Consumers will opt for lowest cost: report

By Claudia Cattaneo, Financial Post

AltaCorp Capital Inc.’s John Mawdsley, managing director of institutional research, looks at the advantages and disadvantages of different energy sources in an 82-page report titled: Renewables vs. Hydrocarbons, The Energy Reality. Some of his findings and observations:

Natural gas has the advantage When different energy sources are measured on an apples-to-apples basis, nonconventional natural gas is the big cost winner, while renewables require oil prices well above $100 a barrel to produce the same amount of energy.

The chart measures the cost of developing 11 different types of energy projects to receive the same amount of energy as a barrel of light oil, or $/boeenergy. The cost includes CO 2 emissions, which are priced at $50/tonne. For example, offshore wind becomes viable at about $342/boe-energy and solar voltaic becomes viable at about $429/boe-energy.

As the lowest-cost source of energy and the most environmentally friendly of the hydrocarbons, abundant natural gas is well placed to become the largest source of energy on the planet.

What they don’t tell you about renewables Solar power is generated only when the sun shines, wind energy is generated only when the wind blows and there is no practical way to store the electrical energy they generate to balance a broad-based electrical grid.

To replace the current global oil production of 84.4 million barrels per day with corn ethanol production, it would take a corn field the combined size of the United States, China and India -an area that is greater than the currently used arable land in the world.

To replace the coal-fired electricity in the United States, it would take solar panels that would cost $4.4-trillion. The limiting factor is the inability to store the power generated during sunny periods for use throughout darkness and times of cloud cover. There is no current technology to store this amount of electricity.

Some 149 million people per year could be fed with the feedstocks now being used for ethanol production in the United States.

An oil-sands plant with a capacity of 100,000 barrels a day could offset ethanol production that could feed 34 million people a year if the same land were used to produce food.

Biodiesel crops use 500 times the water used by an oil-sands plant to produce the same amount of energy.

Many electric cars claim to be emissions free. The claim does not take into account where the electricity comes from in the first place. In the United States, many of them will be powered by electricity produced from coal, the most emissions-intensive hydrocarbon.

Why we cannot abandon hydrocarbons Society uses hydrocarbons because they contain a lot of energy that can be readily accessed through simple combustion. They are also conveniently transported and cost less than other sources. They enjoy existing infrastructure and are preferred in developing countries that are expanding their economies.

Hydrocarbons account for 84% of global energy consumptions. Hydroelectricity, the most significant renewable energy source, satisfies 6% of energy needs. Solar, wind, ethanol, biomass, biodiesel and geothermal make up 4%.

If global energy demand were to increase by only 1.2% a year, total consumption would grow by almost 60% over current levels by 2050, representing approximately three times the total energy use of the United States.

All forms of energy include inputs from hydrocarbons in the form of heavy equipment, machinery, electrical power and materials from petrochemicals.

It will always be the consumer who pays for higher energy prices -even if the government offers subsidies -through taxes, utility costs, vehicle prices or prices at the pump. Most consumers will continue to select the lowestcost options.

10 thoughts on “Consumers will opt for lowest cost: report

  1. Wow…Great Chart and analysis…I don’t think that the voters in Ontario are going to be too happy with the Ontario Liberals once they’ve seen what McGuinty has got us into with his Green Energy Act…..We can’t afford it !!!

  2. This analysis shows no carbon dioxide costs associated with wind or solar due to keeping electrical generation constant by using base load gas plants running in case of clouds or loss of or excessive wind conditions.

  3. Very interesting.
    Another interesting litmas paper survey would be to find out how many people are going to switch to wood heat instead of/or with electric baseboard/furnice/geothermal….
    The particals airborne will be fantastic in dense city environments.
    I am going to phone 2 wood fire installers tomorrow to see if they are mega busy………

    • Peter,

      If the “greenies” can get rid of coal fired plants on the basis of the amount of particle matter in the air this will be used next to get rid of all wood burning devices.

  4. That chart certainly explains why the Ontario government has never provided a cost/benefit analysis of wind and solar to the public.

  5. Do people realize that if natural gas is the preferred choice then the cost will go up. Then I will have to switch to burning coal to heat my house. What a vicious circle we weave. Maybe I burn used tires. Lots of Juelles of energy there.

    • wind hater,

      The world is awash in natural gas so the price will likely remain affordable.

  6. YAHOO NEWS, May 16,2011
    http://news.yahoo.com/s/ap/20110516/ap_on_hi_te/us_led_lighting

    “LED bulbs hit 100 watts as federal ban looms”

    100 watt light bulbs set to disappear from stores in January 2012. New LED bulbs to replace them set to go on sale next year after the government ban takes effect. The new LED bulbs will cost ~ $50 each.

    Does anyone believe the poor will be able to afford light bulbs when the old ones are taken off the market?

    Back to candles for the poor!

  7. i don’t see hydroelectricity generation on the renewables side of the chart? any thoughts on why it would be overlooked or not included?

  8. I wonder if the solar and wind estimates include the cost of building and operating back-up capacity from natural gas – for when the sun doesn’t shine and wind doesn’t blow (which is most of the time).

    Back-up capacity of up to 80% of the capacity of the wind and solar installation is needed (based on my understanding). If this wasn’t done in this report, then the solar and wind estimates are low (by a height roughly equal to 80% the height of the natural gas estimate!)

    Furthermore, the cost of building transmission lines to the widely distributed solar and wind installations is huge, in addition to costs associated with managing the grid with such unrealiable sources of power – smart meters alone cost $2 billion.

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