanol production.

“Is China willing to subsidize ethanol to the extent that it has been in Brazil and the US?” asked Brock. “My impression is no – the government is willing to incentivize but not subsidize.”

About the Author: Gordon Feller is the CEO of Urban Age Institute ( During the past twenty years he has authored more than 500 magazine articles, journal articles or newspaper articles on the profound changes underway in politics, economics, and ecology – with a special emphasis on sustainable development. Gordon is the editor of Urban Age Magazine, a unique quarterly which serves as a global resource and which was founded in 1990. He can be reached at and he is available for speaking to your organization about the issues raised in this and his other numerous articles published in EcoWorld.

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South African Photovoltaics

In the September 4th edition of South Africa’s Mining Weekly, in a report entitled “SA mulls cost and benefits of mega solar project,” South Africa’s Eskom power utility is about to build a 100 MW solar thermal electric generating plant, using the “power tower” design (see our post “Solar Thermal Power” which describes design options).

In the report, Eskom’s resources and strategy division renewable-energy corporate specialist Dr Louis van Heerden explained that “central-receiver technology … concentrates the sun’s energy through multiple large mirrors, using the concentrated thermal energy to produce steam to drive a conventional steam turbine for electricity generation.

The energy concentration is achieved by a field of large sun-tracking mirrors (called heliostats), which reflect the sunlight to a receiver, mounted on a central tower in the middle of the mirror field.

A heat-transfer medium (molten salt) is pumped through the receiver, absorbing the highly-concentrated radiation reflected by the heliostats. The heated fluid is then circulated through a heat exchanger, where the thermal energy is used to generate steam and power a turbine.”

South African solar doesn’t end there. Back on February 11th in “Photovoltaics are the Wild Card” we referenced a report from South Africa on breakthrough photovoltaics. In this earlier story “SA solar research eclipses rest of the world” by Willem Steenkamp, they report “In a scientific breakthrough that has stunned the world, a team of South African scientists, led by Professor Vivian Alberts, has developed a revolutionary new, highly efficient solar power technology” and “The South African solar panels consist of a thin layer of a unique metal alloy that converts light into energy.”

The photo-responsive alloy can operate on virtually all flexible surfaces. The new panels are approximately five microns thick (a human hair is 20 microns thick) while the older silicon panels are 350 microns thick. Alberts claims the cost of the South African technology is a fraction of the cost for less effective silicon solar panels.”

This claim is corroborated in today’s story in the South Africa Mining Weekly, where alongside the report about Eskom’s solar thermal project there is this: “The University of Johannesburg’s Professor Vivian Alberts, from the department of physics, has developed solar panels that may just take this technology further into the main-stream, owing to the cost reductions he has achieved.

Alberts’ invention is five micro-metres thick, combining several semiconductor materials which are as effective, if not more so, than silicon. As it uses no silicon, costs are dramatically lower. It makes use of normal window glass as a substrate, with molybdenum applied as back contact, followed by the core component, being a compound semiconductor comprising five elements – copper, indium, gallium, selenium and sulphide, replacing the silicon – with cadmium sulphide as a buffer layer, followed by an intrinsic zinc oxide layer and, finally, a conductive zinc-oxide layer. The most expensive part of the panel is the glass,” said Alberts.

The pilot plant has shown the production cost per watt to be less than one South African Rand (which is about US $0.15), verified for a 25-MW production facility, assuming a 10% efficiency and average production yield of 85%,” Alberts claimed in the Mining Weekly Report. Alberts went on to say he predicted retail costs for this locally manufactured photovoltaic panel would be one-fifth the current cost of imported panels.

These are very huge claims. So who will be first to market with volumes of inexpensive photovoltaics? A South African consortium, or Silicon Valley’s own Nanosolar, or someone else? Like electric cars, the technology of photovoltaic panels is advancing rapidly. They are both transformative technologies and they are becoming increasingly economically viable.

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