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.

Wednesday, April 26, 2017

Radicalism

Jesus was a radical nonviolent revolutionary who hung around with lepers hookers and crooks; wasn't American and never spoke English; was anti-wealth anti-death penalty anti-public prayer; but was never anti-gay, never mentioned abortion or birth control, never called the poor lazy, never justified torture, never fought for tax cuts for the wealthiest Nazarenes, never asked a leper for a copay; and was a long-haired brown-skinned homeless community-organizing anti-slut-shaming Middle Eastern Jew.
 John Fugelsang

Nuclear meltdown



No, not the physical kind, like what happened at Chernobyl or Fukushima.  The financial kind.  Westinghouse, builder of the Vogtle nuclear plants in the USA, has gone bankrupt, due to the massive cost overruns in the reactors' construction.  The failure of Westinghouse might also take down its parent company, Toshiba.

The nuclear power crisis escalated dramatically on March 29 with the announcement that US nuclear giant Westinghouse, a subsidiary of Japanese conglomerate Toshiba, had filed for Chapter 11 bankruptcy protection. The filing marks the start of lengthy and complex negotiations with creditors and customers and the US and Japanese governments.
The companies are in crisis because of massive cost overruns building four AP1000 nuclear power reactors in the southern US states of Georgia and South Carolina. The combined cost overruns for the four reactors amount to about US$11.2bn and counting. Stephen Byrd from Morgan Stanley said that the cost of the plants, if completed, will be about twice Westinghouse’s original estimate.
Beyond the direct impact of the unfolding crisis on numerous reactor projects around the world, the most important impact of the crisis is the chilling effect it will have ‒ and is already having ‒ on the nuclear power industry.
The AP1000 fiasco in the US shows that industry giants can be brought to their knees by cost overruns on just a few reactors. Further confirmation comes from two French EPR reactors under construction in France and Finland: combined cost overruns amount to at least US$13.5bn and counting, and French utilities EDF and Areva would both be bankrupt if not for repeated multi-billion-dollar government bailouts.
Governments, energy utilities and companies, banks, and investors will be considerably less likely to gamble on nuclear power in light of recent events. Not many energy utilities and companies are as large, and as capable of absorbing debt, as Toshiba and Westinghouse. And few are as experienced: Toshiba has built 20 reactors in Japan (some in joint ventures), and Westinghouse has built 91 reactors globally. Yet cost overruns on four conventional reactors have brought these industry giants to their knees.

[Read more here]

It's increasingly clear that nuclear power is not going to solve the global warming crisis.  They take too long to build and they are too expensive.  We don't have time to wait while nuclear is rolled out, the world is warming too fast.   We can rapidly and much more cheaply build out renewables to reduce CO2 emissions.  Even in backward Australia, we are likely to have 15% plus from renewables nationally by 2019, and nearly two-thirds from renewables in South Australia by that time.  Yes we will need more interconnectors to link the South Australian and NSW and the NSW and Queensland markets and yes we will need some storage (it seems certain that by 2020 there will be a 110 MW CSP plant with molten salt storage in South Australia).  But it's all doable, and much more cheaply than nuclear.

Monday, April 24, 2017

Stunning cost declines in wind and solar

Even just a few years ago, wind and solar were significantly more expensive than fossil fuels, if you ignored the cost of the externalities which come from adding CO2 to the atmosphere (not to mention all the other pollutants.)

Source
But that's emphatically not true any more.  In the USA, over the last 8 years, the cost of PPAs (power purchase agreements) by utilities for solar have dropped from  $154 per MWh to $35, a compound decline of 19% per annum.   Wind has dropped from $69/MWh to $26/MWh, or lower, since 2009.  That is a compound rate of decline of  13% per annum.  Lazard calculates the LCOE* of coal at between $60 and $143 per MWh.  Even their lowest estimate is twice the cost of wind or solar.  It's telling that there are no PPAs for coal because no one is building new coal power stations.  In fact, they're shuttering existing ones, though their replacements are gas as well as renewables.

It seems very likely that both wind and solar will continue to decline in cost in a classic learning curve way.   But what happens when the Federal tax credit expires?  The data above show the costs after tax credits, which are worth about $20/MWh.  The tax credits expire over the next 4 years.  If costs continue to decline at the same rates as they have done for the past 7 years for the next 4, wind will drop by another 43%, solar by another 57%.  That will take wind and solar to $15/MWh after subsidy, or $35/MWh before, still substantially cheaper than coal.  And that's before any carbon tax.  Make no mistake, if, as seems plausible, the increase in global temperatures is accelerating, a swingeing carbon tax is quite certain within a few years.

[Read more here]

*LCOE = levelised cost of electricity.

Accuracy

From Tom Toles



Sunday, April 23, 2017

Renewables and storage

The new administration in the US is taking a leaf out of the rabid right so-called Liberal Party's playsheet in Oz, suggesting that renewables can't be integrated into the grid, because (a) they're variable, and (b) our paymasters in coal want to stop the renewables revolution.

These two videos are instructive about just how you integrate large percentages of renewables into the grid without having to also install storage.   (At least when renewables grid penetration is under 50%--my guess is that some storage will make the grid operator's task much easier when renewables start to exceed 50% and will be essential at 100%.)

The key points are:

  • Because the grid is already designed to handle the potential failure of one or more large "baseload" generators, it can handle the variability caused by renewables
  • Diversifying the sources of renewable electricity helps: solar PV, solar thermal (CSP), wind and biomass can together produce electricity as stable as old-fashioned baseload power stations
  • For the last 10% or 20% of renewables penetration (i.e, going from 80 or 90% renewables to 100%), demand management is critical
  • Below 10% penetration, renewables require no special provisions.  The real change is not technical but in the mind--how to handle renewables as part of the grid.  It used to be firmly believed that renewables could not exceed 5% of the grid, but that was wrong.  In many regions, renewables exceed 25% of electricity generated without problems.
  • To increase renewables from 10 to 30 or 40%, good forecasts are essential.  If we know ahead of time the likely output from wind farms and solar we can plan for gaps.  
  • From 40% on, the cheapest way to diversify supply is to increase grid connections.  
  • Wind turbines are "perfect" for maintaining the frequency of the grid when a power line goes down (or a big fossil fuel generator trips)  Some engineers maintain that this service (FCAS -- frequency control and ancillary services) can't be provided by renewables.  The engineer in the video makes it abundantly clear that they can.

The first video is a little out of date.  Since it was made solar has dropped 50% in prices and wind 30%.




The second is from an interview with the head of 50Herz, the German grid operator for what used to be East Germany.

 

 Listen for his confident assertion that integrating renewables into the grid is easy. This video is a couple of years old, now, and since then the percentage of renewables in the East German and pan-German grid has increased further.

[Read more here]

Friday, April 14, 2017

Not fast enough

In 2016, 55.3% of new electricity generating capacity came from renewables, excluding large hydro, and 59% if you include large hydro.  That sounds really good.  The share of renewables in new generating capacity has gone from 20% in 2007 to 55% now, and that is definitely progress.

Source



But the percentage of actual electricity generated rose by only 1% in 2016.  That's partly because renewables have lower capacity factors (25%-30%) than fossil fuels (60% to 70%).  And with global growth in electricity demand at around 3% per annum these days (though it will accelerate as EV sales take off), that 1/3 of incremental demand growth.

Source



Since big hydro and renewables provide about 25% of electricity generated globally, at this glacial pace it will take 75 years before 100% of our electricity comes from renewable sources.  And that isn't fast enough.  We need to double the annual rise in the percentage generated from renewables to 2% per annum, which would mean we'd reach a 100% green grid by 2050.  And we need to stop building new coal power stations.  Europe has promised to stop doing this by 2020; India will build none for at least the next ten years, which in effect means never, because renewables will be even cheaper then; China has cancelled 104 planned and partly built coal power stations; the USA will never build another coal power stations again.  So there is hope.  Some.