Low Energy Price Crossfeed

[Meredith Poor + 895]

From time to time someone complains about the input costs for things like offshore wind turbines, square-mile-sized solar farms, etc. GE's 12Mw turbine has 300 foot blades, making the total installation about 800 feet tall. Turbine blades are made from epoxy fiberglass, similar in many respects to yachts and recreational houseboats.

Russian and Saudi price wars on US fracking lower costs of RE development across the board. This includes materials cost of petrochemicals; shipment costs for blades, hubs, tower components, etc.; site preparation costs (digging, boring, deployment, etc.); and transmission infrastructure construction. Most PV raw materials processing needs electricity, whether it is purifying silicon or aluminum.

At this point the more material costs are related to storage - regardless of whether the energy is captured from solar or wind, batteries are the 'missing link'. Cheap diesel means lowered mining costs and lower ore transportation costs, along with the above-mentioned component assembly and deployment. Pumped hydro is a similar consumer of site work along with steel pipes and containment structures.

Cheap fuels leave solar at a temporary disadvantage - solar component prices have to shrink even lower to compete with dirt cheap gas. Since the price war has little to do with coal or nuclear, this simply accelerates the exit of these two technologies from the market.

Most of this discussion exists without regards to certain other contexts: continually dropping interest rates and industrialized world demographics. The latter is better explained in terms of 'below replacement' birthrates.

The 10 Year US Treasury Bill is now at .767%, meaning it is below 1%. At the point where it goes 'negative', practically every 'safe' sovereign backed security will be below zero. The combination of COVID-19 and WTI below $40 could well drive that nail into the coffin.

As a general rule, investors tend to distribute risks in a pyramid structure, with 'most' assets being 'safe', a smaller number being higher risk, and a 'few' being 'long shot moonshots'. These days the latter of those is a bit more literal, when people are proposing to mine cesium and helium 3 from asteroids.

As yields shrink, asset allocations shift into higher risk regions. While one high risk bet may be doomed to failure, 100 of these is another matter. Millions of them (excluding duplication) creates a fog of uncertainty, since the interaction of various successes with each other is beyond anyone's capacity to analyze.

A lot of these bets are focused on things like Perovskite solar cells, potassium-ion batteries, 'air to fuels', and so forth. There are other 'consumer side' technologies like lower energy air conditioning, 'cultured tissue' meat, and carbon fiber auto bodies that are presently not producible at scale, somewhat due to R&D and somewhat due to production capital requirements. These are 'medium risk' projects where the technology is well understood - the question is getting the cash for commercialization.

As these 'surface' in the consumer marketplace, they increase the threats to incumbents by orders of magnitude. First, these have to compete with already cheap (silicon) solar and wind. A material reduction in electrical storage costs dooms natural gas, at least in certain major markets including China. This 'war' simply accelerates the ultimate elimination of mineral extraction hydrocarbons.

[0R0 + 6,251]

2 hours ago, Meredith Poor said:

A lot of these bets are focused on things like Perovskite solar cells, potassium-ion batteries, 'air to fuels', and so forth. There are other 'consumer side' technologies like lower energy air conditioning, 'cultured tissue' meat, and carbon fiber auto bodies that are presently not producible at scale, somewhat due to R&D and somewhat due to production capital requirements. These are 'medium risk' projects where the technology is well understood - the question is getting the cash for commercialization.

 

I am a fan of solar and wind air to fuels on the electrochemical side. Particularly for solar H2  for jet fuel replacement in the not that far future. But all of that is miles away to covering capital costs on its own. So long as the solar or wind source of the electricity has to be paid, the capital cost puts it off the realm of the possible. But as these sources are often available at excess to grid demand, and storage capacity, they can offer intermittent "free" electricity for electrochemical processes that can be run intermittently. The technology has already been going through a number of pilot trials so process optimization is already happening. Even with free electricity this isn't competitive with $2 gas, but it can be marginal at $3 and hopefully will eventually be actually profitable at that price point.

The low competitive costs of capital will definitely drive folks up the risk scale the same way it drove the Saudi sovereign fund to invest in the second round of Softbank's incredible money losing machine.

[KeyboardWarrior + 527]

On 3/8/2020 at 1:35 PM, Meredith Poor said:

A material reduction in electrical storage costs dooms natural gas

Yea so the solar figures in my state REALLY disagree with that statement, assuming you could store the power without cost. When I do cost comparisons I always use gas at $3.00 to make sure that nobody pulls the "WELL JUST WAIT TILL GAS SWINGS UP AGAIN". Interested in what I've got?

The project estimates are recent, from a couple months back, and amount to $2 per watt on average. This INCLUDES the tax benefits, which isn't an acceptable way to approach an energy solution. If it needs tax benefits to be profitable, then mass deployment will result in huge deficit. I'll go find links to the projects. 

[Meredith Poor + 895]

13 hours ago, KeyboardWarrior said:

Yea so the solar figures in my state REALLY disagree with that statement, assuming you could store the power without cost. When I do cost comparisons I always use gas at $3.00 to make sure that nobody pulls the "WELL JUST WAIT TILL GAS SWINGS UP AGAIN". Interested in what I've got?

The project estimates are recent, from a couple months back, and amount to $2 per watt on average. This INCLUDES the tax benefits, which isn't an acceptable way to approach an energy solution. If it needs tax benefits to be profitable, then mass deployment will result in huge deficit. I'll go find links to the projects. 

$2 per watt isn't competitive. 50 cents per watt is competitive and 20 cents per Kwh is competitive.

There is one bid in New York for storage at 4.5 cents per Kwh using a zinc fuel cell/battery.

[KeyboardWarrior + 527]

1 hour ago, Meredith Poor said:

$2 per watt isn't competitive. 50 cents per watt is competitive and 20 cents per Kwh is competitive.

There is one bid in New York for storage at 4.5 cents per Kwh using a zinc fuel cell/battery.

I know it isn't competitive. I'm demonstrating that $1 per watt doesn't seem to exist, contrary to what I'm hearing. Why did a company in my state pay $180M for 100 MW installed capacity in 2019, even after all of their subsidies? As for storage, 4.5 seems kinda high, since it takes that much to generate the power in the first place. You essentially double your costs then right? Or is the cost to generate included in that figure?

[Meredith Poor + 895]

16 minutes ago, KeyboardWarrior said:

I know it isn't competitive. I'm demonstrating that $1 per watt doesn't seem to exist, contrary to what I'm hearing. Why did a company in my state pay $180M for 100 MW installed capacity in 2019, even after all of their subsidies? As for storage, 4.5 seems kinda high, since it takes that much to generate the power in the first place. You essentially double your costs then right? Or is the cost to generate included in that figure?

4.5 cents is the fixed capital cost, not the per-Mwh.

[KeyboardWarrior + 527]

4 hours ago, Meredith Poor said:

4.5 cents is the fixed capital cost, not the per-Mwh.

Oh okay, that's pretty cheap.