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, May 29, 2017

New lows in solar costs


In Arizona, this time, by the utility Tucson Electric Power, which plans to produce 30% of its electricity from renewables by 2030.

A new contract signed by a utility in Arizona has set a new low price for large-scale solar power in that country, but more importantly has also smashed expectations of the combined cost of large-scale solar and battery storage. 
Tucson Electric Power (TEP) this week announced it would buy solar energy from a new 100MW solar plant at the historically low price of less than US3c/kWh – less than half of what it had agreed to pay in similar contracts over the last few years. 
The project will also include 30MW/120MWh of battery storage, and the company says that the power purchase agreement for the combined output is “significantly less” than US4.5c/kWh – nearly two-thirds cheaper than the previous such contract struck in Hawaii, and well below the cost of a gas-fired peaking plant.

[Read more here]

Solar at less than US$30/MWh*; solar with storage at US$45/MWh*, well below the cost of a gas peaking power plant!  Wow!

A bit of a digression on capacity and just how much storage is being provided relative to demand. The solar farm will have a capacity of 100 MW, the storage 120 MWh.  But actual output from solar is less than its nameplate capacity, because of night, clouds, winter, etc. According to NREL's PVWatts website, a 100 MW of solar capacity in Arizona would produce during the average of 12 hours of daylight about 39 MW of electricity per hour (a capacity factor of 20%.)  Obviously, that varies by time of day and season.

The battery storage is 30MW/120 MWh,  Batteries are measured by the maximum output  (MW or kW) and the total stored capacity (MWh or kWh). In other words, this battery bank can deliver 30 MW of electricity for 4 hours, or perhaps 15 MW for 8. Unlike the output of the solar panels, this doesn't vary by time of day/season.

The batteries have to be charged.  At 39 MW per hour, that will take a bit more than 3 hours, or spread over the day, about 25% of daily output of the solar panels. This will reduce the net power available during daylight from 39 MW per hour to 30 MW.   So the batteries could provide the same net output as the solar panels for 4 hours after the sun has gone down.

Together solar plus batteries would provide something like 16 hours of electricity per day on average over the year.  In rough terms, the combination of solar and batteries will provide power from, say, 6 a.m. to 10 p.m.  (Arizona doesn't have daylight saving) That's still not electricity 24/7 but it's not far off, since demand from midnight to six a.m. is low.  Also, Tucson Electric Power is planning a new wind farm with 100 MW capacity, so reducing the need for electricity from the solar plus storage facility.   Wind and solar are to some extent complementary (the wind still blows at night when the sun doesn't shine, the wind is stronger during storms, when insolation is reduced, and so on.)

OK, end of digression.  The key takeaways from this are

  •  renewables continue to get cheaper, even in mature markets like the USA.
  • renewables are now as cheap as baseload electricity in the USA
  • renewables with storage can provide dispatchable power more cheaply than peaking power gas
  • coal is already on the nose; and gas will follow.
Incidentally, these conclusions are the same in Australia, and I suspect round most of the world.  I also suspect that Tucson Electric Power will achieve its 30% renewables target long before 2030, especially since the Navajo Generating Station, a massive (2250 MW) coal generator in Arizona, is to close in 2019.  In 2 years time, solar will be even cheaper, and batteries are still plunging in cost.  The cost advantage over peaking power gas plants can only improve.

* after 30% investment tax credit.

Wednesday, May 24, 2017

Energy Payback

One of the classic techniques of soft denialists is to assert that the construction and installation of solar panels or wind turbines uses more energy than they produce over their useful lifetimes.  I call them soft denialists because they don't come right out and say that there is no such thing as global warming and so we can continue to use fossil fuels.  What they say instead is that renewables won't work, and so we have to use fossil fuels.  They don't then add that this will inevitably mean that CO2 emissions will go on rising, the level of CO2 in the atmosphere will go on rising. and so global temperatures will go on rising.  Even if they were right about the energy payback ratios of renewables, the fact is that we have no choice.  We have to cut CO2 emissions to near zero to prevent catastrophic global warming.  Fortunately, the soft denialists are completely wrong.

So what are the facts?

Solar: According to NREL, current PV systems take 3.5 years before the energy they generate exceeds the energy used up in their creation and installation.  Now, solar panels lose about 2% of their capacity in their first year of use, but thereafter capacity declines by 0.5% per year.   This means that over 40 years, PV panels will lose a cumulative  mere 20% of nominal capacity.  Clearly, that's a positive energy balance.  As a corollary, note that costings of solar power assume that project life is 25 years Even with low interest rates, the increase in the present value of the investment after 25 years is small, so that makes sense.  But what that means is that after 25 years, the electricity generated is (virtually) free.


Wind:   On-shore wind turbines produce 34 times the energy it "costs" to make them.  As my source points out, though, this doesn't include the energy cost of batteries or backup.  What is truly fascinating is that the energy payback ratio for coal is much less: between 2.5 and 5.1; and for CCGT (combined cycle gas turbine) is about the same (between 2.5 and 5).  CCS (Carbon capture and storage) is even less efficient.: it reduces the coal payback ratio to between 1.6 and 3.1.  These data mean that even if you include backup for wind for half the time, it still (obviously!) has a far better energy payback ratio than coal or gas on their own.

Source  (Click to enlarge)

Conclusion:  Renewables pay back the energy used to create them many times over.  The soft denialist claim is just wrong.

Thursday, May 18, 2017

How much storage—II


The CSIRO and Energy Networks Australia have done some detailed modelling to estimate just how much storage will be needed as the percentage of renewables in the grid increases.  Although the analysis is specific to Australia, the general conclusions are applicable everywhere.

The paper analyses requirements by state, because although there are interconnectors between states, the separate state grids are not well integrated into a national grid.  For example, there’s only one interconnector between Queensland and New South Wales, one between NSW and Victoria, and two (one low capacity) between Victoria and South Australia.

Some conclusions:

  • Solar is much more predictable than wind, but wind is handy for night generation, so the estimates are predicated on a mixture of wind and solar.  But in the southern states, the swing between winter and summer means that solar has a greater seasonal variation than in northern states, which means more storage is needed, especially at high penetration of renewables. 
  • At low levels of renewables penetration, very little storage is required.  This is because there is already redundancy in the grid to cater for swings in demand as well as potential failures in existing baseload supply.
  • At 50%, something like 2-3 hours of storage is needed.  By 70% it’s something like 5 hours.  
  • The big surge in how much storage is needed is when we exceed 90% renewables generation.  In the northern states, we will need 5-7 hours of storage.  But in South Australia (where 95% of the demand is in the south, even though the geographical area of the state stretches quite far north), and in Victoria, we will need more than 24 hours’ worth.  (Tasmania has lots of hydro, so it needs little additional storage.)
  • That’s with existing interconnectors.  If additional power lines connecting the southern states were built deficit areas would “borrow” power from surplus areas, and pay it back when their situations reversed.  The storage required in the southern states would drop to something much closer to what is needed in more northerly states.  It can be raining in Adelaide while it’s sunny in NSW, and vice versa, and windy in SA while it’s calm in Victoria.
  • Biomass or gas peaking will be more economical than storage if the low output from renewables lasts more than 8 hours.
  • Rooftop solar and behind-the-meter storage will be important in the mix.   By 2030 in Queensland for example, there will be more rooftop solar capacity than there is currently coal capacity.  And it is likely that by then everybody with rooftop solar will also have a battery.  My rough and ready calcs suggest that behind-the-meter batteries will provide at least 3 hours’ worth of storage.
  • They briefly mention concentrated solar power, but don't include it in their forecasts or analysis.  However, it seems almost certain that there will be at least one CSP plant in SA in the north of the state in the next couple of years, and if that's a success, there'll be others in other states.  CSP is relatively cheap and provides dispatchable power which fits perfectly with a high percentage of renewables.
[Read more here and here]

I've made most of these points before, but it's nice to see the experts make them too.

Monday, May 15, 2017

VW's epiphany and conversion

For a long time, car manufacturers said that diesel cars would achieve low emissions, clean air, and so on, without the need for those pesky electric cars that Tesla and Chinese manufacturers were building.  "Clean diesel" (how we laughed) was going to save the world.  Except --  VW had lied about actual emissions by its diesel cars and faked the tests.  This Wikipedia article is an excellent summary of the whole sorry debacle.

Well, in the way of those who sin, VW has had an epiphany ("Oh, wait!  What we did was wrong!) and a conversion ("We need to move towards electric cars, because .... you know ... image and stuff") Christian Senger, head of VW's electric car division, had this to say at the Shanghai motor show:

“Offering our electric cars for prices similar to combustion engine vehicles really is a game changer.”
“We’re using the need to step from combustion engine to electric cars to reinvent VW brand.” 

[Read more here]

So VW will offer at least 4 EVs costing the same as ICEs "in the next few years".   Maybe.  Actually I think of all the heritage car manufacturers, VW is the one closest to being born again.  Toyota is still il love with hydrogen-cell cars, and most of the other manufacturers produce only enough cars to comply with California clean air regulations (GM and its Bolt EV).  VW's concept cars look quite classy, don't they?  We shall see how much of this is airware.



The Rule of Law

From Tom Toles

Sunday, May 14, 2017

Global warming: a simple experiment

First, a little theory. The molecular structure of CO2 makes it transparent to high frequency radiation (which derives from a HOT source, such as the sun) and opaque to LOW frequency radiation (which derives from a COOL source such as the warm Earth's surface). High frequency radiation from the sun (heat and light) easily penetrates the Earth's atmosphere since its source is at 6,000C at which temperature CO2 is transparent to radiation. It strikes the surface of the Earth where it warms it to about 295K (20-25C). Low frequency radiation from the cool Earth cannot penetrate CO2 which is, as I said, opaque to low frequency radiation. So the Earth's atmosphere gets warmer since the sun's high frequency energy is converted into low frequency energy (ie heat) which is trapped by CO2. The more CO2 the warmer it gets. 
Physical experimental evidence? Easy. 
Place a variable temp heat source on one side of a large glass flask filled with CO2. Put a thermometer inside the flask and another thermometer outside the flask on the side away from the heat source. Start heating the heat source. As the heater heats up the temperature registered by the thermometer inside the flask steadily increases and the temperature registered by the thermometer outside the flask, on the side away from the heater registers no temperature change. This is because CO2 is opaque to radiation from a relatively cool source of heat (up to about 5-600C) and so the heat energy is trapped in the flask, heating it up, and doesn't pass thru to the thermometer on the far side of the flask. As the heater increases in temp (to 1,000C or so), meaning the frequency of the radiation from the heater gets higher, the thermometer inside the flask ceases to increase in temp and the thermometer on the outside of the flask starts to register an increasing temp. This is because CO2 is transparent to high frequency (ie high temp) radiation and so the radiation simply passes thru the CO2 in the flask and impinges on the thermometer on the outside of the flask causing it to register a steadily increasing temp while having no effect on the thermometer inside the flask. 
Thus, CO2 allows high temp radiation from the sun to reach the Earth's surface and traps the low temp radiation from the relatively cool Earth's surface. 
Any high school science lab can demonstrate this for you.

World EV sales soar

World EV & PHEV sales, i.e., sales of cars with a socket, whether completely electric or plug-in hybrids, reached a record 1.5% of total world car sales in March, triple the percentage reached just 3 years ago.

At the recent Macquarie companies conference in Sydney, the CEO of CleanTech (CLQ.AX) talked about his company’s plans to produce cobalt, which is used in EV batteries.  He stated that China has a target for EVs and PHEVs as a percentage of new car sales of 8% in 2018 and 12% in 2020.  Of course these targets are driven by China’s horrendous air pollution, and many of the cars will be tiny and with a small range.  Size and range prolly don’t matter a lot in China right now.  As battery costs fall, and the costs of EVs decline, both will increase.  The Chinese targets will also force non-Chinese car manufacturers to increase their EV range and produce more EVs, or risk being shut out of the world’s largest car market. 35% of all cars sold worldwide are sold in China — Europe is 25%, US just 10%.

In a previous piece, I forecast that by 2019 10% of US sales will be EV/PHEVs.  And Europe is likely to start pushing EVs far more aggressively from now on after the Volkswagen diesel scandal and several episodes of extreme air pollution in some of Europe's major cities. If China meets its targets, if the US reaches 10%, then 4.5% of global car sales will be EVs/PHEVs in 2019, ignoring Europe and other countries.  Thereafter, the continued declines in battery prices and the demonstration effect—for example, an acquaintance buys an electric car and boasts about how nice it is, and how cheap it is—will lead to more sales.  Expanding sales will lead to growing charging networks which in turn will drive sales even higher.  Some countries (India, Austria, The Netherlands & Norway) plan to ban all new petrol and diesel car sales from 2025 onwards, and Germany has said that the only way it can meet its Paris targets is by doing this too. EV sales will continue to grow exponentially.  ICE* sales will start to decline, and the decline will accelerate.

The percentage of EV sales tripled over the last 3 years.  It’s likely to more than triple over the next 3.  At that point, the EV revolution will be unstoppable—if it isn’t already.  It’s hard to say what the percentage will be in 10 years, but if the adoption of EVs follows classic S-curve technology adoption patterns, and the historic growth rate continues, it could be close to 100%.  (The percentage is tripling every three years, so, 2019 — 5%, 2022 —15%, 2025 — 45%, 2027 — 100%)  Which is good news for global warming, but very much not good news for oil. And not good news for what now look increasingly like heritage car manufacturers, who still cannot really believe that EVs will very soon sweep ICEs away, and are still dithering about addressing this market properly.

(Source of basic data: Inside EVs & OICA.  2017 world car sales estimated.  My seasonal adjustments and my graphic)

*ICE = Internal combustion engine