Shorting Oil, Hedging Tesla

[jhm]

https://twitter.com/x/status/1727676576072859849

This was a helpful response.

China’s EV Export Boom Is Bringing Southeast Asia Into Beijing’s Orbit

Growing automobile trade with Southeast Asia has all the makings of a “circular” economy that will deepen regional integration.

thediplomat.com

 

[jhm]

Thread by @PZeniewski on Thread Reader App

@PZeniewski: Can the oil and gas industry play a constructive role in transitions? This is one of the burning questions for the climate. Today, the @IEA released a massive new report on the subject. Let’s dive...…

threadreaderapp.com

This is a very nice thread from IEA setting out the basic issues for oil and gas companies.

I know we've discussed this. Returning capital and shrinking out of business is one option. For those that want to try to stay relevant in the energy future. They might try matching the clean to fossil investment ratio.

Currently O&G companies are investing 2.5% into clean. This is a whopping 0.025× investment ratio at a time when the whole energy sector invests 1.8×. Imagine how irrelevant this 0.025× ratio will be against 10× in 2030.

It's not going to get any easier to develop new competencies in clean energy development.

Oh, well, not my circus.

 

[Doggydogworld]

My bet is that they're all EV's, since those won't need to meet any emissions regulations.

This article says NEVs were 96k of 444k total exports in September. Major OEMs like GM, VW, etc. export ICE from their JVs in China. Buick Envision sold in the US came from China. No problem with emissions standards.

 

[Oil4AsphaultOnly]

This article says NEVs were 96k of 444k total exports in September. Major OEMs like GM, VW, etc. export ICE from their JVs in China. Buick Envision sold in the US came from China. No problem with emissions standards.

Ahh. exports from the JV's makes sense.

 

[Doggydogworld]

In the mid-80s I lived in Camarillo, CA, about an hour northwest of LA. The oil company ARCO (now part of BP) had a solar cell manufacturing plant there. IIRC it was the world's largest at one point. They built it in the '70s after acquiring a solar startup. It was a perennial money loser. It passed through a bunch of hands, including Siemens and Shell, before being shut down 10-15 years ago. One of numerous O&G renewable investments that failed.

I think solar and wind are simply outside their circle of competence. The politics also suck. A politician who subsidizes a solar plant is cheered by the left for "saving the planet" and reviled by the right for funding "another Solyndra". Unless the plant is owned by Exxon, BP, etc. in which case the left is irate the politician is "getting in bed with the enemy who will only sabotage the project". And the right? They're still unhappy to see tax dollars "wasted". Few politicians are dumb enough to piss off both sides. This puts O&G at a huge disadvantage when it comes to renewables.

 

[jhm]

Chart of the Day.

I like the concept here. Y-axix indicates the number of years operation for an (average) EV to break-even with ICE. Measures essentially how much the fuel savings are needed to overcome the premium in sticker price. That's how you get to different alternatives depending on the price of oil.

The obvious problem with the chart is that the analysts are constructing some sort of "typical" EV. Arguably, some makes and models are already ahead of this curve, others are well behind. And it depends on the ICE vehicle assumed for comparison.

In reality, most new car buyers are shopping multiple models that fit their needs, wants, and finances. Amongst that consideration set, a buyer could estimate the fuel savings differential between their most liked ICE and most like EV options. If that break-even is at most a couple of years, it will be obvious to the buyer that the EV wins. But this all comes down to how a specific car buyer is framing their short list.

BTW, in my case, I don't even have any ICE or hybrid in my short list. Tesla wins every time, and the cost savings of charging have become irrelevant to my car buying decisions.

 

[Doggydogworld]

New Yorker article about Green Mountain Power's (Vermont) big Powerwall program and similar efforts nationwide. I'm a much bigger fan of their dispatchable demand efforts, though:

Or, if it’s going to be a hot day, he can preheat water heaters in many homes in the morning, so that in the afternoon, as the temperature rises, more power will be available to run air-conditioners. He can also precool some big buildings in the morning. “Then, if you think about it, the building itself is the battery,” he said, in the sense that it stores chilled air for later in the day. “We have about fifty megawatts” of this distributed power, Castonguay told me. “At the scale of Vermont, that’s a lot.” Utilities have always been able to dispatch supply, bringing power plants, which are often in idle mode, online as demand requires. Now they’re increasingly able to call up small, individual home power plants and dispatch demand as well, turning down thermostats or delaying car charging.

I was in a discussion with an off-grid homeowner wanted to buy a separate freezer to run off his excess daytime solar. He had some old lead-acids and was trying to figure out the best way to charge them after his new LFPs filled up around noon. Turns out it's a whole lot simpler to just put a few freezer packs in it and turn the freezer off at sunset. It'll stay at 5 deg F overnight as the packs melt, then the compressor kicks on the next morning and drops the temp to 0F or whatever to re-freeze the packs.

Solar and wind power are extremely cheap if you can tune your demand to use that power in real time. And we can tune an awful lot of our usage, especially EV charging. Too many just want to throw stationary batteries at the issue. Especially those who sell batteries, lol.

 

[jhm]

Seba's notion of superabundant power is that when the grids have enough wind and solar power to make it through the least abundant weak of the year, this implies generating a surplus pretty much most of the year. Batteries are there to smooth out power over about a week. The logic here makes sense. When you try to allocate sufficient wind, solar and batteries to cover that most critical week, you are trading off the relative cost of each sort of asset to obtain your most economic mix. That marginal capital mostly is useful just a week or two out of the year.

Even if you have some clean baseload like nuclear or geothermal, say it covers 20% of demand in your critical week, you still have the sames problem of allocating enough wind, solar and batteries to cover the remaining 80%. This shifts the scale a bit from 100% to 80%, but it does not eliminate the problem. Moreover, adding say marginal nuclear power just to cover the critical couple of weeks, effectively a 10% capacity factor is a super expensive option, easily more expensive that marginal wind, solar or batteries.

So, you get to the same situation, the fossil-free grid is generating 2 or 3 times as much energy as is needed over the year, and most days there is a substantial surplus.

The interesting question is, what adaptive uses can be made of that surplus? How we make good economic use of it actually lowers the cost of system to those who will bear the costs of the critical weeks.

Refrigerator load is one sort of demand that can be made much more adaptable. Chill when the sun shines, and in winter when there is less sunlight, refrigeration loads can also be at their lowest. There is some natural capacity here for adaptation.

We'll want many other processes and industries to find ways to flex power demand.

 

[Oil4AsphaultOnly]

Seba's notion of superabundant power is that when the grids have enough wind and solar power to make it through the least abundant weak of the year, this implies generating a surplus pretty much most of the year. Batteries are there to smooth out power over about a week. The logic here makes sense. When you try to allocate sufficient wind, solar and batteries to cover that most critical week, you are trading off the relative cost of each sort of asset to obtain your most economic mix. That marginal capital mostly is useful just a week or two out of the year.

Even if you have some clean baseload like nuclear or geothermal, say it covers 20% of demand in your critical week, you still have the sames problem of allocating enough wind, solar and batteries to cover the remaining 80%. This shifts the scale a bit from 100% to 80%, but it does not eliminate the problem. Moreover, adding say marginal nuclear power just to cover the critical couple of weeks, effectively a 10% capacity factor is a super expensive option, easily more expensive that marginal wind, solar or batteries.

So, you get to the same situation, the fossil-free grid is generating 2 or 3 times as much energy as is needed over the year, and most days there is a substantial surplus.

The interesting question is, what adaptive uses can be made of that surplus? How we make good economic use of it actually lowers the cost of system to those who will bear the costs of the critical weeks.

Refrigerator load is one sort of demand that can be made much more adaptable. Chill when the sun shines, and in winter when there is less sunlight, refrigeration loads can also be at their lowest. There is some natural capacity here for adaptation.

We'll want many other processes and industries to find ways to flex power demand.

It's for this exact situation of abundant excess power that I would advocate for methane synthesis. Methane can be used in the existing gas peaker plants (which were designed to be efficient under low capacity factors anyway) during those critical weeks. Methane's also easily stored and Using synthesized methane makes the whole power plant NET zero.

From a convenience viewpoint, it beats pre-refrigeration, especially when increased energy consumption for water-heating is factored.

 

[adiggs]

So, you get to the same situation, the fossil-free grid is generating 2 or 3 times as much energy as is needed over the year, and most days there is a substantial surplus.

The interesting question is, what adaptive uses can be made of that surplus? How we make good economic use of it actually lowers the cost of system to those who will bear the costs of the critical weeks.

I've been thinking about this for awhile. I've got some weird ideas - the main thing I've concluded is that is the advent of "approximately zero marginal cost energy".

The internet brought us "approximately zero marginal cost communication", and you can see what that's done for the world of communication. I grew up on a party line with about 8 other families (our house was 2 long rings). One could make a long distance phone call, but it was expensive enough that it was something that got some thought in the family budget. By the mid-80s I was using 9.6kbps and then 19.2kbps modems to connect to bulletin boards (via POTS).

Today communication is so cheap that we've got major businesses built up that are dependent on bandwidth being so cheap that every house can get its own digital copy of video at the same time, and that's a minor load on the network. How many people could conceive of a business like Netflix in the 80s or 90s; heck even the 00s? It certainly wasn't a business that the Internet was designed to make possible. Approximately zero marginal cost <something fundamental to existence> is a step change in, well, everything.


Give entrepreneurs years, and then decades, with approximately zero marginal cost energy and I can't wait to see what new businesses arise.

I do claim that, in time, the way that energy gets metered and paid for, at least in the residential world, will start to look like how we get our internet service at home. Some sort of flat rate for the month, maybe with some super high threshold after which a moderate incremental cost starts. Energy will be so cheap to produce that the residential side can be paid for more cheaply and effectively by charging a flat rate. We'll pay for access to the electric grid, and it'll be too expensive to try and count the kwh as they get consumed. Or at least the cost will be such that trying to charge by the kwh will put a business at a competitive disadvantage to somebody else that will sell it as a flat rate monthly network access.

In this case, the public regulation in place due to these being monopolies is going to get in the way, but I expect to see this during my lifetime.

In fact Elon's already talked about a very early incarnation of this in Texas - Tesla will be providing electricity service, and one of the things they plan to offer is free EV charging at home over night for a flat monthly fee.

 

[jhm]

https://twitter.com/x/status/1728758873065206135

Apparently EVs do lead to demand peaks. Petrol has been declining near 5% a year for the last couple of years. Diesel may be approaching that rate as well. It's down 15% from 2016 peak, but it seems to be picking up speed.

 

[jhm]

https://x.com/swhess15/status/1728970635609833863?s=20

This is an interesting exchange. Clearly there is enough solar in California to drive wholesale power prices down to around $0/MWh. Notice a lot of gas keeps generating (at a marginal loss) through the sunny day. I suspect this is so they can ramp back up easily as the sun is setting. That evening power is worth so much that they are willing to absorb the fuel cost to maintain a head of steam (combined cycle). This suggests that CAISO still needs much more battery capacity. Batteries can charge at nearly zero cost during the day and immediately start discharging as prices surge in the evening. Also notice power prices are nearly constant from sundown to sunup. So I guess there is enough battery capacity to absorb any peak prices that might otherwise occur. Thus, 4-hour batteries look good economically, not just the 1-hour peak batteries. Bulking up on battery energy capacity will push more gas off the market.


Finally, as Steven Hess points out, California utilities still incentivize EV owners to charge at night, not during the day. That seems incredibly wrong. It keeps gas generators going day and night just to charge cars at the wrong time. The obvious low handing fruit is to have low-cost retail rates in the midday to charge EVs. The grid batteries could be charging in the wee hours of the morning whenever the wholesale price might come down. That would give these batteries the potential for a second daily cycle, improving their own economics. I see no need to incentivize EV charging at night. Rather, many EV owners will do so for the sheer convenience of it.

One potential objection here is grid capacity. CAISO might want to avoid having to build out more transmission lines so that EVs can charge midday. If this is the case, it suggests all the more that incremental battery capacity needs to be co-located with solar generation, and other grid batteries need to be strategically located to make the transmission system more efficient. Regardless, the grid will need to be restructured and optimized to handle the solar surge and charging needs. Instilling bad charging habits in EV owners now is shortsighted.

 

[ItsNotAboutTheMoney]

Finally, as Steven Hess points out, California utilities still incentivize EV owners to charge at night, not during the day. That seems incredibly wrong. It keeps gas generators going day and night just to charge cars at the wrong time. The obvious low handing fruit is to have low-cost retail rates in the midday to charge EVs. The grid batteries could be charging in the wee hours of the morning whenever the wholesale price might come down. That would give these batteries the potential for a second daily cycle, improving their own economics. I see no need to incentivize EV charging at night. Rather, many EV owners will do so for the sheer convenience of it.

?

California Edison TOU rates are either cheaper during the day, or no more expensive than at night.

Time-Of-Use Residential Rate Plans

Learn about Time-of-Use residential rate plans and why you should switch. Review pricing, options, FAQs and more.

www.sce.com

 

[jhm]

?

California Edison TOU rates are either cheaper during the day, or no more expensive than at night.

Time-Of-Use Residential Rate Plans

Learn about Time-of-Use residential rate plans and why you should switch. Review pricing, options, FAQs and more.

www.sce.com

Nice. I'm not sure where that poster gets his power. There are different retailers in the CAISO. Also can't rule out that a random poster might be confused or poorly informed.

 

[Oil4AsphaultOnly]

https://x.com/swhess15/status/1728970635609833863?s=20

This is an interesting exchange. Clearly there is enough solar in California to drive wholesale power prices down to around $0/MWh. Notice a lot of gas keeps generating (at a marginal loss) through the sunny day. I suspect this is so they can ramp back up easily as the sun is setting. That evening power is worth so much that they are willing to absorb the fuel cost to maintain a head of steam (combined cycle). This suggests that CAISO still needs much more battery capacity. Batteries can charge at nearly zero cost during the day and immediately start discharging as prices surge in the evening. Also notice power prices are nearly constant from sundown to sunup. So I guess there is enough battery capacity to absorb any peak prices that might otherwise occur. Thus, 4-hour batteries look good economically, not just the 1-hour peak batteries. Bulking up on battery energy capacity will push more gas off the market.


Finally, as Steven Hess points out, California utilities still incentivize EV owners to charge at night, not during the day. That seems incredibly wrong. It keeps gas generators going day and night just to charge cars at the wrong time. The obvious low handing fruit is to have low-cost retail rates in the midday to charge EVs. The grid batteries could be charging in the wee hours of the morning whenever the wholesale price might come down. That would give these batteries the potential for a second daily cycle, improving their own economics. I see no need to incentivize EV charging at night. Rather, many EV owners will do so for the sheer convenience of it.

One potential objection here is grid capacity. CAISO might want to avoid having to build out more transmission lines so that EVs can charge midday. If this is the case, it suggests all the more that incremental battery capacity needs to be co-located with solar generation, and other grid batteries need to be strategically located to make the transmission system more efficient. Regardless, the grid will need to be restructured and optimized to handle the solar surge and charging needs. Instilling bad charging habits in EV owners now is shortsighted.

I think CAISO's aware of this. This summer was the first time where TOU rates were lower from 8am-4pm, than the traditional midnight-6am time. Winter saw the rates even out again. I imagine next summer will be more of the same (or more drastic savings)

 

[jhm]

OPEC Slams IEA over ‘Moment of Truth’ for Oil | OilPrice.com

Days after the International Energy Agency (IEA) said that the oil and gas industry faces “a moment of truth” in choosing between fueling climate change and becoming a part of the solution, OPEC criticized the agency for vilifying the industry

oilprice.com

Diplomacy!!! Ha, ha.

If OPEC really believes the CCS will pay off big time, they are free to invest their own money in it. It's a portion of the 2.5% of investments outside of fossil fuels.

Go ahead, OPEC, double your investment in CCS. I dare you!

 

[iPlug]

...Notice a lot of gas keeps generating (at a marginal loss) through the sunny day. I suspect this is so they can ramp back up easily as the sun is setting...

At least one person in this forum prior suggested a large portion of the lack of natural gas curtailment during these times is due to long term contracts. I have not been able to find source data on that either way.

Someone else had mentioned that transmission/distribution bottlenecks play a role too - that there may be plenty of excess renewable energy generation for hours at a time, but that parts of the grid effectively had islanding limits as to how much of that renewable energy could be delivered to the end customer.

 

[jhm]

https://x.com/CleanPowerDave/status/1729240122489471205?s=20

Yes, let's triple RE generation by 2030. I think this is pretty much in line with 2023 Investor Day presentation.

 

[jhm]

Here's something I've been thinking about lately. Does nuclear power actually reduce the carbon intensity of the global economy.

Consider the following stats about 30-year change from 1991 to 2021:
Global Real GDP: up 138.6%
Global Power Generation: up 131.3%
Global Nuclear Pwr Gen: up 30.7%

Nuclear power would need to be twice as large in 2021 just to keep up with the economy.

Also note that the global economy grows about as fast as total power generation. Indeed, over 30 years the economy grew just 3% faster than electricity, that's only about 0.1% per year.

Nuclear as a share of global generation went from 17.15% in 1991 to 9.85 in 2021.

What the global economy needs to sustain growth is very fast growing clean energy. Nuclear is clean and reliable, but it simply does not keep up. Only clean energy sources that can grow faster than the economy can truly be said to decarbonize the economy.

Electricity Mix

Explore data on where our electricity comes from, and how this is changing.

ourworldindata.org

 

[jhm]

https://x.com/EIAgov/status/1730230222719418468?s=20

Chart of the Day.

Petroleum is becoming more than half of US carbon emissions. Sure, we need to keep shutting down coal plants, but we also need to crush petroleum emissions with EVs and we need to shrink gas emissions with more solar, wind and batters.

I don't see how it makes any sense at this point to build new gas plants so as to shut down coal plants. Rather, we need to start cutting gas generation.