Energy Economics

February 3, 2015 Leave a Comment

“One Less Nuclear Power Plant”: Seoul’s Commitment to a Low-carbon and Non-nuclear City

olnnp — *OLNPP Initiative is designed to reduce the current level of energy consumption in Seoul by as much as a typical nuclear unit can produce annually.*

The recent nuclear accident in Fukushima alarmed many throughout the world. South Korea as one of Japan’s neighbors was immediately shaken by this historical nuclear disaster. However, Korea’s national energy plan to maintain and possibly increase dependence on nuclear energy has not changed much despite worrisome voices from civil society and local communities located near nuclear power plants.

Against this background, Mayor Won-Soon Park of the Seoul Metropolitan Government (SMG) announced in 2012 an innovative and experimental initiative on energy sustainability for the City, titled “One Less Nuclear Power Plant (OLNPP).” Although there are no nuclear power plants in Seoul, the name of the Initiative implies the City’s responsibility to understand and reduce the risks of overreliance on nuclear power disproportionately placed on local residents living near power plants. In this regard, the OLNPP Initiative is designed to reduce the current level of energy consumption in Seoul by as much as a typical nuclear unit can produce annually (approximately 2 million TOE) by 2014. To achieve this goal, the SMG provided a variety of policy measures and channels to enable a broad participation from the citizens. Before the end of the target year, the SMG already surpassed its reduction goal through energy saving (0.91 million TOE), efficiency improvement (0.87 million TOE), and the diversification of energy sources including renewables, fuel cell, and waste heat (0.26 million TOE) [1].

In June 2014, the SMG announced the beginning of the second phase of the OLNPP after its early achievements in the Phase 1 target. In Phase 2, the SMG sets up a more ambitious goal to reach 20% of self-sufficiency in electricity by 2020 (4.2% as of 2013). At the same time, the SMG aims to reduce 4 million TOE of energy consumption and 10 million tons of GHG through additional renewable generation and energy efficiency improvement.

In a paper published in Energy Policy in November 2014, Dr. Taehwa Lee, a CEEP alumni, evaluated the OLNPP policy as a meaningful experiment and effort for energy autonomy and sustainability at a local level. The study analyzed the OLNPP from an analytic framework for urban energy experiments consisting of three dimensions – policy background, governance, and policy content [2]. Among the three dimensions of the proposed framework, the paper highlights the leadership and governance behind the OLNPP able to recognize “burden-shifting” issues existing in the present energy system in Korea as well as incorporate social and moral dimensions into urban energy policies.

Dr. John Byrne, Chairman of the Foundation for Renewable Energy and Environment (FREE), Director of CEEP, and Distinguished Professor of Energy and Climate Policy, serves on the Seoul International Energy Advisory Council which advises the SMG on energy policies and plans including the ONLPP Initiative. Dr. Byrne points out that SMG’s rapid reduction in energy use is a remarkable outcome and that OLNPP Phase 2’s value-centered approach could be an important policy driver for enhancing sustainability and equity in Seoul’s energy system. Recent findings by the FREE Research Group include an estimate of Seoul’s “solar city” potential, noting that about 65.7% of the annual daylight-hours electricity needs of the city can be served by distributed solar power systems on a typical day [3]. Two Korean CEEP alumni, Dr. Sun-Jin Yun and Dr. Jungmin Yu, are also serving on the Policy Implementation Committee of the OLNPP.

Notes:

[1] One Less Nuclear Power Plant, Seoul Metropolitan Government, https://english.seoul.go.kr/policy-information/environment-energy/climate-environment/5-one-less-nuclear-power-plant-2/
[2] Lee, T., Lee, T., & Lee, Y. (2014). An Experiment for Urban Energy Autonomy in Seoul: The One ‘Less’ Nuclear Power Plant Policy. Energy Policy, 74, 311-318. https://dx.doi.org/10.1016/j.enpol.2014.08.023
[3] Byrne, J., Taminiau, J., Kurdgelashvili, L., & Kim, K. N. (2015). A Review of the Solar City Concept and Methods to Assess Rooftop Solar Electric Potential, with an Illustrative Application to the City of Seoul. Renewable and Sustainable Energy Reviews, 41, 830-844. https://dx.doi.org/10.1016/j.rser.2014.08.023

Photo credit: Seoul Metropolitan Government

January 28, 2015 Leave a Comment

Pathways to Deep Decarbonization Report

By Jeongseok Seo

*For deep decarbonization of each country to be realized, three common tools are needed: energy efficiency and conservation, low-carbon electricity, and fuel switching.*

Pathways to Deep Decarbonization 2014 Report is an inaugural effort of the Deep Decarbonization Pathways Project (DDPP). Launched in Seoul in October 2013, the DDPP is “a collaborative initiative to understand and show how individual countries can transition to a low-carbon economy and how the world can meet the internationally agreed targets for limiting the increase in global mean surface temperature to less than 2 degree Celsius” [1]. This report is prepared jointly by 27 partner organizations from 15 member countries and published by Sustainable Development Solutions Network (SDSN) and the Institute for Sustainable Development and International Relations (IDDRI), which are leading the project.

Key findings of this report show that total CO2-energy emissions from 15 preliminary deep decarbonization pathways (DDPs) identified can lead to a decrease in emissions by 45%. While this does not achieve the full decarbonization needed to assure to stay below 2 degree Celsius limit, the report stresses that pathways can be immediately implemented, which moves us substantially toward a global goal of living sustainably. For deep decarbonization of each country to occur, the report provides three common tools: energy efficiency and conservation, low-carbon electricity, and fuel switching [2].

This report can be viewed as a general guidance document for how a country can contribute to the global efforts in limiting the 2 degree Celsius threshold. Detailed analyses for individual countries will be released on the DDPP website. Two country-level reports have so far been released: the U.S. and Australia, which are available at: https://unsdsn.org/what-we-do/deep-decarbonization-pathways), and a report on France is scheduled to be released in the first half of 2015.

While many analysts would find much to agree with in terms of the value in identifying and developing deep decarbonization pathways, the objective of this report has also raised concerns. First, the underlying principles and assumptions of the report appear to be rooted in eco-modernization principles, in which humans not only fix severe problems like climate change but also can secure continued economic growth vis-à-vis technological innovations and through advancement in environmental management. While this perspective seems to be popular, it can be criticized for its dependency on experts and bureaucrats, most of whom are rarely exposed to the difficulties arising from climate change [3]. Some also object to an initiative like this because it seeks to endorse a vain ambition to ‘master’ nature. And some will criticize the effort for its failure to include NGOs in the pathway-building exercise [4]. Participation from civil society in each country could enrich country-level reports which will follow. Even so, DDPP is worth the attention of researchers and citizens seeking ideas on how to build a sustainable future.

References

[1] Deep Decarbonization Pathways official website: https://unsdsn.org/what-we-do/deep-decarbonization-pathways/
[2] SDSN and IDDRI. Pathways to Deep Decarbonization 2014 Report. Sustainable Development Solution Network and the Institute for Sustainable Development and International Relations (IDDRI). Retrieved from: https://unsdsn.org/wp-content/uploads/2014/09/DDPP_Digit.pdf
[3] Glover, Leigh (2006). Postmodern Climate Change. New York: Routledge.
[4] Byrne et al. (2002) “The Production of Unequal Nature,” in Environmental Justice, Discourses in International Political Economy (New Brunswick, NJ: Transaction Publishers)

January 23, 2015 Leave a Comment

Impacts of Shale Boom in the U.S. and Beyond

By Joseph Nyangon

*EIA estimates the growth in natural gas in the U.S. will increase by an average of 1.6% annually between 2012 and 2040. Photo: Reuters.*

The unconventional oil and gas boom has shaken up energy markets in the U.S. and beyond. Across many American states, the energy sector is experiencing a number of changes far larger than in its history including improvements in policies, business models, technologies, and investment options to make energy cleaner, more plentiful and diversified, cheaper to store and capable of handling increased demand more intelligently. Technological advances have significantly enhanced production of oil and gas from shale, turning the U.S. into a major oil producer, with most of the new production coming from unconventional sources.

The U.S. Bureau of Labor Statistics estimates a drop in the producer price index for natural gas of nearly 57% between 2007 and 2012 because of increased supply from unconventional oil and gas sources. [1] Unlike other countries with abundant shale resource potential in Europe, Asia and Latin America, the U.S. enjoys some big advantages, such as solid financial foundation for risky projects, open access, a well-developed supply chain built upon many years of serving communities and rewarding shareholders. This is allowing sufficiently robust domestic supplies to meet even significant growth in demand across major sectors of the economy for example transportation, electric power generation, and manufacturing. The U.S. Energy Information Administration (EIA) estimates the growth in natural gas in the U.S. will increase by an average of 1.6% annually between 2012 and 2040. [2] This is more than double EIA’s projected 0.8% annual growth rate in consumption over the same period.

Yet the long-term trend in shale boom is clear. The projection by EIA points to a continuing supply growth for oil and gas out of the shale regions in the U.S., with composition of shale energy expected to reach 56% of total production by 2040. [3]

new production — *Source: U.S. Energy Information Administration [4]*

Because of the big shifts in production now underway, the industry is continuing to attract more domestic and foreign private investment, which is introducing strong competition in a sector that only a decade ago was deemed obsolete and high cost. A declining trend in U.S. power generation emissions attributed to fuel switching from coal-fired power plants to natural gas systems provides conditions, economic and environmental, that enable electric utilities to improve their operations because shale can come online and offline more quickly. This enhances the capacities of utilities to implement demand-side management strategies more effectively.

Consider the following recent developments:

Since 2007, annual production of shale gas in the U.S. has increased by nearly 51% and technically recoverable reserves have grown five-fold, according to EIA. [5] In particular, increased drilling in the Marcellus Shale has stimulated economic growth in places like Pennsylvania, traditionally a coal-producing state. At the same time, hydraulic fracturing (“fracking”) and horizontal drilling have caused concerns about their impact on the environment.
The EIA predicts that liquefied natural gas (LNG), as a share of U.S. natural gas consumption will grow to 12.4% by 2030 from current levels of around 3%. As energy consumption in general has grown, so has the demand for natural gas. Investment in new LNG gasification terminals will continue to become attractive because of the rising shale boom, flexible contracting arrangements, and falling liquefaction and shipping costs making LNG shipments more responsive to natural gas prices.
Promising oil “plays” (i.e. a commercially exploited energy deposit) in the Niobrara in Northern Colorado and parts of Kansas, Nebraska and Wyoming have revived big local economic gains. Introduction of advanced technologies in oil and gas extraction has led to significant rise in production in the Barnett Shale in Texas since 2003. [6] Drilling has also expanded in other areas, such as the Haynesville and Fayetteville shale plays in Texas, Arkansas, and Louisiana.
For now, rising U.S. shale supply is exerting pressure on global energy markets, pushing oil and gas prices to record lows. The upside of the falling oil prices is that it provides the U.S. with a unique opportunity to reform its energy policy towards a path of low-carbon future our society so clearly needs. Globally, more effective management of supply and demand is required to catalyze further investments and competition in energy markets, especially in Asia, Europe, and parts of Africa.

So far, the expansion in production points to continued market stability and economic gains in the long term. Domestically, more U.S. output will likely shield the country from frequent price spikes and seasonal price volatility. In the short term, a shortage of skilled engineers, seismologists, geologists and other experts may hamper production though, forcing energy companies to increase specialized training in oil and gas operations.

Over the long-term, that expertise may be exported to other countries, providing positive balance of trade benefits to the U.S. Even so, the decision by OPEC not to cut back on its production quota in November 2014 in an attempt to prop up oil prices has exerted pressure on non-OPEC producers especially the U.S. and Canada to reduce their production. But this has not stopped oil-prices from tumbling to fresh lows (settling below $50 a barrel) and forcing Goldman Sachs and Société Générale to sharply reduce their oil-price forecasts. [7]

However, increased production may not keep oil and gas prices down in the long-term as a prolonged price slump could tighten profit margins forcing energy companies to cut or delay investment projects. Escalating conflicts of attrition among top oil-producing nations are also possible as countries scramble for new energy markets. The resultant price rout, if that happens, would weigh on other markets and sectors devaluing currencies exposed to oil exports as well as intensifying risks to oil-dedicated sovereign wealth funds.

Notes

[1] U.S. natural gas gross withdrawals, U.S. Energy Information Administration (EIA), (U.S. Department of Energy, Jan. 12, 2015), www.eia.gov/dnav/ng/hist/n9010us2m.htm.
[2] “Annual energy outlook 2014,” Figure MT-43. U.S. natural gas production, 1990-2040, EIA, May 2014, https://www.eia.gov/forecasts/aeo/MT_naturalgas.cfm.
[3] “Annual energy outlook 2014,” Figure MT-44. U.S. natural gas production, 1990-2040, EIA, https://www.eia.gov/forecasts/aeo/MT_naturalgas.cfm.
[4] Drilling Productivity Report, EIA, Jan. 22, 2015), https://www.eia.gov/petroleum/drilling/#tabs-summary-1
[5] EIA, 2008. EIA, U.S. Natural Gas Supply, Consumption, and Inventories. In STEO Table Browser. Retrieved from https://tonto.eia.doe.gov/cfapps/STEO_Query/steotables.cfm.
[6] “Technology drives natural gas production growth from shale gas formations,” EIA, July 2011, https://www.eia.gov/todayinenergy/detail.cfm?id=2170.
[7] Friedman, Nicole, 2015. Oil Prices Fall to Fresh Lows. The Wall Street Journal. Accessed on January 12, 2013, Available at: https://www.wsj.com/articles/brent-crude-falls-below-50-in-asian-trading-1421039495?KEYWORDS=Goldman+Sachs+