Disclaimer

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, February 27, 2017

India and renewables


Mumbai on a good day (Source)



A constant refrain one gets from denialists is, why should we do anything about global warming when India/China are doing nothing?

It's a feeble argument.

First, China (30% of world CO2 emissions) and India (7%) are both actually doing a lot.  For example, India will have 60% of its total electricity capacity from renewables in 2027.  Note that the headline implies that 60% of generation will come from renewables, which is wrong. Given capacity factors in wind and solar, india's percentage from renewables will be more like 50%.  Which will  be right up there with countries like Denmark, Germany, etc.

And look at this:

Here's the harvest of Thursday's headlines: the Government of India is doubling the scale of the country's solar parks, adding 20 gigawatts, more than total U.S. solar capacity; Great Britain's development finance institution, CDC, announced a major new solar initiative targeted at India's undeserved eastern states; India's largest network of vocational institutes, run by the Catholic church, pledged to shift to renewable energy; Jharkand, India's West Virginia and biggest coal producer, plans to build more solar capacity than its peak internal demand for power; the Indian Supreme Court stepped up its crack-down on water pollution from industrial facilities; analysts projected aggressive bidding Thursday for India's first reverse auction for wind power, with prices expected to set new records; and finally the government announced that starting next year it would prepare a special budget annex assessing the steps it is taking to deal with climate change.
That's one day.

[Read more here]

Second, even if China and India weren't doing anything about their CO2 emissions, switching to renewables won't increase the cost of our electricity nor will it reduce our economic growth rate.  Burning coal is the biggest source of CO2 emissions, and new coal power stations have an LCOE (levelised cost of electricity)  two times higher than wind and solar.   And that's now.  By 2027 coal will be 4 or 5 times as expensive as renewables.  So a progressive switch to renewables should actually reduce electricity prices over time.  Why wouldn't you do it?  Of course, that's exactly why China and India (and Brazil and Chile and South Africa) are also switching to renewables.

Third, we're all in this together.  It's something that has to be tackled by everybody (that's partly why the Right hate it so much--it's socialist) And even if your country produces just 1 or 2% of global CO2 emissions, 40% of total emissions come countries which emit 2% (or less) of the global total.

A couple of weeks ago, solar PV contracts in India reached new lows, falling 16% from the record lows achieved a year before.  In an another auction a couple of days later, they fell again by another 20%, taking the LCOE of solar PV in India down to US$49/MWh, which is not that different from Lazard's estimate of solar LCOE for the USA.  Because India has higher inflation than developed countries, typically contracts include escalation clauses, whereas  in Europe and the US, contracts are typically fixed in price over the term of the contract.  The LCOE of these new Indian contracts is higher than the headline contract price, reflecting this escalation.  This makes solar half the cost of coal. The Indian Government has said that no new coal generating capacity will be needed for the next decade.  Frankly, I doubt that any new coal-fired power stations will be built after 2025, because renewables (and storage) will be even cheaper than they are today.

It's not just their low cost that driving India towards renewables.  It's also that India is especially vulnerable to impacts of global warming: rising temperatures, more droughts, more floods, and the real risk of famine.  And India now has air pollution that's as bad as China's.

It's tempting to get depressed about the triumph of the rabid right in the USA.  But the forces driving the switch to renewables aren't confined to the US.  They're global.  And even in the USA, market forces are encouraging the transition to a carbon-free economy.

Sunday, February 26, 2017

736 Record Highs

2014, 2015 and 2016 produced successive record highs in global temperatures.  El Niño helped contribute to this, though it's important to point out that in an El Niño phase, heat that was previously absorbed into the ocean is released into the atmosphere.  Often, though not always, an El Niño is followed by its reverse, La Niña, which is associated with lower global temperatures, as atmospheric heat is taken up by the world's oceans.

According to NOAA, January's temperature anomaly was below January 2016's.   And the probability is that this will be broadly true for the remaining months of 2017.  However, we have seen record heat in Australia, and now we're seeing records tumble in the US, where February (winter in the northern hemisphere) temperatures are at the sort of highs usually seen in summer.  736 new record highs were set this week, with no record lows.  [Read more here]

I wonder how long it will be and how much it will take before the denialists concede that they were wrong.  And whether by then it will be too late.

(Source)


Friday, February 24, 2017

Only 1.2%?

At the beginning of major technological or market shifts, most people struggle to see that the nascent changes are going to cause massive disruption.  EV sales are only 1% of total car sales, they say.  How can 1.2% influence anything?

Take US EV (electric vehicle) and PHEV (Plug-In hybrid electric vehicles, i.e., those with a hybrid petrol/electric drive but with the capacity to also charge up their batteries from the grid).  Now as at December 2016, EV & PHEV sales made up 1.2% (seasonally adjusted: there is always a December spike in car sales, and weakness in January and February,  which you have to remove via seasonal adjustment) of total car and light truck sales.  The top chart shows EV sales (& PHEV, but I won’t keep on adding that; just remember that it includes both when I say ‘EV’ below) as a percentage of total car sales, and the second chart shows them in absolute terms.  (Source of basic data: Inside EVs)





Now notice a couple of things.

  1. 6 years ago, EV sales were negligible.  (Incredibly, Tesla was still only selling the Roadster.)
  2. From mid-2014 to mid-2015, sales fell—partly because the oil price collapsed, partly because the market was waiting for new EV models
  3. During 2016, EV sales rose by 80%!  

In its Q4 2016 results presentation, Tesla announced that it was planning to produce 1,000 Model 3s a week in July 2017, 2,000 a week in August and 4,000 in September, rising to a peak of 10,000 in 2018.  Total EV sales in 2016 were about 160,000. If we add the likely Tesla Model 3 production in 2018, assuming no increase from any other manufacturer, total EV sales will increase to about 660,000 (a 4-fold increase) which will take EV sales to 5% of the total market.

But, wait, you say—what if Tesla doesn’t manage to sell 10,000 Model 3s a month?  Well, they have nearly 400,000 paid reservations.  OK, but what about Tesla’s production for overseas markets?  I don't know what percentage of Model 3 production Tesla has reserved for foreign markets.  But I suspect that most of the initial deposits were from US customers, and they will get priority.  And, remember, I’m assuming that sales by other manufacturers won’t rise.  But in fact there’ll be a new Nissan Leaf, a new VW e-golf and of course GM’s Bolt, all at around $30-$35K sticker price. It seems that every man and his dog will be offering one (or more) EV/PHEVs.  So I'm pretty comfortable with forecasting EV sales from all manufacturers will equal or exceed 5% of total car sales in the US in 2018.  By 2020, battery costs will be below $100/kW, and the cost of EVs will have fallen another 10 or 15%.  They will have the same or better sticker price as ICEs (cars with an internal combustion engine). So sales as a percent of total car sales will go on rising after 2018.

The key question is: what will this do to petrol (gasoline) sales?  Assuming EV sales rise as a percentage of total car sales by 5% a year, this is roughly what the collapse in demand for petrol sales will be, shown in the table below.  For convenience, I'm treating all sales as if they were of EVs with no PHEVs, but in effect, the expansion in battery sizes will move PHEVs to being EVs for every day and only hybrids on long trips.  I'm assuming a linear not an exponential transition.  Also, this is just for cars, but presumably sales of light and heavy trucks and busses will be affected similarly.  And, it's just for the US, but again, the global trends will be similar.  Electric bus sales are already 20% of total Chinese bus sales, for example.  I'm assuming that the average age of cars and light trucks remains unchanged at 11 years.





In the first year, petrol sales fall just 0.5%.  In 2019, another 1%.  By 2025, sales will be down a cumulative 15%.  By 2030 they will have halved.  But the oil crash will come before that.  As Bloomberg says (in this interesting piece):

We found that electric vehicles could displace oil demand of 2 million barrels a day as early as 2023. That would create a glut of oil equivalent to what triggered the 2014 oil crisis.
That's just 5 years away.  Actually, it's potentially worse than that.  Saudi Arabia has the world's largest reserves and the lowest cost of production.  Once it becomes clear to them (and the others in a similar position, such as Iraq and Iran) that it's a case of sell your oil now, or never, they will expand production to its maximum.  Why restrain production to keep the market "orderly" when high price competitors, (like fracking in the US, for example) will gain, and you one day won't be able to sell your oil at all?

I don't know when the oil crash will start, but once it does it will avalanche.  Each year the annual decline in demand will accelerate.  But wait : will falling petrol prices stop EV sales?  Maybe, but I suspect not, because EVs are just so cheap to run and so much more fun too, and they will just keep on getting cheaper.  Anyway, to reduce air pollution and CO2 emissions, some European countries and India plan to ban new ICE sales from 2025 on.

By 2025 or soon after, petrol service stations will start to close, unless they transition to EV charge stations.    By 2030, it will probly become hard to find an old-fashioned service station that still sells fuel.  That's just 13 years away.

In the year that Elon Musk's SpaceX will start the colonisation of Mars, Musk's other business will have shifted the world half way towards zero carbon emissions.  Interesting times.  I hope I live to see it all happen.


Sunday, February 19, 2017

Solar Panel cladding

(Source)


Until recently, solar panels were add-ons to buildings, ugly additions to rooftops.  Increasingly, though, they're becoming integral to new buildings.  Elon Musk has already announced solar roof tiles, which will cost the same as classy roof tiles already do, but will also produce electricity.  And they really are quite beautiful.  Now this school in Denmark has been clad in coloured solar panels.

Copenhagen International School's new building in the Nordhavn district features the largest solar facade in the world. The 12,000 solar glass panels can generate 300 megawatt hours of electricity per year, more than half of the school's annual energy needs. After much anticipation, the pre-K to 12th grade campus opened last month. 
The unique sea-green hue of the panels was created by the research institute Ecole Polytechnique Federale in Lausanne (EPFL) after more than a decade of development. By using the process of light interference, the researchers achieved the tiles' distinctive color without using any pigments and without reducing energy efficiency.

[Read more here]

The further north you go, or rather the further you are from the equator, the closer to horizontal your solar panels must be to ensure you maximise electricity output.  So, in the tropics, roofs are a perfect place to have solar panels,  but in Denmark, having them on the side of the building facing the sun, is pretty effective.  (The panels should be at the same angle as your latitude, and Denmark is roughly at 56 degrees north)

Of course, the panels will be producing much less power in winter.  But that's the time wind speeds tend to be higher. For example, in 2014, January (mid winter in the northern hemisphere) had the highest production from wind farms (62% of electricity generated), July the lowest (23%).  Right now, where I live in southern Victoria, the sky is overcast with showers and thunderstorms forecast for this afternoon, so my solar panels aren't producing much, but if I had a wind turbine, I'd be feeding power into the grid, as there is a strong southerly wind.  At worst, wind and sun are uncorrelated, at best there is some negative correlation, especially seasonally.  Add the backup from Norway's hydro and grid connections to the pan-European grid and it's doable, though my guess is that Denmark as a whole will still need some  seasonal storage.

Friday, February 17, 2017

Fukushima just keeps on giving


Plans to remove spent nuclear fuel have been delayed again, this time until fiscal year 2018 at the earliest; new fuel leaks continue to be discovered; cleanup cost estimates continue to rise; 300 tons of radioactive water are still pouring into the Pacific Ocean every day; and cleanup robots are still being destroyed by extremely high radiation levels. 
With regard to cleanup robots being destroyed by extremely high radiation levels, that’s in reference to one recently being sent into the Unit 2 reactor for the first time (since the 2011 earthquake and tsunami). The radiation inside the reactor is still high enough that it destroyed the robot’s camera, apparently, after less than 2 hours. 
The cleanup robot was apparently being exposed to an estimated 650 Sieverts per hour while in the reactor. For context, one Sievert of cumulative radiation exposure is the maximum lifetime limit for NASA astronauts, and short duration exposure to 4–5 Sieverts imparts a roughly 50% chance of dying within 30 days (often gruesomely). Higher doses will kill much faster. As an example, after being exposed to 36 Sieverts of radiation over a short period of time in 1958, Cecil Kelley died within 35 hours. 
Read more here.

Sorry, guys. I'm not persuaded that nuclear is safe or viable. Yes, we need to do something about global warming.  And we can and we will. But nuclear is not the solution.  Not when we have solar and wind, which are in any case much cheaper than nuclear and can be deployed far more quickly.  


Molten silicon battery

CSP uses molten salts to store heat so that the sun can provide power 24/7.  This new invention by an Ozzie company, 1414 Degrees, uses molten silicon:

Adelaide-based advanced battery expert, 1414 Degrees, has announced it has created a new silicon battery that costs a fraction of lithium-ion cells but stores up to 36 times more energy in the same space. 
The researchers involved in the pioneering battery’s development told the Australian Financial Review the molten silicon storage device can store 500kWh of energy in a 70cm cube. 
Compared with Tesla’s recently launched 14kWh Powerwall 2 lithium-ion storage battery, the device created by 1414 Degrees stores 36 times more energy. 
Not only does the new tech have a higher density that conventional battery cells, the molten silicon batteries are far cheaper to produce, at about one-10th of the price of lithium-ion. 

Although the article, in Motoring, muses about using these molten silicon batteries in transport, that doesn't seem very plausible.   The company's website reckons that they'll be useful for installations from 10 to 100s of MW for grid stabilsation, filling the gap between lithium-ion and pumped hydro.

Fascinating.  But these molten silicon batteries are still experimental, although the company believes it is on the brink of commercialisation.  I'll keep you posted.


Tuesday, February 14, 2017

Log scale vs linear scale

These charts of electricity generation (not capacity) from wind are interesting.  I can't remember where this chart is from, so I can't give attribution.  And it's old--the data only go up to 2011.  Since then wind has continued its growth rate unabated.

The top chart shows generation from wind on a linear scale.  The bottom chart shows exactly the same data on a log scale.  On a log scale it's very close to a straight line, which means it has a steady (constant) growth rate.  And that constant growth rate is roughly a doubling every 3 years.  This year (2017) the output from wind will have quadrupled since 2011.  It has gone up by less in Europe, but that has been compensated for by rapid growth in the US and China.  And the slope in the line/growth rate is determined by cost declines.  It fact the growth causes the cost declines and the cost declines lead to growth, which is called a learning curve.

Initially in the switch to renewables, wind was favoured because it was cheaper than solar, especially (obviously) in high latitudes.  These days, solar PV is now cheaper than wind (again, except in high latitudes), and that gap is likely to widen in solar's favour, because solar costs are falling faster than wind costs.  So will wind be ditched in favour of solar?  I don't know.  The wind blows at night, when the sun doesn't shine. I've seen some analysis which suggests than even in daytime, wind is negatively correlated with solar, which is one reason why diversified sources of generation make it easier to stabilise the grid.  Solar is growing even faster than wind, doubling every 2 years, and I'm sure that will continue.

(See also Doublings)