WUEG February 2015 Newsletter

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for transport remains unfulfilled, tanker trucks will gain in use and importance. Both trucking and rail pose environmental, safety, and economic concerns. The likelihood for leaks are significantly higher for rail cars and trucks, which are less reliable methods of conveying crude than pipelines. Additionally, rail and roads often run through populated areas and accidents (such as in Quebec in 2013) violently demonstrate the volatile nature of crude. Finally, hiring drivers and contracting trains, though requiring less capital investment, cost significantly more per unit of oil moved. While effective as a stopgap measure to transport crude, pipelines represent the most realistic long-term vehicle for getting oil sands crude to market. Oil Sands Hit by Oil Prices Despite all the hub-bub, current oil prices may make the entire debate moot. Oil sands projects, with their very high set-up costs and relatively low grade product, face significant cuts to investment as oil prices have plunged and stayed low for several months. Shell’s shelving of an oil sands mine on February 23rd underscored the threat that the current pricing environment could have on new production and alternative pipelines. Still, those operations that are being completed or have already been finished will be finished, as the expectation remains that prices will eventually rebound. The long term impacts of the price environment are unclear, but the fact remains that oil from oil sands is going to reach the global market, one way or another. Sources: Business News Network Canadian Association of Petroleum Producers Financial Post Forbes Solar Energy in China Sheetal Akole – Senior member, Academic Committee With a population of over 1.4 billion people and an economy growing at 7.7% per year, China currently holds the title to the largest energy consumer in the world. Major cities such as Beijing, Xi’an, and Nanjing are now known for their pollution, contributed by their dependence and use of coal-powered plants. As of 2011, coal constituted 69% of total energy consumption, and oil constituted 18% -- renewables only accounted for approximately 7%. However, a more recent look at China’s energy consumption shows shifting trends, with renewables, especially solar energy, beginning to play a larger role. In 2012, China had 3 gigawatts (GW) of solar capacity – their goal was to reach 35 GW by 2015. As of August 2014, China’s total power supply was up to 23 GW, coming in second (in terms of solar capacity) behind Germany, which had 36GW of capacity. Although Germany remains the global leader in solar power generation, China is challenging their position. In 2013, China increased its photovoltaic (PV) generation capacity by a whopping 232%. Compare this to Germany’s 56.5% decline in new PV generation capacity additions. Many of the large strides taken by China in terms of solar energy generation comes as a result of two main characteristics: China’s massive solar panel manufacturing industry and the way China incentivizes solar power. China has ramped up its PV cell production and is
selling them on the world market below cost, undercutting domestic panel-makers and uncompetitive manufacturers out of business. Over the past seven years, the costs of PV systems have fallen 80%. While most developed countries have been scaling back government incentives for solar panels, China has been increasing tariffs and subsidies offered to private industry. Both ground mounted and rooftop panels are eligible for a feed-in tariff. Feed-in tariffs allow energy producers to charge a higher price for their electricity than the retail rate, amounting to, in this situation, a subsidy of between 14 and 16 cents per kilowatt hour. New public buildings and public infrastructure are also eligible for subsidies, encouraging orders for solar equipment. Looking forward, China has set its sights on reducing carbon emissions and continuously increasing their supply of solar energy. By 2020, the government aims to have 15% of China’s power mix coming from renewable energy sources, and with solar panel costs so low, a large portion of this mix will be solardriven. In addition, China is seeking solar markets overseas because its current manufacturing capacity exceeds domestic demand. However, certain countries (such as the United States) are pushing back, imposing anti-dumping and anti-subsidiary tariffs on China. The two questions we are left with are how China will handle the overcapacity of solar panels that they are manufacturing, and whether the solar industry will be able to sustain itself in the long run when government subsidies are removed. Sources: World Resources Institute United Nations Environmental Programme OilPrice New York Times Apple Runs on Renewables Arthur Chen – senior member, Academic Committee There has been some big news surrounding Apple, Inc. in the past month. First, it became the first company in America to hit a $700B market capitalization. Second, there are rumors swirling around when Tim Cook will deliver the iWatch. Third, and most recently, the Cupertino-based company appears to be making a move in the electric car space. Possibly lost amongst this deluge of news was another major news story. Apple announced that it had entered into a $850 million dollar agreement to buy solar energy from First Solar, the biggest developer of solar farms in the US. The 130 megawatts of power provided by this procurement deal will be enough to power all of Apple’s headquarters, offices, stores, and data centers in California. The contract is set start almost immediately in mid-2015, and the plants (formally located in the California Flats Solar Project in Monterey County) will have an ultimate footprint of 2,900 acres when it is completed by the end of 2016, 1,300 of which will be allotted to Apple. This agreement builds on top of Apple’s existing investments in two 20 MW plants in North Carolina and one 20 MW plant in Nevada. At this point, all of Apple’s data centers are powered by renewables, positioning the world’s biggest company as a leader in the corporate community over the future of energy.
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Page 9: incident's effect on crude indices

WUEG February 2015 Newsletter

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