Sunday 14 June 2020

Energy in the Future

Regular readers will know I identify 2019 as the year everything changed.  Up until then (in my estimation), most people's attitude to climate change was, yeah, s'pose, maybe; so what?  During 2019 most people switched to yeah, of course - flooding, forest fires:  presumably someone will be doing something about it.   And indeed Theresa May (Theresa May!) did.   On the XR-Greta bounce, she passed the Net Zero 2050 legislation, hastily followed by, errr, pretty much every other western government you can name.

What this jolly damascene narrative misses is two gigantic Real World developments offstage.  The first, and biggest, is that all of a sudden, spending on Adaptation & Mitigation - getting ahead of those floods and fires! - was admitted to the ranks of what counts as Green.  This means that every clunking old heavy-industry company feels it stands a chance of joining in the upcoming feeding frenzy (steel-and-concrete, yay! - not just those poncey, ex-hippy solar farm wallahs); and of course every bank.  That's huge.

The second is that Big Private Energy (if not the NOCs and their like) decided in 2019 that they'd better join the party, too - properly, not just a nibble around the edges of the lettuce-leaf for greewashing purposes as theretofore.  Shell is only the latest.  And why not?  It all plays to their strengths, innit?  -  R&D; Big Engineering; massive capex; expert project management; dealing with governments etc etc etc.  (They are wrong about their strengths in some detailed regards, but let that pass - they'll find out in due course.  And the better ones will quickly learn.)
_   _   _   _   _   _

Let's give one really big, and really important example: the natural gas industry.  It's Big.  And the capital it has sunk (your pension fund has sunk) in steel-&-concrete, & real-estate, & highly-trained people etc etc) is very, very large.  Much of it is rather static, too: gas production facilities, mammoth intercontinental pipelines, processing facilities, liquefaction plant, LNG fleets, re-gas facilities, myriad small distribution pipelines ...  and nobody fancies writing that lot off.
Up until 2019, they kinda felt they didn't need to contemplate this awful prospect because they felt they'd been given a multi-decade pass.  Hey - the greatest reductions ever made in CO2 emissions come when gas replaces coal!  We're the good guys!  Watch us repeat the UK trick and the USA trick in, errr, China and India ...

Then they notice that in the west, coal has already given up the ghost (except in Germany) and all eyes are on them as the next big fossil fuel villains:  AND not just the know-nothing swampy-greens, but the steely-eyed, utterly ruthless ex-hippies taking all the government money for wind and solar, who've got the gas sector lined up to be supplanted by ELECTRIFICATION.  And all that gas capital tied up in steel-&-concrete!

Suddenly (and truly, it was abrupt) the entire industry has lighted upon conversion from natgas to hydrogen.  Why?  Because -

(a)  actually the threat of wholesale electrification isn't imminent: in most countries you just can't switch that amout of space heating from gas to electricity without colossal expenditure (like, in the UK for example, trebling the capacity of the Grid  - which is what you'd need) - so, they get a breather if not a free pass, provided they are seen to be With the Program, and knuckling down (which they are):
(b) they get to utilise a lot of those existing assets that represent so much of their balance sheets (phew!):
(c) it's squarely in their sweet spot:  fairly conventional and established technology, pretty basic chemical- and civil-engineering, lots of scope for improvements and efficiencies on existing processes - the kinds of things they can easily find / redeploy staffing and raise money for:
(d) it solves a massive problem for governments (relying on electrification of space heating, trucking and large-scale gas-burning industry wasn't going to get them far towards Net Zero, as they know):
(e) it potentially also solves a problem for the green electricity wallahs, too.  Solar and wind (and in fact nuclear, too) generates when electricity isn't wanted, which is easily managed when they only represent a small amount of the total, but is getting to be a serious issue.  They can see themselves turning their excess production into hydrogen, via electrolysis:
(f) even the Russians might be able to play: they can turn their methane into hydrogen (via steam reforming) and sell that to us instead of natgas (even if they need to, errr, think about all the left-over CO2 ...)
(g)  SUNK COSTS(!) - as we keep saying on C@W.
Here's not the place to sketch out the many significant practical (and political) issues a hydrogen-based energy system will face along the way.  All I'd say is:  there's a combination here of massive incentive and feasible technology.  In my experience, that's a recipe for things getting done.  Many's the time I've seen first hand, just how far people will go to avoid writing an asset off completely.

And I'd contrast hydrogen strongly with two other supposed "energy-technologies of the future":  (i) small nukes of various types; and  (ii) carbon capture & storage (CCS, or these days CCUS), both of which have been identified as 100% necessary for decarbonisation, and only just-around-the-corner as regards technology and commercial feasibility**.  As they have been for, errr, decades ...  in which case, W(here)TF are they?   Nope, small nukes and CCS don't pass my personal reality-check;  writing not as an engineer but as a commercial type and longtime observer of what's actually happening, and what's BS.

Whereas hydrogen looks the part, in every dimension so far as I can see.  Anone who's skeptical about any of this just needs to check out what's going on.  In the Real World.  Real companies, spending real cash (money of their own, at the moment) and real effort.  Solving real problems along the way.  Don't bet against it.


**Addendum:  not to say there aren't stirrings in both these camps.  And in principle, Big Oil & Gas ought to love the idea of CCS, on some of the same a priori grounds that make hydrogen attractive for them.  But, among several other contrary indicators, Germany shows no interest whatever in CCS, an significant disadvantage when compared with their enthusiasm for H. 


Nessimmersion said...

The article is more of an argument about subsidy hunting than energy generation.
Europe UK is still trying to hamstring its economic future with unreliable methods of electricity generation.
China, India & US are carrying on with coal,
Germany is also doing so quietly.
At root the weather of a society will be determined by the availability of energy to do things, if the economies you are competing with have input costs half of yours you had better have one hell of a competitive advantage elsewhere.
This all ignores
Solar minima, next overdue mini ice age getting going, Krakkatoa or icelandic volcano precipitating a couple of years of global cooling.
Increasingly dodgy gas networks having an unforeseen problem with hydrogen embrittlement.
The reason we switched to nat gas in the first place was cost and nat gas is still there, campaign groups have currently convinced the press that cheap energy is evil, that can change.
Look how quickly hysteria about a winter flu type bug was whipped up.

DJK said...

ND: Thanks very much for an informative post. Great stuff.

Nessimmersion: The costs aren't static. You may have noticed that most of the coal companies in the USA have gone bankrupt. Coal is now simply too expensive. Even in Texas, solar farms are sprouting all over the place.

It was privatisation of the CEGB under Mrs Thatcher that brought the cost of nukes into the open. If you calculate the NPV of 10,000 years of having to guard the waste products, not to mention the liability for an accident that could render parts of the country uninhabitable (and we have seen that the liklihood is not negligible) then nuclear becomes unaffordable, or at least affordable only by governments.

The cost of wind energy meanwhile has been falling ever lower, and this is not the least of coal's worries.

Trump won't be around for ever and it seems to me fairly likely that after a couple more years of extreme weather there will be international agreement to tax carbon fuels, and tax the imports from countries where stuff is made with carbon fuels.

Raedwald said...

Wind is where we can combine taking back control of our EEZ and the topology of the North Sea - the Forewind concession is building 4.8GW on the Dogger Bank, out to the 200m limit, and is covering only a tiny fraction of the bank area.

Combined with fisheries regulation, this gives the UK the opportunity to create sustainable fish-taking and fish-breeding areas in the shallow and fish-rich North Sea free from the rapacious self-interests of the EU27

A reminder that our 200m EEZ is not just about fish - it is a vast energy bank, an asset that no other EU nation can match.

As for Hydrogen .. I once bought a boat that was a floating bomb. The previous owner has stopped up the high level vents in the battery compartment, and had led a leaky half-perished hose from the deck LPG canister through one of the stopped-op pairs of holes. The batteries were sitting in a pool of LPG capped with a layer of H2 sitting on top. Just one spark ...

old git carlisle said...

I did express concern about hydrogen.

However generating hydrogen for electrolysis makes sense, provided costs and efficiency of process are optimised. The hydrogen plant could in principle use any power available over and above direct supply.

When I pointed out hydrogen has only one third the calorific value of methane what I did not factor in on capacity of reticulation system was that it has approximately one tenth of the density (my old flow calculator does not work with this low a density!) so I can't do evaluation of capacity of pipes .

Also the hydrogen, assuming any smellies do not cause corrosion, can burn at nearly 100% .

The engineering is fascinating but the economics even more tortuous.

Anonymous said...

Man-made climate change is myth. Any form of carbon tax is essentially a life tax though, so good luck getting around that.

decnine said...

Before North Sea Gas, the domestic supply was Town Gas. It was a mixture of hydrogen and carbon monoxide. When our conversion was done (1971 or 72) the only change was to the burners in our stove and central heating boiler.

Nessimmersion said...

DJK, around 70% of US power is fossil fuel derived, with clean out of the EPA, som of the Obama legacy Greenwich is going, allowing clean coal to continue as the Forbes article covers.
The US also massively subsidisesngreen energy, although they are now experiencing.problems with how to deal with the toxic end of life legacy of wind turbines, long term land fill etc.
Currently as societies we are choosing not to use the most efficient methods of power generation, we think we are wealthy enough to use inefficient methods because it makes us feel better, all ok as long as our competitors don't drive us out of business.
There is no evidence that unsubsidised electricity generation is economic anywhere on the planet, it all depends on feed in tariffs or fossil fuel powered being hobbled in some way.

andrew said...

Obligatory xkcd on global temperatures

Anonymous said...

It's a well it's a comic, as it's a complete fantasy.

Anonymous said...

ultimately its about the economics. if spinning a turbine in the north sea is cheaper than poking a hole in the ground thats what will happen.
electrolysis to and from water a good trick and if you can build em big enough and cheap enough, then someone will buy it.

america, china & india dont care two hoots about what we get upto. if they stop digging coal its because its more expensive than the alternative, seems gas is cheaper in america these days.

global warming and subsides be dammed, if the cost is too high you can only suspend disbelieve for so long.

Don Cox said...

" If you calculate the NPV of 10,000 years of having to guard the waste products,"

What you call "waste products" is partly used nuclear fuel. Most of the energy is still there, and it will be used in new or updated power stations. We have enough partly used fuel stored in Britain to provide us with all the electricity we want for a couple of centuries.

The fossil fuel companies have managed to sell the idea that this fuel is some kind of bogey man. It is not.

Don Cox

E-K said...

So Boris has caved in yet again.

"We must do much more to eradicate racism."

He's fallen for this white Left wing insurrection.

How nice it would have been for BLM to have looked at Minneapolis and said "Look how so much better the UK police are."


Instead they battered kneeling unarmed coppers in summer blues and ordered the PM to get the Cenotaph out of sight.

What's this to do with energy ? Or the PM's lack of ???

Raedwald said...

Judging by Lammy's incandescent fury, I reckon Boris has done just the right thing - a new enquiry, an enquiry of enquiries, to roll-up all the findings of the previous enquiries, which will take some time.

What Lammy wants is ..

1. More money for black people, now
2. Er, that's it, really.

By the time the recession hits in September, it will get lost in the noise.

Don Cox said...

Assuming that these guesses about IQ are correct, the range can easily be accounted for by culture, home background and education.

Don Cox

Anonymous said...

"the range can easily be accounted for by culture, home background and education"

Do you think it's all those racist teachers and professors depressing black IQ scores and raising Chinese and Jewish ones? Or how odd it is that the patterns I outlined occur in pretty much every country (Haiti has one billionaire - he's Jewish)?

"culture, home background"

Make remarkably little difference, as twin studies (studies of twins adopted into different households) show. Read Pinker's The Blank Slate.

The one I like is that early reading age is all to do with the number of books in the home, as if a trip to Waterstones when the child's two will fix things. Occam's razor says mum and dad have a lot of books cos they are bright, like to read, and those traits are passed on.

If you are right, then how do you propose to change black culture and black home background? Black people already have equal access to education in the UK and the US.

But if you are wrong, then all such theoretical interventions are a waste of time. President Johnson after the mid-60s Watts/Detroit riots promised "not just equality as a right and a theory but equality as a fact and a result". That was nearly 60 years ago!

Nick Drew said...

OK, this is an energy thread

E-K said...

Sorry Nick. I started this.

Anonymous said...

Sorry, Nick. Just responding to Raedwald. Back on topic, are wind turbines in the North Sea actually viable without subsidy at the moment? Including maintenance, decommissioning etc?

Anonymous said...

Just paint the wind turbines black and then it's ok for the subsidies, just call it reparations.

Nick Drew said...

are wind turbines in the North Sea actually viable without subsidy at the moment?

the key is to be clear what type of sub we're talking about

the CASH subsidy has come down and down, thanks to (woefully belated) introduction of competitive bidding. And remember the form the (UK) subsidy takes - a contract-for-difference, i.e. a taxpayer-guaranteed price instead of the vagaries of market price.

Onshore wind is definitely viable without cash subsidy (as we'll find out if HMG loosens planning regs for them). Ditto solar. In Germany, there is talk of the next round of bidding for onshore wind licences coming in at negative prices, i.e. developers willing to PAY instead of getting a cash bung

Why? same as negative prices for anything - excess supply at very low cost PLUS the NON-CASH aspects of the subsidy, which (at negative bidding-in) is privileged access to the Grid ("must-take" - or alternatively, must be compensated for being "switched off"). That's why developers will quite rationally be willing to buy their way in

Offshore? - we'll see in the next round of UK bidding. It's the way things are headed, though.

NOTE: you can find (e.g. here )
... some folk disingenuously boasting we're "sub-free already" offshore. Not really. A tax-payer-guaranteed price of £40/MWH (as cited in that article) may have been less than prevailing market price of £49 (as it was when that article was published) BUT of course the price today is <£30!

taxpayer-guaranteed price is worth a staggering amount when you go to the bank for finance - even if market price ends up being higher than CfD strike price, bringing your cost of capital right down: another BIG non-cash subsidy

Anonymous said...

"taxpayer-guaranteed price is worth a staggering amount when you go to the bank for finance"

Yup, taxpayer guaranteed income stream - we'd all like one of those please.

Raedwald said...

The Euro consortium estimates the (economic, not physical) capacity of the Dogger Bank to be about 110GW - I think UK peak demand is about half that? That's with sustainable dolphin sanctuaries, fish nurseries etc. Of course is B-all use if the wind isn't blowing.

The thing is, the UK has about 70% of the bank in our EEZ, and all the shallow and therefore cheaper parts. Dutch plans for an island in their sliver don't look very economic unless turbines are sited in UK waters.

And the buggers can't even blackmail us by threatening to designate bits of our EEZ an Natura 2000 areas etc any more if we don't play ball with their plans. Brexit really is a *very* good thing.

For the UK economy, offshore wind can be very good news for east coast coastal communities if we seed construction, transport and maintenance investment and build capacity. Work for UK yards, not Dutch ones.

Layman's assessment Nick - feel free to pull it to pieces

Anonymous said...


The power has to onshore and distribute somewhere. The current grid capacity has to increase *if* we all get electric cars.

Having the been involved on the fringe of grid building, it is a slow, expensive legal and PR process. The oncost of these sort of delays, court battles ultimately have to be met.

We may have seas for offshore wind; or mountains for hydro; or vast areas of moor for solar - but we have a densely populated country and an expensive legal system. It's not all upside.

Raedwald said...

As a footnote, the grid-developers impose a very effective tax on new development. Virtually everything I've built in the last 20 years has 'needed' a new substation, with tons of extra capacity for the grid, natch, at £250k - £500k a pop.

Even if you're replacing like-for-like with no increased demand, it somehow still needs a new substation if you're installing a new intake point.

That's quite a tax on development.

Nick Drew said...

That's probably the local DSO (Distribution System Operator), Mr R. Some of them are running substandard businesses with substandard management - not at all FFP for 2020+

rwendland said...

I see that S&P Global Ratings forecasts that in 2022 "Germany will become a net importer of [electricity] energy". Do you understand what is behind that? I know nuclear is being shutdown, but that is only 8GW now. Is coal generation on the decline in Germany even with cheap nasty lignite supplies?

Matt said...

Interesting article I came across from the "Woke" post BTL comments -

Nick Drew said...

Dunno, Mr W - Germany will certainly encounter ever more wild swings on its system (which already depends on its neighbours for balancing via import & more usually export) and in its wholesale pricing (frequently goes negative these days)

it maybe a function of their massive constraints on transmission N (where the RES is) to S (where the industrial demand is)

the "greens" on local planning authorities won't tolerate any upsizing of the grid (might need to chop down some trees ...), and that includes measures needed to accommodate more "green" energy!

crazy country, crazy people

Matt - am always cautious with anything by John Constable: can never quite work out what vested interest he's promoting (various people have advaced various theories) but at the end of the day it always feels there's some unspoken agenda going on with him

rwendland said...

Though the grid limits seem likely to be soluble within the existing right-of-way by converting AC cables on towers to HVDC, which seems to double or treble capacity over long distances. From what I've read you don't even have to change the cables, just the insulators. And you can leave 6+ cable towers as a mixed AC/DC system to service both short and long distance. Newish technology though, just being trialed in Germany, and I have no idea what it costs.