IDEAS21

Faced with the converging crises of fossil fuel depletion and climate change, humanity is in desperate need of an abundant, cheap and clean source of energy.

For decades, fusion has been the holy grail of nuclear energy researchers. ‘Hot’ fusion – the process that creates energy in the sun and hydrogen bombs – involves the fusing of hydrogen or deuterium atoms into helium. After decades of research, scientists have yet to crack the problem of managing the extreme temperatures involved. ‘Cold fusion’, which, in theory, would create useable energy at room temperatures, has for a long time been a similarly elusive dream.

In 1989, two scientists at the University of Utah, Pons and Fleischmann, claimed to have demonstrated a cold fusion reaction that produced excess energy, that is, more energy than would be yielded by a normal chemical reaction.

However, other researchers had great difficulty in replicating the Pons-Fleischmann experiments, and the whole notion of cold fusion became discredited as ‘junk science’.

Nonetheless, some scientists scattered around the globe have continued this line of research and, in the past few years, there has been a renewed explosion of interest in the subject.

The term ‘cold fusion’ has fallen out of favour, to be replaced by the more accurate label of low-energy nuclear reactions, or LENRs.

Scientists working in several labo- ratories have claimed to have produced excess heat energy when mixing hydrogen gas with nickel or palladium under certain conditions. Remarkably, the reactions produce no greenhouse gases or radioactive waste.

Last year, an Italian engineer and entrepreneur named Andrea Rossi catapulted himself to fame – or possibly infamy – by claiming to have invented a device – called the energy catalyser, or E-Cat – that produces commercially viable quantities of LENR energy using a special catalyst.

In October, Rossi performed a demonstration of a 1 MW E-Cat to a handful of scientists and a potential buyer at the University of Bologna. Subsequently, Rossi said he sold his device to an unnamed American buyer, which some people have speculated could be a branch of the US Department of Defense.

With Swedish company Hydro Fusion acting as the agent, the website ECAT.com is advertising 1 MW units for sale at $1.5-million each – a 25% price cut after two months, resulting from a “close and successful colla- boration with the first (still undisclosed) customer” and “new favourable and scalable production processes”. That price would equate to about R47-billion for capacity equal to the Medupi power station, which has a price tag of upwards of R120-billion. The fuel and maintenance costs are said to be a negligible $1/MWh each, while the estimated life span of a device is 30 years. ECAT.com claims that 10 kWh household units will be available for purchase by next year.

Rossi’s claims triggered a storm of debate, with many critics saying it was a scam, as his device defied the known laws of physics. Rossi has yet to allow independent scientific validation of his device, arguing that he wants to secure a patent first.

In recent months various competitors have emerged with similar assertions.

Greek company Defkalion Green Technologies issued a press release in November stating that it will begin selling an LENR device dubbed Hyperion this year. Another statement, released on January 23, invited inde- pendent third parties to test the reactors.

In mid-January, the US National Aeronautics and Space Administration (Nasa) released a short video in which a Dr Joseph Zawodny says that the LENR process “has the demonstrated ability to produce excess amounts of energy cleanly, without ionising radiation, without producing nasty waste”. He says this heat could be used on a household scale for space and water heating and converted into electricity generation, on an industrial scale for power generation and, ultimately, for transportation.

On his blog, Zawodny subsequently stated: “When considered in aggregate, I believe excess power has been demonstrated. I did not say, reliable, useful, commercially viable, or controllable.” Nevertheless, he says the video was released as part of a patent application filed by Nasa for an LENR device.

Most recently, several blogs are reporting that scientists at the Massachusetts Institute of Technology held a short course on cold fusion in the last week of January, where a successful LENR demonstration was apparently conducted.

If commercial energy from LENR proves to be viable and cheap, it could completely revolutionise the world’s energy systems, rendering fossil fuels and conventional nuclear fission reactors obsolete and making fresh- water through desalination affordable. But a widespread transition to LENR energy would likely take a decade or two.

It is still too early to tell whether commercial LENR is imminent or will turn out to be a red herring. But this story is definitely one to watch.

Published in Engineering News, 17 February 2012

http://www.engineeringnews.co.za/article/is-low-energy-nuclear-reaction-new-physics-or-an-old-scam-2012-02-17

Every year the National Treasury increases so-called ‘sin taxes’ on cigarettes and alcohol, both addictive substances whose use results in large health and social costs. So why not impose a similar tax on another substance that is a national addiction, deleterious to our long-term health and depleting globally – namely, oil?

Consumers already pay taxes and levies on petroleum fuels – amounting to about a third of their retail prices, which are now near their all-time nominal highs over R10 per litre. Further fuel price increases would hurt poor people who generally spend a large proportion of their meagre incomes on transport. Rather, the Treasury should impose a ‘syn’ tax – a windfall tax on the profits of synthetic fuel producers Sasol and PetroSA, which together contribute about a third of our fuel supplies. At the same time, consumers should begin a ‘rehab’ programme to address their oil addiction.

A windfall tax on synfuel profits will not make any difference to the price of fuel paid by consumers. This is because national fuel prices are determined by the Department of Energy on an ‘import parity price’ (IPP) basis. That is, local ‘basic fuel prices’ are benchmarked on international refined petroleum product prices, to which are added transport costs, wholesale and retail margins, and levies and taxes. Thus Sasol and PetroSA sell their synthetic petrol and diesel at the same prices as the companies – Engen, BP, Shell, Chevron and Sasol again – that refine imported crude oil.

Any increase in international crude oil prices or a weakening of the rand exchange rate pushes up local fuel prices, raising the rate of inflation and hurting SA’s consumers but boosting the profitability of synfuel producers. PetroSA recorded a R871 million net profit in fiscal year 2011, while Sasol Group operating profit increased by 25% to R30 billion.

Sasol is SA’s largest company by sales and market value and contributed R25 billion in direct and indirect taxes in the past financial year, ranking it amongst the country’s largest corporate tax payers. PetroSA by contrast is wholly owned by the state.

So should an extra windfall tax be imposed on the synfuel producers? This question was addressed comprehensively by a special Task Team appointed by then-Finance Minister Trevor Manuel in 2006. The Task Team found that both Sasol and PetroSA have benefitted extensively from state support over several decades.

Sasol was created and funded by the Apartheid state in the 1950s, but was privatised in 1979 and is now listed jointly on the JSE and the New York Stock Exchange. Sasol’s first synfuel unit was financed by the state-owned Industrial Development Corporation. The company has always been guaranteed full uptake of its products at import parity prices, enjoyed low tariffs on the pipeline network constructed by Transnet over the years – which gave Sasol market access for synfuels and gas and amounted to a subsidy of approximately R860 million per year – and benefited from tariff protection between 1979 and 2000 to the tune of at least R6 billion.

Moreover, Sasol was privatised “on terms very favourable to investors”, thereby benefitting a small group of shareholders, 40 percent of whom are foreigners.

Mossgas, which later became part of PetroSA, benefitted from tariff protection on the same basis as Sasol, ultimately enjoying subsidies from motorists amounting to R1.5 billion up to November 2004. Soeker, which discovered the gas feedstock, was funded by government but later absorbed into PetroSA. The state invested R13 billion in Mossgas and R8 billion in Soekor, and wrote off loans to these entities amounting to R8 billion and R1.5 billion, respectively.

The Task Team cited several independent estimates of the costs of production for existing CTL and GTL; these ranged between $22-45 per barrel and $18-30 per barrel, respectively. Even though these costs have surely risen over the past five years, the profitability of the synfuels producers indicates that they are considerably lower than recent crude oil prices.

In short, the Task Team commented that “very large amounts of the tax payers’ money have been used to support and maintain the synthetic fuels industry”. Thus they recommended the imposition of a windfall tax of R1.25 per litre of synfuel at an oil price of $110 per barrel, which would garner over R10 billion in annual tax revenue.

However, then-Finance Minister Trevor Manuel shunned this advice, saying the tax might undermine further investment in the synfuel industry, which he argued was necessary for bolstering energy security. An additional reason cited by the Treasury was that it could not be sure whether the windfall profits were of a cyclical or structural nature. With hindsight, it is clear that oil prices have been trending upwards for at least eight years now. And they are expected to shoot much higher after the world passes ‘peak oil’ production.

As it happens, at the same time that the Task Team released its report, Sasol announced that it was considering building a new coal-to-liquid plant, dubbed Mafutha. But the company later said it needed partial government funding for an investment set to cost in excess of R50 billion.

Last year Sasol put project Mafutha on ice because of concerns about the costs of greenhouse gas mitigation and the quality of coal in the Waterberg field. Thus the main justification for withholding the windfall tax has not materialised – and given climate change and other pollution concerns, that might be for the best.

The proceeds of a syn tax should not be used to subsidise domestic fuels, as this would encourage our oil addiction. The revenues should instead be utilised to reduce SA’s dependency on oil imports. Global oil production has been essentially stagnant for six years and an increasing number of analysts warn that we are at or near ‘peak oil’ production, and that annual output will begin an inexorable decline within the next few years. As the International Energy Agency’s chief economist Fatih Birol is fond of saying, “we must leave oil before oil leaves us”.

Thus syn tax revenues should be invested in renewable electricity capacity and more efficient and sustainable transport systems, like electrified rail for both freight and passengers. Subsidised public transport would be a much more sustainable form of support to poorer commuters than fuel subsidies.

In a country with amongst the highest levels of inequality in the world, it is iniquitous that a few private shareholders – many of whom are foreigners – should profit at the expense of our citizens. Our government should follow the example set by their Australian counterparts – in respect of their mining ‘super-tax’ – and divert resource rents to sustainable investments for the benefit of all South Africans.

Published in the Mail & Guardian, 10 February 2012

http://www.mg.co.za/article/2012-01-20-barrelling-towards-fuel-shortages/

Everything about the People’s Republic of China is big. It is the world’s second-largest country by land area, has the biggest population at over 1.3 billion people, and in 2010 its economy surpassed that of Japan to become the second largest in the world. China’s rampant industrialisation has profound implications for the global economy, energy security, environment and geopolitics.

For the past three decades the economy has grown at an average compounded rate of almost 10% per annum, which means the economy has been doubling in size roughly every seven years. Industrial growth, of course, requires energy – and China’s demand for energy has been growing prodigiously, so much so that the nation is now the world’s top energy consumer.

Coal is the mainstay of China’s economy, providing two-thirds of primary energy supply and fuelling over 80% of the country’s electricity. China is far and away the world’s top coal consumer and producer, accounting for 48% of global coal consumption in 2010. In each successive doubling cycle – about every decade – China consumes as much coal as it did in all of its previous history. According to a report by the German-based Energy Watch Group, China’s coal production could peak as early as 2015, although two Chinese researchers estimated the peak will likely occur between 2025 and 2032.

Oil is also increasingly important for the Chinese economy, accounting for 17% of primary energy supply in 2009. Oil consumption grew on average by 7.2% a year from 2003 to reach 9 million barrels per day (mbpd) in 2010. Chinese total vehicle sales were 18.5 million units in 2011, having overtaken the US in 2009. China’s expressways network is expected to exceed the total length of the US Interstate Highway system within the next couple of years.

The country is currently the world’s second-largest consumer and net importer of oil behind the US. Production in 2010 was 4.1 mbpd, but is expected by researchers at the China University of Petroleum to peak within the next few years. China already relies heavily on Middle Eastern oil producers – chiefly Iran and Saudi Arabia – for close to 50% of its oil imports.

China’s voracious appetite for energy has three major consequences for the world at large.

The first is pressure on world energy prices. While oil consumption has been declining in the rich Western nations since 2006, China has accounted for around half of world demand growth and thus much of the rise in oil prices. In 2009 China became a net coal importer, which has already had a noticeable impact on international coal markets.

The second implication of China’s hunger for energy concerns the country’s greenhouse gas (GHG) emissions and contribution to global climate change. In 2006 China overtook the U.S. as the largest absolute emitter of GHGs. China plans to reduce its energy intensity – energy consumed per unit of GDP – by 31 percent between 2010 and 2020. Beijing also recently announced a plan to introduce a moderate carbon tax. The world desperately needs China to accelerate its transition to low-carbon fuels to help avoid a climate catastrophe.

The third big ramification of China’s growing energy use is geopolitical. Depletion of finite fossil fuels implies increasing competition with other countries – notably the U.S. – over access to energy resources. In December 2011 President Obama announced that the U.S. military would be shifting its main focus from the Middle East to the Asia-Pacific area, obviously to counter China’s growing influence in the area. Nonetheless, the military actions by the US and its allies in Africa and the Middle East could be partly aimed at restricting China’s access to oil.

For its part, China is rapidly modernising its military, reportedly spending around $100 billion on defence in 2010. But Beijing’s main strategy has so far been to lock up energy resources in bilateral contracts with producer countries. And Chinese oil companies – mostly state-owned – have been investing aggressively in many resource-rich nations.

Looking ahead, three scenarios present themselves.

One is a derailment of the Chinese growth juggernaut. Concerns are mounting that the real estate bubble could soon burst, landing China with the same fate as Japan, whose economy stagnated for more than a decade after its property and equity bubbles burst in the early 1990s.

A second scenario is that China continues its relentless growth, powered principally by fossil fuels. This would be a world of rising carbon emissions and escalating geopolitical tensions. But in the face of oil and coal depletion, this path will also come to an end sooner or later.

Thirdly, if the Chinese government is really serious about transforming their energy-economy system to one that is sustainable and provides greater energy security, it could conceivably lead the world in a transition to renewable energy sources.

One thing is sure: when the Chinese jump, the world shakes.

Published in Engineering News, 3 February 2012.

http://www.engineeringnews.co.za/article/when-china-jumps-the-world-shakes-2012-02-03