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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: 1, Informative) by Anonymous Coward on Saturday March 20 2021, @10:16PM (32 children)

    by Anonymous Coward on Saturday March 20 2021, @10:16PM (#1126875)

    Doesn't seem nearly as complex as outlined in tfa--

    On a windy/sunny day, renewable is cheaper per KWh than traditional generation, so the trad. generators will be shut down, at reduced power output, or idling.

    There will still be cloudy/calm days and we are years from enough batteries to cover any extended outage, so trad. generators will ramp back up.

    Given the intermittent duty cycles, the cost to consumers of power from trad. generation will probably go up per KWh. Fixed costs don't drop as quickly as sales, unless the owners are paying attention...!

    If the total income to the trad. generating companies is reduced, they won't be able to maintain their dividends (at least in USA, utility stocks often have a dividend to shareholders). Dividend/income investors will sell off and the stock price will drop.

    But, in the long term, those trad. generator facilities may last longer if they aren't used so heavily, so the replacement funding will be spread out over more years--the trad. generation companies may be able to hang on for many years.

    What did I miss?

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  • (Score: 2, Insightful) by Runaway1956 on Saturday March 20 2021, @11:00PM (31 children)

    by Runaway1956 (2926) Subscriber Badge on Saturday March 20 2021, @11:00PM (#1126885) Homepage Journal

    You missed the pressure from environmentalists to shut the whole thing down. They are really pushing on laws to get rid of anything related to coal or petrol. Some progressive state will succeed in outlawing any dino-powered generation soon (California? Vermont?) then other states will follow suit. Things will grind on, until the first emergency, when there is no backup to all the non-working renewables. It will look just like Texas during the recent blizzard!

    --
    Our first six presidents were educated men. Then, along came a Democrat.
    • (Score: 0) by Anonymous Coward on Saturday March 20 2021, @11:19PM (9 children)

      by Anonymous Coward on Saturday March 20 2021, @11:19PM (#1126891)

      Ah, non-market intervention, iirc, it's already hit Germany.

      If California, yes, another mess is to be expected, particularly if it's during summer and A/C shuts off in SoCal. But that's not so likely, since solar is best when sunny. If Vermont, much less of a problem because of the many houses heated by wood--they can go without power for a good while (and, at least for now, A/C isn't a necessity in VT).

      • (Score: 1, Informative) by Anonymous Coward on Saturday March 20 2021, @11:28PM (4 children)

        by Anonymous Coward on Saturday March 20 2021, @11:28PM (#1126892)

        Replying to myself. I was wrong about VT on two counts -- https://www.eia.gov/state/?sid=VT [eia.gov]

        tl;dr -- VT is well on it's way--wood isn't primary and they have already done their renewable homework.

        Vermont consumes more than three times as much energy as it produces, but total energy consumption is the smallest of all the states, which contributes to Vermont having the lowest carbon dioxide emissions of any state.
                Nearly 3 out of 5 Vermont households heat their homes with petroleum, 1 out of 5 use natural gas, and almost 1 out of 6 burn wood for heat. More than one-third of Vermont schoolchildren attend facilities heated by wood products.
                In 2019, Vermont generated 99.9% of its electricity from renewable resources, a larger share than in any other state. About 55% of Vermont's in-state generation came from conventional hydroelectric power.
                In 2019, Vermont’s five wind farms accounted for about 18% of the state’s utility-scale electricity net generation, a larger share than in almost four-fifths of the states.
                By 2050, Vermont plans to obtain 90% of all its energy from renewable sources and to reduce overall energy use by more than one-third, according to their Renewable Energy Standard.

        • (Score: 2) by legont on Sunday March 21 2021, @01:03AM (3 children)

          by legont (4179) on Sunday March 21 2021, @01:03AM (#1126914)

          Hydro is not renewable because reservoirs silt.

          --
          "Wealth is the relentless enemy of understanding" - John Kenneth Galbraith.
          • (Score: 2) by hendrikboom on Sunday March 21 2021, @02:30AM (1 child)

            by hendrikboom (1125) Subscriber Badge on Sunday March 21 2021, @02:30AM (#1126949) Homepage Journal

            It is possible to dredge them. But no one seems to be doing it.

            • (Score: 3, Touché) by legont on Sunday March 21 2021, @10:53AM

              by legont (4179) on Sunday March 21 2021, @10:53AM (#1127051)

              I was told that it is prohibitive energy wise. Unless we use nukes to dig which was planned and tested at some point.

              --
              "Wealth is the relentless enemy of understanding" - John Kenneth Galbraith.
          • (Score: 2) by FatPhil on Sunday March 21 2021, @11:17AM

            by FatPhil (863) <{pc-soylent} {at} {asdf.fi}> on Sunday March 21 2021, @11:17AM (#1127056) Homepage
            The guys who set the rules disagree with you: https://www.congress.gov/bill/115th-congress/house-bill/3043
            --
            Great minds discuss ideas; average minds discuss events; small minds discuss people; the smallest discuss themselves
      • (Score: 2, Interesting) by legont on Sunday March 21 2021, @01:14AM (3 children)

        by legont (4179) on Sunday March 21 2021, @01:14AM (#1126919)

        No fear. Russians are building nuclear power right on the German's border.

        --
        "Wealth is the relentless enemy of understanding" - John Kenneth Galbraith.
        • (Score: 1, Insightful) by Anonymous Coward on Sunday March 21 2021, @04:56AM (2 children)

          by Anonymous Coward on Sunday March 21 2021, @04:56AM (#1126974)

          And Nevada and/or Arizona will do the same on the California border. Or maybe they already have? Didn't check.

          • (Score: 2) by FatPhil on Sunday March 21 2021, @11:22AM (1 child)

            by FatPhil (863) <{pc-soylent} {at} {asdf.fi}> on Sunday March 21 2021, @11:22AM (#1127058) Homepage
            In order to be an equivalent example, New Mexico or Utah would need to be doing on the Californian border.

            Handy hint, legont, look at a map before spouting nonsense on the internet.
            --
            Great minds discuss ideas; average minds discuss events; small minds discuss people; the smallest discuss themselves
            • (Score: 1) by khallow on Sunday March 21 2021, @03:41PM

              by khallow (3766) Subscriber Badge on Sunday March 21 2021, @03:41PM (#1127139) Journal
              Much of that construction is likely to be due to California businesses. It's a broken analogy due to the weak state involvement (key contribution would simply be to get out of the way) in the construction and the fluid nature of US business.
    • (Score: 2, Interesting) by legont on Sunday March 21 2021, @12:59AM (13 children)

      by legont (4179) on Sunday March 21 2021, @12:59AM (#1126911)

      There is another, perhaps even more important point. Energy sources are extremely capital intensive to build. The price of electricity absorbs the costs on ongoing basis. So, when somebody on solar panels gets no power and wants to buy fossil, she should pay 10x or 100x the price to compensate me for paying the initial costs for all the years. And if extra power is not available she shall freeze to death while I enjoy the living.

      This is very similar to medical insurance. One has to buy it while young and healthy and pay for all her life so in the old age one could enjoy the care. One can't just buy it when becomes sick - it would never work. Since most people would never do it, the government has to force them and that's what "free" medical coverage means.

      --
      "Wealth is the relentless enemy of understanding" - John Kenneth Galbraith.
      • (Score: 2, Touché) by Anonymous Coward on Sunday March 21 2021, @02:13AM

        by Anonymous Coward on Sunday March 21 2021, @02:13AM (#1126946)

        > So, when somebody on solar panels gets no power and wants to buy fossil, she should pay 10x or 100x the price to compensate me for paying the initial costs for all the years. And if extra power is not available she shall freeze to death while I enjoy the living.

        And, you and your "drill baby drill" friends should pay the costs associated with the environmental damage due to extracting and burning fossil fuels.

        Hint: you will come out way behind on that deal. Just the cost of the damage from the 2019-2020 firestorms in AU and W. US, would be enough to put your net into the red for years. And, the worst is yet to come e.g., sea level rise inundating the majority of major cities (the majority of people live on the coasts). Especially low-lying land areas like 1/3 of the US state of Florida will be lost, as will many small island nations. Equatorial regions will become uninhabitable with only a slight additional temperature increase. And, if ongoing ocean acidification kills off the phytoplankton, most humans and other animals will die.

        There is an area of the brain that when it is damaged, causes people to become religious. I suspect this same brain damage also contributes to right-wing thinking. But, I'm open to the possibility that there are additional areas of brain damage that contribute to right-wing ideology too.

        https://www.salon.com/2019/01/08/a-link-between-brain-damage-and-religious-fundamentalism-has-now-been-established-by-scientists_partner/ [salon.com]

      • (Score: 1) by khallow on Sunday March 21 2021, @06:28AM (9 children)

        by khallow (3766) Subscriber Badge on Sunday March 21 2021, @06:28AM (#1126996) Journal

        So, when somebody on solar panels gets no power and wants to buy fossil, she should pay 10x or 100x the price to compensate me for paying the initial costs for all the years.

        You did pay the initial costs, right? /sarc Else maybe you should just fuck off.

        • (Score: 1) by khallow on Sunday March 21 2021, @06:45AM (8 children)

          by khallow (3766) Subscriber Badge on Sunday March 21 2021, @06:45AM (#1127003) Journal
          Sorry, if that came off as a little rude, but

          So, when somebody on solar panels gets no power and wants to buy fossil, she should pay 10x or 100x the price to compensate me for paying the initial costs for all the years.

          ignores that "she" is paying those initial costs as well.

          • (Score: 2) by legont on Sunday March 21 2021, @10:31AM (7 children)

            by legont (4179) on Sunday March 21 2021, @10:31AM (#1127043)

            Look, insults aside, you do realize that a traditional power company can only exist if a projected number of customers are committed for many years. If another source undercuts it, the power company goes under. Now, if that other source can't provide reliable energy, everybody goes under. It's a simple fact and a matter of survival; now, not in an imaginable future.

            Solar and wind at this point are riding the existing infrastructure.

            --
            "Wealth is the relentless enemy of understanding" - John Kenneth Galbraith.
            • (Score: 0) by Anonymous Coward on Sunday March 21 2021, @01:22PM

              by Anonymous Coward on Sunday March 21 2021, @01:22PM (#1127096)

              > ....a traditional power company can only exist if a projected number of customers are committed for many years

              a traditional power company can only exist if they succeed in becoming a public utility and are good at twisting the arm of the regulators to get rate increases.

              ftfy

              (in reality, it's probably some of each)

            • (Score: 1) by khallow on Sunday March 21 2021, @03:28PM (4 children)

              by khallow (3766) Subscriber Badge on Sunday March 21 2021, @03:28PM (#1127133) Journal

              Look, insults aside, you do realize that a traditional power company can only exist if a projected number of customers are committed for many years.

              So what? That traditional power company is already used to substantial variations and disruptions in supply. They can handle it.

              • (Score: 2) by legont on Monday March 22 2021, @01:56AM (3 children)

                by legont (4179) on Monday March 22 2021, @01:56AM (#1127320)

                The problem is not supply, but demand. It is build for a certain demand predicted for decades in the future. If it's wrong, it will die.

                --
                "Wealth is the relentless enemy of understanding" - John Kenneth Galbraith.
                • (Score: 1) by khallow on Monday March 22 2021, @05:33AM (2 children)

                  by khallow (3766) Subscriber Badge on Monday March 22 2021, @05:33AM (#1127366) Journal

                  It is build for a certain demand predicted for decades in the future.

                  Not at all. I get that the electric company can't turn on a dime. But they have to adjust for problems on time scales of days to weeks.

                  • (Score: 2) by legont on Monday March 22 2021, @11:54AM (1 child)

                    by legont (4179) on Monday March 22 2021, @11:54AM (#1127410)

                    They can't adjust traditional generation so they will not and will go bankrupt. BTW, I believe greens understand this and do undercutting on purpose. They want to provoke a crisis.

                    --
                    "Wealth is the relentless enemy of understanding" - John Kenneth Galbraith.
                    • (Score: 1) by khallow on Tuesday March 23 2021, @02:01PM

                      by khallow (3766) Subscriber Badge on Tuesday March 23 2021, @02:01PM (#1127934) Journal

                      They can't adjust traditional generation

                      They can, actually, such as import power or temporary higher production of power.

                      BTW, I believe greens understand this and do undercutting on purpose. They want to provoke a crisis.

                      I suppose so. My take is that the business side is smarter.

            • (Score: 1) by khallow on Sunday March 21 2021, @06:05PM

              by khallow (3766) Subscriber Badge on Sunday March 21 2021, @06:05PM (#1127184) Journal
              Also, how is the electricity going to get to this alleged moocher? There would be a connection fee for the grid even if you don't normally use it.
      • (Score: 0) by Anonymous Coward on Sunday March 21 2021, @01:14PM (1 child)

        by Anonymous Coward on Sunday March 21 2021, @01:14PM (#1127090)

        There is another, perhaps even more important point. Energy sources are extremely capital intensive to build.

        Really? $15k for an offgrid PV+battery is not that much. Bye-bye grid.

        • (Score: 0) by Anonymous Coward on Sunday March 21 2021, @02:51PM

          by Anonymous Coward on Sunday March 21 2021, @02:51PM (#1127117)

          15k each

          FTFY

    • (Score: 4, Interesting) by Azuma Hazuki on Sunday March 21 2021, @01:27AM (2 children)

      by Azuma Hazuki (5086) Subscriber Badge on Sunday March 21 2021, @01:27AM (#1126926) Journal

      Lucky for us, there's this amazing thing called a battery, and all kinds of neat new tech is showing up that should let us create absolutely gigantic ones pretty soon. I bet it's already feasible, just not commercialized enough yet. Picture something like a house-sized flow battery, for example.

      --
      I am "that girl" your mother warned you about...
      • (Score: 2, Interesting) by Anonymous Coward on Sunday March 21 2021, @04:53AM (1 child)

        by Anonymous Coward on Sunday March 21 2021, @04:53AM (#1126972)

        > Picture something like a house-sized flow battery

        I'm picturing a pretty big containment dam around it too.

        • (Score: 2, Insightful) by khallow on Sunday March 21 2021, @06:31AM

          by khallow (3766) Subscriber Badge on Sunday March 21 2021, @06:31AM (#1126998) Journal

          I'm picturing a pretty big containment dam around it too.

          No biggie. Just look at the the pretty big containment dams that hydrocarbon tanks have. When it's good enough for your house-sized pool of toxic, flammable hydrocarbons, then it's good enough for your house-sized battery too.

    • (Score: 2, Interesting) by Anonymous Coward on Sunday March 21 2021, @04:37AM (2 children)

      by Anonymous Coward on Sunday March 21 2021, @04:37AM (#1126969)

      You can't entirely relate coal and petrol, at least not in the USA. In the USA, almost no electricity is generated from petroleum. The threat to the petroleum industry is EVs, but those are going to take a while to replace the current ICE fleet. ICE cars are still the majority of sales, and a lot of effort has been put in to making the durable. People are getting 200,000 miles out of them, easily. That's at least 10 more years for most people. An interesting fact about oil--when they first started pumping it, they had a hard time getting as much gasoline as they wanted. Then they invented some new processing techniques to up the gasoline percentage from a barrel, so now it's about 40% where it used to be more like 20%. The refineries will have to roll that back a bit if the demand for motor fuels drops. They'll end up with more "heavy" fractions like diesel, kerosene, heating oil. The poor New Englanders who always suffered with heating oil prices may see those drop, and be able to keep their oil heaters going longer. Truckers will get a break on diesel if electric semis don't become a thing. The pie will get smaller, but for a while the oil companies will be able to make up for lost auto sales with smart refinery operations to compensate--but there are limits to that. Over-supplying the other refined products doesn't help their bottom line. They won't go away, but they'll be refining fewer barrels than before. It will be a longer "party" than they thought, but with fewer guests. The electric cars will be driving on asphalt roads still--the heaviest fractions. They'll still make plastics and other chemicals with oil. People are not going to want to go in to petroleum engineering, but it might actually be the most interesting time to be one. The oil companies will pay them very well, I think; because there will be fewer of them and the job will be challenging.

      • (Score: 2) by legont on Sunday March 21 2021, @10:37AM (1 child)

        by legont (4179) on Sunday March 21 2021, @10:37AM (#1127045)

        Historically, petroleum was a hazardous waste of producing diesel, jet, and heating fuel. Gasoline engines were invented to get rid of that waste the most efficient way.

        --
        "Wealth is the relentless enemy of understanding" - John Kenneth Galbraith.
        • (Score: 0) by Anonymous Coward on Sunday March 21 2021, @11:26PM

          by Anonymous Coward on Sunday March 21 2021, @11:26PM (#1127267)

          Huh? Petroleum is the *input* to the process, and gasoline engines predate jets by several decades. If anything was invented to get rid of petroleum wastes, it was plastics--I'm given to understand that back when soda came mostly in glass bottles and shopping bags were paper, they were incinerating a lot of the petroleum fractions until they realized they could make plastics out of them. Then they got plastic bags and bottles out in the market, and the rest is history. It's been a while since I heard this though, so it might be wrong... but not as wrong as you are about gasoline.

    • (Score: 4, Insightful) by Anonymous Coward on Sunday March 21 2021, @10:49AM

      by Anonymous Coward on Sunday March 21 2021, @10:49AM (#1127048)

      Coal and natural gas would already be gone if they weren't subsidized as hell. If we're going to subsidize, we should subsidize nuclear (Biden might actually do this) and let the various renewable technologies emerge and compete in their various overlapping markets.

      Nobody is going to lose power due to lack of winterizing in the north either. You know damn well that Texas lost power because of financially-motivated negligence on behalf of their power providers, who didn't want to shell out for stuff that won't shut down in a little bit of cold.