Things I noticed and thought were interesting
Week ending 19th February 2017
1, EDF and decentralised energy. Les Echos, the French business newspaper, carried an extraordinary article from a Senior Vice President of EdF, the largely state-owned utility that will build the nuclear reactor at Hinkley Point in England. Mark Boillot contends that 'large nuclear or thermal power plants designed to function as baseload are challlenged by the more flexible decentralized model'. He says that the centralised model of power production is dying, to be replaced by local solar and wind, supplemented by batteries and intelligent management of supply and demand. Not only will this be cheaper in the long run but customers are actually prepared to pay more for solar electricity and actively work to reduce usage at times of shortage. His conclusion is that 'the traditional model must adapt to the new realities, thus allowing the utilities to emerge from ...hypercentralized structures in a world that is becoming more and more decentralized'. In most jurisdictions Mr Boillot would have been asked to clear his desk. What will EdF do about one of its most senior people openly forecasting the end of the large power station as it tries to raise the ten billion Euros necessary to pay for its share of Hinkley?
2, Steel flue gas to fuels. In a world first, LanzaTech, the US/New Zealand company that makes ethanol from waste carbon monoxide arising from steel manufacturing said that it had successfully produced the first 6,000 litres of aviation fuel for Virgin Atlantic. The final step in the process – taking ethanol and turning it into kerosene - was done in the factory of its Chinese partner. Other companies turn biomass into kerosene; LanzaTech is the first to use microbes that eat carbon monoxide. Low-carbon jet fuel is an urgent necessity because aviation will be impossible to electrify.
3, UK ‘turn up’. The UK system operator began preparing for an unusual auction in which large electricity users are paid to increase demand quickly when the National Grid is entering surplus during summer nights/eary mornings. Payments are expected to be about £60/$75 per megawatt hour. The most likely circumstances in which 'turn up' will be used are when the wind is blowing strongly and the sun has risen. The raw electricity price at this time is likely to be substantially less than the ‘turn up’ payment, meaning that the net cost of power will be below zero. My guess is that this will provide a new market for fast reacting electrolysers which will use the free electricity to make hydrogen, probably for an industrial process such as ammonia manufacture.
4, EVs. A well-researched new McKinsey report looked at consumer attitudes to EVs. In Germany and the US, 30-40% of consumers will ‘consider’ an EV at the time of next purchase. The figure for China is lower, even though a larger fraction of Chinese sales are now electric. Concerns about driving range and charging availability remain, but fall sharply once the customer actually owns the new EV. Surprisingly perhaps, consumers put more trust in established auto brands than new entrants when thinking about the purchase of an electric vehicle. A study of EVs also showed that 5 year maintenance costs were 20-40% lower than conventional cars. (PS Although the data on consumer attitudes is very interesting, the McKinsey work understates 2016 EV sales by a large margin and also is out-of-line with current estimates of EV battery costs, suggesting a figure of $227/kWh which I suspect is about 15% too high).
5, Indian renewables. An Indian think-tank published forecasts for power generation growth to 2030. It put forward a high and low scenario for renewables. The high scenario sees 35% from wind and solar generation by 2030, with capacity additions running at 100 GW a year in the last part of the decade. (Total solar added worldwide last year was about 75 GW). The low scenario suggests that only about 15% of Indian generation would be renewable in 2030. As in other studies, the report says that there will be no need for any more coal power stations other than those currently under construction if renewables grow quickly. In fact, coal capacity is projected to fall to 2030 in the high scenario, although utilisation rates rise sharply from their current low levels. All new generation will be from renewables after 2024. The report assumes that solar (+gas backup or storage) is competitive with coal at power purchase prices of less than $70 a MWh. A 750 MW auction in Madhya Pradesh this week produced a solar-only price of about $45/MWh, a number over 35% lower than previous Indian contracts. This strongly suggests that PV in India is already cheaper than coal in sunny locations, even including the cost of backup. This is probably also true for wind in some parts of the country.
6, Avantium biobased chemicals. Avantium, a 2000 spin-out from Shell, announced a new facility to create ultra-pure glucose from waste biomass, including forestry thinnings and sugar cane residues. The pilot plant will be built in the Netherlands with shareholders including RWE, which will use the residues after the glucose has been extracted for burning for electricity generation. RWE has committed to convert its Netherlands power plants from coal to biomass. Other partners include Akzo and the Dutch woodlands agency. Avantium also lifted the gloom in the bioeconomy by saying it was hoping to raise €100m by going public in the near future.
7, Coal closure. One of the largest coal plants in the US said it would close. The 2.2 GW Navajo generating station in Arizona estimated its costs will be around $41/MWh in 2019, a higher figure than local wholesale electricity prices. That cost would rise to over $50 if the Obama Clean Power Plan rules remain in place. Even if they are rolled back the Navajo plant is uneconomic. One indication that the new administration will find it difficult to increase coal production in the US.
8, Economics of domestic battery storage. A paper in Nature Energy concluded that home battery storage systems raise total carbon emissions because of the round-trip efficiency losses. A typical home system loses 15% of the energy stored. This adds to the total amount of electricity needed to be generated by fossil power plants. The researchers say that the average home with a battery in their study consumed around 450 kWh more than it would have done without storage. The paper also shows that buying a battery with the sole purpose of enhancing consumption of home-produced electricity is far from financially sensible. (But the authors didn’t look at the impact of using batteries to take night-time power -when CO2 emissions are low - for use to replace day-time electricity use when emissions tend to be higher as coal plants are dragged into the generation mix).
9, Local bank financing of nanogrids. The amount isn’t huge ($2m) but a local Rwanda bank has lent money to home solar company BBOXX to help speed up installations. The Rwandan government wants 40% of the country’s households to have off-grid solar by the end of next year. BBOXX has already installed 20,000 units there. So far, almost all the financing of micro-solar in Africa has been done using funds from abroad. The Rwandan loan is evidence of the local bankability of pay-as-you-go solar in some African countries.
10, Inductive EV charging. A bus route in Sweden now uses inductive charging. (No physical connection between the batteries and the charging pad in the road is necessary). The hybrid bus used in the test can collect enough electricity in seven minutes to refuel for each 10 km round trip. The vehicle stops over a charging pad but other experiments, such as routes in South Korea, can deliver charge when the bus is moving. The advantage is that the vehicle needs much smaller battery capacity. (Harry Hoster, a professor at the UK’s Lancaster University, points out that Nikola Tesla, Elon Musk’s hero, attempted to build a huge electricity transmitting station a hundred years ago using similar ideas). Other groups, such as Siemens, suggest that long distance heavy vehicle charging on major roads will be done using overhead pantagraphs similar to those used by electric trains.