David Fuller and Eoin Treacy's Comment of the Day
Category - Energy

    Elon Musk Challengers Jostle to Solve Riddle of Energy Storage

    This article by Will Wade for Bloomberg may be of interest to subscribers. Here is a section:

    If the storage breakthrough is coming, it seems obvious it would happen in California, which has long led the U.S. in supporting alternative energy. The state has the most demanding fuel-efficiency standards for cars, as well as incentives that have made it the biggest market for solar power in the U.S.

    California “is often a lab” for the rest of the country, said Brian Warshay, an analyst at Bloomberg New Energy Finance. It will “continue to be so on the storage front.”

    Older methods of trying to store power have existed for decades, including pumped hydropower facilities in which water is sent to higher elevation reservoirs and released through lower turbines to produce electricity when demand is high.

     

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    Audi just created diesel fuel from air and water

    This article by Eric Mack for Gizmag highlights the benefits improving solar cell efficiency could potentially have for the wider economy. Here is a section: 

    Sunfire claims that analysis shows the properties of the synthetic diesel are superior to fossil fuel, and that its lack of sulphur and fossil-based oil makes it more environmentally friendly. The overall energy efficiency of the fuel creation process using renewable power is around 70 percent, according to Audi.

    "The engine runs quieter and fewer pollutants are being created," says Sunfire CTO Christian von Olshausen.

    The fuel can be combined with conventional diesel fuel, as is often done with biodiesel fuels already.

    The Dresden pilot plant is set to produce about 42 gallons (160 l) of synthetic diesel per day in the coming months, and the two companies say the next step is to build a bigger plant.

    "If we get the first sales order, we will be ready to commercialize our technology," von Olshausen says.

    Sunfire anticipates that the market price for the synthetic diesel could be between 1 and 1.5 Euros per liter, which would be nearly competitive or a little more expensive than current diesel prices in Europe, but the actual figure will be largely dependent on the price of electricity.

     

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    Tesla Wants to Power Wal-Mart

    This article by Dana Hull for Bloomberg may be of interest to subscribers. Here is a section: 

    Jackson Family Wines, based in Santa Rosa, has a new partnership with Tesla involving battery storage and several vehicle charging stations, according to the February issue of Wine Business Monthly. The winery declined to comment.

    Mack Wycoff, Wal-Mart’s senior manager for renewable energy and emissions, said the company is intrigued by energy storage. “Instead of pulling electricity from the grid, you discharge it from the battery,” he said. “Ideally you know when your period of peak demand is, and you discharge it then.”

    Mike Martin, Cargill’s director of communications, declined to provide details about how the company plans to use Tesla batteries at the Fresno plant. The 200,000-square-foot facility, one of the largest of its type in California, produces nearly 400 million pounds of beef each year.

    Janet Dixon is director of facilities at the Temecula Valley Unified School District in southern California, which plans to install solar panels at 20 of its 28 schools this summer. Dixon said that SolarCity is the solar provider, and five of the facilities will have Tesla batteries.

    “We spend roughly $3 million a year on electricity, and most of that is lighting and air conditioning,” said Dixon. “We are going solar to reduce our overall costs and the battery storage should help us manage our peak demand.”

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    Email of the day on oil prices

    Today I listened to a presentation by Torbjørn Kjus, oil analyst at DNB Markets. He has become quite a guru in the last years so it was interesting to hear what he had to say. Interestingly, after having been possibly the most bearish oil price analyst for quite some time, he is now among the most bullish forecasters, see pages 7-9 in the presentation. He believed that the oil producers would continue to cut investments and particularly exploration costs, even if we see a move to $70-80 bbl. The majors will prefer to maintain dividend payouts. This will be particularly painful for oil services. As such one should expect oil producers to gain more from any oil price rise, rather than oil service companies.

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    Musings From the Oil Patch April 20th 2015

    Thanks to a subscriber for this edition of Allen Brooks’ ever interesting report for PPHB. This edition has more of interest than usual and I commend it to subscribers. Here is a section on the surge in private equity interest in the oil sector:  

    We came away with several impressions from the two presentations and our discussions with fellow attendees. First, as we mentioned earlier, the vultures who circle over every disastrous industry are circling over energy with high expectations that road-kill victims will soon be available. Second, there are a lot of smart investors looking for the right opportunity to “buy into the energy industry at the bottom.” To us, that means there is too much money chasing a limited number of quality investments. That also likely means pricing on deals initially will be too high. The private equity investors believe these early investors may have to wait longer for the returns they are traditionally expecting. Fortunately, or unfortunately, the availability of public money is delaying the typical industry cycle pattern for private equity returns.

    The uniformity of thinking among private equity players is a bit scary. Group-thought is usually not a successful strategy. The volume of public capital is not only surprising, but discouraging if one believes the industry needs to experience pain before a true recovery can begin. Lastly, in looking at the presenters and the audience, there were very few present that experienced the 1980’s forced re-structuring of the energy business following the bullish experience of the 1970’s. In our discussions that day, we encountered another old-timer who referenced the 1980’s downturn starting in 1982, three years before when most who look at the industry’s history think it began. We were there then, and this guy had it exactly right. This industry is headed for significant change.

     

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    Carlyle Dives Into Energy Industry LBOs as Apollo Lies in Wait

    This article by Kiel Porter and Devin Banerjee for Bloomberg may be of interest to subscribers. Here is a section: 

    The four biggest private-equity firms have raised about $30 billion to invest in energy deals. They don’t all agree on how to spend that money.

    Carlyle Group LP is prepared to bet that oil prices have bottomed out and sees now as the best time to deploy its money, co-founder David Rubenstein said last week. Apollo Global Management LLC says the sell-off in oil isn’t over yet and the highest-returning deals are still on the horizon.

    “There will be attractive opportunities to buy now,” Rubenstein said March 23 at the SelectUSA Investment Summit in Washington. Greg Beard, who leads energy investing at Apollo, sees a different timeline: “The worst, the problems, are yet to come,” he said in an interview last month.

    Private-equity firms are trying to take advantage of crude’s 54 percent plunge since June, which has made targets cheaper. Carlyle, Apollo, Blackstone Group LP and KKR & Co. raised about $30 billion in the past 18 months for energy- related deals.

    How and when they spend that money depends on their view on the future direction of oil. Apollo, led by Leon Black, has recently bought debt of companies struggling to meet their repayments because the firm expects oil will remain at multiyear lows, potentially allowing it to take control later. Carlyle has raised billions to acquire companies in leveraged buyouts because it expects oil to start rising, allowing it to sell its holdings at a profit later.

    “Oil prices will come back a bit,” Rubenstein said. “If you can buy now at relatively low prices and hold on for a few years, you’re going to do quite well.”

     

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    Beijing to Shut All Major Coal Power Plants to Cut Pollution

    This article from Bloomberg News may be of interest to subscribers. Here is a section: 

    The facilities will be replaced by four gas-fired stations with capacity to supply 2.6 times more electricity than the coal plants.

    The closures are part of a broader trend in China, which is the world’s biggest carbon emitter. Facing pressure at home and abroad, policy makers are racing to address the environmental damage seen as a byproduct of breakneck economic growth. Beijing plans to cut annual coal consumption by 13 million metric tons by 2017 from the 2012 level in a bid to slash the concentration of pollutants.

    And

    Nationally, China planned to close more than 2,000 smaller coal mines from 2013 to the end of this year, Song Yuanming, vice chief of the State Administration of Coal Mine Safety, said at a news conference in July.

     

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    Musings From the Oil Patch March 24th 2015

    Thanks to a subscriber for this edition of Allen Brooks’ ever interesting report for PPHB. Here is a section:  

    As small U.S. oil producers struggle to remake their business models, the bankruptcies are already beginning to be announced with Quicksilver (KWKA-OTC), a Barnett gas shale producer being the most recent company to file for court protection. Continued low natural gas prices and now low oil and natural gas liquids prices are straining the finances of E&P companies, and in some cases oilfield service firms. We are seeing frequent announcements of E&P company asset sales, capital spending cuts and employee layoffs. We also see numerous announcements of companies hiring advisors signaling that more restructuring activity is on the horizon.

    Indicative of the challenges facing energy companies with substantial debt loads is shown in Exhibit 14, which plots the rates for the high-yield (HY) debt market overall and for the energy sector within that market. As shown, immediately before global oil prices began to slide last year, the spread between energy HY and overall HY yields was almost non-existent. As oil prices fell at the end of 2014, the energy HY rate soared as the financial weakness of highly leveraged energy companies was highlighted.

    The most surprising phenomenon (for us) this year has been the receptivity of public equity and debt markets to offerings from energy companies. As Dealogic has reported, so far this year, energy equity offerings have accounted for 12% of total U.S. equity issuances, or roughly $8 billion. The firm also reports that the pace of energy debt issuance has remained consistent with the pace the sector experienced over the past five years, as companies have sold $5.6 billion in new bonds. It appears investors are happy to back energy companies with the expectation crude oil and natural gas prices will rise from current levels in response to global energy demand growth and prospects that supply additions will be limited or even decline, as producers cut back their drilling. How much this view is shaped by a hoped-for-cut in output this spring by OPEC, Russia and Mexico that would shoot oil prices sharply higher is unknown, but we suspect that possible scenario does play a role.

     

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    Tesla Hackers Show an Energy Revolution Closer Than Once Thought

    This article by Matthew Campbell, Tim Loh and Mark Chediak for Bloomberg may be of interest to subscribers. Here is a section:  

    Consider the crash effort at the Joint Center for Energy Storage Research in suburban Chicago. Within five years, researchers want to create one or more battery types that can “store at least five times more energy than today’s batteries at one-fifth the cost,” according to George Crabtree, an agreeable silver-haired scientist who runs the U.S. Energy Department-backed battery-research skunk works.

    Harvard University, the Massachusetts Institute of Technology, leading-edge technology companies like Elon Musk’s Tesla Motors Inc. and scads of startups are getting into the act. Some are seeking to double the capacity and dramatically cut the costs of the lithium-ion battery, the standard in iPhones and electric vehicles. Others are working on mega-scale battery systems using novel chemistries that could cheaply store enough energy to help power entire cities.

    Battery entrepreneurs have begun to even talk like revolutionaries. “The ability for a battery company to change the dynamics of the world is what has got us excited,” says Bill Watkins, chief executive officer of Imergy Power Systems Inc., a Fremont, California, startup working on utility-scale batteries. “We can actually make a big difference here. I call it democratizing energy.”

    As the former CEO of Seagate Technology Plc, the Silicon Valley digital storage maker, Watkins can speak from experience about tectonic technology shifts. In 1980, a Seagate five- megabyte hard drive that rendered floppy disks obsolete was a $1,500 PC add on. These days, drives holding two terabytes of data -- equivalent to two million megabytes --  can be had for a retail price of under $200.

    What’s primarily driving the battery revolution is the phenomenal growth of rooftop and other forms of solar energy and an awakening by renewable energy advocates that storage is the lagging piece of the transformative puzzle. Solar now powers the equivalent of 3.5 million American homes and accounted for 34 percent of all newly installed electricity capacity last year.

    Wind supplies enough electricity for the equivalent of about 14.7 million U.S. homes, about the same as 52 coal-powered generating plants, according to the Wind Energy Foundation.
    An exponential breakthrough in battery capacity and cost would bulldoze the limitations to adopting renewable energy on a massive scale, be a potent weapon to fight climate change by lowering carbon emissions and potentially bring billions of dollars in profits, never mind fame, to the winners. The knock on renewables is that while fossil fuels keep the power on all the time, solar fades when the sun doesn’t shine and wind power fizzles when the wind doesn’t blow – unless you have a way to store the excess for when you need it.

    “What’s holding back solar and wind isn’t their availability but the fact that the technology to generate renewable energy has lept far ahead of the capacity to store and deploy it round the clock as needed,” says Crabtree of the Joint Center project, which is run out of the federal Argonne National Laboratory.

    Prophesies of energy revolutions always come with caveats, of course, and some researchers note that an exponential breakthrough in battery storage and cost has been forecast for more than a decade and still hasn’t arrived. “Of all these other battery technologies people promote, how many of them are real?” says Jeff Dahn, a professor at Dalhousie University in Nova Scotia who continues to plug away at making stronger and cheaper lithium-ion batteries. “All that remains to be seen.”

     

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