The future of energy generation and storage

[Smurf1976]

The policy vacuum is going to weigh heavily on us very quickly if no action is taken.

It's one of those things where a medium scale incident would probably be a blessing in disguise.

It would shock governments into action and avert a major incident down the track.

 

[qldfrog]

Now Smurf, is there a way to make some profit on the asx from our know established knowledge?
After all, this is a stock market forum
Do i buy santos or origin?
You all get the idea

 

[SirRumpole]

Now Smurf, is there a way to make some profit on the asx from our know established knowledge?
After all, this is a stock market forum
Do i buy santos or origin?
You all get the idea

Hedge your bets would be my advice.

 

[qldfrog]

Basically it is a given we will have a severe blackout down south
So should i buy funeral services, energy, if only to benefit a spike after the event when it becomes bbq talk..
That us where i d like to steer the conversation in parallel with flawless input from @Smurf1976 and @sptrawler etc

 

[Smurf1976]

That us where i d like to steer the conversation

Agreed - we're here to make money not design something etc.

Quite a few of my posts are alluding to something that I won't say outright for my own reasons and to ensure ASF doesn't end up with any legal issues. There are certainly companies who aren't telling investors the full truth about their circumstances with regard to energy however.

I'll give some more thought to the money making aspect and post something in a day or two.

 

[qldfrog]

Much appreciated.
I also understand that having inner knowledge of the shortcut of a company does not give you a free ticket to fortune.
I worked for a small asx listed IT company which technically is a failure..yet i should have kept shares in them...
So no expectation of results, but would be an interesting exercise to go from scenarios to winners selection

 

[Smurf1976]

I'll start on the making money aspect by first looking at something I'd be very, very cautious about investing in.

Note that my focus here is financial based on technical (electrical) considerations and that I'm not buying into political ideology and so on.

First here's a chart of electricity demand and spot price in NSW covering the past 24 hours and forecast through to the next 30 hours ahead.

Source of the above chart is AEMO and this chart plus the data behind it is publicly available via their website www.aemo.com.au

With reference to the chart, the thick bold line is price with scale on the left in $ per megawatt hour (MWh) and the thin line is system demand (electrical load) with scale on the right in MW. To clarify - the left hand edge shows a price around $120 and load around 8600 MW.

Now looking at that chart, note in particular what happened today around midday. Price went below zero yes, to about $-15.78 actually. That's a negative price below zero and no there's no error in the chart.

Then we see prices up around $150 during the evening peak and forecast up close to $300 during the peak tomorrow evening. Around midday tomorrow though it's back down to $40 or so.

Now here's another chart, this one's for today's large scale solar generation output in Queensland. I've deliberately used different states here to illustrate that this is a national issue not simply a local one:

And here's one for large scale solar, that is commercially operated solar farms, in SA over the past 3 days:

Note what happened today in SA, and yesterday, and the day before and also what happened in Queensland. There was no solar eclipse in SA on Saturday, just nowhere for the power to go. Likewise the sun hasn't suddenly started rising twice each day in Queensland - it's just that the electricity price went a long way negative and solar farms cut production.

Source for the above two charts is Open NEM (www.opennem.org.au) produced using AEMO supplied data.

To clarify, the first chart shows price and demand in NSW. The other two show large scale solar (only) generation in Qld and SA. I'm using different states to make the point that it's similar everywhere but to clarify that here's the price and load chart for Queensland:

Note that negative price down to about $-250 during the middle of today in Queensland and that the forecast is for negative prices again around the same time tomorrow.

Now the large solar farms will generally have a PPA (Power Purchase Agreement) with someone which investors find nice and reassuring that they aren't exposed to the spot price. So far, sounds good......

Now I certainly don't know exactly what it says in all of those contracts but it's no secret that two things typically apply:

1. Few if any will pay for power that wasn't generated.

2. At least some include a clause that they pay the fixed price only if the spot price is above zero. At a spot price below zero the PPA is worthless.

Given that the costs of a solar farm are fixed regardless of whether it operates or not, and that there's no ability to ever recoup lost production, all this shutting down of production and/or selling it at prices at or below zero means that someone is going to be getting burned financially. You'd need to know the specific contract details to know who exactly that is, but there's a fixed cost for something that isn't producing the output that was expected and ultimately someone's taking a hit for that financially.

The missing piece of information there is that all this has come as quite a surprise to some of those involved. Certainly there are some competent operators in the industry but there are others who I'm very sure didn't factor in any off loading at all and nor did they factor in prices going below zero. There are some whose revenue expectations will never be met for that reason.

For the vertically integrated companies (eg Origin) they are internally hedged. A low spot price may well cause a loss on the generation side of the business but it boosts profits on the retail side. So there's an internal hedge there.

For anyone else though, those who generate only, if you're going to invest in someone who owns solar farms then I'd be checking very carefully:

1. Exactly how their hedging arrangements work. In particular, is there some price at which the agreement ceases to apply?

2. Can they actually get their output into the grid physically? That's rather critical since almost certainly any hedging won't cover lost output.

 

[qldfrog]

Amazing this cutoff of solar production when at its optimum,
This seems like a cry for short temporary storage in the farms during these negative costs

 

[Smurf1976]

Amazing this cutoff of solar production when at its optimum,
This seems like a cry for short temporary storage in the farms during these negative costs

Looking at SA specifically, we had some wind generation curtailed between 5am and 7am, a lot of solar off between midday and 3pm but by 5pm most supply was from gas indeed combined cycle plant had to start coming on when solar was still constrained, from about 2pm, to be ready in time due to ramp rate limitations.

Load shifting of non time critical loads is one thing that would help but ultimately it needs storage and if you look at Saturday as an example, the need is for storage that can be charged constantly for 5 - 6 hours not just 1 or 2 hours.

 

[sptrawler]

Load shifting of non time critical loads is one thing that would help but ultimately it needs storage and if you look at Saturday as an example, the need is for storage that can be charged constantly for 5 - 6 hours not just 1 or 2 hours.

Which is probably the very reason, that twice as much renewable generation is required, to replace fossil fuel dispatchable generation.
Not only does it have to supply the load, it has to recharge the storage and that includes days of low renewable output i.e overcast and low wind speeds.

 

[rederob]

Which is probably the very reason, that twice as much renewable generation is required, to replace fossil fuel dispatchable generation.
Not only does it have to supply the load, it has to recharge the storage and that includes days of low renewable output i.e overcast and low wind speeds.

Again, this is a failure of policy, and casting renewables as a villain is Trumpian!
US States are now mandating dispatchable power on a contract basis for time of day. Which means renewables and storage, which will still usually be cheaper than other forms of energy generation -especially to build - is being installed.
Such a policy is really easy to implement and starts to backfill the long tail of baseload.

 

[sptrawler]

Again, this is a failure of policy, and casting renewables as a villain is Trumpian!
US States are now mandating dispatchable power on a contract basis for time of day. Which means renewables and storage, which will still usually be cheaper than other forms of energy generation -especially to build - is being installed.
Such a policy is really easy to implement and starts to backfill the long tail of baseload.

No body is casting renewables as a villian, I'm sure everyone thinks they are brilliant, I have solar on two houses.
It is just the reality of the situation at hand, not everyone is fanatical and single minded about the way to overcome the immediate issues, some have a more balanced and realistic view on the options.
I like the idea of electric cars, but I wouldn't bring about the change, by saying no more fossil fuel cars can be built from today.
IMO emotion as taken over the whole debate, as seems to happen on every issue in Australia at the moment.
I guess a lot of the issues are being sorted out of the public eye, as they have to be these days, once it hits the press the chanting begins.
Just my opinion.

 

[rederob]

It is just the reality of the situation at hand, not everyone is fanatical and single minded about the way to overcome the immediate issues, some have a more balanced and realistic view on the options..

The balanced view has been implemented in the USA, and it was not difficult.
Most recent solar+storage in the USA is coming in at around US$35 per megawatt hour.
The fact is that our Energy Minister is not keen on renewables, and we are not looking to the future wrt to storage, except for pumped hydro.
This is a solved problem looking for a policy to support it, and to suggest it is fanaticism suggests you need a broader perspective on the energy equations as the answers are available if you look.

 

[sptrawler]

The balanced view has been implemented in the USA, and it was not difficult.
Most recent solar+storage in the USA is coming in at around US$35 per megawatt hour.
The fact is that our Energy Minister is not keen on renewables, and we are not looking to the future wrt to storage, except for pumped hydro.
This is a solved problem looking for a policy to support it, and to suggest it is fanaticism suggests you need a broader perspective on the energy equations as the answers are available if you look.

I don't disagree with your stance Rob, it is just you are cherry picking, to try to substantiate the reasoning.
I personally don't want to get into an argument about it, I just personally feel the time and scale of renewable/storage installations required, will take far longer than time permits.
Us whipping ourselves into a lather about it, wont change the realities, if renewables can mange great if they can't they need a plan B. Simple really.

 

[rederob]

I don't disagree with your stance Rob, it is just you are cherry picking, to try to substantiate the reasoning.
I personally don't want to get into an argument about it, I just personally feel the time and scale of renewable/storage installations required, will take far longer than time permits.

Fact = renewables get cheaper every year as innovation and scale have not yet been maximised
Fact = cost of storage is declining at around 10% year on year (some suggest closer to 15%)
Fact = in the USA renewables have already been able to surpass coal generated electricity:

The idea that renewables could outperform coal by 2020 was unthinkable in the USA 20 years ago, yet here we are!
Please come up with facts that support what you say rather than accuse me of cherrypicking. Cherrypicking is finding data inconsistent with trends, and I do not do that.

 

[sptrawler]

Fact = renewables get cheaper every year as innovation and scale have not yet been maximised
Fact = cost of storage is declining at around 10% year on year (some suggest closer to 15%)
Fact = in the USA renewables have already been able to surpass coal generated electricity:

The idea that renewables could outperform coal by 2020 was unthinkable in the USA 20 years ago, yet here we are!
Please come up with facts that support what you say rather than accuse me of cherrypicking. Cherrypicking is finding data inconsistent with trends, and I do not do that.

Well then renewables will obviously be used, problem solved.

 

[sptrawler]

Fact = renewables get cheaper every year as innovation and scale have not yet been maximised
Fact = cost of storage is declining at around 10% year on year (some suggest closer to 15%)
Fact = in the USA renewables have already been able to surpass coal generated electricity:

In the U.S as a percentage of total electricity generated 2018:

Fossil fuels are the largest sources of energy for electricity generation

Natural gas was the largest source—about 35%—of U.S. electricity generation in 2018. Natural gas is used in steam turbines and gas turbines to generate electricity.
Coal was the second-largest energy source for U.S. electricity generation in 2018—about 27%. Nearly all coal-fired power plants use steam turbines. A few coal-fired power plants convert coal to a gas for use in a gas turbine to generate electricity.

Nuclear energy provides one-fifth of U.S. electricity
Nuclear energy was the source of about 19% of U.S. electricity generation in 2018. Nuclear power plants use steam turbines to produce electricity from nuclear fission.

Renewable energy sources provide nearly 20% of U.S. electricity
A variety of renewable energy sources are used to generate electricity and were the source of about 17% of total U.S. electricity generation in 2018

Hydropower plants produced about 7% of total U.S. electricity generation and about 41% of electricity generation from renewable energy in 2018. Hydropower plants use flowing water to spin a turbine connected to a generator.

Wind energy was the source of about 7% of total U.S. electricity generation and about 39% of electricity generation from renewable energy in 2018. Wind turbines convert wind energy into electricity.

Biomass, the source of about 2% of total U.S. electricity generation in 2018, is burned directly in steam-electric power plants, or it can be converted to a gas that can be burned in steam generators, gas turbines, or internal combustion engine generators.

Solar energy provided about 2% of total U.S. electricity in 2018. Photovoltaic (PV) and solar-thermal power are the two main types of solar electricity generation technologies. PV conversion produces electricity directly from sunlight in a photovoltaic cell. Most solar-thermal power systems use steam turbines to generate electricity.

Geothermal power plants produced less than 1% of total U.S. electricity generation in 2018. Geothermal power plants use steam turbines to generate electricity.

Last updated: April 19, 2019
https://www.eia.gov/energyexplained/electricity/electricity-in-the-us.php

 

[sptrawler]

So Rob, if we now look at Australia:
CLEAN ENERGY GENERATION
In 2018, the percentage of renewable energy passed 20 per cent for the first time, with clean energy contributing 21.3 per cent of Australia's total electricity generation. This was a significant increase compared to 2017, when renewables were responsible for 17 per cent of total electricity generation.

Hydro generation was again Australia's renewable energy leader, accounting for 7.5 per cent of Australia's total national electricity generation in 2018. However, wind was close behind, contributing 7.1 per cent of total electricity generation throughout the year.

Percentage of renewable generation by technology type

• 35.16%Hydro
• 33.47%Wind
• 19.58%Small-scale solar
• 7.09%Bioenergy
• 3.9%Large-scale solar
• 0.8%Medium-scale solar

Small-scale solar19.6
Annual electricity generation

• 21%Renewables
• 79%Fossil fuels

Fossil fuels79
Percentage contribution to total annual electric
https://www.cleanenergycouncil.org.au/resources/resources-hub/clean-energy-australia-report

You say we should look at the U.S and model off them, when in actual FACT, we are doing better than them?
Especially when it comes to solar, we are actually putting in more as a percentage of generation.
So there isn't really any need to keep thrashing us, we are doing o.k.

 

[Smurf1976]

I'll keep out of the politics apart from noting that politics itself is a game which requires there to always be a problem.

That leads to those involved opposing things they would in principle support simply because politics itself requires that a conflict exists.

As a made up but realistic example of how it works:

1. Say we should have more tourists.
2. Tourist numbers increase.
3. Complain that we have too many tourists.
4. Tourist numbers decrease.
5. Complain that the drop in tourists is killing tourism businesses.

That's a made up example but it's how the game is played. In the context of energy, I'll simply make the prediction that the many who talk of a grid "death spiral" and otherwise wanting less transmission infrastructure will before too much longer be screaming rather loudly once they realise that lack of sufficient transmission is harming the renewables they generally support and that EV's and an off grid world don't generally go together (exceptions of course). That scenario is almost certainly one that will unfold and I'd be surprised if it didn't happen within 18 months at most.

 

[sptrawler]

That's a made up example but it's how the game is played. In the context of energy, I'll simply make the prediction that the many who talk of a grid "death spiral" and otherwise wanting less transmission infrastructure will before too much longer be screaming rather loudly once they realise that lack of sufficient transmission is harming the renewables they generally support. That scenario is almost certainly one that will unfold and I'd be surprised if it didn't happen within 18 months at most.

It wasn't long ago that everyone was screaming that too much money was spent 'gold plating the poles and wires', now we find out, we need to spend a lot more on poles and wires.

As I posted earlier in this thread, Australia is leading the World installing renewables, but you can't please everyone. Some just love to make issues and debate issues, it can become a pastime.

http://re100.eng.anu.edu.au/publications/assets/100renewables.pdf

https://reneweconomy.com.au/how-quickly-can-australia-transition-to-100-renewables-31673/

I'm with you on the politics smurf, when it comes to the crunch, it will be sorted.
No point in going off half cocked, as they usually do, it is a big job and will take a lot of critical path management.