November’s already behind us, with a lot of goings-on in the energy-related space. Not surprisingly, carbon continues to raise its ugly head. As more facts and data flood in over the years to come, the picture will become even more clear than it is today. Atmospheric science will trump ideology, with the result that the physical damage will mount, and huge fortunes will be incinerated, while other fortunes will be created. It’s a bet one simply does not want oneself or one’s legacy to be on the wrong side of.
Uh oh, the climate situation is going to require more of a commitment than previously thought
The UN’s recently releases Emissions Gap Report suggests that the overall picture with respect to climate change is pretty bad, and that in order to limit warming to 1.5 degrees C, we will have to slash emissions over 7% annually over the next decade for a total net reduction of 55% below 2018. We know that isn’t going to happen, since this is the largest collective action problem humanity has faced, and we don’t tend to act collectively until situations get pretty dire.
China says ‘give me more’
A woman walks up a flight of stairs with two decommissioned smoke stacks towering above her in ... [+]
For example, in news reports this morning, China announced that it is increasing its commitment to coal generation, with a total planned capacity of 148,000 MW — similar in magnitude to the entire coal-generating capacity of the European Union. Which means everybody else will point fingers and say “China’s not committed so why should we be?” So, a likely outcome is that we do relatively nothing over the foreseeable future as the carbon (and the evidence of economic and human costs) mounts. And then there will eventually be a global mad scramble to figure this out. On the other hand, there may be a glimmer of hope, if the global movement of money stops supporting fossil developments.
Fettering fossil financial flows
French insurance company AXA indicated last week it was going to accelerate a movement away from supporting coal. The company committed to restrict underwriting of coal projects and stop selling insurance to new coal projects over 300 MW. These policies would affect the Organization for Economic Cooperation and Development (OECD) countries and European Union (EU) by 2030, and the rest of the world by 2040. The company also said it would invest 12 bn Euros ($13bn) in “green investments.”
No soup for you: will money stop flowing to fossil plants?
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French international banking group BNP Paribas last week made a similar commitment, pledging to stop funding thermal coal projects in the EU by 2030 and rest of world by 2040. The bank will encourage existing coal projects to shift to lower-carbon alternative, but failing that action, it will divest. BNP Paribas stopped funding of new coal plants in 2017 but has not yet ceased supporting legacy facilities or utilities with large coal portfolios.
If anybody wants to take the bet, my guess is that sometime within the next few years, AXA and BNP further accelerate these policies. The most recent UN report that came out last week suggests that waiting until 2030/2040 is simply allowing too much time for additional carbon dioxide to accumulate.
So, the pressure in this sector is only going to increase. At the other end of the spectrum, competing tech will continue to improve so the economics won’t support new coal plants in the West anyway.
Given a few years, AXA and PNB Paribas might eventually follow the lead of Italian bank UniCredit (Italy’s largest when ranked by assets), which last week committed to stop all lending for thermal coal projects by 2023. UniCredit also stated it would increase exposure to the renewable energy sector by 25% to exceed 9 billion euros ($10 bn) by 2023.
In late September, a group of 130 banks holding $47 trillion in assets - equal to about one-third of global totals – joined together in adopting the U.N.-backed “Principles for Responsible Banking” aimed at addressing climate change. UniCredit was not among the group, but is now considering joining.
Nothing fails like success: too much gas
Citigroup last week warned that the glut of natural gas plaguing U.S. frackers is echoed at the global level, resulting in a potential price collapse in Europe and Asia. The U.S. may actually be faced with the possibility of reducing exports in order to buttress prices. For its part, Morgan Stanley is eyeing a potential U.S. curtailment of up to 2.7 bcf per day – equal to about 50% of current U.S. LNG shipments.
Might want to park that on the beach for a while
liquefied natural gas LNG transportation tanker ship, blue sea and sunny sky background with ... [+]
One can thank a variety of forces, including the trade war with China, healthy European gas storage numbers, and just a ton of supply from highly productive frackers in multiple U.S. basins that has changed the global demand-supply balance. The price of gas for near-term delivery in Asia has fallen by 50% in just over a year, and the situation is expected to come to a head in Q2 of 2020, when seasonal heating demand declines, even as more U.S. LNG export terminals come online.
Another turbine manufacturer joins the 10 MW club
Ming Yang Smart Energy (MYSE) joined the giant wind turbine contest, unveiling its 10 MW prototype. It will be typhoon-proof (that proof will be in the pudding, when an actual mega-storm tests the claims) with a rotor-blade diameter in excess of 190 meters.
Not wanting to be left out...
TIANJIN, CHINA - JUNE 09: Wind turbine blades are seen at a plant of Ming Yang Wind Power Group on ... [+]
This now puts six OEMs into the 10-plus MW club: GE at 12 MW; Siemens Gamesa with its just-announced 11 MW capability, resulting from a digital upgrade of its 10MW platform; Vestas with its 10 MW machine; Dongfang Electric, also sitting at 10 MW; and CSIC Haizhuang.
There are already reports of 15 MW and even 20 MW machines in the offing, and Siemens Gamesa is holding out the promise of a true ‘step change’ in its technology, to enter markets by 2024/25. All of this suggests bigger machines with higher capacity factors (increased utilization) and lower levelized costs of energy delivered into the marketplace.
Switch to low-cobalt lithium-ion chemistries occurring quickly in China
In the past two years, there has been a significant concern over the cobalt in lithium-ion batteries, since the supply has been relatively inelastic (Glencore did take its Congolese Mutanda mine of production in an effort to raise anemic prices this year in response to an oversupply situation, but it’s harder to turn the new supply spigot on if needed in the future). The mineral is concentrated in the Congo, is associated with child labor, and the prices move around on steroids (quadrupling over a two-year period between 2016 and 2018 and then crashing back to earth).
Let’s leave the kids out of this
KOLWEZI, DRC: Miners weigh bags of cobalt at a depot at the Musompo market on the outskirts of ... [+]
In response, battery manufacturers recently began investigating the chemistry and the proportions of cobalt in the nickel-manganese-cobalt (NMC) battery technology used in most electric passenger vehicles (with the exception of Tesla, which uses a nickel-cobalt-aluminum mix). The original formulation had been 1:1:1 with equal ratios of all three minerals, with a migration path to 5:3:2 or 6:2:2 for some players. However, increasingly, manufacturers are moving straight to an 8:1:1 chemistry that increases nickel utilization at the expense of cobalt, especially in China.
A recent report indicates that this transition is happening quite rapidly: from 1% of all Chinese batteries for EVs in January, and 4% in June, the chemistry has blossomed to representing 18% as of September. Pity the poor 1:1:1 – dead man walking…
