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American Fossil Fuel Divestiture

Discussion in 'Energy, Environment, and Policy' started by TheTalkingMule, Apr 18, 2016.

  1. TheTalkingMule

    TheTalkingMule Active Member

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    We have a thread to watch the Saudi's squirm, might as well track American utilities as they try to divest from fossil fuel based production before the whole profit scheme crumbles.

    Once German solar hit about 4-5% of total electricity production the three major utilities lost up to 70% of their market cap and tried to divest from any and all fossil or nuclear production. With solar having grid priority and feed in tariffs set by law, their was no profit to be found in fossil production. The peak afternoon hours that were once the source of most utility profits actually turned NEGATIVE on the wholesale(supply) side.

    Now that solar is getting a foothold and wind gets stronger every day, we should see American utilities trying to quietly jump ship as well.
     
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  2. TheTalkingMule

    TheTalkingMule Active Member

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    AEP Sharing Data With Potential Power Plant Buyers, CEO Says

    American Electric Power Co. Inc., which hired Goldman Sachs Group Inc. last year to advise on the possible sale of assets in the U.S. Midwest, opened up confidential data to potential buyers, a step that may indicate the company’s closer to a decision on the package of plants.

    The Columbus, Ohio-based company has “done a lot of things with confidential data rooms” and believes there are buyers interested in the plants, capable of producing about 5,000 megawatts, Chief Executive Officer Nick Akins said in an interview at Bloomberg’s headquarters in New York. Opening up so-called data rooms allows potential purchasers to review private financial information while agreeing not to disclose it.

    Akins declined to comment on rival Dynegy Inc.’s claim that it wasn’t invited to make an offer on the plants in Ohio and Indiana. He said the company will take bids from those “we think are suitable.”

    American Electric is among U.S. utilities looking to get rid of plants that compete in wholesale power markets in favor of running assets offering stable, regulated returns. Cheap natural gas flowing out of the nation’s shale formations has dragged down wholesale electricity prices, squeezing the profits of so-called merchant power generators. Akins said his company is looking to sell its unregulated plants as a package in its effort to “move to a regulated utility.”
     
  3. TheTalkingMule

    TheTalkingMule Active Member

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  4. jhm

    jhm Active Member

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    This is an important theme. It's curious that the distinction is between regulated and unregulated assets. Rather than between assets of high economic value going forward and low economic value. Regulation seems to be the arbiter of what is profitable and what is not. And this is the fundamental mistake that utilities have been making all along. They exist simply to enjoy regulated profits rather than to deliver power at lowest cost thereby creating the most economic value.

    Longer-term all thermal electric plants are unprofitable apart from regulated profits. So smart utilities should divest all of them while they still have some regulatory value which might attract a buyer. If they wait and the regulatory environment continues to shift, then by the time these assets move into the unregulated category, they will have lost that value. So they should seek a buyer while a buyer may be found. The regulatory must change, and the utilities must put themselves in a position to benefit from the changes that must happen. Holding onto assets whose value depends on status quo policy makes it very hard for a player to do anything but cling to status quo policy. Let go of those assets and suddenly new policy options present genuine growth opportunities.
     
  5. TheTalkingMule

    TheTalkingMule Active Member

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    The state of Arizona and SolarCity are headed to arbitration on net metering rates and it should begin the downward spiral in this chapter of American utility profits.

    The Latest: Deal between solar firm, utility ends fight

    A deal between the nation’s largest solar company and Arizona’s biggest utility means competing measures asking voters about how to treat rooftop solar power are being withdrawn.

    The agreement announced late Thursday between SolarCity and Arizona Public Service puts an end to an increasingly public fight pitting the utility against solar companies for now.

    The two sides agreed to mediation over how solar customers are paid for the power they produce on their rooftops. Gov. Doug Ducey and lawmakers negotiated with the two sides and the governor’s office will participate in the talks.​
     
  6. SageBrush

    SageBrush Active Member

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    Not in the US unfortunately.
     
  7. TheTalkingMule

    TheTalkingMule Active Member

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    We're barely seeing the first hints of consumers making headway in the US against utilities as they battle to maintain their revenues in the face of far cheaper renewables.

    Meanwhile, Germany remains 5 steps ahead of us as this week their massive utility RWE is discussing selling their $20B renewables arm Innogy. Merkel made it so RWE and the other large utility EON had to break off renewables and grid services from fossil/nuke production then wouldn't let them just walk away from production as wholesale prices tanked on strong wind/solar supply.

    That's the kind of foresight we could use at the federal level, but will never see. Imagine how this scenario might have played out in Nevada or Arizona if these entities were dropped into the US market. Amazing that Germany could get this all done in light of their crap solar potential.

    At least we can now point to a renewables and grid services company being actively courted flashing . It'll be interesting to see how these two massive nonrenewable spin-off end up being valued. Being able to own 25% of an energy marketplace growing more complex each day has got to be wildly valuable 5-10 years from now.

    Engie Eyes Bid for $19.8 Billion Utility Firm Innogy
    How long until we have a semi-unified open energy market in Europe and storage takes off like crazy? Germany(and others ahead of the wind/solar curve) have major incentive to sell across as many borders as possible.

    Russia is f'ed.
     
  8. jhm

    jhm Active Member

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    There is a basic need for batteries to play as market makers in power markets. The power markets are broken because there are really no swing buyers and too many producers which are price takers. Batteries are the natural market swing traders that can help stabilize prices throighout the day.
     
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  9. kort677

    kort677 Active Member

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    there's only one problem, the batteries you reference are not capable or in mass production/usage at this time
     
  10. Ampster

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    So it becomes a matter of when not how it will happen?
     
  11. kort677

    kort677 Active Member

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    when is now, on a very small scale. storing electricity on a large enough scale to make it viable for mass usage has always been the bugaboo. maybe more knowledgeable electrical engineers could fill in the blanks
     
  12. jhm

    jhm Active Member

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    For me an interesting question is how much battery capacity is needed. In South Australia average consumption is 1.8GW, average wholesale supply is 1.5GW (apparently lots of self-supply, think rooftop solar), and recent peak wholesale supply 3.0GW. 100MW of batteries may be enough to prevent some brown out events, but I suspect that something on order of 0.5GW / 2.0GWh would start to fundamentally change the wholesale intra-daily market. With batteries reaching 2GW / 8GWh, I suspect that all the daily balancing would be based on batteries rather that use of peaker and load-following generation.

    So I speculate that SA can get to 0.1GW in about 100 days, 0.5GW in 2-3 years, and 2.0GW in 6 to 10 years. I believe Tesla alone could supply this, but there are many more competitors that will ramp up supply as well.

    Also for comparison, SA State wants to build and own a 250MW gas peaker, but I think that go unused after about 0.5GW of batteries are in play, and be wholly irrelevant by the time there is 2GW in storage. It think the state would do much better incentivizing home owners and businesses to get 250MW of their own batteries for backup use than to build a 250MW gas peaker. It would be more effective/robust, cost only a fraction, and would retain economic value much longer.
     
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  13. SageBrush

    SageBrush Active Member

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    #13 SageBrush, Mar 14, 2017
    Last edited: Mar 14, 2017
    Thanks for the analysis -- I have been wondering about this question of how much battery storage is required. One example is the island of Ta'u where Tesla battery storage is about equal to generating capacity * 4. A grid that also integrates other power plants (like wind, hint hint) and some NG peakers would have markedly reduced capacity requirements.

    Does SA have demand pricing already ?
     
  14. TheTalkingMule

    TheTalkingMule Active Member

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  15. TheTalkingMule

    TheTalkingMule Active Member

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    The dam is beginning to break.

     
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  16. SageBrush

    SageBrush Active Member

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    Let's see ... about 17 with a mixed message, and ~ 330 stuck in Inhofe land.
     

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