Shorting Oil, Hedging Tesla

[jhm]

Hmm, in 2015 US EV sales fell 3%. I have typically thought of that as a response to oil prices. But notice that global sales in 2015 did not decline, but grew 68%, which is substantially higher than the two preceding and two following years. So how is it that the price of oil could halt growth in the US while the rest of the globe has unusually high growth?

It seems the price of oil ought not to be able to explain such a differential. So what really happened in 2015?

 

[TheTalkingMule]

PEV growth in China was 71% last year, and 130% for the month of December y-o-y. Plug-in EVs are now 3.3% of their market.

At say 50% average growth, that's just a handful of years til you hit half the market.

 

[dalalsid]

So what really happened in 2015?

People were waiting for the Model X?

 

[ggr]

Hmm, in 2015 US EV sales fell 3%. I have typically thought of that as a response to oil prices. But notice that global sales in 2015 did not decline, but grew 68%, which is substantially higher than the two preceding and two following years. So how is it that the price of oil could halt growth in the US while the rest of the globe has unusually high growth?

It seems the price of oil ought not to be able to explain such a differential. So what really happened in 2015?

Well, it isn't the price of raw oil that bothers consumers, it's the price of petrol/gasoline/benzien/diesel at the pump. In many countries, particularly Europe, the price drop at pump was proportionally smaller than in the US, because those prices include large taxes (or in the case of Australia, "World Parity Pricing" where the basic price is based on a weighted average of other country's prices). I travel regularly between the US and Oz, and while the pump price in San Diego dropped more than 25%, it only moved about 10% in Oz at the same time.

 

[jhm]

Well, it isn't the price of raw oil that bothers consumers, it's the price of petrol/gasoline/benzien/diesel at the pump. In many countries, particularly Europe, the price drop at pump was proportionally smaller than in the US, because those prices include large taxes (or in the case of Australia, "World Parity Pricing" where the basic price is based on a weighted average of other country's prices). I travel regularly between the US and Oz, and while the pump price in San Diego dropped more than 25%, it only moved about 10% in Oz at the same time.

Thanks. Regional variation in fuel prices could explain some of this.

 

[jhm]

People were waiting for the Model X?

Interesting. The decline in US EV sales was just 5k. Had Tesla been able to pull production 2 quarters ahead, that would have added 7k mostly to US market. Pulling all of 2016 Model X production ahead into 2015 would have been about 24k, but maybe half that would have hit the US market.

So certainly delays in Model X was a disappointment for US EV sales, so a contributing factor. The market should have grown by about 40k instead of declining 5k. Maybe regional variation in fuel prices explains a portion of this as well.

 

[Oil4AsphaultOnly]

Interesting. The decline in US EV sales was just 5k. Had Tesla been able to pull production 2 quarters ahead, that would have added 7k mostly to US market. Pulling all of 2016 Model X production ahead into 2015 would have been about 24k, but maybe half that would have hit the US market.

So certainly delays in Model X was a disappointment for US EV sales, so a contributing factor. The market should have grown by about 40k instead of declining 5k. Maybe regional variation in fuel prices explains a portion of this as well.

I think if you couple this with the end of georgia's state tax incentive (beginning of 2015; pulled forward demand for the leaf into 2014), that would account for a few k's of EV sales between 2014 vs. 2015. 2015 felt like an EV backlash year.

 

[jhm]

I think if you couple this with the end of georgia's state tax incentive (beginning of 2015; pulled forward demand for the leaf into 2014), that would account for a few k's of EV sales between 2014 vs. 2015. 2015 felt like an EV backlash year.

Ah, yes, that was a $5000 tax break. The streets of Atlanta are still full of Leafs. I have many associates who found that the $7500 federal, $5000 state, plus savings on fuel made it the most affordable car on the market.

 

[jhm]

Chinese Coal Futures Spike On Shortage Concerns | OilPrice.com

This is good? Cold weather spurs coal shortage in China. Coal futures up 11%. So on one hand, higher coal prices make coal less competitive with renewables and batteries. That could be good. On the other hand, higher coal prices could trigger more coal production.

In the US, the polar vortex phenomena has been used politically to argue special supportive pricing for coal and nuclear on grounds that the ability to store a 90 day fuel supply on site has some virtue unrewarded by the market. No doubt baseload advocates will exploit this situation in China to try to lock in political support and subsidies for coal.

So I guess I'd just prefer coal to be dirt cheap so that miners move on to more worthwhile minerals.

 

[jhm]

BP Reshapes Portfolio to Ensure Oil Assets Aren't Left Undrilled

BP economist now admits that existing proven oil reserves likely exceed all future oil consumption. And this presumably is based based on oil peaking in the mid 2040s.

This is what I've be talking about for quite a while, though I see oil peaking in about 10 years, not 30.

For BP to use this as a rationale for a strategic move away from oil assets to natural gas suggests that they see the economic risks coming much sooner than 20 to 30 years away. Remember that NO estimate proven reserves at about 60 times current annual production. A peak in 2045 would easily mean that 70 per more years of supply would be ultimately needed, while a peak in 2025 might need only 30 year supply. So I get the impression that BP is coming to an internal view that the peak is coming within 20 years and may much sooner. Granted a surplus of reserves can lose value well before oil peaks. But facing a bubble of this magnitude, you can't count on buyers for surplus assets. So BP has to start grooming their portfolio very early in the process.

 

[jhm]

Being a data analysis geek, I've been playing with the data logs on the operation of the Hornsdale Power Reserve. You can see the live data here:

Load (charging) nemlog-api: Unit: HPRL1 [at HORNSDAL] Output and Regional Price (SA1)

Generation (discharging) nemlog-api: Unit: HPRG1 [at HORNSDAL] Output and Regional Price (SA1)

These links have charts the show the power price and the load taken or generation delivered by the HPR. There are also links the csv files containing the underlying data.

So this evening I was shocked to see these charts.

What is shocking here is the frequency of negative prices. Many of these prices are -$999.999 and -$1000. These are suspicious as they signal missing values. However, negative prices are all over the place and they often last for just a few 5-minute intervals. So these very well could be legitimate negative prices.

So on assumption that the data are correct I calculated how much power the Tesla battery bought and sold over this 36-hour period.

Load, -173MWh @ -$132.85/MWh = $23,045
Gen, +89MWh @ -$154.07/MWh = $13,756
Net, -84MWh @ -$110.34/MWh = $9,289

So in 36 hour the battery made $9289 while gaining a charge of 84MWh. The battery was doing rate arbitrage while the price was rapidly alternating between positive and negative prices. While the battery is quite nimble, it did seem to have difficulty following price signals in real time. If the negative prices are in fact erroneous, this would explain the difficulty. Also if the price signals are not communicated quickly enough, this would cause problems. But assuming all this is working properly, it looks like there may be opportunity to fine tune the trading algorithms for this kind of bizarre price action.

Nevertheless, if the power market is starting to experience this degree of exposure to negative prices, batteries like HRP are uniquely position to soak up these spiky negative prices.

I do hope that reneweconomy.com.au can get to the bottom of this bizarre episode. What the heck is going on?

 

[EinSV]

Being a data analysis geek, I've been playing with the data logs on the operation of the Hornsdale Power Reserve. You can see the live data here:

Load (charging) nemlog-api: Unit: HPRL1 [at HORNSDAL] Output and Regional Price (SA1)

Generation (discharging) nemlog-api: Unit: HPRG1 [at HORNSDAL] Output and Regional Price (SA1)

These links have charts the show the power price and the load taken or generation delivered by the HPR. There are also links the csv files containing the underlying data.

So this evening I was shocked to see these charts.
View attachment 277010 View attachment 277011

What is shocking here is the frequency of negative prices. Many of these prices are -$999.999 and -$1000. These are suspicious as they signal missing values. However, negative prices are all over the place and they often last for just a few 5-minute intervals. So these very well could be legitimate negative prices.

So on assumption that the data are correct I calculated how much power the Tesla battery bought and sold over this 36-hour period.

Load, -173MWh @ -$132.85/MWh = $23,045
Gen, +89MWh @ -$154.07/MWh = $13,756
Net, -84MWh @ -$110.34/MWh = $9,289

So in 36 hour the battery made $9289 while gaining a charge of 84MWh. The battery was doing rate arbitrage while the price was rapidly alternating between positive and negative prices. While the battery is quite nimble, it did seem to have difficulty following price signals in real time. If the negative prices are in fact erroneous, this would explain the difficulty. Also if the price signals are not communicated quickly enough, this would cause problems. But assuming all this is working properly, it looks like there may be opportunity to fine tune the trading algorithms for this kind of bizarre price action.

Nevertheless, if the power market is starting to experience this degree of exposure to negative prices, batteries like HRP are uniquely position to soak up these spiky negative prices.

I do hope that reneweconomy.com.au can get to the bottom of this bizarre episode. What the heck is going on?

This is totally winging it and could be completely wrong but I thought that one of the causes of blackouts has been that when the grid is stressed to its limits and elements of it start to fail one of the things that happens is supply surges beyond the capacity of the grid to absorb and causes other elements to fail -- a domino effect of sorts. So maybe the negative charges are actually positive payments to temporarily take load off the grid, in addition to getting paid to provide the grid with energy when there is a shortfall due to a power source dropping off line, a surge in demand, etc.

I am running off for dinner but a more detailed discussion is here. Explainer: power station ‘trips’ are normal, but blackouts are not

Would be interesting to learn more about this ....

 

[renim]

Being a data analysis geek, I've been playing with the data logs on the operation of the Hornsdale Power Reserve. You can see the live data here:


I do hope that reneweconomy.com.au can get to the bottom of this bizarre episode. What the heck is going on?

This seems reasonable to me, once there is a high amount of intermittant energy to be forcibly dispatched into an edge of grid system (like SA, the constraint becomes getting the power when needed, not the energy when not needed)

SO what prices does Texan wind power need in the USA to turn a profit, Isn't it a negative price, yet its still profitable. Same same

 

[jhm]

Here's another source for HPR activity from its operator Neoen. https://hornsdalepowerreserve.com.au

So this gives a more complete picture of what the battery is working with. It does confirm that these negative price spikes continue to happen.

 

[renim]

congestion

 

[jhm]

congestion

Texas has grid congestion problems and would benefit from distributed storage. Is that what you're referring to?

 

[jhm]

Renewables, Energy Storage, Electric Cars Will Likely Grow Strongly In 2018 As Oil Prices Rebound

The Oil Rally Is Helping Renewables | OilPrice.com

These authors make the basic point that oil and coal prices are supportive of a big growth in renewables, batteries, and EV. Then they opine so as to back off on this assertion. What is missing is that most of this has been growing steadily at a fast clip for years. For example, typical EV growth globally is about 56%/y. To suggest that 40% growth in 2018 is fast and aided by a higher price of fuel obscures the fact that 40% would actually be very slow growth compared to historical trends. Fast growth fueled by pricey oil could be in excess of 65%.

Similarly solar growth is historically around 30%/y. Grid scale solar rose 26% last year to 99GW. The idea that "more than 100GW of solar could come online next year" seriously understates the historical expectation of about 130GW for next year. If 2018 solar came in below 120GW, it would be heralded as a serious slow down in growth. Moreover, despite so much hand wringing about the US tariff on solar panel imports from China, that is not where demand for Chinese panels is coming from. I'm quite confident that any Chinese panel that is not imported to the US will be installed somewhere else on the planet. Moreover, the price is likely to keep falling 15%/y per the historical trend. So even if investments in solar installations remain static in currency, the volume of installation still goes up by some 17%. Basically solar investment would need to pull back by more than 15% for global installations this year to come in a mere 100GW. It takes absolutely no conviction to predict that next year "could be more than 100GW".

In fact, what is going on here is false anchoring of expectations. Growth is not anchored properly on stable historical trends, but on the biases of energy insiders who only begrudgingly admit that clean energy is likely to keep growing.

 

[jhm]

The Force Is With Clean Energy: 10 Predictions for 2018 | Bloomberg New Energy Finance
Here's the article that seemed to tip off the two links in the above post. The tone and context seems to be different. This piece was an opportunity for BNEF analysts to make their own predictions for the year. So there is some question as to how much neck they want to extend. Regarding the "100GW" solar predictions in the Forbes and OilPrice pieces. They misrepresented what the BNEF analyst actually said, "Global solar installations will be at least 107GW in 2018, up from the higher-than-expected 98GW last year, and new countries will become established as significant markets." So the low ball prediction is 107GW, not 100GW. Moreover, this low ball is 9% over the prior year, rather than a measly 2%.

In all areas, I think the impact of batteries is underestimated. Adding batteries to wind could easily enhance new generation market share for wind. Likewise batteries will sustain strong growth for solar. $100/kWh battery packs will come much sooner for EVs than "mid to late 2020s." Even LNG over $9/mmBTU is at substantial risk of competition from batteries. Why burn LNG at over $70/MWh when unsubsidized batteries paired with wind and solar are pushing below $40/MWh, even below $30/MWh, for dispatchable 24/7 power? Would growing Asian countries prefer to spend on LNG infrastructure like import terminals and regasification facilities or massive battery storage? These LNG infrastructure costs on not even represented in the price of LNG. So batteries as infrastructure is a compelling alternative to LNG infrastructure. At some point, we will start hearing news about China building out 10s of GW of battery storage. Will that happen this year?

 

[TheTalkingMule]

China installed far more solar last June than we did all year. These tariffs will have little impact on global installations totals for 2018. All they're doing is pushing us further behind.

 

[TheTalkingMule]

Posted this update in the Energy forum, but it has massive implications here...

All-electric ferry cuts emission by 95% and costs by 80%, brings in 53 additional orders