Tuesday, November 01, 2005

Slippery Slope: Oil after the Global Peak (Peak Oil, Part I)
Special Report
As we head into the summer driving season, it seems a good time to take stock of the issue of oil production.
By Ryan McGreal
Jun. 16, 2005

Ryan McGreal Special Report
Raise the Hammer has written about energy issues rather exensively in our hammerblog, as well as writing reviews and conducting interviews (see Related Articles at the bottom of this page). However, as we head into the summer driving season, it seems a good time to take stock of the issue in a more coordinated manner.

This is Part 1 of a three part series on oil peak production and its implications for Hamilton's future development. Part 1 provides an overview of the "peak oil" theory; Part 2 will explore the unique properties of oil and the limitations of possible replacements; and Part 3 will examine what cities can do to plan and prepare for the future.

Over the next five years, crude prices will almost double, averaging close to $77/bbl and reaching as much as $100/bbl by 2010. ... Tomorrow's price hikes … will follow from the inevitable collision between surging global crude demand and accelerating depletion of conventional crude supply.

-- CIBC World Markets
The earth consumes about 30 billion barrels of oil a year, while the world's remaining endowment of recoverable oil stands at about one trillion barrels. If humans could continue using oil at the same rate, we would drain our endowment in 34 years.

Of course, this won't happen, because oil production follows a bell curve: output accelerates rapidly after production begins until it peaks at about the mid-point of total reserves. After that, output declines and tapers off until it is no longer economical to extract any more (i.e. it takes a unit of energy to obtain a unit of energy).

The earth has already consumed a trillion barrels of oil, which puts us around the mid-point (a trillion consumed and a trillion to go). Since global production is just an aggregate of all the individual wells, it also follows a bell curve. If we're at or near the global peak now, global daily production will soon start declining. The earth cannot maintain its current annual output of 30 billion barrels.

The world economy has gotten fairly comfortable with oil at $45 a barrel. But how will it react to paying $100 a barrel three years from now? Or $150 in five years?

-- Forbes, paraphrasing Stephen Leeb, president of Leeb Capital Management
The U.S. Geological Survey (USGS) claims the production peak is still two decades away, but don't believe it. The U.S. government has an official policy of calculating reserves based on projected demand, not on projected supply. Yes, you read that correctly. As the Energy Information Agency explains, "estimates are based on non-technical considerations that support domestic supply growth to the levels necessary to meet projected demand levels. [emphasis added]"

The USGS hangs its optimism on undiscovered reserves and technological improvements at extracting oil. However, the former is unlikely, as oil companies have mapped the world extensively and have made no new major discoveries in recent years. (In fact, global discovery peaked around 1964, and new discoveries have been declining ever since, with no large finds at all in the past five years. The production peak follows necessarily from the discovery peak with a four decade delay.)

The much-touted technological improvements, rather than increasing supply, have merely accelerated depletion, draining wells faster and hastening the production peak. After peak, production falls off much more quickly than it expanded before peak. Further complicating matters, pumping oil too quickly can also damage the internal structure of the field, leading to structural collapses and lost potential.

We believe oil markets may have entered the early stages of what we have referred to as a 'super spike' period ... Resilient demand has caused us to revise up our super-spike range to $50-$105 per bbl up from $50-$80 per bbl previously.

-- Goldman-Sachs Global Investment Research
Nearly every reserve assessment not based on suspect USGS data puts the peak somewhere between now and 2010. In fact, there likely won't be a discrete peak per se. It will probably stretch over several years as volatile prices squash demand periodically. We appear to be entering that jagged plateau now, as described by analysts at Goldman-Sachs and CIBC World Markets.

This is also consistent with the investment decisions of the major oil companies. They're keeping mum for the most part, but their cumulative decisions to consolidate and merge rather than search for more oil suggests they're hunkering down for the crunch.

The combination of the news that there's no new Saudi Light coming on stream for the next seven years plus the 27% projected decline from existing fields means Hubbert's Peak has arrived in Saudi Arabia.

-- Bank of Montreal
The evidence is mounting that Saudi Arabia, for many years the world's "swing producer," is losing its ability to continue bridging demand with more supply. The pumps are running full-bore and Aramco is pumping seven million barrels a day of saltwater into its massive Ghawar oilfield just to keep production flat. Ghawar's "water cut" - or the proportion of output made up of water, not oil - is on the increase.

Matthew Simmons, CEO of Simmons International investment bank and advisor to Dick Cheney's Energy Task Force, has written a book on Saudi Arabia's secretive oil industry (Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy) arguing that the world's swing producer has already peaked. Raise the Hammer will review Twilight in the Desert in an upcoming issue.

The, er, good news is that our oil endowment will last longer than 34 years as daily production declines. People may still be pumping conventional oil a hundred years from now. The bad news is that the global economy, powered as it is by cheap, abundant oil, will inevitably go haywire as the supply starts to contract.

Peak Oil means supply never grows and probably begins to decline.

Demand then exceeds supply.
Prices rise (but supplies do not).
Fierce energy competition ensues among key users.
Economic rationing will divert supplies to highest price purchasers and highest need areas.
Lifestyles have to change to accommodate less supply.
-- Matthew Simmons, Simmons & Company Intl. [emphasis added]
Economists argue at this point that when oil becomes uneconomical, humans will simply segue across to whatever replacement best meets our needs. This article of economic faith is unlikely to occur, at least in the seamless manner in which economists envision. Part 2 of this series will explore the unique properties of oil in more detail.

Next issue: Part II: Unique Properties of Oil

Bridging the Gap: Alternatives to Petroleum (Peak Oil, Part II)
Special Report
Oil's three unique properties, combined with its sheer abundance, mean it's unlikely any alternative, or combination of alternatives, can replace oil and allow our economy to continue its current course indefinitely.
By Ryan McGreal
Jul. 1, 2005

Raise the Hammer has written about energy issues rather extensively in our hammerblog, as well as writing reviews and conducting interviews (see the bottom of Part I for a list of links). As we wind up the hottest June on record, it seems a good time to take stock of the issue in a more coordinated manner.

This is Part 2 of a three part series on oil peak production and its implications for Hamilton's future development. Part 1 provided an overview of the "peak oil" theory; Part 2 explores the unique properties of oil and the limitations of possible replacements; and Part 3 will examine what cities can do to plan and prepare for the future.

Unique Properties of Oil
How important is oil? Unlike any other energy commodity, oil is concentrated, versatile, and portable.

For a sense of how concentrated the energy in oil is, consider that I can drive my compact car six kilometres on the oil that would fill a pop can. Other fuels don't pack the same punch, and renewables are orders of magnitude less energy dense.

It's theoretically possible to build enough nuclear reactors to convert our fleet of millions of cars from oil to electric, but electric cars don't have nearly the speed or range as gas cars, and hydrogen for fuel cells has far too many problems to power a practical, large-scale car infrastructure. The infrastructure would be prohibitively expensive to build, and hydrogen is extremely light, flammable, and corrosive, making it difficult to store or transport, and highly prone to leaks and explosions.

Petroleum is also incredibly versatile. It powers everything from golf carts to jumbo jets. It's used to make the roads on which we drive our petroleum-powered vehicles. It's used to make all manner of plastics, which make their way into just about everything we buy, a variety of solvents and dry-cleaning fluids (an oxymoron?), lubricating oils and greases, naphtha, and paraffin wax.

It's also used to fertilize the soil to grow our food. A single acre of farmland consumes 19 litres (enough fuel to drive 342 kilometres in my car) of petroleum in fertilizer each year. The so-called Green Revolution of the 1960s, when farm yields tripled, was not a victory for improving the productivity of the land. If you measure productivity by energy invested, modern farms are actually quite a lot less efficient than their non-petroleum-enhanced forebears were.

This doesn't take into account the fuel burned by tilling, sowing, and ploughing machines, aerial crop dusters, or transport trucks that take the crops to factories to be processed. Translated into food, it takes ten calories of fossil fuel energy to produce one calorie of processed food (for beef, the ratio jumps to 35:1). After that, the processed food still has to be trucked to the grocery store, often across the continent.

Oil is fungible, which means oil from anywhere can be interchanged with oil from anywhere else. As the oil supply from a given well declines, it can be replaced with oil from another well, and the global supply is an aggregate of all the individual supplies from the world's active wells.

Oil is extremely easy to move around. It stores in liquid form at room temperature and can therefore be poured into tanks on trucks, train cars, or ships and carried anywhere in the world. It can also travel thousands of kilometres through pipes. It can sit nicely in a tank under a fueling station, or in the gas tank of a car. It is more or less inert, meaning it doesn't react chemically with the materials (metal tanks, plastic and rubber gaskets) used to house it.

Oil's three unique properties, combined with its sheer abundance, mean it's unlikely any alternative, or combination of alternatives, can replace oil and allow our economy to continue its current course indefinitely.

Natural Gas
In contrast to oil, natural gas must be super-cooled until it becomes a liquid and stored in special containers that keep it cold. After it is shipped across water, liquid natural gas (LNG) must be converted back to gas form in expensive regasification plants before it can be piped to its destination.

Domestic natural gas production has already peaked in the United States, which means more will have to be transported there from offshore and from other continents. The infrastructure to do this hasn't been built yet, but will cost many billions of dollars over the next couple of decades, and lead to tremendous battles between developers who want to build regasification plants in coastal towns and local residents who won't want to host them.

The United States accounts for a quarter of the world's natural gas consumption, using it mainly to generate electricity (every power plant built in America in the past two decades has been gas-fired) and heat buildings. LNG currently accounts for two percent of U.S. consumption, but will make ups 15-20 percent by 2025.

Between now and 2010, America will have to prepare for a 58 percent increase in LNG imports to 23 billion cubic metres. 2010 is also the year that Canadian natural gas peaks, meaning America will have to make up the shortfall with NG from Mexico and LNG from offshore sources.

There are currently 40 proposals to build regasification terminals in Canada, the United States, Mexico, and the Bahamas, nearly all of which will feed the American market for natural gas. Eight of those proposals are in Canada, and while most are intended to re-export their NG to the U.S., domestic production will no longer be able to meet Canada's demand after the production peak.

Hydrogen has so many problems related to portability that it will probably never be used widely. First of all, hydrogen is a way to store energy, not a source of energy. Converting energy to hydrogen is a net loss, meaning one unit of energy produces less than one unit of hydrogen energy.

This would be acceptable if hydrogen was a convenient storage medium, but it's not. Hydrogen molecules are the tiniest of all elements, and can escape from nearly any container. It is also highly reactive and corrodes the gaskets that contain it. Furthermore, hydrogen is extremely explosive and can combust at most concentrations with oxygen; merely the energy released by hydrogen escaping a leak in its tank is enough to cause explosive combustion.

Further, the most common and effective means of producing hydrogen is via natural gas, which is already declining in North America and tied up in other uses.

Hydrogen fuel cells are an attempt to overcome the limitations of electric motors. Electrical generators operate at between 30 percent and 60 percent efficiency, so power is lost as soon as it is converted to electricity. Electric power also encounters resistance as it moves through wires; some of its potential is lost through heat.

Further, because electricity cannot be "stored" in tanks, it must be generated as needed. During low demand times, generating stations idle at low efficiency; during peak demand times, less efficient generators are brought on-line, producing power at low efficiency.

Electric cars can store energy in batteries, but the batteries are expensive, have a short life, cannot store very much power, and are not very efficient.

The public's current disdain for nuclear power and its attendant risks probably won't survive a sustained energy crisis. However, the best nuclear power plants can do is replace natural gas power plants for generating electricity. Since natural gas is already declining in North America and imports are much more expensive, nuclear reactors will be busy enough simply maintaining current energy production levels, let alone increasing net energy.

This also neglects to consider the massive investment of petroleum needed to provide nuclear power, for mining and extraction, construction of the facilities, etc. As James Howard Kunstler explains, nuclear power is an adjunct of the petroleum age; it cannot survive far past the end of abundant oil.

Non-Conventional Oil
Media commentators have made much of the huge quantities of oil in Alberta's oil sands. Officially, Canada has the world's highest oil reserves. Unfortunately, the sands will probably never be a major contributor to world oil markets.

Oil sands require massive inputs of natural gas to heat water into steam, which is injected into the sands to separate the oil. Natural gas itself will provide a limit to how much oil the sands can provide, because its use will be increasingly constrained in years to come.

Even if you ignore the staggering volumes of oily wastewater, tar sands production has a low energy return on energy invested (EROEI). After the non-conventional oil is retrieved, it must still be enriched with hydrogen before it can be used in place of conventional oil. All told, the EROEI is about 3/2. It's unlikely that this ratio will be increased much beyond 2/1.

Similarly with "shale oil" (which is not really oil but kerogen, which yields oil when heated), it requires massive investments of energy to extract and refine the shale into oil.

As energy investment banker Matthew Simmons explains of oil sands and shale oil, "They're real and the economics work, but these are high energy intensity projects that can never reach high volumes. They are not a substitute for high flow rate oil. They are not a real offset."

Organic Fuels
Organic fuels like biodiesel and grain ethanol are simply not viable options for large-scale energy consumption. For those enthusiasts willing to collect spent vegetable oil from fast food restaurants, bio-diesel can supply a few niche needs at most.

Similarly, running a country's fleet of cars on grain fuel would require the conversion of far too much farmland to growing feed crops. This doesn't even take into account the fact that modern farming is fueled by petroleum. Growing fuel represents a net energy drain.

Renewable energy from wind, solar, geothermal, and tidal sources cannot replace oil in any imaginable scenario.

They simply cannot produce anything even remotely like enough energy to run the trappings of modern life. Since most renewables are location-dependent, they cannot provide the portability of oil; at best, they could help feed a distributed electricity grid, with the attendant limitations this entails.

At 1.5 megawatts (mW) per turbine, for example, it would take over 1,300 wind turbines to replace one 2,000 mW gas fired power plant. That could conceivably be used to power some electric cars, but it's never going to push an airplane into the sky.

Further, renewables tend to be highly variable in the power the produce. Solar panels work best on sunny days; wind turbines work best on windy days, and so on.

Post-Oil Economy
As a result, an economy running on some combination of alternative and renewable energy sources will be radically different from today's economy. Part Three of this series will explore some possible scenarios for a post-oil economy. Rather than dwelling on the worst case (for that, read James Howard Kunstler's book The Long Emergency, I will focus on opportunities to turn the end of cheap oil to our advantage in creating more humane cities.

More Quotes
More and more energy insiders, investors, and analysts are alerting us to the likelihood of oil peak production. Here's a sampling of recent statements.

The majors, they talk about plenty of oil and that they can produce more, but if you look at ExxonMobil, ChevronTexaco, BP (British Petroleum), all the production [is] going down every year. They don't replace and they don't add to production, but they say there's plenty of oil around.

Now why would they say that? One of the chief economists with one of the major oil companies... I was at a conference where he was... we were talking and I asked, why do they say that? And he said, can you imagine what would happen if one of these major oil company's CEO's got up and made a speech and he said, 'We're running out of oil'? I said there'd be panic and he said, 'That's right. They're not going to make the statement. They're going to say there's plenty of oil around. - T. Boone Pickens, famed energy investor
Kuwait's geologists must have had a pretty good year [in 1985, the year OPEC began to allot exports based on a country's reserves], because their reserves climbed from 64 billion barrels to 92 billion. But the Kuwaitis were pikers compared to their brethren in the Emirates, who said that, upon reflection, they needed to boost their reserves from 31 billion to 92 billion. Not to be outdone, Iran announced its real reserves were 93 billion, up just a tad from a previous 47 billion. The 1985 champ, though, was the savvy Saddam, who was not content with double digits: his reserves went to 100 billion, up slightly from the previous 47 billion.
-- Don Coxe, Chairman, Jones Heward Investments Inc.
We've been down a long road of exploration and exploitation and found everything easy. We've reached the point where all the major initial discoveries have reached their peaks and are declining. The newer ones are too small to offset it, and North American natural gas production has clearly peaked and is irreversibly declining. We think were at that turning point for world oil. From now on we're in a new era where the key question is what prices will be required to cause consumption to decline to match an irreversible decline in supply?
-- Henry Groppe, founder, Groppe, Long & Littell

Riding Down the Curve: How Cities Can Survive the Energy Crisis (Peak Oil, Part III)
Special Report
If cities don't plan for the coming energy crisis, many will not survive it.
By Ryan McGreal
Aug. 22, 2005

Part I of this series made the case for oil peak production some time between now and, say a decade from now. Part II examined the likely candidates to replace oil, concluding that none possess oil's density, portability, and versatility. Part III begins the process of examining what cities can do to prepare for oil scarcity.

The calculus of the oil economy is relatively simple: if the oil infrastructure can continue bringing oil to market fast enough to meet market demand, then the economy will continue to tick along as it has. If, however, the rate of oil production maxes out but demand keeps growing, then the price of oil will keep rising until it gets high enough to push demand down to what the industry can provide.

So far, the oil industry is still putting out, and market demand is still growing. In fact, part of the recent jolt in oil prices has been due to a lack of refining capacity, not a shortage coming out of the ground. However, it does appear that the oil industry is at or approaching an absolute limit to the rate at which it can produce oil (see sidebar: Are We In Peak Oil Today?).

At the same time, a higher proportion of the crude oil on today's market is "sour" and "heavy", meaning it requires more refining before it is of use. This is consistent with the Peak Oil hypothesis, which holds that "sweet", "light" crude (the low-lying fruit of the petroleum garden) will be used up first, leaving the lower quality, more expensive stuff for later. According to energy investment banker Matthew Simmons, "Almost 90 percent of new oil projects produce oil that is either sour, heavy, or both." (Energy Bulletin, March 1, 2005)

In any case, oil prices are nowhere near high enough to make a serious dent in global demand. Demand growth has slowed this year, but demand is still growing, especially in China. Although China consumes much less oil than America, its growth rate is much higher. At current trends, China will surpass America as the world's biggest oil consumer by 2023 (see sidebar: A Strangling Embrace).

Short Term Prices
Barring some major disruption to the oil supply, prices will probably fall over the next three weeks as the summer "driving season" winds down and demand for gasoline eases temporarily. However, even as the cyclical aggravator fades, the underlying supply constraint will come back to haunt prices every time either demand cycles up toward the production limit or an unexpected event disrupts even a small percentage of total production.

The economy is still growing, and demand for oil is still going to be higher this year than it was last year. Next year, when global demand has risen another two percent, the strain on our oil infrastructure will be that much worse. Blinkered analysts will insist again the the problem is cyclical, not systematic, failing to see the emerging pattern.

So far, rising oil prices haven't brought on a recession in North America, but there are plenty of reasons to suspect that growth here must stall sooner or later:

US consumer spending has been growing faster than income for some years. This cannot continue forever. Inflation is starting to return to the US economy due to the rising price of energy.
The US Federal Reserve has been increasing the prime rate slowly but steadily this year, and this will soon eat into consumers' ability to keep borrowing as credit card, home equity lines of credit, and adjustable rate mortgage payments go up.
Much of the boom is related to the US housing market, which shows every sign of being in a serious bubble. Banks are already resorting to negative amortization packages and mortgages to illegal aliens to keep people buying, which smacks of desperation.
This summer's blip in US auto sales is due only to deep discounts that the automakers won't be able to maintain for long. The big three are in deep financial trouble and remain profitable only in their finance divisions. Overall, sales of SUVs have stagnated and resale values are falling as drivers try to unload their gas-guzzlers.
The US economy is still growing, but growth is slowing in response to both rising interest rates and rising oil prices.
Consumers are accustomed to "feeling rich" and living on credit, which has eroded personal savings. The consumer savings rate is zero, down from ten percent in 1982.
Beyond that, the potential for a major supply disruption has never been higher:

Refineries are running full-bore and straining their antiquated machinery to the limit. Unscheduled shutdowns have already brought the airline industry to the brink of jet fuel shortages.
Saudi Arabia is at grave risk of both a collapse in the output of the legendary Ghawar oilfield and a major terrorist attack. Either event will send a shock through oil markets.
Iran and the United States seem destined for a collision as Teheran rolls out its "oil bourse", an alternate pricing mechanism based on euros instead of dollars. (See sidebar: Iran In the Crosshairs)
Seasonal hurricane risks are still a potential disruption.
Even if a major disruption doesn't occur, supplies will become increasingly constrained from one year to the next, until the year arrives when production simply cannot meet demand growth any more.

I've already written a little on what individuals can do to insulate themselves from energy scarcity, but what can cities do to prepare for coming scarcity?

Seventy percent of the oil consumed in North America is used for transportation, mostly on our surface network of roads, highways, and private automobiles. The other thirty percent goes into plastics, asphalt, and other miscallaneous ues. It will not be possible to go on using oil this way, which means by extension that it will not be possible to go on using cars as our main transportation mode.

Hybrid cars will not save our road network as the global oil supply continues to decline. Nor will hydrogen-powerered hypercars or biodiesel cars (biodiesel is actually a net energy sink, since more fossil fuel energy goes into growing the feedstock than the biodiesel produces). Most of these will probably continue in some form or another in increasingly narrow niches.

No single fuel system can replace our continent-wide, internal combustion, gas-powered engine system. Even if a breakthrough was made in battery technology and cars could all shift to electric power, there will not be enough electricity to power our lights, appliances, gadgets, and vehicles. No matter what we do, we will end up with a patchwork of incompatible systems and fuel sources at much higher unit costs. The car will lose a lot of its lustre as a mass transportation vehicle in that case.

However, even if two- and three-car families become rare, our road network will still exist. Whatever means we use to get around will have to find ways to leverage that network. There will be a number of ways to do this, but the following seem obvious:

First of all, stop investing tens or hundreds of millions of new dollars into expanding highway infrastructure. Instead, develop light rail systems for intra-urban transportation between distant points in the city.
Transform existing highways into rail lines. Governments will still own the rights-of-way, and trains are ten times more efficient than vehicles for transporting people and goods long distances.
Share city streets for pedestrians, cyclists, skateboarders, etc., as well as cars.
Land Use and Building
Transportation and land-use are intricately connected. It's not enough to change the streets themselves; cities must also change the building patterns that streets serve. A year and a half ago, in an op-ed for the Hamilton Spectator, I wrote of the suburbs, "First, we must stop the hemorrhaging." This is even more true in the context of energy depletion. Sprawl simultaneously forces car-based transportation and destroys local farmland.

Low-density, use-segregated building guarantees that people will live far from the amenities and services they need to live. Without local groceries, corner stores, etc., residents have no choice but to drive to distant supermarkets. Public transit is not viable in sprawl, because the population density is too low to make buses or light rail cost-effective. There are literally not enough people living within walking distance of a transit line to justify the cost.

Governments must:

Throw out their zoning regulations that encourage sprawl, like use separation, deep set-backs, parking requirements, etc.
Change building codes to require more energy efficient building design (see below).
Draw firm urban boundaries. Instead of subsidizing developers who build on farmland, cities must encourage developers to build on brownfields, restore old buildings, and allow different uses to coexist. This brings prople closer to their destinations and reduces the need for both private and public transportation.
Eliminate hidden "free" parking regulations and other subsidies that encourage people to drive even short distances.
Calm traffic by making streets two-way, lowering speed limits, adding bike lanes, widening sidewalks, etc. This discourages driving and makes it easier for people to choose different modes.
Ban drive-thrus and other building models that force the primacy of driving.
Invest in public transportation options like light rail systems, which are more energy efficient than buses.
Heating and Cooling
We need to build new houses with efficiency in mind. It absolutely boggles the mind that robust and practical conservation targets haven't been standardized in our building codes. There's simply no reason for continuing to build houses with inefficient hot water tanks and forced-air furnaces.

Instead, new houses should include pilotless on-demand water heaters and radiant floor heating at the very least. Europe has built this way for years, and they reduce energy demand by over a half. Instead, North American builders continue to follow the tried-and-untrue practice of assuming energy costs don't matter.

Canadian natural gas production will peak in 2010, after which conventional gas will become progressively scarcer. Even if we manage to build an infrastructure of liquified natural gas (LNG) shipping from offshore and other continents, gas will be much more expensive and subject to supply interruptions than it is now.

Active solar heating, in which roof panels collect solar energy to heat water, is still quite expensive and inefficient, but passive solar heating, in which the house is built with large, south-facing windows and materials that absorb heat throughout the day and release it slowly at night. In summer months, the house is kept cool with shading, ventilation, wing walls (which catch natural breezes), house fans, and thermal chimneys.

It is expensive to retrofit existing houses to improve their passive solar design (and governments should be providing incentives for homeowners and landlords to improve energy efficiency instead of providing incentives for developers to build more sprawling subdivisions), but there's no excuse not to build new houses this way, especially in urban in-fill projects. City residential lots tend to be taller and narrower, squeezing more houses into a smaller area. This has numerous benefits over the more horizontal suburban model, from higher population density and better street life and neighbour interaction to improved energy efficiency through the "huddle effect" of crowding the houses together.

The means to build much better houses exists, but the political will is too often lacking. Given encouragement, efficient building can flourish. In 2000, the City of Chicago's Department of Environment and Department of Housing sponsored a competition to build an affordable green house. One of the finalists was Esherick Homsey Dodge & Davis entry Factor 10, a 1,200 square foot, two-story house on an urban lot that uses only one tenth the energy of a conventional house.

Starting with a thermal foundation and super-insulated walls, Factor 10 also includes a whole house fan for cooling and solar chimney that pushes warm air into the house during winter. It also has a green roof of sedum to absorb heat and insulate the roof, an array of sealed water bottles on the north side that act as a heat sink, and an open, cross-ventilated floor plan. Plumbing is all low-flow, with dual-flush toilets.

The house was designed as part of the city's affordable housing project, so it was designed to be comparable in price to conventionally built houses. Again, there's no reason why every new house cannot be built to similar standards of efficiency. Rather than scrambling to secure new sources of energy, we could be making much better use of our existing sources and saving plenty of money.

Electricity Grid
The electricity grid will also be increasingly strained in the coming decades. Natural gas fired power plants provide much of North America's electricity, but Canadian natural gas production will peak around 2010, after which the growing shortfall will have to be supplied elsewhere.

Over the past fifteen years, the United States bet the farm on natural gas, using it directly for heating and indirectly for producing electricity. Ten years go, the consensus view was that natural gas supplies were adequate to last decades. Since then, demand has surged at unprecedented rates, and America's reserves abruptly peaked. Canada will peak soon, and Mexico doesn't have as much gas as analysts had predicted. That spells trouble over the medium term.

Right now, half of Canada's natural gas is being exported to the United States. According to the North American Free Trade Agreement (NAFTA), Canada is not allowed to reduce its natural gas exports without also reducing its own domestic use, guaranteeing the the US will continue to have premium access to Canadian gas, despite the fact that the US government still refuses to accept the recent unanimous ruling of the NAFTA arbitration panel that it must lift countervailing duties against incoming Canadian softwood and pay back $5 billion in unfair penalties against Canadian lumber exporters.

As a result, we can expect increasing pressure to build more coal-fired and nuclear power plants to make up the shortfall from declining domestic natural gas. Both options come with serious problems.

Coal is cheap and abundant but dirty, and a significant increase in the number of coal-fired power plants contribute to air quality problems, anthropocentric climate change, and toxic, even radioactive, waste. The so-called "scrubbers" touted by the coal lobby only reduce air pollution, and they do so at the expense of energy productivity. As energy scarcity escalates, the pressure will be on to exempt power plants from air quality regulations.

Nuclear power, by contrast, is colossally expensive, and the cost will only increase as high quality fuel is depleted and the fuel costs of mining, refining, and transporting nuclear fuel, not to mention building nuclear power plants, go up. The total ERoEI of nuclear power, accounting for plant construction, monitoring and safety, and decomissioning, is actually quite poor. Nuclear power may, however, enjoy massive subsidies from governments desperate to appear decisive in meeting the public's demand for abundant energy.

There are ways to stabilize the electricity grid, at least in the short and medium term:

Wind turbines have an important role to play, as the cost per kilowatt hour is becoming increasingly competitive. With smart investments now, Canada may one day generate a significant share of its electricity through renewable wind power. Bear in mind also that constructing wind turbines requires the use of oil, so our ability to construct renewable energy infrastructure in the future will be constrained even as our current energy infrastructure declines.
Encourage conservation. The easiest way to "produce" more electricity is to use less. Ontario's electricity deregulation scheme of the 1990s was supposed to accomplish this, but consumption continues to increase (see sidebar: Electricity Deregulation). The government's planned "smart meters" should help considerably, since they charge residents variable rates per kilowatt-hour depending on time of day. This will encourage people to move non-essential activities, like laundry and dishwashing, to off-peak hours. This way, the grid can get away with a lower peak capacity. Similarly, renters who currently pay all-inclusive bills should be billed separately for energy. A recent study found that apartment buildings which split energy bills out of rent saw consumption go down by a third. For every three apartment buildings that do this, enough energy will be conserved to power a fourth building.
Encourage intertie production. Buildings that generate their own power can tie it back into the grid. If a building produces more electricity than it uses, then the meter runs backward and the power company pays the producer.
To be honest, none of these recommendations will prevent the severe disruptions and dislocations that will accompany post-peak oil production. At best, they may provide a way for cities to cushion the blow and reduce economic and social exposure to the energy crisis.

The biggest obstacle to energy independence is the massive proliferation of sprawl: low-density, use-separated development far from the centre of town, often on prime farmland. The loss of the best land means cities are more dependent on poorer quality farmland that not only needs big inputs of petroleum based fertilizers, pesticides, and irrigation, but also is more susceptible to crop failure due to changing climate. At the same time, the built environment is extremely difficult to live in and navigate without private vehicles.

Raise the Hammer is currently engaged in a project to explore ways that cities might retrofit sprawl to make it livable without cars. We will publish our report in an upcoming issue.


Ryan lives in Hamilton with his family and works as an analyst, web application developer, writer and journal editor. He is the editor of Raise the Hammer. Ryan also helps to edit Perspectives on Evil and Human Wickedness, writes occasionally for CanadianContent.Net, and maintains a personal website.