Friday, May 29, 2015

Solar Energy and Oil Production


June 2nd, 2016 update

It feels great when oil and gas producer wins award from Canadian Solar Industries Association! 
https://lnkd.in/ej6T3M3 Imaginea was selected as a winner of CanSIA 2016 Game Changer Award for in Solar Adopter category for this project.


The future belongs to renewable electrification and advanced materials from emission and pollution free hydrocarbons. It's time to embrace the future and start extracting Alberta hydrocarbons more efficiently and with lower emission and pollution intensity. Energy efficiency AND renewable energy can help us to make it happen TODAY!

September 3rd, 2015 update

Effective 10:50 today, two Imaginea's wells are powered by solar energy. Electricity cost and emissions will be lowered by ~80%, we will remove 54,000kg of CO2e from Alberta air annually, equal to removing ten F150 pickups from the road (3.5l, 20,000km/year). This is a baby step towards emission free oil and gas production....more steps to come! 
Our solar power generation can be view here.



Friday, May 29th, 2015

Something very important happened last week that I hope is the first step on the road to Emission Free Oil production at Imaginea. The process of electrifying two oil producing wells with solar power energy has started. It is a small yet very important first step, and if I am able to continue influencing and executing projects focused on lowering the cost of our production and at the same time eliminate direct and indirect emissions associated with the extraction of oil, someday Imaginea will provide Emission Free Oil to those who would like to use it to manufacture long lifecycle, reusable and recyclable products for which oil is the best source material.


48kWh grid connected solar power system will provide around 80% of the electricity currently consumed by both wells. With future improvements in reservoir maintenance and artificial lift efficiency, this installation will supply 100% of the electrical power required sometime in the next 2-3 years.


Obviously there are a lot of questions as to why would Imaginea undertake this particular project.
Some of the question/comments I have encountered so far:


Q: Why we selected a grid connected system, would it be better to go off-grid right away?


A: A grid connected system will not require on-site batteries, although suitable utility scale 100kWh batteries from TESLA will be available in the next 12 months and we will test them at some point in the future on this site. Without batteries the cost of the system is lower however if grid power goes down we will not be able to use our own power as for safety reasons our system will shut-down even if solar power is available.


Q: Will we use 100% of the energy we produce?


A: During the day our system will produce more than twice the electricity that we require to run pumpjack and PCP. The excess will be sold to the grid the high price; the price of electricity fluctuates within each day with low prices at night and frequently high prices during peak use in day hours. During the night, our wells will run on grid electricity that typically is 10-50% lower than average price. This difference will allow us to shorten the payback period. Below is an example when electricity price dramatically increases during the day, it doesn't happen too often, but when it happens, it dramatically improves profitability of solar power system.


Because will will measure everything on this site, in the next 12-24 months we will have a very good understanding if the performance of the system is as expected and if the price we get for exported electricity is better than the pool price.


Q: Last week one of our colleagues distributed article “The ugly side of solar panels” referring to the study which claims “that generating electricity with solar panels can also be a very bad idea. In some cases, producing electricity by solar panels releases more greenhouse gases than producing electricity by gas or even coal”. If this is true, there may be no significant emission reduction with solar power.


A: I always recommend to follow the information trail, read the original source of information, before you cast your judgment. This article attempted to “sensationalize” and misrepresent a study done in 2008 “Emissions from Photovoltaic Life Cycles”. Let me refer to the synopsis of the study “Analysis of material and energy flows in all life stages of photovoltaics shows that 90% of air emissions associated with electricity generation could be prevented if electricity from photovoltaics displaces electricity from the grid.”


As per  Burkhardt et al. (2012) and Whitaker et al. (2012) life cycle GHG generation per kWh using solar panels is around 4% of coal generation. It is worthwhile to notice that at some point with increased penetration of green energy generation, solar energy life cycle emissions will be further minimized while coal based generation will stay the same as 98% of coal (and any other fossil fuel) emissions are from operational processes (burning). There is a possibility that additional processes will be introduced to deal with the emissions from fossil fuel power generation to minimize their impact, again, it will be very inefficient and with time not economically viable as additional processes will consume additional resources and increase cost.
You can find more interesting information at National Renewable Energy Laboratory.
To put the numbers in perspective:
For Average Monthly Electricity Energy Consumption: 2,500 MWh
Alberta Grid Emissions Associated with Above Consumption: 2,028 tonnes of GHG
Equivalent Emissions from Solar Power Generation: 100 tonnes of GHG

Q: There is no payback on solar energy, period!


A: When we looked at the economics of this project, using our standard discount rate it would not be possible to justify it. To be honest, looking at the risks associated with the uncertainty of global oil prices and the ability to deliver promised results by an average oil company, for many industries outside the oil patch the payback justification for standard oil industry projects would not work either.
Looking from the perspective of long term investment by, for example, a utility power company, purchasing the solar system is equivalent to prepaying for the next 18 years of electricity and having electricity for free afterwards. The problem of justifying any long term project is very challenging and requires a long term commitment. Based on the most likely future electricity prices in Alberta, we expect to break even at the end of year nine, at this time, the cash flow outlay from buying grid power is equal to the initial cash outlay plus the cash flow from generating your own energy.  After this point, the purchase of grid power costs more than from the solar system.


This is the worst case scenario and there is no risk that we may have longer payback. Any changes to renewable electricity pricing or carbon pricing will make this project payback faster. Even if the new Alberta government adopts only 50% feed-in-tariffs as Ontario, our project payback period will be 9.5 years with breakeven point in 7 years.
Will It happen? Almost certainly.
I refuse to believe that Albertans will not support initiatives that will make our province cleaner and more successful. The Town of Banff could not wait so they started their own program, Solar Photovoltaic (PV) Production Incentive to encourage property owners to install solar photovoltaic systems that produce renewable electricity. Qualifying property owners who install a solar system, will receive production-based top-up payments over the next seven years to pay the system off.

Q: Is this the best way to spend our money when we can have 1-2 year payback on other projects?


A: At Imaginea, we all want an energy industry that’s better for planet, and people and profits. If were were to only choose traditional profit based projects all that would happen is us talking about our vision while not doing anything that demonstrates our commitment to long term environmental, social and financial benefits. Imagine if all of our electricity comes for free from renewable resources today. Our indirect emissions would be minimal and our cost of lifting will be significantly lower without the electricity cost. Once we have renewable energy sources in place there is very minimal maintenance cost and no fuel cost ever again.
How much more would we have to invest in our field to make it happen? It would take today $20k per flowing boe to make it happen right away, with time we will figure out how to do it at half of today’s cost.

Q: We have to generate respectable return on investment, how will this help us to achieve our goals?


A: The value we create today and tomorrow will not be only measured in $ of free cash flow, or in bbl/d we produce but in what we stand for and where we can take our vision. With time the value of Emission Free Oil will be higher than the value of oil that was extracted in a traditional way and it is used and one-time energy source. There is growing social awareness and need for producing clean, environmentally and socially acceptable raw materials and  using them in a way that they stay and create value for a long time. I believe that we can increase value for our shareholder much easier by following our vision, minimizing emissions and pollution from our operation and in time providing Emission Free Oil for those who recognize and appreciate its long term value than by sticking to the traditional route.



Alberta Reality.

It is estimated that by 2022, Alberta will need additional 7GW of electricity generation, mostly because of older coal stations going off-line. At the same time, our province will need to demonstrate its environmental responsibilities to maintain internal and external social acceptance to produce our valuable resource. We will need not only to develop oil reserves in a responsible way, but to demonstrate our leadership in sustainable business practices, most especially electricity generation.
There are people in Alberta who already recognize that it makes financial sense to start early. The 2MW solar plant pictured below, will be commissioned and connected to the grid in the next two months. It is located near Bassano, Southern Alberta, not too far from our filed.






What would it take for you to put solar system on your roof?

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1 comment:

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