Industry news
Things I noticed and thought were interesting
Week ending 30th August 2020
1, Direct Air Capture of CO2. The differing strategies of the two main competitors were contrasted this week. Canada’s Carbon Engineering promoted its plans to work with Occidental and an outside equity fund to build the first million tonne a year plant and pump the CO2 into oil reservoirs to increase production. Its main rival, Climeworks, moved in a different direction, announcing a scale-up of its existing facility in Iceland which injects captured CO2 into basalt for permanent sequestration. Carbon Engineering’s weakness is its reliance on ‘Enhanced Oil Recovery’ as the market for its carbon dioxide but the scale of its project is several hundred times the size of the Climeworks plant, which will store just four thousand tonnes a year. (Thanks to Bela Hanratty).
2, Domestic housing, storage and demand response. Two interesting developments this week in the drive to make domestic electricity demand more flexible. In the UK, low carbon housing developer Sero has combined with a wide range of energy companies to offer houses that can shift electricity demand to periods of low prices. An array of new(ish) technologies including ground source heat pumps, PV, Sonnen batteries and Mixergy hot water tanks, as well as sophisticated control software, will allow householders to manage their power consumption. But is it all a little too complicated? I’ll be interested to see if the new owners productively use the digital intelligence that is provided. In California, Sonnen batteries are working with a different approach that also uses building solar PV but passes control of the net electricity consumption of large apartment blocks to an energy market participant via a ‘Virtual Power Plant’ (VPP). This 3,000 home project will become the largest domestic home VPP in the world in 2021 with 60 MWh of storage. (Thanks to Alison Fogg)
3, Solar PV prices. A Portugese auction produced another world record low price of just over 1.1 Euro cents (about 1.3 US cents) per kilowatt hour. Experts counselled scepticism as to whether this figure represents the true underlying cost for developers. First, the winning bid was for only a 10 MW tranche of the 700 MW auction, although other bids were also very competitive. More importantly, low prices in this auction reflected the relatively short duration for the agreed price (15 years) and the high value attached by bidders to acquiring permanent development rights and grid connections in Portugal. Nevertheless, the auction prices showed a clear continuing downward trend in the face of concerns about the supply of Chinese polysilicon after recent factory accidents. In the UK, the government published its forecasts for the underlying cost of all electricity generating technologies in 2025, putting solar in the lowest position for the first time at about 4.4 pence (5.8 US cents) per kWh. That’s probably still far too pessimistic; I suspect that developers would happily accept that price today on a large solar site in the sunnier parts of the country.
4, Green hydrogen. Australian academics offered estimates for the cost of making hydrogen from electrolysis, writing that a figure of about US$1.5 per kg was plausible for 2030. That is roughly equivalent to the average cost of hydrogen made from fossil fuels today. If this level is attained Australia will be an excellent position to export hydrogen to Asian economies where manufacturing costs are unlikely to reach this level. Is the target achievable? I thought the some of the underlying assumptions, such as electrolyser efficiencies, were actually a little conservative. In a separate report, analysts Wood Mackenzie agreed that green hydrogen might well be cost competitive by 2030, although I wasn’t convinced by their view that Germany would be one of the first places to achieve parity with fossil hydrogen.
5, Oil majors and decarbonisation. Petro-China is the latest large oil company to announce an intention to switch to low-carbon sources of energy. In a first for the company it said it would participate in renewables development, including geothermal, and would also spend on developing hydrogen capability. It promised investment of about 0.5% of its annual revenue by 2025. For comparison, BP has committed to about four times this level.
6, Green steel. The world's most advanced experiment in making iron (the precursor to steel) without the use of coal starts production on Monday 31st August. The steelmaker SSAB's new plant in northern Sweden uses hydrogen to reduce ore to a form of iron that can be used in electric arc furnaces to make steel. Steelmaking is an unusually important source of Swedish emissions. SSAB's targets a reduction of 10% in national CO2 by fully replacing fossil fuels. This is just one step in a long process that will see the company first starting to sell near zero-carbon steel in 2026 but it is probably the most significant point in the long period of trials. SSAB has always claimed that hydrogen steel can be cost competitive with coal-based metal but I suspect this depends on a high carbon price.
7, Fashion and emissions. McKinsey produced some useful numbers on the impact of textiles, saying that fashion is responsible for about 5% of overall global emissions. It offered a view that up to half this total could be avoided by better supply chain management at no financial cost. It barely mentions that the most obvious way of reducing the impact of fast fashion is simply to reduce the volumes of clothing sold, by improving genuine recycling, making full refashioning of clothes possible and by increasing manufacturing quality. This industry is unusually conscious of its extreme environmental impact but seems slow to realise that the fast fashion business model is incompatible with climate stability.
8, Synthetic fuels. A range of Danish companies and Norwegian electrolyser manufacturer Nel announced a plan to build a small hydrogen plant by 2023, expanding to synthetic fuels in 2027 using the green hydrogen and CO2 captured from biogas or municipal waste treatment. The companies in the consortium include some of the big Danish shipping companies, including Maersk. Their interest is, of course, in finding a zero-carbon fuel for their ships. By 2030, the group wants to have 1.3 GW of electrolysis capacity to make renewable liquid fuels, equivalent to about 0.3% of world hydrogen demand today. But the group says that this target is dependent on large-scale access to power from the wind farm off Bornholm island in the Baltic sea, another example of the vital links between offshore wind and hydrogen. The project points again to the potentially vital global role of the Danish catalytic chemistry specialist Haldor Topsoe, which is also a key participant in the huge renewable ammonia NOEM project in Saudi Arabia. The Danish plan mirrors some aspects of the Norwegian power-to-fuels scheme announced in June but is less aggressive in its timing.
9, European EV sales. July saw a rapid rebound in car sales in Europe as showrooms opened. EVs had sharply gained share in previous months and - perhaps surprisingly – the growth continued in July. Almost 10% of units sold were plug-in cars, more than doubling the figures of a year ago. New models and more aggressive pricing helped but Tesla sales were down as production difficulties interrrupted the flow of cars to Europe. (This link provides some of the data but also continues the auto industry’s dishonest habit of including ‘mild’ hybrids as EVs, even though they are without electric motors).
10, Space needed for renewables. I wrote an over-complicated post about the amount of land needed for renewables in the UK. I roughly calculated how much total energy, not just electricity, that the UK will need and how much hydrogen would be required for storage and synthetic fuels. Using data from existing projects, I estimated the number of watts per square metre that will be produced by wind and solar and then projected the surface area required. Perhaps crucially, these calculations suggest that the UK may have to devote about 1/3 of its shallow waters to offshore wind but a relatively small area for PV farms. If floating wind becomes cost competitive with all other renewables, which some experts believe will happen, the surface requirements offshore become much less demanding. In another article, I wrote about the expected energy productivity of an offshore wind farm that has just been approved off the Netherlands coast. The calculations in this note support the UK figures.
I was interviewed about What We Need To Do Now by Planet Pod.
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