Archive for May, 2009

It should come as no surprise that last year’s record high oil prices also led to near record profits for big oil companies. The price of oil climbed from January 2 to July 14, 2008, repeatedly setting new price records until it peaked at $147 per barrel—more than twice the price of the previous year. The big five oil companies—BP, Chevron, Conoco Phillips, ExxonMobil, and Shell—made record profits during the first three quarters of 2008 due to these record prices. When oil prices collapsed along with the world’s economies, the oil companies’ profits were reduced, too. However, the big five companies still made a combined profit of $100 billion for 2008 ^ (see note below). The sum is the second-highest combined big oil profit on record, exceeded only by the 2007 combined total of $123 billion.

The 2008 big oil profits bring the grand total under the two terms of the Bush administration to $656 billion, which is nearly two-thirds of a trillion dollars. Given the urgency to restart the economy with clean energy investments, and the need to slash U.S. oil use, you would expect these wealthy energy companies to be taking steps to develop new clean-energy technologies and fuels to address these economic and security concerns. Despite their soaring earnings, the big five companies were very stingy with investments in renewable and low-carbon energy technologies and fuels that would reduce oil dependence. In fact, a CAP analysis of their investments reveals that the big five oil companies invested just 4 percent of their total 2008 profits in renewable and alternative energy ventures. This reality contrasts with their ads that promote greener, cleaner images.

After oil prices hit a record last July, the August unemployment rate hit a five-year high of 6.1 percent and has continued to rise. Some jobs losses were directly related to high oil prices, such as in the aviation industry, which was forced to make major cuts to be able to handle the high price of jet fuel. Further, as households were forced to cut back on spending to keep up with exorbitant gas prices, sectors such as retail also purged payrolls. In June 2008, CNN reported that “many economists say job losses could intensify during the rest of the year due to rising energy prices.”

ExxonMobil, the largest publicly-traded American corporation, accounted for nearly half the 2008 oil profits. With over $45 billion in net income for 2008, Exxon earned the equivalent of nearly $150 for every U.S. resident. Despite being the highest earner of all the oil companies, ExxonMobil invested the least in renewable energy—less than 1 percent compared to its 2008 profits. It also invested the least in absolute dollars.

While oil prices steeply declined in the fourth quarter last year, all but one of the Big Five saw net profits in excess of $20 billion. These enormous profits were primarily due to record prices at the pump, which squeezed the budgets of everyday Americans. The big oil companies were worried about the impact of these huge profits on their images while Americans were bearing the burden of record prices. So to soften the public’s perception, these companies launched a green public relations offensive to convince the public that they were part of the energy solution, instead of part of the energy problem.

Media tracking group TNS Media Intelligence reported that $52.5 million was spent by the oil industry on greenwashing advertisements—advertisements boasting about investments in wind and solar power or efficiency while the companies did very little—in the first quarter of 2008 alone. However, a CAP analysis of actual company investments in renewable energy and energy efficiency indicates that the PR campaigns are little more than empty rhetoric.

For example, ExxonMobil spent $100 million on advertising in 2007, (its 2008 advertising totals are unavailable). Some of its ads catalogue ExxonMobil’s “efforts” to combat global warming, with messages that include “saving energy and reducing greenhouse gas emissions.” This ad ignores the millions of dollars Exxon pumped into funding organizations that questioned the existence of global warming. Exxon’s television ads similarly talk about global warming, efficiency, and alternative energy sources, concerns not reflected in investments.

Chevron has its own advertising campaign to tout its green credentials. The company is spending millions to disseminate its “I Will” message on newspapers, television, and even on the sides of buses. But Chevron made a total of $23.9 billion in profits in 2008 while investing only 5 percent of its total profits in renewable and alternative energy ventures.

Other companies have also engaged in major greenwashing advertising campaigns in an attempt to protect their images during record gasoline prices and profits. BP has a whole series of cheerful animated commercials, and the BP logo itself is a green and yellow sunburst-like flower. BP’s profits for 2008 were $21.2 billion, yet it invested only seven cents in its alternative energy unit for every dollar of profit.

Similarly, Shell has recently launched a major new web advertising campaign that emphasizes the company’s focus on technology and innovation. However, the majority of these advertisements focus on technology for the extraction of hard-to-access petroleum reserves, such as tar sands, which produce huge amounts of greenhouse gases and toxic waste. In addition, Shell just announced a moratorium on investments in wind and solar energy (see “Big Oil’s small investments” section below).

The advertising campaign by the American Petroleum Institute—big oil’s lobbying muscle—reflects the oil industry’s real agenda. Instead of exaggerating the green credentials of oil companies, their “Energy Tomorrow” ads argue that oil is the fuel of the future. The latest advertisement advocates drilling for oil and gas in previously protected coastal waters. “Increased production of domestic oil and natural gas will… drive our 21st-century economy…Maybe that’s why most people support putting more of America’s oil and natural gas to work.” The claim that increased production of oil and natural gas would drive the economy has been disputed by President George W. Bush’s Energy Information Administration, which determined that “access to the Pacific, Atlantic, and eastern Gulf regions would not have a significant impact on domestic crude oil and natural gas production or prices before 2030.”

Big oil investments, 2008*

Company – 2008 data	Exxon Mobil	Shell	BP	Chevron	Conoco Phillips
Profits (millions)	$45,220	$26,288	$21,157	$23,940	($16,830)
Amount invested in stock buybacks and dividends (millions)	$40,100	$13,307	$11,644	$8,000	$11,029
Investments in stock buybacks and dividends compared to 2008 profits	88.7%	50.6%	55.0%	33.4%	^ (see note below)
Amount invested in renewable energy (millions)	$10	$500	$1,500	$1,250	$650
Investments in renewable and alternative energies and efficiency compared to 2008 profits	<1%	1.9%	7.1%	5.2%	^ (see note below)
Contributions to federal candidates and parties for 2008 election cycle (millions)	$1.2	$0.3	$0.5	$1.0	$0.7
Lobbying in 2008 (millions)	$29.00	$3.3	$10.5	$14.5	$8.5

And API’s assertion that “most people” support more oil and gas drilling is misleading at best. An NBC/Wall Street Journal poll asked “When it comes to addressing our energy problems, which one of the following do you think should receive the most emphasis?” (italics used for emphasis). Six of 10 respondents favored “developing alternative energy sources.” Only one quarter supported “exploring and drilling for oil in the United States.” A more recent poll by the Center for American Progress shows that 76 percent of Americans actually feel that “America ’s economic future requires a transformation away from oil, gas, and coal to renewable energy sources such as wind and solar.” And by two to one, Americans favor more financial support and incentives for alternative sources of energy, such as wind and solar, over support for oil and gas.

The commitment of the oil companies to renewable energy is also undermined by how much they spend to counter legislation that would support clean energy development over oil. Case in point: More than $65 million was spent on lobbying by ExxonMobil, Chevron, Conoco Phillips, Shell, and BP in 2008. ExxonMobil had the second-largest lobbying expenditures of any company in any industry. What’s more, total lobbying expenditures in 2008 for the five companies far outstripped those of 2007, when $37.7 million was spent to pressure lawmakers to protect industry interests.

The big five companies also attempted to curry favor with politicians by donating money to campaigns via oil company political action committees. The 2008 cycle saw $3.6 million in contributions to federal candidates and parties. Four out of the five companies are in the top 10 of oil and gas contributors to federal candidates and parties. Unfortunately, these contributions and their lobbying efforts have been largely successful. Last year they were able to whittle down the repeal of $25 billion in tax breaks and recovered royalties to only $8.9 billion as part of the Emergency Economic Stabilization Act of 2008—about one-third as much as originally proposed in June 2007.

The good news is that President Barack Obama’s proposed budget would further reduce taxpayer support for oil companies awash in profits. It would eliminate another $31.5 billion over a decade by repealing tax breaks and recovering lost royalties. The new measures include “closing loopholes, charging appropriate fees, and reforming how royalties are set.”

The Obama administration believes that oil companies don’t need any more money from taxpayers. Testifying before Congress on March 3, Office of Management and Budget Director Peter Orzsag urged elimination of some taxpayer support for big oil companies. “Although the administration supports the responsible production of oil and natural gas as part of a comprehensive energy strategy, excessive government subsidies distort market signals and slow the transition of the economy from fossil fuels to clean, renewable sources of energy.”

With a growing federal budget deficit, taxpayers should not have to subsidize companies that made two-thirds of a trillion dollars over the past eight years. On March 26, both the Senate and House Budget Committees included President Obama’s proposed cuts to big oil subsidies in the budget resolution. The House budget committee voted for the budget proposal by 24 to 15, while the Senate voted by a margin of 13-10 in favor. Both bodies plan to vote on their budget resolution this week.

The oil industry has alreay begun forcefully lobbying to preserve the handouts. The American Petroleum Institute is running radio ads that attack the budget proposal. The ads claim that lifting oil subsidies “could actually reduce local, state, and federal revenue.” In fact, a state-by-state analysis indicates that taxpayers would actually save money if the hefty subsidies and tax breaks for oil and gas companies were lifted.

API also urges people to write to Congress to “oppose … taxes and fees on the oil and natural gas industry.” Congressional allies of the oil industry such as Senator Mary Landrieu (D-LA) have joined the defense of handouts to big oil.

The bottom line is that big oil companies profited mightily during the Bush administration. Their $656 billion in profits enriched their executives and shareholders, while they invested precious little in the research of clean-energy technologies and fuels that are essential for our economy, security, and environment. Oil companies may be spending millions trying to convince people that they are committed to being part of a clean energy future, but their miserly clean-energy investments say otherwise.

Daniel J. Weiss is a Senior Fellow and Director of Climate Strategy at the Center for American Progress. Alexandra Kougentakis is a Fellow’s Assistant. For more information on the Center’s Energy policies, please go to the Energy and Environment page of our website.

^ The net loss by Conoco Phillips is due to its write-downs of more than $34 billion for domestic oil exploration and production and an investment in the Russian oil company Lukoil. If not for these costs, the company would have made a nearly $18 billion profit, making 2008 the record year $134 billion for the Big Five.

*Sources for table information: Quarterly reports were used to obtain company profits, share buybacks, and dividends; the Center for Public Integrity was the source for information on lobbying-federal contributions; renewable energy investments are based on CAP conservative average estimates based on reported commitments in company annual reports and sustainability reports, and in the case of Shell a private correspondence with the company.

 

Big Oil’s small investments

BP

BP has an entire division devoted to “alternative energy.” Investments include biofuels, solar energy, wind energy, hydrogen power, and carbon capture-and-sequestration. The company’s most recent sustainability report pledges to invest $8 billion over a period of 10 years in alternative and renewable energy technologies. This $800 million annual investment is a paltry sum compared to the $125 billion made since 2001.

Recently, employees in BP’s renewable energy division in the United Kingdom were laid off with the cancellation of several clean energy projects, such as two power plants that would have captured and stored their carbon dioxide emissions. It is expected that global operations will be affected as well, and proposed wind farms in the United States may be delayed. Interestingly, the apparent investment caution has not prevented BP from pursuing a tar sands project in Canada, announced at the end of 2007.

Oil from Canada’s tar sands is the most expensive form of crude oil to produce. The extraction and conversion of tar sands to a usable energy source can cause as much as five times the greenhouse gas emissions compared to conventional crude oil. Contamination of waterways by pollution from tar sands development is suspected of causing bizarre mutations of marine organisms. The pollution from these developments is also suspected of causing the high cancer rates and other health problems in the surrounding areas.

BP recently agreed to pay $180 million to settle a lawsuit filed by the federal government for “putting air quality and public health at risk.” BP’s refinery in Texas City, TX, violated federal health safeguards for benzene, asbestos, and ozone-depleting chemicals. The settlement includes the installation of pollution controls to the refinery as well as a civil penalty and for a pollution reduction project.

Chevron

Chevron has made some investments in alternative and renewable energy technologies and energy efficiency, including biofuels, geothermal, hydrogen, and solar energy projects. Ventures in Indonesia and the Philippines make Chevron the largest private geothermal power producer in the world. The alternative energy subsidiary Chevron Energy Solutions develops projects that include technologies that generate electricity from waste heat of industrial processes. In the United States, CES projects are estimated to reduce greenhouse gas emissions by 3 million metric tons.

But Chevron’s investments reflect its commitment to oil and relative disinterest in renewable energy. Its 2007 Corporate Responsibility Report notes “…the world’s consumption of energy is expected to grow 55 percent by 2030. The majority of that energy will be provided by fossil fuels.” The company invests a measly 5 percent compared to total annual profits in low-carbon energy programs.

What’s more, Chevron does not plan to reduce its greenhouse gases emissions. In 2007, it reported total net emissions of 60.7 million metric tons, but its 2008 goal was 62.5 million metric tons—an increase of nearly 3 percent.

Conoco Phillips

Conoco’s most recent sustainability review in 2006 emphasized biofuels as a key renewable energy investment. All renewable and alternative energy projects are part of the company’s “Emerging Businesses” segment, which also includes advanced hydrocarbon processes, energy conversion technologies to make liquid fuels from coal and other fossil fuels, and new petroleum-based products. The 2007 annual review mentions partnerships and collaborations on biofuels, but there’s no mention of solar or wind energy investments.

Conoco’s pollution efforts are also questionable. The company provided 2007 figures for performance metrics on air pollution and greenhouse gases. While its emissions of sulfur dioxide, nitrogen oxide, and volatile organic compounds declined between 2006 and 2007, these reductions are required by law. There are no federal restrictions on greenhouse gas pollution, and it rose by 0.5 percent.

ExxonMobil

ExxonMobil’s main area of investment in clean energy has been in the development of vehicle technologies. Advanced engine research aims to improve vehicle fuel economy by 30 percent, and the company conducts battery research for hybrid electric cars.

ExxonMobil is one of four sponsors of the Global Climate and Energy Project, or GCEP, at Stanford University (the other three are General Electric, Toyota, and Schlumberger Limited, which is an oilfield services corporation). This is a controversial university-corporate research program to develop clean-energy technologies.

As evidence of its support for new renewable technologies and fuels, the sponsorship of GCEP was cited by an ExxonMobil representative in a hearing last year before the House Select Committee on Energy Independence and Global Warming. Committee Chairman Edward Markey (D-MA) observed that Exxon’s investment of $100 million over a decade was almost embarrassing compared to its annual profit, which was over 400 times that amount. “Why is ExxonMobil resisting the renewable energy revolution?” Markey asked of ExxonMobil’s Senior Vice President Stephen Simon. Simon quickly cited the $100 million research program at Stanford. Chairman Markey replied, “$100 million? But you made $40 billion last year.”

ExxonMobil reports a 3-percent reduction in greenhouse gases since 2006, and a 23-percent reduction in emissions of VOCs, nitrogen oxides, and sulfur dioxide since 2004. Yet at the end of 2008, the company agreed to pay nearly $6.1 million for violating the Clean Air Act by failing to monitor sulfur dioxide pollution. A 2008 University of Massachusetts analysis ranked Exxon as the ninth in a ranking of top U.S. air polluters.

The company’s greenwashing efforts are particularly outrageous given its support for organizations and people that disputed climate change science. The company’s actions and statements by its officers indicate that the ExxonMobil business model will continue to rely on oil dependence. CEO Rex Tillerson said: “For the foreseeable future—and in my horizon that is to the middle of the century—the world will continue to rely dominantly on hydrocarbons to fuel its economy.”

Recently CEO Tillerson announced his support for a carbon tax to address global warming, but some analysts are skeptical of his motives. Susan L. Smith, a law professor at Willamette University, notes that a call for a carbon tax “certainly muddies the waters for quick passage of a climate change bill. And maybe that’s the real point.”

Shell

From 2003 to the first half of 2008, the Shell Oil Company invested $1.75 billion in alternative energy and carbon dioxide reduction projects. This is a small sum compared to the company’s profits of $133.5 billion during the same period. It declares itself the world’s largest distributor of conventional biofuels, and it has also made investments in solar and wind energy projects in the United States and abroad.

But in 2007, Shell dumped many of its solar projects. While total profits for the gas and power division, which includes wind and solar projects, was $2.8 billion that year, only one wind energy project was mentioned in the 2007 annual report. Even though Shell made the second-highest profit of the oil companies for 2008 at $26.3 billion, it invested less than 2 percent in renewable energy projects.

Shell recently reiterated its disinterest in renewable energy when the company announced a moratorium on new investment in wind and solar energy. On March 17, Linda Cook, the head of Shell’s gas and power unit, announced that, “We do not expect material amounts of investment in [wind and solar energies] going forward.” In response to the decision, John Sauven, the executive director of Greenpeace UK, noted, “After years of proclaiming their commitment to clean power, [Shell is] now pulling out of the technologies we need to see scaled up if we’re to slash emissions.”

Like BP, Shell is also involved in significant investments in Canada’s tar sands while reducing investment in European wind and solar energy ventures, including the world’s largest planned offshore station, valued at $4 billion to $6 billion. Shell raised a major outcry in Europe in 2007 for an advertisement that was so blatant in its greenwashing that it was actually banned in Britain.

Between 2006 and 2007, Shell reported across-the-board reductions of greenhouse gases, VOCs, sulfur dioxide, and nitrogen oxides. But like its fellow big oil company Exxon, Shell was sued for Clean Air Act violations between 2003 and 2007. If found guilty, Shell could be liable for over $32 million in fines.

 

Big Oil executives protest President Obama’s proposal to reduce tax breaks

President Obama’s proposed budget would eliminate $32 billion in tax breaks and recover lost royalties over 10 years. Top officials of the big three oil companies oppose this proposal despite their billion dollar profits over the past eight years.

ExxonMobil

Chief Executive Officer Rex Tillerson: “Any steps which cause the industry to be less competitive overseas or cause the cost of development here at home to go up, ultimately, in my view, does not serve the interests of the American people.”

ExxonMobil made $45.2 billion in profits in 2008, and a total of $235 billion from 2001-2008.

Shell

Marvin Odum, the president of Royal Dutch Shell’s U.S. operations: “It’s a concerning area, of course, because as you put more royalty and tax burdens on the industry, particularly a cyclical industry, you just have to be cognizant of the potential impact it has on investments. That’s not something you can put real definition to, but I think it’s a concern.”

Shell made $26.3 billion in profits in 2008, and a total of $158 billion from 2001-2008.

Chevron

David O’Reilly, Chief Executive Officer: “Raising taxes on domestic production is the wrong thing to do.”

Chevron made $23.9 billion in profits in 2008, and a total of $99 billion from 2001-2008.

Source: Centre for American Progress 

Keep it Green 

Greencon 

The McKinsey Global Institute has published another terrific piece of analysis, “The carbon productivity challenge: curbing climate change and sustaining economic growth.”

MGI is best known for its comprehensive cost curve for global greenhouse gas reduction measures (reprinted below), which came to the stunning conclusion that the measures needed to stabilize emissions at 450 ppm have a net cost near zero. The new report has its own stunning conclusion:

In fact, depending on how new low-carbon infrastructure is financed, the transition to a low-carbon economy may increase annual GDP growth in many countries.

The new analysis explains that “at a global, macroeconomic level, the costs of transitioning to a low-carbon economy are not, in an economic ‘welfare’ sense, all that daunting — even with currently known technologies.” Indeed, 70% of the total 2030 emissions reduction potential (below $60 a ton of CO2 equivalent) is “not dependent on new technology.”

The final reality is perhaps the most important:

 

The macroeconomic costs of this carbon revolution are likely to be manageable, being in the order of 0.6–1.4 percent of global GDP by 2030. To put this figure in perspective, if one were to view this spending as a form of insurance against potential damage due to climate change, it might be relevant to compare it to global spending on insurance, which was 3.3 percent of GDP in 2005. Borrowing could potentially finance many of the costs, thereby effectively limiting the impact on near-term GDP growth. In fact, depending on how new low-carbon infrastructure is financed, the transition to a low-carbon economy may increase annual GDP growth in many countries.

I am reprinting the cost curve here, because MGI have provided a much bigger version of it (click to enlarge):

The report notes that “we have been fairly conservative in our assumptions about technological progress in these projections.” For instance, the analysis appears to ignore the potential of concentrated solar thermal electricity entirely (see “Concentrated solar thermal power — a core climate solution“).

Finally, although McKinsey is a classic market-oriented business consulting company, the report offers a realistic assessment of the policies needed to achieve our crucial low-carbon future:

The microeconomic changes needed to increase carbon productivity at the levels required will not occur without the active leadership and collaboration of governments and businesses globally. We need new policies, regulatory frameworks, and institutions focused on four areas: creating market-based incentives to innovate and raise carbon productivity; addressing market failures that prevent abatement opportunities from being captured profitably; resolving issues of allocation and fairness, in particular between the developed and developing worlds and between industry sectors; and accelerating progress to avoid missing critical emissions targets.

 

Source: Climate Progress Blog 

Keep it Green 

Greencon 

 

What is the best evidence that concentrated solar thermal power (CSP) aka solar baseload is indeed a core climate solution with big near-term — and very big medium-term — promise?  One of the country’s biggest companies, Lockheed-Martin, with 2008 sales of $42.7 billion, has jumped into the race to build the biggest CSP plant with thermal storage.

The CSP market was already exploding (see “World’s largest solar plant with thermal storage to be built in Arizona — total of 8500 MW of this core climate solution planned for 2014 in U.S. alone“).  Now big players are getting on board, as Phoenix’s East Valley Tribune reports:

 

Arizona Public Service, Starwood Energy Group Global and Lockheed Martin announced plans Friday to build one of the world’s largest solar plants in the Harquahala Valley about 75 miles west of Phoenix.

The 290-megawatt plant will produce enough electricity to power more than 73,000 homes when it is completed in 2013, the developers said,

Called Starwood Solar I, the plant will be financed and owned by an affiliate of Starwood Energy and built and operated by Lockheed Martin. APS has agreed to take all of the electricity generated at the plant for distribution to its customers.

The plant will include 3,500 parabolic mirrors that will focus the sun’s heat onto tubes containing a heat-transfer fluid. The hot fluid will convert water into steam that will turn the plant’s turbines to generate electricity.

The Starwood plant is the second major solar project spurred by APS. In February 2008 the company signed an agreement with Abengoa Solar of Spain to purchase power from a 280-megawatt plant the Spanish company plans to build by 2011 at Gila Bend. But Abengoa has had trouble lining up financing for that project, and construction has not yet started.

APS is required by the Arizona Corporation Commission to obtain 15 percent of its electricity from renewable sources by 2025. The utility said it will be ahead of schedule to meet that requirement if Solana and Starwood are built.

First, I hope that the Department of Energy is going to use its loan program to help CSP companies like Abengoa get financing for CSP during this credit crunch (see “First Energy Department loan guarantee goes to … a solar manufacturer“).

But that is precisely why it is such a big deal for a company like Lockheed-Martin to enter this space.  They bring credibility and confidence to potential financiers who might otherwise worry about the long-term viability of some relatively new and relatively small solar company.

And in case you were wondering who this mysterious Starwood Energy Group is, they are “a private equity investment firm based in Greenwich, CT, that specializes in energy infrastructure investments.”  Apparently they have deep pockets:  “Founded in 2005, Starwood Energy has committed to seven transactions representing nearly $4.9 billion in enterprise value.”  Yes, this is the Starwood in Starwood hotels — the Chairman and CEO, Barry Sternlicht was “was Chairman & CEO of Starwood Hotels & Resorts Worldwide, Inc., a company he founded in 1995.”  Gizmag reports that “Principals at Starwood Energy and its affiliates have developed or acquired 37 power generation and transmission projects to date, valued at more than USD$12 billion.”  Be interested to know who those “affiliates” are, since it looks like these folks are going to be serious investors in clean energy.

When big players enter the market, there is the real prospect for lower financing and transaction and engineering costs.

Significantly, this plant will have thermal storage:

Solar I will be designed and built by aeronautics giant Lockheed Martin on about 1,900 acres, using a concentrating solar power system. This use mirrors and tracking systems to focus a large area of sunlight into a small beam. Solar I will have 3,500 parabolic mirrors to capture the sun’s rays. Heat captured by the mirrors and transferred will be used to convert water into steam. Just like a traditional power plant, the steam is then used to drive the plant’s turbines to create electricity. By storing energy captured during the day, up to six hours of back-up power will be available in a molten salt solution.

The key point is that the easiest way to deal with the intermittency of the sun is cheap storage — and thermal storage is much cheaper and has a much higher round-trip efficiency than electric storage.  The ability to provide power reliably throughout the day and evening in key locations around the world (including China and India) is why CSP delivers 3 of the 12 – 14 wedges needed for “the full global warming solution.”

Kudos to Lockheed-Martin for getting onboard this fast-moving train.

Source: Climate Progress Blog

Keep it Green 

Greencon 

 

We have warned many customers about the future of power costs in SA. When asked “How long it will take, to pay back for my solar geyser?” the standard answer is four to five years depending on unit used and size of family/facility using the solar unit. When you factor in, increasing electricity costs, that repayment becomes sooner and sooner. Here is some scary news from Bloomberg Media:

May 28 (Bloomberg) — Eskom Holdings Ltd., South Africa’s state power company, may need to raise prices 90 percent to fund expansion plans, according to a regulatory official, increasing costs for business as the nation seeks to shake off a recession.

“At this stage I don’t know any other source other than the tariffs,” Thembani Bukula, a member of the National Energy Regulator of South Africa, told a Johannesburg conference today.

Eskom needs to spend 87 billion rand ($11 billion) in the year ending March 31, and 118 billion rand in the two years after that, as part of a five-year expansion, he said. Another option is to curb the program, originally aimed at preventing a repeat of 2008’s rolling blackouts and mine closures, he added. Eskom has asked for an “interim” 34 percent tariff increase.

The company, which generates 60 percent of the power used in Africa and 95 percent of South Africa’s supply, is building new plants, including the world’s fourth- and fifth-biggest coal-fired sites.

“Prices would be expected to increase by around 90 percent or over 90 percent for 2009-10,” Bukula said, and another 50 percent in the next year. Eskom’s funding options are limited by cuts in its credit rating and weak financial markets, he said.

Moody Investors Service last year reduced the utility’s foreign-currency rating by three levels to Baa2, the second- lowest investment grade.

‘Very Difficult’

Borrowing is “very difficult” as capital markets are tight and Eskom’s credit rating is under threat, Chief Executive Officer Jacob Maroga said at a conference on April 22.

Eskom will have to raise power prices “significantly” again this year to fund the expansion after increasing them 27.5 percent last year, Maroga said. The increase in 2008 helped push the nation’s inflation to a record 13.6 percent in August.

Even the company’s proposed interim price hike is one of the main “upside” risks to inflation, Reserve Bank Governor Tito Mboweni said in a speech in Pretoria today. Inflation slowed to an annual 8.4 percent in April, but was still above the central bank’s 3 percent to 6 percent target range.

Eskom should consider selling plants to fund its planned 385 billion-rand expansion, Westerouen van Meeteren, senior investment officer for Africa at Netherlands Development Finance Co., said at the April conference.

Inadequate power supply shut most mines in the country for five days in January last year as the national power system neared collapse. Demand has dropped since then as production of metals including ferrochrome declined amid a global recession.

Falling Into Recession

The utility has about 26 plants with total capacity of close to 40,000 megawatts. Thirteen are coal-fired and one is nuclear-powered. The biggest is the Majuba coal plant, with capacity of about 4,110 megawatts. Eskom is the world’s 11th- largest power utility in terms of generating capacity, and ninth-biggest in terms of sales, according to its Web site.

The country’s gross domestic product contracted in the first quarter, pushing Africa’s biggest economy into recession for the first time in 17 years, according to an official report released May 26. GDP fell an annualized 6.4 percent, the most since the third quarter of 1984, after declining 1.8 percent in the final quarter of 2008, Statistics South Africa said.  

Keep it Green

Greencon   

 

 

 

You can see the carbon emissions rising by the day over the skyline of Guangzhou, where armies of construction workers are busy throwing up skyscrapers that will soon surpass anything in New York in terms of height and ­energy consumption.

Pearl River Tower in Guangzhou, China. Artist’s impression: Skidmore, Owings & Merrill LLP 2009 It is the same story all over China where, despite the economic crisis, engineers are completing four more tower blocks every day – almost all fitted with air conditioning, heating, lighting and lifts that will run on coal-powered electricity.

The country is in the middle of the greatest building boom in human history. Six of the world’s 10 tallest buildings completed last year were in China, including the 492-metre-tall Shanghai World Financial Centre. Even taller structures are on their way – such as the Shanghai Centre, 632 metres,  and at 600 metres, the Goldin Finance 117 in Tianjin.

But among the giants there is one that could hold out hope for a low-carbon future. The Pearl River Tower, now being erected in Guangzhou, the provincial capital of Guangdong province, is being billed as the most energy efficient superskyscraper ever built.

With wind turbines, solar panels, ­sun-shields, smart lighting, water-cooled ceilings and state-of-the-art insulation, the 310-metre tower is designed to use half the energy of most buildings of its size and set a new global benchmark for self-sufficiency among the planet’s high rises.

Engineers say the tower could even be enhanced to create surplus electricity if the local power firm relaxes its monopoly over energy generation.

Due for completion in October 2010, the structure currently looks no different from the many other masses of steel and concrete that are reaching for the sky in Guangzhou.

The horizon is rising fast and grey in China’s wealthiest province. By the time the Asian games begin next year, the provincial capital will boast a 432-metre-high TV tower, excluding its 150-metre antenna, and the 391-metre Zhongxin Plaza. Both structures will be bigger than any building in New York.

While Dubai and other cities in the Middle East are building a handful of still loftier structures, nowhere can compare with China for the sheer mass of supertowers being planned or under construction.

One management consultancy firm estimates that China will erect up to 50,000 new skyscrapers by 2025. Along with smaller structures, McKinsey ­estimates that buildings will account for 25% of China’s energy consumption by then, up from 17% today.

More efficient buildings could drastically reduce this demand, though few are likely to go as far the 71-storey Pearl River Tower, which combines many of the world’s leading energy-saving technologies on a scale never seen before.

The most spectacular feature will be the four wind turbines built into the belly of the structure. The building has been shaped to drive air through the cavities at maximum velocity so the ­turbines can generate 1m kilowatt hours of electricity a year. The building will also produce electricity via the photovoltaic cells of the solar shades cooling its east and west facades.

The biggest contribution to energy efficiency will come from the radiant ceiling technology, which uses piped water to keep the internal space cool. Energy will also be extracted from the difference in air temperature between the building’s inner and outer walls. Rather than use fans to recirculate old air, fresh air will be delivered to every floor through natural buoyancy.

According to Skidmore, Owings & Merrill, the US architectural firm behind the design, the energy efficiency devices add about $13m (£8m) to the construction costs. But this could be earned back within five years by reduced electricity bills, lower maintenance costs and extra rent from the space not used for air ­conditioning ducts.

Roger Frechette, the firm’s chief engineer, estimates the tower will reduce energy consumption by 58% compared with a standard building this size.

Under the initial design for a “zero-emission skyscraper”, it could even have generated surplus energy with micro-turbines that could sell electricity back to the grid at night. But this proposal was dropped after opposition from the local utility company, which is cautious about allowing rival sources of power generation.

This may change. Faced by a deteriorating environment, uncertain world energy supplies and pressure to act on climate change, the Chinese government is trying to shift towards a more sustainable model of development. It is experimenting with ecocities and introducing new green building codes.

Guangzhou is following this trend. As the workshop of the world, the city has a reputation as a humid, heavily polluted sprawl. But it is trying to change this by building taller structures as well as improving the infrastructure for service industries.

“We are trying to make our city more energy efficient. In the past, we expanded too fast. That was a mistake we are trying to correct now,” said Chen Qing, the deputy director of the city’s Urban Planning and Research Centre.

Not everyone, however, is convinced that skyscrapers are the best way to achieve the city’s green goals, given that the Pearl River Tower will be built with 26,500 tonnes of steel and more than 40,000 cubic metres of concrete, and that its main tenant will be a tobacco company.

Meng Qinglin, a professor at the ­environment and energy laboratory of the South China University of Technology, says urban planners are following global fashions without paying sufficient attention to whether low emission buildings are what they claim to be.

“There is a misconception that buildings can generate sufficient wind and solar power for themselves. We need to look deeper at how much pollution is caused and how many resources are used in the development and manufacture of those technologies,” he said.

“They call it clean energy, but often the burden is simply being shifted to other places, where the silicon is mined and the turbines and solar panels are made.”

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Massive tracts of land in Africa, Russia and Ukraine are being bought up or leased by richer countries to ensure access to food and for production of biofuels—a development that could result in unrest as locals begin to lose access over their territory.

An area roughly the same size as the amount of farmland in Germany is in play and at a cost of tens of billions of euros.

This phenomenon, a product of the twin food and fuel crises of last year, is threatening local communities whose traditional use of such lands is being undermined by the food and energy security needs of others.

This all comes from a warning issued on Monday (11 May) by the US-based International Food Policy Research Institute (IFPRI), an agricultural research centre funded by an alliance of 64 governments around the world.

A year after the global food crisis that saw food riots and protests spread throughout the developing world—and even to some rich countries—a number of nations have learnt their lesson.

These countries—largely emerging nations such as China, India and the Gulf states—feel they must ensure food security for their people, even at the cost of the food security of other countries.

At the same time, exacerbating the problem is the scramble by mainly European firms for so-called idle or marginal lands on which to grow biofuels.

Stung by the criticism of scientists last year that using farmland for such crops can actually boost carbon emissions and increase food prices, biofuels firms have been scouting about for cheap ‘wasteland’.

“EU policies is certainly contributing to Western biofuels investment,” Ruth Meinzen-Dick, one of the report’s two authors, told EUobserver,

“When you hear the word ‘wasteland’ or ‘unused’, it usually does have some use, just not uses that are officially recognised,” she added, “whether as a village common or as pastureland, gathering nuts, honey, or for rattan.”

The danger is, her report warns, that these companies risk setting off unrest as communities react to the loss of their lands.

Jatropha, palm oil

Details about the deals, the size of land purchased or leased, and the amount invested are often murky and shrouded in secrecy, according to IFPRI, but they highlight a number of agreements.

UK-based Sun Biofuels has secured land in Ethiopia and Mozambique for the cultivation of biofuels produced from jatropha, as well as some 5,500 hectares in Tanzania for the same purpose. Britain’s CAMS Group has also purchased 45,000 hectares for jatropha biofuels in Tanzania. The researchers found that another 10,000 hectares have been secured in Nigeria by Trans4mation Agric-tech, also of the UK.

Ethiopia is home to 13,000 hectares secured under a contract farming agreement with Germany’s Flora EcoPower for biofuel crop cultivation.

Sweden’s Skebab has secured 100,000 hectares in Mozambique for biofuels as well.

Meanwhile in the east, Denmark’s Trigon has secured 100,000 hectares from Russia. Sweden’s Alpcot Agro has secured 128,000 hectares and Black Earth Farming 331,000 hectares in the country. Landkom, a UK firm, has leased 100,000 hectares in Ukraine.

Food production meanwhile is usually the focus of the land acquisition by emerging economies. The UAE has secured some 378,000 hectares to grow corn, alfalfa, wheat, potatoes and beans, while Saudi Arabia is in the process of gaining access to 500,000 hectares in Tanzania.

Some emerging economies as well are also getting in on the biofuels bonanza. China has secured a whopping 2.8 million hectares in the Democratic Republic of Congo for oil palm and is hoping to access another 2 million hectares in Zambia for jatropha.

All told, the acreage secured through lease or purchase by Asian and European private and public investors amounts to 15-20 million hectares, at a cost of €15-20 billion ($20-30 bn).

By comparison, annual net official development aid by OECD countries amounted to around €90 billion ($120bn) in 2008, €50 billion of which came from the EU.

Jobs, infrastructure

“Additional investments in agriculture in developing countries should be welcome in principle,” the report says.

These land acquisitions could inject much-needed investment into agriculture and rural areas in poor developing countries, with the monies potentially creating farm jobs, improving rural infrastructure and aiding technology transfer.

But, avers the report, “the scale, the terms, and the speed of land acquisition have provoked opposition in some target countries” as local people lose access to and control over land on which they depend.

Often the agreements are not made on equal terms between the investors and local communities, resulting in smallholders who cannot effectively negotiate with these big players being displaced from their land and unable to seek redress in the event of foreign investors failing to live up to agreements.

Elsewhere, people may not have formal title to the land on which they depend, but instead use it under customary tenure arrangements. As a result, they are frequently pushed off the plot so that the official ‘owner’ of the land can profit from the sale or lease to the investor.

According to IRIN, the UN’s humanitarian information news service, the lease of coastal wetlands in Kenya by Qatar threatens to displace thousands of locals who use the region for produce and livestock farming. Local councillors have said they will go to court to prevent the government from leasing the property.

In Madagascar meanwhile, the IFPRI researchers write, negotiations with South Korea’s Daewoo Logistics Corporation to lease 1.3 million hectares for maize and oil palm played a role in the political conflicts that led to the overthrow of the government in 2009.

Code of conduct

“It is possible to have win-win scenarios,” said Ms Meinzen-Dick, “but it requires making sure that local people will at least be no worse off and hopefully derive some share of the benefits from the investment.”

To this end, IFPRI has recommended a code of conduct for foreign land acquisition and is developing guidelines on negotiations with investors in tandem with the African Union. The researchers want to see transparency in negotiations so that existing landholders are informed and involved in any land deal negotiations.

There should also be respect for existing land rights, including customary and common property rights.

And when national food security is at risk, they say, domestic supplies should have priority and foreign investors should not have a right to export during an acute national food crisis.

The IFPRI-African-Union guidelines are to be presented to the continent’s leaders at their July summit.

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