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Henry Hewitt

Henry Hewitt

Henry Hewitt is an investment strategist and portfolio manager with 36 years of experience in renewable energy. He is also a seasoned writer having published…

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Is The U.S. Getting Left Behind In The Renewable Race?

Wind

Climate change is the cost of burning capital that cannot be replaced. The best thing about switching over to renewable energy is that the world will no longer be burning irreplaceable capital; we will be living off our income, with an infinite supply. Grandfather would be pleased: “Never dip into capital” being one of the first things he (should have) told you.

The mightiest economic power ever (so far), the U.S., rose to its zenith on an ocean of virtually free energy – coal first, then oil. American oil at 35 cents per million Btu (= $2 barrels) or less brought us here (as did being the world’s leading creditor); staying mighty at $8.50 per mBtu ($50 barrels) or more and $19 trillion in debt will be another matter, regardless of how much the Permian, Eagle Ford and Bakken spit out.

Even if U.S. production gets back to its all time peak of 10 million barrels per day (mbd -- which occurred in 1970), or manages to zoom past that figure, the price of a mile using gasoline still won’t compete.

If you own a car that gets 35 miles per gallon and you are paying $2.50 per gallon, the cost per mile is 7 cents. But an average car in the U.S. gets around 25 miles per gallon which means it costs 10 cents per mile. If you drive a clunker or a hog (15 mpg) in some parts of the country, with gallons selling at $3.50 each, you are paying 23 cents per mile.

Suppose, on the other hand, you drive a Tesla near Seattle or Vancouver. (It is permitted though bicycles are favored, even during the 150 days of rain.) Using unremitting hydropower at around 6 cents per kWh (retail), you will pay less than 2 cents per mile, or a tenth of the clunker/hog benchmark. Considering that your EV only has a handful of moving parts, against more than 1,000 in a typical internal combustion model (= ICE-age), the outcome of this race should be clear to all.

From a policy perspective, it is also worth noting that having variable sources of domestic production, i.e., electricity, is a much more sensible way to feed vehicles than a single source, often coming from places and powers hostile to American interests.

Since the U.S., even with frackers working full tilt (100 barrels at a time vs the Saudi Ghawar, a single well pumping 5 million at a time), only produces what we burn in our cars, around 9 mbd, the other 9 we use everyday have to come from somewhere else. Or we could just plug into the roof. (PV4EV.)

In Seattle, you are still better off with hydro since 1,000 hours of sun is only a blessing not a feature. However, in the SW and many other parts of the world, where 2,000 hours and sometimes 3,000 are on offer (there are 8,765 hours in a year), the dynamics for EV miles are superb. Many places are already producing reliable power at 5 cents per kWh or less, and at that rate an EV mile costs around a penny and a half. In fact, Tucson Electric has just announced it will buy power from a 100 MW array for less than 3 cents: Miles for a penny. Come and get ‘em. (Tucson Electric isn’t the first to get here and there are many.

Along with 3-cent PV, the Tucson project is providing storage at a price of 4.5 cents per kWh. Bankable storage is the most interesting new game in town, and it’s a big game. The sources of funds for storage projects are clear to see. First, eliminate the losses caused by the curtailment of generation by system operators when ‘too much’ sun and wind drive prices below zero, i.e., when sun and wind turn back the meter.

Then there are the gas peaker plants that sometimes see only 100 hours of service per year (roughly twelve hard days). The case for either of those sub-optimal conditions is going away. “If the pricing proves accurate, it would represent a major cost reduction for combined storage facilities since the signing of the last significant PPA — a $0.11/kWh Hawaii contract in January” (UtilityDive.)

Tucson is not alone. GTM’s Shayle Kann has this to say: "There's a race for the next record for lowest power-purchase agreement price that keeps happening," Kann said. "We'll get probably the lowest one again in the next couple of months. We have a sub-$30 megawatt-hour price in the U.A.E. We've got another one at about $30 in Mexico. In India, we're down to about $40 a megawatt-hour. India historically has been a much more expensive market for solar, so these projects are real. This is a notable change."

(Click to enlarge)

And as this chart shows, PV can get cheaper still. With projects already coming in at 3 cents and room to improve module lifetimes to 50 years in conjunction with very low degradation rates (0.2 percent per year), perhaps 1-cent solar is in sight. Imagine getting an infinite supply of miles from your rooftop at three to a penny (which is a lot like free). Related: What Is Behind The Surge Of Russian Oil Exports To India?

Even if you want a 54.5 mpg ICE-age vehicle (the California standard in 2025) and gasoline stays near $2.50 per gallon, you will be an order of magnitude ahead in an EV. In a clunker/hog you will lag EVs by a factor of 25 to 50x. No one sees gasoline getting back to a nickel. (Hence, cash for clunkers is still a good idea.)

Think about it, gasoline will have to come from barrels costing a dollar or less to compete (even if they weren’t carboniferous), which means that it is all over but the shouting. We can still argue about when EVs with a 200-mile range will be produced profitably, or when widespread PV will produce more miles than crude oil. (My guess is Monday morning at 10:15 AM EDT, May 11, 2037, when the last Pinto breaks down and the tide will have turned forever.)

(Click to enlarge)

Multiple Domestic Sources -- Renewables Take the Lead

As we all know, there is no crying in the investment world, so rather than whine about the rise of renewables, the time has come to recognize that they are the place to be, whether as an owner or user. The chart below indicates that it is, by no means, too late to get on board. And while you are at it, it is past time to divest yourself of fossil fuels. In case you had not heard or did not know, fossil fuels are finite. The same cannot be said for the source that is coming to eat their lunch (dinner and breakfast).

(Click to enlarge)

$2.8 Trillion More Invested in Solar by 2035

For those renewable enthusiasts who do not yet realize they have already won (or, at the very least, are winning) and who still rant about the end of the world because of fossil fuels and rising seas, the time has come to stay calm, get on with it and understand it is much better to buy a PV panel than to curse the oil patch. Related: The Battle For Natural Gas Dominance In Russia

If you still doubt the old order is under threat, consider what is already happening to California utilities in the face of the onslaught. From Greentech Media we learn: “. . . as much as 25 percent of retail electric load will be effectively unbundled and served by a source other than an investor-owned utility sometime later this year, the paper noted. And these trends are only accelerating. Over 85 percent of retail load could be served by sources other than the investor-owned utilities by the mid-2020s.” 

(Click to enlarge)

Finally, there are the jobs. In the U.S., solar jumped over oil & gas in 2014. Worldwide there are already 10 million in renewables, and counting. Shoveling coal and piping Canadian bitumen do not stack up on this score.

The wind sits fair for this new generation and if you are clinging to nostalgic notions about a world that cannot live without fossil fuels, you would do well to realize you are now part of a crew wracked upon a sand looking to be washed off the next tide.

(Click to enlarge)

But gracious in victory, I suppose we can still argue about the merits of Chinese manufacturers, like Goldwind, hiring out-of-work U.S. coal miners to build wind arrays in Wyoming, the nation’s leading coal producer. Where is GE, one of the industry leaders? Why are the Americans letting the Chinese beat us in the long march to the future?

By Henry Hewitt for Oilprice.com

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  • Steve on May 26 2017 said:
    This is a propaganda piece for dead-end sources of energy. The only way electrical vehicles will be able to compete with the gasoline engine is if there is a major breakthrough in battery technology.

    Even then the electricity will have to come from somewhere. And most of it will NOT come from "limitless" hydro-power or windmills. It will come from either coal, fuel-oil, or natural gas generating plants.

    All the wishing in the world will not change this reality.
  • Dan on May 26 2017 said:
    This article fails to take into account; with the profitability of generation severely reduced, who will pay to replace our worn out power grid? No grid,,,, no charging.
  • Bill Gates on May 26 2017 said:
    This article is about a phenomenon known as "forward thinking." Stop living in the past, embrace and put effort into new technology and build a better future. Anyone who doesn't see the potential of solar is a head-in-the-sand lunatic, and the author is right. The USA is not leading the world in renewable energy system research as it should be. Our obsession with fossil fuels is so entrenched it's like a disease that makes us crazy. It also doesn't help that it makes those in the business an awful lot of money. There is resistance to change from every angle. That doesn't mean it isn't the sensible/obvious thing to do. Forward thinking tells you so, if you listen. The dinosaur generations of the United States that are resisting the technologies of the future are being ignored by the younger generations(and Europe and China and India etc.) and they will be running the world soon enough. Ultimately the will of the majority of humanity will be played out and they will find a way, things will change and a lot faster than you dinosaurs think. Fossil fuels are on their way out, good bye dinosaurs. We in the United States will have the dinosaurs to thank for the fact that we will not be remembered as the society that led the way to a better future, but will be remembered as the fossil fuels addicts who just couldn't allow themselves to see past their old thinking and embrace the future.
  • Alen Hippler on May 26 2017 said:
    "Considering that your EV only has a handful of moving parts, against more than 1,000 in a typical internal combustion model (= ICE-age), the outcome of this race should be clear to all."

    Um, no. You are focusing on variable costs and ignoring the massive upfront cost. EVs are incredibly expensive, even after large government subsidies. Further, you ignore the cost of periodic maintenance. Batteries simply do not last indefinitely.

    Also, the fact that solar now employs more people than coal and oil&gas is a FAILURE, not a win! Oil & Gas is vastly more efficient - through government mandates, we are forcing inefficiency on the economy and then pretending it is success when a huge number of people are working in an inefficient industry!

    The best news of all would be if America completely 'fell behind' and got out of the buggy whip industry. I mean the solar power industry.
  • David Hrivnak on May 26 2017 said:
    I fully agree and we have personally made the switch. Both of our cars are plug-ins and we power them AND the house cleanly and affordably from our rooftop solar in less than ideal NE Tennessee. No feed in tariffs no state money yet it works day in and day out. We now have racked up over 50,000 gas free miles and I will never buy another car unless it has a plug.

    It is not only the future but the present for any current forward thinkers.
  • Independence01776 on May 27 2017 said:
    Starting July 1st my utility will charge a flat transmission rate and I can choose a separate electricity provided, which I have done because the cost is about the same per kw and the energy is 100% renewable from the new provider. Also, I can save lots because during the early morning hours, I can charge my EV for 2.5 cents per kw, which equates to driving 100 miles for 75 cents.

    Yes, I live in progressive state, but plenty of places around the world are proving this is not only doable, it allows families to save money and not pollute as much. The economics are saying this transition is just starting to take off and will continue to grow each year and will spread across the Country as it already has begun too.
  • William Gatto on May 27 2017 said:
    Grid-scale wind and solar squander massive quantities of land, resources (steel, concrete etc), financing, and manpower. The unreliable intermittent nature of the ancient energy source of the past will leave societies in the lurch, as either too much or too little energy (of poor quality) is generated. Since these erratic sources operate unpredictably, they are unsuited to high tech industrial nations, which need power on-demand of high quality only.
  • CapitalistRoader on May 27 2017 said:
    Sorry, well-to-wheel (total operational energy consumption), hybrids are more energy efficient than plug-in electrics*. And considering that we have enough natural gas to last us the rest of the century, in all likelyhood automobiles will be powered by natgas/electric hybrid engines for decades to come.

    *Comparison of Energy Efficiency and CO2 of Gasoline and Electric Vehicles, Williem Post, "The Energy Collective", 11 May 2017
  • Raymond Johnson on May 27 2017 said:
    A small number of points. Many fail to realize how many ways fossil fuels are ingrained into American life. Even if all the gasoline goes away for cars. You still need fossil fuels for medicines, for fertilizers for plastics and a number of other items we used every day. I am all for renewable energy but to bind ourselves only to solar and wind is a mistake. Options are developing all the time.
  • Watt Bradshaw on May 27 2017 said:
    [The cost advantages of BEVs] "are entirely offset by a host of other economic factors. The TCO for a BEV is significantly greater than the TCO for an equivalent ICEV. BEVs in 2015 were, without exception, significantly more expensive to manufacture than comparable ICEVs – due primarily to the cost of battery manufacturing – and they imposed a much higher cost burden on vehicle owners. Ultimately, this cost burden presents a significant barrier for wider adoption of BEVs and could explain why their market penetration has been limited to date.”

    Battery Electric Vehicles vs. Internal Combustion Engine Vehicles – Arthur D. Little, Inc., 2016
  • anthony barbuto on June 22 2017 said:
    This article paints a "rosy" outlook for renewable energy. Some of the comments say it is propaganda. I don't think so....The age of oil is coming to an end and THANK GOD..!!!...It has been written that the quest for oil and the sale of weapons have been the TWO destabilizing elements in the world...causing countless wars, coups, assassinations of world leaders, etc....than any other causes. We can't end the sale of weapons but we can reduce the importance of oil....and the ills it has caused to the world.....Oil fans, and I must admit I still like a 302 HP eight cylinder engine...must wake up and smell the exhaust from the internal combustion engine.....while you can. EVs are taking over....The Military Industrial complex has ruled manufacturing long enough. Its time for new players to enter the market. Tesla is an example of a game changer. They say it takes a village to raise a child...well it takes an entrepreneur to change an industry and to change a world...WE have had Ford, Chrysler, Firestone, etc.....and now we have Musk. By lowering the cost of the electric car battery and using it as electrical storage in buildings, Musk is making electric generation ( with his Solar City solar panels) more affordable to the masses. His Tesla car came out first as a toy for the wealthy, but by making less expensive models.......the average public may get into the EV. Other companies like Mercedes have hit on an energy storage unit to help charge the car, so Musks idea of a home battery to power a house when the solar arrays are not generating electricity is not a stand a lone idea. MUsk has admitted in interviews that the reason he started a EV company was to produce a battery in the millions of units. By using the economy of scale,....millions of units.....he can reduce the cost of the battery so that it can be sold as the Power Wall to home owners and business owners......His costs are coming down and they will further decrease as his production and sales increase....Musk has the correct idea and the full circle of solar energy generation may be met when we build solar satellites and receiving ground stations as described in the 1970s works " High Frontier" and " Colonies in Space". By wringing the earth with solar satellites, " FREE"....solar power can be collected in space, and beamed down to earth...then the solar is put in to the grid..We do not need to burn coal nor oil to generate electricity any longer....
    We shall always need oil for pharmaceuticals, lubricants and chemicals...we no longer will need oil to burn in internal combustion engines....what a relief. Thank you Mr Musk and other entrepreneurs. If we were to wait for the military industrial complex or government...we would just run out of oil....and then people would ask " what do we do now?".....It is an Abundant future we foresee if we go solar....as Peter Diamandis writes....it will be a bleak cold winter if we stay with oil.....which has past its peak......Hooray for solar and entrepreneurs like Musk...!!!!

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