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. I do make mistakes, but I try hard to do my analysis thoroughly, and to make sure my data are correct. Remember: the unexpected sometimes happens. The expected does too, but all too often it takes longer than you thought it would.

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.

Sunday, January 14, 2018


A cartoon from Steve Sack

Kentucky coal museum installs solar panels

Deep in the heart of coal country, a very unexpected business is going green.

The Kentucky Coal Mining Museum is adding solar panels to its building.

The museum, located in the southeast Kentucky town of Benham, aims to shine a light on the important role coal played (and continues to play) in meeting our energy needs — which makes it worth asking why it's moving away from its namesake fuel source to suit its own power needs.

The answer is actually really simple: Solar is cheaper.  The irony certainly isn't lost on the museum's owners, but there's no denying that solar power just makes sense from a financial standpoint.
[Read more here]

Getting to Mars--cheaply

Asteroid mining. Source

NASA estimates a cost of $100 billion for 5 astronauts to get to Mars and back. $20 billion per person!  It's no wonder the date mankind will reach Mars is always 15 years from today.  No government will fund that kind of expense.  But what if the cost could be dramatically, massively, cut?

If SpaceX manages to make the BFR and BFS reusable, even for just 10 times, the cost of getting to Mars will be 4 or 5 orders of magnitude less than NASA's mission.  (An order of magnitude is a 10 fold increase or decrease)

There are three parts to the Falcon 9: the first stage, or booster; the second stage; and the payload which is protected by a fairing.  Already the Falcon 9 first stage is being used twice, and with each successful launch and relaunch, the steps needed to reuse the first stage have been reduced and the speed with which SpaceX can reuse them rises. But the second stage and the fairings are discarded, and allowed to fall back to earth where they burn up in the atmosphere or crash into the sea.

We know from SpaceX that each launch of the Falcon 9 costs $62 million, and the launch of Falcon Heavy costs $90 million.  Musk has said that the fairings cost several million, but he has also said that the first stage is somewhat less than 75% of the total cost.   Reconciling these two statements is beyond my skills.  So let's assume that the second stage plus fairing costs 1/2 the first stage.  That gives us 3 equations, where A = the cost of stage 1, B=the cost of stage 2 plus fairing and C = profit margin.

(1) A+B+C=62
(2) 3A+B+C=90
(3) B=A/2

Three variables, three equations--hey, I can solve that!  And the solution is:

A (cost of stage 1)=$14 million
B (stage 2 + fairing)=$7 million
C (profit) = $41 million

The high profit margin (66%) explains why SpaceX is still going despite its heavy outlay on development, and despite frequent predictions that it was in imminent danger of bankruptcy.  (In that sense it's not really a profit margin, rather development cost recovery)

Undoubtedly I've got things wrong, but it gives us some reasonable guesses.

Let's use the number of engines as a proxy for the cost of the BFR vs the Falcon 9.  I know that's far from exact, but the engines are a big part of the cost and if they are all the same size, the number should be proportional to the size of the rocket, and therefore its cost.  The BFR (i.e., stage one of the Mars Transporter) will have 31 Raptor engines, compared with the Falcon 9's 9 Merlin engines, so a very rough calculation would put the cost of a BFR at 14/9*31=$48 million.

The BFS (the upper stage of the BFR, the proper "spaceship") will have 4 vacuum Raptor engines and three smaller atmospheric "sea-level" engines) The BFS will cost much more than stage 2 and fairing of the Falcon 9--it'll be much bigger and will have life support (though the tanker and cargo versions won't.)  To get some idea, let's again assume the rule of thumb we used with the BFR.  That suggests the BFS might cost 14/9*7=$11 million.

Now, profit/development costs.  Much of the development cost has already been spent, with the development of the Raptor engine and the composite-fibre fuel/lox tanks.  But this still has to be redeemed from future launches.  Let's assume that the profit/development costs are 5 times the profit on the F9, or roughly $200 million.  That gives a total cost of about $260 million. That's for ONE use: if the BFR/BFS combo can be reused just 10 times, the cost per launch drops to $26 million.

Musk thinks the BFR can be reused 1000 times, the BFS 20 times.   But BFS reuse assumption is low because it's being used for Mars journeys, which means 2 years between journeys because Mars is only in opposition to Earth every 26 months.  If it's used for journeys to the International Space Station, the moon, and to launch SpaceX's fleet of satellites for its world-wide internet system, its reuse will be greater.  On the other hand, maybe it's just impossible to actually reuse spacecraft several times because the rigours of launch and re-entry are too great.  I've seen estimates of 12 reuses of stage 1, followed by a major refurbishment.  Refurbishment will however be expensive.  So let's ride with 10 reuses.  Even that will be enough to make the BFR/BFS combo ridiculously cheap.  And 12 reuses will cut the cost another 20 percent, 20 reuses by  50% more.

The cost of fuel is (relatively speaking) negligible in this context: $200K for a F9, so perhaps $1 million for the BFR. So the cost of each launch (with 10 reuses) would be $27 million. For a Mars trip, the BFS will have to be refuelled in space 7 times.  That suggests the total cost of the first Mars trip of $432 million -- $216 million each for one manned ship and one cargo ship, with 7 refuelling flights for both. Subsequent launches will require less cargo, because machinery will be manufactured on Mars using 3-D printing and local resources, so costs will fall sharply.  Each manned ship will be able to carry 100 passengers, so cost per passenger will be under $500K for the first few trips, much less thereafter. (This compares with $5 billion per person with NASA's current plans.)  However, Musk reckons the total cost per launch will be lower than the Falcon 1, which was $7.3 million in 2015 dollars. This is way lower than my estimates, which means he is assuming more reuses than I am--at least 30 or so.  However for the point to point rocket flights on Earth, to get the cost down to the price of a business class air ticket, you'd need to get 100 reuses.  Hmmm.

The key is reusability. If SpaceX delivers that, especially if they get even 100 reuses, the whole solar system opens up to manned exploration. People have consistently dismissed Musk's plans, with both Tesla and SpaceX. And he's achieved all his goals, though admittedly it's usually taken longer than he said ("Elon time"). Perhaps most significantly, where NASA, ULA, Ariane, Uncle Tom Cobley and all seriously doubted or even rubbished his efforts to make rockets reusable, he succeeded. The first few landings failed, right enough. But there have been 20 perfect landings in succession to date.

Musk has clearly dismissed any hope of finance from NASA.  SpaceX generates a "profit" of $41 million per launch of the F9.  That's $6.1 billion over the next 5 years with 30 launches a year (SpaceX will have half the market this year), enough for 26 BFR/BFS sets, assuming $200 million "profit" per set.  But of course, SpaceX will be selling the services of BFR when it is built, getting revenue that way.  When the BFR/BFS becomes the workhorse rocket within the firm, launching satellites and servicing the ISS, SpaceX will be making $20 million per launch.  And given the probable elasticity of demand for space services at much lower prices (remember the BFR/BFS will carry 150 tonnes to LEO compared to F9's 22.8 tonnes,  at a cost of $180K per tonne vs $2.7 million per tonne), there will likely be thousands of launches per year, not 60.   Development costs will be spread across far more launches.  Up until SpaceX slashed the cost of space launches, it cost $22,000 per kilogram, or $22 million per tonne to get stuff into orbit.

Why does all this matter?  

Well, there is already one spin-off.  Cheap satellite launches will make SpaceX's world-wide high-speed internet feasible.  In the past, the biggest component of satellite costs has been the launch.  A truly world-wide high speed internet, available in the middle of the Pacific, the Amazon jungle, the Sahara desert, Africa, outback Australia, etc, not just in wealthy cities in the West, will transform the world.   SpaceX envisages that you will need no more than a book-sized receiver on your roof to access internet speeds 180 times faster than they are on average in the world today. 

Another possible spin-off: to extract CO2 from the Martian atmosphere, SpaceX will need to develop its own machinery or use machines created by others. Just as they have with everything else, they'll cut costs and improve efficiency.  What works on Mars will likely work on Earth too.  This will be tremendously useful on Earth.

Probably, all the things we'll need to do to maintain life in our domes on Mars, and later on its surface, will have useful applications for Earth too.  NASA is responsible for a long list of useful inventions which are spin-offs of the space program.  Solar panels were first developed for use in satellites.  Now they will save the world by replacing fossil fuels.

The asteroid belt beyond Mars and near-Earth asteroids closer to Earth are a treasure trove of minerals, containing a planet's worth broken up into bite-sized chunks.  The BFR will make getting to the asteroid belt cost effective, and shipping minerals back will be cheap because the asteroids have hardly any gravity--a small push will send them on their way to Earth or Mars.  Mars will be a way station for miners in the asteroid belt, because it's much closer than Earth.  So they will likely also mine the asteroids for water and ammonium (for the nitrogen) for Mars, as well as minerals for the Earth.

When the mobile phone and the internet were invented, no one could foresee how they would revolutionise society, or how disruptive they would be to established industries.  Cheap space travel will change the world for ever.  We will start a colony on Mars, we will mine the asteroids, and the spin-offs from rapid technological advancement in space will change our lives here on Earth in ways no one can foresee.   That's if we don't blow ourselves to bits with nuclear war before that.  Or cause global temperatures to rise by more than 1.5 degrees C, which will lead to huge adaptation costs in low-lying cities as well as massive numbers of refugees. Or do something else stupid.  I live in hope.

Sunday, January 7, 2018

Record temperatures in Oz

While denialists witter on about how cold it is in the USA ( Alaska is warmer than Florida) it's mid-summer here in Oz and we're having record, record heat.  That  by itself of course doesn't prove there's global warming, but if we know (and we do) that global temperatures are rising rapidly, then a record heat wave is significant.  And it's likely to be followed by more records being broken.  And then even more.  How long before significant chunks of the world become uninhabitable in summer?

Burning Nemo

From Jack Pratt

Electricity market ignores Trump

Source: CleanTechnica

The electricity grid is inexorably transiting to one powered by renewables.  The grid of the future will be mostly powered by a mix of solar, wind and CSP, with batteries, molten salt and pumped hydro for storage, and with HVDC (high-voltage direct current) power lines connecting places with different climates, so that output of the grid as a whole is stable. 

The cost of all these technologies is falling.  In some locales, renewables are already cheaper than fossil fuels, and they will get cheaper still.  Even though their costs have halved over the last 3 years, batteries are still pricey, but their costs are likely to halve again over the next 3 years.  Ultimately, the grid will have battery storage in its transport fleet (an electric car stores 2-4 days of power demand for a typical home); it will have distributed storage at major substations and places where long-distance power lines meet and diverge; and it will have behind-the-meter storage in homes and businesses with rooftop solar.

Adding long distance HVDC connections to the grid makes a lot of sense.  Power losses are small, and having long-distance connections to other geographies means that even if the wind isn't blowing in your state, you can get power from two states away where it is blowing.  If the sun is shining in your area, and there is too much electricity, HVDC lines can convey it to where the sun isn't shining and there is a shortage. 

Wyoming is part of the US "wind corridor".  It has about the same population as South Australia, which also has excellent wind resources.  Wyoming has huge coal resources.  It also voted overwhelmingly for Trump.  Yet it is rapidly extending its wind generation capacity.  Politicians may make grand gestures (they do that a lot), but in the end wind is expanding despite political grand-standing because it's so cheap. Wind contracts in the wind corridor are being signed at $20/MWh or less.  Even better, Wyoming wind blows strongly in the late afternoon, just when Californian demand is strong.  To take advantage of Wyoming's wind resources, a new HVDC line is to be constructed from Wyoming to the edge of the Southern California grid in southern Nevada.

You can read a detailed account here, but what interested me wasn't so much the details but the principles.  Renewables are cheap and getting cheaper; when push comes to shove, the market shrugs off politics; the percentage of renewables is steadily rising; and the usefulness of wind plus long-distance HVDC lines is being recognised even in a state where Trump won 2/3rds of the vote.

Saturday, January 6, 2018

Alaska warmer than Florida

Anchorage Alaska warmer than Jacksonville Florida!!  The fact that it's very cold in the eastern half of North America  does not prove that global warming doesn't exist.  Because it's very hot in the rest of the USA, and the rest of the world.  Look how hot it is in Siberia relative to the average, for example (lower chart)

Source: ClimateCrocks

Source: ClimateCrocks

[Read more here]