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.

Monday, February 23, 2015

Compelling chart

This chart comes from a CleanTechnica article about how solar is soon going to make shale oil and gas redundant because it is getting so cheap.  It is a telling and compelling picture.  Note that it is drawn on a log scale (although that means that the x-axis can't be at zero as labelled--they must mean 20, I'd guess)   Now, because it is a log scale, a constant slope ( a straight line) represents a constant rate of decline or a constant annual percentage decline.  If you assume that recent rates of decline/percentage declines will continue, then all you have to do is extend the green (solar) line downwards in a straight line.  And if you do that, solar, which already cheaper than retail electricity in the US, will cross crude oil this year and natural gas next.  That doesn't mean that electricity generation will switch to solar in the next year or two, because there are all sorts of issues to be settled, including legal issues, grid stability, etc.

But if solar keeps on falling in price, then the logic for switching wherever possible will be irresistible.  And as battery costs fall, the 'wherever possible' will expand exponentially.  And the beauty of this is that it doesn't matter what the climate change denialists say,  the world will switch to clean energy, not because they care (though I think they do, as it has become obvious that global warming is real and potentially disastrous) but because it makes economic and financial sense.

[click on chart to see it full sized]


Saturday, February 21, 2015

Climate change is expanding the tropics

Waves crash into a breakwall after Tropical Cyclone Marcia made landfall near Yeppoon


As the air and the seas heat up, the band in which tropical cyclones form is creeping towards the poles:

Climate change is resulting in the expansion of the tropics at the rate of 150-300 kilometres every 30 years, bringing more regions in the path of potential cyclones, Professor Turton said. (See his essay in the 2014 State of the Tropics report.)

"The research is suggesting that, in a warmer world, we'll get more intense cyclones because there'll be more energy in the oceans and also the atmosphere," he said.

Climatologists say the atmosphere can hold about 7 per cent more moisture for every degree of warming, potentially adding clout to major storm events.

Last year, a study led by scientists at the US based National Oceanic and Atmospheric Administration, The Poleward Migration of the Location of Tropical Cyclone Maximum Intensity, argued that the areas where cyclones were reaching their most powerful were shifting towards the North and South Poles at the rate of 56 kilometres a decade.

"With their devastating winds and flooding, tropical cyclones can especially endanger coastal cities not adequately prepared for them," the NOAA said.

"Additionally, regions in the tropics that depend on cyclones' rainfall to help replenish water resources may be at risk for lower water availability as the storms migrate away from them."

Professor David Karoly, a scientist at the University of Melbourne, said the prospect of fewer - but more intense - cyclones in the western Pacific basin under global warming is because of expected changes to atmospheric circulation.

The expansion of the tropics would likely result in a strengthening of the high-pressure belt over southern Australia, leading to reductions in rainfall, Professor Karoly said.


Some of that shift is already evident in south-western WA, where cool season rainfall in particular has dropped sharply in recent decades, according to the CSIRO and the Bureau of Meteorology. Similar reductions in rainfall are also becoming evident across the south-east.

Read more here.

Friday, February 20, 2015

Fiddling with the data

In response to the evidence that the world is warming, the climate change denialists have accused the scientific community of fiddling with the data.  Of "the biggest science scandal ever".  This piece from the Guardian rebuts this specious rubbish.

This video by the founder of Berkeley Earth, who was a skeptic (in the proper sense of the word) is very telling.



And this one talks about the adjustments meteorologists make to past data to compensate for changes in the geographical locations of weather stations.



And finally, the long term global temperature chart, with and without adjustments.  As it turns out, without adjustments, global temperatures have risen faster than the adjusted number.  How we laughed.


Wednesday, February 18, 2015

The oceans are warming



More than 90% of the heat accumulating on Earth from global warming has gone into the sea.  In years that the seas retain heat, the atmosphere warms less than the trend.  In other years, when the sea releases heat into the atmosphere it warms more.  That is what ENSO (El Niño/La Niña; averaging 9 or so years from peak to peak); the PDO (Pacific Decadal Oscillation a 20-30 years cycle); and the AMO (Atlantic Multidecadal Oscillation) cause--heat is transferred backwards and forwards from the sea to the air.  We are (as regards the atmosphere) in a cool PDO phase and also in a cool ENSO phase.  Global air temperatures would have been much higher if both cycles had been in a warm phase.

The climate change denialists point to the "pause" in the rise of global temperatures from 1998 onwards.  As it happens last year was the hottest ever measured, but never mind, now they're claiming the data are faked, of which more later.  But the heat has gone into the sea.  Which means that when it is released, even if just some of it, as will happen with an ENSO or the (inevitable) reversal of the PDO, global air temperatures will soar.  The "pause" such as it was, only applied to the air, which holds less than 7% of the increasing warmth of the earth.  Sea temperatures just went on rising, right off the top of the chart.

Oh, but the scientists are making up these numbers too, don't you know?  Cue tin-foil hats.

Read more here.  And there are a whole string of fascinating charts here.

Large scale solar

And total costs of solar (including installation, PV panels,etc) continue to decline, by 10-20% per annum.



The 1%


Monday, February 16, 2015

Why oil is not going back to $120

Some quotes from an interesting article:

The recent price decline is expected to have only a marginal impact on global demand growth… Projections of oil-demand growth have been revised downwards, rather than upwards, since the price drop.


Oil demand is falling in rich nations because of ageing populations, improved city design, environmental rules, vehicle efficiency standards and structural shifts, such as the growth of online shopping. Fuel switching towards gas and electric vehicles are also a factor, the IEA says.

Emerging economies are more than offsetting demand reductions in rich nations, says the IEA. They will continue to do so, though the pace of growth will be slower than previously expected.

This phase will see oil demand continue to grow at 1.2 per cent per year to 2020, well below the near-two per cent rate of growth before the global financial crisis.

These shifts are particularly apparent in China, previously a key driver of increasing oil demand. The IEA says it has entered a new, less oil-intensive stage of development. Demand there is expected to grow at 2.6 per cent each year over the six years to 2020, roughly half the rate over the previous six years.

Electric cars are barely mentioned.  Yet they are critical to how the picture is changing.  At the moment (2014) they form just 0.5% of total car sales.  But they are growing extremely fast.  The growth rate is slowing a little from the hectic early days, but given (a) the plunge in battery prices and (b) the clear political will in all the main car producing and consuming countries to cut carbon emissions, the growth rate is unlikely to slide much below a doubling every 2 years (like solar).  Which means that in 4 years (or before) EV sales will be 2% of total car sales.  In six years 4%; in 8 years 8%; in 10 years 16%.  They already  exceed 1.5% in the US.


Source: Bloomberg

What this means is that in just 6 or so years, the rise in the percentage of EVs in the total car fleet will equal 50% of  the growth in total oil demand.  And that's without a carbon tax applied to petrol (gasoline) and diesel, which would cut oil sales, and would be a sensible move by governments seeking a relatively painless way to cut emissions.  And in the next 2 year period all additional "demand" for oil will be satisfied by EVs, as the percentage rises towards 10%. (Assume a car life cycle of 6 years.)

Now the significance of this is that the world's largest oil producer, Saudi Arabia, not only is one of the lowest-cost producers globally but also has the longest reserves (30 years at current rates of production).  In the past Saudi Arabia acted as a swing producer when the oil price collapsed.  This time they haven't.  And they won't, because they can see the writing on the wall.  Oil demand, even without a recession, will soon peak.  And Saudi Arabia can still sell oil profitably down to $20.  Why not sell all you can while you can, if you are still making money?  Especially if you can annoy the Russians and the Iranians and those uppity shale oil producers?  And especially if you know that your market will disappear long before your oil runs out?


Of course, there will be a short-term and prolly not very big rebound in the oil price as shale oil production tails off.  It's currently looking for a bottom, if I judge the technicals correctly.  And the fall in the petrol price will perhaps cause a  short term hit to the growth rate of electric cars sales, though ppl who buy electric cars aren't doing it because they're cheaper than petrol-driven cars but for all sorts of other reasons,  In fact  EVs will be as cheap as other cars in 5 or 6 years as battery costs plummet, not just initial outlay but also running costs (EVs require very little servicing) .

The Saudis have seen the future.  And precisely because of EVs, their reaction to the obvious and inexorable shift to EVs s will prevent any big rise in oil prices.  The real oil price has begun an secular descent as battery costs fall and both market and political forces drive the switch to clean energy.


Sunday, February 15, 2015

Too late


The scientific guide to global warming

It's long, but it's essential reading.

Every single indicator discussed in the report adds to the unequivocal evidence that global warming is (a) real and (b) man-made.  I urge you to read it.  In my opinion, global warming denialists are either cretins or venal.  Especially since the cost of switching to renewables is negligible.




And if that doesn't scare you (and it should), this article about how the warming of the Arctic (2-3 times as fast as the globe as a whole)  is leading to the massive release of methane which is, over a 20 year period, 85 times as potent a greenhouse gas as CO2 is.


We need to do something about global warming and we need to do it NOW.  Not by 2050.  That will be too late.

Wind power reality

This blog post summarises why wind power doesn't cause the grid to be unstable and why it doesn't need massive special "base load" power stations to compensate for wind variability, at last not at the sorts of levels wind power penetration has reached so far.

- How much does it cost to integrate wind?
Grid operator data show that the cost of the incremental flexible reserves needed to accommodate wind amount to pennies on a typical electric bill. In fact, the cost of accommodating the unexpected failures of large conventional power plants is far higher.

- How much more wind energy can we reliably integrate?
While U.S. and European grid operators have already reliably integrated large amounts of wind energy, studies indicate that we can go far higher. Studies examining obtaining 40% or more of our electricity from wind have found no major obstacles to doing so. Ten years ago some utilities and grid operators were concerned about reaching 5% wind; they now have a lot more experience to draw from, and over the next ten years, they will surely learn more and be able to continue increasing reliable penetration.
- Don’t grid operators need to add backup to integrate wind?
No. One of main reasons why an integrated power system was first built more than 100 years ago was so that all power plants could back up all other power plants. Because most sources of variability cancel each other out, having a dedicated backup source for each would be highly inefficient and counterproductive.
- What happens when the wind doesn’t blow?
Other plants provide energy at those times, in the same way that all power plants back up all other power plants. Portfolio diversity is the key, as no resource is available 100% of the time. All power plants have reduced output at times, and grid operators plan for wind’s contribution using the same tools they use to evaluate the contributions of other resources. Adding wind power never increases the need for power plants, but rather reduces it. During a number of events wind has demonstrated its contribution to a more reliable and diverse energy portfolio by stepping in when other resources failed unexpectedly.
- Don’t we need baseload power?
Instead of using the term “baseload,” it is more productive to talk about the three main services the grid needs to operate reliably: energy, capacity, and flexibility. Energy is the production of electricity, capacity is the ability to produce power during periods of high demand, and flexibility is the ability to change output to keep supply and demand in balance. Cost-effectively obtaining all three services requires a division of labor among a diverse mix of energy sources, as no resource excels at providing all three. For example, baseload resources typically do not provide flexibility, and there can be lower-cost ways of obtaining the energy and capacity provided by baseload. Wind energy primarily adds value to an energy portfolio as a low-cost and non-polluting source of energy, though it also provides some capacity and can provide flexibility when it is economic to do so.

Read more here.  Wind and solar complement each other, and batteries are already being used to stabilise the grid and will be used much more as their costs decline.  Wind is now the cheapest source of power in the US, even ignoring the investment tax credit.  And solar isn't far behind.