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CARBON COMMENTARY NEWSLETTER

This is a weekly newsletter about low-carbon energy generation and efficiency. I summarise the blog posts I have published during the previous week and comment on news stories that have interested me in the last few days. Subscribe at www.carboncommentary.com.

Industry news

Things I noticed and thought were interesting

Week ending 25th March 2018

Apologies for the long gap in production and many thanks to readers for the encouraging comments!

1, Power to gas. Australia’s largest gas distribution business said it would install an electrolyser to convert surplus cheap electricity to hydrogen in a suburb of Adelaide. The hydrogen will be added to the natural gas grid to reduce the carbon impact. (Most gas networks will accept additions of hydrogen, in some places to over 10%. In other countries, such as the UK, added hydrogen is effectively banned, though this will change). The electrolyser is small at  just 1.25 MW -  the UK’s ITM Power is now offering 50 MW systems – but this 'power to gas' project is a first for Australia. A much bigger scheme is in an earlier stage of development. The country’s abundant renewable resources give Australia a strong incentive to decarbonise its gas network using hydrogen and also to try to develop international markets for inexpensive renewable hydrogen for fuel cells and other uses. Grid operators around the world are being surprisingly slow to recognise the importance of turning surplus - and therefore very cheap - renewables into gas.(Thanks to Thad Curtz).

2, Grid battery storage. GE announced a new range of large battery systems, based on lithium ion cells made by major manufacturers such as LG. The batteries will be built into shipping containers and offer about 4 MWh of storage, deliverable at a rate of around 1.2 MW. Engineers working on the product claim longer life and better efficiency than competitors and appear to say that the cost is below $250 per kWh. A battery that lasts 4,000 cycles would therefore cost approximately 6 cents per kWh in capital cost amortisation alone. As its gas turbine business deals with the rapid market contraction of the past year, GE’s latest move into energy storage looks like an important reorientation. (See my note at 11 below on the sharp worldwide contraction in gas turbine sales - GE has suffered particularly acutely).
 
3, EV sales. Nissan took 20,000 orders for the new LEAF electric vehicle in a little over a month across Europe. Total EV sales across the continent in 2017 were about 300,000 and the top-seller, the Renault ZOE, sold just over 31,000. Despite some indifferent reviews the LEAF looks likely to break sales records.
 
4, Indian solar. India will have added about 10 GW in the financial year to end March 2018, nearly double the rate of the previous year. Now with 20 GW+, the country aims for 100 GW of solar by 2022. (For comparison, China added over 50 GW in 2017). Although the state governments are pushing ahead with auctions for huge farms of up to 2 GW in size, the downward trend in prices has stalled. Import tariffs and increased taxation have pushed up costs, meaning that the latest auctions in Karnatka, the state with the most installed capacity, have produced tariffs of about 2.9 rupees/4.4 US cents per kWh, about the same as achieved a year ago. (This price of PV electricity delivered in auctions can be as low as 2 cents in some countries). Only about half of the total capacity auctioned in the recent Karnatka offer was bid for. But India’s political commitment to leading the world growth of PV seems unchanged; Prime Minister Modi promised $1.4bn to aiding solar developments in other tropical countries.

5, IEA data on energy use. Difficult not to be disappointed by the latest IEA figures on energy use. A decline in the rate of improvement in efficiency meant that global energy use rose 2.1% last year, twice the rate of 2017. Although renewables grew faster than any other energy source, they only provided about one quarter of the increase in overall demand. Oil use expanded, principally because of an increase in the sales of bigger cars, and coal burning increased, mostly for electricity generation. Coal use had fallen in the previous two years. Most tellingly of all, fossil fuels still provide 81% of global energy, a figure similar to the level of 3 decades ago.
 
6, Zero subsidy offshore wind. The Dutch government awarded a Vattenfall subsidiary the right to build two large farms about 20 km offshore. Completion is due in 2022. If built to schedule, these will be the first offshore wind farms to be constructed without a subsidy or a price guarantee. Four bidders had each offered to build the farms under these terms. The attractiveness of the contract is enhanced by free connection to the Dutch grid, reasonable certainty that the wind power can be sold and, most importantly, knowledge that the government has committed to a carbon price of €43 a tonne by 2030. (This implicitly raises the price of gas-fired power generation by about €14/MWh, giving offshore wind operators reassurance that market prices will sufficiently high).
 
7, Dubai Concentrating Solar. Dubai broke ground on a 700 MW concentrating solar power (CSP) plant. Financed by Saudi’s AWCA and to be constructed by Shanghai Electric, it will supply dispatchable 24 hour electricity for 7.3 US cents per kilowatt hour. This is the lowest cost worldwide for power from concentrating solar. The plant combines both parabolic troughs (600 MW) and a 100 MW heliostat site using a 260 metre solar tower. The $4bn project will cover about 20 square kilometres and is scheduled to be finished in late 2020. The plant claims that it will have the largest storage capacity of any non-pumped hydro energy site in the world. But Australia’s drive into massive batteries alongside wind and solar may mean that this statement may no longer be true by the time the Dubai project is completed.
 
8, Electric buses and household waste trucks. The 60,000 person town of Roskilde in Denmark (once the Danish capital) said it would run an entirely electric bus fleet from spring 2019. The 20 new buses made by Chinese manufacturer Yutong, the world’s largest bus manufacturer, are said to be equivalent in price to conventional diesel versions. In a separate deal, a Yutong long-distance electric bus will be trialled on the Paris-Amiens route from April this year and in southern Germany later in 2018. Paris-Amiens is a 150 km hop and the bus has a 200 km range. In Amsterdam, the city took delivery of an electric household waste vehicle from E Trucks Europe. Now 100% electric, the truck will be fitted with a fuel cell range extender powered by hydrogen next year. Despite the apparently unattractive economics, fuel cell powered electric vehicles continue to attract investment. Daimler and Audi have both promised new models in the last few weeks.
 
9, Perovskite solar cells. Dutch researchers showed off a solar cell that combined a layer of perovskite material on top of one of silicon. The combined efficiency was over 26.3%, 3% better than just the silicon layer. ‘Tandem’ silicon/perovskite cell outputs are continuing to improve rapidly in labs around the world. Research in Cambridge, for example, has just demonstrated that addition of potassium to the perovskite solution can improve performance and stability. One day perovskites will provide cheap and easily installable PV. But, despite what is sometimes said by enthusiasts, limited durability means that they are still some years away from full commercialisation. 

10, US renewables. Even after recent growth, renewables are still relatively unimportant constituents of US power output. Wind saw 6.3 GW added in 2017 and solar 8.2 GW, compared to a net addition of 5.3 GW for gas last year (and net retirements of coal fired power stations of over 6 GW). Electricity output from coal and from gas fell by 2.5% and 7.7% respectively in 2107. However wind and solar combined still account for only about 8% of total US power generation, not much above hydro.
 
 Recent blog posts
 
11, Gas turbines. I wrote an article on the unexpected but very rapid fall in gas turbine sales. I tried to show that the market was a clear example of the implosion of a ‘carbon bubble’. Possibly this was the first time that an entire industry saw large scale destruction of shareholder value as a result of management failing to spot the contraction of a large industry because of the switch to low carbon electricity generation. The decline caused the three main global manufacturers to shut factories and other facilities, dismiss about 20,000 staff and radically shift business strategies. All this happened within a few weeks in autumn 2017. In a much longer article – available on request – I examine the reasons why the three companies were able to disguise their difficult position for so long, both to their shareholders and to themselves.
 
12, Electric cars. I looked at the assumptions about electric cars made by BP in its annual Energy Outlook. I identified arithmetic errors and highly implausible assumptions that allow the company to push back the forecast date at which oil demand for transport starts to fall.
 
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