Sunday, March 6, 2011

Renewable Energy: Batteries Not Included


“Windfarm on Oahu’s north shore. As soon as we started shooting, the wind stopped.” from janewells [CNBC, Hawaii] http://twitpic.com/45rh6r
Renewable energy has a problem in reliability.
We all know the wind doesn’t blow all the time and the sun doesn’t shine 24/7, and that’s a fact of nature. If wind and solar power are to break out and become significant sources of electricity, changes are needed to improve the way we deal with that variability. Wind and solar power, as we’ll see, need backup batteries.

Minor Role Players
In what is probably a familiar pie chart by now, coal, natural gas and nuclear currently provide 90% of U.S. electricity. The remaining 10% is from renewable sources, of which one source, hydroelectric, makes up two-thirds. The remaining renewable sources in the “other” category are wind and biomass, with minor contributions from solar and geothermal. In total, wind and solar power are less than 2% of the total electricity pie. Despite all the news and interest in renewable energy, wind and solar power have a long way to go to become significant sources of electricity.


from EIA: 2009 U.S. Electricity by Source

Focus on Wind and Solar
Whenever renewable energy is mentioned, wind and solar usually get the attention over the other sources, hydroelectric, biomass, and geothermal. As generating sources of electricity, hydroelectric, biomass, and geothermal are all more continuous, and therefore more reliable.

Part of the reason appears to be psychological. What, after all, could be more clean and natural than the wind and the sun. Biomass still comes down to burning a fuel; geothermal development involves drilling, which makes it look like a cousin to the oil and gas industry; and hydroelectric power comes from what used to be a very dirty word, dams.

The other part is growth. Wind and solar installations provide faster construction, are scalable, and typically don’t have the permitting battles that, in most cases, are associated with biomass or hydroelectric. Wind and solar projects also don’t carry the development risk and regional limitations that can be associated with geothermal power.

This ability for rapid growth is seen in wind power. In the last 5 years, the generating capacity from wind power in the U.S. has grown by about 400% to about 40 GW. To put that in perspective, the total generating capacity from all nuclear plants in the U.S., 104 of them, is about 100 GW.

From EIA: Growth in Wind Power

Hitting A Wall
The problem with wind power is that 40 GW is in generating capacity, not actual generation. Because of its variability, wind power produces less than 2% of our electricity. Nuclear power, with 100 GW in generating capacity, produces about 20%. It should be no surprise, then, that nuclear power fills a role as a steady provider of base loads. Wind power, as it stands, does not fit well into either base load or peaking power.

The problem can be found summed up in a report on California Renewable Portfolio Standards [1]:
Historically, given its variable nature, wind generation has been taken on an as-available (or “must take”) basis, and grid operators compensate by incrementing or decrementing the output of other committed generation. At low wind penetrations, such actions do not significantly affect system operations. At higher levels of wind penetration, however, forecast uncertainty becomes more challenging.
The problem is not as bad for solar power, which has the advantage of being there at the same time additional power is needed in the grid for cooling. At present, however, solar rates as the highest cost of all forms of energy, double that of wind power, as ranked in a recent issue of Smart Money.

The EIA also sees the problem as one of cost.
1. Renewable Energy Technologies Are Capital-Intensive: Renewable energy power plants are generally more expensive to build and to operate than coal and natural gas plants. Recently, however, some wind-generating plants have proven to be economically feasible in areas with good wind resources, compared with other conventional technologies. 
2. Renewable Resources Are Often Geographically Remote: The best renewable resources are often available only in remote areas, so building transmission lines to deliver power to large metropolitan areas is expensive.
[from EIA website: Why We Don’t Use More Renewable Energy]
The combination of cost and penetration is seen in EIA’s forecasts.  By 2035, wind and solar power are projected to grow to about 60 GW in capacity, this out of total generating capacity in the U.S. of 1,110 GW. Unless there are changes, wind and solar will continue to be small slices in the energy pie.

Resources are Resources
So, with such a negative outlook, why even worry about wind and solar? Politics is one reason. Renewable Portfolio Standards in some form have been legislated in 35 states, and, with rising oil prices, efforts to regulates carbon, coal ash, and hydrofracing for natural gas, and concerns over nuclear power, we can count on more money going into renewable energy. Another reason is change in economics. Costs change as technology improves, so ignoring a resource on the basis of current economic conditions can be short sighted. Canada’s oil sands are a prime example of a resource that some thought would never be economic.

So Why Batteries?
From reading papers on California’s RPS website, one doesn’t have to be a power engineer to see that, at even low levels of “penetration”, variability is a problem. Utilities need to be able to fill in the gaps in generation from wind and solar. We can think of this as adding batteries to store up energy as it is being generated for later use.  We can also try to fill in the gaps by bringing in electricity from elsewhere. In the latter case, we look for improvements in transmission, deferrable loads, energy saving devices, and the Smart Grid to lead the way.  As it stands now, the burden of leveling out wind and solar power lies with the sources of peaking power, hydroelectric and natural gas.

Profile from Wind Power Only

Balanced Profile with Natural Gas Generation

Physical Storage
A good overview can be had from papers in the DOE’s Energy Storage Systems Conference from November, 2010 [2]. 

Storage systems vary in output and capacity. At the small end of the scale are actual batteries, such as lithium ion or sodium sulfide batteries, which have potential for use in households and small utilities, up to about 10 MW. Above that, at the larger scale that would support a large wind farm or solar field, three approaches appear to be emerging so far: 1) pumped storage; 2) compressed air energy storage, or CAES for short; and 3) molten salt.

Pumped Storage
The idea of pumping water up to a reservoir for later use is not new. There are 18 reservoirs in the U.S. that function as pumped storage, the earliest being built in the 1960’s and the most recent in 1995. Together, they have total generating capacity of 22 GW, which compares to total hydroelectric capacity in the U.S of 77 GW. [3,4]

The obstacles to new projects are high construction costs and environmental impacts. An article in NY Times [5] notes that pumped storage projects today take five years to permit, another five years to build, and cost up to $2 billion for a 1 GW facility.


from tva.gov: Pumped Storage at Racoon Mountain

Compressed Air Energy Storage (CAES)
As anyone who owns a shop compressor knows, you can store energy in a compressed air tank too. The idea of doing it on a large scale, using an underground cavern for the storage tank, is also not new. Two large-scale CAES plants operate in the world, a 290 MW plant in Germany, built in 1978, and 110 MW plant in Alabama, built in 1991. At least 3 more plants are planned, including a 270 MW project in Iowa, a 150 MW project in New York, and another plant in Germany. [6]

To operate, CAES plants reheat the air in natural gas burners before generating electricity via turbines. Efficiency is a problem as about 1 unit of energy is needed from natural gas for every 2 units of energy generated. Current research is focusing on plants that don’t use natural gas for reheating, thereby eliminating the criticisms over efficiency and use of hydrocarbons.


From nrel.gov [7] CAES Plant


Molten Salt
One other way of storing energy on a large scale is through heat, in this case, by melting salt. Unlike pumped storage or compressed air, storage using molten salt is more restricted by time. The process is thermal, so it’s a natural fit for solar energy using mirrors in concentrating solar plants. One being built in Arizona is the $500 million Crossroads Solar Energy Project, a 150 MW plant with 10 hours of storage time. [8,9]

The Winner Is
... too early to tell. In construction cost, the advantage at present goes to compressed air, at about $700/KW, versus $1,000/KW to $2,000/KW for pumped storage, and $3,300/KW for molten salt [10]. Combined with operating costs and energy losses, all three systems can cost more than what utilities are able to charge for electricity, but negative revenues for storage may be the price tag for bringing more wind and solar power onto the grid. 

The idea is also out there that the balancing for more wind and solar power can be achieved through existing hydroelectric, by upgrading transmission through new power lines and Smart Grid technologies. The difficulty is this is a lot easier to talk about than actually do given the permitting and land issues that come with building new transmission lines. 

In the end, the best friend to wind and solar power could turn out not to be storage or better transmission, but more local generation from natural gas, a fact that may be getting lost in the ongoing turf war between industry groups and their supporters. One thing for sure is the U.S. needs more electricity, and changes are needed to get it. How we get there depends on how the wind blows, politically and economically speaking that is.




[8] http://www.solarpowerengineering.com/2011/02/arizona-uses-molten-salt-for-storage/

Wednesday, February 16, 2011

Clean Energy Part 2: Swallows and Coconuts

There’s a memorable part in the 1970s movie Monty Python & the Holy Grail where King Arthur argues with a guard on a castle wall about whether a swallow could have carried a coconut to England, the punch line being is that an African or European swallow?

Fact checking about birds aside, the point of the story is if you don’t have the ability to lift a coconut you need to increase capacity by adding more swallows, or find yourself an African swallow.
Needless to say, when it comes to generating electricity, we are dealing with a very big coconut. In 2010, the U.S. Energy Information Administration (EIA) estimates that the U.S. consumed about 4 trillion kilowatt-hours of electricity. By 2035, the year that we are to reach the goal of 80% of our electricity from clean sources, that number will be about 5 trillion kilowatt-hours. In average electrical generation, we can divide those figures by the total hours in the year and see that, on average, we use about 474 gigawatts (GW) now; and that number will grow to about 587 GW by 2035.
We can similarly look at the major sources of electricity through EIA’s tables and compare average generation with the capacity of the five major sources of electricity. As with the coconut story, capacity must be greater than the average generation, or else our coconut will be staying on the ground. But, not only must the capacity be greater, we also need to have a surplus of capacity because the 474 GW is average generation; additional capacity is needed somewhere in the grid to handle those times of day and year when the demand is greater, that is, when our variable weight coconut is heaviest.


Data from EIA 2011 Forecast Tables


The chart for 2010, above, shows % capacity, which is average generation divided by the capacity of each source. Some refer to this as the capacity factor; others as overall efficiency because it takes into account all the factors that can affect power generation.  These factors include: mechanical availability (the amount of time a plant can run between breakdowns and maintenance); Mother Nature (the efficiency of thermal plants on hot or cold days, the ability of a hydroelectric plant to run during high water or drought, or the number of windy days in a year that can sustain a wind farm); flexibility of a plant to start or stop (also called dispatchability); and the cost of the energy sources. Taken as a whole, these factors influence whether a plant runs all the time and supplies base load to the grid, or during those periods of high demand (heavy coconut) when additional "peaking power" is needed.


In the 2010 chart, we see the highest capacity factors are highest for nuclear and coal, the two primarily sources for base loads, and are much lower for hydroelectric and natural gas, which have the flexibility to serves as the primary providers of peaking power.  The low capacity factor for wind, at 28%, reflects mostly the limits of Mother Nature, and does not fall easily into either role of base load or peak generator.



Changes by 2035 

Looking out to 2035, we can see EIA is forecasting no surprising changes in average generation or capacity.

Data from EIA 2011 Forecast Tables

      

Coal and natural gas are expected to pick up most of the increase in average generation, accounting for 395 GW of the 587 GW required by 2035. Natural gas does so with an increase in capacity that indicates additional new plants will be built, but the capacity factor of 27% indicates natural gas will continue as our primary source of peaking power.  Coal shows no net gain in capacity and an increase in its capacity factor to 78%, a combination which indicates coal plants will be better utilized in base loads and, if additional plants are built, their capacities will be offset by those being retired.
Nuclear, hydroelectric, and wind show relatively minor changes in generation and capacity.  The net gain of 10 GW in capacity for nuclear is the equivalent of several new nuclear power plants.  Considering the enthusiasm for new dams, one is left wondering where 3 GW in new hydroelectric capacity can come from. Fans of wind power will recognize that a 19 GW increase in capacity is not a very ambitious goal considering that 20 GW of new wind capacity has been built in the U.S. since 2007 alone. It may be that there is some skepticism regarding the potential to incorporate a large increase in the contribution of wind power to the grid.  
Adding together the average generation from the five energy sources gets us to 549 GW of the 587 GW needed by 2035. In EIA’s forecasts, the other 38 GW are found in a variety of other sources, including biomass, solar, and geothermal.  Whether these other sources are up to the task, or the balance will be taken up by the major five, remains to be seen.


Changes to Achieve Clean Energy

This brings us to the larger question of how to achieve President Obama's recently stated goal of obtaining 80% of our electricity from "clean" sources by 2035. In his State of the Union speech, the President spelled out part of the answer when he said that clean sources are: wind and solar, clean coal, natural gas and nuclear. The one item not on the list is plain old coal, as opposed to clean coal. As discussed in my previous post, one approach to the 80% goal is clean coal technologies. But how much new clean electricity do we need?  
Taking 80% of 587 GW gives a 2035 target of 470 GW of generation in the clean category. If coal is omitted for the moment, we are left with natural gas, nuclear, hydroelectric, wind and the 38 GW in the Others category, above.  All of these are on the clean list and total 337 GW of generation. Subtracting the 337 GW "already clean" from the 470 GW target leaves 133 GW required for new clean electricity. 
So, there it is: if you are a power producer, there are 133 clean gigawatts for the taking. Hydroelectric is most unlikely (or say conventional hydroelectric, leaving the option open for tidal power). Nuclear has the potential for additional capacity through more power plants or expansions to existing plants, but faces an uphill battle in permitting.  Wind has scope for additional capacity, but, if we look at the capacity factors, the number of new windmills becomes daunting. Among the big five, that leaves us with coal and natural gas. If clean coal, by which we mean dealing with the carbon dioxide, is not possible, that leaves natural gas. As advocates of natural gas point out, the carbon dioxide emissions are up to 70% less than from coal (which is the reason natural gas is on the clean list) and we have abundant resources, so the potential is there for natural gas to make inroads against coal. Doing so, however, requires significantly expanding the role of natural gas from peaking power into base loads. Perhaps there is an African swallow on the horizon, but for now, it looks like we are left with coal and natural gas to do the heavy lifting.


Links:
1. That bit about swallows:
http://www.youtube.com/watch?v=rzcLQRXW6B0
2. EIA 2011 Forecast tables:
3. Wind Capacity:

Tuesday, February 1, 2011

Clean Energy: Between the Lines

In last Tuesday’s State of the Union address, President Obama announced: “by 2035, 80% of America’s electricity will come from clean energy sources”.  The first question that comes to mind is: what are we counting as clean energy?  The second question: what do we have to do to get there?

First Question: What Is Clean Energy?

The President went on to give us an indication, saying: “Some folks want wind and solar. Others want nuclear, clean coal, and natural gas. To meet this goal, we will need them all.”


“Some folks” may have been a bit surprised and perhaps disappointed to see nuclear, clean coal and natural gas included that statement. Do an internet search for clean energy, and you’ll come up definitions that include the words sustainable, renewable, green, environmentally-friendly, and non-polluting. Usually included are references to wind, solar, biomass or biofuels, hydropower, and geothermal. Usually not included are nuclear and hydrocarbons, which, by nature, are extraction intensive, depleting, and generate waste in one form or another. Some definitions do include natural gas, however.

Proponents of nuclear, coal and natural gas were no doubt pleased by the President’s statement. Correction, clean coal, that is. 

One might question whether the statement was really sincere, or whether the separation into two sentences with the words “Some” and “Others” was some sort of code: “Some” sources of energy we like, “Others” we don’t. 

Nuclear, after all, has the decades-old waste disposal problem. The problem didn’t get any better last year when the government pulled the plug on the Yucca Mountain disposal site in Nevada.

The natural gas industry was no doubt happy to be mentioned, and usually gets props for being the cleanest of the hydrocarbons in terms of carbon dioxide. There is that little practice of hydrofracking, however, on some people’s minds. 

Then there’s coal, I mean clean coal: provider of over 40% of our electricity now, but the worst of the hydrocarbons in terms of carbon dioxide, and that’s without mentioning its other problems that from time to time crop up in the news (explosions, fly ash, dam failures, and mountaintop mines).  Clearly, when it comes to the idea of whether coal can be "clean", there are those who don’t believe it and those who believe there will be a technological solution to the problem of carbon dioxide. The country has vast reserves, and the key word to remember here is jobs. 

The Unmentioned

We are talking about clean energy for electricity, not transportation, but it's worth mentioning the persona non grata of the evening: oil. This was made clear with the President saying:
“... I’m asking Congress to eliminate the billions in taxpayer dollars we currently give to oil companies. I don’t know if you’ve noticed, but they’re doing just fine on their own.”

Also left out of the clean energy statement was biofuels, but, again, we’re talking electricity, not transportation.  Biofuels had their own special recognition in the President’s statement: “With more research and incentives, we can break our dependence on oil with biofuels, and become the first country to have a million electric vehicles on the road by 2015.”  

Others in the unmentioned category: hydropower, geothermal, and fuel cells. Hydropower is already a significant contributor to renewable energy in EIA electricity statistics. Don’t expect any growth in this sector, unless you’re thinking of tidal power: hydropower is a still just a nice way to avoid saying the word dam. Geothermal is looking like the Rodney Dangerfield of renewables; if it's not third behind wind and solar, it's left out entirely. Its omission on Tuesday appeared intentional.  Fuel cells were mentioned in another line about innovation, but, we've been hearing about them for years.  Hybrids and EVs are winning in transportation, and so are wind and solar in serious power generation. Like geothermal, fuel cells went unmentioned for a reason.
                

Second Question: How do we get there?

Clearly, if we take quick look at our current electrical energy balance, we see it makes a big difference whether nuclear, coal and natural gas are included in the clean energy mix.  EIA statistics show our current sources of electricity are currently 45% from coal, 23% from natural gas, and 20% from nuclear, for a total of 88% from the three.

Looking out to the year 2035, EIA projects US. electricity demand growing from 4 trillion KWH per year to 5 trillion KWH per year.  This is a growth rate that roughly mirrors the Census Bureau projections for US population, growing from 310 million people now to 389 million by 2035. 

Two areas that might cause EIA projections to be low are electric vehicles, which will increase home use for overnight charging, and a shift way from fossil fuels for home heating.  Let’s assume, though, that the EIA projections are accurate. 

By 2035, EIA projects the relative contributions from coal, natural gas and nuclear to be about the same: natural gas increasing to 25%, coal dropping to 43%, and nuclear dropping to 17%.  Renewables, of which hydropower is currently dominant, are forecast to grow from 10% to 14%. That growth will come from wind and solar as hydropower will obviously remain flat.

With the counrty needing 5 trillion KWH per year, reaching the goal of 80% “clean” means we need 4 trillion KWH per year to come from the clean category. Obviously, counting natural gas and nuclear as clean makes the goal a lot easier. Now, all we have to deal with is cleaning up the 43% portion from coal, meaning, get rid of the carbon dioxide emissions. To reach the 80% number, all we really have to do is to get half the coal, at least 1 trillion KWH per year, into the clean category. 

Fans of wind and solar will be saying at this point: wait, we don't need coal, just put more resources into wind and solar. Perhaps that could work, but there are those who say wind and solar will have their work cut out for them just getting renewables up to the 14% number. 


Reading between the lines, then, we might expect to see more than a few clean coal ads cropping up in the future.


from EIA 2035 Forecast

Related Links

Saturday, January 22, 2011

Battle Over Mountaintop Mining




A week ago I attempted a post on mountaintop mining but withdrew it after realizing I needed to do more reading on the subject. Here is a second attempt that I hope will capture the key points.


Background


Mountaintop mining, or mountaintop removal mining as it is often called, is the name given to surface coal mining in the Appalachian states. It sometimes goes by the abbreviations MTM (mountaintop mining) or MTR (mountaintop removal). Elsewhere in the world it might be called strip mining, opencast mining, or just plain quarrying, but, in the rugged Appalachian Mountains, mountaintop mining is an appropriate description.

According to EPA estimates, the coal fields in the central Appalachian states West Virginia, Kentucky, Virginia and Tennessee comprise an area of about 12 million acres.  Disturbance from MTM operations will reach about 1.4 million acres of that total by next year.

While concerned about the overall disturbance, including deforestation, EPA is most concerned about the impacts of MTM operations on streams. EPA notes that an MTM operation will remove as much as 400 feet of overburden material to get at a coal seam. The overburden material is commonly placed in valley-fill dumps. EPA refers to these as MTM-VF operations. EPA estimates that, since 1992, more than 2,000 miles of streams in the region have been buried by MTM-VF operations, a rate of 120 miles per year.




Spruce No. 1 Mine



A focal point of EPA's attention has been the Spruce No. 1 Mine, called “the largest mountaintop removal mine in West Virginia”. Owned by a subsidiary of Arch Coal, the mine was proposed as a 3300 acre project back in 1998, and later reduced during the permitting process to 2278 acres. In January, 2007, the Army Corp of Engineers issued the mine a key permit, a Section 404 permit under the Clean Water Act, which enabled the mine to dump its overburden material in three drainages on the property: Seng Camp Creek, Pigeonroost Branch and Oldhouse Branch.

EPA expressed concerns over water quality and noted that there were already impacts along Seng Camp Creek from previous mining activities. The 404 permit was challenged in court by environmental groups.  The mine was allowed to start within Seng Camp Creek. EPA, meanwhile, sought to limit the impacts on Pigeonroost and Oldhouse Branches, and, in 2009, requested that the Corps of Engineers modify or revoke the 404 permit. The Corps declined and EPA began its own course of action under the Clean Water Act.

On January 13, 2011, EPA revoked the 404 permit.  In announcing its decision, EPA summarized the impacts that would occur if the mine was allowed to expand:

* Burying more than 35,000 feet (more than 6 miles) of high-quality streams under mining waste, which will eliminate all fish, invertebrates, salamanders, and other wildlife that live in them;

* Polluting downstream waters as a result of burying these streams, which will lead to unhealthy levels of salinity and toxic levels of selenium;

* Causing downstream watershed degradation that will kill aquatic wildlife, impact birdlife, reduce habitat value, and increase susceptibility to toxic algal blooms;

* Inadequately mitigating for the mine's environmental impacts to high-quality streams, by using mining ditches, for example, to offset the functions provided by these natural streams; and

* Exposing Appalachian communities to additional mining related sources of pollution in a watershed already highly impacted by mining activity.

EPA noted that "it has used its Section 404(c) authority sparingly, prohibiting just 13 projects, including the Spruce mine, since 1972.  EPA is taking this action because a substantial body of new scientific studies and work completed since the mine was permitted in 2007."




Commentary


On the one hand, it's difficult to fault EPA's intentions. Who, after all, wants to see streams buried under piles of rubble and thousands of acres of habitat ruined.  EPA also notes the unwillingness of Arch Coal to cooperate and modify its plans. Recently, EPA released an independent study that showed the mine could significantly reduce its impacts for a slight increase in operating costs.  EPA gave the example of another mine it recently worked with to reduce its impacts and obtain a 404 permit.

On the other hand, industry groups and politicians point to the decision as "an unprecedented action in retroactively denying a permit."  No business likes to operate under conditions where the rules change.  In industries where projects depend on multi-year horizons for planning and permitting, such uncertainty is a serious deterrent to investment.  Small projects might be able to tolerate it, but large ones, the kind that create large and stable employment and require major capital investment, can’t.  EPA might say it’s acting with restraint, but it is setting a precedent all the same. 

EPA’s decision to act proactively will also be disturbing to investment. The action was not taken for any specific violation or wrongdoing on the part of the mine, but was made for the future protection of the environment, both on and off the property.  For the government to take such action and effectively make a park out of someone’s private property is not without precedent.  Such cases can wind up in court being argued as a government taking. 

In the case of Spruce No. 1 Mine, where jobs and a local economy are on the line, there is speculation an agreement between EPA and the mine will happen sooner rather than later.  In any event, we can expect we have not heard the last of this story.


Related Links



from EPA,  Spruce No.1 Mine footprint (yellow)






From EPA, Steps in Mountaintop Mining

 

Saturday, January 15, 2011

Rare Earth Lessons in Supply & Demand

The U.S. Department of Energy (DOE) tells us, in its 2010 Critical Materials Strategy [1], that we are on the cusp of a clean energy revolution.  That revolution is visible from my window at night, in 96 blinking red lights, and growing, that mark the location of a wind farm on the horizon, soon to be capable of generating 180 MW.  I have yet to see a Volt or Leaf on the road, but Priuses abound.  DOE tells us that clean energy production by wind turbines and solar cells; and consumption by vehicles (electric and hybrid) and energy-efficient lighting, depend on a handful of critical materials, and our dependence is likely to grow in the coming decades.  Of these, DOE determines that five rare earth metals, dysprosium, neodymium, terbium, europium and yttrium, are the most important to clean energy and carry the highest risk of problems in supply. 

By Supply, We Mean Production
As DOE and others tell us, the ‘rare’ in rare earth metals, or REE (rare earth elements) for short, is not because they are rare.  As an article by Kidela Capital Group notes [2], REE mining started in India and Brazil, then shifted to South Africa and the United States.  Continuing through the 1980s, one mine in the United States, Molycorp’s Mountain Pass mine in California, became the world leader, producing more than 70% of the world’s REE’s.  By the 1990s, exports from China came to dominate the market.  As DOE tells us, REEs can be found in many countries.  China, however, now produces 97% of the world’s REEs.
He Who Produces Cheapest Wins
It’s doubtful that, before the 1990s, China was consciously positioning itself towards world domination in REEs.  Clean energy has only recently come to the forefront, and Mountain Pass had been recognized by the United States Geological Survey as the greatest known concentration of REEs.  But, faced with abundant production from China, and increasing operating costs, Mountain Pass faced the same economic challenges that threatened or shut down US producers of other metals, tungsten, cobalt, molybdenum, antimony and others.  In 1998, Mountain Pass closed, following a spill into a dry lake of process waste water carrying uranium and thorium.  Resuming production  won’t be cheap, but Molycorp believes, with new capital investment, their operation will compete with China, and do so with process controls that will eliminate their past environmental problems [2,3].
Environment,The Un-level Playing Field
The realization that there is environmental cost to cheap metals has begun to dawn on some. In December of 2010, PBS touched on the issue with a news piece entitled “Are Rare Earth Minerals Too Costly for Environment?” [4], which focused on the environmental problems of the REE industry in China.  China responded with an announced crackdown on small, ”rougue” mines, as reported by the New York Times [5], and with pronouncements of increased environmental standards and future reductions in exports [6,7,8].  Are they too costly?  Dysprosium, the top of DOE’s leader board for critical materials in magnets, has risen from $6.50 a pound in 2003 to a current price of $132 a pound.  Yet, as Eamon Keene points out in a post [9], the 50 grams of dysprosium oxide in a hybrid car amounts to $15, or 1/2000th of the car’s price.  Clearly, we can afford to pay more for more environmentally sound production of this metal.  Unfortunately, that hasn’t been the developed world’s track record.  Markets gravitate toward the cheaper sources of a resource, be it energy, labor, or material, and it’s often only later we learn about the unseen environmental cost.         
Stability Needed for Investment
With various news articles declaring the shortage in REEs, and DOE announcing its Critical Materials Strategy, the scramble is on to find new resources, and get the existing ones back up and running.  But, as any developer of a copper, molybdenum or other metal project knows all too well, attracting investment requires some level of stability and predictability in prices.  One need only look at the absence of any new coal-fired power plants in the US last year to see what uncertainty will do to investment.  In the US, we can look at Molycorp’s capital costs, in the 100s of millions of dollars, to see that even re-opening an existing operation is not cheap, that is, if one wants to do so with any measure of environmental standards [10,11].  In the developed regions of the world, any new mine today faces a much longer lead time and greatly larger capitalization than just 40 years ago.  Without price stability, the advantage lies with those willing to accept or overlook the environmental cost.

Power of Substitution
Then, there’s the age-old way to beat a supply problem: substitute.  Copper too expensive for wires, use aluminum.  Not enough aluminum for cans, use plastic bottles. Not enough plastic for disposable diapers, now we may have a crisis.
This week, Toyota announced their strategy for the supply problem in REEs: to develop dysprosium- and neodymium-free motors for their hybrids and electric cars [12,13].  The news dragged on Molycorp stock, which traded as low as $44.93 on Friday, down from its high of $62.46 back on January 5th, an indication that stability for REEs, as well as other commodities, may not be coming anytime soon.



1. Critical Materials Strategy 2010.Department of Energy. 

2. Can America Regain the Rare Earths Crown?. Kidela Capital Group. November 28, 2010

3. Rare earth metals mine is key to US control over hi-tech future. Suzanne Goldenberg. December 26, 2010. guardian.co.uk.

4. Are Rare Earth Minerals Too Costly for Environment? Lindsey Hilsum. December 14, 2010. PBS Newshour transcript.

5. In China, Illegal Rare Earth Mines Face Crackdown. Keith Bradsher. December 29, 2010. New York Times.

6. China pollution standards for rare earth mining to be tightened

7. China cuts rare earth export quotas, U.S. concerned. Niu Shuping, et. al. December 28, 2010. Reuters. http://www.reuters.com/article/idUSTRE6BR0KX20101228

8. 2011 spells desperate search for rare earth minerals. Anil Das. January 7, 2011. International Business Times. http://www.ibtimes.com/articles/98836/20110108/rare-earth-mineral-us-department-of-energy-china-s-ministry-of-commerce-institute-for-defence-studie.htm

9. Critical Energy Metals - A Once Way Bet? Eamon Keene.  Dec 22, 2010. http://www.altenergystocks.com/archives/industry_general/

10. Global Outlook. Molycorp. http://www.molycorp.com/globaloutlook.asp

11. Troubled mine holds hope for U.S. rare earth industry. Andrew Restuccia. Oct 25, 2010. Washington Independent. http://washingtonindependent.com/101462/california-mine-represents-hope-and-peril-for-u-s-rare-earth-industry

12. Hybrid Electric Vehicles. Molycorp Minerals http://www.molycorp.com/hybrid_ev.asp

13. Toyota Developing Motors Without Rare Earths for Electric Autos, Hybrids. Alan Ohnsman. January 14, 2011. Bloomberg. http://www.bloomberg.com/news/2011-01-14/toyota-readying-electric-motors-that-don-t-use-rare-earths.html


from DOE Critical Materials Strategy 2010 



Mountain Pass Mine and Processing Facilities   Photo: WikiCommon















Pit Floor at Mountain Pass Mine Photograph: Barry Sweet/Polaris, guardian.co.uk