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posted by martyb on Saturday March 20 2021, @07:16PM   Printer-friendly

Over-valued fossil fuel assets creating trillion-dollar bubble about to burst:

A major new report has warned that conventional energy assets including coal, gas, nuclear and hydro power plants have been consistently and "severely" over-valued, creating a massive bubble that could exceed $US1 trillion by 2030.

The report is the latest from Rethinx, an independent think-tank that was co-founded by Stanford University futurist Tony Seba, who is regarded as one of few global analysts to correctly forecast the plunging cost of solar over the last decade.

According to the new report, co-authored by Rethinx research fellow Adam Dorr, analysts and the broader market are still getting energy valuation badly wrong, not just on the falling costs of solar, wind and batteries, or "SWB," but on the true value, or levelised cost of energy, of conventional energy assets.

"Since 2010, conventional LCOE[*] analyses have consistently overestimated future cash flows from coal, gas, nuclear, and hydro power assets by ignoring the impacts of SWB disruption and assuming a high and constant capacity factor," the report says.

Where the analysts are going wrong, according to Seba and co, is in their assumptions that conventional energy plants will be able to successfully sell the same quantity of electricity each year from today through to 2040 and beyond.

[...] This assumption, says the report, has been false for at least 10 years. Rather, the productivity of conventional power plants will continue to decrease as competitive pressure from near-zero marginal cost solar PV, onshore wind, and battery storage continue to grow exponentially worldwide.

"Mainstream LCOE analyses thus artificially understate the cost of electricity of prospective coal, gas, nuclear, and hydro power plants based on false assumptions about their potential to continue selling a fixed and high percentage of their electricity output in the decades ahead," the report says.

[...] "In doing so, they have inflated the value of those cash flows and reported far lower LCOE than is actually justified ... and helped create a bubble in conventional energy assets worldwide that could exceed $1 trillion by 2030."

[*] LCOE: Levelized Cost Of Energy.


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  • (Score: 2, Insightful) by khallow on Saturday March 20 2021, @08:29PM (13 children)

    by khallow (3766) Subscriber Badge on Saturday March 20 2021, @08:29PM (#1126833) Journal

    The issue isn't daily variability costs but that SWB is growing faster than demand and undercutting base-load generation.

    Would SWB be growing that fast, if its costs were taken into account?

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  • (Score: 3, Touché) by Anonymous Coward on Saturday March 20 2021, @09:33PM (1 child)

    by Anonymous Coward on Saturday March 20 2021, @09:33PM (#1126863)

    That's a bit of a change from your usual free market shtick. "SWB is undercutting the old model, therefore SWB is the problem."
    Got your 401K invested in fossil fuels have you?

    • (Score: 1) by khallow on Sunday March 21 2021, @05:48AM

      by khallow (3766) Subscriber Badge on Sunday March 21 2021, @05:48AM (#1126980) Journal

      That's a bit of a change from your usual free market shtick.

      Not at all. My take is that much higher subsidizes (per electricity generated) for solar and wind are distorting the power production markets even more than usual. After all, if businesses are getting paid a lot of money to do something dumb, then they'll do it.

      And even if it were a free market, faulty accounting still is faulty accounting. The economics of fossil fuels and other forms of power generation have been worked out. I don't buy that this group has figured it out while the rest of the electricity providers have not. If, for example, we see a huge drop in solar and wind subsidies, that will make competing sources look a lot more attractive in comparison.

  • (Score: 2) by legont on Sunday March 21 2021, @01:11AM (2 children)

    by legont (4179) on Sunday March 21 2021, @01:11AM (#1126918)

    I agree with you on this and above points. I've another observation though. I am heavily invested in "energy services" and I am loosing a shitload on them. It appears that the US does not need or wants energy of any kind any more. Is it the case? What am I missing?

    --
    "Wealth is the relentless enemy of understanding" - John Kenneth Galbraith.
    • (Score: 0) by Anonymous Coward on Sunday March 21 2021, @04:33AM

      by Anonymous Coward on Sunday March 21 2021, @04:33AM (#1126968)

      The drive to higher efficiency means demand is not increasing in line with population. Combine with 'eco-friendly' virtue signalling, and traditional energy suppliers are not going to make anywhere near their historical profits. Wall St doesn't like that and punishes the stocks, the dinosaurs raise prices and that just pushes more SWB.

      I would get out of the energy services market, it is a cheap, rugged, long-life battery away from a major crash. Off-grid solar/batteries become economic when storage costs are less than some factor of (expected no of cycles) x (price KWh). Lithium is still too high, lead acid too prone to dying and you can't use all the capacity, nickel-iron would work except it requires maintenance and is still ridiculously expensive for some reason. Add in that small backyard windmills in the 0.5 ~ 2 KW range are becoming available and I foresee within a few years most of suburbia and pretty much all rural properties going off grid. There will be a runaway effect at some point - as customers leave maintaining the grid for the remainder becomes more expensive pushing more into the home SWB systems.

      Draw some graphs of 1/ (amortized off-grid power system cost vs Year) and 2/ (Grid-power cost vs Year). 1/ is falling, while 2/ is rising and they are pretty close to crossing over. Really, the whole thing is a good cheap battery away from imploding.

    • (Score: 0) by Anonymous Coward on Sunday March 21 2021, @12:40PM

      by Anonymous Coward on Sunday March 21 2021, @12:40PM (#1127074)

      What am I missing?

      Half a million geezers and more croaked in the last year, they ain't need power no more.
      And their replacement are still sharing the cages at the southern border until sorted out, not much power demand from a shared accommodation.

  • (Score: 2) by sjames on Sunday March 21 2021, @04:47AM (7 children)

    by sjames (2882) on Sunday March 21 2021, @04:47AM (#1126971) Journal

    Costs are being taken into account and wind and solar are coming out on top. Do you REALLY think corporations are building out wind and solar without looking at cost?

    And before you cry subsidies, don't forget to look at fossil fuel subsidies and externalized costs.

    • (Score: 1) by khallow on Sunday March 21 2021, @06:01AM (6 children)

      by khallow (3766) Subscriber Badge on Sunday March 21 2021, @06:01AM (#1126982) Journal

      And before you cry subsidies, don't forget to look at fossil fuel subsidies and externalized costs.

      Subsidies! Going to cry that anyway. Of course, these things don't make sense until you look at subsidy per unit of electrical energy produced, rather than the fatuous acknowledgement that every form of electricity generation is subsidized.Wind and solar just happen to be heavily subsidized by that metric.

      Once again, someone has answered their own question.

      But let's actually compare [soylentnews.org] subsidies rather than just bullshit around.

      Let's look at a study [europa.eu] that did so. On page 262, they break down subsidies by energy source with "RES" being all renewable sources (hydroelectric, solar, wind, geothermal, biomass, etc.). Fossil fuels are the expected 55 billion Euro in 2016 (and near constant through the previous decade through 2008) while RES is 75 billion (grew from 25 billion Euro in 2008).

      That doesn't accurately describe the subsidy issue since fossil fuels are consumed for far more energy than renewables. Here [europa.eu], it is claimed that in 2016 there was fossil fuels consumption of 1093 million tonnes of oil equivalent while renewable sources generated 216.6 million tonnes of oil equivalent - including energy consumption of transportation. So we have roughly 50 Euro subsidies for one unit of fossil fuels consumed and 350 Euro per unit for renewable sources. The subsidy per unit of consumption is seven times higher for renewable sources compared to fossil fuels.

      So seven times higher subsidy per unit of energy generated for renewable sources. So sure, businesses can see the thumb on those scales and which energy source is presently favored. Maybe part of the reason that some businesses are still building other sorts of generation is that they don't buy that these subsidies will continue indefinitely. This may be yet another warning that things won't last, which would be a strong indicator of a bubble in renewable energy (particularly, SWB).

      • (Score: 5, Insightful) by sjames on Sunday March 21 2021, @06:48AM (4 children)

        by sjames (2882) on Sunday March 21 2021, @06:48AM (#1127005) Journal

        You missed the subsidies on the fossil fuel production. You also missed the externalities. All that fly ash doesn't just go away, nor does the CO2.

        • (Score: 1) by khallow on Sunday March 21 2021, @08:10AM (2 children)

          by khallow (3766) Subscriber Badge on Sunday March 21 2021, @08:10AM (#1127014) Journal

          You missed the subsidies on the fossil fuel production.

          Nope.

          You also missed the externalities.

          Let us note that a terrible case has been made for high externalities from fossil fuel use with proper pollution controls.

          All that fly ash doesn't just go away, nor does the CO2.

          Doesn't sound like much of a problem here.

          Notice that we're moving the goalposts now. These weren't important enough to mention when you thought you had a lock on fossil fuel subsidies.

          • (Score: 2) by sjames on Sunday March 21 2021, @09:03AM (1 child)

            by sjames (2882) on Sunday March 21 2021, @09:03AM (#1127020) Journal

            They certainly were important enough. Gee, awfully damned sorry I didn't post 1,000 pages of details. No goalposts moved. Sorry, but "Nope" isn't a counter argument. Nor is "Doesn't sound like much of a problem". For example "But it will kill 3/4 of the Earth's population!" "Doesn't sound like much of a problem!".

            Try again.

            • (Score: 0) by Anonymous Coward on Sunday March 21 2021, @09:39AM

              by Anonymous Coward on Sunday March 21 2021, @09:39AM (#1127028)

              As long as it doesnt disrupt The Bachelor then fine.

        • (Score: 2) by FatPhil on Sunday March 21 2021, @11:04AM

          by FatPhil (863) <{pc-soylent} {at} {asdf.fi}> on Sunday March 21 2021, @11:04AM (#1127053) Homepage
          He also seems to have used the EU to counter a comment which I had presumed was about the US.
          --
          Great minds discuss ideas; average minds discuss events; small minds discuss people; the smallest discuss themselves
      • (Score: 2) by deimtee on Sunday March 21 2021, @03:07PM

        by deimtee (3272) on Sunday March 21 2021, @03:07PM (#1127124) Journal

        While I am in favour of cleaning up the environment I would just point out that your subsidies argument includes hydroelectric which, when viable, is mostly pre-existing and would have a lot lower subsidy than solar or wind. (I am not disagreeing, this strengthens your point.)

        Putting aside direct subsidies you can argue forever about externalities without getting anywhere. It is a never ending rat-hole of each side attributing a cost to the other, each more vague than the last. Direct subsidies, indirect, environmental damage, disposal costs, military actions, social cost of vastly enriching medieval level governments, earthquakes, flammable tap water, etc, etc, etc.

        --
        No problem is insoluble, but at Ksp = 2.943×10−25 Mercury Sulphide comes close.