10/14/2015

Not Going Anywhere


My take on why Tesla Motors is not going anywhere medium / long term and thus on why its current market capitalization is unsustainable.

  • Designing / manufacturing an electric vehicle is not that difficult. Thus, the barriers to entry from current high volume manufacturers are not high. Actually many are already joining the fray.
  • What is difficult respecting electric vehicles is to sell them above cost. Currently governments all over the place are subsidizing their purchase but this is an unsustainable policy and thus won't last forever.
  • High volume vehicle manufacturers can subsidize losses on their EV line with the profits from the internal combustion engine vehicles. "Pure" EV players obviously cannot. Once government subsidies are removed they will have a difficult time.
  • If Tesla tries to move down market to produce cheaper, higher volume cars, it would be eaten alive by the high volume car companies that enjoy substantial economies of scale.
  • So, essentially, the only option for Tesla is to remain a type of Ferrari for EVs. However, let's underline that Ferrari is not an independent company anymore: it is mostly owned by FIAT.
  • Bringing a new car to market is very expensive. Being a low volume producer, Tesla would essentially have to maintain a "perfect" batting average over the long run. This is hardly a low risk strategy. 
  • Once the novelty of EVs wears off, people will be more critical of the whole category and make more rational decisions. 
Based on the above, I predict that in 12 years or so Tesla either won't be an independent company or, if it remains independent, its market capitalization will be less than half what it is today.

For the record, its market capitalization today is $28.2 billion dollars. 

If my prediction turns out to be wrong, I'll donate $100 to @FeedTheChildren

Feel free to add to the conversation on Twitter.




9/04/2015

Going Solar


Some people insist that solar PV has achieved "grid parity" but to claim this they obviously have to consider grid connected PV.

The real cost of solar PV is masked when grid connected. In order to better understand the real cost of solar PV, let's make a simplified exercise here.

What would be needed to go off grid? The following:

  • Obviously, the solar PV panels.
  • Storage batteries
  • A gasoline electric generator (unless you plan to store heroic amounts of electricity, you would need the backup generator).
We'll consider the following parameters in our installation (feel free to substitute your own numbers):

  • Annual solar capacity factor: 18%.
  • Cost of the PV installation (including inverters, installation, etc.): $3 per Watt.
  • We'll use Tesla storage batteries (the 7kW version) at a cost of $6,000 including installation.
  • Solar panel useful life: 20 years.
  • Batteries useful life: 10 years.
  • Annual electricity usage: 8,400 kWh.
So, this house would consume the following electrical energy in 20 years: 20 x 8,400 = 168,000 kWh.

The average electricity consumption is: 8,400 kWh / 354 / 24 = 959 W.

To supply (on average) that amount of power we need the following PV capacity: 0,959 kW / 0.18 C.F. = 5.3 kW of solar panels. Let's round this off to 6 kW to be on the safe side. 

To minimize cost, we'll consider storing only 3 days of electricity, That would be: 8,400 kWh / 365 x 3 = 69 kW. Let's round this off to 70 kW.

We would then need ten 7 kW Tesla batteries at a cost of $6,000 each: 10 x 6,000 = $60,000.

Finally, we'll need a gasoline backup generator at a cost of $1,000.

If we use it 10% of the time, we should be consuming ~$300 of gasoline per year.

So, the total cost to produce 168,000 kWh (in 20 years) would be:
Solar Panels: $18,000
Tesla batteries: $60,000 x 2 = $120,000 (considering the batteries last 10 years).
Backup generator: $1,000
Gasoline: $300 x 20 = $6,000

Total: $145,000

If we divide the above by the total kWh generated in 20 years, we get the cost per kWh:
$145,000 / 168,000 kWh = $0.86 / kWh.

Currently, the average cost of the residential kWh in the US is $0.13, thus the solar kWh as calculated here is 6.6 times more expensive.

Sure, the assumptions above can be modified and the costs will vary, still, once the total costs of solar PV are included it is very doubtful that this technology has reached "grid parity" or that it will achieve it any time soon. 

Feel free to double check the numbers above. Thank you.

References:

Average cost of residential kWh in the US:
http://www.eia.gov/electricity/monthly/epm_table_grapher.cfm?t=epmt_5_6_a

Cost of Tesla battery:
http://www.cnbc.com/2015/05/07/teslas-new-bet-a-home-battery-to-slash-energy-costs.html






9/03/2015

It Doesn't Work That Way

Note: this article is a team effort between Susan Chapelle and myself.
I am sometimes too harsh, Susan is more diplomatic. We hope our collaboration will continue in the future and be fruitful.
Thank you, Susan!




There is a misconception that in order to solve a problem, the most important step is "finding a quick solution." In our current political climate, this seems most evident with global climate change.

For example, in this subject people may present any or several of the following "solutions:"

  • Implement heavy carbon taxes.
  • Subsidize renewables.
  • Ban Arctic drilling.
  • Aggressively ramp up nuclear power plant construction.
  • Offer generous tax incentives in the purchase of EVs.
  • Divest from fossil fuels

At times, these approaches do not work as intended, and may even be counterproductive. 

Why?

The world is infinitely more complex than a bunch of bureaucrats working on spreadsheets in a government office, and the climate is infinitely more complex than can be resolved by a single financial institution. 

Historically, when a problem is declared unsolvable, often there comes an entrepreneur and proves them wrong.  





Yes, Henry Ford saved the cities from being drowned in manure.
Fracking is helping the USA reduce its reliance on coal.

Who will "fix" Global Climate?

The answer might lie in a variety of not yet available solutions, but in the end it may be a bunch of entrepreneurs that find innovative ways to resolve an extremely complex issue.

The "manure" conferences achieved nothing aside from producing even more manure.

We wonder, is is time to discontinue climate conferences for good?

Is there a better way to examine global energy use?

Feel free to add to the conversation on Twitter.










8/27/2015

The Real War


The real war is not between renewables and fossil fuels, no, the real war is between renewables and nuclear.

This is somewhat ironic, because nuclear is one of the lowest CO2 emitting energies we have and so, in theory, renewable promoters should be fully on board with nuclear, but this is obviously not the case.

The reasons are very simple: 

1. Renewables need pairing fossil fuel power plants since solar and wind energy are intermittent and unreliable.
2. Even though, in theory, nuclear could be paired with renewables, it would make no sense whatsoever. Nuclear is better suited to produce 24/7 and besides adding renewables to a nuclear grid would increase CO2 emissions so it would be a lose-lose proposition (more expensive and higher emissions).

On the other hand, nuclear doesn't need renewables at all, what is more, they siphon funds that could have been better spent in additional nuclear capacity (if the objective is to reduce the CO2 intensity of a grid).

Thus, it is not surprising at all that renewable promoters spend inordinate amounts of effort attacking nuclear.

At the same time, it is not surprising either that nuclear promoters tend to attack renewables. 

Yes, whether we like it or not, renewables and nuclear are "natural" enemies. Appeasement will not work. This war will only get worse as the penetration of both increases in the energy marketplace.

The result of this war is, and will continue to be, a more gradual replacement of fossil fuels vs. the scenario in which renewables are dumped and nuclear gets most of the alternative energy investment.

The message this war sends is that humanity is not really in a hurry to reduce CO2 emissions. As always, acts speak louder than words.



Feel free to add to the conversation in Twitter.









8/26/2015

The Air Conditioned Office


As long as we have persons concocting "solutions" to world problems from the comfort of their air conditioned offices we will continue to see completely impractical or even absurd proposals.

My request to them is: come to the real world! Get your hands dirty. Speak with the people that are desperately poor. Ask persons all over which are their real priorities. Try to understand economics and get a modicum of knowledge respecting engineering.

If these reality insulated persons came to the real world, they would realize that climate change is hardly a priority for anybody.

Right. Their priorities are feeding, and educating their families. Increasing their standard of living. And yes, maybe even be better prepared for violent weather.

How do you achieve all of the above? By, among other things, having access to abundant, reliable, affordable energy.

Today, for the most part, energy with the above mentioned characteristics are mainly fossil fuels. Yes, eventually other energies will compete and grab a significant part of the market but that process may take decades, many decades.

At this stage no energy can be removed from the table, least of all coal. Today coal is the #1 source of electricity worldwide and the EIA projections maintain it in the top position at least through 2040.



Is there something worse than coal? Yes, absolutely. Worse than coal is bio-mass or no energy at all.

So, if coal is the best option today for India or other countries, let it be.









8/21/2015

Team of Rivals


Why are many renewable energy promoters more anti-nuclear than anti-fossil fuels when in reality nuclear is one of the lowest CO2 emitting technologies we have?

Good question.

The reason is that renewables need a pairing fossil fueled power plant since on an annual basis, they produce only 10 to 20% (solar PV) or around 25% (wind) on average of their plate capacity.

The marriage made in heaven is that of renewables with pairing natural gas power plants. The natural gas plants can be easily modulated and thus are perfect for compensating for the fluctuating / unreliable output of renewables.

If a country commits to renewables what they are actually doing is locking in fossil fuel generating capacity for the long haul. Renewables do not reduce the need for fossil fuel installed capacity as at any particular moment their output will be zero.

Here a renewable promoter clearly states that wind and solar plants are really natural gas plants:

https://www.youtube.com/watch?v=qcm1gmPL50s

And what about nuclear?

Nuclear can stand on its own. It needs no pairing fossil fuel power plant and pairing renewables with nuclear wouldn't make any sense whatsoever (actually, CO2 emissions would rise if renewables were paired with nuclear power plants). Once you have the nuclear power plant, the most cost effective way to run it is 24/7/365. Sure, every so many months part of the nuclear fuel needs to be replaced, but this is scheduled for the most convenient times of the year. 

So, that is the reason renewable promoters hate nuclear. Once you consider the system nuclear is the truly low CO2 way of generating electricity and nuclear does not need renewables at all. On the other hand renewables not only need fossil fuels, they are actually "gas plants."

Feel free to add to the conversation in Twitter. Thank you.






7/30/2015

On Why AGW is an Endless Battle


These are some of the main reasons why the AGW debate is endless:

1. CO2 is indispensable for life. We'll all die of starvation and cold without a sufficient amount of it in the atmosphere. I don't think there is a single reasonable person that questions this. So far, so good.



2. Yes, it is indispensable but, how much is too much? Here the arguments begin. Some want to return to the "primeval" 280 ppm CO2 concentration. Others arbitrarily state that the target should be 350. At the other extreme, we have people comfortable with 1,500 ppm. Since we have already exceeded 400 ppm and our global emissions are not being curtailed, the 350 ppm seems like an impossible objective. Should a more achievable objective such as 550 ppm be established and focus on trying to adapt to that world (that is almost certainly coming)? Would a 550 ppm world be worse in every sense or would it also have positive consequences? The latter is probably the right answer.



3. We cannot today replace fossil fuels wholesale. Sorry, but this is a fact. Yes, in theory nuclear could do it, but it is not doing it. Yes, China is going crazy with nuclear but they are also going crazy with fossil fuels. Yes, conceivably in 100 to 150 years nuclear (fission and / or fusion) could be our number one energy source but that is still many decades in the future. So today we have only one option: fossil fuels. Let's get over it. 


If accepting the "settled" science means agreeing that CO2 is a GHG and thus that in theory higher concentrations of it in the atmosphere will tend to increase the average temperature of the Earth, then, many, maybe even most persons, are on board.

However if accepting the "settled" science means artificially making fossil fuels more expensive or scarce without first having a massive replacement for them (that, I repeat, we do not have), many will fight back with full determination. They will be fighting for their lives and the lives of even the alarmists themselves. 

Conclusion: independent of the effects of increased CO2 concentrations in the atmosphere, fossil fuels will continue to dominate the energy markets for many decades to come. The alternative would be far worse: widespread poverty, hunger, violence, early deaths, and the destruction of most of our civilization. 




7/23/2015

550.org



We are launching an alternate organization to 350.org because we believe that just wishing for something to happen (in other words for the CO2 concentration in the atmosphere to go back to 350 ppm) is absurd in the light that we break a new CO2 emissions record every year.

So, it makes no sense to invest time, effort and money in pursuing an impossible objective. 

Let's state here in what we firmly believe: nobody alive today will ever see again 350 ppm.

So, if not 350, where are we headed? 

We are "easily" headed for 550 ppm, thus the name of our non-profit.


Before we proceed further, let us state why we believe our non-profit will be more attractive than 350.org:

  1. We will not, ever, under any circumstances ask for donations. Hell, we won't even accept them even if somebody volunteers some money.
  2. We won't be dogmatic. We won't believe blindly in models, organizations (e.g. IPCC) or the Pope. We will strive to actually listen to reality.
  3. If 550 ppm is going to have consequences, we'll focus on minimizing the negative impacts and taking advantage of the positive ones.
  4. We won't promote any "feel good" actions that are actually irrelevant. So, you can stay at home: no need to pack yourself in diesel buses and march against something. 
  5. We are against carbon taxes (at the end of the day, C taxes are just taxes so thanks, but no thanks).
  6. We support the discontinuation of subsidies for all energy sources, starting with renewables. 
  7. We believe nuclear energy is safe, dense, reliable, scaleable and affordable.
  8. We do not believe that reducing the concentration of CO2 in the atmosphere is THE priority of humanity (actually, it is not). 
Now, although we don't accept donations, we do accept $100 USD bets.

If the CO2 concentration does (miraculously) drop to 350, each member of 550.org will contribute $100 USD to: www.feedthechildren.org


If you bet against 550 and we do reach 550 ppm, then you should donate $100 USD to Feed the Children.

Deal?

Our objective is to educate the world not only respecting climate science, but more importantly, on engineering reality. The world cannot afford to go the way of the Energiewende. We want to be the voice of reason in the climate / energy discourse. 

We are open for suggestions and observations. Nothing in 550.org is, or will ever be, written in stone.

Please feel free to add to the conversation in Twitter.

Thank you!






7/21/2015

Natural Gas Revolution


Today, in the energy discourse it is very difficult to find relatively unbiased opinions. Most people seem to be lobbying for one cause, or the opposite one, or for an ideology.

When somebody tells you that something is all good, or all bad, immediately distrust them. They are not being truthful. 

Thus, this book by Robert. W. Kolb is like a breath of fresh air because it treats fracking as what it really is: a way of extracting natural gas that creates all sorts of benefits but also causes environmental problems.

However, and at least for me, the most important insight from this book is that the "easy" success of shale gas in the USA will not be massively replicated soon elsewhere.

The USA has several key characteristics that have allowed this fracking revolution. Other countries lack some or even most of them.

For example, apparently the shale gas reserves of China are even greater than those of the USA, however as of today their shale production is close to zero.


Why is China so far behind in exploiting shale gas?

Fracking requires loads of water, gas pipelines, relatively sparse population at the drilling sites, a good highway network (to move the drilling equipment back and forth), technology, know-how, capital, etc.

The USA has ALL of these. China and many other countries do not.

Thus the shale gas revolution will run decades behind the USA elsewhere. Actually the barriers in other countries are so high that shale gas production might never be profitable there. 






7/13/2015

Baseload Solar with Natural Gas


Several weeks ago we wrote an article underlining what would be required to install a one GWe solar baseload power plant using storage batteries to achieve a reliable output (from an unreliable solar input).

http://daysgt.blogspot.mx/2015/05/baseload-solar.html

The conclusion was that the approach was too expensive and not environmentally friendly.

Today, we'll analyze another option: make solar PV output reliable by pairing it with a natural gas power plant.

Again, there will be some simplifications here, but bear with us.



The objective is to deliver 1 GWe of reliable electricity, thus we'll install a 1 GWe natural gas power plant plus 1 GWe of solar PV.

Let's consider the annual solar capacity factor at the selected location is 20%.

The natural gas plant will be dispatchable to be able to produce 100% of the required power at any particular moment, zero when solar PV is at peak production and all the intermediate values throughout other particular moments during the year.***

The combined solar / natural gas power plant will produce this amount of energy annually:

     1 GWe x 24 hrs. x 365 days = 8,760 GWh.

Of the above, solar PV (at 20% annual capacity factor) will produce: 8,760 x 0.20 = 1,752 GWh.

And the nat gas plant will then produce the rest: 8,760 - 1752 = 7,008 GWh.

Thus, the theoretical emissions of the system per kWh would be:*

     0.20 x 48 grams/kWh + 0.80 x 490 grams/kWh = 402 grams/kWh.**

Yes, 402 grams are lower (vs. an unpaired nat gas plant) but not low.

If we consider the installed cost of solar PV at $2 USD per peak watt, the 1GWe installation above would cost 2 billion dollars. Would this money be well spent to achieve a reduction of 88 grams per kWh?

As a reference, just consider that nuclear, without any pairing with solar PV, produces electricity at a carbon intensity of only 12 grams per kWh.

If nuclear replaces coal, for instance, the CO2 emission reductions per kWh should be around 808 grams.

Feel free to add to the conversation in Twitter. 





* https://en.wikipedia.org/wiki/Life-cycle_greenhouse-gas_emissions_of_energy_sources

** However, in real life the natural gas plant will have to be idled, stopped, restarted, etc., so the combined emissions of the system will be above 402 grams per kWh.

*** To simplify, we are considering the availability of the natural gas power plant to be 100%.





6/20/2015

Laudato Si


The talk of the town these past few days has been Pope Francis' encyclical letter Laudato Si'.

So let's start by asking what would happen if we massively followed one of its key recommendations.

"Replace consumption with sacrifice." 

Let's leave aside the sacrifice part for a moment but, imagine if say, people heeded this message and world automobile production dropped by 50%. We would have in our hands the mother of all layoffs. 

The reduction in auto production would have a cascading effect all through the network of suppliers, dealers, independent mechanics, government revenue, what have you.

Almost certainly the weaker automobile companies would go bankrupt. All luxury brands would be history (remember, replace consumption with sacrifice). This would in itself generate another wave of bankruptcies among suppliers, dealers, etc. 



Think also about the textile industry. If people replaced consumption... we would use our clothing until it wore off, not to show off and thus millions of people would lose their jobs in third world countries. 

In consumption think of many other things that would be curtailed: travel, electronics, entertainment, housing, etc.

Add all of this up and we'll have a catastrophic economic depression in which a substantial percentage of the global population would lose their jobs and this would create a snowball that would continue to eliminate jobs throughout the world. 

Yes, a substantial reduction in CO2 emissions would by then be achieved, but it would be a Pyrrhic victory. 


So, bottom line, it is not as easy as it may seem at first sight to reduce our consumption. It would be equivalent to reducing the speed of an airplane in the middle of the Atlantic. It would crash and burn, killing all on board.

"The road to hell is paved with good intentions."






6/13/2015

Technical Feasibility


Many, maybe even most of the alternatives to fossil fuels that have been or are now being proposed are for the most part technically feasible.

  • Is hydrogen as a fuel feasible? Yes.
  • Are electric vehicles feasible? Absolutely. You can run now to the dealer and buy a LEAF or a Tesla.
  • Could we generate, say, 30% of our electricity with solar and wind? Don't even doubt it.
  • Will fusion power become a reality? You can take that to the bank.
  • What about tidal power? Yes, it works, in France, Canada and elsewhere.
  • Compressed air cars? Also, fully feasible and the "battery," in other words the air tank, can be recharged forever.
  • Geothermal? Just ask Iceland. 
So, if we have all these feasible and wonderful alternatives to fossil fuels, how come they barely make a dent in the global energy market?

Ah, the reason is that to compete and win technical feasibility is not enough. To displace fossil fuels the alternatives need to be cheaper. If, for example, the kWh of electricity (in the USA) can be produced for 6 cents from natural gas, THAT is the technology to beat. If a company brings something to market that can produce that same electricity for, say, 10 cents, then it is almost certainly going to fail. 

The same with electric vehicles. For them to truly compete, their purchase price would need to be the same or lower than a gasoline or diesel car and, more important, their cost per kilometer driven (including the battery replacement cost) should be the same or lower than that of a conventional automobile. Even if both these requisites were met, the EV is still not as convenient as an internal combustion vehicle. 

Alternative energy reporting is, for the most part, deceiving. For example, renewable lobbyists tend to report "installed capacity" rather than actual energy production. 

If we show actual energy production we can see fossil fuels almost completely dominate the market and this is not due to cute political tactics but because they are (relatively) cheap, abundant, convenient, etc.