Saturday, May 07, 2005

Peak Oil Revisited

This from the weekend version of The Daily Reckoning, a free daily newsletter which I highly recommend.

Received this today from our friend Bob Gibbs in Cleveland. Bob has his own company and sells transformers and switch gear to power companies and others who operate their own power plants. I think he knows what he's talking about.

Nuclear Power is having a rebirth. The newer design does away with these cooling tower types of installation. It is called a PBMR (pebble bed modular reactor) which is smaller and cheaper, takes about 24 months to build and lasts about 40 years. They are much safer. Inside a PBMR, there is a bed of high temperature silicon graphite balls each about the size of a billiard ball. About 70 % of the balls have flecks of uranium. When they interact, the bed of graphite balls gets hot. The gas carries the heat to a turbine. If the core hits peak temperature of about 1600 deg. C, it starts to cool itself down automatically. There is no uncontained chain reaction to cause a meltdown as in the existing type of plants. Also they are built to store their own waste in the basement with storage space for forty years of operation. Of course, the Sierra Club and others will still find fault with this.

In the next 15 years, China will need to generate at least six times what it already generates or at least two of these nuclear reactors per year. India has the same expected growth. You hear a lot about the wind power being so clean, etc., but it is small potatoes. Four of these nuclear reactors could generate more than all of the existing wind power turbines in California and use very little real estate to do so.

Surprisingly enough, this rebirth of nuclear does not mean the demise of coal because there also is new coal technology. The world has about a 300-year coal supply. China now generates about 70% of their power with coal. Coal presents two problems: Transportation and dirty burning. Both of these are being solved by liquefying coal for cleaner burning and it will be a lot easier for the Chinese to get coal via a pipeline from the north of China to where the factories are in southern China. This technology is like turning coal into oil.

Uranium has been rising in costs because of the rebirth of nuclear. It is now about $20/lb. At that price, relative present fuel costs are:

Coal - $1.25 per million BTU
Natural Gas - $3.5 per million BTU
Oil - $6.00 per million BTU
Uranium - $0.055 per million BTU

Let's assume that Uranium increases to 50 times the current price as demand picks up again. The new PBMR nuclear plants would provide energy at the equivalent to buying gasoline at 1/2 cent per gallon.

Most of the world's untapped coal reserves are in the U.S., northern China, Australia and Canada.

The U.S., Canada and Australia have the greatest part of the world's uranium.

The best news of all is that there is one place in the world that does not have much of these reserves and that is the Middle East. Wouldn't it be nice to be around when we don't need them anymore and they have to fend for themselves.

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