DMN Opinion Article on Europe Energy Supply

Investment Analysis Clubs Macro Economic Trends and Risks
#7

It is my analysis that intermittent energy will not be economically viable (sans subsidies) until storage is sub 100 a kilowatt hour installed. Currently automotive storage is at 137 dollars a kilowatt hour at pack level, but solar plus storage here in Florida is running 800 dollars a kilowatt hour installed. So, a ways to go. Also, an effective machine controlled energy arbitrage system at the kilowatt hour level will be required. Short of this intermittent energy is not going to replace the traditional systems.

In the short term, we can increase fracking supplies quickly in Eagle Ford shale and in North Dakota. We should have enough pipelines to move the oil now. Unfortunately we do not have Keystone XL, but the lifting of sanctions on Venezuela could help, but don’t be surprised if Venezuela is slow to deliver. For one the infrastructure is probably in disrepair and they will like to make the USA twist in the wind for a while.

Cheers
Qazulight

#8

He clearly has a dog in this fight, but he makes telling points about how wind and solar cannot solve EU’s energy problems.

Not in the short run but eventually.

The Captain

#9

My biggest take-away is that wind and solar are not going to replace Russian gas. Other alternates should receive higher priority than they’re getting. More common sense is needed and less politics.

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Nobody is saying that wind and solar will replace Russian gas in the short term. Natural gas has always been the bridge to wind, solar and energy storage becoming the major source of electrical power generation.

But the Russians have upset the Europeans in there long term goals. Nuclear is not a short term answer or goal either. The old nuclear power plants that are being shutdown in Europe and US are just not economical any longer.

Jaak

#10

The old nuclear power plants that are being shutdown in Europe and US are just not economical any longer.

The German decision to shut down all their nuclear plants was not based on economics, and they’ve been shutting down large plants with potentially decades of life left in them if refurbished.

The three nuclear plants they still have running are:

Isar-II, 1,485 MW, initial operation 1988, so with the typical 40 year initial lifespan, it should have another 6 years.

Emsland, 1,363 MW also initially powered up in 1988.

Neckarwestheim, 1,400 MW also initially powered up in 1988.

These are large, modern nuclear plants, operating with capacity factor of ~91% on average. It’s not an economic decision to shut them down at the end of this year, especially with the security factor of relying on Russian natural gas counted in, and the spiking cost of natural gas. If they have any sense, they’ll continue operating these past this year’s deadline to close them, until 2028, and possibly beyond.

Three other large modern plants were just shut down this winter:

Neckarwestheim, 1,440 MW, initial operation in 1986, so four years left on it’s typical lifespan

Grohnde, 1430 MW, initial operation 1984, two years lifespan left.

Gundremmingen C, 1284 MW, initial operation 1984. Germany’s last operating boiling water reactor type.

I don’t know how far they’ve gotten on decommissioning these, but they could probably still be refurbished and brought back for another couple decades of use. The Gundremmingen reactor, being an older design, should probably just be left shut down.

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#11

in 2020 Germany electricity production was partially from natural gas and nuclear:

12.1% NG
12.5% Nuc

With no NG and no Nucs Germany is about 25% short. France is also short currently because of corrosion problems with several of their Nucs.

Norway is starting to provide more NG to EU countries. Germany is going to build some LNG seaports.

Germany may keep their remaining 3 Nucs operating and restart 3 other Nucs.

Wars change priorities in the short term.

Jaak

#12

I am less sanguine than the author that fracking could make a meaning contribution for any near-term help. But I agree that it should not be rejected out-of-hand as a longer term contribution. The EU needs to objectively study all alternates to Russian supply of energy.

Shutting down nuclear plant where the investments have already been made seems stupid in the EU’s energy supply situation. And wood, while replaceable, takes many years to replace. Lignite coal is a readily available but very dirty environmental alternate to wood.

It seems logical that expanding access to LNG as quickly as possible would be a higher priority than wind and solar from a government standpoint. I think the Western world could find ways to assist.

My biggest take-away is that wind and solar are not going to replace Russian gas. Other alternates should receive higher priority than they’re getting. More common sense is needed and less politics.

Lomborg has never impressed me as an honest broker. This article didn’t change my mind. Lomborg claims shale gas could provide cheap energy. But some years ago, the US State Department made a big push to develop fracking in Europe for the exact reasons he brings up. The Supermajors explored in Poland, Romania as well as Denmark and a few other countries too. They analyzed their data and concluded it wasn’t close to profitable and walked away. Poland would love to be selling gas to Germany, and the Germans would love to be buying it from Poland instead of Russia, but it straight up isn’t economically feasible. So for now we can scratch fracking in the EU as a solution, at least until new technology is developed and we don’t know if or when that will be.

Next he suggests 4th gen nuclear. Optimistically, any significant utility use is at least 20 years out, at a minimum. Again, he suggests it will be cheap. It might be, but it might not be too. We don’t know. It is a big maybe and a long time in the future.

So if fracking and 4th gen nuclear aren’t solutions in any kind of reasonable time frame, what’s left? Renewables and not much else. His argument against renewables takes the form: Renewables do no provide much power currently, therefore they are not a solution. Well, why not? Unlike his proposed solutions of fracking and 4th gen nuclear, renewables are perhaps expensive-ish but can be built quickly and the costs are well-understood and predictable.

And they don’t have to replace all natural gas, just the amount they are buying from Putin. Part of that can be buying gas from elsewhere. To that end Germany just fast tracked two LNG terminals. LNG is expensive, but that just makes renewables more attractive.

Next, Lomborg either doesn’t understand how utility scale battery storage works or is misleading his readers. Neither is a good look for him. That’s why I don’t trust what he says. I heartily agree with your comment about common sense though.

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#13

Syke6

I did a little digging on Lomborg before I decided to share his piece. And I thought I went to some effort to suggest that in the article.

As for fracking, I also downplayed it as a short term solution. OTOH, the studies of EU potential were done some years ago. And people, myself included, have consistently underestimated the ability of technology to make significant improvements if the incentives are there. Market demand for gas might be valued differently now that Russia has displayed its true colors. Look at Permian economics today compared with 2-3 years ago. XOM publishes >10% returns at sustained , an important point, Brent crude prices of $35 per barrel. In other words, turn the dogs loose to hunt if the alternate isn’t cheap Russian gas. That could change economics. Don’t brush it off. I don’t think you really understand it.

I’m less sanguine than you about renewables being a sufficient alternate. The EU isn’t prime wind and solar territory. And the problem of intermittent supply has not been solved without fast reacting natural gas plants to back it up.

Importing LNG to replace purchased gas should be a priority. I highlighted that. And the full use of existing and upgraded nuclear plants should not be so easily dismissed.

As we both agree, use common sense.

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#14

It is my analysis that intermittent energy will not be economically viable (sans subsidies) until storage is sub 100 a kilowatt hour installed. Currently automotive storage is at 137 dollars a kilowatt hour at pack level…

Nickel surge just raised the input cost for an electric vehicle by $1,000
www.cnbc.com/2022/03/08/nickel-surge-just-raised-the-input-c…

DB2

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#15

How much do EV batteries cost per kWh?
The cost of electric vehicle battery packs has fallen to $132 per kWh – continuing decades of cost improvements. However, it might go up over the next year as increased material prices are catching up to incremental cost improvements. Price per kWh is the metric used to track the price of batteries.Nov 30, 2021

So between when the article was written and last November a drop of $5…expect more drops in cost.

#16

Again, he suggests it will be cheap. It might be, but it might not be too. We don’t know. It is a big maybe and a long time in the future.

There is going to be a lot of propaganda to get he funding and permits.

The 1950s saw the propaganda when it was smart like this period to build out nukes.

But it was never economical. Just needed.

Unless the common inflation rate on nuclear power of 6 to 7% on such one offs drops substantially it will always be expensive.

I get modular brings down the inflation rate a bit. But those are smaller plants so they are less economical in that way to run. I do not know how much less economical. I am assuming a much smaller plant means less energy will be produced.

#17

As for fracking, I also downplayed it as a short term solution. OTOH, the studies of EU potential were done some years ago.

FWIW, nine years ago the British Geological Survey estimated that the UK had 1,300 trillion cubic feet of natural gas, but the government shut down exploration.
https://www.ogauthority.co.uk/media/2782/bgs_decc_bowlandsha…

DB2
The best time to plant a tree is 20 years ago…

1 Like
#18

But the Russians have upset the Europeans in there long term goals. Nuclear is not a short term answer or goal either. The old nuclear power plants that are being shutdown in Europe and US are just not economical any longer.

Jaak

Happen to have a link on the German ones? According to the company running them they were relatively new … enough that they sued the German government for lost revenue and won. The oldest nuclear power plant in the world has been operating for over 50 years.

https://www.cleanenergywire.org/news/germany-agrees-pay-ener….

NEWS 05 Mar 2021, 13:12 Sören Amelang

Germany agrees to pay energy companies over 2 billion euros in nuclear exit compensation
Nuclear phase-out Utilities

Clean Energy Wire
The German government has agreed to pay nuclear power station operators 2.4 billion euros in compensation for losses suffered during the country’s early nuclear shutdown in the wake of the Fukushima disaster, ending a long legal battle. “The government has reached an agreement with EnBW, E.ON/PreussenElektra, RWE and Vattenfall,” Germany’s environment, finance and economy ministries said in a joint statement.

Germany's constitutional court ruled in 2016 that the nuclear phase-out was legal, but called for compensations to the operators.

So while the Germans are waiting for enough wind and solar to keep the lights on … how much will they be paying Putin to keep killing Europeans? How much more Russian fossil fuel will they burn, how much lignite and imported hard coal? After over 20 years of trying they still haven’t made a whole lot of headway.

During my many years living in Germany I noticed that they are neither particularly sunny … nor particularly windy. It rains a lot.

Tim <glad I don’t have to pay German power bills, my total bill is so low they only bill me six times a year>

In contrast to 2020, there were no above-average wind and sun conditions in 2021. But increased electricity from solar was from more solar panels, not more sunlight, and Germany couldn't install enough of them to make up for the loss of electricity from wind turbines. Jul 28, 2021

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#19

Nickel surge just raised the input cost for an electric vehicle by $1,000

Sure, for some future date. That is the spot price I would think. Any forward thinking EV company would have some long term contracts in place and as long as their source still exists, they should be getting that price.

This might be what is needed to lower the high used car prices (up 30% in the last year or so) for ICE cars.
EVs you can refuel from your own solar panels and their prices are sure to go up due to demand and higher metal prices.

Mike

1 Like
#20

Nickel surge just raised the input cost for an electric vehicle by $1,000
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Sure, for some future date. That is the spot price I would think. Any forward thinking EV company would have some long term contracts in place and as long as their source still exists, they should be getting that price.

Certainly true. I do wonder, however, where the raw materials will come from for the millions and millions of EVs that have been announced for the next few years.

DB2

#21

Saw this in yesterday’s local newspaper and thought it was worth sharing. It’s an opinion by Bjorn Lomborg concerning the need for the EU to become independent of Russian gas and the alternates he sees.

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Bjorn Lomborg and Michael Shellenberger have been anti-renewable energy and climate change skeptics. They have also been pro fossil fuels and pro nuclear power. They have been discredited by the scientific/engineering community.

https://en.wikipedia.org/wiki/Bj%C3%B8rn_Lomborg

https://en.wikipedia.org/wiki/Michael_Shellenberger

Jaak

#22

I’m less sanguine than you about renewables being a sufficient alternate. The EU isn’t prime wind and solar territory. And the problem of intermittent supply has not been solved without fast reacting natural gas plants to back it up.

This makes no sense. They clearly already have the natural gas plants “to back it up” because they’re using them now all the time . If the EU isn’t prime wind and solar territory, somebody should tell Denmark, home too the two largest windmill companies in the world (Siemens is one). Nebraska is the largest wind producer in the US, Denmark which is 4 times smaller has 2 times the installed wind capacity and projects to double even that in the next few years.

Germany already has more installed solar capacity than any state in the US except California.

The simple fact is that every cubic foot of natural gas replaced in the daytime because it is another cubic foot that can be burned at some other time, and reduces the amount that has to be imported from Russia. Denmark, incidentally, reports almost no problem with intermittency even though 40% of their power comes from wind/solar; they trade credits with other countries across the EU grid. (No, Denmark is not some crazy always windy place; they are almost perfectly average with the rest of Europe.)

It’s weird. European countries and the United States can turn their economies on a dime when someone shows up with airplanes or tanks, but is paralyzed with indecision when Russia holds the energy card even as they send their airplanes and tanks into a non-hostile country.

But yes, apparently that’s too much trouble for us.

17 Likes
#23

Certainly true. I do wonder, however, where the raw materials will come from for the millions and millions of EVs that have been announced for the next few years.

I recall people saying the same thing about how we’d get enough raw materials to build a PC for everyone back in the 80s and 90s. Somehow, demand caused supplies to go up.

Mike

2 Likes
#24

I’m less sanguine than you about renewables being a sufficient alternate.

Renewables are the long term solution but we are facing a short term problem so the solution has to be what is readily available now, oil & gas.

The Captain
yesterday Enphase Energy (ENPH) was up +10.82%

#25

Nickel surge just raised the input cost for an electric vehicle by $1,000

Nickel is being phased out of standard range EVs with the use of the much safer LFP battery cells.

BYD Blade Battery

https://www.youtube.com/watch?v=uEvR3kyx_KM

Tesla is using LFP in the storage products, PowerWall & MegaPack.

The Captain
F for iron

1 Like
#26

Certainly true. I do wonder, however, where the raw materials will come from for the millions and millions of EVs that have been announced for the next few years.
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I recall people saying the same thing about how we’d get enough raw materials to build a PC for everyone back in the 80s and 90s. Somehow, demand caused supplies to go up.

Is the time scale realistic? For the '25-26 time frame, Ford and GM alone have announced an increase of four million EVs. Do you know the time scales on ramping up production, finding and opening new mines and so forth?

DB2

1 Like