Category: Electricity

Real costs beginning to emerge?

dchone December 12, 2017

There was great excitement coming from South Australia recently as the Tesla 100 MW generation capacity, 129 MWh storage battery commenced operation within the electricity grid. This is part of a much-needed upgrade to the grid such that it can better support the high level of renewable energy now available across the state. South Australia has been hit by a number of high profile blackouts over the past two years. While these were the result of various sets of unusual events unrelated to renewable energy deployment, the presence of a very high level of renewable energy had left the grid less robust, leading in turn to the blackouts.

The State Government has been under pressure to rectify the situation and the installation of a battery facility is one of the measures implemented, along with additional natural gas capacity. The addition of the battery also offers the opportunity to better understand the underlying cost of the renewable energy transition.

From the outset, the cost to consumers of renewable electricity generation has been hard to pin down. In all cases, solar PV and wind have been added incrementally to an existing grid, typically powered by some combination of coal, hydroelectricity, nuclear and natural gas. More recently, that incremental cost has fallen to very low levels, in some cases to just a few cents per kilowatt hour. These very low costs have been highly visible in the media, but do not represent the true cost for the system as a whole.

While very low marginal installation costs are great news for renewable energy deployment, the rapid increase in available capacity in some grids has played havoc with the existing power generation business model. When the renewable energy is available it reduces the dispatch of existing generation, thus cutting into the profitability, and possibly viability in extreme cases, of these operations. However, intermittent renewable energy cannot exist alone on the grid, so it is effectively undermining its own existence by driving existing generators away. This is a well-known issue and is being tackled in some jurisdictions with new business models; for example, the use of capacity payments to existing generators to ensure the viability of their facilities. This increases the overall cost of renewable electricity but doesn’t change the low marginal generation cost offered by additional renewable energy added to the grid.

In additional to capacity payments, the grid operator can provide further backup generation and energy storage, such as in South Australia. In the case of the latter, Tesla have built the 129 MWh storage facility, located adjacent to an existing 99 turbine, 315 MW wind farm. The Tesla battery is reported to have cost A$50 million. If it operated as a back-up to the windfarm itself, it would provide less than 30 minutes of storage, so this isn’t true backup for extended windless periods. Rather, the battery is there to address shorter term grid fluctuations and natural gas is added as a reliable back up for periods of low renewable generation. The need to keep the battery charged also reduces the output of the wind system for periods of time, however, that energy isn’t lost, just time shifted (apart from storage and transfer losses).

Exactly how the total cost of supply changes depends entirely on the situation for each individual grid, but that cost is greater than the marginal cost of renewable energy supply, even when expressed as a levelized cost of electricity (LCOE). This higher system cost for renewable electricity is how we should view this resource within a grid.

A solar transportation system?

dchone October 19, 2017

While Elon Musk is waxing lyrical about the Tesla Model 3, a house with solar roof tiles and batteries both in the house and in the car, an innovative group from Eindhoven in the Netherlands have combined all of this into a single offering and produced a solar powered family car that can also be used to supply energy to the grid.

The Stella Vie, claimed to be the most efficient family car ever built, recently featured in the World Solar Challenge, a biennial event which sees solar vehicles travel the 3000 km route from Darwin to Adelaide in Australia. The car competed in the Cruiser category. The 2017 event saw the third running of this class, which was introduced in 2013 when a four-seater ‘family car’ travel over 3000 km with an external energy input of just 64 kWh! To put this into context, a modern Tesla S (P100D) family car has a 100 kWh battery with a range of around 500 km, although in a very slightly modified Tesla S, a distance of over 1000 km has been achieved.

A report by The Guardian on the event, claimed that these vehicles represented ‘the future’. All of this begs the question as to whether solar powered cars are in our future?In fact, it is possible to buy a part solar powered car today. The new Toyota Prius plug-in hybrid has the option of a solar roof panel, although according to Toyota this adds just 5 km a day to its range. But to open this discussion further requires a deeper look at the numbers.

Jaguar solar powered concept vehicle (Source: Jaguar)

We could start by assuming that a future solar powered car doesn’t just have a single roof panel, but a surface made largely of a solar material, akin to the Tesla roof tiles on a house. It is conceivable that this extends to the windscreen glass as well. That means for a car such as the Tesla Model S, there is up to 10 m² of solar panelling. In the USA in June, solar insolation (i.e. the energy arriving from the sun) would be around 7 kWh/m2/day. If the solar material on the vehicle had a conversion efficiency of up to 40% (a leading-edge research result today), then 28 kWh of energy might be collected, but by December this would fall to as little as 8 kWh. These amounts are far in excess of the typical daily needs of the Stella Vie for family use (say 50 km/day, or ~1 kWh), but not so for the Tesla S, with heating, air-conditioning, media, various IT systems and heavier paneling for safety. In winter (50 km in a Tesla S equates to 10 kWh) there is an energy shortfall, although potential generation is in excess of typical daily needs in summer. The balance could be exported to the grid in the summer.

However, in central London, the vehicle would generate very little of its needs in winter (<2 kWh), but should still cover its own requirements in mid-summer (~18 kWh). On an annual basis, it would likely fall short on its needs (~10 kWh/day maximum generation vs. a similar daily requirement).

The numbers indicate that in some geographies, assuming efficiency improvements in both solar PV and the vehicles themselves, a family car that requires no net electrical energy on an annual basis is plausible, although considerable advances in material engineering to integrate solar PV into various surfaces would be required. In other geographies, the balance wouldn’t be as favourable, but the contribution to the annual energy requirement of the vehicle could be substantial.

But this isn’t the end of the story. For the vehicle to collect such an amount of energy it must be parked in the sunshine all day, or be on the road. It would also have to be kept relatively clean. This might be possible in towns or some (treeless) suburbs, but in larger cities with outdoor parking limitations and taller buildings, the energy collection potential could drop substantially. Nevertheless, there would be some contribution when on the road.

Given that Toyota have already started down this track with the Prius, it can’t be too long before others follow. Innovation in solar PV, materials technology and vehicle efficiency could see solar augmentation becoming widespread by 2030, with a global vehicle fleet potentially requiring little to no net energy by the early years of the second half of this century. While this may seem a long way off, even a high deployment scenario for electric vehicles takes until the mid 2050s to completely dislodge internal combustion engine vehicles from the market.

Other scenarios for vehicle development could change this balance. For example, a much smaller fleet of autonomous ride sharing vehicles would still require the same amount of total fleet energy, but with far fewer cars deployed, energy generation would likely be much lower. Nevertheless, the World Solar Challenge, like the Shell eco-Marathon where vehicle efficiency is tested to the limits, points to an interesting future for mobility.

A new era for aviation?

dchone October 9, 2017

The pressure to reduce carbon dioxide emissions and the prospect of a world running largely on renewable electricity has sent research and development teams in every sector back to their respective drawing boards to look at options that might exist for electrification. Perhaps the most challenging sector is aviation, where liquid hydrocarbon fuels are the only form of energy carrier available (mainly of fossil origin, but with some bio-origin fuels now appearing). The dependency on hydrocarbons is due to their high energy density and the challenge with fuel to weight ratio that planes have. However, fuel costs can represent up to 70% of total costs for an airline, so the business model tends to focus on efficiency as a primary consideration. Efficiency isn’t just about the plane itself, but about maximising passenger load, minimising extraneous weight, limiting taxiing and air traffic delays, using electricity for power at departure gates and optimising routes.

In the light of all the above, the idea of electrification in aviation is tantalizing, but there is little sight of this happening. At one end of the spectrum there is the prospect of single person electric drone taxis for short hops in cities, but after that there is nothing, until last week. EasyJet, in conjunction with the startup, Wright Electric, announced that they hoped to be flying a short-haul battery electric passenger plane within a decade.

The concept illustration looks impressive, but is this really feasible? Battery energy density is a key determinant and it is moving rapidly in the right direction. The energy density difference between the traditional Lead-Acid battery, still the standard for starting most cars and the best lithium based batteries is nearing a factor of 10, but lithium based batteries are still a long way from Jet A1 fuel as shown in the table below. The difference in energy density on a weight basis is around twenty times, in favour of Jet A1.

	Jet A1	Current Li-Ion Battery	Emerging Li-Metal batteries
Energy MJ/kilogram	42.8	~0.7	1.8
Energy MJ/litre	37.4	~2.0	4.3

Like an electric car, the efficiency of a battery electric aeroplane would be significantly higher than the combustion engine equivalent, although the starting point for a modern jet engine already exceeds that of vehicles. The chart below (IPCC Report on Aviation 1999, chart from 1991) shows that overall efficiency of jet aircraft falls in the range 20-40%, but significant improvements have been made since then. A modern Boeing 787 would show an overall efficiency approaching 50% on the same chart.

Even with near 100% efficiency for the battery electric aeroplane, the energy density of Jet A1 still gives that fuel a factor of ten advantage. As such, it will be distance that suffers, given there is a weight restriction for aeroplanes.

I am a regular traveler out of London City Airport and often see the Embraer 190 plane, which is similar in size to the easyJet concept photograph distributed with their announcement. But the Embraer 190 has a range of over 4,500 km, so one tenth of this gets near to the 335 mile range goal mentioned by easyJet, ideal for the flight I often take from London City to Rotterdam. So on paper, this would appear to work, but a plane with a range limit of a few hundred miles might significantly restrict the operational flexibility that airlines enjoy; for example, it couldn’t be swapped at short notice for a London City to Rome flight, should that be necessary.

Battery electric planes also bring with them a particular design change – apart from the obvious. Currently, planes land some 20% lighter than they take off, as they burn the fuel. With battery electric planes, they will land heavier than they take off, because the discharge of the battery means oxidation, meaning it gains mass. This will require very different landing gear.

Another facet of the EasyJet announcement is the desire to see these planes carrying passengers within 10 years. Given that the plane is concept only and doesn’t come from an existing family of similar planes, this may be ambitious. The 787 Dreamliner was announced in concept by Boeing in early 2003, finally receiving certification in late 2011. That’s nearly nine years for what is essentially a new version of an existing product, albeit with some significant changes such as the use of carbon fibre in the fuselage. But the 787 then had problems with its battery system for on-board electronics, leading to a temporary grounding and eventual regular flights from April 2013.

The 787 was not Boeing’s first attempt at a new aircraft following the 777 series. In the late 1990s it started development of the Sonic Cruiser, releasing a concept proposal in March 2001. With aviation business models changing rapidly at that time, Boeing abandoned this concept and instead moved to the 787, but this evolutionary process still consumed valuable design years. At least from one perspective, it could be argued that the 787 took over 13 years to go from concept to regular use.

The Wright Electric concept represents a revolutionary change in aircraft design and propulsion, so there is every chance that this may take longer than anticipated to get going. It will require extensive certification and testing by airlines, airports and the aviation authorities and may go through more than one design iteration, depending in part on the evolution of battery technology and the resultant changes in energy to weight and volume ratios. The story of the Mitsubishi Regional Jet is outlined here, and is a saga of changes and delays spanning 17 years. It is a conventional jet aircraft, but represents a first for Mitsubishi for a very long time.

A further ambitious aspect of this project is the notion that a start-up can take on the likes of Boeing and Airbus and find the necessary investors to back what is typically a multi-billion dollar investment in design, engineering, prototype development, manufacturing, testing and certification of a new aeroplane.

Behind all this is the pressing need for electrification across society, so this type of thinking and risk taking is essential. The question that remains though, is whether I will be able to ride in such a plane from London City Airport before 2030.

Chasing electrification

dchone August 31, 2017

One of the important changes that needs to take place in the global energy system as it heads towards much lower emissions is electrification. This is the increasing use of electricity as final energy (i.e. the energy we all use to deliver services) rather than fossil fuels, such as natural gas for cooking and gasoline for mobility. According to the IEA, electricity made up nearly 19% of final energy use in 2015, with the bulk of the 81% that isn’t electricity being oil products, natural gas, coal and biomass. The Shell scenario work on a net zero emissions world indicates that electricity should exceed 50% of final energy use.

Over the course of the last few decades, electrification of final energy has moved relatively slowly, at around 2 percentage points per decade (i.e. it was about 16.5% in 2005 and 14.4% in 1995). This rate of change is far below what is necessary to reach 50+% during the second half of the century – in fact, at the current rate it would take over one and half centuries to get above 50%. Therefore, the rate of electrification of the final energy system has to approximately triple over the coming few years for the Paris goals to be approached. At the same time, overall expansion of the energy system also has to be catered for, which might see a near doubling in final energy demand, even as electrification brings considerable efficiency gains.

Today, global electricity production stands at some 25,000 TWh per annum, representing ~19% of final energy demand. The trends described above indicate electricity production rising to at least 100,000 TWh per annum during the second half of the century, or the addition of ~1,400 TWh of generation per annum from now on. The 3.3 GW Hinkley Point nuclear power station being constructed in the UK operating at full capacity for the entire year would add about 29 TWh. The likely progression probably won’t be linear, so good progress would still require some 800-1100 TWh added each year in the near term. That’s still at least 30 Hinckley Point projects brought on line each year.

This new electricity production shouldn’t contribute additional emissions to the atmosphere, so many will look for it to come from wind and solar. Total global generation from wind and solar was around 1,300 TWh in 2016, but the added generation from 2015 to 2016 was 208 TWh (Source: BP Statistical Review of World Energy) against total added electricity generation of 600 TWh. Total added generation in recent years has average around 500 TWh, well short of the 800-1100 TWh mentioned above.

Additional solar and wind are not yet close to meeting additional generation needs, although both are rising quickly with additional generation more than doubling over the last six years. That would point to somewhere around 2030 when all new generation needs are being met by additional solar and wind being added to the grid in sufficient quantity for both demand and increasing electrification needs. It also means that emissions from electricity generation globally will only fall in the medium term to the extent that natural gas and nuclear can displace coal. Although coal use is now falling in some economies, it is also increasing rapidly in others as new generation capacity is required for development. Vietnam is one such economy, with several new facilities close to approval.

Electrification of the energy system is a critical driver for change, yet progress today is more mixed than many recognize. Although renewable penetration has been significant in recent years, it must make even more rapid progress in the next decade to bring about material change in the time frames that are being contemplated for net-zero emissions (with some expecting such an outcome by 2050 ). The first electricity grid appeared in New York in September 1882, 135 years ago. Although the technology has spread globally and appears ubiquitous, it still requires significant development and expansion. That will certainly happen, but the time-frame in the context of the Paris Agreement appears uncertain.

Scenarios are part of and ongoing process used in Shell for more than 40 years to challenge executives’ perspectives on the future business environment. They are based on plausible assumptions and quantification and are designed to stretch management thinking and even to consider events that may only be remotely possible.

Applying Pigouvian charges

dchone August 17, 2017

A recent article in the Guardian argues that fossil fuels receive about $5 trillion per year globally of unseen benefits, representing some 6.5% of global GDP. The journalist concludes that this must point to a dim future for this energy source. The discussion stems from a paper that has been recently published in the journal, World Development, but is originally a piece of work by two analysts who work for the IMF that surfaced prior to COP21 in 2015. The same authors are involved with the current article.

The new version of the paper classifies these benefits into two types,

‘‘pre-tax subsidies”— these arise when consumer prices paid by fuel users are below the opportunity costs of fuel supply (e.g., many oil producers in the Middle East and North Africa traditionally set domestic prices below international prices). This is the definition that leaders had in mind at the 2009 G20 Pittsburg meeting when they called for a phase out of energy subsidies (IEA, OPEC, OECD, & World Bank, 2010).
‘‘post-tax subsidies”— these arise when consumer prices are below the cost of supply when a ‘‘Pigouvian” charge ⁽¹⁾ is included to reflect environmental damages. Economic efficiency requires that the prices of goods and services reflect not only supply costs but also (i) (most importantly) environmental costs like global warming and deaths from air pollution and (ii) taxes applied to consumer goods in general.

A visit to the IEA website on energy subsidies shows that the value of pre-tax consumer price subsidy worldwide totaled $493 billion in 2013, falling to $322 billion by 2015 as oil prices fell globally. This is equivalent to ~$25 per tonne of oil equivalent, or $3.50 per barrel. By comparison, these amounted to $390 billion in 2009 (in 2014 dollars), the year the G20 and APEC commitments were made. The value of these estimates has fluctuated from year-to-year in line with reform efforts, the consumption level of the fuels in question, international prices for fossil fuels, exchange rates and general price inflation. IEA decomposition analysis reveals that, while movements in world prices typically have the greatest impact from year-to-year, policy interventions have played an important role as well. These subsidized prices are primarily focused on oil and electricity and in many cases, are a mechanism for distribution of benefits to very low income segments of the national population. For example, India subsidized oil, electricity and natural gas in 2015 for its consumers for an amount of nearly $20 billion, but is not a recognized oil producer.

However, the focus of the Guardian article is the lack of charges for externalities in relation to fossil fuel use. By applying a series of Pigouvian charges to fossil fuels, covering issues such as carbon dioxide emissions and air pollution, they argue that fuels are under-priced by some $5 trillion per annum. The additions made also cover issues related to fossil fuel use, but not directly caused by them. An example is road traffic congestion and safety which the article specifically mentions. These would also be externalities in a transport system powered by electricity. In total, these missing post-tax charges for coal amount to $2.5 trillion, oil is $1.5 trillion and natural gas about $400 billion. Pre-tax price subsidies for coal hardly exist, amounting to just over $1 billion per annum globally per the IEA.

Applying this methodology to fossil fuels also opens the debate for other goods and services. For example, many governments offer direct help to farmers and subsidise food prices. The production of rice and beef contributes some 6 billion tonnes of carbon dioxide equivalent to the atmosphere in the form of methane, which alone amounts to an externailty of $250 billion per annum or roughly $1.30 per kilo in the case of beef (vs. a US average ground beef price of $7 per kilo).

A robust and comprehensive application of Pigouvian pricing across the economy incorporating all externalities would likely touch every single product or service in use today, excluding any energy penalty related to fossil fuels. Environmental damage and health issues remain widespread in the world, despite great efforts to address them at every level of society. Many are simply a function of the vast scale on which manufacturing operates, which in turn results in some environmental degradation. In March 2014, the Guardian reported on the social and environmental costs associated with the production of rare earth metals, which have become critical in the manufacture of a multitude of electronic products today, including renewable energy systems. The article raised questions on cancer rates, which in turn links human mortality costs with these products.

In the case of fossil fuels, the simplest and most effective way of confronting this issue is to introduce a carbon price, ideally at a level that reflects the social costs of use. The World Development article uses a figure of around $40 per tonne of carbon dioxide. While this wouldn’t address every aspect of fossil fuel use, it would nevertheless go a long way towards addressing the concerns of the authors.

(1) This refers to the work of Arthur Cecil Pigou, a University of Cambridge economist who published The Economics of Welfare in 1920. In this book, Pigou introduced the concept of externality and the idea that external problems could be corrected by the imposition of a charge. By ‘externality,’ Pigou meant an indirect economic impact of an activity that happened outside the immediate system where the activity was underway. The externality concept remains central to modern welfare economics and is at the heart of environmental economics. In the case of climate change, the externality is the release of carbon dioxide into the atmosphere and the future social and economic impact caused by the consequent increase in the surface temperature of the planet. Externalities can be both positive and negative, but in the case of carbon dioxide emissions, it is considered negative. Pigou argued that the activities associated with a negative externality should be penalized to the extent of the impact, such that their real economic value can be assessed. This penalty is widely known as a Pigouvian Tax. Alcohol taxes are Pigouvian; so are taxes on cigarettes.

The battery that made headlines

dchone July 14, 2017

It is hard to imagine that something as mundane as a battery could make national headlines, but that is what happened last week in Australia. I was there for a family visit and as much as climate science gets debated in the media (see my previous post), it barely rates against the energy debate that has dominated the Australian headlines in recent months. The issue is the cost of electricity and the reliability of supply, both of which continue to be contentious subjects.

The cost of electricity has risen sharply in Australia over the last two years, but this has been coupled with supply problems that have led to blackouts in some parts of the country. This has been most visible in South Australia, which has closed all its coal fired power plants and invested heavily in renewable energy. The result is a wind / solar / natural gas power mix, backed up by an inter-connector with Victoria. For the most part this has been a workable solution, but when particular conditions coincide the result can mean blackouts or load shedding by some industrial customers. This usually involves periods of high load coinciding with low renewable energy availability at a time when some other part of the network is under stress, e.g. supply from the inter-connector. The problem is that this has happened enough times to become a major issue, leading to extensive media coverage, finger pointing and public outcry.

The reporting around this issue can be likened to the climate science debate I discussed in my last post – i.e. overly prone to hyperbole and lacking in basic facts. The solution that has been proposed for South Australia is the rapid construction of battery storage and into this foray stepped Elon Musk (CEO of Tesla). Some months ago, after power supply problems in South Australia hit the headlines yet again, he made the offer to build a major Lithium-Ion storage facility in 100 days, with no payment required if construction was delayed beyond that period. Not surprisingly this galvanized the government and led to a public tender for such a facility.

Last week the South Australia government announced that Tesla had won a tender to build a grid scale battery. The project will incorporate a 100MW peak output battery with 129 megawatt hours of storage alongside an existing windfarm, near Jamestown. Elon Musk flew into Adelaide for the announcement, which added to the fervour. What was interesting was the reaction in the media, ranging from support bordering on adulation to downright condemnation. Contrast the July 9^th Sun-Herald, where their social commentator Peter Fitzsimons noted;

Oh, how sweet it is. After all the haters, all the pile-ons, all the craven dinosaur politics which maintains that coal really does have a future, the SA government shimmies, shakes, steps left, steps right, bursts through into clear and announces its lithium battery deal.

. . . with political commentator Tim Blair in the Daily Telegraph on July 10^th, who starts a near full page article with the headlines;

Charge of the left brigade – People are falling over themselves to fawn over magic man Elon Musk’s battery absurdity but he is just the latest saviour to get the green light from eco worriers.

Neither are energy commentators of any note, but such is state of the energy transition debate in Australia that this doesn’t seem to matter. The controversy highlights the need for clear policy and thoughtful steps forward in implementing an energy transition, irrespective of the reasons driving such a transition, be they climate change, energy costs, local air quality or some combination of these and other needs.

In the case of South Australia, exuberance and some technology bias led to a rapid shift in the electricity system to a point where stability became a problem, which will now take some time to correct. The battery solution isn’t a full solution at all, but one of several measures that will be required to correct the imbalance that has been created. Alongside the Musk excitement, there was also the recent announcement that the government will build additional gas fired generation capacity at a cost of over A$300 million.

The South Australian electricity system operates at around 2-3 GW, with peaks and troughs depending on the time of day and year. Annual demand is some 14,400 GWh, or about 40,000 MWh per day. The initial battery capacity is 129 MWh. The gas capacity can add over 5,000 MWh per day if it operates continuously, or 13% of the demand. While the battery commanded all the headlines, it is clearly not a solution for extended periods of high demand or reduced supply, given that it can hold only 5 minutes of South Australian demand. However, it is an important step in the quest for a more balanced system that has very high levels (often >70%) of intermittent renewable energy. Further battery systems are likely, but a better balance between natural gas and renewable energy would appear to be the more achievable outcome in the short to medium term. It is also likely to be the more cost efficient outcome, given the ~A$100 million investment required (according to a local private source) for what will be the largest Lithium-Ion battery system in the world.

Drivers behind flattening CO2 emissions

dchone March 29, 2017

The International Energy Agency (IEA) recently reported that carbon dioxide emissions from energy use remained flat in 2016, the third year in a row. This is a noticeable departure from the 21^st century trend which has seen global carbon dioxide emissions rise by some 40% in just 14 years. The Guardian reported this story and added the by-line “International Energy Agency report puts halt in emissions from energy down to growth in renewable power”. But the story within the energy system has more facets than this (Data sourced from the BP Statistical Review of World Energy).

Although global growth hasn’t been outstanding in recent years, it has nevertheless chugged along at around 2.5-3%. Energy use has also increased, albeit at a lower rate of some 1% per annum. This is at the lower end of the expected range of energy vs. GDP, but it is probably too early to say that this represents a longer term shift in this relationship. However, this could be the case if efficiency improvements can outpace economic development or at least come close.

Renewable energy is growing rapidly, although this is mainly in the area of electricity generation. From 2014 to 2015 solar and wind generation increased globally by about 200 TWh, which was nearly equal to the overall growth in electricity generation for that year. As an aside, BP reported that the overall electricity growth rate in 2015 was down on 2014 (2.4%) and remained well below the 10-year trend (2.8%). This is slightly concerning as electrification of the energy system is a key requirement for long term emissions reduction. Electricity generation needs to be accelerating compared to overall energy demand growth.

Although the 2016 data isn’t available yet, BP reported that coal use declined globally in 2015 vs. 2014 by 1.8% and natural gas use increased. While most of this could be attributed to the USA and Canada, China also saw a notable coal decline along with growth in natural gas use. The global coal use reduction is equivalent to nearly 300 million tonnes CO2, or about 0.8% of global emissions. Any replacement with natural gas would result in about half the emissions. This is very noticeable in the USA where coal use fell in 2015 by 13%, natural gas use grew by 3% (but against a larger absolute use), oil demand increased by 3%, but emissions declined by 2.6%.

Coal use is declining for a number of reasons;

The surge in natural gas production in the USA in particular, triggering the closure of older coal fired power stations that cannot meet new environmental regulations.
Air quality concerns in China, leading to a shutdown of coal fired industry and power generation around the major cities.
Some mothballing or closure of overcapacity in metallurgical industries in China.
The impact of a modest carbon price in a number of jurisdictions and some government imposed moratoriums on new coal generation construction (e.g. Canada).

However, coal use continues to increase sharply in a number of developing countries such as Vietnam, the Philippines, Malaysia, India, Colombia and Indonesia. Current expectations are that this will continue.

Oil use continues to increase, with BP reporting a global rise from 2014 to 2015 of 2%.

The final story is therefore one of several parts and it would appear that this trend has continued into 2016 although further data will be required for verification;

Global growth is modest, but energy use increases are trending at the lower part of the expected rise for this level of economic growth.
Coal use is declining, with natural gas filling much of the gap but at lower emissions.
Renewables are growing quickly, covering most of the increase in electricity generation, but not quite all.
Oil demand continues to increase, with its growing emissions being offset by the reduction in coal use.

The end result is that flattening in global emissions that has been seen for three years now.

The cobalt rush?

dchone March 6, 2017

It was interesting to see the FT report recently that there may be a cobalt crunch looming, with hedge funds actually stockpiling physical cobalt. The FT reported that half a dozen funds have purchased and stored an estimated 6,000 tonnes of cobalt, worth as much as $280m. This is equivalent to 5 per cent of annual global production of the metal.

I talked about cobalt in a recent post and noted that the current Tesla S battery contains some 7 kgs of Cobalt; so the stockpile reported by the FT is sufficient for 860,000 cars. This is equivalent to ten times the Tesla 2016 requirement for the 80 thousand electric vehicles (EV) they manufactured. In 2016 total global sales of EVs neared 800,000, although not all of these would use cobalt to the extent that a Tesla S does.

Going forward, the EV outlook appears strong, with the IEA Global EV Outlook 2016 showing a “Paris Declaration” (Figure 3) EV stock build of some 40 million cars globally over the coming eight years. If each of these vehicles required 7 kgs of cobalt, then total additional demand for cobalt between now and 2025 would be 280,000 tonnes. This compares with global production of 123,000 tonnes per annum, i.e. it represents more than two years of global cobalt production. The website mining.com reported in October last year that the Democratic Republic of the Congo has a healthy pipeline of new cobalt projects and could see production rise by nearly 5% per annum in the coming years. If this continued through to 2025 then about half the shortfall would be covered.

Cobalt appears to be a critical component of the current generation of batteries. While there are many electro-chemistry formulations for rechargeable batteries, the use of cobalt in the cathode results in high energy density, important for vehicle range. But alternative chemistries offer other benefits, for example Lithium Iron Phosphate batteries have much better power output. Nevertheless, cobalt seems to feature in many of the battery chemistry formulations now being used for EVs.

Cobalt is primarily mined as a by-product of nickel and copper production, which is good news in that there will likely be significant additional demand for these metals as EV production ramps up. The same Tesla S battery discussed above has about 35 kg of nickel and the electric motor itself will have copper in the coil windings. Nearly half of global copper production is for electric motors, although alternatives may appear in the form of exotic material, e.g. carbon nanotubes.

Finally, there is a human rights issue associated with cobalt. About half the global production comes from the Democratic Republic of the Congo, where concerns have been raised regarding labour practices in the cobalt industry. Sky News reported on this recently but only mentioned the link with smart-phone batteries.

In recent months the cobalt price has doubled (Source: infomine.com), although it is clear that there is considerable long term volatility in this commodity, partly related to the fact that it is mined as a by-product of another process, so matching supply and demand can be problematic.

Materials in a transition

dchone December 13, 2016

In thinking about the energy transition, it is easy to look at the status quo and compare it with a clean energy future of renewables, electric vehicles, bio-polymers and recycling then naturally opt for that future. After all, that future looks very attractive. What is often missing in this thought process is the required change in the global stock of materials to get there.

A good example of this comes from looking at the electric vehicle (EV). There are about 2 million globally or 0.2% of the passenger car fleet, but we might imagine a world in just a few decades where all the cars are electric. Some months ago I looked at what a highly accelerated EV transition might look like. It meets the 2020 goal of the Electric Vehicle Initiative of the Clean Energy Ministerial and is compatible with the Paris Agreement in terms of a 1.5-1.8°C goal (i.e. well-below 2°C with a stretch to 1.5°C). The outcome has internal combustion engine (ICE) vehicles largely departing the scene by 2060 and peak passenger vehicle stock of around 1.6 billion, compared with about 1 billion in 2016. This is a faster transition than many other outlooks, but it is a normative scenario designed to show the rate of change required for the Paris outcome to be realised.

Populating the world with 1.6 billion EVs requires building that many batteries and producing the materials that those batteries require. Although we can visualise a world of near 100% recycling of the battery components, the benefits of recycling don’t come until much later, as in a fast growth scenario the number being recycled after 15 years use is far lower than the number being produced. Even in 2060 in my rapid EV scenario, scrappage of EV vehicles still lags EV production in 2060.

The current Tesla Model S has a Nickel-Cobalt-Aluminium Lithium Ion battery. The cathode of the battery consists of about 35 kgs Nickel and 7 kgs Cobalt. While there are many different battery chemistries available, each offering different properties in terms of energy density, charging rate, hysteresis etc., all the chemistries depend on particular combinations of metals.

In a world in which the current Tesla chemistry dominated, the shift to a 100% EV fleet would require an on-the-road stock build of some 50 million tonnes of Nickel and 10 million tonnes of cobalt. This assumes an eventual global fleet of some 1.6 billion cars, as per my EV scenario. This stock is never recovered unless battery chemistry changes or the EV car population falls.

Current global production of Nickel is around 2 million tonnes per annum, with about 3% of that used for batteries. Nearly 70% of Nickel is used in the stainless-steel industry. Global cobalt production is around 110,000 tons per annum, with nearly two thirds of this coming from the Democratic Republic of the Congo. The remainder comes from about ten other countries.

Given the above, such a stock build would require 25 years of global Nickel production and 91 years of Cobalt production – assuming 100% of production is directed to the new EV battery industry. An accelerated EV scenario requires this level of stock build in under 35 years, which either means a rapid escalation of production in these metals or many different battery chemistries, but probably both. Competition will also come from grid batteries, home batteries such as the Tesla Powerwall and many other new battery applications, although these may also use alternative chemistries.

The initial proposition of the Tesla chemistry dominating isn’t simple conjecture either. As I reported in my blog from COP22 in Marrakech, Professor Jeff Sachs from the Earth Institute at Columbia University made the strong claim that there would be no further production of internal combustion engine vehicles after 2030. Scaling up battery production so rapidly would likely depend on an existing chemistry; there simply wouldn’t be time to wait for new chemistries to be researched, developed and perfected for mass production.

A potential energy transition outcome is one of significantly increased production of certain materials, diversity in battery chemistry, a slower than desired uptake in EVs and perhaps a much smaller EV fleet than anticipated thanks to autonomous driving and vehicle sharing. Nevertheless, some simple calculations quickly show that the transition is likely to be a complex one, with an end result possibly far from the expected.

Baby steps through Marrakech

dchone November 20, 2016

COP22 has come and gone and despite a surprise US election result in its early days which reverberated throughout the temporary site in Marrakech that was built for the meeting, progress was made in starting to turn the Paris Agreement into an operational treaty. This was of course helped by the early entry into force of the Agreement on November 4^th. That event also meant that COP22 became the first meeting of the Parties to the Paris Agreement, or CMA.1.

The COP had a clear division into two parts. The first seven working days were spent agreeing on the steps to take to reach a conclusion on the many different aspects of the Paris Agreement that require further detail, rules, modalities and procedures. This effectively sets the work plan for the discussions over the next two years to COP24 which will see two important aspects of the Agreement come into play;

The IPCC will present its findings on a 1.5°C goal in accordance with paragraph 21 of the accompanying decision text.
As per paragraph 20 of the decision text, a facilitative dialogue among the Parties will take place to take stock of the collective efforts in relation to progress towards the long-term goal.

Of particular interest to me was the discussion on Article 6 of the Agreement, which contains the potential foundation elements for a globally traded carbon market. There were also a number of side events and background discussions held over the first few days to help observers, primarily from the private sector, input their thinking into that process. The Parties agreed a process to share further views over the coming months, including a new round of more focused submissions and a round-table discussion at the inter-sessional meeting in Bonn next May. But the Article 6 discussions that were held and which observers were permitted to attend seemed to be held in the abstract, without significant reference to carbon market development and the wider adoption of carbon pricing policies at national level. For many of the Parties carbon pricing remains contentious, leaving others to walk on egg-shells as the Article is discussed.

The remainder of the COP involved the arrival of various Ministers and Heads of State, in what was called by one delegate more of a celebration of the Paris Agreement than adoption of measures to implement it. CMA.1 opened, but instead of closing as would normally happen at the end of a COP, it was suspended. The Paris Agreement requires some thirty work items to be concluded at the first meeting (CMA.1) following entry into force, but the unexpected early entry into force has made such a task impossible. Hence the suspension. This won’t go down as a memorable COP in terms of real progress, but it has effectively served to launch the process to operationalise the Paris Agreement.

Any COP, and this was no exception, is host to numerous side events, side conferences and functions to allow all the attendees to share views. At the Paris COP last year, carbon pricing was a particularly high profile subject, led by the World Bank and various other institutions. The Paris COP served as the launch platform for the Carbon Pricing Leadership Coalition (CPLC). While carbon pricing was discussed on the sides of this COP and the World Bank CPLC event was standing room only, low carbon technology was the more pervasive theme.

A Low Emissions Solutions Conference was held within the COP itself, with an interesting speech by Jeff Sachs of Columbia University as part of the opening. Professor Sachs made the bold statement that no more internal combustion engine (ICE) vehicles would be sold after 2030; this assertion was based on the pace of change he sees in the electric vehicle (EV) market. He asked the audience to hold him to his statement. I looked at a highly accelerated EV transition in a post earlier this year and even in such an extreme calculation it wasn’t until 2030 that the crossover between ICE and EV production occurred (i.e. 50/50 sales in 2030 rather than 100/0 as forecast by Sachs). This then led to a possible crossover in vehicle stock (i.e. more EV than ICE on the road) around 2040. The EV will require a range of new supply chains to be developed, such as for the specialty metals used in battery formulation (e.g. Nickel, Cobalt). Production on such a scale could require global production of some metals doubling in a short space of time.

The Moroccans did a splendid job hosting the event and should certainly be congratulated. Transport around Marrakech was excellent, to the extent that a free Uber service was available for COP participants. Next year the process reconvenes in Bonn, but with Fiji holding the COP Presidency.