Things I noticed and thought were interesting
Week ending 17th February 2019
1, Power to gas. Last weekend’s sustained low prices for German electricity as a result of high winds proved a reminder of the urgent need for progress on power to gas. Two of the German grid operators proposed a 100 MW electrolyser in Lower Saxony that will make hydrogen for insertion into the natural gas infrastructure. ‘The German climate targets, the nuclear phase-out and the emerging coal exit pose an enormous challenge to our energy system, so we now have to create the conditions for power-to-gas after 2030 on a gigawatt scale’ said the representative from Amprion at the press conference. The cost of €150m implies a cost per kilowatt of around €1,500. This seems surprisingly low, even though electrolyser prices are declining rapidly.
2, Artificial leaves. University of Illinois researchers showed how CO2 can be captured from low pressure, low density streams such as flue gases and turned into carbon monoxide, which can be used as an ingredient (alongside hydrogen) for synthetic fuels. The scientists claim that their photosynthesis is about 14 times as efficient as natural leaves and can produce carbon monoxide for about $185 a tonne in their current design. This implies, if I have understood the chemistry correctly, that the cost of extracting a tonne of CO2 from a waste stream and turning into carbon monoxide is about $120/tonne, which makes it financially plausible.
3, BP energy outlook. Most attention was focused on BP’s upgrading of the forecasts for renewable electricity. Buried more deeply in the document was a significant cut in the company’s expectations for electric vehicles. BP now expects 24% of passenger kilometres to be in EVs in 2040, down from 30% in 2018, a fall of about a fifth. Unsurprisingly, BP has therefore increased its forecast for oil demand for transport in 2040 to over 2.8bn tonnes a year, up about 4% over the 2018 figure. In its new prediction, oil use in cars and trucks continues rising to 2040 instead of falling from 2030 to 2040 as it suggested a year ago. There is no explanation whatsoever of the changes. A cynic might suspect that these quiet adjustments were necessary for BP to show stable oil demand into the foreseeable future. (Transport accounts for about 55% of all oil use).
4, Electric pick-up trucks. Highly-rated Michigan start-up Rivian has attracted investment of $700m from Amazon and others to help launch its urban delivery vehicle in 2020. Amazon would use the vehicle for its delivery fleet. A unrelated report from McKinsey said that electric buses and urban delivery trucks are already cost competitive with their fossil fuel equivalents. By the way, McKinsey’s estimates for electric vehicle penetration are approximately three times as high as BP’s.
5, Solar PV at mines. Gold mines need large amounts of power but are often far from the grid. Barrick’s Loulo mine in Mali, one of the largest in the world, has a dedicated 63 megawatt conventional power plant to supply its electricity needs. It now plans to install a 24 megawatt solar farm to run alongside the thermal station. Meteorological software will ensure the stability of the micro-grid by tracking local cloud cover. The company said that the PV farm would have a cost of electricity 2 US cents lower than its existing plant. This figure was calculated using Barrick’s internal cost of capital of 20%. This is a very high figure and more normal discount rates would produce a much larger difference between the PV costs and those of the conventional power station.
6, Shell buys Sonnen. Shell’s acquisition of German battery manufacturer Sonnen may be even more significant than it appears. One of Sonnen’s strengths is the integration of its batteries into electricity grids. It operates a service called Sonnen Community in some of its major markets, such as Australia. This allows an individual home a specific quantity of electricity use each year, whether supplied by the battery or from the grid. A monthly charge is made for this but Sonnen itself controls whether the battery is charging or discharging. In the UK, Shell owns a large electricity retailer and I presume it will enter other markets soon. With an electricity supply licence and battery systems that can be operated remotely for ‘demand response’, Shell is well placed to overtake conventional power suppliers.
7, Floating wind. Shell also committed to one of Europe’s first floating wind trials. It announced late last year an investment in the Stiesdal technology and has now said it will fund the first installation off the Danish coast. Floating wind is important for two reasons. First, it allows the collection of energy in much deeper waters than conventional turbines. The Atlantic coast of France, for example, or much of the seas off California are largely unavailable for standard offshore wind but ‘floaters’ are likely to work well. The second reason is that eventually floating technologies may be cheaper than turbines with foundations. The more experiments that follow Equinor’s investment in Hywind off the coast of Scotland, the faster costs will be driven down.
8, Indian renewables. Few things matter as much as the pace of Indian renewables development. Rates of solar installation have recently flagged, but a new report emphasised how cheap PV and wind are in India compared to the coal alternative. The researchers said that by 2030 solar will be able to provide electricity at around 2.7 cents per kilowatt hour with wind a little higher. New coal power stations will need to be paid over twice the cost of PV in order to cover their costs. The report gives a target of 30% of total generation for renewables in 2030. S&P Global forecast that India may cancel many of the planned new coal-fired power stations, partly because solar is now so much cheaper.
9, Wind+solar+storage. The Oregon utility PGE announced a large wind and solar farm coupled with battery storage. 300 MW of wind and 50 MW of solar will be complemented by a battery system capable of providing 30 MW for four hours. This is the first time in the US that wind, PV and batteries have been jointly developed.
10, Renewable hydrogen for ammonia. The industry continues to say that hydrogen made from natural gas is cheaper than using electrolysis of water. A partnership in Western Australia between the world leader in ammonia production, Yara, and Engie may undermine this conclusion. The companies committed to a feasibility study for a plant to produce 280,000 tonnes a year of hydrogen, about 4% of the existing needs of the Burrup ammonia plant, which supplies about one twentieth of the world’s total needs. Power from the electrolyser will come from 100 MW of panels sited at one of the world’s best locations for solar energy. (If all plants were sited close to solar resources as good as Western Australia, production of the hydrogen necessary for all the world’s ammonia would require about 50 gigawatts of solar panels - spread over several years - or just 40% of the PV installations expected for 2019).
* I won't be publishing this newsletter for the next few months as I start work on a new book. I want to record my deep appreciation of the comments and assistance I have received from subscribers. Thank you.