WILDFIRES: THE WORST IS YET TO COME

September 21, 2020 § 2 Comments

California is ablaze. So are Oregon and Washington. The tally to date is 5 million acres burned, about halfway through the fire season, and well on its way to record territory. Putting that in perspective, the east coast of Australia, devastated similarly earlier this year in the Southern Hemisphere summer, closed the season with 46 million acres burned.

The statistic of greatest concern is that the intensity and scale of the fires is getting worse. Over the last thirty years, the number of fires annually has no discernible trend; certainly, has not gone up. But the acreage burned has; decisively. Both patterns are evident in the figure below. Five of the ten largest fires ever in California are currently active. The largest of these, the August Complex is already at 839,000 acres and still going. The next largest, ever, was 459,000 acres, the Mendocino Complex in 2018. Labeling any of this chance, or poor forestry management, evokes imagery of the proverbial ostrich, and the placement of its head.

This image has an empty alt attribute; its file name is wildfire-number-and-size-1988-2018.png
Courtesy US EPA 2019 (Wildland Fire Research Framework 2019-2022)

The average hectares (a hectare is roughly 2.47 acres) burned has nearly doubled over this three-decade period. Nine of the ten largest fires have occurred since the year 2000. Note that this does not include the ongoing five, which certainly would be in that group, making it 14 of the 15 since 2000. Although a regression line would have uncertainty due to big annual swings, an eyeball estimate indicates a strong upward slope. If this is a predictor of the future, that future is indeed bleak and warrants a study of causes.

The recent EPA report, from which the figure was reproduced, ascribes the pattern of increased fire acreage to higher temperatures, drought, early snow melts and historically high fuel loading (which is the fire prone vegetation, including underbrush). We will examine these separately, although they may not be disconnected. But first, a comment on the pattern of numbers of fires being essentially flat. Ignition events determine numbers of fires. In California, the principal ones are arson, campfires, power lines and equipment. The equipment category comprises items such as power saws, mowers, and other operated machinery. Human behavior, absent intervention, can be expected to be constant. So, the flat profile on numbers of fires is to be expected. Interestingly, the incidences are seasonal, even, counter-intuitively, arson.

Climate change is implicated in many of the causes of increasing severity over the years. While the term has many interpretations, one generally accepted aspect is temperature rise in the atmosphere and in the oceans. The debate is not whether this happens, but how fast it does. Also generally accepted (to the extent any climate change causality is generally accepted) is that oceanic temperature rise causes increased severity in the El Niño phenomenon in the Pacific Ocean, which is responsible for catastrophic droughts. These are accompanied by drenching rains in other parts of the world in the same year. Both disturbances are extreme deviations from the norm, with resultant impact on vegetation and the way of life.

Atmospheric temperature rise can also be expected to change the proportion of rain and snow in precipitation. Lighter snowfall can be a result, as also early snow melts. Both are in the EPA list noted above.

California, being generally arid, gets most of its water supply from melting snow. While less snow in a given year is certainly a drought indicator, the phenomenon most studied is that of the timing of the snow melt. Data from four decades commencing in 1973 conclusively demonstrated that burn acreage was strongly correlated with the earliness of the snow melt (Westerling 2016). Decadal comparisons show that the fire seasons in 2003-2012 averaged 40 more days that the seasons in 1973-1982. Fires in the later decade were more severe. Large fires, defined as covering greater than 400 hectares, burned for 6 days on average in the early decade and for more than 50 days in 2003-2012.

Power lines deserve special mention.  Falling power lines were blamed for several fires in 2017 and 2018. The utility has accepted blame and is in bankruptcy. Trees falling on power lines snapped the poles. The tree roots, finding uncertain purchase due to drought conditions, were no match for the Santa Ana winds or any other storm sourced shoves. Those same drought conditions caused the underbrush to be dry. Power lines are usually not insulated.  Sparking wires on dry underbrush and the rest is incendiary history. A poster child for distributed power.

The wildfire future is indeed bleak. Climate change retardation is necessary. But it may not be sufficient in the shorter term. We need a reincarnation of Smoky to change human behavior to minimize the ignition events.

Westerling, A. L. (2016) ‘Increasing western US forest wildfire activity: sensitivity to changes in the timing of spring’, Philosophical Transactions of the Royal Society B: Biological Sciences, 371: 20150178. http://dx.doi.org/10.1098/rstb.2015.0178

Vikram Rao September 21, 2020

AUTO INDUSTRY TAKES LEAD IN CLIMATE ACTION

August 27, 2020 § 2 Comments

A recent story in the NY Times describes four auto makers making climate action policy. OK, so that is a bit of a stretch, but not by my much. BMW, Ford, Honda, and Volkswagen cemented a binding agreement with California to limit tailpipe emissions. Volvo has also agreed to join the other four. This deal was struck despite a Trump administration’s roll back of the Obama era regulation, which had called for fleet averages of 54 miles per gallon (mpg) by 2025. The current target is 38 mpg, and the roll back regulation calls for a mere 2 mpg increase by 2025. The new California deal is for 51 mpg by 2026. The auto makers could have settled for the low target and beaten it handily. But, instead, they chose to take the high road.

This is not the behavior one ordinarily expects from industry. But these are nor ordinary times. Recently, BP announced its intention to reduce oil production by 40% by 2030, planning to produce 50GW renewable electricity by the same date. Not much detail was given and yet the share price rose in response. Green energy resonates with investors, it seems.

Much the same happened when the Trump administration rolled back yet another Obama era environmental protection scheme, regulations ensuring the curbing of fugitive methane emissions. The roll back was opposed by Shell, ExxonMobil, and BP. Methane leakage occurs at various stages of the natural gas production and distribution system. A multi-year study led by Prof. Allen at the University of Texas, Austin, sponsored in part by EDF, has identified the sources of leakage and industry has taken steps to ameliorate. This has been aided by the fact that most of the actions are cost neutral. Natural gas that leaks is natural gas that cannot be sold, so the motivation is not just environmental. Much progress has already been made, especially by the larger oil companies. A reversal of the regulation has no benefit to them. In fact, their opposition to the roll back is in part because they want to represent natural gas as a clean fuel and allowing leakage undercuts that message.

 In inking a deal with California, those five auto companies did more than merely push back. They inserted themselves into a federal versus states’ rights dispute. And this was an “in your face” move in response to the roll back, which was intended to “produce far less expensive cars for the consumer, while at the same time making the cars substantially SAFER.” The administration’s move appears to have been designed to be a win for both the consumer and the producer. The only loser was the environment. However, the auto companies must believe that the net cost of ownership will be lower with the new targets. The modest capital cost increase would be offset by the lower cost of operating a fuel-efficient vehicle. Direct fuel injection, combined with temperature measurement and multiple injection capability, can dramatically increase the compression ratio. Increased mileage combined with more muscle; a winning combination that will sell.

I suspect, however, that the bet they are placing is not only on the type of improvement I note above. This is a vote of confidence in electric vehicles, as was BP’s in the move away from oil production to generating renewable electricity. If a substantial portion of the new fleet comprises electrical vehicles, it takes some of the pressure off on improving the current fleet. An electric family sedan can be expected to have an effective “miles per gallon” between 110 and 120. But 2026 is not that far away, and possibly too soon for a major shift to all-electric vehicles. Then again, maybe not. I found the shift of the target date from 2025 to 2026 interesting, indicating a level of granularity that presages a firm plan. Hybrid vehicles already deliver the 51 mpg target. Direct injection combined with elements such as turbocharging are proven mileage enhancers.

One of the drivers for industrial responses to the Trump administration’s roll backs on Obama era environmentally themed rules has been a desire for stability in regulation. Change potentially every four years is disruptive. Logic dictates that this desire will apply primarily to those affecting capital investment with long cycles. Certainly, automobile design changes and oil exploitation of the Alaskan National Wildlife Refuge fit that bill. Methane emissions somewhat less so, but still involving changes in equipment and procedures. Warning labels on machinery probably lie on the other end of the spectrum.

California represents a solid 30% of the automotive sales market. Thirteen other states are committed to California regulations and add to that percentage. Unless President Trump succeeds in taking away states’ rights in this regard, that pretty much means the entire country will be using these vehicles, no matter the regulations in the individual states. This has happened before. Devices such as television sets consume power while on standby. A scant 15 years ago, that could have been as much as 20 watts. Based on research conducted at the Lawrence Berkeley National Laboratories, it was concluded that the full functionality could be achieved for as little as 1 watt, at virtually no extra cost; you just had to design it more smartly. California mandated that in 2006 (I think it was 3 watts at the start) and the rest of the country followed. At that time, a full 10% of all national electricity consumption was this sort of wasteful passive use. Since then, we have taken other actions to reduce passive consumption.

It began with the 1 watt rule, unilaterally laid down by California. Perhaps that bell will get rung again in tailpipe emissions.

Vikram Rao

August 28, 2020

THE ARCTIC IS COLD, RENEWABLE HYDROGEN IS HOT

August 20, 2020 § 4 Comments

Oil drilling leases will soon be available in the Arctic, according to a story in the New York Times. The Alaska National Wildlife Refuge (ANWR), a land-based portion of the Arctic, is cited. But the Arctic is cold, both figuratively and literally. When he took office in 2017, President Trump announced a roll back of a “permanent” ban on Arctic drilling that President Obama instituted as he was leaving the White House. I opined then that the roll back would have no net effect because interest from oil companies would be minimal. I also wrote at the time that President Obama’s action was also largely symbolic, and not material.

The principal reason for these conclusions is that the price of oil has been low since 2015, when US shale oil became the determinant of oil price in the world and the ability of the Organization of Petroleum Exporting Countries (OPEC) to prop up prices was deeply undercut. USD 120 per barrel highs became USD 70 highs. The Covid-19 pandemic has decimated shale oil company ranks, but it has also caused demand, and price, to plummet to historic levels. Accordingly, the crystal ball of future oil prices is murky. Murky crystal balls equate to uncertainty, which, added to the environmental risks, further equates to higher discount rates. Making matters worse on the investment side, any Alaska play has a long-term payout. First oil is likely a decade after the lease purchase. This involves forecasting the price of oil into the second half of the century.

All the indications are that oil demand will reduce significantly by 2040, largely through electric vehicle adoption. Certainly, the super-major oil company BP’s beliefs in this regard have translated into plans for a major replacement of oil revenue with revenue from renewable electricity. They recently announced that by 2030, their oil production will be reduced by 40%, concurrent with major investment in renewables, resulting in 50 GW electricity production. That production is up there with good size electric utilities. This decision also comes at a time when the dividend has been halved and properties divested to raise cash. It also is coincident with the divestiture of their pioneering Alaska North Slope holdings to privately held Hilcorp, during which transaction they sweetened the pot with a loan to ensure closure of the deal. This does not sound like a company that will invest in a US Arctic lease. I do not see any oil company headquartered in Europe doing it either.

Hydrogen is an important industrial commodity even not counting the possible use as electric vehicle fuel. US refineries purchase 2 billion cubic feet per day of hydrogen (in addition to using another 0.5 billion cubic feet produced internally). Virtually all of it is produced from natural gas. As we discussed in these pages earlier, hydrogen produced using surplus electricity during low demand periods is one of the most promising solutions for the problem of  intermittency of renewable electricity. Oil companies like BP, doubling down on renewables, are unlikely to miss this point. Also, if conversion to ammonia is more appropriate for storage and transport, who better positioned than an integrated major oil company? In its announcement, BP makes a vague reference to hydrogen. No mention is made of geothermal electricity, but it is highly unlikely they are not watching that space.

Returning to the issue of success of a lease sale in the ANWR, one of the primary challenges is the paucity of high-quality seismic data. These are subsurface images acquired by individual oil companies in proprietary shoots or by seismic operators speculatively shooting to then sell subscriptions to the data in “libraries”. The acquisition and interpretation of the data is the edge employed by oil companies in obtaining the winning bids without overpaying. Less data means more uncertainty. My take on the situation is that there will be fewer bids due to competing capital spend directions, the uncertainty in the price of oil, the environmental risks, and the delays likely due to litigation (case in point the litigation based delays in the Keystone XL oil pipeline construction). But whatever bids that materialize are likely to be low-balled. In that case, the revenue from the sale will be underwhelming. This assumes, of course, that the administration goes ahead with plans to auction the tracts. More than likely this is just another tempest in the Alaskan teapot.

Vikram Rao

August 20, 2020

FIXING CARBON DIOXIDE

August 9, 2020 § 4 Comments

This discussion is about fixing, as in solving, but it is also, and mostly, about fixing as in rendering immobile. The impact of the greenhouse gas CO2 can be mitigated either by producing less or by capture and storage. A recent paper in the journal Nature triggered this piece. It discusses the feasibility of fixing CO2 in the form of a stable carbonate or bicarbonate by reacting atmospheric CO2 with minerals in the volcanic rock basalt, one of the most ubiquitous rocks on earth. Crushed basalt is to be distributed on farmland. The bicarbonate fraction is water soluble and run offs take it to the ocean, where the alkalinity mitigates ocean acidification. The reaction products are also a desirable soil amendment. This paper is mostly not about the technology. It studies scalability and the associated economics. The authors estimate the process can be accomplished at a cost ranging from USD 80 to 180 per tonne of CO2. Putting that in perspective, the current US regulation has a 45Q Federal Tax Credit of USD 50 per tonne sequestered in this fashion. This lasts for another 12 years. While no business ought to be built on the promise of subsidies, the length of time allows cost reduction to occur. At USD 80, the lower end of the range noted by the authors, the cost is in an acceptable range.

The use of basalt to fix CO2 is a part of the genre referred to as mineralization of CO2. Divalent species, but principally Ca and Mg, are present in rocks. In low pH conditions they react with CO2 to produce a carbonate (or bicarbonate). Olivine, another common mineral, often found in association with basalt, is a mixture of MgO.SiO2 and FeO.SiO2. The reaction product is MgCO3 and SiO2. For CO2 sequestration purposes this may be accomplished in situ or ex situ. The term sequestration most properly includes both capture and storage, but is often used just for the second step, and that is how we will use the term here.

A promising approach for in situ storage of CO2 is injection into oceanic basalt deposits. Basalt is formed when the magma from volcanic eruption cools rapidly. When it cools slowly, it produces species such as granite, with large crystals and high hardness, a rock more suitable for structural applications. Basalt on the other hand is fine grained and weathers easily. This is good for reactivity. In oceanic deposits it is even more so the case when the rapid cooling in water results in “pillows”, which partially disintegrate to be permeable. They are often overlaid with later placements of magma sheets. These impermeable layers act as barriers to injected CO2 escaping, affording time for mineralization. The mineralization is further accelerated if the injected CO2 is in the supercritical state (achieved at greater than 31 oC and 1070 psi). All fluids in this state have properties of both gas and liquid. Here the supercritical CO2 permeates the rock as if it were a gas and reacts with the mineral as if it were a liquid.

Ex situ fixing of CO2 follows the same chemistry as in situ, at least in the aspect that the product is a carbonate. The raw material can be tailored to the need if cost permits. The CO2 capture cost is the same in either case. However, an ex situ process has many advantages over in situ ones. The process kinetics can be advanced using higher rates of reaction using standard process engineering methods such as fluidized beds. Catalysis could also be employed. The products could also be expected to have value, such as in substitution of concrete ingredients. But, as in the case of fly ash from coal combustion, also a simple additive to concrete, the realization of that value can be elusive. Niche uses can be found, but monetization on the massive scales required to make a dent in climate change will require concerted effort.

The cost of production will still dominate the economics and the largest component of that is the acquisition of CO2 from the industrial combustion process or air. Air capture is a relatively recent endeavor and targets production cost of USD 100 per tonne CO2, at which point it becomes extremely interesting. The principal allure of this method is that it can be practiced anywhere. If located near a “sink”, the utilization spot, transport costs and logistics are eliminated. This underlines a key aspect of ex situ sequestration, the availability and cost of CO2 in the form needed.

The original premise for this discussion, mineralization of CO2 from the air, skips the CO2 acquisition constraint. But the focus shifts to the procurement of massive quantities of rock and crushing into small particles. Two pieces of good news. One is that basalt is possibly the most abundant mineral on earth, although a lot of it is at ocean bottoms. The other is that basalt crushes relatively easily, especially if weathered (contrasted to its country cousin granite). But the elephant in that room is that procurement still involves open pit mining, anathema to environmental groups. In recognition of this, the authors of the cited Nature paper encourage a study of availability of tailings from mining operations as basalt substitutes for oxides of divalent ions. They opine there are vast hoards of such tailings from mining operations over the years. They also suggest the use of Ca rich slags from iron making. These are oxides of Ca and Si in the main, with some oxides of Al. Lest this idea be extrapolated to slags from other smelting operations, a caution: the slags from some processes could have heavy metals and other undesirables such as sulfur. On the plus side of that ledger, the processing of certain nickel ores entails a beneficiation step that results in a fine-grained discard rich in Mg silicates, which ought to be very reactive with atmospheric CO2.

While the use of industrial waste for sequestering CO2 is technically accurate, acquisition and use of alkaline earth rich oxides will have hurdles of location, ownership, and acceptability to farmers, to name just a few. I am also reminded of the fact that when “waste” products with no or negative value create value for someone else, the price will often be revised, upwards. But the method in the cited paper certainly is a useful addition to the arsenal of measures to mitigate global warming, provided field operations verify the predictions on rates of reaction. This battle will only be won with many different arrows in the quiver.

Vikram Rao

August 9, 2020

RENEWABLE ENERGY: THE HYDROGEN SOLUTION

August 2, 2020 § 10 Comments

The two principal sources of renewable energy share a serious shortcoming. As has been discussed in these pages over the years, wind and solar do not generate electricity when the wind does not blow, and the sun does not shine. Germany gets 40% of its power from renewable sources. But on certain days, that percentage jumped up to 75% and on other days it plummeted to 15%. The (literally) rainy days had electricity augmented from a variety of sources, including batteries. But the days of surplus sometimes required idling of the generation.

 Great advances have been made in lowering the cost per unit in both wind and solar. But the need to level the load has never been more important because those very advances have increased the footprint. Some have rushed to use natural gas generators to fill the intermittency gap. This has caused consternation, with some positing the notion that renewables perpetuate fossil fuels because of this dependency. This concern ignores the fact that storage is being investigated at many levels.

Electrochemical storage is the only reasonable option for devices that are carried or move. In many cases, the options are even more limited to light weight batteries. But stationary applications have other options. One that has been in use, where feasible, is pumped water storage. Excess electricity is used to pump water to a high storage site, such as at a dam. When needed, it flows back down to generate electricity. Danish windmills utilize Norwegian hydroelectric sites for this purpose.

The flavor of the day is hydrogen. Excess electricity is used to electrolyze water, producing hydrogen and benign oxygen. The hydrogen may be stored on location to be used to power turbines to produce electricity when needed. In this it serves a similar purpose as does natural gas for the back up generators. As in the case of natural gas, the relatively low duty cycle stretches the pay back period of the capital equipment. Efforts are under way to reduce capital and operating costs. In the former area, expensive platinum electrodes are being replaced with base metal with novel coatings. Operating efficiency improvements are also being targeted. By its very nature, the method is conducive to small scale distribution. Electrolysis to produce hydrogen may be here to stay.

Produced hydrogen could find applications other than for generating electricity.  An interesting variant has been piloted for over a year in Cappelle-la-Grande, a town in northern France, by the energy firm Engie, where the hydrogen is blended into existing natural gas pipelines. Hydrogen is a very small molecule and initially there were concerns regarding leakage. But a 25% blend was found to be retained and did not materially corrode the pipes. Furthermore, household burners were found to operate efficiently with that mix. In fact, the mix produced a cleaner burn. Most European countries permit the blend. Some are considering repurposing natural gas lines to exclusively distribute hydrogen.

 Hydrogen is an important reagent used in all refineries.  Hydrogenation of edible oils is another application. But the workhorse application for this source may well be the admixture into natural gas lines for domestic and industrial use. Because of the low volumetric energy density of hydrogen, storage of hydrogen in the form of ammonia is also being considered. The liquid is easily stored and transported under conditions similar to those for propane. The conversion to ammonia, using nitrogen from air, is straightforward. Utilization can be directly as a fuel in an internal combustion engine, or by catalytic dissociation back to hydrogen for use in that form in a fuel cell for an electric vehicle or any other purpose. Research is under way for improvements in this space, including ammonia production at lower temperatures.

Pipeline transport of hydrogen is feasible but expensive, especially for small volumes. Ammonia, on the other hand, can be transported in pipelines at a cost of about USD 0.20 per kg hydrogen per 1000 miles. This is less than 5% of the expected cost to produce renewable hydrogen at solar and wind installations. The US currently has nearly 3000 miles of ammonia pipelines. Ammonia is a leading candidate for renewable hydrogen storage and distribution.

The main takeaway from this discussion is that renewable energy requires storage, and that storage in fluid form is likely to lead the way. An alternative to using the stored fluid to generate electricity is to use it for a different purpose. This solution for monetizing electricity from periods of excess supply would require the supply troughs to be augmented from another grid source. Hydrogen and ammonia will be important players in the renewable energy world. Alas, silver bullets went out with the Lone Ranger.

Vikram Rao

August 2, 2020

DISRUPTIVE IDEAS

June 22, 2020 § 3 Comments

In a New York Times story, Taylor Branch, a historian of the civil rights era is quoted as saying: “A movement is different from a demonstration. It’s not automatic – it’s the opposite of automatic that a demonstration in the street is going to lead to a movement that engages enough people, and has a clear enough goal that it has a chance to become institutionalized, like the Voting Rights Act”.

He was discussing a social movement that challenged the orthodoxy. Demonstrations, even ones with a coherent and unified message were unlikely to persuade a majority. But, once the message took hold, it would be the new orthodoxy.

This has striking similarities with the concept of disruptive technology, a term coined by Clayton Christensen exactly a quarter century ago. Considerable detail is to be found in his very readable book Innovator’s Dilemma, but all you really need to know is in the (free!) 1995 Harvard Review paper by Bower and Christensen. A disruptive technology is one that initially is rejected by industry as not a good fit or too unreliable and costly. After success in niche applications, the appeal broadens. Eventually, it becomes the norm and usually completely displaces what preceded it. It is now the new orthodoxy in that technical space. Hence the term “disruptive”.

I lived through the development of one such technology in the oil and gas space. My company, Sperry Sun, had been a leader in developing the technology of horizontal drilling and the enabling technology of measurement while drilling. Early horizontal wells cost 2.7 times conventional wells of the same length. But they multiplied production in the Austin Chalk, by intersecting oil-bearing vertical fractures. That business segment put up with the teething pains for the value created. A U S Department of Energy survey showed that in a few years horizontal wells cost just 17% more and delivered 2 to 7 times the production. Eventually, it was the key enabler for the development of heavy oil in Canada and for the shale oil and gas boom in the US. A Shell Oil Company executive once confided in me that in the early going one needed permission to plan a horizontal well, but by the late 1990’s, one needed permission not to use horizontal wells. That pretty much defines a disruptive technology: looked at askance at first, becoming the norm afterwards.

Being a techy, I may be ill qualified to opine on matters that follow. But I propose to do so just the same! Caveat emptor! Ideas that upset and transform societal norms appear to be have underpinnings similar to those of disruptive technologies. Ideas initially appeal to just a minority of the populace. The appeal may be broader, but the only a minority may be undaunted by the enormity of the task of getting wide acceptance. In the civil rights era, it took decades for that to happen. Today, communication technology and especially the social media variant have changed the game. This may in part explain the rapid breadth of the movement for reform in policing. Or could be that the incendiary pile had grown with a succession of events and just needed the spark.

The descriptor Defund the Police is unfortunately worded if broad acceptance is the objective. A better one would possibly be Reform Policing. My take on what it means, or at least what I think it ought to mean, is for policing to emulate medicine in addressing both the symptom and the cause. Eliminating police departments is as absurd as outlawing doctors. But more emphasis ought to be placed on addressing the underlying causes for crime. This certainly already happens to different degrees in many jurisdictions but is clearly not the norm. Funding that ordinarily would simply go to enforcement, ought to be diverted in part to ameliorating the causes of crime.

The other layer, that of codifying behavior by individual police-persons to be more humane, while still protecting their own selves, is certainly needed as well. Leadership is coming from many quarters, including police officers. Houston’s police chief Art Acevedo was recently quoted as saying, “It’s not about dominating, it’s about winning hearts and minds.”, in a clear reference to one of President Trump’s comments on the subject.

Disruptive technology is one of the best-known terms in the lexicon of innovation. Here, disruption does not carry the plain English pejorative connotation. So also, should it not in the term Disruptive Ideas.

Vikram Rao

June 22, 2020

FOSSIL FUEL SAVES THE ENVIRONMENT

June 9, 2020 § Leave a comment

When was the last time you saw a headline such as this? Probably never. While indulging in a modicum of hyperbole, as you will see, the headline is not too much of a reach. The environment here is that experienced in household air pollution (HAP) and is the direct cause of an estimated 3.6 million deaths annually. Substantial radiative forcing is also expected from the elemental carbon emissions, with the HAP source estimated to provide 20% of the loading worldwide, and a much higher proportion in Asia. Radiative forcing has a direct impact on climate change.

3 billion persons use biomass as a cooking fuel, almost all in low- and middle-income countries (LMIC’s). The biomass is largely the wood of convenience but can also be animal waste (dung). In countries such as the Sub-Saharan Burkina Faso, 95% use biomass for cooking. Improving cookstoves has been a pursuit for decades. While improving efficiency of the stove does reduce the emissions per cooking episode, the overall reduction is not sufficient for a significantly favorable mortality outcome. For a clue regarding the reason for this, consider that the PM2.5 count can be as high as 600 μg/m3, as compared to the WHO guideline of 35 μg/m3, and the US standard of 12 μg/m3. Some of the “improved” stoves reduce the emissions by 60%. That does not cut it. To make matters worse, the emissions/impact curve is supralinear, meaning the impact curve flattens at high exposures, despite being linear at the very low numbers. This means that the gains are relatively small for exposure reductions from high to moderate numbers.

This relatively recent realization (a 2014 publication) has led to interventions involving complete substitution of the biomass fuel. The leading candidates are alcohols, liquefied petroleum gas (LPG) and electricity. Electricity is not a good idea. Target villages lack electricity for the basic necessities of lighting, fans and cell phone charging, with the occasional refrigerator. Diverting what little is available to cook stoves, when other alternatives exist, is a bad idea. Ethanol is too expensive and in many countries the production would compete with a food use. LPG has become the favored substitute in many countries.

LPG is a mixture of propane, butane, and some larger molecules. It is derived from oil and gas production. It is delivered in pressurized cylinders, typically holding 14.2 kg fuel. The particulate emissions from an LPG stove have been observed to be close to the WHO guideline of 35 μg/m3, compared to up to 600 μg/m3 with traditional fuel and stoves. Many countries have doubled down on this fuel substitution. India has programs for distribution of stoves and substantial subsidies on the fuel.

But the health benefits from this substitution have not been quantified in randomized control trials until recently. Many of these are ongoing. The largest of these is the USD 30 million Household Air Pollution Intervention Network (HAPIN) trial in 3200 households in India, Rwanda, Guatemala, and Peru. In a recent advance in the state of the art in PM2.5 monitoring, a small wearable device, RTI’s Enhanced Children’s MicroPEMTM is utilized. This follows the personal exposure on pregnant women, other adult women, and children under 1 year of age. This cohort is the most affected by HAP caused by cookstoves. Carbon monoxide is also measured in the cooking area. Studies have shown that the total PM exposure captured by the wearable monitor is usually less than would be measured in the ambience of the home. In any case, the monitor comes closest to determining what the person breathes and will likely become the standard of practice in trials. The filters in the monitors are archived and the collected PM may be used in in vitro studies to assess the toxicity of the particles.

Even if the health benefits of LPG substitution of biomass are established, issues remain. Almost all the affected LMIC’s are net importers of LPG. The price is pegged to the marginal kg, which is basically the world price. Propane pricing may be used as a proxy for LPG. Natural gas liquids, including propane, generally track the oil price. Short term volatility in the price of oil has become a way of life since about 2014. In the US, propane has been priced as low as USD 3.63 per million BTU in January 2016 and a scant two years prior to that was at USD 15. These fluctuations will be very hard on the poor in villages, even if respective governments act to ameliorate with subsidies. The practice of “stacking”, comprising switching back to wood, at least in part, will vitiate the gains.

LPG, undeniably carrying the label of a fossil fuel, may well be the means for improving air quality for the poorest and for addressing the single biggest public health problem in the world today. Labels can be deceiving.

Vikram Rao

MIND THE GAP

May 25, 2020 § Leave a comment

London Underground railway platforms have warnings to “mind the gap”. In those cases, the meaning is literal: curvature of the platform often creates a variable gap between the concrete and the first step on the train. In any Presidential election year news and views are sometimes difficult to separate. For this discussion I am ignoring the obvious disinformation promulgated by conspiracy theorists and the like. The gap we are minding is more along the lines of spin.

Spin has always been a permissible technique in society. These are facts presented in a light favorable to a point of view or cause. This year the main issue that will get spun is the economy. Had the pandemic not intruded, the argument would have been the causes of the Dow at 29000. The present administration handed a vibrant economy on a plate by Obama or Trumpian wizardry. Well, Covid-19 took care of that. Now, it will be about how the pandemic was managed to keep deaths to a minimum, while also minimizing damage to the economy caused by the shutdowns. On the one hand you have Australia and New Zealand, who took early decisive actions on distancing and now have remarkably low mortality. On the other end of the spectrum is Sweden, which conducted a massive experiment by relying almost solely on herd immunity. Every state in the Union is relaxing distancing differently. While only time will tell, the spin business is in high gear.

In the reporting of improvement in the economy, mind the gap in how percentages are used. Mind the denominator. Consider a commodity, say oil at USD 100 a barrel. A 50% drop (as happened in late 2015) would take it down to USD 50. Then a 50% gain at that point would take it to USD 75, still USD 25 short of where it started. Each a 50% change, but the denominator intrudes. A recent headline stated that air travel had surged 123% in just the last month. The comparison was with a period that had seen a drop of 96%. The 123% gain brought it up to a figure that was still 91% short. This is not to say that the increase was not welcome and noticeable; it is just that some reporting leaves that detail unsaid.

An interesting variant on dicey comparisons is a story in the NY Times on the price of oil. It reports that price was USD 31.82 on May 18, 2020. Then it goes on to say, “That may seem like a minor miracle given that the price is more than $60 above where it was about a month ago”. While not inaccurate, the fact is that the drop to negative USD 37 a month ago was anomalous and for one single day due to an oddity in trader behavior. The comment was in the context of prices at which oil production could be profitable. However, the producer never saw the negative price, just the traders. The true price at that time was the price a day later, about USD 17. Still a huge jump to USD 31.82, but not USD 60 and not in the miracle range, minor or otherwise.

Currently, possibly the biggest gap is in matters relating to ameliorating or avoiding Covid-19. Investigative papers are placed online before they have been peer reviewed. The intent is to get them out for use by other investigators, but an eager press does not always underline that fact. Vaccines get a spotlight. While understandable, in view of the promise of such things, the “we are nearly there” feeling underlies many of the stories. They even move markets, as did the recent success of Moderna’s vaccine in a very limited trial. Dueling well-intentioned experts add to the gap, the minding of which proves daunting for the general public.

Now, this last is for the many of us who are in baseball withdrawal. In the parlance, throwing a curve is not the same as putting spin. In baseball, a curve may have some spin, but so can a fast ball. And fielders must be ever vigilant in minding the gap. Else, a single could turn into a double or worse. Now I return you to regular programming.

Vikram Rao

May 23, 2020

NEGATIVE LNG PRICES IN OUR FUTURE?

May 14, 2020 § 3 Comments

The combination of Covid 19 driven demand loss and the Russia/Saudi spat sent oil into negative pricing for a day in late April 2020. This was largely an anomaly driven by futures trader missteps. Now, there is the real, although still unlikely, scenario unfolding for negatively priced Liquefied Natural Gas (LNG). Spot pricing in Europe and Asia is at historic lows, approaching USD 2 per MM BTU, and dipping below that on one occasion. At that price it is tantamount to being negative because it is less than the cost to produce and deliver for most.

The cost of landed LNG anywhere may be broken down into two parts: liquefaction and transportation. Post landing, there is a re-gas cost. The first step is the costliest and is broken into capital cost amortization and operating cost. The capital component is the higher of the two. While location specific variants exist, very roughly speaking, liquefaction costs USD 2 – 3, transportation 0.4 – 1.1 (sometimes double that in times of scarcity of vessels) and re-gas O.4. The transportation costs are distance driven. Add to that the cost of the feed gas, which can be lower than the regional price due to long term contracts. Nevertheless, even if a low cost of USD 1.0 is ascribed to it, a useful total figure for the US would be USD 4. This makes the landed cost still higher than the spot pricing in evidence today.

LNG is the methane part of natural gas cooled to -161 oC. Most natural gas contains up to 10% larger molecules than methane. These are primarily ethane, propane, and butane. These must be removed prior to liquefaction. In the liquid state methane is 600 times denser than the gas from which it was derived. This property makes it amenable for long distance transport across oceans. But it must be kept at -161 oC. The most economical way to accomplish this is to allow some of it to evaporate, which cools the bulk liquid. An everyday example is the cooling action of sweat evaporating from one’s skin in a breeze. The gas is collected and used in the vessel engine or to make steam, which conserves it and prevents a greenhouse gas emission, but still constitutes loss of a saleable good.

As in the case of oil, when the demand is suddenly depressed, LNG gets stored. Limited capacity at the land locations leads to storage in the idled vessels. This week Qatar reportedly has 17 tankers idling off their coast. Each tanker carries up to 3 billion cubic feet of gas. Unlike in the case of oil, this storage has a cost beyond the lease of the vessel: the boil off gas has no use in a stationary vessel. It must be released from the tanks and will likely have to be flared.

Most LNG contracts have pricing pegged to the price of oil. The plummet in the price of oil in the last couple of months took with it the LNG price. In net importing nations, LNG sourced gas is the marginal cubic foot. Domestically sourced gas is used first. In India, for example, in normal times, the controlled price for domestically produced gas was complex, but around USD 4 per MM BTU. The LNG import price was around USD 11. Now things are different. After the Covid 19 depressed demand is met with regional gas, LNG demand is low, thus driving down the spot price. Incidentally, Indian renewable electricity has increased as a percentage of the total during the last few months.

LNG is to Qatar what oil is to Saudi Arabia: the primary source of income for the nation. It does not have the luxury of a cartel to control prices. Qatar, together with Russia and Iran, did attempt to form the Organization of Gas Exporting Countries (OGEC) in 2008. This was about the time that US shale gas was hitting its stride. Within a few years, US shale gas throttled the formation of the cartel because it was producing some of the lowest cost gas natural gas in the world, and lots of it. In very short order, the US went from plans to be a major importer of LNG (and therefore a client for the OGEC aspirants) to an exporter. Cheniere Energy, the US leader in LNG was forced to dump development plans for re-gas plants and to shift gears to become exporters. This reinvention did give them a cost advantage over competitors who joined the trend to take advantage of plentiful low-cost gas: existing facilities. The docking stations for the vessels and the shore storage existed and comprised nearly half of the cost, and half the time to commission, of that in greenfield operations.

Green field LNG liquefaction facilities and associated marine berths and storage cost about USD 4 billion, give or take some depending on details. 40-60% of this is labor, one reason why local governments find such plants attractive. But the high cost means long amortization periods. Add to that the fact that from start to finish they take up to 10 years to build. Uncertainty in pricing, the practice in this industry of long-term contracting notwithstanding, is daunting. That is precisely what Covid 19 has accomplished: created significant uncertainty in demand. Predictably, investors are balking. Worldwide, USD 50 billion worth of plants have been canceled or delayed.

Qatar faces the quandary of not being able to control prices, and yet needing a high market share: exactly what the Saudis faced with oil a couple of months ago and responded by offering discounts to get share increases. If Qatar were to do this, LNG price could briefly dive into negative territory. The US producers are likely to curtail production because it is unprofitable. Russia and Norway already are throttling back on gas sales. Qatar will most likely also drop production, no matter the fiscal pain, and spare us the drama of negative price lightning striking again *.

Vikram Rao

*”Lightning is striking again” in Lightnin’ Strikes, performed by Lou Christy (1966), written by Lou Christie and Twyla Herbert

WHEN 90% IS NOT GOOD ENOUGH

May 10, 2020 § 3 Comments

Usually 90% is a pretty good target. High schoolers in the top 10% get automatic admission to the University of Texas. Maybe not in engineering, but you get in. 80% right answers for 25 questions will get you a driver’s license. But when it comes to the post Covid 19 economy, 90% will not cut it, according to a story in a recent issue of the Economist. Much of the argument goes that an average of 90% means high nineties is some areas and much lower in others. In China, the manufacturing sector and export shipping are dramatically up, but consumer spending is still down, way down.

This observation reminds us that the US has increasingly become a consumer-based economy, with manufacturing going abroad, notably to China. The exception is the manufacture of petrochemicals. More on that later. The inference, therefore, is that a post Covid 19 recovery will lag in consumer goods being purchased. In large part this will be because of uncertainty regarding the disease and its likelihood of either lingering or reappearing. Job losses and savings being ravaged are not conducive to a climate for discretionary spending. When Germany allowed reopening of smaller retail stores, shoppers simply did not turn up. The same happened in China. Nieman Marcus declared bankruptcy, indicating that even the well heeled are likely to be cautious. Business models premised on continuous growth (think Uber), with investment in market share increases trumping earnings retention, are seriously damaged now and the model may be in question. Risk and uncertainty are recipes for less investing. At the very least, discount rates go up with risk, making the returns less attractive. The current rally in the stock market may prove to not have legs.

Innovation and creativity have been the hallmarks of economic growth in the last two decades. The list of the most valuable companies in terms of capitalization is informative: Amazon, Google, Apple, and Microsoft. All arrived there through some combination of innovation in technology and business models. Creative thought is difficult during the pervasive anxiety during a pandemic. Video conferencing is a poor substitute for personal interaction, not the least for the cross fertilization of ideas that occurs by chance in casual white board sessions and the like. Zoom meetings are now purpose driven and prone to distractions. Innovations that do see the light of day will find financing harder to obtain, except in narrow areas that are responsive either to the disease or to the restrictions brought on by the disease. The pipeline could endure a dry spell.

The US does have one thing going for it which could offset cheap labor abroad, which, in any case, has become less cheap over time. That is low cost energy. Natural gas prices are lower than in the cheap labor countries. Until this Covid 19 inspired downturn, US gas prices were less than 25% of those in India or China. They are artificially low in those countries now because liquefied natural gas (LNG) prices are pegged to the price of oil, which has plummeted. In fact, US export of LNG must be in trouble because the producer delivered cost will be over USD 5, whereas landed prices in Asia are under USD 3. But, when some semblance of normalcy returns, US natural gas prices will remain under USD 3 and Asian prices will drift back up to high single and low double digits. The certainty of low prices is why the US is a worthy target for manufacturing investment.

For goods where energy is a major component of cost, this is an area where manufacturing can return. For goods where natural gas is also a raw material it already has, in the last decade of the low gas price trend. The US also has the lowest cost ethane, a raw material for many plastics. This means that select sectors of manufacturing could return and should be given incentives to do so.

This pandemic has exposed ugliness in the more affluent societies. Americans earning less than USD 20,000 per year are twice as likely to have lost their jobs as those earning over USD 80,000. Mortality is greater in the minorities. The government is expected to do more. There is squabbling regarding federal action versus that in each state. States not being allowed to run at a deficit, federal bailout appears the only option, one which is resisted by elements of Congress. It is possible, perhaps likely, that the economic upheaval wrought by this pandemic will call for radical changes. What these are, and whether the changes are a net benefit for the future, will be determined by leadership and luck. This extraordinary period occurring during a presidential election year is unfortunate timing. The bipartisan response to the emergency sought recently by President George W Bush may be extremely difficult to come by.

We got lucky that the economy was robust at the time the pandemic hit. It allows for a quicker recovery. However, a 90% recovery will be uneven across sectors and is likely to lead to a world that is recognizably different. The term “new normal” has been thrown about. Regrettably, the emphasis will be on the “new”, and the habits formed during extended lock downs may be enduring. The last few percent always take longer, in innovative projects and cell phone battery charging.

Vikram Rao

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