Discover more from The Gregor Letter
Monday 29 July 2019
Los Angeles aims to humanize its river, restoring portions to nature and adding a continuous bike path in advance of the 2028 Olympics. One of the most unique infrastructure projects in the country right now, the project—currently in the planning and design stage, and set to begin by 2023—will transform communities from the San Fernando Valley to Long Beach. But doing so will require filling a labyrinthine eight-mile gap running past industrial drylands, and the river’s cement-hardened channel. For Atlantic Media I interviewed local architects and wrote about the project’s ultimate prospect: the activation of a new ecosystem, and, one that excavates a bit of LA history.
Los Angeles River looking south, from the First Street Bridge
A great plains electricity cooperative set the renewables industry on fire this week, with a massive hybrid proposal composed of wind, solar, and storage. The Western Farmer’s Electric Cooperative of Oklahoma announced a 700 MW triple-hybrid project that would deploy 250 MW of wind, 250 MW of solar, and 200 MW of energy storage. Until recently, the cost of energy storage was not following the same rapid cost declines as wind and solar but that has begun to change. Bloomberg New Energy Finance reported earlier this year that lithium ion battery costs have finally started to plunge, falling 35% from 1H 2018 to 1H 2019. Increasingly, storage is being paired with new wind and solar projects, and most agree this will become standard practice as a way to protect, or enhance, the income stream from clean generation.
Coal’s prospects are worsening from an already poor position, if that was possible. This decade has seen a massive retirement wave of over 55 GW of US coal capacity. Most assumed that heady pace would eventually slow, but 2018 saw the second highest volume of coal retired of any year this decade. Worse for coal is that renewables are falling so far in price that it now makes sense to shutter coal, amortize the losses, and roll those up into wind, solar, and storage projects while still delivering savings to rate payers. I wrote about the US coal outlook this month for Petroleum Economist.
Elsewhere in the world, coal’s final hope to latch on to remaining growth has mostly centered on India. Alas, there too coal’s prospects have dimmed suddenly. Just 24 months ago, many large coal projects were still looking likely to go forward, but in my second piece this month for Petroleum Economist, I report that coal cancellations are now the established trend in India. The axe in coal is now coming from the financial sector, which unsurprisingly sees all proposals as inevitable money-losing ventures. Globally, despite last year’s strong uptick in Chinese coal consumption in the power sector, the 2013 peak of global coal consumption is firmly in place. The only remaining risk to oscillating strength in coal use is the current inventory of spare capacity, which could conceivably slow efforts to see global coal consumption enter rapid decline.
Combined wind and solar provided 10.6% of US electricity through the first five months of 2019. Data comes from EIA (Washington) in the latest Electric Power Monthly. By next year, or 2021 at the latest, the world’s major regions will all have crossed the 10% share level of wind and solar in electricity generation. That’s a big deal, and very encouraging.
We should pay attention to the declining energy intensity of the global economy. For a number of years it was reasonable to doubt declining energy intensity; especially during the peak of offshoring as Western economies shifted industrial production to the Non-OECD. But the electrification supertrend, in which the marginal unit of GDP is more likely to be created via power, rather than oil for example, is starting to accelerate.
The Gregor Letter intends to cover this topic on a repeated basis. And in this week’s letter, I thought I’d offer a simple primer, as seen through the lens of changes taking place in California. The intent here is to foster your own thinking on the subject, and to make repeated passes over time until it’s more fully absorbed in your outlook.
First, let’s consider a very uncomplicated trend taking place in California: the declining sales of internal combustion engine (ICE) vehicles. Oil Fall warned that by the time global car markets were set to recover next year, it would be too late for ICE vehicles to grow again, beset as they would be by affordable electric vehicles. And here, we have a very rudimentary portrait of declining oil intensity. California’s transportation system will continue to perform the kind of work it does today, but with fewer oil inputs, as the shift to EV unfolds.
While “using less oil” is simple enough for everyone to grasp, less understood are the systemic changes also taking place in California as fossil fuel combustion represents a declining share of the state’s total energy consumption. It’s not just oil consumption growth that is now constrained; it’s coal and natural gas too that have lost their grip on growth. When fossil fuel combustion is steadily removed from any system, waste heat goes into decline, and with it, energy intensity.
Notice, for example, how wind and solar have not only advanced to the 20% share of California electricity, but how all other sources—mostly natural gas in this case—are being pushed out of the system. Last year, combined wind and solar produced 53.6 TWh in a system that used 252.7 TWh in total.
Now let’s put these concepts together. You can probably intuit that an electric car driving a mile in Los Angeles is running cleaner than an EV running a mile in, say, Columbus, Ohio. Why? Because Ohio has very little electricity not generated by fossil fuels. But what’s harder to absorb is how much more energy-efficient an EV will run in Los Angeles—how significantly less energy intense that EV will run—compared to an EV on the streets of Columbus.
Remember, the engine in the Columbus EV uses electricity just as efficiently as the engine of the Los Angeles EV. If we were comparing two identical Tesla Model 3’s, for example, we would have in each case the same engine. The difference is in the two systems used to produce that electricity for each EV. In Los Angeles, every bit of electricity that did not have to come from the excavation, extraction, transport, refining, or burning of fossil fuels is used far more efficiently, with less waste heat (loss), than the electricity delivered to an EV in Ohio.
How much more efficiently? Helpfully, The Argonne National Laboratory, a partnership between the Department of Energy and the University of Chicago, publishes a study of whole system transportation efficiency that it updates each year, called GREET. Let’s consider the following two figures:
The first figure represents a whole-system accounting of the energy required to run an electric vehicle for one mile, on average, in the United States outside of California. This accounting looks at all the energy required to drill, extract, lift, ship, pipe, and burn coal or natural gas and other energy sources, necessary to “fill” that EV with electricity. The accounting also includes the expenditure of that electricity in the engine to drive that EV one mile. It’s called a “Well-to-Wheel” accounting.
The second figure performs that exact same calculation. This time, for an EV running one mile in California. As you can see, the California EV requires 17.8% less energy, in this whole system accounting, to run one mile. Why? Because California now derives over 20% of its electricity from sources that require no excavation, no transport, no shipping, no piping, and most important of all—no combustion.
An EV on the streets of Columbus is a machine that exists within a larger system of energy extraction, delivery, and combustion. Same too with the EV in Los Angeles. But they are two systems now different enough to produce significantly different energy intensity outcomes, even when driving the exact same EV model one mile down the road. Just to put an exclamation point on this lesson, now consider the next two figures:
This is not a trick. The first figure indicates how much electricity the engine in the Columbus EV uses to drive one mile, and the second figure the engine the Los Angeles EV uses to drive one mile. Sure, you knew that. And yet, it’s helpful to see it written out. Here, Argonne Lab has used not the Well-to-Wheel accounting, but rather the “Pump-to-Wheel” accounting. All this tells you is that a Model 3 or Chevy Bolt sold and run in Ohio uses the same amount of energy to move one mile, as its counterpart in Los Angeles, as long as you restrict your accounting to the level of the engine.
Now comes the kicker. Let’s consider a final figure:
That’s how much energy an ICE vehicle uses in a Well-to-Wheel accounting, representing of course all the systemic energy expended to extract oil, ship oil, refine oil into gasoline, and to burn that gasoline in an ICE engine while driving a single mile.
Global energy density has been in gentle decline for decades. This 2016 update from EIA Washington gives some sense of the long-term decline. But the decline of energy intensity is now set to advance more rapidly. Consider: every item mentioned in today’s newsletter is, at bottom, about declining energy intensity. For a long time, we perfected machines to better utilize fossil fuel combustion. But the big mover today is technology that allows us to entirely push combustion out of the system.
—Gregor Macdonald, editor of The Gregor Letter, and Gregor.us
The Gregor Letter is a companion to TerraJoule Publishing, whose current release is Oil Fall. If you've not had a chance to read the Oil Fall series, the single title just published in December and you are strongly encouraged to read it. Just hit the picture below.