Things I noticed and thought were interesting
Week ending 27th May 2018
1, Subsidy-free wind. France’s Engie and its consortium partners moved ahead with plans for 300 MW of subsidy-free wind across 9 parks in Spain. The crucial recent development was Engie’s commitment to buy a large part of the power from these wind farms at pre-determined prices (‘PPAs’ or Power Purchase Agreements). Engie says that this is the first renewables PPA in Spain. And, of course, the PPA was only possible because of its confidence that it had found major electricity consumers willing to commit to take the power from the farms. Subsidy free renewables are growing across Europe but only because final customers - often large industrial companies - are deciding in large numbers to contract to buy the electricity and therefore making it possible to finance construction.
2, Biomass carbon capture. Drax, the UK’s largest power station, said it was working with an innovative local startup to trial a new carbon capture technology. Flue gas from wood pellet combustion will be passed through a liquid that contains chemicals called amines that react with CO2, but not with other gases. The amines loaded with CO2 drop to the bottom of the column of liquid and are separated off. Heated to 120 degrees, the CO2 is then released from the amines and stored. This is a very small experiment but it is the first European trial of bioenergy carbon capture and storage or 'BECCS'. In theory, BECCS could result in negative emissions because the CO2 that is stored was originally captured from the atmosphere by trees. Many doubts persist over whether BECCS can be viable at large scale and indeed whether Drax’s pellets are actually low carbon. But if carbon capture was used on all Drax’s flue gases, the UK’s net emissions would fall by about 3%.
3, Fuel cell cars. Toyota remains committed to hydrogen fuel cells to generate the power for electric vehicles even as almost all other manufacturers move to batteries. It promised to expand production to at least 30,000 cars a year from ‘around 2020’. The advantage over conventional electric cars is a longer range and faster refuelling. But manufacturers will sell nearly 2m battery electric cars this year, pushing costs down to levels well below hydrogen fuel cell vehicles, which sell in tiny numbers. (The UK price today of Toyota's fuel cell car, the Mirai, is over $85,000)
4, Power to gas. A Belgian venture will build what will be the largest European power-to-gas project. A consortium including an offshore wind developer promised to install a 25 MW electrolyser to convert surplus power into hydrogen for insertion into the natural gas grid. The project said that a key source of revenues would be from grid stabilisation (if grid frequency drops, the electrolyser will turn off). An EU study also backed the financial viability of hydrogen manufacture using electrolysis, with much of the value coming from grid services. There are now about 40 power to gas projects around Europe and even the laggards are beginning to take interest. The CEO of the UK subsidiary of E.ON said that power to gas could be the solution to seasonal storage needs in high latitude countries. This is the first time I have seen a UK energy CEO espouse power to gas. If we want a zero-carbon world, there is no realistic alternative to employing surplus power to make either hydrogen or methane.
5, Impact of renewables on power prices. The idea that higher levels of renewables cause wholesale power prices to rise is still surprisingly prevalent around the world. A study by one of the US National Laboratories showed that 2030 costs in four regions of the US will be about 20% lower than today if renewables rise to 40% of total generation. But the daily variability of prices will be much greater than today. The presentation of the research makes little mention of electricity storage even though by 2030 batteries will almost certainly dampen daily price swings.
6, The carbon bubble in gas turbines. Industrial conglomerate GE saw its share price fell about 7% after it cut its projections for gas turbine sales. To put it another way, shareholders lost about $10bn. A year ago GE was predicting a world market of around 80 GW between 2018 and 2026 and said that turbines were necessary complements to renewables. It now forecasts total shipments of less than 30 GW for 2019 and 2020 and admits that the main effect of renewables is to ruin the economics of owning turbine plants. In my long note on the deflation of the ‘carbon bubble’ in gas turbines (summary here, full text available on request), I noted that the three global turbine manufacturers had been quite extraordinarily slow to recognise that the falling cost of renewables was eroding their market at an unprecedented rate. If GE is right, turbine sales in 2019 will less than a quarter of the level of the early 2000s. The sheer speed of the collapse in sales of gas turbines is a potent warning to investors of the rapidity of valuation destruction in industries linked to fossil fuels.
7, Big Oil and batteries. German domestic battery manufacturer Sonnen took in another €60m investment round, led by Shell Ventures. Sonnen said it would use the money to expand in the US and Australia. The company has now sold 30,000 battery systems worldwide and increasingly focuses on its ‘Sonnen Community’ offer that provides peer-to-peer energy trading between battery owners. BP put $20m into Israeli start-up StoreDot, which has been developing technology for ultra-rapid charging of batteries. Currently StoreDot focuses on phone batteries but if its ideas work they may be transferable to much larger cells. (Advertisement: both Sonnen and StoreDot have been previously featured in this newsletter as having world-class potential).
8, More on batteries and car charging. A new joint venture unveiled plans to put a network of batteries on major UK routes to enable reliable supply of electricity for car charging. The company talks of putting as many as forty five 50 MW batteries close to the high voltage grid, enabling cheaper electricity supply and minimising the strains on the distribution network. The intention is to offer ultra-fast charging (150 kW and above). The immediate problem is that no existing cars can accept charging at this rate.
9, EV forecasts. Bloomberg gave us its latest predictions for EV sales. Last year it significantly increased its forecasts but this year saw few major changes. In fact, the new report shows a slight decline in the number of EVs expected to be sold in 2040 - about 60m down from about 62m – although this in the context of a prediction that world sales of all cars will be 10% lower than previously predicted. Bloomberg sees a strong move to purely battery vehicles and away from hybrids. The share of world sales in 2040 represented by EVs is 55%. I find this a strange number; if EVs are cheaper than equivalent ICEs before 2025, as Bloomberg says, and are also much cheaper to run, maintain and insure, why would sales in 2040 not be nearly 100%? Separately, it sees world urban bus sales transitioning to electricity far quicker than cars.
10, Hydrogen (and battery) ferries. Norway is launching a tender for zero emissions ferries for short distance routes. The first ferry is expected to go into service in 2021. A hydrogen fuel cell will provide ‘baseload’ electricity during trips while batteries will supplement the power at times of higher load, such as when the ships accelerate. Probably correctly, Norway reckons it can build a world lead in electrifying short-distance ferries, although Finnish competitors also want to dominate the market.