Trump's team & the remarkable tale of the M10 tank

While Trump is stomping the world making desperate attempts to sate his Deal Lust at whatever cost to plausibility, partnerships, policy or prestige, business goes on in the vastness of the US government: and it seems possible not all of his appointees are complete dickheads.  I give you the youthful Army Secretary Dan Driscoll (wiki doesn't seem to know quite how old he is).

The M10 'Booker'.  Of no use to man nor beast

Upon taking office this chap has noticed that the M10 Booker program - a tank? an assault gun? an "armored infantry support vehicle"? - is, in any event, a costly dud.  And rather than soldier on regardless, as in many a similar circumstance over the decades, he has simply scrapped it, boldly and wisely stating that he ain't gonna fall for the Sunk Cost Fallacy.  

What a man! 

The soundness of his decision-making is of course compounded many-fold by the war in Ukraine, which signals as clearly as anything could that the weapons and doctrinal paradigms of the 20th Century are badly in need of 100% overhaul, not to say wholesale discarding.  In the race to do this effectively, every dollar spent on badly-procured, intrinsically obsolete stuff like the M10 is a dollar wasted, that could have been spent much better on something so completely different, it makes the head spin. 

In another excellent move, the US Army is not going to replace its 150,000 lumbering Humvees like-for-like.  For infantry purposes they are going instead for this - at a fraction of the cost.  

The Mad Max vibe obviously represents the future: see also the Russians abandoning the use of APCs for assault use - they get instantly malleted by Ukrainian drones - in favour of motorbikes on weaving courses to traverse the open fields between tree-lines.

I do feel sorry for the descendants of the two Booker families being commemorated.  Hopefully, they can take faint cheer from the wisdom of Driscoll's action.

Anyhow: to encounter a politician who properly understands the Sunk Cost Fallacy is a rare event, much to be applauded.  (Maybe there are other such people in Team Trump ..?)  As a matter of urgency, can Driscoll take Ed Miliband aside, please?  Hinkley Point, Sizewell, government-financed hydrogen projects etc etc, this means you.

ND 

Germany: looking grim - energy policy doomed

We've often said hereabouts that Germany is never to be underestimated for the things it does strongly.  That, of course, includes vigorously digging deep holes for itself: Es irrt der Mensch so lang er strebt  - and there's no striver like a German who's got religion.  Prior to Ukraine Germany was already embroiled in a nonsensical 'energy transition' policy - Energiewende - that we've written about here several times.  Formerly I took a simple & cynical view on this: they can probably afford it; and it's better to watch them do the experimentation on moonbeams from cucumbers etc, than do it ourselves.

Since Putin kicked off in 2022, they've bizarrely doubled down on what was at the time an embryonic policy, namely to become a hydrogen economy.  The (natural) gas sector in Germany had been privately working on this for a while, using its own funds (always a good sign) , wishing to have a lifeboat for its vast sunk-cost infrastructure against the scenario of natgas falling as far out of favour as have nukes, lignite and hard coal in their turn.  Quite fairly, the entire German state doesn't favour UK-style deindustrialisation as an alternative approach to 'green'.  In some kind of arm-waving fantasy, hydrogen seemed to be the answer - first 'blue' H2, swiftly to be followed by 'green' H2, and getting started with imports (another fantasy; but a lot of countries from Australia to Saudi keep saying they'll be big exporters any year now).

Being Germans with a Policy, they've now zoomed past the sensible 'private experiment' stage and have erected a complex system of targets and subsidy structures for hydrogen projects, both upstream and downstream.  (I have tried to get to grips with it in all its byzantine complexity, but it's not easy - and indeed may not represent anything you can understand rationally at all.)  Every German firm that might conceivably participate in the putative H-economy is dabbling in this, all hoping someone else will jump first.  Along the whole length of the putative H2 supply chain, every single major scheme that was more-or-less on the starting blocks at the start of this year has either foundered already or suffered major setbacks.  

A key player in the German economy - until a couple of days ago - was Federal Minister of Finance Christian Lindner.  I have a very good friend who knows the man, and tells me Lindner was a lone voice of sanity in a cabinet of lunatics.  Lindner's overarching view is that his fellow countryman have too much in the Manic Enthusiasm department, and little instinct on the matter of value for money.  These two things he saw coalescing to baleful effect in the hydrogen policy.

What now?  Ploughing on regardless would be very German, but maybe even they are beginning to see it for the nonsense it is.  Perhaps everyone hangs on until after COP29, and then the ructions really begin.  However much we might mock, we'll all feel the impact if the bicycle topples over. 

Es irrt der Mensch so lang er strebt.  Yes, Goethe had it right: and as he also suggested, they just can't stop striving ...

ND

Future of the UK electricity "market"

BTL on the last thread, Clive triggered some comments with: Renewables are rocking da house. And negative prices! So, while hydrocarbons will linger around for a while yet, they’re obviously not indispensable and are, arguably, definitely in run off;  followed by Anon: Interesting points being raised by @Clive on negative electricity prices due to generation imbalance. Perhaps another thread on suggestions on how to use up all the surplus power when its available e.g. pumped storage. 

So here we are.  Nobody quite knows the future evolution of the UK power fleet, seeing that the government is willing to throw really quite serious money these days - plus various threats of compulsion - into a range of energy-related options (nukes of various sorts, CCUS, hydrogen, EVs, HPs), some of which frankly look like backing several horses in case one or more turns out to be totally lame.  You can pretty much suspend the laws of physics for as long as you're willing to throw enough money at it - and certainly the laws of economics.  Also, they've allowed themselves some very prudent opt-out language in case this isn't working: for example, there's a 'security of supply' override on the 2035 'net zero carbon electricity system' deadline (which means it's just a target / aspiration).  And there's no date on ending sale of gas boilers. 

But some things we can say for sure.

1. there is absolutely no end in sight for dependency on natural gas
2. the cost of generating electricity to meet demand securely will rise
3. global anthropogenic CO2 emissions haven't peaked, and won't peak for a very long time (if at all) 

There's no point that I can see in banging on about 3, in the context of dealing with what's before us.  Anyone who thinks the global "drive to net zero carbon" (qua western-governmental policy) can be halted by blog discussions hasn't understood the force of politics behind it (as a policy).  As I first wrote in 2019, it's 100% mainstream now, including the entire banking sector, and most of industry, which expects to benefit from a whole new era of state handouts under various headings, always the source of revenue requiring the least effort.  Nothing to do with Greta, BTW, and everything to do with Business.  

So: back to 1 & 2.  It's entirely likely that the annual average amount of gas actually burned will remain on a decreasing trend, with total "renewable" electricity generated rising.  The final demise of coal will extend current levels of gas burn a while longer, simply by displacement of said coal.  But that's not the point.  Mention of pump storage - including SSE's new project - is fine and dandy but, like batteries of the present technologies, UK pump storage supplies minutes-worth, or maybe hours-worth of standby electricity capacity: important for micro-balancing of grid operations (for frequency stabilisation etc) but broadly irrelevant in terms of dealing with long periods of no wind.

But that means maintaining a lot of expensive stuff on standby, specifically, gas-fired electricity generating capacity AND the entire infrastructure, physical and commercial, to ensure gas will be available when needed.  That's easy enough** when (a) it all exists anyway; and (b) there's strong reason to believe that residential gas demand will continue for a long time at roughly the present level, even as UK industry slowly transitions towards electrification, hydrogen, or an early grave, a.k.a. further offshoring.   Keeping stuff hanging around mostly idle doesn't cost nothing.  Just like paying windfarms to stop generating; bringing ever more sophisticated batteries into the fleet; building vast new infrastructure to accommodate new windfarms; etc etc.  

But what of negative (wholesale) prices, increasingly a feature of most electricity markets?  Easy.  They are negative for just a few hours, just as they go wildly high for just a few hours (or longer ...).  It's volatility, that's all - and tells you nothing about the average price which, as I've asserted, will rise and rise.  And what do we know about volatility?  It's like a heartbeat: too low and it signifies death - but too high, and it's a Very Bad (and costly) Thing.  Or (to switch useful analogies) like friction:  too low, and you'll slide all over the place.  Too high, and you're seriously (and expensively) inconvenienced.

We hear endless chatter, mostly from the EU (though Will Hutton is egregiously stupid misinformed on this also) where ignorance about markets is a dominant strand in public life, about "decoupling" the price of electricity from the price of gas.  What do they mean?  Well, initially they "meant" nothing more than "we've heard renewable electricity is cheap, nay free - so why has the retail price gone up?" - an expression of pure ignorance.  More recently, they've been gently steered towards something meaningful, indeed, logical - i.e. thinking about a more widespread deployment of longer-term financial hedging against electricity price volatility.  There's nothing remotely new about this: any party that feels uncomfortable being exposed to price fluctuations should go for a fixed price!  If this is to be achieved via extending the market for 'renewable PPAs', i.e. fixed priced electricity sales contracts (or more likely CfDs) offered by renewables developers - compulsorily?? brokered by regulators?? - then so be it.  I'm not sure many industrial companies will enjoy the fixed prices on offer: that's another matter entirely.

But it does bring us back rather neatly to point 2 above.  Whether it's the average of volatile wholesale prices, or fixed-price PPAs, the price of electricity will carry on rising - long after Putin has been put back in his box.  That's what happens when you move to an intrinsically more complex and basically entirely new way of running an entire, very large, industry.  All at once++.  Across a very large part of the world economy.

Doesn't mean it can't be done.  Does mean it's gonna be expensive.

ND    

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** It'll be a lot more difficult without a base level of residential gas demand  

++ People who pretend otherwise  - and there are many - are like those who said Brexit would boost the UK economy.  I write as someone who voted for Brexit.  But I never thought it would be anything other than costly.  

The Hydrogen thing - another polarised energy issue

No, nothing to do with anodes and cathodes: this is to do with vehement disagreements of a pseudo-scientific nature.  Recapping (on an issue we've touched on before, e.g. here and here):

The case for: (BTW, both sides of this "debate" accept future 'net zero' as a given)

1. Theoretical: electrification of some current uses of fossil fuels is well-nigh impossible to envisage; but conversion to hydrogen-burning looks feasible
2. Pragmatic / vested interests: this suits a lot of people very well - in particular the natural gas industries along the entire value chain, whose sunk costs are astronomical and whose risk of asset stranding looks quite real; and a load of engineers for whom the practicalities are well-understood, if a little challenging
3. It's not difficult to see (or at least hypothesize) a future world where periodically there will be large amounts of 'spare' electricity generating capacity, e.g. when the wind is blowing strongly and demand is low: conversion into hydrogen for later use (maybe back into electricity again) might be a whole lot easier than building batteries that are big enough.  Every green advocate whose pet project is inflexible, potentially surplus electricity (nuke, solar) or negative-flex (wind) resorts to "you can always make hydrogen with it" as a fall-back 

Mostly by dint of 2. above, there has been a heap of effort going into this, not least in Germany (some of it bizarre, see links above) and now in the USA.  Initially this was private money - always a good sign - although now the subsidy-farmers are pitching in, busily persuading governments they'd better throw public money in as well.

The case against:

1. The inefficiency of moving from electricity into hydrogen and back to electricity again is very great indeed (true)
2. Dreams of there being lots of spare electricity of zero marginal value (or even sometimes negative) to make this economic are just that - dreams: electricity will almost always command a higher price than that, particularly when (ex hypothesi) vast swathes of heating and transportation load has been electrified
3. Hydrogen is way too dangerous to be used in residential applications**
4. Pragmatic / vested interests: labour unions dream of untold unionised jobs installing heat pumps and the vast home-adaption paraphernalia that accompanies them  - really quite labour intensive, a decades-long programme, and not a service they can easily be substituted for by robots
5. Ideological:  we hate those old natural gas people, boo, hiss    

You can see how, what starts life as something of an ideology-free economic debate descends into left-vs-right mudslinging, the Left tending to view hydrogen as a wicked capitalist ramp.

Me?  As you've gathered, I'm always impressed when anyone forges ahead without waiting to garner subsidies: & that's exactly how the great hydrogen movement started.  But that moment has passed: the professional subsidy-farmers have taken over, just as A&R men move in on creative new talent in the pop industry.  And of course they are on both sides of the "debate", seeing as how there are subsidies available on both sides, too.  So now it's really difficult to tell what's good solid analysis and what's BS & hype.  

My guess is that:

1. hydrogen for domestic use doesn't make much sense
2. there will be specialised industrial applications where it does
3. there will be odd, localised, maybe temporary situations where electricity really will be 'almost free' (e.g. in the middle of a remote hot place where there's no grid, plentiful solar and a big mining industry that currently uses a lot of diesel)
4. it will be hard for hydrogen to compete as a means of strategic storage (via conversion) for electricity with other tools for balancing grids, even those with lots of wind capacity

But that's as far as I'd go.  Views?

ND
 
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** personally I wouldn't bet on that.  Electricity can be quite dangerous, too, and engineers are quite good at solving easily-defined physical problems.

Fun and Games with Hydrogen in ... Germany

The whole hydrogen thing is very interesting in loads of dimensions.  We've debated several of them, above and below the line, in a number of posts over the past several months, this one being quite recent.

For present purposes, some definitions:

• 'Grey' hydrogen is what almost all past and current industrial hydrogen has been: manufactured essentially from unabated fossil fuels, = lots of CO2 as a by-product
• 'Blue' H is currently a fanatsy - manufactured, more-or-less conventionally or with some newer technologies, from natural gas AND with the resultant CO2 sequestered
• 'Green' H is currently uneconomic - manufactured from water by electrolysis: no CO2 at all
• I won't detain you with 'Turquoise' H (sic) 
  

As noted before, the gas industries of the world, petrified by the prospect of asset stranding on an humungous scale, are piling - with deadly serious intent - into hydrogen as their putative saviour, thinking that (a) in many cases it can utilise their existing infrastructure downstream (distribution, storage); (b) it plays readily to their existing engineering skills; (c) everyone loves them for it; (d) in due course there will be some subsidy-dosh on offer; (e) whisper it quietly, but while we are waiting for Green H to become a serious economic proposition, there might be a big role for Blue, or even ...Grey! 

Which brings us to Germany, our old friends with the fine words, *noble aspirations*, and demented policies.  They are dead keen to be at the forefront of the H-revolution, and are Absolutely Adamant it must be Green H and nothing else.  They have also been solemnly told by their scentific advisers (a panel of government and industry types) that there is no way in Hell that there will be economic Green H possible by 2030**.  But they don't want to be sitting on the sidelines while the pragmatic Brits get started with Grey (as we are doing already) and Blue.  So ... "we may have to import it to get started".  Hahahah!

And where might it come from?  And might it be, errrr, Grey? 

• Germany in talks with Russia over hydrogen imports – but coy about 'colour' (RechargeNews). Germany is in talks about the import of “CO2-neutral” hydrogen from Russia, energy minister Peter Altmaier said during a virtual conference on bilateral relations. The minister was, however, unclear whether discussions concerned imports of green hydrogen produced via electrolysis from renewable electricity, or blue hydrogen from natural gas linked to carbon capture and storage (CCS) from a nation that is already Germany's biggest gas supplier.  

Yup, I think we may be sure that'll be a deep shade of Grey.  If not, *ahem*, Red ...  Did CU mention schadenfreude?

ND

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** They may be wrong about that: the technology is really motoring

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.

ND 

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**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.