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Electric vehicles (part 2)

In part 1 of this series, I introduced the two main types of electric vehicles: plug-in hybrid electric vehicles (PHEVs), and battery electric vehicles (BEVs). Today, I want to talk about their energy efficiency.

Electric motors – such as those used in a PHEV or BEV – are around three times more efficient than internal combustion engines. However, this is only part of the picture. The production, transportation, conversion and consumption of “useful” energy tends to involve losses at each stage of the process. A vehicle may appear to be more, or less, efficient than another depending on how many stages are taken into account.

“Useful” energy is lost in several of the processes involved in charging and powering an electric vehicle. There are losses in the generation, transmission and distribution of electricity to the charging point. The generation losses can be substantial, (especially for geothermal plants), and the transmission and distribution involves a loss of around 7%.

You pay for these losses, indirectly, in your retail electricity prices. But let’s put them to one side, since they’re being costed anyway, and their emissions are negligible, which is ultimately where I’m heading with this.

For EVs, additional losses arise from the conversion of electricity into stored energy in the battery (charging the battery), and the conversion of that stored energy back into electricity to drive the motor (and move the car).

Similarly, for conventional vehicles, useful energy is lost in extracting, transporting and refining oil; large amounts of energy are lost within the engine as heat or friction, and so on. The overall efficiency of this process is referred to as “well-to-wheels” efficiency – an energy life cycle going all the way from the oil well through to the wheels of your car.

Fuel_Full_Life_Cycle_av650

Source: http://www.psehealthyenergy.org/_Full_Fuel_Cycle_Assessment__Well_to_Wheels_Energy_Inputs__Emissions_and_Water_Impacts

 

Although the process for EVs is substantially different and may not involve oil wells at all, the overall efficiency of generating electricity through to driving the car is also called “well-to-wheels” efficiency. Similarly, “tank-to-wheels” efficiency refers to just the latter stages of the process, from the fuel tank onwards for conventional vehicles, or the battery onwards for EVs. I’ll focus on this from now on.

On average, petrol cars in New Zealand consume around 10 litres of petrol for every 100 km they travel, a “tank-to-wheels” measure of their energy use. Given the energy content of petrol at around 35 megajoules per litre (MED, 2011a), these cars use 350 megajoules per 100 km.

On the other hand, a BEV might have a “tank-to-wheels” electrical efficiency of 20 kWh/ 100 km (or just 72 megajoules per 100 km). Certainly, you could be looking at an EV using 70% or 80% less energy than a typical car on this basis.

Anyway, this has been a fairly lengthy look at the energy efficiency of various types of cars – sorry about that! However, energy efficiency isn’t that important in itself. Where it becomes important is when you look at its implications for running costs, or energy security, or greenhouse gas emissions. I’ll look at those topics in future posts.

65 comments to Electric vehicles (part 2)

  • Nice work John, the other aspect is that electricity can generated from both renewable resources (water,wind,geothermal,sun) and non-renewable resources.

  • It get’s quite tricky to compare well to wheel between EVs and conventional cars because the numbers change not just from country to country but from city to city. It does depend a lot of where your electricity is coming from. In saying that the last time I did a bit of research on this, which was about 4 or 5 years ago, I think EVs still had potential for reducing energy and carbon pollution even when the electricity came from coal power. I say ‘potential’ because it would need a smart grid to manage charging so as to avoid charging during peak load. If you charge during off peak hours it actually helps the grid. Large coal plants can’t turn off during off-peak hours so energy is wasted. There is a lot of potential is using EVs to use that spare capacity without increasing overall demand.

  • MFD

    “Certainly, you could be looking at an EV being 70% or 80% more efficient than a typical car on this basis”

    On the quoted basis a BEV has nearly 5 times the efficiency of a petrol-fueled ICE car. What is the derivation of your 70% to 80% figure?

    • John Polkinghorne

      Whoops, thanks for picking that up MFD… yup, I meant they could reduce tank-to-wheels energy use by 70% or 80%, not that they’re 70% or 80% more efficient. I’ll change the text.

  • JohnP

    I think your last sentence nails it and the comments above. If you can charge from power generated from solar or wind energy then it probably wouldn’t matter how energy inefficient the process was. But of course it will still need to be economically efficient or only enthusiasts will adopt it.

    • When I visited Google Campus last week they had a 500m long charging bay with solar panels mounted above to assist the charging stations. Also Chrissy field reserve opposite Golden Gate had six types of micro wind turbines assisting the charging stations. It was a windy day and couple of the micro wind turbines were going like the clappers, what struck me was how silent they were.

      • insider

        And there in a sentence is the key issue that continues to be a challenge – three bits of infrastructure (two of them intermittent) to do the one job.

      • The charging stations were assisted by solar panels and wind turbines, so the grid would be used as backup. However when no cars are charging then the excess power can go back into the grid. I thought it was a pretty cool setup and it would be interested in a cost/benefit analysis on it all. In the end costs for wind turbines and solar panels will only go down so the future for this technology is all good.

  • Ari

    For NZ, EV’s have always been a great option by viture of our huge renewal energy resource. If you are in France with mostly nuclear power, or in the US with mostly coal, then EV’s don’t make as much sense. The points made by JP are the very reason why hydrogen makes zero sense. Except for people selling the infrastructure.

  • looking into the fact that Taxis contribute emissions equivalent to 10 private cars, it would be worth considering EV’s for Taxis.

  • Still loving these posts, John :D There’s an ongoing issue of charger standards, I think the new supercharging stations for the Teslas in the USA use their own propriety connectors. Hopefully a standard charger can be adopted sooner rather than later.

    Also glad to read this post given that the new Formula One season is about to start, and the first test session is underway in Jerez this week. This is the first year that the ERS will be running constantly alongside the engines through all stages of the throttle map, instead using a ‘push-to-pass’ style ‘boost’ system. Over the next few years the rules will allow for systems with more and more energy recovery so hopefully we’ll see some benefits and miniaturisation coming from it.

    • John Polkinghorne

      Cheers Dan, I don’t think standards will be a major obstacle in the long run (although there are other obstacles!) – we’ve figured it out for other technologies, after all. Many of the ‘first mover’ auto companies have already agreed on standards – see http://cleantechnica.com/2012/05/08/gm-ford-and-chrysler-adopt-new-sae-standard-for-ev-charging-ports/. Although the article does mention different systems being proposed for Europe and Japan for now.

    • John Polkinghorne

      Also interesting to see the ERS, which I had to look up as I’m not a motorsport watcher – yup, regenerative braking makes a lot of sense and should hopefully see greater use in road cars in the next few years. No doubt some of the things they figure out in Formula 1 will help to develop the technology.

  • Phil

    EV’s are a waste of time – a dead end technology.
    Sure in NZ where we have plenty of capacity to generate electricity from renewable sources it might be nice but in the real world electricity is mostly generated from non renewable fossil fuels. So while it may help in NZ – unless we plan to build our own cars – who else is going to develop the technology?
    In any case – we currently produce a quarter of our power gen from fossil fuel – adding to the electricity demand will mean burning more fossil fuel. It would probably also mean drowning more towns like Manapouri and expensive ugly and noisy wind farms. Then we would have to build charging stations all around the country because it is no good assuming you can always charge at home.
    Alternatively we could go down the Hydrogen route which is favoured by large auto manufacturers like Ford, Toyota, Hyundai and Honda and supported from the oil industry. If the global car makers and energy firms are going the Hydrogen route it would be mindless for NZ to think it can swim against the tide.
    Of course all of this is being played out in a rapidly changing energy climate which is seeing cheaper transport fuel prices from shale oil. Who the frack needs EV’s when gas is going to be affordable for at least another generation.

    • John Polkinghorne

      I’ll cover most of these points in future posts – I’ve pretty much said all I want to about hydrogen, though. I’ll add a quote from Steven Chu, former US Secretary of Energy, available at http://m.technologyreview.com/business/22651/:
      “Interviewer: It used to be thought, five to eight years ago, that hydrogen was the great answer for the future of transportation. The mood has shifted. What have we learned from this?
      Steven Chu: I think, well, among some people it hasn’t really shifted [laughs]. I think there was great enthusiasm in some quarters, but I always was somewhat skeptical of it because, right now, the way we get hydrogen primarily is from reforming [natural] gas. That’s not an ideal source of hydrogen. You’re giving away some of the energy content of natural gas, which is a very valuable fuel. So that’s one problem. The other problem is, if it’s for transportation, we don’t have a good storage mechanism yet. Compressed hydrogen is the best mechanism [but it requires] a large volume. We haven’t figured out how to store it with high density. What else? The fuel cells aren’t there yet, and the distribution infrastructure isn’t there yet. So you have four things that have to happen all at once. And so it always looked like it was going to be [a technology for] the distant future. In order to get significant deployment, you need four significant technological breakthroughs. That makes it unlikely”.

      • Phil

        John, the quote you are using is five years old, a lifetime ago in the fast moving high stakes game of next generation transport fuels.
        His point about reforming nat gas can be applied also to generating electricity for EVs. Both electricity and hydrogen are power carriers and so the energy has to be converted from somewhere. Commercial quantities of hydrogen for transport fuels would at the moment be likely to come from nuclear. Longer term water splitting looks good. It is basically photosynthesis so copying nature.
        But regardless of what your preferred flavour is, hydrogen or EV, the problem that will hold back investment is cheap fossil fuel.

      • Greg N

        John: “…natural gas, which is a very valuable fuel”

        you’re right, but in the North Dakota around fracking wells, they burn it off as there is too much of it relative to the oil, so they don’t even bother storing it, nor do they have the infrastructure to compress/liquefy and/or transport (no pipelines for the Natural Gas coming from ND for instance).

        Its got so cheap comparative to Diesel in the US that Union Pacific Railroad is (again) looking to run locomotives on the stuff, an idea they considered in the 60s/70s before Oil and Gas prices went up.

        So, while reforming it to make Hydrogen or other hydrocarbons may not make sense, it better than just flaring the stuff off as they do now.
        Of course, the long term sustainability of these fracked wells is an open question (the elephant in the room in fact).

        So I wouldn’t base my energy strategy for the next decade on cheap gas from fracking wells, so its a bonanza all right, but one that won’t last..

        • Phil

          You are right about the flaring. I am however not sure shale is a short term bonanza. Until recently I would have agreed but I have been looking at new data that makes me believe shale is going to last at least 50 years. It really is in my opinion a game changer.

          • Greg N

            Shale will only last long (in Bakken at least) if the local water supplies hold out. Water is the lif blood for fracking, and it needs a lot of water – not only to frack but to keep the wells producing. Without a continuous water supply your wells will not get fracked, nor produce a thing if they have been.
            And the water that comes of the fracked wells – well thats so containimated it can’t currently be cleaned up for re-use, so has to be dumped – creating further poisoning downstream water supplies.

            Right now the ability of mid west water supplies to deliver is way more uncertain than the life of a Shale based fracking well.

            And is the US about to enter a race between using water for cheap gas and water to feed growing cities demands and to grow food?

            Sound like those generation 1,2 and 3 Bio-Fuels “race” all over again to me.

          • Phil

            They will take the water from the Missouri river if they need too.

          • Greg N

            Because the US hasn’t already over-committed many of its major aquifers and rivers some 300% already?!??!? – Yeah Right

      • I dont know if you have read this article John P:
        http://theconversation.com/why-is-hydrogen-fuel-making-a-comeback-22299

        I found it interesting after your article and comments on the hydrogen storage issue. The article is quite bullish about hydrogen. However, it mentions the big problem with storage at the beginning and then ignores the issue for the rest of the article.

        I would have thought that was still a massive issue. If it is really expensive and dangerous to transport the fuel, then it is unlikely the fuel will be very affordable or that fuel stations will be allowed in built up residential areas.

        • Phil

          I’m no expert but my understanding is currently it is handled much like LPG so not insurmountable. Of course Celar Energy in the UK is storing hydrogen in plastic tanks using nano tech capsuals.
          Sure there are problems to overcome but at least there is a plan B in the making. And who doesn’t want a car that only emits water

        • John Polkinghorne

          Hadn’t read that article in particular… note a quote from it though: “Hydrogen is inextricably being linked to renewables in energy strategies to meet radical greenhouse targets. Hydrogen can store renewable energy for powering vehicles and supply 100% reliable electricity.” – if you’re going to do that, you’re better off using electric vehicles; it’s more efficient.

          The article also mentions “A 2013 study showed hydrogen would have a vital role in meeting the UK’s carbon emissions goal.” – well, I just read the study, and I think a bit more context is needed. The UK government has recently passed a law mandating 80% CO2 reduction by 2050, with 23% by 2020 (puts ours to shame, doesn’t it?).

          One scenario in the study shows hydrogen cars becoming the main vehicle of choice by 2050, in large part because it assumes liquid hydrogen is imported from outside the UK. “As import of hydrogen is carbon-free, the model finds it optimal to buy it in liquid form and feed into the market through 3 terminals at Teesside, Isle of Grain and Milford Haven.” Well, there are still emissions involved in producing the hydrogen, but that counts against another country’s targets, not the UK – passing the buck on down the road, essentially.

          The study also mentions “intense resource competition between low carbon hydrogen production and electricity generation”, but as far as I can see, doesn’t make any mention of EVs, which are obviously a competing vehicle technology. It’s really just looking at the technical constraints of hydrogen for the UK, and how they could best be met; it’s not offering an opinion on whether EVs or hydrogen vehicles are more desirable (or likely) for the UK or world. Which isn’t an easy question to answer either, by the way.

          • Phil

            The ‘study’ wont open for me. Id be interested to know who did the study because a lot of things have to change before Isle of Grain becomes a dedicated hydrogen import entry.
            Isle of Grain is a BP owned terminal that currently is a major entry point for Jet Fuel going to Heathrow. It is the major entry point on the GPSS pipeline which is one of the few ways of getting fuel to the airport. Any change of utilisation would be a major problem for UK aviation so I am inclined to believe (without reading the report) that its a bit pie in the sky.

    • Phil the logic in you’re argument is a bit flawed. Both hydrogen and electricity are simply energy carriers. You can’t penalise EVs for needing to increase our electricity demand and let hydrogen off the hook. Yes, you can get Hydrogen from natural gas but that defeats the whole purpose. It’s more efficient just to burn the natural gas in a cheap ICE. What’s worth nothing though is that ICEs are soo inefficient that even if we were to use the same fuels in a power plant and run a fleet of EVs, we would still use less energy. Because with a single large power plant we can optimise fuel and energy use as they run at a constant speed. Vehicle engines aren’t optimised in the same way because they have to operate at varying speeds (unless you have a CVT gearbox).

      Furthermore as I said in my post about increasing the number of EVs (or hydrogen) doesn’t necessary mean we need the same proportional increase in generation. This is because with a bit of pricing creativity we can use the peaks and troughs during the day to flatten our energy demand. The grid is build for peak demand (globally) and on a given day we do waste a lot of energy because large power plants can’t be turned off that quickly. We would need to get to a very high percentage of the fleet being electric before we would need to build more power plants. And that is a long way away. Longer still if you’re waiting for the hydrogen miracle.

      On that note, if I had about 80k to spend I could go out right now and buy me one of a few different electric cars. We have the Chevy/Holden Volt, Nissan leaf and the Mitsi MiEV, and that converted Hyundai thing. (Plus a few more coming along very quickly) For the most part I can charge any of those cars at home. In countries where they have a bit more scale there are fast charging stations. Some which I remember seeing as far back as 2009. The fast charging tech is nowhere near as complicated as anything to do with hydrogen. And thanks to the electric grid we don’t need to build a massive hydrogen infrastructure. We will need to think about the business model we have with the private car and how we use them. I’ll give you that. It’s not a direct replacement for current ICE vehicles.

      But even if I had about half a mil I still couldn’t go out right now and buy me a hydrogen car. And even if I did there is no way I could fill the damn thing up without getting some kind of in-home natural gas reformer. If we look at the race between the two technologies, electricity is miles ahead of hydrogen. They’ve got products on the market, an exiting distribution infrastructure that goes into every single home and they are a whole lot easier to work on as you’re not dealing with a dangerous fluid. For the cost of hydrogen to come down they will need to build a heap of the things and get people to buy and start using them. In the same time I expect the costs to come down a lot more and the technology and business models to get a lot simpler for EVs because they have a massive head start.

      • Phil

        Kirk, you think it is practical for NZ to go it alone down the EV route just because we have more access to renewable generated electricity? My point is NZ will follow global trends and I see that as being hydrogen.
        If you want to see hydrogen in action look at what’s happening in California. Sure it’s all a bit of fluff and nonsense right now but it’s likely to be the genesis of things to come.
        And as I keep saying – for as long as we are going to have cheap fossil fuels – and we are, the incentive to go down EV or hydrogen isn’t there for NZ or anyone else.

        • Phil, I think it is highly more likely that all countries are going to go down the EV path. Let’s just say it’s a race between just EVs and Hydrogen. Right now EV technology is simpler, products are on the market at prices even I can almost afford and it requires much less new infrastructure to get going. NZ doesn’t have to go it alone because quite a few manufacturers are building EVs aleady and I can buy an extension cable from Bunnings, as opposed to some kind of water splitting technology from who knows where.

          When it comes to the efficiency of how the energy is used in both potential models, EVs would still be lower than Hydrogen because of the laws of thermodynamics. Compression, transporting, water splitting of hydrogen, all eat up some of the energy you started out with. That energy lost is greater than what would be lose if you just transported electricity. It’s just thermodynamics.

          Now none of this means that we are guaranteed a future with electric vechicles over hydrogen but I would rate it about a 60 to 70% chance.

          However, it’s perhaps more likely that we end up some kind of mixture of that, hydrogen and algae biofuels when you look at the whole transportation fleet and network. Things that fly will need biofules, ships and trucks that go cross country might well use hydrogen or biofuels. Busses, taxis and most city cars will probably be electric. With significant changes to the ownership and business models so we use our transportation stock more efficiently.

      • TheBigWheel

        @Kirk.. great exposition.

        The main issue here is not money or style or consumer choice, it is decarbonising car travel. As you say: “Yes, you can get Hydrogen from natural gas but that defeats the whole purpose.”

        Given sea level projections of +1-2 m by 2100, today’s scenes are going to be much more frequent.. http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=11195446

        Defending Tamaki Drive against the rising seas will incur many millions in massive civil engineering projects over the next few decades. Some of this is already on the planning horizon. It is called, without a hint of irony, “future-proofing”. Yet if we don’t (globally) ramp up the switch from fossil fuels to renewable energy, we will have no choice but to give it up. Tamaki Drive, and swathes of urban and coastal Auckland along with it.

        By then, arguments about personal motorised vehicle technologies may be somewhat academic.

        • Phil

          Pay attention wheel – electricity is generated by fossil fuel. The future of hydrogen will be using the sun and with a smaller carbon foot print than any EV will manage. You should open and read the links.

          • Greg N

            Why bother generating Hydrogen from solar, when you can make electricity the same way, then use that to run a fleet of PHEVs/EVs?

            The only reason Hydrogen gets a look in is due to range anxiery for current EVs.

            By the time Hydrogen Technology makes it way into cars in volume so its mature enough to compete with EVs – the range anxiety issue for EVs will be solved, either by longer range EVs and/or by widespread fast charging networks.

            Note: The Tesla supercharging network allowed a cost-to-coast drive of a Tesla recently, and while thats unusual today, in the future that will be normal just like it is for an ICE.

            So, once that happens, why bother going ICE to Hydrogen with all the issues it has, when a long range EV with fast charging will achieve the same kind of range?

          • That maybe where you live Phil, but in New Zealand 73% of electricity is generated from renewables.

          • Phil

            That’s still 27% power Gen from non renewables

          • Bryce P

            We should be aiming to remove that 27%

          • John Polkinghorne

            Phil, the link with Steven Chu changing his mind is quite interesting actually, thanks for that. And hydrogen vehicles may well be lower-emissions than EVs in countries with a lot of fossil fuel generation (i.e. most of them). I’ll look at emissions in a future post, I haven’t gotten to it quite yet. But if you’re going to use renewables, like solar or anything else, it’s impossible for hydrogen vehicles to be more efficient than EVs. In which case, why bother with them? It seems to me that the only way they could gain traction is if the hydrogen is produced by the current mechanism, i.e. steam reformation of natural gas.

          • Phil

            John, I think the problem with Hydrogen and EV is apart from some small companies like Tesla, most of the alternative fuel R&D is more about compliance with Government emissions standards than actually producing a new generation of car.
            Aston Martin for example made the Cygnet to bring the average fleet emission figures down as it was a small engine petrol car that offset all the V12’s they sold.
            Until petrol gets really expensive there just isn’t the incentive for anyone to get serious about alternative energy. I am not saying that is a good thing but the change is likely to be about emissions now – not affordable transport fuel. Of course in NZ our biggest threat to transport fuel is our exposure to the US Dollar. Maybe a weakened exchange rate would push more Kiwis to EV’s?

  • MFD

    A couple of simple questions re hydrogen-fuelled vehicles:
    What will be the process by which the hydrogen will be manufactured?
    How will it be distributed to the end user?

  • Phil

    As you know Hydrogen, like electricity is an energy carrier. Production of Hydrogen can be from fossil fuel, nuclear power or a renewable energy. I believe long term we will be striping hydrogen from a fast growing bio mass like kelp or by water splitting – both harnessing the Sun as the prime energy source.
    Here is a link about water splitting http://www.dvice.com/2013-8-2/water-splitting-breakthrough-could-produce-cheap-hydrogen-fuel
    Hydrogen in a liquid form will be distributed the same way as any other liquid transport fuel is today. End users will be able to pull into there Shell or BP station – select the Hydrogen pump and pour it into their tanks. Hydrogen can be burnt either in existing internal combustion engines or used as a fuel cell to power electric motors. Personally I favour the first option as it most mirrors current fuel use.
    The biggest problem facing Hydrogen today is the low cost of traditional fossil fuels which are expected to get cheaper again but emissions may be driver behind mass Hydrogen fuel/car production.

    • Nick R

      Just pour the liquid hydrogen in? The stuff has to be stored under pressure at -250 degrees so it’s a lot more difficult that that. And what about the energy density being one fifth that of petrol per litre? Are you really expecting cars with 500 litre cryogenic tanks?

    • TheBigWheel

      “traditional fossil fuels… are expected to get cheaper again”. Says Phil, who obviously knows more than the EIA or the IEA or most other long term analyses. Other than short term blips, there is only one way for the price of a one-time inventory laid down over 100s of millions of years to go as we burn through it, and that is inexorably up. At some point, the price will reflect not just the cost of getting the stuff out of the ground, but the far larger cost of loading the atmosphere with CO2. The effect will not be linear, given that we cannot afford to burn all the reserves.

      Here’s my prediction. One day there will be wars over fossil fuels. Not like in the past, to gain access to them, but to prevent their extraction.

  • Phil

    Nick – we have been here before – technology exists today through nano to encapsulate the hydrogen and then you can store it in a plastic tank.

  • Phil

    Don’t be daft. Where is this up to date analysis you are talking about Wheel? Just have a look at any forward curves on WTI or NYMEX mogas and you will see the market agrees with me. Feel free to try and explain the backwardation in crude if I’m wrong.
    Yes – all fossil is finite but shale has moved the goal posts at least 50 years and the price of petrol is coming to reflect that.
    As for CO2 – I already said that is what will eventually push us to hydrogen and we already reflect the cost of pollutants in our fuel prices. You are totally wrong about a war to stop extraction – are you fantasising about Greenpeace invading China or Russia? I’m sorry wheel but you lost any credibility with that claim.

    • TheBigWheel

      Phil, I already read the EIA link and have seen plenty of others like it and the best you can claim is that, under some scenarios, there is a short term reduction.. Typically to all of USD90 per barrel.

      Green peace are not going to invade anywhere. Start with countries affected first and disproportionately by climate change. Or sectors within countries.

  • Phil

    Wheel – The EIA are saying crude will be cheaper until about 2040 – a distant time in the future for energy supply. Don’t forget that crude today is $106.40/bbl so we are talking more than a 10% reduction in crude price despite global demand increasing year on year. Don’t also forget that crude was $145 in July 2008 so we are talking a significant reduction in price of feedstocks.
    Of course it is not just about the value of Brent crude. It is the value of petrol which will be made from competing feedstocks including shale oil and WTI Crude which is lighter than Brent so produces more petrol per bbl. WTI is also cheaper than Brent.
    There will be a glut of petrol and diesel in the US that weighs against global markets – we will be seeing cheaper fuel for the foreseeable future. None of this means you have to sell the Prius, it just means less people will be inclined to step out of their Humvees.
    As for global warming through climate change – Here is a link to one of the low lying countries preparing for the invasion of the USA http://www.wimp.com/bicycleband/

    • Yes and in 2005 and the EIA said the 2010 crude price would be $24.53 a barrel. To get a forecast so wildly wrong just five years on means making any kind decision based on what this organisation says is naive in the extreme, and especially so for much longer periods.

      Oh and that’s not a particularly special result for their forecasts. They have a long history of being much much more wrong than right.

      Of course predicting is a hard business, few get it right, the article below suggests a series of reasons why this might be. And in the EIA’s case, being a government agency at the heart of the world’s leading oil dependant economy this one in particular seems likely:

      “Fifth, it may be politically uncomfortable to forecast price spikes. Who wants to be the head of a government forecasting agency, and have to tell their political bosses, regularly facing re-election, that oil prices are going to double or triple and in the process likely tanking the economy and their superiors’ re-election hopes? The issue is who’s going to be the one to deliver to the Secretary of Energy or the White House unpleasant analytical findings?”

      http://www.ensec.org/index.php?option=com_content&view=article&id=466:why-energy-forecasting-goes-wildly-wrong&catid=139:issue-content&Itemid=425

      Also the following is also clearly true; there is a readily observable group-think among these tribes of analysts. I got into a debate at the recent transport conference [where I presented the CFN] with an NZIER economist who basically said recent oil price rise was a ‘shock’ and therefore an unimaginable aberration and he couldn’t see it happening again. Really? Between now and 2040, no surprises at all?

      “Analysts tend to stick together because they are sensitive to being criticized. In addition, if they make such a prediction and they’re wrong, they could risk their careers. In contrast, if they’re wrong, but everyone else is too, they can all stay safe within the herd.”

      Anyway, regardless of the cause the consistently over-optimistic forecasts are dangerous because they inform policy so much, or at least policy justification. Remember that phrase ‘oil shock’ it will be wheeled out again… because how could anyone expect that we might face a supply/demand imbalance anytime between now and 2040 because the mighty EIA has said it won’t happen? So any dramatic change, up or down, will be a ‘shock’. And language matters:

      “Conclusion

      Why does any of this matter, and why should any of us care if energy forecasts are off base most of the time? To the extent that policymakers believe erroneous forecasts, they can make wildly incorrect policy choices. For instance, if they believe that oil prices will remain far lower in the future than is the case, their forecasts will undermine efforts to conserve or to switch to alternatives. Why would nations, businesses, entrepreneurs, and individual consumers take such steps if oil prices are predicted to remain low? At a minimum, this will be one factor working against conservation and movement away from fossil fuels.”

    • TheBigWheel

      Phil, that has to be the best link I’ve followed up for ages :-D

  • Phil

    Predicting oil price trends is a hard job – that is why oil traders get paid fortunes :D

    Why do you think you know better Patrick?

    • I don’t claim to do it. But then traders don’t do what the EIA tries to do either, which is just as well as the EIA would have lost its shirt decades ago with their record.

      The tragedy is that public policy decisions are made on the basis of their nonsense.

  • Phil

    The EIA predictions for the future price of crude is in my opinion likely to error to the high side, and that should be considered a huge relief. We don’t want to be running out of oil or crippled by high energy prices with no plan B.
    What I would like to see happen is increased taxation as the wholesale price comes down with these funds used for transport issues. In NZ that would be RONS, PT, and investment in alternative energy.

    • The EIA predictions any further than a year out are CERTAIN to be wrong, as to whether on the high or low side is of course the question. You may well be right and of course it’s a scenario worth running. Especially as it leads to all sorts of possibly counter intuitive likely outcomes, like bankrupt (or at least seriously capital constrained) oil majors, abandoned arctic and ultra deep programmes. In short any extraction that requires the punishing costs of unconventional oil. Probably including most biofuels and fracking outside of the US.

      Which then surely impacts on supply and therefore price, and so on.

      The most likely way we can get cheap oil again is through a serious collapse in demand. Either through substitution and efficiency gains or widespread economic contraction. Take your pick, here’s hoping it’s the former. With the news that the Pentagon is going hard out to reduce FF dependency by switching to renewables for 25% of it primary energy use is good news (and shows what all society should be doing).

      Other possible programmes like the booming US rail freight business experimenting with LNG locos would also accelerate the already begun structural demand drop there. Union Pacific alone is the second biggest US user of Diesel behind the Navy.

      • TheBigWheel

        In the 1990s I was part of a team that ran some scenario planning for the UK electricity industry. It was interesting to note, as we got stuck into the scenarios and the assumptions behind them, the huge range of possible outcomes. From one extreme to the other, boom or bust.. especially when we considered possible medium term outcomes for nuclear power.

        This of course, is the whole point of scenarios.. we use them when we the uncertainty precludes our ability to project with confidence within a meaningful range. The EIA so-called scenarios in the ENSEC paper are amazing.. way too narrow! Not much more than variations of a single trend scenario in my view. They completely failed to imagine (or at least to report) any surprises at all, for decades. QED.

        But we’ve known this for ages. Here’s JM Keynes from 1937.. “[Under uncertainty] there is no scientific basis on which to form any calculable probability whatever. We simply do not know. Nevertheless, the necessity for action and for decision compels us as practical men to do our best to overlook this awkward fact.”

        It’s been said before, but little old NZ is hopelessly exposed to oil price or supply “shocks”.

        • Phil

          Well there is never a certainty – that is why it is called a prediction. However if you wanted to ignore all the fundamentals and fret about future price shocks the NZ Govt can buy call options. They could fund these from fuel tax.
          For while you can not predict with 100% certainty the forward value – you can buy any forward value you want.
          Having just asked a colleague what the cost of ATM Brent Calls are – these would look very attractive to anyone bullish forward crude.
          So to protect the NZ public from future supply shocks the Government could buy calls and while they are at it – lock in the NZD/USD forward Forex rate (our real oil price risk).
          Personally I wouldn’t want the State taking oil trading positions but if they do – I can sell them as much as they want :D

  • Phil

    The US is not a big user of diesel anyway. They have traditionally exported diesel to Europe and imported petrol. Now – thanks to Shale Oil the US is actually exporting petrol to South America and West Africa.
    Global oil demand is rising at around 1.5% per annum which in reality means demand in the west is falling and partially offsetting the rapid demand growth in Asia. I believe we will see continued decline in crude prices and product values despite this overall increase in demand.
    You can theorise that oil producers will reduce output but if you are the King of Saudi Arabia you don’t really care if oil is worth $100 or $10 a barrel. You keep pumping it (in fact the lower the price the more you try and pump) because you are only interested in how many Lamborghinis you can buy in your lifetime – you are not worried about legacy or the long term financial stability of the Kingdom. Its the same in the rest of the Arab Gulf, West Africa, Venezuela and even Russia.
    The worst consequence of cheap oil will be the reduction in investment in alternative fuels. We wont learn – it is in our nature to be wasteful

  • An illustration of why the end of cheap oil is really a problem, and why in inability of the world’s economies to afford >100 a barrel means big trouble for the oil majors:

    From Bloomberg:

    “In a way, the world’s major oil companies all suffer from some version of the same problem: They’re spending more money to produce less oil. The world’s cheap, easy-to-find reserves are basically gone; the low-hanging fruit was picked decades ago. Not only is the new stuff harder to find, but the older stuff is running out faster and faster.”

    http://www.businessweek.com/articles/2014-01-31/big-oil-earnings-reports-reveal-big-production-problems

  • Peter Olorenshaw

    John you said “The generation losses can be substantial, (especially for geothermal plants)” I think you probably meant Thermal plants, not geothermal didn’t you? (Geothermal is essentially free energy so isn’t the concept of losses rather meaningless)

    Phil time of use metering is surely going to be the future normality. So people would be mugs to charge their cars up during peak times, instead they are likely to use some of the remaining power in their cars during peak times to offset their need to get expensive power from the grid. And capitalising on really cheap nighttime power to charge their vehicles up. In this way the amount of extra generation needed for an battery electric fleet is not nearly as much as it might seem. I think Mike … of Massey Uni worked out it would only be of the order of 10% more in NZ.
    Cheers
    Peter

    • Phil

      Peter – if everyone started charging at night it would just move the ‘peak’ I do not believe NZ has the spare capacity to run our road transport fleet off the grid. In fact according to this article (I have linked) our green power gen expansion is limited and the reliability of the present capacity relies on imported coal.
      http://world-nuclear.org/info/Country-Profiles/Countries-G-N/New-Zealand/

    • John Polkinghorne

      No, I did mean geothermal – their conversion from primary energy to electricity is quite low, around 12% I think. You’re right that the energy is essentially free and therefore it’s not really a big deal, but I wanted to be precise. Conversion rates for thermal plants (coal/ gas) are lowish as well, but higher than that.

      Charging capacity for EVs wouldn’t be a problem for NZ or, probably, most countries. Will tackle that in a future post.

      Phil, I’m afraid that article is quite mistaken – we’ve got plenty of room to grow our renewable capacity, and can indeed become less dependent (completely independent, in fact) of coal and other fossil fuels for electricity generation. Again, in a future post.

      • Phil

        Good to know that – clearly the article is written from a Nuclear biased view. I would hope NZ can grow renewable power Gen as importing coal is a very expensive and wasteful way to make electricity. I look forward to reading your future post.

  • Phil

    The term ‘Yet to pay off’ give a clue to what is going on. What is really shows is that oil majors are prepared to invest heavily in upstream activity because they expect a big pay off. What the graph doesn’t tell you is how the majors are divesting from downstream business (refining and marketing) because they see the boom is in exploration and extraction.
    Of course they could be wrong but they could also be very right.

    • Of course, but the list of cost blow outs and disappointing results from pre-salt to Caspian to the arctic means that the pay days aren’t looking near or big. Shell has just abandoned Alaskan Arctic after blowing 5bil… that’s no ‘yet to pay off’.

      Bakken and Eagle Ford are the only white knights to actually show up since we got on the plateau in 2005 and the majors, to quote XON boss, ‘are losing their shirts there’, furthermore how long it will last and if it can be spread to other geologies is yet to be proven.

      And time is of the essence: decline never sleeps, and the more EOR is done to old fields to reduce decline the greater the depletion.

      Or as Bloomberg put it: “The world’s cheap, easy-to-find reserves are basically gone; the low-hanging fruit was picked decades ago. Not only is the new stuff harder to find, but the older stuff is running out faster and faster.”

      The company PR shills are really having to earn their keep turning bad news into ‘strategic realignments’ etc

      Very interesting to watch.

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