Fergus Cullen #09 - The Case Against Renewable Energy https://tv.cruxinvestor.com/programs/fergus-cullen-09-11-02-21-fcmp4-c1df22?categoryId=71534

 Renewables are the socialists in the energy space. They only work part-time and expect the government to support them.

 

Unreliable (Intermittency) - Solar only generates electricity during the day which is inverse of our power consumption habits. Its generation capacity is also substantially impacted by overcast weather which is common in the northern hemisphere.  Wind fares better than solar yet is unreliable by virtue of relying on the wind. 

 

The Economics of Renewables

Yes, developed countries can overlook all these shortcomings and continue to throw money at them but developing countries do not have this luxury. Renewables need to be economic to scale in the developing world which is where the population growth and by default energy growth is. For renewables, you need to know the fully integrated costs to operate them.

 

Battery Storage 

Battery storage is currently more frequency control and still cost-prohibitive to store more than a few hours of power. Take the Hornsdale Power Reserve (Teslas Battery) which it claims is the largest lithium-ion battery in the world.

At a cost of $90million, it provides a total of 129 megawatt-hours of storage (capable of discharge at 100 megawatts).

 

Power pricing model not being designed for renewables

Once renewables are installed they have no marginal cost so push electricity into the grid regardless of when it is needed or not driving prices down. This makes it tough for base-load utilises as they can’t compete and it ruins their economics, yet once they drop out of the system there are shortfalls. 

 

This has led to discussions around electricity being priced based on guaranteed supply to combat this.  

 

Materials 

As mentioned at the start if you wish to replace something energy dense with something orders of magnitude less energy density than you are going to need to produce orders of magnitude more of it and that is going to require a lot of materials.

 

"Building one wind turbine requires 900 tons of steel, 2,500 tons of concrete and 45 tons of non-recyclable plastic. Solar power requires even more cement, steel and glass—not to mention other metals. Global silver and indium mining will jump 250% and 1,200% respectively over the next couple of decades to provide the materials necessary to build the number of solar panels, the International Energy Agency forecasts. World demand for rare-earth elements—which aren’t rare but are rarely mined in America—will rise 300% to 1,000% by 2050 to meet the Paris green goals.”

 

“Last year a Dutch government-sponsored study concluded that the Netherlands’ green ambitions alone would consume a major share of global minerals. “Exponential growth in [global] renewable energy production capacity is not possible with present-day technologies and annual metal production,” it concluded.”

 

It isn’t much of a stretch to see battery metal prices rocket on the back of demand if even a proportion of this demand is realised.

 

Capacity is not Generation

One thing that always annoys me is the apples to apples approach to renewables, nuclear plants and gas plants.

 

For example, if you take 1GW of nuclear capacity offline you can’t replace it with 1GW of solar capacity.

 

Nuclear runs at 90% capacity factor making that 1GW 900MW of generation

 

Solar runs at 20% capacity factor making that 1GW 200MW of unreliable generation

 

The Learning Curve

This has often been referred to as a sort of renewable Moores law. The issue with this is ultimately renewables are grounded in physics. 

 

A senior wind engineer told me bearings are the Achilles heel of wind turbines, his words were “we need a quantum leap in bearing material technology”. As of late 2018 turbine owners were still experiencing problems with wear. The bearings wear out too fast, but if they make the bearings bigger and stronger, turbine performance plummets, because larger bearing creates greater friction.

 

Sure there have been some fantastic gains over the past decade in the space but it is coming off a very low base. Mass manufacturing and a commodities bear market have played no small part in dropping these costs significantly. They need increasingly large jumps inefficiency to counteract lower capacity factors as a result of all the ideal renewable spots already being taken.

 

Renewable High Grading

This is never talked about but renewable capacity factors are taken from the optimal locations globally. As we push to expand renewable capacity we will need to accept less suitable locations and lower resulting capacity factors, resulting in more needing to be found.

 

The prime example is the projections for India and China to be 50% renewable by 2050. How do they achieve this with very little wind? Simple question, very big implications.

 

Where are the materials going to come from for EVs?

Consider roughly a third of an EVs price is the battery and majority of that is battery metals.

 

 Leading UK scientists set out resource challenge of meeting EV targets by 2050

 

Meeting UK electric car targets for 2050 would require the production of: 

 

-Two times current total annual world cobalt production.

-Nearly the entire world production of neodymium.

-Three quarters the world’s lithium production. 

-At least half of the world’s copper production.

 

And this is just EVs in the UK.

The Dutch did a similar study and came to the same conclusion

 

Metal demand for renewable electricity generation in the Netherlands

 

Plus they produced some great graphs to reinforce the point.

It goes without saying that when global solar demand requires 12x current Indium production by 2050 we have some issues on our hands.

 

Don’t bet against innovation

I agree with this wholeheartedly. The issue is true innovation usually shows up when it is a necessity. Not when money is being thrown around with no focus on the underlying economics.

I believe we will see amazing innovations in the EV space over the coming decade, it will just be on the back of a bull market in fossil fuels pushing innovation in the EV and renewable space.

 

 

“It doesn’t matter about the economics as governments will keep throwing money at them regardless”

While this is true in the developed world, especially with the likes of MMT getting into gear I cycle back to my point of developed being the minority. It’s what developing countries choose to do that matters. I can’t imagine they are all that eager to follow in the footsteps of Germany and California.

 

I have a tweet which gets at this;

 

We've had a bull market in energy ideology 

 

and a bear market in energy economics.

 

This will prove cyclical.

 

What will likely cause a rotation?

 

My pick is inflation and energy security.

 

To end on a positive note I believe we do have the technology to achieve our climate goals

 

Renewables can continue to contribute to the energy mix but will be below 20% of the power grid.

 

Circling back to one of my first statements;

 

Throughout history, advancing energy generation as always involved moving up the energy density ladder.

 

SMRs and/or molten salt reactors look to be a game-changer.

 

History has always involved progressing up the energy density ladder and MSR technology fits this bill.

 

Six considerations

 

1. Public perception - Nuclear needs a rebrand & PR makeover, when people hear nuclear the likes of the Chernobyl series or nuclear weapons spring to mind. MSRs achieve this and address both safety concerns and waste concerns (the two most common nuclear reservations).
2. Safety - MSRs are "walk-away safe" An operator couldn't melt it down even if they wanted to MSRs aren't vulnerable to a terrorist attack as they work at atmospheric pressure, so a breach would cause the fuel to solidify without a significant release of radioactivity.
3. Cost - By design, they are relatively simple (no containment domes and far fewer moving parts)This could make them accessible to developing countries Their small size lends them to factory-based mass production. The fact they can run on nuclear waste is cost saving in itself.
4. Efficiency - "Conventional reactors typically use only 3-to-5% of the available energy in their fuel rods before the fuel rods must be replaced due to cracking" MSR doesn't have this issue and can use up most of the rest of the available fuel in these rods to make electricity.
5. Waste - Because of this efficiency waste remains radioactive for a relatively short time ~300 years or less (compared to 10,000years for conventional nuclear waste). This is obviously a huge sell that MSR consumes nuclear waste and produce very little themselves.
6. High heat processes - The most interesting to me being hydrogen. MSRs could produce hydrogen using both thermal and electrical energy making the process very efficient. Using 78% thermal energy & 22% electrical its estimated hydrogen could be produced for less than $2kg.