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.

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Saturday, December 10, 2016

Trump vs Truman

A Tom Toles cartoon



Record lows in sea ice

Global sea ice extent is way below previous lows.  (Note (a)  that this says nothing about ice on land, such as on the Antarctic or Greenland land mass and (b) Arctic and Antrarctic have different seasons--it's winter in the northern hemipshere and summer here in the southern)





Read more here

Denmark: 56% of electricity from renewables

In 2015, Denmark produced 56% of its electricity from renewables:

Higher electricity imports and much higher wind power generation led to a large drop in consumption of coal and other fossil fuels at power plants in 2015. This in turn meant that observed CO2 emissions fell by 6.6% in 2015, and that renewable energy now covers 56% of electricity consumption. These are headlines from Energy Statistics 2015, which were published by the Danish Energy Agency.

(Note (a) that's not 56% of total energy demand, and (b) they're having no issues with grid stability)

[Read more here]


Friday, December 9, 2016

Nuclear power not a solution



Here are just a few of the reasons nuclear won't work in Australia:
Currently available nuclear power plants are between 1 and 1.3GW.
and they don't like being trimmed much below 60% of peak output
particularly in the second half of the refuelling cycle.
Minimum demand in SA [South Australia] is around 600 MW and in most cases there will be some wind
running or solar or gas so the plant will need to find export demand for around
500-600 MW and on a windy night again competing with wind and sometimes finding
that there is not enough demand from Victoria or capacity on the interconnect.
To solve that problem, Japan and France have built a lot of pumped hydro (almost
60% of peak nuclear capacity in Japan) or interconnects to other markets. That
capacity can also be used to backup the plant in case of an outage. However, if
you only have one nuclear plant you must have backup equal to the peak capacity
so a 1.1 GW nuclear plant (AP1000) needs 1.1GW of fast acting capacity. i.e a
combination of gas spinning reserves and pumped hydro. Now pumped hydro is great
for a 4-5 hour shutdown but refuelling takes 4-6 weeks every 3 years so that
means all of the nuclear capacity has to be replaced by gas for that time.
There is another little trick to nuclear power. If the reactor is disconnected
by a SA style event [the once in 50 years storm recently, which brought down 19 transmission pylons] for 2-3 hours there is a built up of Xenon 135 which "poisons" the neutron flux and stops the reactor working. The Xenon-135 can take 25-35 hours to die down before the reactor can start up again. Then it can take another 30 hours or so to reach full power. Imagine how much money the gas
generators are going to make during that time
Now to the cost. In SA a nuclear plant might manage 75% utilisation while on
line (same as France) and therefore 72% allowing for refuelling, generating
around 7 TWh per year.
Plant Vogtle in the US is currently less than half complete, 40 months late
already after 5 years of construction and currently estimated at US$21b
including finance costs for two units, if there are no further delays.
We [in Australia] have no experience in nuclear building and none of the skills and heavy
welding, lifting equipment so we learn by doing or import a lot of expensive
French or American labour and we are only building one unit. 
So less 15% for learning curve +20:30% for local costs +5% for seawater
cooling +10% for one unit not two so A$17.5b for one AP1000, plus storage + gas
backup and by the way it will take 10 years from permitting to full power. Then
add about $2-3b for the storage and $1.5-2.5b for a dual circuit interconnect to
the Sydney basin and using Pelican Point + Osbourne as the constantly running
"spinning reserve".
Permitting in the US and the UK where there are experienced regulators take 3-4
years. How are we going to do it quicker? So in total we can expect a 15 year
project from today.
Operating costs for nuclear are pretty cheap, probably around US$25-35 per
MW.hr. say A$40 but at a generous 8.5% weighted average cost of capital and 45
year life, the interest and depreciation works out at A$278 per MWhr + $40
operating costs. Be generous and say $310. Forward prices in SA now for 2020 are
$83/MWhr so the proposed nuclear plant plus infrastructure would increase the
already high SA cost almost 4 times
With falling wind prices, $17.5b over 15 years can build about 10 GW of wind. As
the capacity factor is increasing with every new generation of turbines, we can
expect about 45 GWh of annual generation. Now even if we added 25% of that
amount of wind to the existing fleet we would already be generating all the
power SA needed from wind so again we need gas and extra storage. The advantage
is that even though one or even three wind wind farms could be taken off line by
a storm there would still be plenty generating so with 1GW of storage there
would be plenty of time to power up gas turbines from cold. Thus although there
might be more gas generation over the year, there would be very few times where
the generators are running "just in case" so overall gas costs would be lower.
We have operating costs for wind turbines at about $15/MW.hr and capital and
depreciation over 25 years at the same 8.5% so we are adding about 2.5GW of
wind at a cost of $4.5b, Lets say a new interconnect but because we don't have
the Xenon problem it doesn't need to be large or ro bust and leave the storage the
same. So now we have a total system of $4.5b + $1-1.5 interconnector + $2-3b for
storage say $8b generating about 11 TWhr. or $123/MW.hr with no subsidies i.e.
less than 40% of the cost of nuclear even including the excessive storage.
[From comment from reneweconomy.com.au, via a comment in The Guardian--Hat tip to summerswood.  My minor edits in square brackets]

Paris Air Pollution



It's easy to worry about the rise of Trump and his Troglodytes.  These antediluvian backward-looking idiots want to pull the US out of the Paris accord and reverse US moves towards combating climate change.  And make no mistake, they will have some effect.  Yet they can't and won't stop the revolution.  It's simple: in electricity generation, renewables are cheaper than coal, and as cheap as gas.  In transport, EVs (electric vehicles) are already cheaper to run than petrol- or diesel-driven cars, and soon -- by end 2017 -- will have similar sticker prices.  Meanwhile, outside the demented Right in the US (and Australia), the reality of global warming is crystal clear.  And so is the obviousness of other kinds of pollution created by particulate emissions from diesel and petrol cars.  This episode of toxic air pollution in Paris shows why the switch to EVs won't stop.  Several European countries plan to ban sales of new petrol-driven cars altogether within 10 years.  My guesstimates are than within 15 years, nearly 100% of all new car and lorry sales in the US and Europe will be electric,  Whatever the Troglodytes say or do.

Wednesday, December 7, 2016

Seasonal storage

(source)


For places between latitudes 30 or 35 north and south, we only need to provide enough storage for one day (diurnal storage).  Although there are seasonal fluctuations, the difference between winter and summer insolation is small or at least tolerable.  Averaged out over thousands of locations, the supply of power is predictable.  One day's worth of battery storage will cater for energy demands most of the time, with the batteries filled up between 10 and 2 and drained during the morning and afternoon peak.

And even one day's storage would be pricey.  The Tesla Powerpack probably costs about $115/MWh now [Edit, 10/Dec 2016: I have probably overestimated the cost of Tesla batteries in my initial stab at estimating their LCOE because Tesla understates the actual capacity, in which case costs after this new decline are more like $70/MWh] , which means that if solar costs say $30 per MWh, adding just one day of storage increases the cost by 4 to 5 times, to the top end of coal.  Battery costs are falling, so in 5 years, costs might have fallen by 2/3rds (let's be conservative!) and solar costs may well have halved so solar plus batteries would be about $65/MWh.  Those costs assume an "island grid", a real island like Hawaii or a virtual island like Western Australia, where no power can be "borrowed" from other regions.  If a region is part of a wider grid much less storage is needed.  And the calcs also ignore that 2/3rds of power is consumed during the day.  (The only reason the net demand peak has moved into the afternoon is because rooftop solar panels pump so much power into the grid at midday.)  It also ignores that the big battery installers will initially be households with "behind the meter" storage, where the cost consideration is different, because they pay the (much higher) retail rates for electricity than the lower wholesale rates big users pay.  But still, let that calc stand: $145/MWh now, probably falling to $65/MWh in 5 years.

Obviously, the further away you go from the equator, the less the insolation and the bigger the seasonal variance.  At the extremes, within the arctic circle, there is no sun for 3 months of winter, while for 3 months over May/June/July there is sun for nearly 24 hours.  In the high latitudes, solar can still be used for power in summer, but not for winter.  And one day's solar storage wouldn't really be much use.

The good news is that at high latitudes wind is stronger and blows for longer. Hence the prevalence of wind rather than solar as a generating source in Scotland/Denmark/Northern Germany.  And the wind blows all winter.  Although from year to year the wind averages the same, it's possible (though rare) in high latitudes that there might be no wind for a week (the longest "no wind period" recorded in Denmark is 7 days.)  And it is possible that there could be a cold spell, which could even--oh horror!--coincide with that wind-free period.

For this we need  seasonal storage: storing power when the sun is strong and the wind high to provide for the winter dark.  This isn't a problem now: many high latitude wind-dependent regions have reached 50% renewables without encountering problems with electricity supply in winter or with grid stability. But as the percentage from renewables rises this is going to become more difficult.  Currently, we use gas peaking power plants to provide for times of high demand and low supply, but that means we are still using fossil fuels and are still emitting CO2.

Battery storage for such contingencies would be prodigiously expensive.  For an "island grid", there would need to be at least one week of storage.  The storage would cost 20 times the cost of the wind power alone.

But while we wait for battery costs to halve and halve again, there are two cheaper alternatives.  One is concentrated solar power with storage.  As the molten salts storage is integral to the system, the total cost of power production plus storage is cheap: below $80/MWh.  But even here, building tanks to store molten salts for a week would add to the cost, though I have no idea how much.  Producing power 24/7 is one thing; storing enough power for a week or more would be more costly.  And anyway, for an "island grid" in high latitudes there just isn't enough sun in winter.

The other is power-to-gas. This is a shorthand phrase for producing hydrogen by electrolysis of water and either feeding the hydrogen into the gas grid directly or converting the hydrogen to methane using the Sabatier process and storing that.  This synthetic methane is indistinguishable from natural gas.  The sources I looked at proposed various limits on the percentage of hydrogen you could mix with methane from a conservative 5% to a generous 20%.  Electrolysing just to hydrogen and not producing methane as an additional step means a slightly lower (8%) energy conversion loss and less capital expenditure, which would reduce costs, so the higher the hydrogen percentage feasible, the better.

Most developed countries have about 10 weeks of gas storage already, and a gas reticulation system. Adding power-to-gas to our energy system to provide for seasonal storage would be cheaper (for now) than using batteries.  How much would it cost?  According to this article, the energy loss going from electricity to gas and back again is about 65%.  With co-generation (using the heat produced during the burning of the gas to heat buildings as well as produce electricity), it's only 50%.   That means that the electricity produced from this power to gas would cost between 2 and 3 times the cost of wind electricity on its own.  On the other hand, it would be needed only for a week or two a year, with a four to six weeks reserve.  That would increase the cost of wind by about 10%.  However, you need a concentrated source of CO2 to produce the methane, and the best way to get that would be to capture and store the CO2 emitted when the methane is burnt. This would produce a closed cycle with no net CO2 emissions.  The best estimate of costs I could find was a piece by the Global CCS institute (chart on page 9), which calculates the additional cost of carbon capture and storage for a gas combined-cycle generating plant as somewhere between $6 and $34/MWh.   This increases the additional cost of power-to-gas to about 12% above the cost of wind alone, for two weeks' storage.

These are my guesstimates.  I would be fascinated if any of you know of better data.

One final point.  None of this is to be taken as arguing that we can't have renewables in our electricity grid.  We can, and many countries have reached 50% from renewables without grid instability or power outages.  But if we want to increase that percentage, storage will become essential.  It will take us 15 or 20 years to get to 100% renewables, so we have time to plan just how we'll do it, while all the time, the costs of these new processes will fall.  In the end, I suspect we'll use all of the techniques at our disposal: battery storage, CSP,  power-to-gas, HVDC lines, and demand management.




Saturday, December 3, 2016

0.2 ℃ per decade

There are still people out there who say that there has been a pause in the rise in global temperatures.  "Tamino" (who knows more about statistics than I've forgotten) looks at the data.  His explanation is so clear even I can understand it.  And the rise in temperatures since 1998 hasn't been much different from the rise before, roughly 0.2 ℃ per decade.  In other words, no slowdown.

0.2 deg. C per decade is 1 ℃ every 50 years.  And that's before powerful feedback mechanisms have got underway.  For example, the "compost bomb" .  Or the melting of methane clathrates.  As I keep on pointing out, moving to replace all coal-fired electricity generation by renewables will not raise the price of electricity, it will not cause an economic collapse, it will not cause lower living standards.  But not moving towards a green energy system surely will.

[Source of all charts]