Plus: Another new forecast from BP; Canada’s 3 wheel answer to Tesla; Fixing the regulatory system to reward batteries
Hi Everyone,
Two deaths in the family – my Aunt and my wife’s Uncle – is the reason behind the abbreviated updates the last couple weeks. Both events were marked by wonderful celebrations of their lives.
Shell just bought my favourite battery company sonnen. What made them unique was their software and it’s why they were so successful. Check it out: Oil companies are competing to buy battery companies.
I’m mixing it up again this week with a bit more of my take, but also asking some questions for which I’d like your help.
Thanks,
Peter
Big Oil’s Big Issue With Embracing ‘Big Energy’
Excerpt: The upshot is that a one-percentage-point improvement in return on average capital employed in the exploration and production business translates to $1.1 billion of adjusted operating income for Total — almost 16 times what a one-point improvement in the GPR business’ return would generate. …more from Yahoo Finance
Comment: Let me start by declaring this is a deeper dive on this, but here goes…I’ve been saying this for a while now….the challenge oil and gas companies face in pursuing ‘new energy’ business lines is that investment in renewables and storage dilute higher returns from oil and gas. Harvard professor Clayton Christensen has long taught about this: industry after industry throughout history falls into the trap of chasing ever higher returns and yielding market share to disruptive new entrants (see 8 min video, for starters). A recent example: Blockbuster was unable to adapt to competition from Netflix. Can oil companies outsmart what history has proven over and over to be very difficult to do? The big integrateds have shown they’ve awakened to the threat. Others have so far signalled intent to continue to ‘rent DVDs’ on the basis that the energy system is so large that it will take decades to change.
There are a host of macro forces at play that could interact in ways that make the future very difficult to predict: the rise of millennials with a different value set, populism, inequality, IoT and AI, just to name a few. Add to this the march of cost reductions to solar, wind and energy storage, plus – importantly – the synergistic way in which new technologies are being combined to deliver value (solar + storage + software] These, together with the climate change imperative facing all of humanity suggests speed could offer surprise.
So how can the financial markets reward oil companies for making the right moves? Using the carrots and sticks analogy, divestment is for sure a stick, albeit a crude one [and let’s not forget the large proportion of oil reserves/production represented by State-owned oil companies less beholden to these measures]. With all the work going into carbon risk and ratings systems (TCFD, SASB, etc), I remain skeptical any of this will differentially reward (the carrot) those that rank well in ways that spur investment by oil companies to rapidly decarbonize the energy system. Got ideas about what’s needed, let me know! If you think I’m missing something, by all means, set me straight.
As renewables soar, BP sees China hitting brakes on energy growth
Excerpt: Global demand for renewable power will soar at an unprecedented pace over the coming decades, BP said in a benchmark report on Thursday, while China’s energy growth is seen sharply decelerating as its economic expansion slows. …more from REUTERS
Comment: I rarely post on forecasts because they almost always underestimate renewables. That said, by BP provides useful insights on the basis for and the uncertainties associated with their prognostications. Start with the 8 min key findings video.
Virtual power plant snags contract in wholesale capacity auction – a US first
I saw multiple articles characterizing this as a real ‘breakthrough’. One Step Off The Grid offers the best insights – definitely worth the read. Sunrun is the first to take advantage of a Federal regulatory rule making this kind of virtual power plant possible. It’s worth learning about. Sunrun now has to install 5000 batteries in homes that can both help the customers save money but also provide power to the grid.
There are many other companies combining solar and storage in various jurisdictions around the globe, made possible by the right regulatory environment. I’m fed up with not seeing these things in my home province of Alberta. Anyone who thinks they can help me problem-solve this, let me know. Let’s get this fixed. Who’s in?
Just in case you’re on the fence, here is a great proof-point: why does Alberta need to pass a brand new stand-alone piece of legislation to get a single pumped hydro project approved? That is not efficient regulation. It’s a work-around to a flawed policy/regulatory construct.
Oregon to get groundbreaking large-scale wind/solar/storage facility
Excerpt: A new energy facility in eastern Oregon will be the first of its kind in the U.S., combining wind power, solar power, and battery storage on a large-scale. …more from Electrek
DC-Coupled Solar-Plus-Storage Systems Are Gaining Ground
Most people don’t give this a lot of thought – the knobby thing at the end of your iPhone cord converts the alternating current in your house to direct current (DC) needed to charge your battery. Solar panels generate direct current, so taking the power directly into a battery is more efficient. “War of the currents” offers some history, if you’re interested.
Excerpt: DC-coupled solar-plus-storage is becoming increasingly common for front-of-meter applications and will likely come to dominate the residential market. …more from Greentech Media
EDF launches blockchain solar-plus-storage, P2P trading pilot in South London
Excerpt: Consumers in a South London housing estate will soon be able to trade solar power amongst themselves as an blockchain-enabled pilot project backed by EDF gets underway. …more from Energy-Storage.news
World’s Biggest Battery to Boost Solar in Texas Oil Country | Yahoo Finance
In a twist, oil and gas drilling is behind demand for more electricity in this part of Texas.
Zero to 68: US set to join top 3 LNG exporters
Comment: I’ve heard it said that ‘China is starved for gas’. The US is ramping up liquefied natural gas exports to meet rising global demand. I know it’s not what some want to see or hear, but this is the reality of today’s energy system.
Excerpt: It’s going to be a big growth year for U.S. exports of liquefied natural gas, with three more terminals set to start operations in 2019 and developers already this month committing to a $10 billion investment for another project. …more from Alaska Journal
Ikea to trial furniture rental – is the future of homeware a temporary one? | iNews
IKEA wants to become fully circular by 2030. Impressive ambition. Great leadership.
Canada’s Answer to Tesla Is a $15,500 Electric Three-Wheeler
Source: Eectra Mechannica
Yet another disrupter. Way to go guys!
Excerpt: It’s all-electric like a Tesla. It’s priced like a Ford Fiesta. It’s one of the oddest-looking vehicles you’ve ever seen — and it may just redefine the commuter car. …more from Bloomberg