Energy
Reports of the Impending Death of Petroleum Have Been Greatly Exaggerated
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From EnergyNow.ca
By Jim Warren
There is a good chance climate activists smugly celebrating the collapse of conventional energy production within a generation are wildly mistaken. It is just as plausible that the time between today and ‘sunset’ for petroleum will run several decades beyond ‘net zero day’ in 2050. Actually, both predictions are suspect. History has shown people are rarely able to foresee conditions three or more decades into the future with any great precision.
Yet it seems sections of the investment community and the legacy news media assume our geopolitical future will be governed by the race to achieve net zero. They see the green transition as inevitable as death and taxes and presume oil will be sidelined accordingly.
A CBC news item that aired on March 16 boldly led with the prediction that the recently completed Trans Mountain pipeline is “likely the last new oil export pipeline the country will ever need.” The reporter was clearly caught up in a chicken and egg conundrum. He mused that due to declining production over the next decade we wouldn’t need any new pipelines. Here’s a thought, if increases in production do indeed taper off it will likely be because we can’t get enough pipelines built. Of course some CBC reporters and their fellow travellers in the climate alarmist camp never let logic get in the way of writing jubilant obituaries for the fossil fuel industries. One of the problems for conventional energy producers is that lots of people, including potential investors, have been drinking the same Kool-Aid as the media.
If the climate alarmists really have won the day, the window of opportunity is closing or has already closed on significant oil sands plant expansions, new pipelines to tidewater and any future boom in conventional oil production. After all, who wants to invest in infrastructure projects that will take a decade or more to be approved, could later be cancelled, or taxed into insolvency well before the end of their productive life spans?
No matter how long the window for viable investments remains open, one thing is clear—the Justin Trudeau government has already shortened it by a decade or more. During the eight year oil price depression that began in late 2014, new pipelines to tidewater were the one glimmer of hope for an improvement in the prices received by Canadian exporters. With more than 90,000 jobs lost in oil and gas production, manufacturing and construction by 2017, there were a lot of unemployed people in the producing provinces looking for a break. Northern Gateway, Energy East and Trans Mountain would of course allow Canadian producers to avoid the steep discounts they were subject to in the US for a significant proportion of their exports. The Trudeau Liberals cancelled any hope for that modestly brighter future.
Trans Mountain was the exception. It was the consolation prize to make up for the cancellations of Northern Gateway, Energy East and the Keystone XL. And yes, amazingly, the federal government finally got it built. It was touch and go. We were always just one bird nest away from another lengthy delay.
But wait, take heart. There is mounting evidence to suggest the hand wringing climate activists and cautious investors could have it all wrong. The goals of the green transition will probably take many more decades to achieve than they imagine.
In fact, recent events suggest the whole green transition project could actually be coming off the rails. Europe’s Green politicians are being clobbered at the polls while climate change skeptics from populist and conservative parties continue to attract voters and win elections. Green transition initiatives have been postponed and cancelled in several EU countries and the UK. The principal cause of the retreat is popular resistance to green transition initiatives that contribute to what is already an unacceptably high cost of living.
For instance, the Yellow Vests protests in France forced President Emmanuel Macron to forego a number of unpopular fuel tax measures including a carbon tax. But that wasn’t until after 11 people died and over 4,000 were injured as a result of the protests. The protests began in November 2018 and have continued sporadically to the present.
Protests by farmers in the Netherlands in 2019 beat back GHG reduction measures which would have restricted nitrogen fertilizer use and cut the national cow herd by one-half. Farmers refused to accept the assault on their incomes and plugged the country’s highways with their tractors. One of their demonstrations was reported to have caused 1000 km of traffic jams. In another protest they shut down Eindhoven airport for a day. Members of one of the more militant groups participating in the protests, the Farmers Defense Force, threatened civil war.
A new political party, the Farmer-Citizen Movement (Dutch: BBB), arose out of the Dutch farm protests. In March of 2023, the BBB won the popular vote in Netherlands’ provincial elections (they are all held on the same day) and the majority of seats in each of the country’s 12 provinces. The victory is all the more significant because the provincial governments choose who sits in the national Senate which has the power to block legislation. Protests by farmers over similar green transition projects have been occurring in France, Belgium and Germany.
The German government’s ambitious heat pump mandate had to be postponed and rethought. The ineptitude of environmentally-friendly bureaucrats who came up with the scheme was evident in the fact they still hadn’t figured out which type of heat pumps would work best under different conditions. For example, the heat pumps’ inability to operate effectively in cold weather was one of the details planners had overlooked. Additionally, they neglected to train enough technicians in heat pump installation to actually put them in people’s homes. Green politicians and their allies in government were blamed for the technical debacle and high costs for consumers. As a result, populists and likeminded conservative candidates have been defeating the Greens and Social Democrats in regional elections.
The October 2023 state elections in economically and politically powerful Hesse and Bavaria provided two of the more significant (and startling) losses in support of Germany’s three party governing coalition that includes the social democrats and the Greens. What the coalition parties lost, the right-wing populist Alternative for Germany (AfD) and conservatives won. (The Greens claim the AfD are “climate change denialists.”) The AfD is now the second largest party in terms of voter support in Hesse and the third largest in Bavaria. The online publication Energy Wire observed that the AfD platform featured concern for the flagging German economy, high energy prices, climate policy, the energy transition and immigration (in that order). More recently the Greens were the biggest losers in this May’s vote in the city state of Bremen. The Green’s 11.7% share of the vote was their poorest showing in 25 years.
Last year’s auction of UK government contracts for new offshore wind farms failed to receive a single bid. Under the auction scheme companies who purchased permits to build wind farms would receive a guaranteed premium price for the electricity they produced. The premium offered was too low to attract any interest. The Sunak government was simply not prepared to weather the consumer backlash that would accompany raising the guaranteed premium price high enough to attract bidders. Increasing the premium would require increasing electrical bills and/or taxes paid by British voters.
Melting glaciers are apparently not enough to convince some Europeans to open their wallets in support of achieving net zero. This applies even in the heart of the Alps in Switzerland. The 2020 Swiss referendum on a plan for achieving net zero GHG emissions by 2050 was soundly defeated. A significantly revised plan was later approved, but only after carbon taxes had been removed in favour of a carbon offset system and a number of other tax measures had been withdrawn. The Economist reported that one of the loudest lobby groups opposing the first referendum was the organization for Swiss resort and hotel owners. The carbon tax threatened to raise the cost of making artificial snow.
Europe’s Greens hoped to take a victory lap after recent increases in the number of solar power farms being built across Europe; especially in Germany. They have been woefully disappointed. Their promises about the thousands of new jobs that would be created by the transition to renewables proved empty and voters are not impressed. It turns out 95% of the solar systems installed in Europe are imported from Asia, mostly from China. With the exception of some local installation work, the lion’s share of the economic benefits and jobs go to Chinese firms.
No less embarrassing is the fact that one third of the essential components for Chinese solar systems are sourced from Xinjiang Province where manufacturers are known to be using forced labour. Members of the region’s Uyghur minority, who are being held prisoner in “reeducation camps,” provide the captive labour. Europe’s own solar panel producers are lobbying for relief in the form of trade restrictions on Chinese imports and/or EU subsidies. Solar system advocates in the west are between the proverbial rock and a hard place. To create the promised jobs will likely require stiff tariffs that will in turn increase the cost of solar energy and contribute to the public backlash over the already high cost of living.
Europe’s solar power dilemma echoes the French populist, Marine Le Pen’s, critique of global free trade: “Globalization is when slaves in China make things to sell to the unemployed in the west.” Le Pen came second in the last French presidential election. She has a shot at winning the next one which will be held three years from now. Le Pen is an EU skeptic who is unlikely to readily buy into its suite of exceedingly zealous GHG reduction targets and green transition policies; especially those relying heavily on foreign imports.
European auto makers have geared up their electric car production capabilities in anticipation of the EU ban on the manufacturing of new internal combustion passenger vehicles set for 2035. They are currently worried Chinese electric vehicle makers (EVs) are going to eat their lunch. The zippy little EVs made in China are far less expensive than European models. Chinese EV exports grew by 70% last year to just over $34 billion. As is the case with solar systems, the employment benefits associated with the transition to electric vehicles will be enjoyed in China not Europe. Apparently, European auto makers are frantically lobbying their governments to follow Joe Biden’s example and impose hefty tariffs on Chinese made EVs. If the car makers get their wish, jobs will be saved in Europe but the costs to European car buyers will be higher than they would be if they could buy Chinese autos. Europe’s EV problems involve the same sort of high costs versus jobs Catch 22 plaguing the EU’s solar system manufacturers. Whichever way things go, a lot of voters will be unhappy.
The growing list of failed and failing green transition initiatives is in part responsible for the surge in support for populist and conservative parties in Europe (Poland’s general election being a recent exception). And, most of Europe’s populist politicians are openly opposed to measures that increase taxes and the cost of living on behalf of combating climate change. The electoral success of the right-wing populist party, the Party for Freedom (Dutch: PVV) in the Netherlands’ November 2023 federal election is a case in point. The PVV is led by the infamous anti-immigration populist, Geert Wilders.
Wilders is not a climate change denier. He just doesn’t want to ruin the Dutch economy to combat it. Dutch environmentalists warn sea level rise caused by climate change warrants a significant reductions in GHG emissions; particularly in a country where 26% of the land is below sea level. Wilders’ solution is to just build the dikes higher.
The PVV won more seats than any other party in 2023 giving it the plurality but not a majority in the Dutch parliament. On May 16, four parties including the PVV and the Farmer-Citizen Movement (BBB) finally cobbled together a coalition government. Geert Wilders will become prime minister sometime this June. Obviously, neither the PVV or the BBB are fans of the EU’s climate change mitigation policies.
Closer to home, should Donald Trump win this November’s U.S. presidential election, progress toward net zero will virtually cease in the US for at least the next four years. And, in Canada, if current federal polling numbers hold up until Trudeau finally calls an election, we can expect the cancellation of a number of Liberal environmental initiatives; presumably, the No More Pipelines Bill and the carbon tax in particular.
The foregoing examples of recent setbacks, along with stories told by the tea leaves, indicate the road toward a green transition will be pitted with potholes and subject to roadblocks. Achieving net zero by 2050 is far from a slam dunk. Oil production is just as likely to prove far more robust than the environmental movement imagines.
Then again, if science figures out how to contain fusion reactions for extended periods of time in the next decade or so, all bets are off. Nobody knows for certain what the future holds when it comes to geopolitical conditions and energy production thirty to fifty years from today. The economist, John Maynard Keynes, claimed the only consolation for those foolishly trying accurately to predict events over the long run, was that “In the long run we are all dead.”
Energy
BC should revisit nuclear energy to address BC Hydro shortages
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From Resource Works
The short-term costs of nuclear SMRs are preferable to paying hundreds of millions to import foreign energy in the long-term.
British Columbia takes great pride in its tremendous hydroelectric resources, which result from the province’s many long, powerful rivers. For decades, BC has found it easy to rely on hydroelectricity as a clean, renewable source of power for homes, industry, and businesses.
However, the ongoing viability of hydropower in BC should be called into question due to worsening summer droughts and declining snowfalls, which have negatively impacted the annual supply of hydropower. BC has not seriously entertained the possibility of alternatives, even though other provinces have begun to embrace one particular source of energy that has been illegal here for over a decade: nuclear power.
By refusing to strike down the law passed in 2010 that prohibits the mining of uranium or the building of nuclear reactors, BC has made itself an outlier among its peers. Since last year, Ontario has announced plans to expand its existing nuclear capacity, which already provides the majority of the province’s electricity.
Alberta, Saskatchewan, and Nova Scotia have also begun to explore the possibility of expanding nuclear power to help power their growing provinces. BC has prohibited nuclear energy since passing the Clean Energy Act of 2010, which bans the building of reactors or mining uranium.
This prohibition is a barrier to diversifying BC’s energy supply, which has become more reliant on foreign energy. Due to energy shortages, BC Hydro had to import 15 to 20 percent of the energy required to meet the province’s needs.
Do not expect the situation to improve. Snowpacks are shrinking in the winter months, and summer droughts have become more frequent, which means BC’s dams will see a reduction in their power capacity. Power shortages may be on the horizon, leading to vastly more expensive purchases of foreign energy to meet BC’s growing electricity demand, driven by the construction of new homes and projects like LNG facilities on the coast.
Energy diversification is the solution, and nuclear power should be included, especially Small Modular Reactors (SMRs).
Low-carbon and reliable, SMRs can provide steady nuclear power in any season. They are flexible and much more cost-effective than traditional, large-scale nuclear reactors.
For a vast province like BC, filled with small communities separated by mountainous terrain, SMRs can be deployed with great ease to ensure energy stability in remote and Indigenous communities that still struggle with energy access. The Haida Nation, for example, is still reliant on diesel to supply its energy, which goes against the BC government’s clean energy goals and relies on fuel being shipped to the Haida Gwaii archipelago.
While SMRs are cheaper than massive nuclear reactors, they are still expensive and require strict safety regulations due to the ever-present risks associated with nuclear energy. However, is the cost of building nuclear facilities in the short term more expensive than importing energy for years to come?
In 2023, BC Hydro spent upwards of $300 million USD on imported energy, while the cost of the smallest SMR is $50 million, with the more expensive units costing up to $3 billion. Building SMRs now is the right decision from a cost-benefit perspective and in terms of BC’s clean energy goals because SMRs guarantee low-emitting energy, unlike imported energy.
The Clean Energy Act stands in the way of nuclear power’s emergence in BC. Amending it will be necessary for that to change.
BC is not going to need any less energy going forward.
It is high time to get over old fears and stereotypes of nuclear energy. Hydroelectricity need not be displaced as the cornerstone of BC’s energy supply, but it alone cannot face the challenges of the future.
Alberta
AI-driven data centre energy boom ‘open for business’ in Alberta
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From the Canadian Energy Centre
By Deborah Jaremko and Will Gibson“These facilities need 24/7, super-reliable power, and there’s only one power generation fuel that has any hope of keeping up with the demand surge: natural gas”
Data centres – the industrial-scale technology complexes powering the world’s growing boom in artificial intelligence – require reliable, continuous energy. And a lot of it.
“Artificial Intelligence is the next big thing in energy, dominating discussions at all levels in companies, banks, investment funds and governments,” says Simon Flowers, chief analyst with energy consultancy Wood Mackenzie.
The International Energy Agency (IEA) projects that the power required globally by data centres could double in the next 18 months. It’s not surprising given a search query using AI consumes up to 10 times the energy as a regular search engine.
The IEA estimates more than 8,000 data centres now operate around the world, with about one-third located in the United States. About 300 centres operate in Canada.
It’s a growing opportunity in Alberta, where unlike anywhere else in the country, data centre operators can move more swiftly by “bringing their own power.”
In Alberta’s deregulated electricity market, large energy consumers like data centres can build the power supply they need by entering project agreements directly with electricity producers instead of relying solely on the power of the existing grid.
Between 2018 and 2023, data centres in Alberta generated approximately $1.3 billion in revenue, growing on average by about eight percent per year, lawyers with Calgary-based McMillan LLP wrote in July.
“Alberta has a long history of building complex, multi-billion-dollar infrastructure projects with success and AI data centres could be the next area of focus for this core competency,” McMillan’s Business Law Bulletin reported.
In recent years, companies such as Amazon and RBC have negotiated power purchase agreements for renewable energy to power local operations and data centres, while supporting the construction of some of the country’s largest renewable energy projects, McMillan noted.
While the majority of established data centres generally have clustered near telecommunications infrastructure, the next wave of projects is increasingly seeking sites with electricity infrastructure and availability of reliable power to keep their servers running.
The intermittent nature of wind and solar is challenging for growth in these projects, Rusty Braziel, executive chairman of Houston, Texas-based consultancy RBN Energy wrote in July
“These facilities need 24/7, super-reliable power, and there’s only one power generation fuel that has any hope of keeping up with the demand surge: natural gas,” Braziel said.
TC Energy chief operating officer Stan Chapman sees an opportunity for his company’s natural gas delivery in Canada and the United States.
“In Canada, there’s around 300 data centre operations today. We could see that load increasing by one to two gigawatts before the end of the decade,” Chapman said in a conference call with analysts on August 1.
“Never have I seen such strong prospects for North American natural gas demand growth,” CEO François Poirier added.
Alberta is Canada’s largest natural gas producer, and natural gas is the base of the province’s power grid, supplying about 60 percent of energy needs, followed by wind and solar at 27 percent.
“Given the heavy power requirements for AI data centres, developers will likely need to bring their own power to the table and some creative solutions will need to be considered in securing sufficient and reliable energy to fuel these projects,” McMillan’s law bulletin reported.
The Alberta Electric System Operator (AESO), which operates the province’s power grid, is working with at least six proposed data centre proposals, according to the latest public data.
“The companies that build and operate these centres have a long list of requirements, including reliable and affordable power, access to skilled labour and internet connectivity,” said Ryan Scholefield, the AESO’s manager of load forecasting and market analytics.
“The AESO is open for business and will work with any project that expresses an interest in coming to Alberta.”
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