April 23, 2013,
18:05 |
Tags: biofuels, China, ethanol, Germany, Japan, renewables, solar, USA, wind
The latest survey of global renewable-energy investment by the Pew Charitable Trusts, a non-profit organisation, paints a relatively sorry picture. Last year, funds devoted to solar plants, wind farms and the like in G-20 industrialised countries fell by 11%. Subsidy cuts in places like Spain and Germany contributed to the decline in investment in wind and solar projects (by 15% and 13%, respectively). Biofuels saw the most dramatic decline, attracting 46% less investment than in 2011 (see our article on the troubles of US maize-ethanol makers).
Renewables have been weaned on government-provided goodies. But clean-tech firms are speeding towards the day when they must flourish on their own—or run out of luck, like China’s once-supreme solar firm, Suntech. China nonetheless offers clean-tech investors more than a splash of consolation. Despite the lull in investment, global renewable-energy capacity still managed to grow by a record 88 gigawatts (GW) in 2012—thanks more than anything to Beijing’s supportive policies. China both topped the 2012 investment charts and added a world-beating 23GW in renewable capacity during the year. Its firms also brighten the global scene by making cheap clean-tech gear, helping investors’ scarcer resources spread further.
China’s methods inspire gripes about unfair competition and punitive trade tariffs. But remove China from the global renewables picture and the industry scene starts to look like a stodgy old European oil painting rather than an upbeat piece of Chinese modern art.
The EIU's Energy Briefing provides forecasts to 2020 and daily news analysis for the world's most important energy markets, along with a database developed in association with the International Energy Agency.
A data release from the US Energy Information Administration (EIA) prompted headlines this week declaring that China had displaced the US as the world’s top oil importer. The background: US imports are tumbling as, on the supply side, it produces more (shale) oil of its own while, on the demand side, the economy runs at half throttle. Meanwhile, Chinese growth is spurring domestic oil demand. The resulting switch in import positions is “a generational shift that will shake up the geopolitics of natural resources”, reports the Financial Times. But the small print reveals some big caveats.
To begin with, the imports in question are net (total imports minus total exports), and not just of crude oil: petroleum products (kerosene, naptha and the like) are also included. Confusingly, though, much of the reporting speaks simply of “oil imports”. Moreover, China’s anointment as the biggest oil importer is based on only one month’s data (December, the month when Chinese refined-product imports tend to peak). Over the whole of 2012 the US bought 7.1m barrels/day of crude and products—net—whereas China purchased 5.7m b/d. When it comes to absolute imports of crude oil alone, the US (8.5m b/d) leads China (5.4m b/d) by an even greater distance, although the gap is closing (see chart).
None of this is to argue that the day—or rather year—when China truly overtakes the US as a net importer of oil and related products will not come. Unless the US shale-oil boom fizzles, for instance, or China replicates it, the “generational shift” is only a matter of time. It just hasn’t happened quite yet.
The EIU's Energy Briefing provides forecasts to 2020 and daily news analysis for the world's most important energy markets, along with a database developed in association with the International Energy Agency.
Solar energy’s star may not be dimming, but it is making decidedly spotty progress. Growth in demand for solar photovoltaics (PV) plunged to a ten-year low last year, according to Solarbuzz, a research company. Only 5% more panels—or 29 gigawatts (GW) worth—were sold in 2012 than in the previous year, the first time in a decade that annual growth dipped below 10%. The result also confounded industry expectations that more than 30GW would be installed; most believe that 45GW is needed to soak up total supply.
The glut of panels is harming the profitability of solar-equipment manufacturers, forcing increasing numbers out of business. US tariffs on Chinese equipment have caused supply-chain disruptions and suppressed demand. The world’s solar factory is also at the centre of a looming trade dispute with the EU, its makers accused of using state subsidies to sell at below cost. This hurts: Europe accounts for 60% of worldwide solar demand and serves as Chinese firms’ biggest market. There are, however, a few rays of hope.
The 29GW sold last year was nonetheless equal to nearly 30% of total installed capacity at the end of 2012, implying resilient installations growth. As Europe’s share of the pie shrinks, new sources of demand are emerging. The Americas accounted for 13% of global PV demand in 2012, driven by California’s aggressive green agenda. Asia burns brighter still, buying 8.7GW. Over the coming year, the region will continue to spur growth: Japan is casting around for alternatives to nuclear power after the Fukushima accident in 2011; India and, especially, China have their own plans. Crucially, too, plummeting panel prices due to overcapacity help overcome the main barrier for solar: its costliness. Unfortunately, to look on the bright side in the solar industry you need a rather long-term lens.
The EIU's Energy Briefing provides forecasts to 2020 and daily news analysis for the world's most important energy markets, along with a database developed in association with the International Energy Agency.
Shale gas, you might think, is old hat. As a topic of conversation, the “revolution” in US natural gas production—in which innovative techniques including hydraulic fracturing (“fracking”) have opened up hundreds of trillions of cubic feet of reserves—is being overtaken by developments surrounding shale oil. With US gas prices languishing, investment is flooding away from “dry”, gas-dominated shale plays into “wet”, oil-rich ones. Burgeoning oil output from the Bakken shale in particular, as well as new supplies of natural-gas liquids (NGLs), hold out the promise of US oil self-sufficiency. At least, so some people appear to think.
In a new report on North America’s oil and gas boom, we argue that dreams of US oil self-sufficiency, let alone energy independence, are overblown. Oil is a global good. The availability and price of American oil is determined by the interplay of far-flung factors—from Nigeria’s supply to Norway’s demand. Even the miracles of fracking cannot obscure economic reality.
This is not to deny, however, that shale oil is having a big impact. US oil output is growing quickly, and will continue to make large strides. Despite gluts and transport bottlenecks, Canadian tar-sands output is also flowing fast. Somewhat puzzlingly, given low gas prices, the shale-gas bonanza rolls on. This is fuelling a new race, in both the US and Canada, to launch shale-gas exports in the form of liquefied natural gas (LNG).
Our report, Independence Day: A special report on North America’s oil and gas boom, is available for download (free registration required) at www.eiu.com/oilgasnorthamerica.
The EIU's Energy Briefing provides forecasts to 2020 and daily news analysis for the world's most important energy markets, along with a database developed in association with the International Energy Agency.
Since the end of June, oil prices have been steadily climbing, regaining much of the ground lost during a plunge in the second quarter. Brent crude futures are now around US$115/b, more than US$23/b higher than at the end of June.
On the demand side, oil market indicators look bearish. Global economic performance is hampered by a stagnant euro zone, a struggling US economy, and signs of a slowdown in China. Meanwhile, Saudi Arabia is pumping oil at record levels, while Iraq and Libya have made significant production gains this year. What gives?
One explanation is ongoing tension between Iran and the West. The harshest US and EU sanctions on Iran’s oil exports took effect in July, and these exports have plummeted by around 1m b/d from 2011 levels. Speculation is mounting about a possible Israeli strike on Iran’s nuclear facilities, while Iran is threatening to block the Strait of Hormuz. All of this sabre-rattling makes oil markets nervous. A modest acceleration in demand in the second half of the year after a lacklustre first half will also support prices somewhat.
So, although the daily headlines focus on poor growth prospects in many developed economies, the news from the oil market is about sharply higher prices. The futures market implies some softening in the coming months, while the Economist Intelligence Unit expects a more pronounced fall in prices. Still, Brent crude should fetch more than US$100/b for the foreseeable future, an unwelcome trend given the sluggish global economy.
The EIU's Energy Briefing provides forecasts to 2020 and daily news analysis for the world's most important energy markets, along with a database developed in association with the International Energy Agency.
As the world enters a “golden age of gas”, liquefied natural gas (LNG) from Australia is poised to play a key role in meeting the world’s growing energy needs. In a new report, the Economist Intelligence Unit forecasts that Australia’s gas production could more than double by 2020, which could make it the world’s largest LNG exporter by volume, ahead of current leader Qatar.
As an LNG exporter since the late 1980s, Australia is already a key supplier to Asia, the largest regional market for liquefied gas. To meet robust gas consumption growth in this region in the future, Australia will initiate the largest increase in export capacity of any LNG-supplying country. Operators of Australian LNG projects, both existing and planned, have also signed longer-term supply agreements that guarantee a role in feeding gas-guzzling Asian economies for years to come.
The EIU’s report explains the drivers and constraints of Australia’s LNG sector for the rest of the decade, including the country’s role in meeting Asian demand as well as the potential for long-term competition from suppliers in North America and East Africa.
Read the press release here. Register to download an executive summary at www.eiu.com/australiagas. The full report can be purchased at the EIU’s online store.
The EIU's Energy Briefing provides forecasts to 2020 and daily news analysis for the world's most important energy markets, along with a database developed in association with the International Energy Agency.
A few months ago, natural-gas traders in Asia were excitedly recalling the boom days of 2008. Back then, cargoes of liquefied natural gas (LNG) fleetingly sold for US$20/million British thermal units (mBtu); this summer, new records beckoned. The renewed bullishness owed much to spiking Asian demand—especially in Japan, where utilities coped with reactor shutdowns after the Fukushima nuclear accident partly by importing shiploads more gas. Good news for those planning and building a swathe of LNG plants in Australia, North America and elsewhere, whose schemes depend on robust Asian demand for gas (see articles on LNG prospects in the US and Canada). Then, prices plummeted.
The spot price of LNG in north-east Asia fell from heights of US$18/mBtu and more in June to around US$13.5 last week, reports say. Just as Japan inflated prices, so it has helped puncture them. Japanese firms have bought new gas on contract and quit the spot market. Two of Japan’s 54 reactors are running again, raising the possibility that more will return and the need for gas will diminish. Neither is it just about Japan, or demand: resurgent supplies from Qatari LNG plants following maintenance work are also dampening prices.
A further slide in Asian LNG prices looks unlikely. New production coming from Angola, Australia and Yemen this year and next will help keep average north-east Asian LNG prices simmering at roughly US$14-15/mBtu or so, well below the average of almost US$17/mBtu between April and June. But this is still well above the US$3.2/mBtu that North American gas costs now. Most importantly, the long-term needs of China and India will be vast. Still plenty of encouragement, then, for aspiring LNG exporters to pursue their Asian dreams.
The EIU's Energy Briefing provides forecasts to 2020 and daily news analysis for the world's most important energy markets, along with a database developed in association with the International Energy Agency.
Pots of ink are expended when China’s turbine makers catch new gusts or the star of its solar manufacturers brightens or dims. By contrast, the old-fashioned business of damming rivers to produce power generates curiously little press (the Three Gorges Dam aside). Yet in China, as globally, dull old hydro still leaves solar and wind in its wake. It makes up about a fifth of China’s generating capacity, compared with less than 5% for solar and wind combined.
Dam-building is an area where environmentalists can claim a rare degree of success; the need to relocate people slowed hydropower’s progress during the previous five-year plan (2006-10). China’s hydro capacity nonetheless grew by over 80%, from 117 gigawatts (gw) in 2005 to over 210 gw in 2010. Officials are reportedly targeting 284 gw of conventional hydropower and 41 gw of pumped storage, or 325 gw in total, by 2015; the Economist Intelligence Unit thinks a gush of dam-building will take total hydro capacity to just under 300 gw by then. By 2020, however, we expect slower installations growth, to 332 gw. This will fall short of the government’s reported target of 380 gw (which it is rumoured may be raised to 430 gw), including 330 gw of conventional hydro and 50 gw of pumped storage.
China’s best-laid hydro plans are likely to go awry due to the difficulty of harnessing ever more inaccessible water resources. Growing concerns about the environmental costs of dam-building, and local-level opposition to human relocation caused by hydro projects, will also have an impact. Such factors, together with stiff domestic competition, will push Chinese hydro companies on overseas adventures. They are already proceeding with vigour: International Rivers, a non-governmental organisation, has traced the involvement of Sinohydro, the world’s biggest hydropower firm, in 195 (sometimes controversial) dam projects in 60 countries.
The EIU's Energy Briefing provides forecasts to 2020 and daily news analysis for the world's most important energy markets, along with a database developed in association with the International Energy Agency.
With tensions rising between the US and Iran over Tehran’s nuclear programme, attention is turning to the Strait of Hormuz, a vital oil tanker thoroughfare. Markets fear that the narrow stretch of water between the Persian Gulf and Gulf of Oman could be shut to tanker traffic, either due to retaliation by Iran in response to a blanket embargo on its oil exports or as a result of a military conflagration pitting Iran against the US and/or Israel.
Either scenario would rile global energy markets. Around 20% of the world’s traded oil passes through the Strait, so any closure—even for a few days—would push up prices significantly. And it’s not just oil: the Strait is also an important export outlet for liquid natural gas (LNG), with Qatar, the world’s largest LNG supplier, shipping 25% of the world’s LNG through the passage in 2010.
According to the International Energy Agency, just over 15.5m b/d of crude oil and 1.3m b/d of oil products flowed through the Strait of Hormuz between January and October 2011. Around three-quarters of this crude was directed to markets in Asia-Pacific, highlighting the region’s significant dependence on Middle East oil supply compared with North America and Europe. Japan has historically been dependent on Middle East oil, and the two rising economic powers of Asia, China and India, rely heavily on the region for crude oil supply as well.
The nature of the oil market is such that a closure of the Strait would impact on oil-consuming economies globally. However, should there be a series of events that causes the Strait to be closed to outgoing oil tanker traffic, the graph above shows that Asia in particular will suffer collateral damage.
The EIU's Energy Briefing provides forecasts to 2020 and daily news analysis for the world's most important energy markets, along with a database developed in association with the International Energy Agency.
The year 2013 will be a landmark one for the global oil market. That is when oil consumption from outside the OECD will exceed that of OECD economies for the first time ever, reflecting the locus of energy consumption patterns shifting east. According to EIU forecasts, in 2013 the OECD will consume 45.45m b/d of crude oil, while the rest of the world will consume 46.84m b/d. Between 2009 and 2013, oil demand is set to increase by 7m b/d in non-OECD countries and decrease by 200,000 b/d in the OECD.
China, of course, will be the main driver of non-OECD demand growth, with its oil consumption hitting the 10m b/d mark in 2012 and reaching 10.8m b/d in 2013. In 2013, nearly 25% of global oil demand will come from non-OECD Asian economies, where oil consumption will exceed that in the US. As the Asian region is resource poor when it comes to oil, its import needs will dramatically increase, providing a new opportunity for OPEC producers in the Middle East whose market share in the US, the world’s largest market, is declining. Demand for oil is also growing in the Middle East, however, which will leave fewer barrels available for export.
The EIU's Energy Briefing provides forecasts to 2020 and daily news analysis for the world's most important energy markets, along with a database developed in association with the International Energy Agency.
