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.

Thursday, August 17, 2017

Barnaby's chickens come home to roost.

Barnaby Joyce is the deputy Prime Minister, leader of the National (country) Party, one of the two parties in the ruling right-wing coalition government of Australia.  He has fallen foul of section 44 of the constitution, which forbids any member of the House or the Senate from being a dual citizen.  Turns out he's a New Zealand citizen as well as an Ozzie citizen.  The birds are kiwis, a flightless bird from NZ, which is also what Ozzies call their cousins from across the Tasman Sea.

The cartoon is from Broelman, who I thought had given up cartooning but I see is still on Twitter.






Trump's golf game

By the very clever Cathy Wilcox.


Trump Vision

From the excellent Dan Wasserman of the Boston Globe



Ozzie renewables costs have halved in 5 years

I constantly encounter people who deny that renewables are the cheapest source of new power.  "We will have to live in caves", they moan.  "It means 'lights out'," they grumble.  "Our civilisation will never be able to survive with 100% renewables", they shout.

So it's nice to get the facts from an electricity company's chief executive:


Source: Origin Energy Presentation to shareholders and analysts.
Note (1): Origin and publicly released 3rd party data

The chart comes from Origin Energy's results presentation two days ago.  It shows bundled PPA (power purchase agreements) for wind and solar PV.

The average cost in 2012 was A$132.50/MWh.  This year the average is A$67.5.   They've halved in just 5 years.  Halved.

Origin Energy is, like AGL, a large generator and retailer ("gentailer") of electricity.   AGL estimates the costs of new brown coal power stations at $100/MWh,  and new black coal power stations at $110/MWh, and stated that its cost of existing production from its fleet of black- and brown-coal power stations at A$37/MWh.  Origin stated that "renewables are the lowest cost new-build generation today".  Which is pretty much what AGL has been saying too.

There is a key follow-through:  if renewables costs halve again in the next 5 years or 6 or 7 years (and they most probably will), this means renewables will then be cheaper than existing coal power stations never mind new ones. It's worse than that, though, for coal power stations.  Once you have built a wind or solar farm you might as well use it as much as possible, since they have (close to) zero marginal costs (no fuel and minimal maintenance.) Which means that quite often old coal power stations will be competing at the margin with electricity which is virtually free.  But coal power stations can't ramp supply up or down in response to movements in supply and demand or in wholesale prices.  They can't just stop operating for a couple of hours or so while renewable electricity is free and they're losing money.  And that is a recipe for financial disaster in the longer-term.  

Inevitably, the plunge in the costs of renewables and the simultaneous rise in their penetration into the grid will accelerate the closure of superannuated coal-fired power stations.  Probably much faster than most analysts now expect.  This local dynamic surely reflects the global picture too.

What about the famous "variability" of renewables?  I've talked a lot about how little storage is actually needed to provide stability to the grid, especially if supply comes from different technologies (wind, solar, CSP, hydro, biomass) spread over different geographies, here and here and here.   South Australia's decision to build a CSP plant at Port Augusta, as well as its decision to build the world's largest battery bank shows what's likely to be replicated elsewhere in Australia as well as overseas.

The Port Augusta CSP plant has a PPA of A$75/MWh, materially below the cost of new coal.   Another three CSP plants (with a total cost of under A$2 billion) would by themselves take South Australia's renewables to 100% of total supply and would provide enough storage (36% of demand for 8 hours) to do it without compromising reliability even if all the rest came from wind and solar, and even if SA lost the interconnectors with Victoria.

 Again, what is happening here in Oz is symptomatic of what is happening globally: rapidly falling renewables prices; dirt cheap CSP; mega battery banks; inevitable closure of coal power stations; and a rapid greening of the grid.

The moral remains: yes we can.

Wednesday, August 16, 2017

Make it look like an accident

It's time for some humour.

Daniel Craig is to play 007 again (yay!)

Frankly, there is much to be said for a Constitutional Monarchy.


Ozone pollution tied to cardiovascular disease



I must confess, I used not to worry too much about air pollution, I suppose because I live in a relatively unpolluted part of the world, in the countryside.  Recently, however, I've been getting chronic bronchitis, and so I started doing research on what might cause it.  One of the possibilities is air pollution.  When we moved here 8 years ago, the road outside our house was a lot less busy than it is now.  Now, in our front yard, we can smell diesel fumes.  The reality of air pollution has become personal.

Here's Wikipedia on low level (near the surface of the earth) ozone:

Low level ozone (or tropospheric ozone) is an atmospheric pollutant. It is not emitted directly by car engines or by industrial operations, but formed by the reaction of sunlight on air containing hydrocarbons and nitrogen oxides that react to form ozone directly at the source of the pollution or many kilometers down wind. 
Ozone reacts directly with some hydrocarbons such as aldehydes and thus begins their removal from the air, but the products are themselves key components of smog. Ozone photolysis by UV light leads to production of the hydroxyl radical HO• and this plays a part in the removal of hydrocarbons from the air, but is also the first step in the creation of components of smog such as peroxyacyl nitrates, which can be powerful eye irritants. 



[Read more here]

It turns out that tropospheric ozone is a powerful greenhouse gas too, but fortunately, unlike CO2, it's relatively short-lived.

Although ozone was present at ground level before the Industrial Revolution, peak concentrations are now far higher than the pre-industrial levels, and even background concentrations well away from sources of pollution are substantially higher. Ozone acts as a greenhouse gas, absorbing some of the infrared energy emitted by the earth. 
Quantifying the greenhouse gas potency of ozone is difficult because it is not present in uniform concentrations across the globe. However, the most widely accepted scientific assessments relating to climate change (e.g. the Intergovernmental Panel on Climate Change Third Assessment Report) suggest that the radiative forcing of tropospheric ozone is about 25% that of carbon dioxide. 
The annual global warming potential of tropospheric ozone is between 918–1022 tons carbon dioxide equivalent/tons tropospheric ozone. This means on a per-molecule basis, ozone in the troposphere has a radiative forcing effect roughly 1,000 times as strong as carbon dioxide. However, tropospheric ozone is a short-lived greenhouse gas, which decays in the atmosphere much more quickly than carbon dioxide. This means that over a 20-year span, the global warming potential of tropospheric ozone is much less, roughly 62 to 69 tons carbon dioxide equivalent / ton tropospheric ozone. 
Because of its short-lived nature, tropospheric ozone does not have strong global effects, but has very strong radiative forcing effects on regional scales. In fact, there are regions of the world where tropospheric ozone has a radiative forcing up to 150% of carbon dioxide.

[Read more here]

Now comes the research that ozone significantly increases the risk of cardio-vascular disease.
Ozone air pollution has now been directly tied to the risk of developing cardiovascular disease, which expands the list of health effects known to be caused by ozone exposure, and also lowers the threshold at which ozone is known to be dangerous (by a fair amount). 
To explain, it’s been known for quite some time that exposure to ozone is associated with reduced lung function — and everything that goes along with that — but the new work now shows that high blood pressure (and the risk of experiencing a heart attack and/or a stroke) are associated with it as well. 
These effects were found with ozone exposure lower than that which affects respiratory health, and lower than current Environmental Protection Agency (EPA) air quality standards.

[Read more here]

Burning fossil fuels isn't just causing global warming.  It's also causing pollution which is killing us.  More on that in my next post.