Shorting Oil, Hedging Tesla

[ggies07]

https://twitter.com/x/status/1589660814679584768

EV share to reach 13.5% this year!
BEV share to reach 10.1% this year!

This gives me such joy. Growth in vehicle count this year is 57%. Just one more doubling of EVs gets us past the oil demand peak. That's just 2 years away, 2024.

I still think 2019 will likely stand as the all time demand peak, but within this decade, the 2020s there must also be a local peak before oil demand is forced into secular decline. In my view, that final peak will happen 2022, 2023, or 2024. Growth is to hot and heavy over the next four years for 2025 to post a new demand peak for oil.

This is no longer about making long-term assumptions. It's about the next 3 years. In 2022, EVs hit 10.6M. Then exceed 21M in 2024. This gets EVs to a scale where even if growth in 2025 is just 25%, 5M, it's big enough to offset 0.2 mbpd of motor fuel demand. This is significant demand decay near the peak.

Additionally, I'm mot worried about PHEVs. BEVs are 3× PHEVs and growing faster. BEVs are crossing the 10% market share right now. So it's hard for PHEVs to keep up, being about 3 years behind. They do help cut oil demand and help some consumer transition to BEVs. So I'm glad to see these contributions. In 2026, BEVs can hit 50% market share. I think PHEVs will be losing market share to BEVs past that point as saturation starts to slow the transition.

I have a tiny data point that I thought everyone would like to hear. It's nothing like what @jhm and others share, but I think it helps with this narrative.

My wife works for a company that does underwater welding and for most of the time their income came from fixing oil rigs. After updating her with this new info @jhm has shared, she goes onto to tell me that they used to have 2-3 oil rig jobs per month and now it's 2-3 a year. Over the last, say 7 years, they have slowly transitioned from offshore projects to onshore, doing mostly service on water tanks.

They saw the writing on the wall and knew they had to pivot if they wanted to survive.

 

[petit_bateau]

I have a tiny data point that I thought everyone would like to hear. It's nothing like what @jhm and others share, but I think it helps with this narrative.

My wife works for a company that does underwater welding and for most of the time their income came from fixing oil rigs. After updating her with this new info @jhm has shared, she goes onto to tell me that they used to have 2-3 oil rig jobs per month and now it's 2-3 a year. Over the last, say 7 years, they have slowly transitioned from offshore projects to onshore, doing mostly service on water tanks.

They saw the writing on the wall and knew they had to pivot if they wanted to survive.

I too used to be offshore and have managed a lot of subsea stuff over the years.

They need to start bidding on underwater wind farm stuff, both fixed and floaters. Both are coming to US waters. However they need to be prepared for a very different cost structure.

 

[winfield100]

Coal is the bigger driver. You have to use 2019 as the baseline, not 2021, due to COVID's disproportionate impact on oil. Coal is up 0.5 Gt vs. 2019, oil down a bit.


In the US, yes, but Chinese and 3rd world coal growth should again outweigh global solar/wind deployments. Europe may also increase coal as they scramble for alternatives to Russian gas.


About 60% of EVs today are sold in China, where grid power is mostly coal so the net GHG impact is pretty small. Meanwhile, the world will buy another 80m ICE vehicles this year and only scrap something like 50m. So the global ICE fleet will grow. And ICE efficiency gains are mostly offset by vehicle size/weight growth.

It's tough to move the needle. Banning long range consumer BEVs and directing our constrained battery supply to commercial BEVs and consumer PHEVs would cause oil to peak a little sooner, but there's no constituency for that.

 

[winfield100]

coal consumption

 

[petit_bateau]

coal consumption
View attachment 879480

To be fair a lot of the coal upsurge is a) covid rebound and b) Ukraine effect. Both are temporary and imho we are at retesting peak coal.

A side worry is the concern that BP may stop World Energy. I commented on this in daily news. I hope not as long run data sets in the public domain are crucial.

 

[engine ear]

This blog post by Michael Liebriech at BloombergNEF was from 2020 but is a good read:

Liebreich: Separating Hype from Hydrogen – Part One: The Supply Side | BloombergNEF

On the surface, Hydrogen, the most common element in the universe, seems like the answer to every energy question. But, what drawbacks does it face?

about.bnef.com

Liebreich: Separating Hype from Hydrogen – Part Two: The Demand Side | BloombergNEF

In part two of his Hydrogen series, Michael Liebreich looka at the demand side of hydrogen.

about.bnef.com

By 2050 ... BloombergNEF estimates that green hydrogen will be available at between $0.8 and $1.0 per kilo.
...
Distributing cheap green hydrogen around Europe, the other part of the EU Hydrogen Strategy, should add between 7 and 50 euro cents per kilogram, according to BloombergNEF’s most recent report ... as long as it is done via a pipeline.

[from part 2]
That does not mean that hydrogen’s future role will be marginal, however, far from it. First of all, that little phrase “as a chemical feedstock” will be doing an awful lot of work. Secondly, the corollary of hydrogen’s limited use to meet final energy demand is that we are going to be enormously dependent on electricity. An electricity system built on a foundation of ‘base-cost’ wind and solar power may be cheap, but it is going to need two things that hydrogen is uniquely positioned to supply: unlimited flexible capacity for reliable backup, and strategic energy storage for resilience to shocks.

 

[adiggs]

This blog post by Michael Liebriech at BloombergNEF was from 2020 but is a good read:

Liebreich: Separating Hype from Hydrogen – Part One: The Supply Side | BloombergNEF

On the surface, Hydrogen, the most common element in the universe, seems like the answer to every energy question. But, what drawbacks does it face?

about.bnef.com

Liebreich: Separating Hype from Hydrogen – Part Two: The Demand Side | BloombergNEF

In part two of his Hydrogen series, Michael Liebreich looka at the demand side of hydrogen.

about.bnef.com

By 2050 ... BloombergNEF estimates that green hydrogen will be available at between $0.8 and $1.0 per kilo.
...
Distributing cheap green hydrogen around Europe, the other part of the EU Hydrogen Strategy, should add between 7 and 50 euro cents per kilogram, according to BloombergNEF’s most recent report ... as long as it is done via a pipeline.

[from part 2]
That does not mean that hydrogen’s future role will be marginal, however, far from it. First of all, that little phrase “as a chemical feedstock” will be doing an awful lot of work. Secondly, the corollary of hydrogen’s limited use to meet final energy demand is that we are going to be enormously dependent on electricity. An electricity system built on a foundation of ‘base-cost’ wind and solar power may be cheap, but it is going to need two things that hydrogen is uniquely positioned to supply: unlimited flexible capacity for reliable backup, and strategic energy storage for resilience to shocks.

I'm curious - does the author get into the technical details of successfully storing and transporting hydrogen (I'm eager to read if so)? This is the thing that I never see addressed when talking about using hydrogen direction (vs. using hydrogen in the form of ammonia, methane, or something similar). The technical problems, the associated costs, and the risks associated with widespread storage and movement of hydrogen look to me to be too large to overcome compared to alternatives (and thus my question).

The biggest risk I see is that in a world that contains even a tiny sliver of bad actors, it looks to me like the risks associated with willful mis-use are too high for any insurance companies to belly up and insure.

 

[engine ear]

I'm curious - does the author get into the technical details of successfully storing and transporting hydrogen (I'm eager to read if so)? This is the thing that I never see addressed when talking about using hydrogen direction (vs. using hydrogen in the form of ammonia, methane, or something similar). The technical problems, the associated costs, and the risks associated with widespread storage and movement of hydrogen look to me to be too large to overcome compared to alternatives (and thus my question).

The biggest risk I see is that in a world that contains even a tiny sliver of bad actors, it looks to me like the risks associated with willful mis-use are too high for any insurance companies to belly up and insure.

No, that is beyond the scope of his blog post. Certainly hydrogen is more challenging to handle than methane, but it can be stored in underground caverns the same way methane can, and it can be moved by pipelines also. Generally you need specially built pipelines and it probably only makes sense to connect major infrastructure, such as a chemical refinery or as a backup source of power generation. It doesn't make sense for homes and businesses to be connected to a hydrogen pipeline, as is currently done with natural gas. It doesn't make sense financially, even if there were no safety concerns.

What willful misuse risks apply to hydrogen that don't also apply to methane?

 

[Unpilot]

Curious as to thoughts on investing in petro companies that make nitrogen and potash. The conflict in Ukraine has impacted production of these, so investing in company's that make them seems like a smart play.

I have looked at a couple such as ICL, a global manufacturer of products based on unique minerals and Nutrien Ltd. (NTR) Stock Price, News, Quote & History - Yahoo Finance

What do you folks think about this?

 

[adiggs]

No, that is beyond the scope of his blog post. Certainly hydrogen is more challenging to handle than methane, but it can be stored in underground caverns the same way methane can, and it can be moved by pipelines also. Generally you need specially built pipelines and it probably only makes sense to connect major infrastructure, such as a chemical refinery or as a backup source of power generation. It doesn't make sense for homes and businesses to be connected to a hydrogen pipeline, as is currently done with natural gas. It doesn't make sense financially, even if there were no safety concerns.

What willful misuse risks apply to hydrogen that don't also apply to methane?

Hydrogen Pipelines

Gaseous hydrogen can be transported through pipelines much the way natural gas is today. Approximately 1,600 miles of hydrogen pipelines are currently operating in the United States. Transporting gaseous hydrogen via existing pipelines is a low-cost op...

www.energy.gov

I didn't look much further but it looks like hydrogen via pipeline is more of a POC level technology than something widely deployed, with actual existing pipeline small in quantity and with a focus on short runs, such as from a refinery to a nearby industrial factory that consumes the hydrogen in its chemical manufacturing process.

It looks like primary movement of hydrogen via pipeline right now is by mixing it in with the methane / natural gas, and moving it in existing pipeline infrastructure. Considering how hydrogen works on its own my guess is that hydrogen in caverns is mixed with nat gas and is not stored on its own.


Willful misue risks, as well as mishandling risks, for hydrogen risks are grossly beyond methane. Methane is kind of in the vicinity of gasoline when it comes to flammability and explosiveness. Gaseous hydrogen yearns to burn - it needs to burn. And liquid / pressurized hydrogen wants to be gaseous. It tends to wreck containment vessels and equipment.

In fairness to hydrogen it wants to burn (fast) more than explode.

I'm not a chemist - best suggestion I have is a quick DuckDuckGo search on explosiveness of hydrogen. I get a number of people emphasize just how wide of a range its flammable and explosive, how easy it is to get things wrong, how small of a quantity you need to impress people (or kill yourself). Also that people with the right knowledge and experience do indeed induce hydrogen flames and explosions in classroom settings so it IS manageable.

The core problem is that "doable" in the lab and small controlled circumstances, doesn't translate to scale deployment in less than well controlled circumstances.

 

[petit_bateau]

Underground storage of hydrogen appears perfectly reasonable, either in salt caverns or in depleted oil & gas reservoirs. This paper shows the amount of storage required for inter-seasonal usage equates to a singe depleted gas reservoir volume that is fairly reasonable to obtain in much of the world. As the paper notes this reservoir volume would be enough for the static mass/volume, but it might not be enough for the withdrawal rates required (i.e. rate per well, and well spacings).

https://pubs.acs.org/doi/10.1021/acsenergylett.1c00845

However further research work is required to close out some knowledge gaps

Enabling large-scale hydrogen storage in porous media â the scientific challenges

Expectations for energy storage are high but large-scale underground hydrogen storage in porous media (UHSP) remains largely untested. This article identifies and discusses the scientific challenges of hydrogen storage in porous media for safe and efficient large-scale energy storage to enable a...

pubs.rsc.org

An issue with hydrogen safety is that it has a very wide range of LEL and UEL

LEL and UEL Explained (Explosive Gas) - Projectmaterials

LEL UEL meaning (lower/upper gas explosive limits), LEL UEL chart by type of gas, types of instruments to measure gas concentration

blog.projectmaterials.com

The practical limit to mixing (blending) hydrogen with natural gas (methane) for delivery through the existing gas distribution pipeline network is 15-20%. Other work I've seen suggests a safe limit of 14%. Above that blend limit the existing pipelines are susceptible to failure via hydrogen embrittlement as the hydrogen molecules are able to pass into the pipleine wall material. The higher the blend % and the higher the operating pressure the greater the risk.

https://www.sciencedirect.com/science/article/pii/S2452321618302683

Clearly if hydrogen cannot be distributed at a blend of greater than (say) 15% it is only of utility in domestic networks alongside natural gas as a (expensive !) bridge-fuel/carrier. Because replacing to hydrogen-tolerant pipelines is thought (reasonably) to be not cost-effective it is likely that longer term pure-hydrogen pipelines will be limited to major petro-chem/steel/etc complexes and clusters.

 

[Oil4AsphaultOnly]

Underground storage of hydrogen appears perfectly reasonable, either in salt caverns or in depleted oil & gas reservoirs. This paper shows the amount of storage required for inter-seasonal usage equates to a singe depleted gas reservoir volume that is fairly reasonable to obtain in much of the world. As the paper notes this reservoir volume would be enough for the static mass/volume, but it might not be enough for the withdrawal rates required (i.e. rate per well, and well spacings).

https://pubs.acs.org/doi/10.1021/acsenergylett.1c00845

However further research work is required to close out some knowledge gaps

Enabling large-scale hydrogen storage in porous media â the scientific challenges

Expectations for energy storage are high but large-scale underground hydrogen storage in porous media (UHSP) remains largely untested. This article identifies and discusses the scientific challenges of hydrogen storage in porous media for safe and efficient large-scale energy storage to enable a...

pubs.rsc.org

An issue with hydrogen safety is that it has a very wide range of LEL and UEL

LEL and UEL Explained (Explosive Gas) - Projectmaterials

LEL UEL meaning (lower/upper gas explosive limits), LEL UEL chart by type of gas, types of instruments to measure gas concentration

blog.projectmaterials.com

The practical limit to mixing (blending) hydrogen with natural gas (methane) for delivery through the existing gas distribution pipeline network is 15-20%. Other work I've seen suggests a safe limit of 14%. Above that blend limit the existing pipelines are susceptible to failure via hydrogen embrittlement as the hydrogen molecules are able to pass into the pipleine wall material. The higher the blend % and the higher the operating pressure the greater the risk.

https://www.sciencedirect.com/science/article/pii/S2452321618302683

Clearly if hydrogen cannot be distributed at a blend of greater than (say) 15% it is only of utility in domestic networks alongside natural gas as a (expensive !) bridge-fuel/carrier. Because replacing to hydrogen-tolerant pipelines is thought (reasonably) to be not cost-effective it is likely that longer term pure-hydrogen pipelines will be limited to major petro-chem/steel/etc complexes and clusters.

I never quite understood how "blending" was seen as a viable method for the transport of hydrogen? Regardless of whether the hydrogen is used for industrial processes or fuel cells, wouldn't it need to be re-separated from the methane at the other end of the pipe (for EVERY destination)? That's a rather wasteful process isn't it?

 

[mspohr]

I never quite understood how "blending" was seen as a viable method for the transport of hydrogen? Regardless of whether the hydrogen is used for industrial processes or fuel cells, wouldn't it need to be re-separated from the methane at the other end of the pipe (for EVERY destination)? That's a rather wasteful process isn't it?

I think the blended gas is just burned. They don't try to separate it.

 

[Oil4AsphaultOnly]

I think the blended gas is just burned. They don't try to separate it.

And that's what I was afraid of. Proponents of H2 as a fuel mention how it could be transported like natural gas, but if the H2 (which at best is electrolyzed at a cost of $2/kg) ultimately gets treated like natural gas, then the hydrogen-based steel production is no longer "clean". Or we all end up with really expensive top ramen.! Why don't they see this?

 

[petit_bateau]

And that's what I was afraid of. Proponents of H2 as a fuel mention how it could be transported like natural gas, but if the H2 (which at best is electrolyzed at a cost of $2/kg) ultimately gets treated like natural gas, then the hydrogen-based steel production is no longer "clean". Or we all end up with really expensive top ramen.! Why don't they see this?

Indeed, just burnt is the proposal.

The ostensible purpose is a bridge to decarbonisation and to kickstart the production of green hydrogen.

The real purpose is further delay, in short a con job.

 

[Oil4AsphaultOnly]

Finally, we can convert net energy Yet back to gross efficiency to get 0.0537 DGE/mi. This is also 2.03 kWh/mile and has a fuel replacement ratio of 12.18 kWh/DGE and relative efficiency 32.2%.

So in the foregoing I have place key assumptions in bold. So one can vary this at will to check sensitivity. I'm not convinced that these are necessarily the best values to assume. They are just for illustration and do not lead to glaring problems like Rdt becoming negative.

I'd also point out that the energy efficiency assumption are not so sensitive. Making the electric drivetrain 90% efficient instead of 80% moves relative efficiency to 11.81 rather than 12.18. Or moving to diesel efficiency to 25% for 30% moves relative efficiency to 11.56 from 12.18. Or combined 90% and 25% gets to 10.96 So something in the neighborhood of 11 to 12 may be robust for estimating impact on diesel consumption, and this macro effect is what interests me most in this thread.

I would point out that a key element missing in this analysis is any provision for Tesla to improve Ct, the cruising energy, which is potentially impacted by aerodynamics. Some diesel designs are able to achieve efficiency in the 10 to 13 mpg range well above the average 6 mpg. Thus, I've got to believe there are important gains to be made on design side, directly impacting Ct. More importantly when Ct/Yet is pushing 94%, reducing Ct is about the only place where more energy efficiency improvements are possible.

Out of nostalgia, I went back to find this discussion we had over 5 years ago! Boy was I wrong! But I wanted to point out how prescient your analysis was, since Tesla was able to achieve 1.7kWh/mile, 15% better than what a competitive electric drivetrain would've been able to achieve!

 

[jhm]

Hydrogen will have a brilliant future once we have three times as much renewable energy than we know what to do with.

 

[jhm]

PV could turn Europe into ‘solar-to-X economy’

New research from LUT University shows the central role of solar in Europe's attempt to reach its 2050 zero-emissions target. It describes how photovoltaics will gradually become the characteristic element of the Old Continent's emerging energy system by extending its use to the heat and...

www.pv-magazine.com

I recall years ago Musk saying that solar would provide about 2/3 of global electricity. This recent study and other anticipate that by 2050 solar would contribute about 56% of total energy and 63% of electricity. Note this also implies that electricity would be about 89% of total energy by 2050!

This solar dominance makes solar the key driver of most energy applications, hence, a solar-to-X economy. For example, solar-to-EV for transport, solar-to-battery for storage, solar-to-hydrogen-to-X with hydrogen as an intermediary to many different applications. I like this perspective.

I have observed before that that solar seems to pair well with batteries. Daily generation of solar is fairly stable from day to day, whereas daily wind generation in many places can ebb and flow for many days on end. So if you're going to pair a battery to wind or solar, you can have a more reliable recharge cycle with solar. (Also DC PV to DC battery can avoid inverter loss when charging.) Wind, where it is available, is great to have on the grid, but maybe pair it with electrolyzers or long-term storage to smooth out variation in weekly generation and load.

Here's to the solar-to-X economy!

 

[adiggs]

Daily generation of solar is fairly stable from day to day,

All onboard with the solar-to-x economy.

However the stability of solar generation is very much dependent on where you live.

Here in the Pacific NW my solar system routinely clears 60 kwh per day over the summer, or 1.5MWh over a month (ish). That's enough, even with the AC going, that I'm out producing my consumption.

We have winter days that can generate <1 kwh over the day, and <10 is typical. Of course we also get the occasional sunny day worth more like 10-20. My point being that solar electricity in the pacific NW is being imported from somewhere else Maybe from over the mountain range and out the gorge where the wind farms are generating more consistently.

Also doesn't change your additional point that batteries pair well with solar. The next PV system we install - that'll have some batteries and some degree of off grid / generator replacement capability.

 

[jhm]

All onboard with the solar-to-x economy.

However the stability of solar generation is very much dependent on where you live.

Here in the Pacific NW my solar system routinely clears 60 kwh per day over the summer, or 1.5MWh over a month (ish). That's enough, even with the AC going, that I'm out producing my consumption.

We have winter days that can generate <1 kwh over the day, and <10 is typical. Of course we also get the occasional sunny day worth more like 10-20. My point being that solar electricity in the pacific NW is being imported from somewhere else Maybe from over the mountain range and out the gorge where the wind farms are generating more consistently.

Also doesn't change your additional point that batteries pair well with solar. The next PV system we install - that'll have some batteries and some degree of off grid / generator replacement capability.

A lot of hydroelectric power is transmitted from the Columbia River down to southern California. Maybe halt or reverse the flow when the sun shines in SoCal.

Yeah, regional variation is real, and transmission lines can help exploit those differences. Places that are endowed with substantial hydroelectric resource may not need so much battery storage. So pairing batteries may not be much of an issue in the NW.