Tag Archives: energy

Abating the easy stuff

Electrification is often easy in many cases. It is just about changing appliances. Of course, it is also about lifestyle and way of life. I personally still prefer to cook over a gas stove. But I won’t stop cooking without one; I’ve used various electric stoves before as well and didn’t face any major issues.

I’ve lived in house that had gas heating and also one with electrical heating. Regardless, the level of thermal comfort tends to be a trade-off between use of energy and insulation rather than necessarily the equipment for heating though the efficiency of the appliances would play a part. Going on to bigger things, there’s the electrification of transport. For most part, this can be based off just taking public trains or trams instead of driving. It can also involve using electric bikes. Of course finally, there’s the transition to electric cars.

None of these really do reduce emissions in and of themselves assuming no particular changes in energy efficiency of the basic fuel used. It is the energy source that matters. Electrification must be paired with switching power generation to renewable sources such as wind, solar, hydropower and so on. It is meaningless to have electric vehicles on the road and heating of homes with heat pumps when you are generating the power. The challenge of the energy transition is that many things are taking place together and people are not able to really keep track of how much emissions are going to be or might be. Therefore, the direction and rate of change is perhaps more significant to give a sense of how much change can or will happen.

Abatement of emissions through increasing power generation through renewable energy combined with electrification remains the simplest and most effective way to decarbonise our economies. However, the complexity lies in the fact that power prices affects the economy broadly and in many countries, they are subsidised at least for some sectors of the economy. By increasing the demand for power through electrification, the plans for subsidies for certain sectors might be affected. If supply is not increasing fast enough, power prices may increase in a way that reduces the competitiveness of other sectors and the economy as a whole. At the same time, there is also a risk that renewable power supply that is coming online is much more expensive, leading the overall electricity prices to increase anyways even if the supply is keeping up with demand.

Governments are afraid of adversely affecting the power prices as it has very broad sweeping economic consequences. Additionally, power transmission and distribution investments will also have to accelerate to cope with the increased demand and supply for power. Unlike the older set of infrastructure invested over time and much longer ago, we are looking at a huge ramp-up during a short period which means the infrastructure cost will have to be passed on to customers during an intense period of change. So while electrification combined with renewable power generation is the easiest pathway to decarbonise, there are systematic and political challenges around the distribution of the cost of energy transition to consider. Overall, the players who are electrifying some of the previous energy uses actually pass on parts of their cost of transition to the overall system as their participation in the market raises the cost of power for everyone.

For the typical electricity consumer, they would expect their share of the energy transition cost to be converting their load to be drawn from renewable energy sources. However, they now have to pay a share of the heightened infrastructure cost from the increased load, as well as the increased energy cost due to competition for renewable electricity. These complexities are slowing down a process that needs to happen much more quickly.

EV charging incentives

For a long time, EV charging infrastructure has been seen as something in the domain of public goods and should be driven by the government. The challenge on the government side is the question of whether it makes sense for them to invest ahead of EV adoption. Investors are nervous about it because EV chargers seem to them like something, which can pop up pretty much anywhere, and there’s no ‘moat’ to support stable revenues even if they serve as an infrastructure practically. Without proper government-regulated structure, it is difficult for investors to put capital into infrastructure in a place where there’s going to be limited utilisation.

Contrast this with petrol kiosk franchises – they are well-established and have demonstrable cash flow, with strong support from the oil & gas companies backing them. Electricity companies are sometimes backing EV charging point networks in order to increase electricity retail but the truth is that electricity distribution works on an entirely different business model from fuel distribution. A lot of investors believe that the petrol kiosks will themselves be the best location for very fast or ultra-fast chargers (usually 10-20 minutes for a full charge). The other fast chargers (1.5-4 hours for a full charge) will likely be in destinations like shopping malls or other commercial buildings.

Yet EV charging infrastructure is so important as a basis to increase EV uptake which the energy transition desperately needs. Electrification of energy needs from transport enables an easier decarbonisation as we can focus on renewable energy in the power sector while transport and other sectors just have to focus on electrification (which of course, can be quite a pain for some sectors – that’s for another day). So how do we increase and improve EV charging infrastructure? Where can we align the incentives? What role should the government play, if at all? And what if it becomes an extremely profitable business down the line?

Pathway to Hydrogen

I keep thinking about the role hydrogen would play in the netzero energy system. It is important because most specialists in the field think it will be incredibly important. But I’m afraid some of them think of the importance not from an energy or thermodynamics perspective but from a technological, socio-economic perspective. I think that is misguided for something that is so nascent and imature.

The solar and battery learning curves cannot be used to project what happens to hydrogen because it is fundamentally a more complex type of project. A lot less plug-and-play compared to solar panels or batteries. For solar panels, the technology takes in light and transform it into power, which in essence is the flow of electrons. There is of course the issue of DC power versus AC power but the inverters will deal with that translation; and you can plug directly to existing electricity grids. Of course, when you have a lot of them the grid must start shifting but at least you get a shot at getting started. And after that you’ve got batteries coming in, again almost ready to work with the existing electrical infrastructure.

Green hydrogen production integrates with the electricity system fine as well; it takes in power, feeds the electrolyser which separates pure water into oxygen and hydrogen, storing away the gas as it is being produced. However, the most valuable output in the process, the hydrogen, needs to be properly stored and transported to where it is needed. And all of these infrastructure do not yet exists! The largest part of the revenue generation problem has not been sorted!

This is why it is so difficult to get hydrogen started, and so expensive to do so even when the technology seem more and more established. The challenge is that a lot of that infrastructure would also serve some of the current fossil gas interests. There are issues of couse with the risks of interest conflicts when the fossil industry push for hydrogen.

The fact that hydrogen is not so plug-and-play to our current system means more evolution is needed before we are ready. Instead of putting direct incentives into hydrogen production, we should be using our resources to solve the problems along the journey to the hydrogen future. A lot of these problems involves collective action, coordination of choices and displacement of swarthe of economic activities that requires proper thought about restructuring.

There is really much more work to do than administering incentives. And this is definitely not an area the government can easily rely on market incentives to accomplish.

Ordering the transition

There is some kind of rational order to the energy transition. It depends on the maturity of the system, the current technologies deployed, the infrastructure in place, and also our views on the technologies ahead. This order will not occur naturally, nor will the economics of it follow naturally. Instead, it is an approach that requires coordination across the energy system, regulatory framework, and the markets to ensure that order proceeds as it should. There is no single right answer, which means there can be some variation but by and large, there are clearly right directions to move forward on.

It is critical to sharply focus on the objective of decarbonisation and organise other matters around it first. Presently, most of the global discussions, and the market narratives are clouded by issues around cost concerns, job losses, stranded assets and lots of doom and gloom around those. Worrying about them is putting the cart before the horse because we need to properly envision a future before we decide whether the sacrifices are worth and how to deal with those secondary problems derived from them. After all, you don’t choose your destination based on the public transport time table.

If for example we want to look at the decarbonisation of power systems, there is first the displacement of fossil generation with wind and solar. So wind and solar must first be installed into the system and ‘traditional renewable power’ such as hydropower and even bioenergy boosted. As battery technologies are not rolling out as quickly, hydropower and even biogas plants can and should help with some of the smoothing of supply. Yet if they are not sufficient, batteries must be put into the system to enhance the reliability and reduce intermittency so that renewable power is able to displace fossil generation.

And only then, would the power system be able to start supporting electrification of other industries as a route to decarbonise. There is no point thinking that electrification is a route to decarbonisation if the power system itself is loaded with coal and gas plants, and increased demand is continually used to justify the continued fossil presence. And then only when the power system is properly decarbonised should we start considering and pushing for green hydrogen. Otherwise, having our renewable electricity capacities all caught up in green hydrogen production is definitely not a great idea for the industries looking at electrification to decarbonise – you’re pushing up the electricity cost on both sides, and then you end up complaining that green hydrogen is not cost-competitive.

If we believe that we want to pursue a route of hydrogen production that is based on highly efficient electrolysers then we may only be able to do so when batteries are really cheap. This is because highly efficient electrolysers can only have their costs justified through high utilisation. Yet renewable electricity is expensive when they are scarce which is probably the case for a system full of solar at night, so if you want to keep the electrolysers going 24/7, you need batteries to keep pushing electrons through them. Highly efficient electrolysers, combined with lots of batteries for maintaining high utilisation is a great formula for extremely expensive green hydrogen. Cheap but inefficient electrolysers might actually end up doing the work of pushing down cost of hydrogen earlier (see some ideas here).

Now all that only helps with the production cost of green hydrogen; there are other issues and cost barriers which needs to be overcome. More on them in my next post. But what I’m trying to show here is that there is a rational, orderly way to approach the problem of decarbonising our systems. And the way to consider it is not to load up the emissions problem with all of the other considerations upfront. Rather, we organise ourselves better by thinking first about the best route to decarbonise based on carbon intensity, then we identify the costs, figure out the trade-offs and see what is worth sacrificing.

Transition fuels III

I’ve written about hydrogen (here, here and here) before and I would like to write more about it. Hydrogen is fascinating. It is a sole proton with an electron around it. Well, that’s the element, but it typically doesn’t exist in that form. Instead, it exists primarily as 2 protons bound together by a covalent bond supported by the existence of the 2 electrons sharing their electron orbitals within the covalent bond cloud.

Many people today believe that hydrogen is one of the fuels that the world will eventually transition to in the net zero world. This is one of the main reasons people are excited about hydrogen projects and hydrogen production (‘this is the future’). Much of that is grounded on the elusive quest to find some monolithic solution for the carbon conundrum. Not that the world will universally converge upon a single solution but that all solutions that are ultimately low carbon will stem from hydrogen or find its linkages to it somewhat.

But is hydrogen the future? Sure, hydrogen cars are really quick and easy to refuel. And indeed, a lot of industrial heating process currently running on natural gas can be supported by combusting hydrogen. And even better, hydrogen combustion merely produces steam, a byproduct that can be used for other purposes. There’s something beautiful about the non-toxicity and purity of the byproduct, the elegance of the molecule and perhaps the fact hydrogen is used in different processes in petrochemical industry. Hydrogen will be part of the future, but will it be ‘the future’? I think a lot more other supporting elements needs to come in place. An orderly energy transition is about proper sequencing and targeted shifts rather than trying to leapfrog or take potshots.

Over the past decades of stability, we’ve allowed the whole idea of economic growth and making money to take centerstage in the lives of the most productive people in the world. With the climate challenge, it is getting important to channel that resource and capability towards the energy transition. I’ll write more on my vision for an orderly transition from here. And if we all can align on the mission, we can start evaluating and piecing together various different routes and work through breaking the barriers and blockers. More on that soon.

Transition fuels

When Blunomy first started out as Enea Consulting in 2007, the world was not that different. We were burning lots of fossil fuels, except a lot more coal and oil. There was also less renewables then. Solar panels were incredibly expensive and people thought wind turbines were so clunky (and expensive for the amount of power it generates) it was not possible for the world to have more wind turbines than combustion turbines.

The period of 2000s saw the mainstreaming of liquefied natural gas (LNG) and gas was broadly touted as the transition fuel as the world cross from coal towards renewables. Emissions from combustion of gas was less than half that of power generation with coal, and gas power plants could fire up faster than coal power plants. Energy transition then was about fuel switching and the metric was more around carbon intensity per unit energy. Unfortunately, there was no regulations to push for shifts in this metric and so when the economics doesn’t line up, it simply was ignored. Coal power continued propagating in the world especially in the developing countries. Even in developed countries, coal plants were continuing to operate or even refurbished to extend their lifespans. Singapore’s Tembusu Multi-utilities complex which burns a mix of coal and other fuels, was commissioned as recent as 2013.

All these meant that as energy demand increased, the mainstreaming of gas especially through LNG was only serving incremental demand and not exactly displacing coal. Today, it gets lumped as ‘bad’ with coal and there are calls for it to be eliminated from the system. In many sense, people are considering gas no longer as a transition fuel but to be leapfrogged somewhat. The leapfrogging makes sense from a carbon intensity point of view. But by most counts, gas is a superior technology even to renewable power generation as gas power can still serve as baseload and is dispatchable unlike wind and solar which do not respond to the beck and call of power demand. Batteries help to overcome this but as long as the economics of renewables-plus-batteries is not superior to coal or gas, it will be a tough sell.

The reason for expansion of LNG was because of the superiority of gas in terms of technology, the way it matches our energy use, and the falling costs in the early 2000s. Projecting the way forward, this is unlikely to be true anymore as exploration in certain jurisdiction have slowed or ceased, existing gas fields are no longer as productive, and material costs have risen to counter the competitiveness. There is also a question of the new generation of engineers bothering to enter into this space if they perceive it as declining.

This is where bioenergy comes in and becomes positioned so awkwardly that it finds itself a little stuck. More on this soon.

Structuring incentives for waste

As we try to navigate the climate transition, we are working within a framework of incentives and economic structure where incentives are sometimes mis-aligned to driving climate-positive behaviours. Not just climate but sustainability overall. Waste management represents one of the more problematic area. In many situations, the cost of waste management is pretty much socialised with the cost spread out across a large number of people while the economic benefits accrued by only some. Take electronic waste without proper framework in place for disposal and attribution of responsibility to producers, the society bears the overall cost of managing these difficult waste while the benefits are borne only by the users (especially those who are replacing devices extremely often, and the producers who are selling electronic products.

By incorporating producer responsibility, the cost of disposal and waste management should preferably be priced upfront to customers so that they are paying for the lifecycle cost.

The same should be done for various product packaging. After all, the producers are typically the ones responsible for handling the packaging in the first place so it won’t be too bad for them to take on the responsibility. They can then put the cost into the price tag of the users, who would then be the ones paying for those goods that require the particular packaging. The thing about packaging materials and electronic waste is that they have value as recycled materials anyways – which means that if the ‘disposal’ logistics cost can be at least in part offset through the value recovered from aggregation of these materials, it is a win-win.

What about food waste? Food waste should not be the responsibility of the producers since it is the consumers who determine the level of waste based on how much they purchase and eventually consume. Likewise, those in-between the value chain from farm to table would also be responsible for some of the food waste through their utilisation of the ingredients. The way to make them responsible for the disposal cost is to allow only specific channels of disposing food waste and pricing it properly. The cost of disposing food waste will necessarily be the logistics involved, and then offset against whatever residual value the food waste can generate. What kind of residual value is there? After all, food waste cannot be used to remanufactured food (unlike cardboard whose fibre can be used for recycled paper, or e-waste where the extracted metals can be turned back into materials to produce new products).

Food waste can be turned into energy through anaerobic digestion. And the process will generate methane that can be used as a fuel. The fuel potentially displaces fossil fuel and emits biogenic carbon dioxide in the short carbon cycle. Of course, there are plenty of other biofuels that can also be produced from food waste. If we start putting a value on the food waste, does it mean more of such waste would be produced? It is quite unlikely since the value will probably represent some kind of residual value from the primary use of the food. Yet we find CEO of multi-national company Lufthansa thinking otherwise.

The challenge we have today is that the incentives around recovery of residual value from waste. We will need to redesign how we are able to extract residual value, offset against the disposal costs. We will also need to ensure disposal costs are properly priced and applied to the right parties responsible for the waste generation. We need to set up incentives such that waste is properly sorted and pushed into various streams. The cost of mixed-stream convenience needs to be costed to reflect the cost of sorting.

There’s a lot of work ahead. We need people to get on to them.

Who is the polluter?

There was a recent piece on Eco Business about Singapore’s packaging recycling scheme being delayed and how the polluter-pays principle seems to have failed to take hold in this particular situation. It was partly because of a speech by an activist in the recent SG Climate Rally.

The principle of polluter-pays is important because it helps to internalise the social cost of pollution and allows the market to price it in correctly. The result would be that the production and eventual consumption of the relevant goods stays at the level which is socially optimum.

Product packaging is itself a massive problem where it is clear certain social costs of the waste production is not properly internalised. The fact that supply chains are such that buying a new product is cheaper than the refill version, and the fact that massive amounts of materials are used in packaging without producers having to foot the cost of disposal, seems to be an issue. But the situation is also because waste management is not properly priced. Today, in Singapore, the amount of cost you shoulder for waste disposal is based on where you live and the type of dwelling you live in rather than the amount of waste you generate. This in itself is already not exactly adhering to the polluter-pay principle.

Creating a plastic bottle or aluminum can refund scheme would also jack up the cost of the products but sometimes we forget who are actually the polluters. The ultimate polluters are still the consumers and in making our purchase decisions, if we recognise the cost to the environment and decide that accordingly, it changes the dynamics of the situation and allows the producers to ‘suffer’ the cost from the lack of demand despite the low-ish prices. But that still doesn’t produce a very reliable signal in the marketplace. And that’s why it makes sense to properly ‘tax’ the producers or the consumers somehow to get the market back in line.

As it turns out, the identification of the polluter does not matter much. What matters is that the associated product gets the pollution priced in somehow. You can charge even the shops that are stocking the products. The reason is that the cost will reverberate through the supply chain; the higher price will result in less customers buying it, sending a demand signal that reduces the orders and stocking by the shop, who will order less from their suppliers and so on. Eventually, at the default price point the producer will realise the market isn’t taking as much of the product that they are producing hence reducing their production and hopefully the pollution as well.

The tricky issue is pricing the pollution and getting a sense of how much the marginal reduction in production could reduce the pollution. This is tricky because the average pollution per product isn’t the same as the marginal pollution. And indeed you may have to curb consumption/production very drastically in order to reduce a bit of pollution if there is significant non-linearity involved. I won’t go into the mathematics here but suffice to say, there is reluctance to tinker too much with the pricing of more ‘ordinary’ consumer goods in Singapore. And it might be a shame for sustainability.

Electrification Tussle II

This post continues from yesterday’s blog post.

There will be players who cannot electrify their processes, and they will need solutions. Most of them would be using natural gas running through the pipelines. And for them to decarbonize, they would need either a renewable form of natural gas, which is probably the most acceptable solution for them technically. For some of them, burning green hydrogen could potentially work as well, assuming they overcome the issues around the lower energy content of the hydrogen. Let’s consider again the drive to electrify. Using green hydrogen for these industries is equivalent to electrification because green hydrogen production is driven by renewable wind or solar power production. The notion is ultimately to shift the energy demand of these hard-to-abate industries back to the electricity grid, except through green hydrogen. Except, of course, the green hydrogen route is a very inefficient use of electricity because of poor conversion by electrolyzers and then coupled with the fact that more energy might be used to transport or store the hydrogen.

What I’m trying to point to here, is not that green hydrogen isn’t a viable solution – because in due course, with technological improvements, it definitely can and should be used. But in light of the electrification challenges I highlighted in part 1 (yesterday’s post), green hydrogen does not help alleviate the problem. It tends to complicate it and put even more stress on the electricity system when trying to green the grid. The mix of policy stances involving the heavy promotion of green hydrogen, the attempts to accelerate the reduction in gas use domestically, and setting aggressive renewable energy targets (really more like renewable electricity targets) for the grid emissions factor are all putting a lot of pressure on the electricity system while trying to keep electricity cost pressures under control.

Already mentioned in the earlier blog post is that natural gas resources can serve as part of the transition story. Now, there are concerns and worries about an addiction to fossil gas. After all, the economy might actually be addicted to it because it is a very lucrative export for Australia and so even as the country tries to reduce domestic use, it is unlikely to give it up as an export. And the fear is that the addiction would make it harder to decarbonise. This is why the other area for the government to direct its resources and develop policies that channel efforts in the right direction would be to promote biomethane production and displacement of fossil natural gas through the use of biomethane.

It is almost a no-brainer. Yet, there were concerns about the costs of biomethane while the more costly green hydrogen is being subsidised in all directions. There were further concerns about the limits of the resource potential of biomethane when the grid resources for green hydrogen production are even more scarce and expensive.

In providing my opinions, I have not given any figures but assumed that readers can find and discover for themselves the relative costs, and other challenges associated with how the overall policy mix and energy transition conversation is creating needless bottlenecks and distorting the orderliness of the energy transition. I suggest that we direct our efforts as an industry, economy, society and country in a more sensible, coherent, and directed manner to navigate the energy transition. The technically sensible approach is available and on the table, let’s set that as a destination first, and then slowly navigate the political minefield to get to it. This would likely produce better results than to be muddling through the technical solutions while trying to satisfy various political constituents and be none the wiser as to which destination we’re trying to get to.

Just an additional note to say that these entries are purely my personal opinions and do not reflect any views of my employers or any organisations I happen to be affiliated with.

Electrification tussle

The more I observe the energy transition in Australia, the more I realise that its attempts at balancing many different principles and ideas are at odds with achieving an orderly transition. Too often, we cast the energy transition as a technical or economics problem but more often, it’s a policy and political science problem. At the heart of the debate, is the age-old welfare economics issue around winners and losers. And with lobbying, power plays, risk of job losses, and a mix of various different studies, academic and commercial contributing to various perspectives, it can be incredibly confusing for policymakers.

Having worked on the side of government and alongside policy makers when I first started my career in Singapore, I thought that the volume of noise that exists in Australia around the energy transition is startling. I recalled that there were a lot more ‘no-brainer’ type of policy directions and being in the government was a lot more about trying to steer a large, heavy ship towards the destination that we can more or less agree on. In Australia, it almost feels like the policymakers are simultaneously being pulled in a hundred different directions at the same time and trying to achieve it all.

If, at this point, we are seeing that the policy direction is towards electrification, then the actual effort will have to be looking at what can green the grid and focus on that. So there’s been funding towards more solar and wind, as well as batteries to help balance the load in the system. The next big challenge is grid stability and network capacity. This will require extremely large investments and infrastructure build-up that will take time. This means we cannot electrify everyone at the same time, and this phase-in of various functions being electrified will have to be determined and planned carefully. The risk of not working this out is high – the greatest being continually being held hostage by the coal-fired power capacities and unable to shut them down to green the grid because power demand is climbing faster than we can build the grid and renewable capacities.

Gas is a transition fuel for precisely this reason; and it can play its role in the transition in two ways. First, it continues to supply energy to industries that need heat, delaying their need to electrify and hence keeping power demand at bay. Second, it can provide peaking power and supplement or displace coal-fired power in baseload, playing a critical role in taking the most carbon-intensive power source off the grid. Yet this brilliant idea keeps getting drowned out by the fear that once the gas industry is entrenched, it won’t go away. The economic lifespan of combined cycle gas-fired power plants or open cycle ones is about 25 years though their operational life can be extended. This means that they can be introduced immediately and fired up to replace coal-fired power plants and the tail end of their economic life can be more for peaking uses to stabilize the variable renewable energy, deferring investment in batteries that have significant lifecycle carbon emissions themselves.

The earlier we cut coal, the better; by allowing gas-fired power generation, we also defer the need to scale up our network capacity quickly when the electrification drive advances. These actions can mutually reinforce each other and allow battery, wind, and solar capacities to enter the system gradually alongside network upgrades. We observe how energy cost on consumers have increased while trying to green the grid (levellised cost of electricity from solar and wind is not a strong measure given that they are not produced when needed); trying to force the electrification is not going to make things better. Coupled with the strong anti-gas sentiments would only mean costs will keep going up.

Part II of this article continues tomorrow.