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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.
(Score: 2, Interesting) by legont on Sunday March 21 2021, @12:59AM (13 children)
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
> 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)
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)
ignores that "she" is paying those initial costs as well.
(Score: 2) by legont on Sunday March 21 2021, @10:31AM (7 children)
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
> ....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)
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)
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)
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)
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
They can, actually, such as import power or temporary higher production of power.
I suppose so. My take is that the business side is smarter.
(Score: 1) by khallow on Sunday March 21 2021, @06:05PM
(Score: 0) by Anonymous Coward on Sunday March 21 2021, @01:14PM (1 child)
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
15k each
FTFY