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. These days I'm retired, and I can't by law give you advice. While I do make mistakes, I try hard to do my analysis thoroughly, and to make sure my data are correct (old habits die hard!) Also, don't ask me why I called it "Volewica". It's too late, now.

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

Saturday, December 15, 2018

Lazard's 2018 electricity costings

Lazard has just published its latest LCOEs for different kinds of electricity generation.  In the chart below I compare the different costings, with some additions of my own.  I have used Lazard's data for everything except:

  1. CSP (concentrated solar power), where it seems to me that Lazard is using the US experience, where no new CSP plant has been built for a couple of years.  However, Solar Reserve has won tenders for CSP plants outside the US, and I've used those PPAs for costings of CSP.
  2. I've estimated storage costs using $400/kWh total cost of battery pack, plus engineering inverter(transformer) and grid connection.  This is what Tesla's "big battery" cost in South Australia. For cars, the battery pack currently cost $170/kWh,  Tesla and Envision Energy expect battery pack prices to reach $100/kWh by 2020 and $50/kWh by 2025.  I'm assuming (conservatively) that the battery only lasts 10 years, whereas it does seem as if at least Tesla's batteries will last much longer.  At $400/kWh, one hour of storage will add $4.60 per MWh (delivered) to the generation cost of electricity.  (Lazard's estimates for the cost of storage  are twice as high--I can't get my head around that yet, so I'll go with the "big battery" costings.)  
  3. Wind plus power-to-gas is my estimate of the costs of wind plus long-term storage via power-to-gas, as I discuss here, and assumes that gas peaking using synthetic natural gas is used for 10 weeks a year.  The cost of producing synthetic natural gas will fall as the percentage of renewables in the grid rises because of increased curtailment.  Running power-to-gas plants when there would otherwise be curtailment will reduce its cost.  

  1. Green represents renewables, red, fossil fuels/nuclear, green/red stripes=mixed
  2. These are unsubsidised data, however Lazard excludes the social costs (externalities) of fossil fuels.
  3. "1/3rd each" is my calculation, and is 1/3rd wind, 1/3rd solar, 1/3rd CSP 
  4. "Wind/solar plus 10 hours of storage" are Lazard's data plus $45/MWh for li-ion battery storage
  5. Coal (marginal cost) is the cost of operation, excludes depreciation, interest, debt repayments
  6. Coal (new) includes marginal cost plus capital costs for newly-built power stations    
  7. These data, excl. my estimates of CSP, are for the USA.
  8. Gas is 60% more expensive outside the US, pushing it up to "wind plus storage" cost levels. 

The first thing to note is that the marginal cost of unsubsidised coal is still, on average, cheaper than solar and wind.  There is a tax credit of 30% in the US which changes that, and the calcs would also be different if even a low carbon tax of $10/tonne of CO2 emissions were levied.  That would add roughly $10/MWh to the cost of coal-powered electricity.  However, some wind and solar (before subsidy) is already cheaper than the the marginal costs of some coal, and as the costs of wind and solar continue to fall, eventually existing coal's marginal cost will exceed wind and solar.  In 5 years even the most costly solar will be cheaper than the lowest marginal cost coal power station. (This decline will be partially offset by the ending of the 30% tax credit.)

Also, the marginal costs of wind and solar are near zero.  Grid operators will use renewables whenever they can.  The calcs for coal's marginal cost assumes it's used 24/7.  If renewables price it out of the market for just a few hours a day, even though nominally the operating cost of coal is cheaper than renewables, it will in fact become uneconomic.  Coal power stations cannot be turned off and on again.  As renewables expand into the grid, this factor alone will make coal uneconomic.

The second thing to note is that apart from existing coal with its low marginal cost, all the cheapest power sources are renewables, except for baseload gas.  (Gas is more expensive outside the US, so that's only true in that country.) Even allowing for 10 hours of storage, which would allow renewables penetration of 90%, renewables are cheaper than coal.  And even if we use power-to-gas to provide back up for the last 10-15%, it will still be cheaper.  I've been conservative in my estimates of how much power-to-gas would be needed, assuming that backup gas peakers would be required when the wind doesn't blow for 10 weeks a year.  Remember that the costs of renewables/batteries/CSP will keep falling as we move along the learning curve.

This is good news for the climate.  As I argue here, the chances are that emissions will start to fall soon, as battery costs decline.

Thursday, December 13, 2018

2019: A Space Idiocy

Oz has started a new space agency, to be located in Adelaide, South Australia.  However, our (Federal) government still believes that coal is the best and cheapest source of electricity, despite all the evidence.  The car wreck is symbol of the collapse of the car industry in SA, aided and abetted by the same Federal Government.  The two men on the car are Chrissie Pyne, leader of the "Liberals" (= far right in Oz) in SA, and as Captain Lightfoot, Scott Morrison, the current Prime Minister and leader of the Libs nationally.

Cartoon by David Pope.

2000 years of economic history in one chart


East Antarctica glacial stronghold melting

The Totten glacier, East Antarctica. Photograph: Esmee van Wijk/Australian Antarctic Division

From The Guardian:

A group of glaciers spanning an eighth of the East Antarctica coastline are being melted by the warming seas, scientists have discovered.

This Antarctic region stores a vast amount of ice, which, if lost, would in the long-term raise global sea level by tens of metres and drown coastal settlements around the world.

Freezing temperatures meant the East Antarctica region was until recently considered largely stable but the research indicates that the area is being affected by climate change.

The vast Totten glacier was known to be retreating but the new analysis shows that nearby glaciers in the East Antarctica area are also losing ice.

To the east of Totten, in Vincennes Bay, the height of the glaciers has fallen by about three metres in total since 2008, before which no loss had been recorded.

To the west of Totten, in Wilkes Land, the rate of height loss has doubled since 2009, with glaciers losing height by about two and a half metres to date.

The data comes from detailed maps of ice movement speed and height created by Nasa from satellite information.

Ice in West Antarctica is already in serious retreat, with scientists reporting a threefold acceleration in recent years, meaning it is vanishing faster than at any previously recorded time.

In April, researchers found that hidden melting beneath the ocean surface was also increasing, putting Antarctica on track to overtake Greenland as the biggest contributor to sea-level rise.

[Read more here]

The deleterious effects of global warming are happening right now.  And they will only get worse the longer we delay doing something about reducing emissions.

Tuesday, December 11, 2018

Emissions at new record

Three years ago I really thought that greenhouse gas emissions had peaked.  China's determination to reduce air pollution was going to keep her emissions from rising, and her switch from coal to gas, renewables and hydro would be how this was achieved.  Emissions in developed countries have been falling slowly.  So it seemed plausible that, even though it wasn't fast enough, emissions would start to decline.  Well, no.

Blame China—and India.

Global carbon emissions are on the rise, and hit record levels in 2018, after remaining flat in 2016 and experiencing a small gain last year, a new report shows. 

The report by the Global Carbon Project came out just as world leaders gathered in Poland to discuss the next steps for reducing carbon emissions under the Paris Climate Accords. (And the U.S. set up a token booth to promote more efficient burning of fossil fuels.)

The Global Carbon Budget 2018 report showed that emissions of global warming carbon-dioxide increased 2.7 percent to record levels in 2018 as China loosened controls on new coal-fired power plants in response to an economic downturn. CO2 emissions in China rose 4.7 percent this year and account for more than a quarter of such global emissions, the report shows. Still, it says that the increases in China are not likely to be sustained, as they stem from an economic stimulus package designed to spur construction to boost the economy.

India had the second largest gains in greenhouse-gas emissions as it works to bring power to regions that have never had electricity before.

Other nations with the largest greenhouse emissions included the U.S., Russia, Japan, Germany, Iran, Saudi Arabia, South Korea, and Canada. Overall, 15 percent of emissions come from the U.S. and 10 percent of all emissions from the European Union as a whole.

Although the U.S. had the largest decline in coal use, having closed more than 250 coal-fired powerplants since 2010, overall greenhouse emissions from the U.S. still increased as a result of an increase in driving and more demand for cooling and heating, the report says.

[Read more here]

The chart below shows different carbon emission scenarios and their likely impact on the climate.

Source: Green Car Reports

An increase of 1 degree C since the 19th century is already causing havoc, with more storms, more droughts and more floods.   What would 2.3 degrees do (the high forecast for the lowest carbon emissions pathway)?  Or 3.2 degrees, the upper likely outcome of the Paris targets?  (And don't assume, as so many do, that we will "get lucky" and only have the lowest temperature outcomes.  We might get unlucky instead.)

Now the good news is that in the lowest scenario, we don't have to get to zero emissions by 2050, but by 2070--although some negative emissions after 2070 are needed to achieve that.  That's still a 5% cumulative decline per annum, and it would mean an 80% decline by 2050.

Can we achieve a 5% per annum cumulative decline?  I think we could, if we wanted to.  As I argued here, the key now is cheap storage, which may be only a couple of years away.  Already nearly half all coal power stations across the world are loss making, and a third have operating costs which exceed the total cost of new renewables.    By 2025 half new car and light truck sales could be electric.  We could manufacture carbon-neutral jetfuel, and although it would increase airfares by 70%, if introduced over 20 years the annual fare increase would be just 3%.  In any case, if the cost of renewable electricity halves again over the next 10 years, there would be no increase in airfares.

We have favourable winds in our sails because of the startling declines in the costs of wind, solar and storage.  But there are still massive subsidies for fossil fuels, and they must stop.  And a carbon tax, returned to all citizens by means of a "carbon dividend" would make the transition faster, and also help fund negative emissions.

Monday, December 10, 2018

Energy storage storm

What's stopping us from reaching 100% renewables in electricity generation?  The absence of cheap storage.  There's no real difficulty getting to 20% of 30% or even 50% without storage, and of course, we can "firm" renewables using gas.  But if we want to pivot away from gas, and also reach a high percentage renewable penetration, we need cheap storage.  Tesla thinks it will get to below $100/kWh for the Tesla battery pack by 2020.   Envision Energy also thinks that their battery packs will be below $100/kWh by 2020 and below $50/kWh by 2025.

What this means is that the last remaining hurdle to reaching 100% green energy is about to disappear.  Already, renewables without "firming" are cheaper than coal most places in the world, and in fact in many places, the operating costs of coal (i.e., ignoring depreciation, debt repayment, etc.) are less that the total cost of new wind or solar (i.e., the cost including depreciation, interest payments and debt repayment)  Yet, without storage, the variability of renewable energy sources still crimps just how far we can increase the percentage of renewables in the grid. 

At $100/kWh (stored) the cost per kWh dispatched is about 2.7cents/kWh or $27/MWh, for 24 hours of storage (but see note below).  This is cheap, yet if costs drop to just $50/kWh (stored) then the cost of providing 24 hours of storage will drop to just 1.4 cents/kWh or $14/MWh dispatched.  These low costs will make green energy, even with 24 hours of storage, cheaper than any competing fossil fuel.  Remember that, unsubsidised, the average cost for US wind is $42/MWh, with the low end $29/MWh, and the average cost for solar is $38/MWh.  The average total cost of coal is $101/MWh, and its average marginal (operating) cost is $36/MWh.  Add the cost of storage to wind or solar, and the total is below the cost of new coal, right now.  Factor in further falls in the cost of storage, and of wind and solar by 2025, and even with 24 hours of storage, wind and solar "firmed" by storage will be cheaper than the marginal cost of coal.  There will be no reason to use already-built coal power stations, and certainly no logic in building new coal power stations.

Even in countries run by denialists and corrupt politicians in the pay of fossil fuel producers, the pivot to green energy will be irresistible. 

At current costs, new battery storage at grid level and behind-the-meter is already exploding.  The exponential S-curve take-up has started.

Source: Wood MacKenzie, via PV Magazine

A Wood Mackenzie report shows U.S. energy storage deployments tripling in capacity during Q3 ’18 versus last year’s volume, while noting that the future pipeline growth rate doubled versus prior quarters to reach 33 GW of future projects.

The U.S. solar power pipeline is already popping, now the batteries needed to get us to 80% with wind+solar are starting to get down to the mad and exponential growth we’re told to expect.

Per the US Energy Storage Monitor, from Wood Mackenzie Renewables & Power along with the Energy Storage Association (ESA), total energy storage deployed, in the U.S. expanded by 60% in terms of energy and 300% by capacity in the third quarter of 2018 versus the prior year. However, given a strong Q2 both energy and capacity were flat or declining in Q3 ’18 versus the previous quarter.  

In total, 61.3 MW / 136.3 MWh of energy storage was installed during Q3 2018, in the U.S. California continued to achor the market, while Hawaii and New York had strong quarters. Behind the meter installations accounted for around 57-60% of capacity deployed.

Going out mostly until 2023, the report noted that the front of the meter pipeline expanded to approximately 33 GW of power. This pipeline more than doubled from just over 15 GW reported at the end of the second quarter.  

This pipeline does not include behind the meter deployments, and as noted in this report these represented approximately 60% of the volume this quarter. Future growth is expected to heavily expand on the utility scale.

For instance, PG&E recently approved four energy storage projects totalling 567 MW / 2.64 GWh. These include a 300 MW / 1200 MWh system by Vistra Energy, and a 182.5 MW / 1,095  MWh six hour system by Tesla, which are the largest battery projects seen by pv magazine USA staff in the United States to date.

[Read more here]

Source: EPA

Of course, the plunge in battery costs will also drive out petrol- or diesel-driven cars (ICEVs).  If heating also switches to green electricity (which it will, even without government pressure, because it'll be cheaper) something like 60 to 70% of emissions will stop.  We need to get rid of just another 20% to prevent runaway global warming.  That will mean carbon-friendly fuel for jets, new techniques for making steel and cement, as well as offsetting remaining carbon emissions with afforestation/reforestation and better soil management

But it's all eminently doable, despite my doubts and worries.

➥  A note on terminology and measurement.  A battery's storage capacity is given in kWh or MWh (kilowatt-hours, megawatt-hours).  Its output is measured in kW or MW (kilowatts, megawatts).  It's like a watering can.  You can put 5 litres into it, but you can only pour out, say 80 ml of water per second.  It takes time to empty it (and time to fill it).  The watering can's capacity is 5 litres (think MWh), its maximum output is 80 ml per second (think MW).

Now, to work out the cost of each kWh or MWh dispatched, over the lifetime of the battery, you take the kWh/MWh stored, and work out a rough LCOE (levelised cost of energy) by dividing it by 3650, which assumes the battery is 100% discharged every day for 10 years.  Actually, Tesla batteries seem likely to last much longer than 10 years. In fact, the batteries in Tesla cars might lose just 25% of the capacity over 25 years.  If the batteries do in fact last 25 years, the cost per MWh dispatched, at $100/kWh stored will be $11.  And at $50/kWh stored, it will cost just $6/MWh dispatched.  Of course, we don't know yet for certain how long batteries will last.  So I've gone with 10 years above--but I think the eventual numbers will be much, much better.

Saturday, December 8, 2018

UK heatwave made 30 times more likely by global warming

UK heatwave 2018

From Carbon Brief.

This year’s summer heatwave, which saw temperature records broken across the UK, was made up to 30 times more likely by climate change, a new assessment says.

A preliminary study by scientists at the Met Office Hadley Centre finds that the extreme heat experienced by the UK this year had around a 12% chance of occuring. In a world without climate change, it would have had a 0.5% chance, according to the results*.  [I.e., once every 8 years vs once every 200 years]

The influence of climate change on the odds of the 2018 summer heatwave is the highest recorded for a study of this kind looking at extreme events in the UK, the study scientist tells Carbon Brief at the UN’s 24th Conference of the Parties (COP24) in Katowice, Poland.

And, by 2050, the chances of such a heatwave occuring could reach 50%, the scientist adds. “With continued emissions, we’ll eventually make it impossible to adapt.”

This year’s summer heatwave dominated front pages in the UK – with all-time temperature records broken in, among other places, Belfast (29.5C), Glasgow (31.9C) and Porthmadog, Wales (33C).

The new analysis suggests that such extreme heat was made around 30 times more likely by human-caused climate change.

The results are “surprising”, says study author Prof Peter Stott, who leads on climate monitoring and attribution at the Met Office Hadley Centre: 

“This is a piece of scientific evidence showing that this is not just chance; we’re not just unlucky. We’re reaping the results of our emissions.

“If you look right back at global temperatures, it’s effectively impossible to have the temperatures that we’re having now without human-induced climate change. Zooming in to a region like the UK, this is probably the highest I’ve seen in that context.”

[Read more here]

To cut greenhouse gas emissions by 80% by 2050, we need to reduce them by 5% per year.  Even a 4% per annum decline would still cut emissions by 72%, which would be a pretty good result.  This year, however, it looks as if emissions rose by 2.7%.  I despair, sometimes.

* I think '0.5%' is a typo and it should read '0.4%', which is once every 250 years.  Below the section I quoted, the text says once every 245 years, so that makes more sense.  A rounding error?  Anyway, somewhere between 25 and 30 times as likely.