Things I noticed and thought were interesting
Week ending 10th June 2018
1, Hydrogen. EdF, one of the world’s largest utilities, bought a 20% stake France’s electrolysis pioneer McPhy and injected capital. McPhy is probably the European leader in building of hydrogen filling stations and this week also announced that it had opened a refuelling point for Engie’s fleet of maintenance vans in southern Paris. EdF’s said its purchase of new McPhy shares ‘represents a first step that will enable EDF to speed up its expansion into this burgeoning new market’ of hydrogen-based mobility'. It added that it sees hydrogen ‘as an essential energy vector for the decarbonisation of both industry and mobility’. (Cheap hydrogen combined with inexpensive CO2 from air – see paragraph 7 – means zero carbon fuels will eventually be less expensive than fossil).
2, Battery costs. Elon Musk said Tesla was ‘closing in’ on a battery cost of $100/kWh, expecting to achieve this figure by the end of 2018, provided metal prices don’t rise. That means that a mid-size car with 300 km range will have a battery costing about $5,000. Earlier this year BP said that this cost level would not be reached until about 2029. Separately, Musk offered an important new metric: he said that Tesla would offer a charging/driving ratio of 10 to 1. (100 minutes driving at typical speed requires 10 minutes at a charger). (Thanks to Gage Williams)
3, More on battery costs. As Musk hinted, the prices of metals are an increasingly important determinant of battery costs. Sources offer differing numbers but today’s EV batteries use approximately 0.9 kg of lithium (expressed as lithium carbonate) and 0.2 kg of cobalt per kWh of capacity. At today’s prices that is about $12 for lithium and $16 for cobalt. (One of the reasons for Tesla’s low battery prices is that it uses far less cobalt in its batteries than most other manufacturers). The price of cobalt has tripled in the past year, and lithium has increased by 50%, although both have fallen in the last weeks. Long term projections tend to see lithium prices falling sharply because of increased availability; there is no shortage of underlying supply. Cobalt will remain scarcer but battery suppliers are working to reduce their use of the metal, partly because of cost and partly because of concerns about Congo. My wild guess is that in the long run lithium ion batteries will need metal inputs costing perhaps $25 a kWh.
4, Chinese solar. Possibly worried about the growing costs of feed-in tariffs, the Chinese government abruptly reduced subsidies for solar PV installations and restricted additions of new capacity, both at large and small scale. Since China is responsible for about 50% of global installations of PV, this will affect the growth of world solar. Commentators suggested that Chinese installations will fall about 40% in 2018. Reduced local demand will mean that the prices of solar panels for export from China will probably decline, therefore increasing the rate of growth in other countries. But it is looking increasingly likely that total global PV installations will be lower in 2018 than 2017, the first ever interruption to growth. On a more positive note, Indian government asked for over 10 GW of tenders (10% of world PV installations in 2017) in May alone.
5, Liquid air storage. The UK’s Highview Power commissioned a new form of storage. Air is liquefied at times of electricity surplus. When power is needed, the liquid is allowed to heat up, turns back to gas and then drives a turbine as it expands. The owners say that the technology is robust, simple and uses conventional industrial components. However the round-trip efficiency is low (about 65%) and the process cannot be used for a rapid response to grid problems. Of course the new plant is a ‘first of a kind’ and therefore cannot be easily assessed. Nevertheless, per unit of storage capacity, the government subsidy alone for building the plant was about seven times Elon Musk’s projected 2019 battery costs ($100/kWh, see point 2).
6, Ammonia fuel cells. Israeli company GenCell energy unveiled a fuel cell that uses ammonia to make electricity. The product aims to provide power for remote telecoms towers but I think it may have a wider market. Ammonia can be manufactured renewably and, unlike hydrogen, can be easily transported and stored at remote locations. So it can be used to provide backup to PV or wind in communities with weak or non-existent grid access. GenCell quotes a high cost per kWh, but it will be cheaper than a diesel generator that fills the same function.
7, Direct Air Capture. Scientists have tended to see capture of CO2 from the air as impractical. How can it make thermodynamic sense to extract a gas which represents a tiny fraction of the constituents of air? A peer-reviewed paper from Canada’s Carbon Engineering undermines this objection. The start-up calculates that capture costs are as low as $100 a tonne, not the $500 to $1,000 that was usually assumed. The Swiss company Climeworks is Carbon Engineering’s main competitor at this very early stage. Both of these businesses have now produced similar estimates for the amount of energy needed to capture CO2, which dominates the eventual financial cost; like Climeworks, Carbon Engineering says this figure is less than 2 MWh per tonne of CO2. 2 MWh from solar PV in a very sunny place costs less than $60, helping to justify both companies’ figures. (One implication of the Carbon Engineering conclusions is that the world may never need a carbon tax of more than $100/tonne). More generally, the low numbers demonstrate the possibility of making synthetic fuels economically from hydrogen and captured CO2. David Keith, the Harvard professor behind Carbon Engineering, says that at scale a CO2 capture plant combined with an electrolyser will produce gasoline at around $1 a litre. I think this figure may be too pessimistic because it assumes quite high prices for renewable electricity. For comparison, crude oil trades today at about 60 cents a litre.
8, Indoor farming. GE and its UK partner publicised the start of construction of the largest indoor farm in Europe. A 5,000 sq metre farm will produce 420 tonnes of leafy vegetables per year, roughly 40 times the productivity of an open field. Water use is said to be 10% of a conventional farm. The UK farm is sited in an agricultural area but an indoor venture in Paris is set in the heart of the suburbs as an aid to urban renewal. This 1,000 sq metre farm, built over 8 stories, is expected to provide 16 tonnes of produce annually, or only about 20% of the areal productivity of the UK venture. The construction cost of €5m for the Paris farm means that by any conventional assessment the venture is financially deeply unattractive.
9, Floating wind. French pioneer Ideol announced that a second floating turbine was ready to be towed into position off Japan. As interest grows in floating turbines, Ideol’s unusual design is battling against several other manufacturers to become the standard for the industry. Korean companies are backing the Swedish Hexicon design, which puts two turbines onto a floating frame while in California a consortium is seeking commercialisation of what is known as the Stiesdal spar. Equinor (Statoil) is looking for new locations around the world for its market-leading Hywind design, including off western Scotland.
10, Domestic solar plus storage. German battery maker Sonnen announced a deal with a Arizona home building company in late 2017. All new homes will have PV and storage. The builder has now given more details and explained the financial logic. (A very interesting interview is here). In particular, the company explained that the storage capacity is engineered to ensure the house absolutely never takes power from the grid in the 3pm to 8pm period, the time of maximum electricity demand. The local utility has offered better rates as a consequence. Sonnen software controls the intake of power during the rest of the day, ensuring that the battery is fully charged prior to 3pm. Sonnen and the building company are working on a scheme for adding battery capacity to each house to also allow Sonnen to operate the estate of new homes as a virtual power plant.