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. 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.

Saturday, November 26, 2016

Cost of transmission grid

(Source)


Yes, so renewables are cheaper than coal, and soon gas.  But what about the need for power lines to connect the places where there is lots of wind or lots of sun with the places where there is demand for electricity?  Many studies have suggested that a well-connected grid reduces the need for storage, because while the air may be still at one place, at another the wind is blowing, and while it may be cloudy at point A it remains sunny at point B.

I have seen few studies showing what such lines add to the cost of renewables.  So let's make a rough and ready estimate using the new Plains and Eastern Clean Line (1) (2), which  will be an HVDC (High Voltage Direct Current) line running east-west from the Oklahoma panhandle across Oklahoma and Arkansas into Tennessee, where it will connect with the Eastern Interconnection.  It will have a capacity of 4000 MW and will cost $2.5 billion and will be 720 miles (1150 kms) long.

So what will it cost per MWh?

Assume current flow varies randomly between half and all of capacity, but averages 75%, then it will have a capital cost of $833,000 per MW (2.5 billion/3000).   Assume an interest charge of 5%, and that the capital cost is amortised over 25 years, and the annual cost is $75,000 per MW. But that's the cost of the capacity.  It will operate for 24 hours a day and  365 days per year.  So that $75,000 per MW per annum has to be divided by 24 (hours) * 365 (days) to get cost per MWhour.  That's about (on my back of the envelope estimates) $9.3 per MWh per 1000 kms.  Wind costs before tax credits average about $50 per MWh in the US though in the wind corridor running up from Texas through Oklahoma and Kansas to Minnesota and the Dakotas the cost is $30 or less.  The distance from South Dakota to NYC is about 2,400 kms, so the cost per MWh of transmission from the wind corridor to the eastern States would be about $22/MWh.  Or less; because you would still need only two transformers, one at each end.  The point is, even including a power line which reaches halfway across the continent, the cost of far away wind-generated electricity would still be lower than the cost of local coal which at its cheapest is $63/MWh, but averages around $100/MWh.

What about transmission and transformer (inverter) losses?  There is a transmission loss of 3.5% per 1000 km with an HVDC line.  There is also energy loss when AC is converted to HVDC and back again--but the grid is full of these losses.  At any rate, a power line running from South Dakota to New York would lose 7% in transmission and (say) 10-20% in conversion.  That would increase the cost from $22/MWh to $30.  At $30 for the power from the wind turbines, that's still cheaper than coal.

After I wrote this is discovered this source, which estimates median cost of transmission at $15/MWh, suggesting I've (by chance) got the calcs about right!  Interestingly, there seem to be significant economies of scale, with the cost of the larger projects at the lower end.

The cost of a bigger and better integrated grid is not an argument against renewables, even if the source of the energy is 2,400 kms away.  Wind and solar are still cheaper than coal.


Sunday, November 20, 2016

Solar roof tiles cheaper than conventional tiles

A month or so ago, Elon Musk unveiled the new Tesla/SolarCity solar roof tiles, tiles which make up the roof but are also solar panels.  They look really classy, and are much tougher than conventional tiles.  You can see the tiles and what they look like in this shortish video by Elon Musk:




 In the video, Elon said that the goal of Tesla's solar roof tiles was to make them as cheap as a conventional roof plus the cost of the electricity they save.

But a couple of days ago he announced that the roof would cost less than a conventional roof even without considering the cost of electricity saved:

He announced that the cost of a Tesla glass tile solar roof would actually be equal to or slightly less than a conventional roof. And no, that is not after deducting the value of the electricity it generates over the next 20 years or so. That is right now, today, as soon as it is installed.   
How is that possible? Elon explained to the audience that a lot of it has to do with the current supply chain for roofing materials, which he said is incredibly inefficient. It turns out, the glass tiles weigh up to 80% less than conventional roofing materials, especially ceramic tile or concrete tiles. Both of those are very popular in many locations around the world, especially southern California and the Mediterranean countries. Not only do the Tesla glass tiles weigh less, they are less fragile, which means less loss for breakage. 
Much of the cost of conventional roofing materials can be attributed to shipping all that weight over long distances. 

(Read more here)

You can see why Elon was excited.  As he says, why wouldn't you choose solar roof tiles?  They're the same or cheaper than conventional tiles, they're lighter, they're stronger, they look as good or better, and they produce electricity.

Of course, people with existing roofs might not replace them, even if they want solar.  But given how beautiful the tiles are, there is probably a very large market, and certainly, it will make a lot of sense to go with solar roof tiles if you're building a new house.  Along with the new cheap Powerwall and Powerpack batteries and electric cars and lorries, generation and storage will be transformed.

El Niño, La Niña, and volcanoes

El Niño means 'the child' and it was named by South Americans who were affected by its effect on local weather after the Christ child, because it usually happens over Christmas.  During an El Niño heat absorbed by the upper layers of the sea is released into the atmosphere.  La Niña is the opposite phenomenon.  During La Niña, the sea absorbs more of the earth's heating up, so air temperatures drop.  Now, overlaid on this cycle, which causes fluctuations round the rising trend caused by global warming is the effect of random volcanic eruptions.  Volcanoes release massive quantities of aerosols into the atmosphere which temporarily cools the earth because they increase the earth's reflectivity or albedo.

The chart below shows how in El Niño years (red), the temperature is above the trend, in La Niña years (blue) it is below, and in years when there is a big volcanic eruption (grey), it is below trend.  Yellow shows years when there were neither volcanic eruptions nor ENSO (El Niño/La Niña) fluctuations.  Note that the chart does not include 2016, which will also be an El Niño year, and is even hotter than 2015.  2017 may or may not be a La Niña year.  If it is, there will be a temporary cooling before the longer term trend reasserts itself.  But note how in the "normal" years after the last La Niña (2010) global temps have risen each year--even though they weren't El Niño years.  It's a scary trend.

It is absolutely vital that we switch as rapidly as possible to renewables in electricity generation and to electric powered vehicles.


(source)

Saturday, November 19, 2016

2016 another record

It seems clear that 2016 is going to be another record year for global temperatures, the third in a row.  The chart below, from Better Nature, plots the 12 month moving average of the monthly anomaly, plus a 132 month (11 year) moving average, plus a linear OLSQ trend from 1970 to 2016.  The dots show the annual (January-December) average.  Obviously, there isn't yet one for 2016, because we don't have data for November or December.

The 11 year moving average is very close to the linear trend, suggesting that an 11 year moving average is a pretty good approximation.  And, the rise over the last 4 years is larger than the rise leading up to the last big El Niño in 1998, so if global temperatures don't fall as they did after the last El Niño, then the slope of the 11 year moving average will steepen, hinting that the trend also has shifted.  If they do fall, of course the denialists will be back with their rubbish "temperatures haven't risen for the last X years."  But the thing to watch is the 11 year moving average.

I'll keep you posted.

(Source)

Conflict of interest


Sunday, November 13, 2016

Electric busses in China

Electric bus sales are exploding:

Electric buses are being shipped everywhere right now. They are being driven from Sydney to Melbourne, and LA to Vegas and back, on a single charge.
(Read more here)

(source: CleanTechnica)



Silhouette man


Occupy-Posters

Denial

Let's talk about it. Or not.

How denialists cherry-pick the data and ignore unpalatable evidence.

(Via)


Tesla Powerwall cost plunge



When Tesla first introduced the Powerwall just over a year ago, it cost US$3000, which was extremely cheap by comparison with all the previous battery options.  Just to remind you, the Powerwall was Tesla's home battery, to store power from your solar panels for use at night, and it had 7 kW of storage, about enough to run an average home in the evening for 2 or 3 hours.  But that price didn't include the inverter (alias the transformer).  Costs for the inverter varied but they were roughly US$2000, so the total cost was US$5000 before installation.  Tesla has just introduced a new Powerwall, which will cost $5500--but, it includes the inverter which is integral to the device, and it has twice the storage (14 kW.)

In effect, in just one year, Tesla has almost halved the price of home battery storage.  In this post, I mentioned how battery costs have dropped 70% in 18 months, as much as they had dropped in the previous 5 years.  Now we are seeing this reflected in retail house-powering batteries.  That's not the only advantage of these new Powerwalls--they're also easier to install; almost plug-and-play, so the installation costs are lower.

So, ignoring the beneficial impact on the grid and the environment, is it worth installing?

According to the NREL PVWatts calculator, 5 kW of solar panels would produce an annual output of 6909 kWh where I live (in Brisbane, 2000 km further north, output would be 10% more, and with much less seasonal variation, but in London, latitude 50 N, it would be just 4,500 kW, 35% less). Average annual household usage in Oz  is 5817 kWh.  Some of the output produced is going to be sold back to the grid in summer.  And in winter, electricity generation is insufficient: you'll need to buy power from the grid.

You can now buy 5 kW of PV panels, fully installed with inverter for A$3900.  US$5500 for the Powerwall 2 is about A$8000, assume installation is A$1000.  Total cost of Powerwall plus 5 kW of solar panels would be A$12900.  Using the tariffs of my electricity provider, Diamond Energy (8 cents feed in tariff, peak 21 cents usage tariff, 12 cents off-peak) and assuming that the battery allows me to use 100% of my solar power in summer, and in winter the battery charges overnight using off-peak power, the annual savings would be $1300.  Ignore interest charges but also ignore the rise in electricity prices, and the cost savings will pay for the battery and the panels in 10 years. The panels will last at least 25 years, and although the battery is only guaranteed for 10 years, it will still have plenty of juice at the end of 10 years.  And remember, battery and solar panel costs are still falling. Right now the combination of 14 kW battery plus 5 kW panels will pay for itself over 10 years.  In 5 years, costs will have likely halved, or better.

But if the Powerwall has nearly halved in cost over 1 year, what about the industrial/utility scale Powerpack?  Well we don't know; Tesla hasn't revealed new costings.  I estimated the LCOE of the Powerpack as $230/MWh, which was still somewhat more expensive than peaking gas ($163 to $218) But assuming the same decline with the Powerpack as has happened with the Powerwall (it's almost exactly the same technology) the new LCOE of the Powerpack will be $126, much lower than peaking gas.  Much lower.  Would you build new peaking power gas generators when batteries are so much cheaper?  You'll keep those you have, for now.  But new ones?  Nah.

And what about cars?  The Tesla model 3, due out towards the end of 2017, was projected by Tesla as costing US$35,000, before incentives  The average new car in the US sells for around $34,000.  Most of the cost of an electric car used to be the batteries, so if battery costs have halved EVs are going to be much cheaper.  Did Tesla expect battery costs to halve so quickly?  Did anyone?  Will Tesla pass the gains on in quality improvements or price cuts?  Or will they pocket the profit?  A possible tactic would be to up the range and the quality on the model S and X, but cut the price on the model 3, while keeping its range the same.  Remember, Tesla has the widest and densest range of fast chargers, and even if they won't be free any more, they still mean that range anxiety with the Tesla is vieux jeu.

From 2017 on, Tesla is likely to gain a 1/3rd or better share of the mid-priced car market, just like its 1/3rd share of the luxury car market.  And other car manufacturers are switching too.  Volkswagen is targeting 25% electric share of its sales by 2020, Toyota started a battery division at the beginning of this year and has quietly conceded that hydrogen-cell vehicles aren't going anywhere, General Motors has the Chevy Bolt.  By 2020, 1/3rd of all new car sales could be electric.   By 2025, 2/3rds, because even small cheap cars will be EVs: they'll have a small range--100 miles/160 km--but most commuting is less than 100 k per day.  These small cars will have small battery packs, with perhaps the option to upgrade.  And batteries by then will be a quarter of their cost now.  And this will mean that even the cheap car market goes electric.  On my calculations. this will mean that demand for oil in the US will fall by half by 2030.  In China, EVs are now 25% of new sales.  Some European countries are considering banning petrol cars by 2025.  Global oil demand and global CO2 emissions will plunge.

This is a tipping point.  Between latitudes 50 N and S, every house, school, factory, shopping centre, or office complex which has enough roof space will have solar panels and behind the meter battery storage. In electricity generation the switch towards renewables will continue.  Wind and solar are now half the price of coal, and as cheap as or cheaper than gas. Gas was uniquely useful to fill the gaps left by variable renewable supply, and to provide peaking power.  But batteries are now cheaper--and better.   And their costs keep falling.  Within 20 years, 99% of the car fleet will be electric. The Right have done nothing to support this essential shift towards renewables.  In fact they have done as much as possible to stop it.  But Trump and his troglodytes are powerless to stop this.  Technology and economics have taken the lead.    From 2018 onwards, CO2 emissions will start to fall, and that decline will inexorably accelerate.

Thank you, Elon Musk.