Disclaimer. After nearly 40 years managing money for some of the largest life offices and investment managers in the world, I think I have something to offer. But I can't by law give you advice, and I do make mistakes. Remember: the unexpected sometimes happens. Oddly enough, the expected does too, but all too often it takes longer than you thought it would, or on the other hand happens more quickly than you expected. The Goddess of Markets punishes (eventually) greed, folly, laziness and arrogance. No matter how many years you've served Her. Take care. Be humble. And don't blame me.

BTW, clicking on most charts will produce the original-sized, i.e., bigger version.

Monday, April 24, 2017

Stunning cost declines in wind and solar

Even just a few years ago, wind and solar were significantly more expensive than fossil fuels, if you ignored the cost of the externalities which come from adding CO2 to the atmosphere (not to mention all the other pollutants.)

But that's emphatically not true any more.  In the USA, over the last 8 years, the cost of PPAs (power purchase agreements) by utilities for solar have dropped from  $154 per MWh to $35, a compound decline of 19% per annum.   Wind has dropped from $69/MWh to $26/MWh, or lower, since 2009.  That is a compound rate of decline of  13% per annum.  Lazard calculates the LCOE* of coal at between $60 and $143 per MWh.  Even their lowest estimate is twice the cost of wind or solar.  It's telling that there are no PPAs for coal because no one is building new coal power stations.  In fact, they're shuttering existing ones, though their replacements are gas as well as renewables.

It seems very likely that both wind and solar will continue to decline in cost in a classic learning curve way.   But what happens when the Federal tax credit expires?  The data above show the costs after tax credits, which are worth about $20/MWh.  The tax credits expire over the next 4 years.  If costs continue to decline at the same rates as they have done for the past 7 years for the next 4, wind will drop by another 43%, solar by another 57%.  That will take wind and solar to $15/MWh after subsidy, or $35/MWh before, still substantially cheaper than coal.  And that's before any carbon tax.  Make no mistake, if, as seems plausible, the increase in global temperatures is accelerating, a swingeing carbon tax is quite certain within a few years.

[Read more here]

*LCOE = levelised cost of electricity.


From Tom Toles

Sunday, April 23, 2017

Renewables and storage

The new administration in the US is taking a leaf out of the rabid right so-called Liberal Party's playsheet in Oz, suggesting that renewables can't be integrated into the grid, because (a) they're variable, and (b) our paymasters in coal want to stop the renewables revolution.

These two videos are instructive about just how you integrate large percentages of renewables into the grid without having to also install storage.   (At least when renewables grid penetration is under 50%--my guess is that some storage will make the grid operator's task much easier when renewables start to exceed 50% and will be essential at 100%.)

The key points are:

  • Because the grid is already designed to handle the potential failure of one or more large "baseload" generators, it can handle the variability caused by renewables
  • Diversifying the sources of renewable electricity helps: solar PV, solar thermal (CSP), wind and biomass can together produce electricity as stable as old-fashioned baseload power stations
  • For the last 10% or 20% of renewables penetration (i.e, going from 80 or 90% renewables to 100%), demand management is critical
  • Below 10% penetration, renewables require no special provisions.  The real change is not technical but in the mind--how to handle renewables as part of the grid.  It used to be firmly believed that renewables could not exceed 5% of the grid, but that was wrong.  In many regions, renewables exceed 25% of electricity generated without problems.
  • To increase renewables from 10 to 30 or 40%, good forecasts are essential.  If we know ahead of time the likely output from wind farms and solar we can plan for gaps.  
  • From 40% on, the cheapest way to diversify supply is to increase grid connections.  
  • Wind turbines are "perfect" for maintaining the frequency of the grid when a power line goes down (or a big fossil fuel generator trips)  Some engineers maintain that this service (FCAS -- frequency control and ancillary services) can't be provided by renewables.  The engineer in the video makes it abundantly clear that they can.

The first video is a little out of date.  Since it was made solar has dropped 50% in prices and wind 30%.

The second is from an interview with the head of 50Herz, the German grid operator for what used to be East Germany.


 Listen for his confident assertion that integrating renewables into the grid is easy. This video is a couple of years old, now, and since then the percentage of renewables in the East German and pan-German grid has increased further.

[Read more here]

Friday, April 14, 2017

Not fast enough

In 2016, 55.3% of new electricity generating capacity came from renewables, excluding large hydro, and 59% if you include large hydro.  That sounds really good.  The share of renewables in new generating capacity has gone from 20% in 2007 to 55% now, and that is definitely progress.


But the percentage of actual electricity generated rose by only 1% in 2016.  That's partly because renewables have lower capacity factors (25%-30%) than fossil fuels (60% to 70%).  And with global growth in electricity demand at around 3% per annum these days (though it will accelerate as EV sales take off), that 1/3 of incremental demand growth.


Since big hydro and renewables provide about 25% of electricity generated globally, at this glacial pace it will take 75 years before 100% of our electricity comes from renewable sources.  And that isn't fast enough.  We need to double the annual rise in the percentage generated from renewables to 2% per annum, which would mean we'd reach a 100% green grid by 2050.  And we need to stop building new coal power stations.  Europe has promised to stop doing this by 2020; India will build none for at least the next ten years, which in effect means never, because renewables will be even cheaper then; China has cancelled 104 planned and partly built coal power stations; the USA will never build another coal power stations again.  So there is hope.  Some.

Friday, March 31, 2017

World's largest battery installation

A huge $1bn solar farm and battery project will be built and ready to operate in South Australia’s Riverland region by the end of the year.  The battery storage developer Lyon Group says the system will be the biggest of its kind in the world, boasting 3.4m solar panels and 1.1m batteries.  The company says construction will start in months and the project will be built whatever the outcome of the SA government’s tender for a large battery to store renewable energy.  A Lyon Group partner, David Green, says the system, financed by investors and built on privately owned scrubland in Morgan.  “The combination of the solar and the battery will significantly enhance the capacity available in the South Australian market,” he said.

[Read more here  and some background here]

The hamlet of Morgan is on the Murray River, about 100 kilometres north-east of Adelaide.  Lyon Group has started building a similar installation at Roxby Downs, 300 or so kilometres north of Adelaide.


A couple of points:

  • This will be the world's largest battery installation to date.
  • These two battery banks (Roxby Downs/Kingfisher and Riverland) will be in addition to any batteries installed as a result of the tender the South Australian government has initiated.
  • Combining wind and solar produces a more stable electricity output.  For example, wind often is stronger at night, when there is no sun.  Solar output is "smoother" during the day than wind, especially from a number of geographically spread solar farms.  South Australia gets 40% of its electricity from wind, and only 5% from solar.  Increasing the solar percentage would make the supply more even and the grid more stable, especially when there is strong demand on very hot days, when everybody's aircon is running.
  • This will take only a few months to complete.  Construction will be finished by the end of the year.  Compare this to conventional power stations.
  • The battery banks by themselves will not be nearly enough to provide for peak SA demand in the late afternoon.  But (a) they're a (small) step towards having enough stored power in the evening to dispense with gas peaking plants and (b) batteries can provide other very important grid services: frequency control (keeping the grid frequency at 50 hertz) and voltage stabilisation.  Unlike gas peaker plants which take 7 or 8 seconds to fire up, the response of batteries is virtually instantaneous.
  • Although the cost of solar panels is being reduced by the values of the Large Scale Generation Certificates created as part of the government' RET (renewable energy target) the battery banks are profitable in themselves.  This is the first time that's been true in Australia at this scale.
  • In future, probably all new wind and solar farms will have complementary battery storage because it will allow their owners to sell their electricity more profitably.  For example, now, there are times late at night when the wind is blowing strongly that wholesale electricity prices in South Australia go negative, and other times (late afternoon on a hot day) when the wholesale electricity price is 1000 times higher than the long-term average.
  • All these recent developments show conclusively that South Australia will easily be able to reach 100% renewables in their grid within 10 years (5% a year from now on.) 
  • This is the end of coal.  And of the dishonest story from the Right that only coal can provide us with energy security.  
  • Coincidentally, today the giant Hazelwood power station in Victoria is closing down.  It used to provide 25% of Victoria's electricity and 5% of the nation's and was the most polluting power station in the world (it burnt brown coal or lignite.)  Australia's solar resources are among the best in the world.  New solar PV plus storage will quickly fill the gap caused by Hazelwood's closure.

Tuesday, March 21, 2017


Why would the number of extremely hot days rise by a much larger percentage than the rise in average temperatures?

It's to do with the shape of the statistical distribution.  Let's suppose that the average temperature for a season or a year is X, and that the observations are normally distributed.  That means that the number of times  the temperature is X-10, X-9, X-8 ...... X+8, X+9, X+10 (just as an example)  starts out with very few times it's X-10 (or X+10), a few more times when it's X-9 (or X+9), still more times it's X-8 (or X+8), in a shape which is reminiscent of a bell.  The normal distribution is often called the bell curve because of this.

There are other distributions which are skewed to one end of the curve or the other, which means that they are asymmetrical.  For example, wealth is very asymmetrically distributed: there are far fewer rich people who own most of the wealth, and lots of poor people who own little.  But observations for weather tend to be symmetrically distributed, but because of global warming, they have drifted over time.  The distribution is still bell-shaped but the mean  (the average) has shifted higher.  And that means that the "tails" of the bell shape have also shifted.  So whereas in the old days you had say 1 very hot day 3 days a year, 1 % of the time, now you have 2 or 3 or 4 times as many very hot days.  Similarly, in the old days you used to get 1 very cold day 3 days a year, now you get none.  The graphic below demonstrates this principle very nicely.


Lots of people think that a rise of 1 degree C in average temperatures is small, because they are used to the shifts in temperature from day to night, and from winter to summer, which are obviously much larger.  But what global warming means is that we will have far more hot days in summer, with temperatures reaching and exceeding new highs more often and by more.  We have just seen this in our Australian summer, and they've just seen this in the US, where February heat has been at July levels,  If the mean, and its whole distribution shifts still higher the number of super hot days will double or treble or quadruple, with devastating consequences for us and for our world.