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Shorting Oil, Hedging Tesla

Discussion in 'TSLA Investor Discussions' started by jhm, Mar 15, 2016.

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  1. jhm

    jhm Well-Known Member

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  2. jhm

    jhm Well-Known Member

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    Is This Big Oil’s Next Secret Weapon? | OilPrice.com

    So big oil is starting to take an interest in hydrogen.

    But let's be clear: this is not about hydrogen fuel cell vehicles.

    The attraction here for Equinor is to allow natural gas to be part of a zero emissions world via carbon capture. This is truly a long term prospect because as yet adding carbon capture to steam methane reforming is not an existing cost-effective technology. While the O&G industry would want to talk down electrolysis as "too expensive," we don't really know if SMR+carbon capture and sequestration will ever be cheaper than electrolysis as a form of emissions free hydrogen. So it may be a fair horse race for either tech at this point. It may also be that for a rather long time the two technologies can coexist.

    I would point out that strapping CCS onto SMR running at near 100% capacity factors would easily have half the capex cost of strapping CCS onto a gas power plant used at a 50% capacity factor. So if you think of this as a clever trick for adding CCS to gas generators at lower cost, this may have some favorable economics that enable natural gas to be part of a near zero carbon world for quite some time.

    But I'm still pulling for electrolyzers. McKenzie believes the cost of electrolyzers could fall 70% within the next ten years. Mostly this is about scaling up production and installations to cut cost and gain efficiencies. I think basically we just need a market to grow like wind, solar or EVs to scale things up and cut the installed cost Watt to fall 10% to 20% per year. I don't even think there is a critical need for the efficiency of electrolyzers to go higher than 75% which is currently doable. We just need to cut the capex through manufacturing and scale efficiencies. The reason why is that the cost of surplus power is coming down. In many markets the average price of power below the median price is around $20/MWh. This gets you to $0.88/kg H2 for marginal power cost. This is plenty cheap, but the below median average price will continue to drive lower as more wind and solar are added to a grid.

    So it is actually helpful for electrolyzers if there is already a substantial market for hydrogen paving the way with infrastructure. So if Equinor and others want to be part of developing an offtake market for hydrogen, I would be happy to see it. If such a market existed, it would help electrolyzers scale up, which is their fundamental challenge.

    But here's the rub. If the globe does not invest in electrolyzers, this would hand over this potential market entirely to fossil fuels (all three). This could remain as a niche for fossil fuels into the low carbon world. So you still have all the other environmental problems associated with extracting those fuels. Such a future does not inspire me, though it may give some succor to the fossil industries. So I still want electrolyzers to be well developed to add in the transition. I think it is a more elegant solution.
     
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  3. mspohr

    mspohr Well-Known Member

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    The problem with electrolyzers is that they don't use fossil fuels.
     
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  4. jhm

    jhm Well-Known Member

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    Ha, actually they can. Using electrolyzers to soak up cheap power can include power from must run gas and coal generators. The prices won't be high enough to cover the marginal cost of fuel, but it will mitigate even larger marginal losses.

    I think the discussion often overlooks this point. People are more inclined to imagine electrolyzers running strictly off of renewables, which we'll get to in several decades. But in the interim a lot of dirty power can be redeemed by electrolyzers. This likely seems counterintuitive to many, but thinking more deeply about the problem, I believe this is absolutely needed to transition quickly to an emissions free world.
     
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  5. jhm

    jhm Well-Known Member

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    Stanford Study Shows Realigned Wind Turbines Can Boost Output Of Wind Farms | CleanTechnica

    This is really cool. We've become used to the idea that Tesla can tweak computer code and release higher levels of performance from their cars. It turns out this is true for wind farms too.

    A wind farm does not get optimal power generation if all the turbines face directly into the wind at all times. Upwind turbines creates waves and turbulence for downwind turbines which can reduce their performance severely, especially at lower wind speeds. So if you steer the turbines a little out of direct alignment with the wind, you can optimize the performance of the whole wind farm. This is especially helpful at stabilizing power production, on top of increasing energy production by about 40%.

    So wind steering minimizes the need for peaking capacity to compensate for volatility or under production of wind. I find it fascinating the we are still learning how to best harvest the wind. From what I can tell this is largely a software based improvement. It can be rolled out to existing wind farms. So perhaps we could see a step increase in wind production and a step decrease in fuel spent on balancing the grid. And of course, it can lower the cost of new wind.
     
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  6. mspohr

    mspohr Well-Known Member

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    I know they can but the point is that they would only use "surplus" electricity and shouldn't be used as an excuse to keep burning fossil fuels.
    Fossil fuel companies keep pushing H2 from steam reformation of methane since it would give them an excuse to keep up demand for methane. Their argument becomes much weaker if they have to intentionally burn additional fossil fuels to generate electricity to make H2. That just compounds the inefficiencies and environmental damage of H2 production... adding fuel to the fire, so to speak.
     
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  7. jhm

    jhm Well-Known Member

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    Yes, I agree. They clearly have a vested interest in seeing that SMR can outcompete electrolyzers. Indeed I think for them electrolyzers are not just a missed opportunity to produce hydrogen, but they can balance the grid in ways that reduce the need for gas and coal generation and that generation capacity. So electrolyzers are a double or triple threat to gas and coal. OTOH if you want to minimize the use of fossil fuels as the world decarbonizes, you really want electrolyzers to get the upper hand on SMR technology. Frankly I don't trust the fossil industries to put CCS on SMR.it won't be cost effective, and the industry won't do it unless a government forces it. So realistically, electrolyzers need to be competitive with SMR without CCS (and without a carbon tax or elimination of fossil subsidies to level the playing field). There will never be a level playing field, so renewable energy must be substantially cheap than the competition to make a difference.
     
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  8. generalenthu

    generalenthu Member

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    #5368 generalenthu, Jul 20, 2019
    Last edited: Jul 20, 2019
    For the record, diesel retails at $1 per liter or $3.8/gal. The days of subsidizing are long gone, especially with low oil prices. Fuel is actually a source of revenue for the government.
     
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  9. adiggs

    adiggs Active Member

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    Interesting article about upcoming IMO 2020:
    Scrubber total when IMO 2020 hits will be a number better for diesel buyers: execs - FreightWaves

    Several things that I learned:
    - First is that this is the first time I've seen this site. Now that I have, I like it enough to recommend it broadly to anybody interested in getting to know the commercial transportation industry (including trucking / semi).

    - The scrubber or fuel choice ships will be making, either way the requirement is a limit of 0.5% sulphur in exhaust on Jan 1 2020. For those using the low sulphur fuel choice to meet the requirement, their tanks need to be empty of the higher sulphur fuel by end of the year, so they'll start buying the lower sulphur fuel as early as October this year. (Sidebar - how about a fuel tank where you measure endurance in weeks or months!?!)

    - I've been thinking the low sulphur fuel is the better choice. At least one reason why scrubbers are better is that they also grab small particulates as a side benefit. Whether it's sulphur or particulates, it looks like these systems work by pushing the resulting soot / stuff into the ocean (solids in the ocean, instead of gases and particulates in the air). I don't know what I think about that yet.


    A good read - the economics around scrubber installation are discussed. It makes a scrubber system sound a lot more reasonable than I'd previously thought, and that might impact barrel economics by retaining more use for the bottom of the barrel / high sulphur fuel oils than I've been thinking.
     
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  10. adiggs

    adiggs Active Member

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    FreightWaves continues to deliver.
    Commentary: How can machine learning be applied to improve transportation? - FreightWaves

    This article is a summary, as it applies to commercial truck / transportation, of this paper:
    https://arxiv.org/pdf/1906.05433.pdf

    This paper is >50 pages about the use of machine learning to tackle climate change. I've just started reading it, but it looks .. comprehensive.
    This might not be the right thread for this post - the paper is so comprehensive, the information is applicable to many of our forums and threads. I can tell its going to take awhile for me to take the whole thing in - just the summary applied to transportation is good stuff.
     
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  11. TheTalkingMule

    TheTalkingMule Distributed Energy Enthusiast

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  12. jbih

    jbih Supporting Member

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    North American oil producers burned through $187 billion of cash since 2012. That's between 5-20 billion dollar negative free cash flow in most of the years...

    ValueAnalyst1 shows the interesting graph directly:

    ValueAnalyst on Twitter

    Here the full article on Bloomberg: I had to open a private window to watch it (article limit reached).

    Bloomberg - Are you a robot?
     
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  13. TheTalkingMule

    TheTalkingMule Distributed Energy Enthusiast

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    Do you often hear contango rear it's head in late July? Seems ominous.
     
  14. jhm

    jhm Well-Known Member

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    A way oversized DC:AC ratio seen in the wild!

    Here is a nice overview of over oversizing PV (DC) capacity to inverter (AC) capacity. Article makes the point that DC:AC ratios are highly specific to the application. So we see and increasingly wider range of ratios.

    But as batteries (and PV modules) become cheaper and more available, I would expect average DC:AC ratios to increase. Basically, batteries can capture the excess surplus DC power, hold it, and make use of the constrained AC inverter capacity at a later time. This makes for greater utilization of both PV capacity and inverter capacity. So if batteries are cheap, the economics can become irresistible. But what is surprising about the lead story here on a 1.9:1 DC:AC system is that no battery is mentioned. Somehow the developers look to be rejecting a mere 11% of DC energy produced over the course of the year. It sounds like the potential for actual overgeneration in this northern setting is quite fleeting. And this may actually leave so little surplus for batteries as to make them economical.
     
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  15. jhm

    jhm Well-Known Member

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    A Return of Fuel Subsidies Follows Rise in Oil Prices - The Fuse

    Thanks. Thanks my comments we meant to be more general. Politically, as oil prices go up, many governments feel pressure to bring price relief through a combination of cutting taxes and increasing subsidies. India was nearly in this situation last year when oil prices were higher than current prices. There are all sort of problems with politicians giving price relief when the cost of fuel goes up. So my basic point is that governments can mitigate these political risks of higher fuel prices by pursuing policies that are supportive of EVs.

    For example, building out a huge fleet of EV buses mitigates the risk that oil to critically higher price points, think $80 to $100 a barrel. This is not just because the buses would run on electricity avoiding expensive diesel, but that they would also offer economic relief to those finding fuel prices too high to operate their own private vehicles. So this mitigates the political need for the government to try to step in and try to transform and unsubsidized $100 barrel into a $75 barrel net of subsidies and tax abatements.
     
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  16. RobStark

    RobStark Well-Known Member

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  17. RobStark

    RobStark Well-Known Member

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    upload_2019-7-26_1-12-52.png
     
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  18. mblakele

    mblakele pre-jackpot member

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    The Economist
    Can American utilities profit from the energy transition?
    The monopolists at the heart of America’s shift to cleaner energy place their bets

    [...]

    The big question for utilities is how much of coal’s declining share to replace with natural gas, and how much with renewables. The answer depends partly on their location.

    [...]

    Regulated utilities make money by investing capital; the variable costs of fuel are borne by consumers. But wind has the benefit of being free, no matter how hard it blows. So xcel settled on a strategy to please both investors and customers: invest more in wind farms, on which it can earn a regulated return, and spend less on fossil fuels, on which it cannot. In the long term, consumers save money and utilities make more of it.

    Shareholders have welcomed this “steel for fuel” strategy [...]

    The availability of cheap gas has dissuaded many utilities in the region that sits atop the shale-rich Marcellus formation in America’s east from investing much in renewables, says Michael Weinstein of Credit Suisse.

    [...]
    The article concludes by observing that solar is an option for customers who want more renewables than the local utility offers. But as we know here, some utilities actively lobby regulatory bodies and state governments to make that more difficult.
     
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  19. jhm

    jhm Well-Known Member

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    Wow, I'm so surprised to see oil emitting at twice the level as coal, and even natural gas is out gassing more carbon than coal. Even if all coal generation were switched to natural gas, it looks like oil would out emit oil. So it is absolutely essentially that we start reducing emissions from oil. I suspect that only EVs will actually start to reduce emissions from oil, as fuel efficiency gains are insufficient to cut those emissions.
     
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  20. neroden

    neroden Model S Owner and Frustrated Tesla Fan

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    It's really the transportation sector, which is the primary user of oil. It's spectacularly large and spectacularly inefficient (we all know that car-sized gasoline engines are under 20% efficient). The oil refineries don't help -- they're huge emitters, so the gasoline has emitted a lot of CO2 before it even gets to the gas station. Coal mostly isn't refined at all, so its impact is all directly at the power plant, which is 30%-45% efficient.
     
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