YPF to redeploy rigs in Vaca Muerta on export potential

[ceo_energemsier + 1,818]

YPF to redeploy rigs in Vaca Muerta
on export potential

 

 

 

By Charles Newbery/Platts

 

Argentina's state-backed energy company YPF plans to redeploy 46 rigs in the Vaca Muerta region over the next six months, helping to revive oil and natural gas output from the country's biggest shale play after a plunge in activity during the coronavirus pandemic.

"There is a sequential plan so that all of the company's drilling rigs in operation before the pandemic are reincorporated," Neuquen Governor Omar Gutierrez said Sept. 2 in an energy seminar put on by Rio Negro newspaper. "The idea is that the 46 rigs will be operating by next February."

Gutierrez said YPF CEO Sergio Affronti told him about the plans in a meeting. A press source at YPF declined to comment when asked about the rigs.

If the plan is carried out, YPF, the country's biggest oil and gas producer, would be moving forward with the development of Vaca Muerta as other companies in the play, like Chevron and Shell, also dust off plans after a plunge in activity during a lockdown of the economy forced most to shut-in production in April and May.

The lockdown, which started March 20, cut local oil demand by more than half to as low as 200,000 b/d and prevented some field work on health concerns. But a gradual easing of the lockdown — it has been extended to September 20 — has rekindled demand, encouraging producers to start drilling and completing wells again. The refinery utilization rate recovered to 67.3% in June from a low of 46.2% in April, but is still shy of the pre-pandemic levels of 80%, according to the state statistics agency Indec.

Fracking activity revives

The number of frac stages drilled in Vaca Muerta rose to 98 in August from 44 stages in July, led by Shell and Mexico-based Vista Oil & Gas, according to data from the Argentine unit of Houston-based services company NCS Multistage. While that is down from more than 650 stages in August 2019, it is up from zero in April and 28 in May.

The decline in activity during the pandemic has pushed back the Neuquen government's forecast of reaching 230,000 b/d of production by December, up from a pre-pandemic 170,000 b/d, Gutierrez said. Instead, production fell to 130,000 b/d in April and was only at 155,400 b/d in July, according to the provincial government's latest data.

Gutierrez did not provide a forecast for production growth, but said that it could be increased relatively rapidly because 105 wells have been drilled but not fracked in Vaca Muerta. Analysts have said that these wells can be put on line fast and at a low cost, meaning that the recovery in production can be quick followed by growth.

Of the wells, YPF has 85 wells that are ready to connect, Gutierrez said.

Investment still low

Gutierrez said he wants to encourage companies to step up investment in Vaca Muerta, with a target of surpassing $5 billion per year, like in 2015, up from $4.4 billion in 2019 and an estimated $2.5 billion-$3 billion this year.

"Vaca Muerta requires investments of at least $5 billion a year and the target to reach is $10 billion per year," he said.

Gutierrez said that so far companies have vowed to invest $195 billion in developing the play, of which only $25 billion has been invested.

"It's not that we have go out and look for investors," he said. "The investment is committed and the acreage is under concession."

What is necessary, he said, is for companies, governments and the labor unions to continue to cut costs, improve productivity, provide tax benefits and legal security, and widen access to financing for companies to move forward with their investment plans, including by bringing in new partners.

To show how fiscal incentives can help, Gutierrez said that after the federal government slashed the tax on oil exports to 0% from 8% in May, international deliveries began to surge, including to the US. Neuquen's oil exports more than doubled to 59,890 b/d in July from 28,300 b/d in June, and were up from sporadic shipments in all of 2019, according to data from the provincial government.

"Vaca Muerta was able to reach the world market with its oil," Gutierrez said.

While at first the light shale oil was sold at Brent minus $10/b, the discount has since declined to $4.5/b in August as buyers get to know the product, he said. "This month it will certainly be $3/b."

Export potential

Gutierrez said a driver of investment for oil companies should be the export potential of Vaca Muerta, which can be stepped up with little investment. The province, he said, has pipelines to ports on Argentina's Atlantic coast and Chile's Pacific with a total of 360,000 b/d in capacity to be filled.

There is also potential to export more gas to Brazil, Chile and Uruguay while investing in longer-term export growth by selling on the global market.

"We have to start with nearby markets such as Chile and Uruguay and then think about a liquefaction plant that allows us to export to overseas markets," he said.

The export potential, he added, has made the development of Vaca Muerta a national priority because it will bring in what the country needs most to pull out of a financial crisis in its third year: dollars. But he said that there haste is necessary to attract investment.

"We are thinking of more [development] concessions because we cannot leave the resources sleeping underground," he said. "We have come a long way but we are challenged to take the next step."

 

[Jay McKinsey + 1,489]

8 hours ago, ceo_energemsier said:

 

What is necessary, he said, is for companies, governments and the labor unions to continue to cut costs, improve productivity, provide tax benefits and legal security, and widen access to financing for companies to move forward with their investment plans, including by bringing in new partners.

To show how fiscal incentives can help, Gutierrez said that after the federal government slashed the tax on oil exports to 0% from 8% in May, international deliveries began to surge, including to the US. Neuquen's oil exports more than doubled to 59,890 b/d in July from 28,300 b/d in June, and were up from sporadic shipments in all of 2019, according to data from the provincial government.

"Vaca Muerta was able to reach the world market with its oil," Gutierrez said.

While at first the light shale oil was sold at Brent minus $10/b, the discount has since declined to $4.5/b in August as buyers get to know the product, he said. "This month it will certainly be $3/b."

Export potential

Gutierrez said a driver of investment for oil companies should be the export potential of Vaca Muerta, which can be stepped up with little investment. The province, he said, has pipelines to ports on Argentina's Atlantic coast and Chile's Pacific with a total of 360,000 b/d in capacity to be filled.

There is also potential to export more gas to Brazil, Chile and Uruguay while investing in longer-term export growth by selling on the global market.

"We have to start with nearby markets such as Chile and Uruguay and then think about a liquefaction plant that allows us to export to overseas markets," he said.

The export potential, he added, has made the development of Vaca Muerta a national priority because it will bring in what the country needs most to pull out of a financial crisis in its third year: dollars. But he said that there haste is necessary to attract investment.

"We are thinking of more [development] concessions because we cannot leave the resources sleeping underground," he said. "We have come a long way but we are challenged to take the next step."

 

So oil production being subsidized by the gov't because they can sell it for dollars.

[Sebastian Meana + 278]

On 9/13/2020 at 8:41 PM, Jay McKinsey said:

So oil production being subsidized by the gov't because they can sell it for dollars.

Not really, a tax cut is a 1 in a million in argentina, we subsidize everything except oil and aggriculture, from which we tax a lot, 67% of the Argie liter of naphta is taxes

it would be a great oportunity to fully nationalize YPF now that is worth 1.4 billion, buying the remaining 49% of the company for 700 million.

Edited September 16, 2020 by Sebastian Meana

[Jay McKinsey + 1,489]

1 hour ago, Sebastian Meana said:

Not really, a tax cut is a 1 in a million in argentina, we subsidize everything except oil and aggriculture, from which we tax a lot, 67% of the Argie liter of naphta is taxes

it would be a great oportunity to fully nationalize YPF now that is worth 1.4 billion, buying the remaining 49% of the company for 700 million.

Are you saying a tax cut is not a subsidy?

[ceo_energemsier + 1,818]

2 minutes ago, Jay McKinsey said:

Are you saying a tax cut is not a subsidy?

People getting child credit is a subsidy , why should I finance someone else having kids? I already paid for mine!

If we want to get rid of subsidies , then let there be a flat tax and no tax credits for anything! Simplify the tax code, reduce taxes and stop wasting tax payer dollars on all sorts of things. That is not going to happen. Tesla is thriving on tax payer dollars and tax subsidies for so called "green" cars. Nothing green about them except the green greed.

[Ward Smith + 6,615]

2 hours ago, Jay McKinsey said:

Are you saying a tax cut is not a subsidy?

I'll say it. 

A tax cut is not a subsidy. 

Only a communist believes they're entitled to collect money from the sweat off your brow. CEO is right, the government takes a piece of your action at the point of a gun. When they take less of your income are they giving you something? Or simply stealing less? Interested in what your commie indoctrination taught you on this. Please don't bother trotting out the Obama, "you didn't build that" trope. That dog won't hunt. 

[Jay McKinsey + 1,489]

3 minutes ago, Ward Smith said:

I'll say it. 

A tax cut is not a subsidy. 

Only a communist believes they're entitled to collect money from the sweat off your brow. CEO is right, the government takes a piece of your action at the point of a gun. When they take less of your income are they giving you something? Or simply stealing less? Interested in what your commie indoctrination taught you on this. Please don't bother trotting out the Obama, "you didn't build that" trope. That dog won't hunt. 

Just what I was waiting for because that means solar and wind are not subsidized as the gov't benefit they are given are tax cuts. 

[Enthalpic + 1,496]

10 minutes ago, Ward Smith said:

Only a communist believes they're entitled to collect money from the sweat off your brow.

https://en.wikipedia.org/wiki/Internal_Revenue_Service

Do you like your communist country?

[Jay McKinsey + 1,489]

7 minutes ago, Enthalpic said:

https://en.wikipedia.org/wiki/Internal_Revenue_Service

Do you like your communist country?

Good question for @Ward Smith 

[0R0 + 6,251]

1 hour ago, Enthalpic said:

https://en.wikipedia.org/wiki/Internal_Revenue_Service

Do you like your communist country?

One good reason to shut down the income tax and return it to its original unconstitutional status.

[Ward Smith + 6,615]

13 hours ago, Jay McKinsey said:

Just what I was waiting for because that means solar and wind are not subsidized as the gov't benefit they are given are tax cuts. 

Tax credits are not the same as tax cuts. I'm guessing accounting wasn't your strong suit, but the math is easy. A tax credit means you can receive money from the IRS in excess of what you've paid. A tax cut simply means you pay less than you did before. As CEO pointed out, the child tax credit means filers who don't even pay taxes can receive money from the government. Calling it a tax credit was just a sop for the minority party at the time, since it was nothing less than a welfare expansion. 

[QuarterCenturyVet + 312]

13 hours ago, Enthalpic said:

https://en.wikipedia.org/wiki/Internal_Revenue_Service

Do you like your communist country?

We live in a communist country called Canada. 

[Sebastian Meana + 278]

16 hours ago, Jay McKinsey said:

Are you saying a tax cut is not a subsidy?

When tax man decides to give you money is a subsidy, when taxman decides to not taking from you so much money for a while is a tax cut

[Enthalpic + 1,496]

3 hours ago, Ward Smith said:

Tax credits are not the same as tax cuts. I'm guessing accounting wasn't your strong suit, but the math is easy. A tax credit means you can receive money from the IRS in excess of what you've paid. A tax cut simply means you pay less than you did before. As CEO pointed out, the child tax credit means filers who don't even pay taxes can receive money from the government. Calling it a tax credit was just a sop for the minority party at the time, since it was nothing less than a welfare expansion. 

You can have a non-refundable tax credit  Either way you end up paying less tax.

A tax rate cut can be a much bigger advantage than a credit.  Credits have a fixed value, the lost tax revenue can not exceed the credit value.  The lost revenue from a rate cut is unknown and can end up being quite large.

 

 

 

Edited September 17, 2020 by Enthalpic

[Jay McKinsey + 1,489]

4 hours ago, Ward Smith said:

Tax credits are not the same as tax cuts. I'm guessing accounting wasn't your strong suit, but the math is easy. A tax credit means you can receive money from the IRS in excess of what you've paid. A tax cut simply means you pay less than you did before. As CEO pointed out, the child tax credit means filers who don't even pay taxes can receive money from the government. Calling it a tax credit was just a sop for the minority party at the time, since it was nothing less than a welfare expansion. 

 

3 hours ago, Sebastian Meana said:

When tax man decides to give you money is a subsidy, when taxman decides to not taking from you so much money for a while is a tax cut

I never liked accounting but I rather enjoyed tax law. So let me once again expose your intellectual shortcomings @Ward Smith. 

There are two types of tax credits: Refundable and Non-Refundable

Refundable are what you are referring to as you can indeed get a refund. But your problem is that the ITC and PTC are both non-refundable. That means you get no refund, all you can do is carry forward excess credits to future years.

So it stands that by your definition wind and solar are not subsidized.

Edited September 17, 2020 by Jay McKinsey

[Enthalpic + 1,496]

15 hours ago, 0R0 said:

One good reason to shut down the income tax and return it to its original unconstitutional status.

How would you propose collecting money?

Corporate tax, sales tax, wealth tax?  Can't have that giant military without some money.

 

[Ward Smith + 6,615]

2 hours ago, Jay McKinsey said:

 

I never liked accounting but I rather enjoyed tax law. So let me once again expose your intellectual shortcomings @Ward Smith. 

There are two types of tax credits: Refundable and Non-Refundable

Refundable are what you are referring to as you can indeed get a refund. But your problem is that the ITC and PTC are both non-refundable. That means you get no refund, all you can do is carry forward excess credits to future years.

So it stands that by your definition wind and solar are not subsidized.

No intellectual shortcomings here, you should put the rocks down, living in that glass house and all. 

Your ignorance is duly noted on this plus other subjects. A tax cut means the percentage paid to the govt is reduced. For example, a corporate rate going down from 39% to 35% is a tax cut. A tax credit regardless of type is a dollar for dollar benefit. This means if there's a $7,000 credit for buying an EV, I purchase the EV and the govt pays me $7k. That's dramatically different than a tax cut. My point stands. 

The edge case of someone wealthy enough to purchase an EV while simultaneously being too poor to owe taxes is beneath my consideration. Only a foolish person (yourself perhaps?) would buy the EV without knowing the tax ramifications. 

Perhaps your alma mater offers remedial classes? That or you could try running a legitimate business for awhile, where the School of Hard Knocks will edumacate you better than any curriculum taught by ivory tower know nothings. 

[Enthalpic + 1,496]

28 minutes ago, Ward Smith said:

No intellectual shortcomings here, you should put the rocks down, living in that glass house and all. 

Your ignorance is duly noted on this plus other subjects. A tax cut means the percentage paid to the govt is reduced. For example, a corporate rate going down from 39% to 35% is a tax cut. A tax credit regardless of type is a dollar for dollar benefit. This means if there's a $7,000 credit for buying an EV, I purchase the EV and the govt pays me $7k. That's dramatically different than a tax cut. My point stands. 

The edge case of someone wealthy enough to purchase an EV while simultaneously being too poor to owe taxes is beneath my consideration. Only a foolish person (yourself perhaps?) would buy the EV without knowing the tax ramifications. 

Perhaps your alma mater offers remedial classes? That or you could try running a legitimate business for awhile, where the School of Hard Knocks will edumacate you better than any curriculum taught by ivory tower know nothings. 

The "edge case" of the government paying someone $7,000 is obviously within your consideration. You don't get that money, it offsets taxes you would have paid. 

You are arguing semantics, and not in your favour. Which is greater 4% of a million, a billion, or a fixed $7,000?  

 

Edited September 18, 2020 by Enthalpic

[Gerry Maddoux + 3,627]

Wind and solar have unequivocally been subsidized by the government. I profit from wind energy, and oil and gas, but not from solar. The wind credits are expiring this year, I believe, and the EIA has looked at competitiveness sans subsidy. This varies for wind, as a "wind corridor" goes right down the center of the United States, from Minn and the Dakotas into Kansas and Texas. 

Without subsidy in 2021, onshore wind is estimated to average $48.80/MWh, which compares to electricity from a conventional gas-fired utility plant of $46.70 and $40.50 for advanced NG. Offshore wind is still very expensive. Solar is more widespread, of course. 

It seems to me that new battery storage of electricity will turn the power exchanges on their head. Electricity is a commodity and as such has always priced according to supply and demand. In fact, the exchanges used to clear pricing every five minutes. I have read with great interest the California Plan to use backup Lithium-ion battery depots as their redundancy system. The history of electricity in the United States has worked on demand met by a corresponding supply--not storage (a new concept within the last two years). In the past, if more supply was injected into the system at a certain point, electricity pricing would work exactly as the oil market: namely, by a fall in the price (which has been called "eating your own lunch"). On the other hand, if demand spikes and there is inadequate supply (as happened recently in California), then the price of this unique commodity spikes too (you get to eat out). 

So back to the California Plan, if the redundant source of electricity is a second, or even a third, Lithium-ion battery dump, and there are two or three days of electricity stored to be on the safe side, would feeding redundant electricity into the battery not be "eating your own lunch" in terms of a very low commodity cost for electricity? I'm not knocking low cost, but I do believe the farmers of wind and solar--when they are unsubsidized--will not want to see a dramatic reduction in the price for their commodity. 

The logic in my head tells me that there is going to be a certain migration out of California in the coming year--and I'm not saying this in a mean-spirited way: some people have simply had enough. No matter, many of those in say, San Francisco are fleeing to say, Carmel Valley--they can work from home and want to escape the city, especially now with its lingering smoke. As a certain exodus takes place at the same time that revolutionary changes are being made in supply of electricity, and as the grid struggles to accommodate an intrastate change in distribution and requirements, and as the subsidies for solar and wind expire, with higher farm costs, higher battery storage costs, but lower commodity prices to the farmers and the battery emitter as well, how on earth will the economics make sense?

It would appear naively that the solar and wind farmers--accustomed to subsidies and a LCOE profile--will all of a sudden be faced with +/- higher volume but definitely lower prices for electricity. At the same time, it would appear that redundant Lithium depots will be faced with expensive storage but lower prices for their commodity as it is emitted throughout the grid. Gone are those terrifying spikes but like storing a glut of oil in floating vessels, there would seem to be a substantial profit erosion from storing a commodity that the exchanges have always traded with immediacy rather than long-range.

This hasn't been tried before on such a large, no-going-back scale. As such, it is an experiment. Perhaps some smart number-crunchers have worked this out, There would appear to be too many moving parts to be sure, however, and I doubt subsidies will come back. When the subsidies leave altogether, such a massive scale change in renewables, along with this relatively new concept of storage, could get one in a pickle.   

[Ward Smith + 6,615]

13 hours ago, Gerry Maddoux said:

Wind and solar have unequivocally been subsidized by the government. I profit from wind energy, and oil and gas, but not from solar. The wind credits are expiring this year, I believe, and the EIA has looked at competitiveness sans subsidy. This varies for wind, as a "wind corridor" goes right down the center of the United States, from Minn and the Dakotas into Kansas and Texas. 

Without subsidy in 2021, onshore wind is estimated to average $48.80/MWh, which compares to electricity from a conventional gas-fired utility plant of $46.70 and $40.50 for advanced NG. Offshore wind is still very expensive. Solar is more widespread, of course. 

It seems to me that new battery storage of electricity will turn the power exchanges on their head. Electricity is a commodity and as such has always priced according to supply and demand. In fact, the exchanges used to clear pricing every five minutes. I have read with great interest the California Plan to use backup Lithium-ion battery depots as their redundancy system. The history of electricity in the United States has worked on demand met by a corresponding supply--not storage (a new concept within the last two years). In the past, if more supply was injected into the system at a certain point, electricity pricing would work exactly as the oil market: namely, by a fall in the price (which has been called "eating your own lunch"). On the other hand, if demand spikes and there is inadequate supply (as happened recently in California), then the price of this unique commodity spikes too (you get to eat out). 

So back to the California Plan, if the redundant source of electricity is a second, or even a third, Lithium-ion battery dump, and there are two or three days of electricity stored to be on the safe side, would feeding redundant electricity into the battery not be "eating your own lunch" in terms of a very low commodity cost for electricity? I'm not knocking low cost, but I do believe the farmers of wind and solar--when they are unsubsidized--will not want to see a dramatic reduction in the price for their commodity. 

The logic in my head tells me that there is going to be a certain migration out of California in the coming year--and I'm not saying this in a mean-spirited way: some people have simply had enough. No matter, many of those in say, San Francisco are fleeing to say, Carmel Valley--they can work from home and want to escape the city, especially now with its lingering smoke. As a certain exodus takes place at the same time that revolutionary changes are being made in supply of electricity, and as the grid struggles to accommodate an intrastate change in distribution and requirements, and as the subsidies for solar and wind expire, with higher farm costs, higher battery storage costs, but lower commodity prices to the farmers and the battery emitter as well, how on earth will the economics make sense?

It would appear naively that the solar and wind farmers--accustomed to subsidies and a LCOE profile--will all of a sudden be faced with +/- higher volume but definitely lower prices for electricity. At the same time, it would appear that redundant Lithium depots will be faced with expensive storage but lower prices for their commodity as it is emitted throughout the grid. Gone are those terrifying spikes but like storing a glut of oil in floating vessels, there would seem to be a substantial profit erosion from storing a commodity that the exchanges have always traded with immediacy rather than long-range.

This hasn't been tried before on such a large, no-going-back scale. As such, it is an experiment. Perhaps some smart number-crunchers have worked this out, There would appear to be too many moving parts to be sure, however, and I doubt subsidies will come back. When the subsidies leave altogether, such a massive scale change in renewables, along with this relatively new concept of storage, could get one in a pickle.   

Excellent points all good Doctor. Only semantic legerdemain pretends laws written into the books as subsidies equate to tax cuts. One is directly focused to specific industries for the specific (market distorting) purpose of government choosing winners and losers. The esteemed doctor of economics either ignored or downplayed the two major credits involved. Most interlocutors focus on the ITC (investment tax credit) while studiously ignoring the PTC (production tax credit) which can be vastly larger over time (assuming they actually produce). In real terms it can be the difference between a wholesale price of 4 cents per kwh and 32 cents/kwh for the renewable operator. Which business would you rather be in? Interestingly utilities that have normal production from fossil plants are foolishly concerned with things like operational quality and grid integrity. The pure play wind and solar operators have no such qualms. Hence paying a fine is more profitable than playing by the rules. If the solar or wind VP of a major utility played those games they'd be unemployed, but the president of the independent renewable operator gets a bonus. 

Imagine the oil industry without storage. Actually it sort of exists with natural gas since in most cases the "storage" is the pipelines. Notice what this has done to natural gas pricing. The fraccing free ride is just about over, so get ready for truly wild fluctuations. 

[Jay McKinsey + 1,489]

On 9/17/2020 at 8:34 AM, Ward Smith said:

A tax cut simply means you pay less than you did before. 

I agree, a tax cut simply means you pay less than you did before, regardless of how it was calculated.

21 hours ago, Ward Smith said:

 

 A tax cut means the percentage paid to the govt is reduced. For example, a corporate rate going down from 39% to 35% is a tax cut. A tax credit regardless of type is a dollar for dollar benefit. This means if there's a $7,000 credit for buying an EV, I purchase the EV and the govt pays me $7k. That's dramatically different than a tax cut. My point stands. 

The edge case of someone wealthy enough to purchase an EV while simultaneously being too poor to owe taxes is beneath my consideration. Only a foolish person (yourself perhaps?) would buy the EV without knowing the tax ramifications. 

Perhaps your alma mater offers remedial classes? That or you could try running a legitimate business for awhile, where the School of Hard Knocks will edumacate you better than any curriculum taught by ivory tower know nothings. 

Wrong again. The EV tax credit is also non refundable. If a person owes $3000 in tax and buys an EV they get a credit of $3000 that they can deduct from their taxes and in this case they would owe no tax. The gov't does not send you a check for the other $4500.

You must have a federal tax liability in the year you purchase an electric car or plug-in hybrid to claim the tax credit. The tax liability must meet or exceed the amount of credit you're requesting. If, for example, you owe $6,000 in federal taxes, you can only claim a credit of $6,000 – even if the vehicle qualifies for a full $7,500 tax credit. https://cars.usnews.com/cars-trucks/how-does-the-electric-car-tax-credit-work

The gov't does not pay you, you deduct the credit from your taxes.

Edited September 18, 2020 by Jay McKinsey

[Jay McKinsey + 1,489]

4 hours ago, Ward Smith said:

Excellent points all good Doctor. Only semantic legerdemain pretends laws written into the books as subsidies equate to tax cuts. One is directly focused to specific industries for the specific (market distorting) purpose of government choosing winners and losers. The esteemed doctor of economics either ignored or downplayed the two major credits involved. Most interlocutors focus on the ITC (investment tax credit) while studiously ignoring the PTC (production tax credit) which can be vastly larger over time (assuming they actually produce). In real terms it can be the difference between a wholesale price of 4 cents per kwh and 32 cents/kwh for the renewable operator. Which business would you rather be in? Interestingly utilities that have normal production from fossil plants are foolishly concerned with things like operational quality and grid integrity. The pure play wind and solar operators have no such qualms. Hence paying a fine is more profitable than playing by the rules. If the solar or wind VP of a major utility played those games they'd be unemployed, but the president of the independent renewable operator gets a bonus. 

Imagine the oil industry without storage. Actually it sort of exists with natural gas since in most cases the "storage" is the pipelines. Notice what this has done to natural gas pricing. The fraccing free ride is just about over, so get ready for truly wild fluctuations. 

Nice word salad. I discussed the ITC and PTC above and pointed out that they were non refundable credits.

[Jay McKinsey + 1,489]

20 hours ago, Gerry Maddoux said:

Wind and solar have unequivocally been subsidized by the government. I profit from wind energy, and oil and gas, but not from solar. The wind credits are expiring this year, I believe, and the EIA has looked at competitiveness sans subsidy. This varies for wind, as a "wind corridor" goes right down the center of the United States, from Minn and the Dakotas into Kansas and Texas. 

Without subsidy in 2021, onshore wind is estimated to average $48.80/MWh, which compares to electricity from a conventional gas-fired utility plant of $46.70 and $40.50 for advanced NG. Offshore wind is still very expensive. Solar is more widespread, of course. 

It seems to me that new battery storage of electricity will turn the power exchanges on their head. Electricity is a commodity and as such has always priced according to supply and demand. In fact, the exchanges used to clear pricing every five minutes. I have read with great interest the California Plan to use backup Lithium-ion battery depots as their redundancy system. The history of electricity in the United States has worked on demand met by a corresponding supply--not storage (a new concept within the last two years). In the past, if more supply was injected into the system at a certain point, electricity pricing would work exactly as the oil market: namely, by a fall in the price (which has been called "eating your own lunch"). On the other hand, if demand spikes and there is inadequate supply (as happened recently in California), then the price of this unique commodity spikes too (you get to eat out). 

So back to the California Plan, if the redundant source of electricity is a second, or even a third, Lithium-ion battery dump, and there are two or three days of electricity stored to be on the safe side, would feeding redundant electricity into the battery not be "eating your own lunch" in terms of a very low commodity cost for electricity? I'm not knocking low cost, but I do believe the farmers of wind and solar--when they are unsubsidized--will not want to see a dramatic reduction in the price for their commodity. 

The logic in my head tells me that there is going to be a certain migration out of California in the coming year--and I'm not saying this in a mean-spirited way: some people have simply had enough. No matter, many of those in say, San Francisco are fleeing to say, Carmel Valley--they can work from home and want to escape the city, especially now with its lingering smoke. As a certain exodus takes place at the same time that revolutionary changes are being made in supply of electricity, and as the grid struggles to accommodate an intrastate change in distribution and requirements, and as the subsidies for solar and wind expire, with higher farm costs, higher battery storage costs, but lower commodity prices to the farmers and the battery emitter as well, how on earth will the economics make sense?

It would appear naively that the solar and wind farmers--accustomed to subsidies and a LCOE profile--will all of a sudden be faced with +/- higher volume but definitely lower prices for electricity. At the same time, it would appear that redundant Lithium depots will be faced with expensive storage but lower prices for their commodity as it is emitted throughout the grid. Gone are those terrifying spikes but like storing a glut of oil in floating vessels, there would seem to be a substantial profit erosion from storing a commodity that the exchanges have always traded with immediacy rather than long-range.

This hasn't been tried before on such a large, no-going-back scale. As such, it is an experiment. Perhaps some smart number-crunchers have worked this out, There would appear to be too many moving parts to be sure, however, and I doubt subsidies will come back. When the subsidies leave altogether, such a massive scale change in renewables, along with this relatively new concept of storage, could get one in a pickle.   

Yes, solar, wind oil and gas have unequivocally benefited from subsidies.

Storage dramatically increases the profitability of solar because it allows the solar farms to store energy during peak production, which is otherwise a period of lower prices for electricity or even curtailment, and then selling it at peak demand. Storage is just getting cheaper and cheaper and it won't be all batteries. Compressed air, hydrogen, etc, etc.

The purpose of the subsidies is to get the technology to a competitive point in the market. That has been achieved and the subsidies are no longer needed. 

[Ward Smith + 6,615]

2 hours ago, Jay McKinsey said:

Nice word salad. I discussed the ITC and PTC above and pointed out that they were non refundable credits.

Look, this is a total red herring on your part. There's no utility out there selling MW of "green" power that's doing it out of the kindness of their hearts. They're all doing it for money and they'll collect every dime of those credits before they're done. Pretending it doesn't exist because it might not be matched dollar for dollar to tax liability? Yeah, right. At least you've fully admitted wind and solar are heavily subsidized so no point in rubbing your nose in it further. Cheers and have a nice weekend