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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, 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.

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  • (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.