Thoughts on the Engineering Industry

A blog covering engineering, technology and business topics

Archive for the category “Renewable Energy”

Tax incentives for promoting renewable energy production

Hello everyone, I hope your week is going well.  Today I would like to look at a topic that is less technical and a more political – how to implement tax incentives that promote sustainable energy production.  I believe that this is a topic that gets over-politicized and some information needs to be shared in an objective way.

Currently, there are a lot of subsidies provided to oil companies.  According to Oil Change International, the subsidies range from $10 to $52 million annually in the US.  Internationally, the subsidies are somewhere between $775 billion and $1 trillion.  As of July 2014, Oil Change International estimates this years subsidies to be about $35 billion.  $2.4 billion of those subsidies go to the big 5 oil companies in the form of federal tax deductions: BP, Exxon, Chevron, Shell, and ConocoPhillips.  Subsidies also go to “independent” oil companies which, which are larger operations than the name implies.  These companies produce about 50% of the oil.  The rest of the subsidies are earned through loans or aid certain types of operations such gas exploration and production at an estimate value of $18.5 billion on the federal level and $21.6 billion on the state level.  After that, there are consumption subsidies which amount to $11 billion.  Along with the subsidies, infrastructure loans are provided to the companies which amount to about $4.7 billion.  It shouldn’t be noted that the article goes on to recommend that these subsidies be reduced and also outlines roadway maintenance and health concerns.  That being said, I am trying to keep the references focused on the raw data in this section.

In comparison, the subsidies for renewable energy are lower.  A report by Nancy Pfund and Ben Healey shows that the renewable energy has a lower initial investment and projected investment over a 30 year span overall.  The historical average of annual subsidies of renewable energy is $370 million as compared to $4.86 billion for oil and gas, $3.5 billion of nuclear and $1.08 billion for biofuel.  Interestingly enough, nuclear had far greater initial investment than the other forms of energy; however, safety concerns caused there to be a large reduction those investments.

My current opinion is that we need to strip away a lot of the “blank check” type subsidies.  While there are probably subsidies for every industry that could fit in this category, the worst offender in this regard is the oil and gas industry.  I also think that some practicality is warranted too.  In my opinion, oil and gas will still always be the best option for hauling goods across the country for the next couple of decades.  Renewables can’t provide the efficiency needed and other tech such as nuclear is not scaleable enough for that yet.  For electric power production, I believe renewables can’t completely fill that gap either and stable energy production is needed for peak hours.  With all that being said, a balanced merit system needs to be applied to energy subsidies to produce the most sustainable energy infrastructure possible.

What is your opinion on how to best subsidize energy industry?  What is your opinion on the current state of subsidies?  If you enjoyed reading this post, like this post and share it.  Thanks for reading have a good day.

Sources

“Fossil Fuel Subsidies”, Oil Change International, 2014, http://goo.gl/BYdMg

Nancy Pfund and Ben Healey, “What Would Jefferson Do?: The Historical Role of Federal Subsidies in Shaping America’s Energy Future”, September 2011, http://goo.gl/XuioTH

Image Source

Roger H. Bezdek and Robert M. Wendling, “Energy Subsidy Myths and Realities”, June 2012, http://goo.gl/A8Ws96

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Growth of the “Forgotten” Renewable Energy

Hello, I hope everyone is doing well.  Today, I would like to discuss a recent growth in geothermal energy.  Geothermal energy uses the power of water heated to steam temperatures to spin turbines that produce electricity.  Geothermal energy is sometimes described as the “forgotten” renewable because it is by far the least popular and well known renewable energy compared to wind and solar.  Furthermore, geothermal energy only produces 1% percent of electrical power worldwide according to the World Energy Outlook.  However, geothermal energy is growing as drilling for oil  and natural gas increases.  The Geothermal Energy Association reports that geothermal resources grew by about 4% to 5% recently.

Interest in the geothermal industry is growing internationally as well as domestically and international development banks are helping to finance these projects.  According to Maria Richards at SMU, “If you’re  wildcatting for geothermal, Africa is really of those parts of the world where we seem to be going…”  Large projects are also planned for Indonesia and some Central/South American countries as well as East Africa.  In addition, the Ring of Fire is a current hot spot for new production because it has high temperatures relatively close to the earth’s surfaces.

There are several benefits to the use of geothermal energy.  Compared to other electric power production methods, geothermal energy can heat and cool homes at lower temperatures.  This source can also be used to produce energy consistently 24 hours day, unlike the other renewables which are intermittent in nature.  This could also be a good alternative source of energy for countries, like Kenya and El Salvador, that rely heavily on hydroelectric energy.

However, there are disadvantages to geothermal energy as well.  Research has found that 50% to 60% of a typical geothermal drilling project is up front with a 10% to 30% chance that the drilling will be unsuccessful.  Richards sums it up best with this observation: “You can put out a meter and measure easily how much wind and solar is at a site.  You can get real data.”  But it is “much harder to understand” how much geothermal hot water is available in a certain area.

The recent developments of oil and gas have allowed for increased research in this field though.  The drilling has allowed researchers to improve data on temperature, water availability and seismic data.  Furthermore, the researchers at SMU hope to incorporate previously drilled oil and gas wells, like the Huabei oil field near Beijing, to produce small scale geothermal power.  Countries that are trying to reduce their reliance on traditional fuels are the ones pursuing this research most actively.  China is trying to increase their geothermal production to reduce their smog and ease reliance on traditional fuels for their growing population.  Munich, Germany is hoping to obtain all its heating from renewables by 2025 and plans on most of it being geothermal. It is also predicted that many more places around the Ring of Fire will develop geothermal energy faster than other locations as research continues.

I am interested to see how this industry grows with the development of this research.  It is my opinion that this energy has the potential to fill the gap that other renewables have in regards to consistent energy production.  Furthermore, the knowledge gained from oil and gas drilling, as well as the previously drilled wells, could greatly reduce the up front costs.  What is your opinion on this renewable resource? What are your predictions for the future of this industry?  Be sure to follow me and share this article if you enjoyed it.  Thanks for your time and have a good week!

Reference:

Galbraith, Kate, “Geothermal Industry Grows, With Help From Oil and Gas Drilling”, New York Times Online, July 23, 2014, http://goo.gl/ixL318 

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