The shale-gas boom in the US has slashed power prices and a new report explores the next energy game-changers.
The shale-gas boom in the US has slashed power prices and a new report explores the next energy game-changers.
Ten years ago you needed a crystal ball to see the future of shale gas, the energy source that is playing a leading role in rebuilding the US economy after the global financial crisis, thanks to the way it has slashed power prices.
Australia’s shale-gas revolution is just starting, with important tests over the next few months in a number of locations, including the Perth Basin.
But, just as we prepare to enter the world of shale, which has cut the price of gas in the US by 85 per cent, a team of boffins in the US has moved on to the next phase of the global energy revolution.
McKinsey & Co, one of the world’s leading management consultancies, asked some of its smartest staff to analyse innovations in energy technology to see which ones could be game-changers in the same way shale gas has altered the way the US thinks and acts.
Before sharing the picture McKinsey saw in this exercise in futurology, it is worth considering how technology and the price mechanism are doing more to cut pollution than government taxes on carbon or tougher environmental rules on what fuel is used to generate electricity.
Shale gas, which is simply natural gas released from rocks once regarded as too hard and impervious to release their trapped gases, is causing coal-fired power stations across America to scale back production because it is proving to be abundant, cheap and far less polluting than burning coal.
An unintended consequence of shale gas driving the price of natural gas down from $US13 per million British Thermal Units to less than $US2/mbtu is that politically popular renewable energy sources such as solar and wind are also struggling to compete.
The five technologies that McKinsey identified, and reported in the latest edition of its McKinsey Quarterly, are:
• Grid-scale storage of electricity that will dramatically cut the size and number of power stations because of the ability to store electricity for release in periods of peak demand.
• Digital power conversion that uses less energy than conventional high-voltage transformers, which have changed little since the 1880s.
• Compressorless air-conditioners and electrochromic windows, which could cut the cost of cooling houses and offices by 50 per cent.
• Clean coal, a dream being pursued around the world, but getting closer as technologies evolve which can capture up to 90 per cent of the carbon dioxide released in burning coal.
• Biofuels and ‘electrofuels’, also technologies that have been around for years but which are taking on new forms through the innovative application of science.
“Recent breakthroughs in natural gas extraction highlight the speed with which game-changing technologies can transform the natural resource landscape,” McKinsey wrote.
“Just over the horizon are others, such as electric vehicles, advanced internal combustion engines, solar photovoltaics and LED lighting, that are benefiting from the convergence of software, consumer electronics and traditional industrial processes.
“Each has the potential to grow by a factor of 10 in the next decade.”
Of the five future game-changing technologies identified the most interesting appear to be the grid-scale electricity storage and electrofuels.
Large-scale storage of electricity, which works in much the same way conventional batteries keep consumer appliances functioning, has been a scientific goal for decades.
It can be done today using techniques such as pumped hydro, which means lifting water during periods of low power demand and releasing it to pass through turbines during peak periods – but the cost is high at anywhere between $US600 to $US1000 per kilowatt hour.
“Innovations such as flow batteries, liquid-metal batteries, flywheels and ultra-capacitors could reduce costs to between $US150 to $US200 per kilowatt hour and make it possible to provide grid storage in every major metropolitan market,” McKinsey said.
Being able to store electricity more cheaply and efficiently could also be the technology to boost “weather-dependent” electricity generation such as solar and wind.
Electrofuels, a novel step down the biofuels pathway, is science at the extreme, though perhaps no more radical than the early proposals to extract gas from shale. It is being developed by pharmaceutical researchers to effectively recreate naturally occurring fuels.
“Bio-pharmaceutical researchers are developing electrofuel pathways that feed carbon dioxide, water and energy to enzymes that create long-chain carbon molecules that function like fossil fuels at one-10th the cost of current biofuels,” McKinsey said.
“The key question is whether these new technologies can be scaled (up).”
What makes the McKinsey crystal ball exercise particularly interesting is that it throws light on how innovation, science and the price mechanism are working on the same issues being tackled by government – how to cut reliance on scarce energy resources and reduce pollution.
Just as shale gas caught everyone by surprise, it is possible that the latest crop of innovations will again change the energy landscape.
Still no sparkle
Rio Tinto’s decision to offer for sale its entire diamond division, including the Argyle mine in Western Australia, caught some observers by surprise, though not people who really understand the poor financial returns generated from producing “upmarket gravel”.
Last year, despite gee-whiz promotion of its Argyle pink stones, Rio Tinto’s entire diamond division earned a net profit of $US10 million from gross diamond sales valued at $US727 million, with that profit a tiny fraction of the margins generated by iron ore and coal.
And it’s not as if 2011’s miserable return was a flash in the pan. In 2010 the diamond division generated a profit of $US69 million from sales valued at $682 million – better, but hardly worth the effort.
Diamonds have been such a poor performer that some shareholders wonder why Rio Tinto bothers and why it is spending $2.1 billion to keep Argyle operating.
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“Successful research impedes further successful research.”
Keith J. Pendred.
