Plus: Pivots away from hydrogen; Britain commits $28.5B to carbon capture; Fortescue spending $2.8B to electrify mining equipment; More big batteries
Hi everyone,
In this issue, I offer up some thoughts specific to Alberta. I realize this doesn’t apply to many of you – at least not directly. Yet grids are being challenged to adapt quickly to changing demands, first from electric vehicles and now from data centers processing all our artificial intelligence requests. Can grids keep pace? I aimed to answer that for EVs in Alberta.
Remarkably, I have no stories on solar and wind this issue. But investment in energy storage continues impress.
As always, please continue to forward on to others and encourage them to subscribe.
Thanks,
Peter
Peter’s take: Can Alberta’s grid support EVs?
Someone asked me this question recently and it took a bit of work to try to answer it. Electrification of transport is just one dimension for grid build-out. Other sources of demand growth include increased use of heat pumps and growth of data centers due to increased use of artificial intelligence. But there are also aspects that are pulling down on the growth in demand: increased energy efficiency in buildings and importantly for EVs, time-of-use pricing or demand management incentives that could shift loads so EVs are charged off-peak. A key assumption needed here is: how many EVs can we expect? We know the current Federal government expects all new passenger vehicle sales to be 100% electric by 2035, beginning with a minimum 20% of new car sales in 2026. For reference, in the first quarter of 2024, EVs represented 11.3% of total vehicle sales in Canada.
So, how much bigger does the grid need to be? From a 2022 Canadian Climate Institute report, it says in a net zero future: “Canadian electricity demand will grow to be 1.6 to 2.1 times larger by 2050 compared to today. And to meet that demand, Canada’s electricity generation capacity will need to be 2.2 to 3.4 times bigger than today.”
Digging into the technical documents (see Figures 3 and 4 here), by 2035, electricity generation needs to be about 1.5X larger and installed capacity needs to be about 2X larger. Putting aside what form this takes, I thought it would be instructive to know how electricity supply has shifted in composition over the last 10 years or so (see figure below). In the 5 years from 2018 to 2023, natural gas fired generation grew from about 45GWh to 62GWh, an increase of 17GWh or about 38%. So, a nearly 1.4X increase using gas over 5 years. Pretty impressive growth. On the face of it, adding another 50% over the 10 years to 2035 seems very doable if using gas. But the current Federal government also aims to have a zero emissions grid by 2035, a particularly daunting challenge for Alberta. Many experts have said such a target is unachievable. But in the same 5-year period, renewables grew by over 2X. Then, the Alberta government inserted a pause on approvals to sort out policy, sending a chill on investment – a chill that has had a lasting effect and is well-outlasting the pause.
So far, I’ve only been considering generation. Transmission and distribution can be fraught with opposition and delays. I have no special insights on the ability of the current transmission grid to support a 1.5X growth in supply over 10 years. I can say the system grew by just shy of 20% over 12 years (2011-2023).
One last thing to insert here: EVs can use existing generating capacity by charging overnight. To do so, local distribution systems would likely need to be upgraded. But herein lies the challenge: charging EVs at night in Alberta means using mostly gas-fired electricity. Sorry if that takes the shine off EVs, but that is a reality of the current system. If EV owners had ready access to chargers at daytime parking spots, we could make much better use of solar for that purpose. Which brings into light the importance of what the future of charging infrastructure ought to look like.
Alberta’s Electricity System Operator (AESO) published its 2024 Long-Term Outlook in May. The high electrification case shows an increase of 20% in Average Alberta Internal Load (AIL) by 2035. See Figure below. I am more inclined to believe the 20% projection by AESO than the 50% projection by the Canadian Climate Institute.
What are we to conclude: I think Alberta’s grid (not including charging infrastructure) could quite easily grow to accommodate the demand from EVs by 2035. Doing so with a zero emissions grid by 2035 is not likely to happen, given the current policy and investment context. Broadly, I just don’t see the political will that would be needed to subsidize such a rapid transformation of Alberta’s electricity generation.
You are now likely to pose a new question: what about the cost? To answer that, besides the addition of generation, transmission and distribution, one would need to also consider the substantial buildout of public charging infrastructure. I’ll admit I haven’t researched that. If you have, let me know!
Source: Up to the Challenge: Achieving A Net Zero Grid In Alberta. CCI August 2024
Source: AESO 2024 Long-Term Outlook; additions in red by P. Koning
Finance & Sentiment
A $9.5 trillion investor group has unveiled impressive emissions reductions. The Net Zero Asset Owner Alliance (NZAOA) says its 88 members have reduced emissions by an average 6% annually since 2018 – a rate that aligns them with the goal of limiting global warming to the critical threshold of 1.5C. The NZAOA is a sub-unit of the Glasgow Financial Alliance for Net Zero (GFANZ), which is co-chaired by Mark Carney. At some point, one would have to think this will increase the cost of or access to loans for some companies seen to be at odds with emissions reduction aims. So they say, though it hasn’t yet proven out in real-world experience. I say “yet”, because the coming mandated ESG disclosures can be expected to have some bite in the next 5 years or so.
Technology
Hydrogen
Shell has scrapped plans for a low-carbon hydrogen plant in Norway due to a lack of demand.
This announcement comes days after Equinor scrapped similar plans to export blue hydrogen to Germany via the world’s first offshore hydrogen pipeline.
Origin Energy in Australia has decided to pivot away from hydrogen and focus instead on renewables and storage. Add them to the list of companies seeing market uncertainty and high risks for green hydrogen.
IEA: Of the 520 GW announced electrolysis projects, 20 GW reached FID (Final Investment Decision), with projects in 2023 amounting to a 2.5% increase over 2022.
Construction begins on $1.5bn green hydrogen project in China with a hydrogen-fired power station and six hydrogen filling stations that will fuel 600 trucks. Interestingly, the power plant serves as a peaker-plant to back up a renewables-rich grid.
ECL says it will build a 1GW hydrogen-powered AI data center in Texas. Don’t get too excited as they will start with 50MW powered by 50% grey hydrogen (produced from natural gas) and 50% blue (produced with natural gas, but with carbon capture). Later, the aim is to use 80% blue and 20% green hydrogen (produced with water using renewable power). We’ll see.
Carbon Capture/Removal
British Airways has signed a record $11m carbon removal deal with CUR8, a UK-based carbon removal company, to purchase 33,000 tonnes of carbon removal credits over six years.
Britain committed $28.5B to carbon capture, over 25 years.
The Grid
The last remaining coal-fired power plant in the UK has closed.
Finally, the Texas grid will no longer be an island. A 320 mile high voltage direct durrent (HVDC) line will connect Texas to Mississippi, adding 3,000 MW of bidirectional capacity across three states. The US DoE announced $1.5B in funding for four transmission lines totaling 939 miles or 1502 km. Works out to about $1 million per kilometer.
Urban Design & Buildings
Finally, the U.S. government’s road safety agency wants the auto industry to redesign increasingly large SUVs and pickup trucks so that they reduce pedestrian deaths and injuries. Talk about overdue. Back in 2021, the US was ranked among the world’s worst places to be a pedestrian – seeing not a decrease, but a 45% increase in deaths in over the prior decade. Higher front hoods of SUVs and trucks are a key contributor.
Nuclear
Microsoft has signed a deal to restart the Three Mile Island nuclear plant in a move to help decarbonize data centers.
Energy Storage
Plans have been revealed for a 1GWh iron-air battery in Ireland, possibly a first for Europe.
Image: Form Energy
Look at the size of that thing! The battery would be able to discharge 10MW for 100 hours, all based on reversible rusting. I’ve seen very few grid batteries that cover more than the usual evening peak demand of 2-4 hours.
South Korea’s largest battery (nearly 1GW) has come online.
Origis Energy has signed a PPA for Mississippi PV plant with 800MWh battery storage system.
Officials from the city of Moorpark, California, unanimously rejected a proposal from Hecate to construct a very large batter project (600MW/2,400MWh) over zoning regulations mandating such systems be housed indoors and concerns of possible hydrogen fluoride vapours and hydrofluoric acid run-off if there ever was a fire.
A five-fold increase in big-batteries is projected for Germany by 2026, with around 7GWh to be added, according to the industry body there.
Transportation
Fortescue will pay $2.8 billion to replace two-thirds of its fleet of haulage trucks and equipment in Western Australia with electric versions. As the world’s fourth-biggest iron ore miner, the pivot to e-mining equipment is significant. Noteworthy too, is the 6MW charger that can top up the batteries for the 240-tonne haul trucks in 30 minutes.
Toyota says it will cut 2026 global EV output plans by a third, forecasting 1 million EVs instead of 1.5 million. Pretty ambitious considering Toyota sold only 104,000 EVs last year.
Ford has decided to install home chargers for free in a bid to boost EV sales of its Mustang Mach-E, F-150 Lightning pickup truck and E-Transit cargo van.
Air France-KLM have signed an MOU for 1.9 billion liters of Sustainable Aviation Fuel with TotalEnergies. Beginning in 2025, all flights originating in European airports will be required to utilize a minimum percentage of SAF, beginning with 2% of all fuel used in 2025 and rising to 70% by 2050.