[vtsnowedin]

A shot glass full is as far from 100 gallons as taking off from Long Island is from landing in Paris.

[ROCKMAN]

Mr. Bill,

The $4 trillion still seems light but way beyond my expertise. But who would supply the $400 billion/yr while we'll still be paying ever increasing energy prices? Even if DD kicks in high gear that would also kill many capital sources. Oddly enough, the only likely capital source I can imagine would be OPEC.

Am I way out of line with these thoughts?

[Starvid]

$this->bbcode_second_pass_quote('ROCKMAN', 'M')r. Bill,

The $4 trillion still seems light but way beyond my expertise. But who would supply the $400 billion/yr while we'll still be paying ever increasing energy prices? Even if DD kicks in high gear that would also kill many capital sources. Oddly enough, the only likely capital source I can imagine would be OPEC.

Am I way out of line with these thoughts?

[MrBill]

$this->bbcode_second_pass_quote('ROCKMAN', 'M')r. Bill,

The $4 trillion still seems light but way beyond my expertise. But who would supply the $400 billion/yr while we'll still be paying ever increasing energy prices? Even if DD kicks in high gear that would also kill many capital sources. Oddly enough, the only likely capital source I can imagine would be OPEC.

Am I way out of line with these thoughts?

[vtsnowedin]

$this->bbcode_second_pass_quote('MrBill', '[') If bio-fuel from algae is part of that revolution then I think worrying about peak wastewater is a little nit-picky?

.

[ROCKMAN]

Mr. Bill,

I thought you might be a little more pessimistic about capital availability given past comments regarding the current debt situation. I was also assume you saw direct gov't funding of much of the initial effort as a way to accelerate the process. But you have a good view of the macro so I'll roll the dice with you.

[MrBill]

The key word is proven technology not wild unsubstantiated claims that will attract capital.

My problem with the nay-sayers is not that they do not have valid points, but they are rather negative. Their opening position is that based on today's technology that nothing is scalable enough to replace petroleum in our current energy mix. And despite commerical projects coming on-line they simply will not move with the times. Or recognize break throughs when and where they happen.

If we have a financial problem we need to find a financial solution. If we have an environmental problem we need to find an environmental solution. If we have an energy problem we need to find an energy solution. Linear thinking does not help. There is no one solution to replacing petroleum in our current energy mix. But there are a 1000 mitigating strategies large and small that can reduce the impact of a world without oil in 20, 30 or 50-years time.

The problem with servicing the past debt situation is quite simple. That money has already been spent. It was spent on the wrong priorities. It was spent with no regard as to how to repay it. Now that public debt can only be repaid by a combination of inflation; currency devaluation; lower, slower, no growth; higher taxes; lower living standards; and debt default. Obviously this affects the USA not most of the rest of the world that are net savers. The US may have the intellectual capital necessary to find some solutions to our energy problems, but the entity called The United States of America is a debtor nation, and therefore lacks the financial resources at this time to solve these energy issues on a large scale.

Therefore the burden falls on the rest of the world that has capital to invest in these problems. They can choose to fund American initiatives or they can choose to fund their own energy projects. But those energy projects are being built. They are being financed.

Like the peak of a roof there is a tipping point where wide spread adoption takes place. The first steam engine, the first bicycle, the first plane and the first automobile did not start a revolution overnight. The gains made by alternative fuels thus far have also been modest. First of all they have to compete against petroluem that is still relatively cheap and abundant given its superior EROEI. And secondly these technologies are still pretty much in their infancy. They may need thirty to fifty years before they reach critical mass and wide spread adoption.

If you tell me the world will collapse in the next thirty to fifty years before those technologies are commercial on a wide scale then fine. I certainly cannot prove you wrong. Then really my only advice to you is good luck. Enjoy your life and stop worrying about problems that apparently can never be solved. I personally would sooner spend my time looking for a solution than worrying about peak feces or peak wastewater. In the long-run we're all worm food in any case! ; - ))

UPDATE: From Fish Farm to Fuel

Mechanizing a Green Movement

[ROCKMAN]

Mr. Bill,

Perhaps my expectations are too much controlled by US ego. Even though I see the truth in your words it's difficult not seeing the US take the lead in such an effort. But, given the inequity in fuel consumption, I wonder if the rest of the world will be as motivated/aggressive as the US would be if we had the capital and common sense.

And I do appreciate your comments about herd mentality. Almost 20 years ago when I first started studying horizontal drilling technology I was like the proverbial kid in the candy shop with a $20 bill. So many applications...I just needed a capital source. I can't remember how many meetings I was politely thanked for my presentation and told "we call you". And, of course, the phone never rang. After all, "if it were really a good idea we would already be doing it" could be easily read between the lines. It will be interesting (scary) to see how long it takes the US to adjust its attitude toward alternatives.

[MrBill]

RM, the funding could come from private sources within the US, but if it is government funding then ultimately it is being under-written by Asian and OPEC central banks.

Alternatively, private equity funds can hoover up funding from anywhere on the globe and invest it into US lead projects. Infrastructure funds as well as alternative energy are where many of the big players want to be. There is scope to expand that if energy prices stay high making alternatives that much more attractive. Some of it is, of course, based on proprietary technology naturally, but there is also a great deal of public-private networking and sharing of ideas going on as well.

I found this article interesting:
$this->bbcode_second_pass_quote('', 'U').K. Prime Minister Gordon Brown was deluded when he announced in March that ``we will never return to the old boom and bust,'' said Willem Buiter, a professor at the London School of Economics and a former Bank of England policy maker.

Writing in the Financial Times, Buiter said capitalist market economies are inherently cyclical, the private credit system is by its nature prone to alternating fits of irrational euphoria and black depression, and busts play an essential role, cleaning up the mess.

Financial stability was undermined by thoughtless liberalization, especially in the U.S. and the U.K., with ``soft-touch'' regulation leading to a proliferation of opaque securities held by ``shadow-banking'' institutions that were anything but transparent, he said.

In the U.S.' ``balkanised'' supervision regime, no one was in charge and few were even aware of the disastrous developments that were in train, Buiter said.

The result in both countries was bloated banking systems, house-price bubbles and households living beyond their means, and it will take two or three years to work off these excesses, he said.

The correction, which will involve higher unemployment and more defaults, repossessions and bankruptcies, will leave highly advanced countries with reasonable prospects, as long as material expectations moderate, and developing countries that are net commodity exporters will have the potential for prosperity, Buiter said.

For poorer countries that are commodity importers, worsening terms of trade and an acute environmental challenge will make life ``very difficult,'' he concluded.

[vtsnowedin]

$this->bbcode_second_pass_quote('MrBill', 'T')he key word is proven technology not wild unsubstantiated claims that will attract capital.

My problem with the nay-sayers is not that they do not have valid points, but they are rather negative.


Linear thinking does not help. There is no one solution to replacing petroleum in our current energy mix. But there are a 1000 mitigating strategies large and small that can reduce the impact of a world without oil in 20, 30 or 50-years time.

. I personally would sooner spend my time looking for a solution than worrying about peak feces or peak wastewater. In the long-run we're all worm food in any case! ; - ))

[MrBill]

Absolutely, vtsnowedin, I know one Canadian company that fleeced a lot of investors over claims about hydrogen fuel cell technology that was purely bogus. They are still in business and still working on their next scheme. I lost money in an ag bio-tech start-up that ran out of money at the wrong time. That hurt. They were legit, but just in the wrong place at the wrong time. Ouch!

Sorry, I really did not mean to step on your toes. I have not personally gone that great into the technology of biofuel from algae. I was orginally just commenting on the size of investment that Curmudgicus thought was needed. Although the number is large it was not scary large. That is, of course, based on a proven technology that can deliver those type of gains claimed. If not, then fool me once...

[Curmudgicus]

Thank you Mr. Bill for the thoroughly reasoned post.

The economics of oil's replacement also has a local/regional component.

The Brasilians are able to use sugar-cane ethanol in place of oil because of the size of their equatorial sugar-cane industry when balanced against the national energy demand. It works for them. It doesn't transplant here though, because our consumption is so much higher and we don't any way to grow enough sugar-producing crops.

Iceland is commiting to a hydrogen-based economy, and is able to do so because they have a small population and a volcanically active island that permits using geo-thermal as their generation source. It might actually be transplantable to Hawaii, but wouldn't fit the US mainland.

One of the reasons algae appears to me to make sense for the US is because we have the available land area with an appropriate climate (lots of sunshine) to, at least theoretically, produce what we need. It's a good fit.

The economics and planning of a major infrastructure change isn't wholly foreign to US history. Eisenhower's commitment to the US interstate highway system that we all take for granted was begun in my childhood over fifty years ago, and took four decades to complete. The original impetus was national security. (Note- our long straightaways are intended to act as surrogate airfields in a national emergency.) In many ways, it was a bigger undertaking than the Manhattan project or the Space Program.

People's enthusiasm for the Bakken reservoir, if it can be made to produce at an economic cost, could easily take us right back to 1981 when everyone joyously ceased concerning themselves with the "oil crisis" and went back to conspicuous consumption. God, I hope not. It was depressing at the time. It would be monstrous now.

[CarlosFerreira]

I wonder if all the enthusiasm for oil shales and tar sands isn't draining some of the capital needed to research and implement the new technologies we'll need. Of course, not all depends on relative efficiencies of the different technologies and predicted gains: it's probably up to the oil companies pushing for that kind of solutions because, for them, it's business as usual after the oil is extracted.

The economics of the stuff, if you do not account for the environmental costs, essentially leaving them for populations and government to pay for, afterwards, are presented as interesting in these 2 papers:

DOE US Oil Shale Economics

DOE US Oil Shale Road Map

I'm far from contesting any of these numbers. It might be a good choice to use if Peak Oil hits harder and that 3% decrease in production has to be overcome overnight. I just wonder if this won't further delay the more interesting solutions.

[MrBill]

Looking a map of N. Canada - the Canadian Shield and all long the Prairie Provinces say between the 55th to 60th parallel - there are literally thousands of small and large lakes. It is predominantly non-arable land. The growing season is too short and the soil is for the most part too rocky and/or it has a poor gray-wooded soil that is very acidic. Good for some trees, but not farmland.

All that land used to belong to the Hudson Bay Company. It is a huge potential source of cellulosic ethanol from bio-mass like poplar trees that grow like weeds, but have a very shallow root system, so they usually blow over or die before they reach any appreciable height or girth for the purposes of making lumber. Basically garbage trees of no commercial value now. The caterpillers kill more trees than loggers in any case.

And some, many, most of those smaller lakes could be used both for commercial fish farming and/or growing algae ponds. There is some commerical fishing on some of the larger lakes, but the most part these lakes are too small and too shallow for commercial fishing. Naturally there are deeper lakes in the Canadian Shield, but many of the Prairie lakes are not much more than potholes. They would be useful for growing algae. Many of the lakes farther south already have algae bloom problems from the run-off of fertilizer and farmers allowing cattle to graze right up and into the water that also degrades the shoreline and causes erosion.

Our neighbors and ourselves grew trout in our two small lakes. It is possible, it is just that the labor was a problem. We were not doing it on a sufficiently large enough scale. So after a few seasons we just gave it up. The real problem with fish farming and algae ponds, aside from scale naturally, is the environmental one. Making sure domestic fish do not escape into the wild due to flooding or holes in the nets. And making sure algae blooms do not take over lakes where they are not supposed to. In this regard, small, self-contained lakes are better than those connected to other lakes via streams and rivers.

But, yah, if a self-contained feedback loop could be established between commercial fish farming and bio-diesel from algae and/or if cellulosic ethanol from wood chips is commercialized then N. Canada offers some great possibilities aside from its other deposits of oil, gas, coal, uranium and, of course, the Athabasca tarsands. It is afterall the second largest country in the world after Russia, and much of the same potential can be found there as well. However, I would not like to see a free for all. Any such projects on a large scale need proper management, environmental controls and strict enforcement to prevent over-exploitation and destruction of marine and wildlife habitats.

Note: not all these lakes are small. Some larger lakes include Great Bear Lake, Great Slave Lake, Lake Athabasca, Lake Winnipeg, Lake Manitoba, etc., but there are also thousands that are only a few miles wide, a few miles long and less than 50 feet deep.

[yesplease]

$this->bbcode_second_pass_quote('Starvid', 'S')olar: so bloody expensive no one takes it seriously.

[vtsnowedin]

As alga oil is a process to convert sunlight into a storable liquid form The viability of any alga growing project anywhere in Canada is very suspect. The sun is just too low in the sky and the winters are just too long. As you drive North from Montreal the forrest rapidly changes to pure stands of softwoods and then the size of each tree declines and they become more spaced out. Eventually they fade out altogether and the tundra begins. There just isnt enough growing degree days to support any lush growth. What they do have an abundance of is wind and water. The Lagrand four project has already tapped the water supply for hydro power. One of there spillways carries more water than all the rivers in Europe combined. Indeed Canadians call utility poles Hydro-poles . And a line of T Boones windmills from Moose Jaw Sak. to Great Slave lake would probably do as well as anywhere in the world. Lets put the right thing for a given location in place and not try a one size fits all strategy .

[CarlosFerreira]

The fact is that we're looking at a lot of alternatives, some of them quite interesting, so the future might hold the need to invest in several ways of producing power. Not that I believe in the homogeneity of oil nowadays, but the fact is the reduced EREOI of all these alternatives will force us to use different alternatives. Won't this result in lesser efficiency - and therefore, increased costs besides the development and implementation if those alternatives. How do we add these costs in the predicted price of oil's replacement?

[vtsnowedin]

I would think that the EREOI for oil will be taking a turn for the worse soon also. Consider that the shallow easy to reach and pump fields were the first found so in most cases will be the first depleted. When all our oil come from fifty miles off shore or the center of a war zone (if you add in the cost of your army) your net energy out will be much less than we are used to. Same for coal, move a mountain before you start and have to put it back when you are done then add in the cost of stack scrubbers and CO2 sequestraing and its a long way from $200 per ton.
The good old days are over and we are going to have to get to work.

[cube]

$this->bbcode_second_pass_quote('MrBill', '.')..
My problem with the nay-sayers is not that they do not have valid points, but they are rather negative. Their opening position is that based on today's technology that nothing is scalable enough to replace petroleum in our current energy mix. And despite commerical projects coming on-line they simply will not move with the times. Or recognize break throughs when and where they happen.

If we have a financial problem we need to find a financial solution. If we have an environmental problem we need to find an environmental solution. If we have an energy problem we need to find an energy solution. Linear thinking does not help. There is no one solution to replacing petroleum in our current energy mix. But there are a 1000 mitigating strategies large and small that can reduce the impact of a world without oil in 20, 30 or 50-years time.

[MrBill]

I don't know, cube. I really do not agree with you. Common sense is not all that common. Some say that common sense is all the prejudices you learn before you're 18 years old that you carry with you till you die. Lack of imagination is not common sense. Its lack of imagination. The economic cost of pursuing 500 blind allies in search of the right answers is lower than the economic cost of doing nothing.

That some financial innovations fail like the subprime mortgage market in the USA is not evidence that financial innovation itself is bad. A similiar system in Germany called the pfandbrief market operates quite well. There has not been one default in over 100 years. However, it is better regulated and only offers covered bonds backed by pools of mortgages with minimum downpayments of at least 25-percent.

It is simply wrong to say that because we cannot solve every problem that we cannot solve any problems. I am all for local and regional solutions. If the alternative is to freeze to death in the dark with nothing to eat then I will gladly live in one of those communities that is supplied by renewables even if that technology is deemed inadequate to solve everyone's energy needs.