On this page we will post much shorter pieces on the business of energy – a mixture of original content and brief analyses of interesting articles from elsewhere.
March 2017 – Sun, Wind and Horses
Two pieces were posted on the site in April.
In Short the Expensive Horses we looked at how the rise of wind and solar to likely over 1000GW capacity by the end of next year is eating up all incremental electricity growth.
This chart summarised the fossil fuel problem – solar plus wind meeting the global power growth requirements even before nuclear and wind kick in.
In addition, we continue to be bearish regarding the growth in gasoline demand. The US is a major growth engine for sure, but the trajectory of non-OECD growth looks very different – more urban and electric.
A reworked analysis of BP’s relatively bullish outlook was summarised here – noting that vehicle miles driven across the world may look very different when China and India dominate growth.
In the Sun will always Shine, the Wind will always Blow, we looked at the implications for solar and wind as they become major parts of the global grid.
A good paper from IEA noted a four stage process for gradually increasing the performance and presence of both technologies.
Along the way the paper also managed to quietly clear up some myths regarding solar / wind intermittency – all energy sources have uncertain demand, its a matter of degree, not kind.
The chart below shows how the scalable and repeatable nature of the wind / solar technologies allows learning from mature stage users eg in Denmark to be passed to those climbing the transition ladder.
With 1000GW to be delayed soon globally, and growing at 15% per year, wind and solar have long ago left the laboratory, and are now leaving behind the hype and subsidies that once were assumed to propel their growth.
This is not now the case – growth is now driven by technology, lower costs and improved environmental and energy provision.
The growth of solar and wind is moving fast – it will pay to keep up with their progress in the coming months.
February 2017 – Gasoline Evaporates and China Converts
US Gasoline Evaporates
US gasoline demand is down around 4-5% in 2017, prompting scratched heads all round. How come, when there is not a whiff of recession? The post here was picked up by Bloomberg Gadfly, and Zero Hedge for discussion.
Its a big deal given US gasoline make up about 45% of global demand as has been growing robustly over the past few years supporting oil demand.
A possible answer may be that US gasoline demand may in fact be the aggregate result of two forces: long-term structural decline due to demographics and urbanisation – see here – and the more recent phenomenon of SUV purchases, lower retail prices and stronger economy pushing demand back upwards.
As prices have moved upward by 20% over the past few months, and car purchasing may be saturated, it could be the longer-term trend,masked for a couple of years, is showing through again.
If correct, then this would explain a) the downturn in demand, and b) why gasoline demand may not be as not strongly correlated with the health of the general economy as supposed.
If the long term trend does begin to take hold, then a solid element of oil consumption will have been removed, pushing oil toward a demand peak.
China’s Conversion – A Path Less Taken
China is moving ahead with a Fiver Year Plan (FYP) that is likely to fundamentally change the future path of its energy consumption. If it achieves its targets, it will have started to rapidly remove its dependence on internal coal consumption, and import reliance on gas and oil.
A chart summarising this is shown below – over 50% of China’s new generating capacity out to 2020 could be provided by solar, and 100% by non-fossil fuel energy sources. Demand for coal and gas has tended toward zero.
A world of detail and complexity lies beneath these numbers – but there you have it. The post here provides more detail.
January 2017 – “Supply Dwarfs Demand”
BP’s annual Energy Outlook is a solid, although orthodox industry analysis. However, this year it give a lot more airplay to alternative (downside) scenarios to the standard upward and onward projections of never-ending energy consumption. Its analysis of EV usage suggests oil demand could fall steeply between now and 2035 for example.
But its most striking image is this one – the recognition that the world has over 2.5trillion barrels of technically and economically viable oil reserves, but future demand out to 2050 of less than half of that. BP thus expects the big three reserve-holders and producers (OPEC / Russia / USA) to increase output to dominate market share and maximise reserves value. Interesting counter-point to oil bulls.
Also released in the last few days has been this work by analysts Carbon Tracker on future demand for oil, gas and coal. A long note, it basically highlights that peak demand for three fossil fuels will come quicker than expected because the costs of solar, wind and EV batteries have constantly been lower than forecasted. The power of the global manufacturing curve now turned toward major energy production.
Carbon Tracker’s gas and oil projections could well be right, but be wary of coal. China and India are both clearly pivoting toward a dual strategy of coal and renewables as the foundations of their future energy strategies – an issue which will be explored in detail in a post on the site in February.
Finally, Bloomberg New Energy’s Top 10 predictions for 2017 are always worth a read. One of them, renewables as baseload for power generation is counter-intuitive, surprising – and almost certainly correct.
And one more thought – EVs will almost certainly reduce oil demand in the long run, but in the short run, note how US miles travelled per annum and fuel efficiency are global outliers (see charts). As global transport expands, its growth is going to look a lot different, and less gasoline-hungry than before – even before EVs kick-in. See posts on the main site.
A short piece from Bloomberg Gadfly on the rapid changes in global energy systems ahead – including a contribution from this site