Category: Report

Solar trackers are worth $10bn pa. They typically raise solar revenues by 30%, earn 13% IRRs on their capex costs, and lower LCOEs by 0.4 c/kWh. But these numbers are likely to double, as solar gains share, grids grow more volatile, and AI unlocks further optimizations? This 14-page report explores the theme and who benefits?

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A solar module is a 2.7 m2 rectangle, whose internal semiconductors convert incoming electromagnetic radiation into a direct current via the photovoltaic effect. To maximize energy production, ideally, the entire 2.7 m2 rectangle will be pointed directly at the sun and receiving full sunlight. But this is challenging as the sun arcs across the sky, tracing a different path every day of the year, and varying with latitude, as shown on page 2.

Solar trackers orient solar modules towards the sun. The market size, key parameters of different systems, and “how solar trackers work” are succinctly explained on pages 3-4.

The energy uplifts from solar trackers have been estimated at 10-50% in different studies. But we can do better than this broad range, and actually calculate both the energy uplift and the revenue uplift from first principles, on pages 5-8.

The economics of solar trackers can therefore be modeled more effectively. Our base case yields 13% IRRs and deflates solar LCOEs by 0.4 c/kWh. We can also model how steepening duck curves, battery co-deployments, and AI optimizations will further improve the case for solar trackers, on pages 9-10.

The solar tracker industry is worth $10bn pa, relatively concentrated, and relatively unusual for a solar supply chain in that it is still dominated by US companies. We discuss key conclusions from our screen of solar tracker companies on pages 11-13.

A key mega-theme that has permeated our 2024 research has been the rise of AI, and the benefits of greater digitization and optimization. It is interesting to end by noting that solar trackers, once again, fit this trend, and amplify demand for sensor equipment.

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Energy transition is a triple challenge: to meet energy needs, abate CO2 and increase competitiveness. History has now shown that ignoring the part about competitiveness gets you voted out of office?! We think raising competitiveness will be the main focus of the new administration in the US. So this 15-page report discusses overlooked angles around energy competitiveness, and updates our outlook for different themes.  

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A common framework is to call the energy transition a “dual challenge”. The first task is meeting the energy needs of human civilization. And the second task is abating the world’s CO2 emissions. But we increasingly think this framework is incomplete. Energy transition is a triple challenge. The third component is raising competitiveness.

If we only solve for energy supply and CO2 reduction, then there is a danger of backing technologies that achieve both of these things at very high costs; which inflates living costs for consumers, and worsens competitiveness in countries that adopt them (pages 2-3).

The distinction between CO2 abatement and competitive CO2 abatement is illustrated by contrasting CCS and nature-based solutions, in a detailed case study on pages 4-6.

It is really worth thinking about this distinction. Our sense is that the incoming Trump administration is not anti-decarbonization per se. It is simply pro-competitiveness. Hence, we have re-visited our outlook for energy markets and energy transition themes from this lens.

How can developed world economies improve their competitiveness with emerging world economies that have lower labor costs, lower energy costs, and lower environmental costs? Our answer hinges on minimizing the difference in energy costs, then producing better products, via better technology, helped by better infrastructure (page 7).

High-quality infrastructure clearly boosts competitiveness, but can it also be considered an energy transition category? A fiber optic cable moves 1 GB of data with 15,000x less energy than physically transporting it. Bridges, canals, railways and transmission lines save MT-scale CO2. Examples and case studies are on pages 8-10.

Boosting the competitiveness of an industrial economy is helped by selecting low-cost sources of energy and de-selecting expensive ones. Hence, we revisit our electricity cost curves. Especially in the US, we grow more constructive on gas production, gas pipelines, gas turbines on pages 11-12.

Some solar and onshore wind deployments genuinely can improve the competitiveness of energy systems, when deployed in the right place, and in the right quantities. Our outlook for renewables under the new US administration is on page 13.

Incentivizing new technology is another area where we think the new US administration may introduce surprising policies. One proposal that resonates with us is a “first mover tax credit” to help companies justify investments that will de-risk new technologies that later benefit others. Technologies that excite us are re-capped on pages 14-15.

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Gas turbines should be considered a key workhorse for a cleaner and more efficient global energy system. Installations will double to 100GW pa in 2024-30, and reach 140GW in 2030, surpassing their prior peak from 2003. This 16-page report outlines four key drivers in our gas turbine outlook, and their implications.

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25% of global electricity came from burning 150bcfd of natural gas in 2023, generating 6,750 TWH of electricity from a fleet of 1.9 TW of gas turbines. The basic functioning, cost and efficiency of a typical gas turbine are described on pages 2-3.

Our goal in this report is to forecast the market for gas turbines through 2030. To predict the future, however, it is first necessary to predict the past and present, estimating the total market for gas turbines from 1985 to 2023. Our methodology and conclusions are on pages 4-6.

The first reason we think gas turbines will continue gaining share in the global power mix is that they are genuinely a better technology, in thermodynamics terms, than thermal generation via Rankine steam engines, which makes up 50% of global electricity today. This is why the CO2 intensity of a gas CCGT can be 65% below coal-fired power.

There are four key drivers that will accelerate demand in our gas turbine outlook. They are linked to the rise of AI, energy policy in China, the rise of renewables lowering utilization rates across the global generation fleet and pushing baseload facilities to run more like peakers, and rising retirement rates from early-2000s installations. These ideas are discussed on pages 9-13.

Our outlook above suggests a sharp acceleration should be underway in gas turbine orders. Interestingly, we can find evidence that this is occurring, based on the leading indicators discussed on pages 14-15.

Another attribute of the gas turbine market is its high market concentration. Leading companies in gas turbines are noted on page 16.

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Metal Organic Frameworks (MOFs) are a game-changer for industrial separation, which consumes c10% of global energy. Activity is surging. This 18-page report reviews MOFs’ recent progress and future promise. As a case study, CALF-20 can deflate CCS costs by c50%, per Svante’s TSA process, hence the note contains a deep-dive on this process.

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Separating mixtures into their component parts is worth $300bn, absorbing 10% of global energy, and all the more so if CCS/DAC scale up in the future. Costs, energy intensity, CO2 intensity and challenges of separation processes such as refining, chemicals, LNG, hydrogen, biogas, desalination and CCS are summarized on pages 2-5.

Separation is inherently an energy-consuming process, to overcome the Entropy of Mixing, yet today’s industrial separations use 5-30x more energy than their thermodynamic minimum, as outlined on page 6.

Metal Organic Frameworks (MOFs) could be a game-changer for improving industrial separations. But what are MOFs? Why are there 10^15 MOFs in theoretical state space? What are some examples, advantages, disadvantages and costs for MOFs? Answers are on pages 7-9?

What motivated this research note was not simply desperation, due to slower progress and higher costs for many of the post-combustion CCS technologies we have been tracking. We have recently seen some fascinating technical papers, focusing in upon CALF-20, independently replicating claims made by Svante, and helping us to de-risk the idea that MOFs could gain traction for future CCS/DAC, as reviewed on pages 10-12.

What costs for MOFs in CCS? We can de-risk 50% lower CCS costs using MOFs rather than amines, when we take the numbers back to first principles, including the Langmuir Isotherms, MOF material costs, MOF capture rates (in tons of CO2 per year per kg of MOF) per pages 13-14.

Our company screen captures the building momentum behind leading companies in MOFs. Most of these companies are still at venture stage, and some are now reaching growth stage. For public market investors, the momentum of these companies may determine the market for other CCS-related technologies. Key companies and their recent progress are profiled on pages 15-18.

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Modeling US gas supply and demand can be nightmarishly complex. Yet we have evaluated both, through 2035. This 13-page report outlines the largest drivers of demand, requires a +3% pa CAGR from the key US shale gas basins, and argues the balance of probabilities lies to the upside.

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US gas supply-demand matters in the energy transition, in our US energy models and across the shale industry. But the forecasting can be woefully complex, as gas is the bottom of the US LCOE cost curve, and hence it acts as a balancing line.

Hence to forecast US gas consumption, first you need to forecast total US energy consumption, then you need to deduct all other sources of energy supply. Especially in the power sector. In turn, this makes gas demand for power sensitive to all of these other variables.

After five years of research, we actually have done the necessary work to forecast US gas supply and demand, based on the energy consumption of AI, electric vehicles, wind, solar, nuclear, coal phase-outs, grid bottlenecks, gas peakers, global LNG, key export markets, materials demand, reshoring, blue hydrogen, blue ammonia, blue steel, blue chemicals and CCS. It is all connected.

Our definition of US gas markets – what is included and not included in 2023’s 113bcfd market – is spelled out on page 2.

Our outlook for US gas demand in power is discussed on pages 3-5, including bridges of US electricity demand growth, the share that will come from gas, and possible upside on changes in the efficiency of the gas-fired fleet, as baseload plants run more like peakers.

Our outlook for US LNG exports is discussed on pages 6-7. Recent data show countries such as China switching diesel trucks to LNG, and there is upside to our numbers.

Our outlook for gas heating is discussed on pages 8-11. Growth in industrial gas is well underpinned. But after excluding the impacts of weather, recent data suggest a slower phase-back of residential gas heating.

Our outlook for US gas supply, to meet rising demand, is discussed on pages 12-13. It hinges on our US shale forecasts, Marcellus productivity, shale gas economic models, and most interestingly, whether an oil price pullback could pull harder on shale gas basins.

Hence the note concludes by discussing what gas prices might be needed to unlock these requisite volumes. We look forward to discussing our US gas supply-demand outlook with TSE subscription clients.

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Greater digitization of gas networks looks increasingly important, as gas, biogas, hydrogen and CCS all aim to shore up their futures. This 15-page note started as a deep-dive into the true leakage rates in downstream gas; and ended up finding opportunities in sensors and pipeline monitoring.

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Gas sensing is going to be increasingly important, to detect and remediate leaks in the gas network. And all the more so, as gas networks aim to earn their keep in the evolving energy system, while perhaps expanding to include more biogas, hydrogen and/or CCS.

But debatably, there is little point to other clean initiatives if the industry cannot improve monitoring and leakage within its gas networks, and especially gas distribution networks. Our outlooks for biogas, hydrogen, CCS and US gas volumes are on pages 2-3.

Methane leaks matter for the future of gas value chains and require digitization of gas networks. Climate goals have now spawned a large drive to mitigate methane. The key numbers and breakdowns of methane leaks, by industry and sub-industry are re-capped on pages 4-5.

1-5% less gas is metered flowing out of a typical downstream gas network than flows in. This is known as Unidentified Gas (UIG) in the UK or Lost and Unaccounted For Gas (LAUF) in the US. These numbers are increasingly controversial and open the door to gas critics. Our review of the numbers and controversies is on pages 7-10.

Digitizing the downstream gas network is the most widely discussed solution, to detect and remediate leaks in real time, while also potentially lowering the operating and maintenance costs across the network. Costs of methane mitigation are stress-tested on page 11.

We have screened a dozen companies that are specialized in gas pressure sensing and monitoring, and added them to our screen of technologies for mitigating methane leaks. Sensing is a fascinating industry worth $200bn pa across all sectors. Our highlights and observations about these dozen companies are on pages 12-15.

Can GDP decouple from energy demand? Wealthier countries’ energy use has historically plateaued after reaching $40k of GDP per capita. Hence could future global energy demand disappoint? This 15-page report argues it is unlikely. Adjust for the energy intensity of manufacturing and imports, and energy use continues rising with incomes.

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Some commentators argue that energy demand will naturally plateau as GDP rises in the future – or at least the beta between energy use and GDP will fall dramatically. As evidence, the energy consumption within developed world countries has hardly increased over the past 20-years, even as GDP per capita rose by 25%. But can this really be right?

Our outlook for global energy demand is re-capped, with charts illustrating different nations’ energy demand versus incomes, on pages 2-3.

The debate about whether energy demand plateaus with income also matters as markets are starting to price in a re-acceleration of energy, and especially electricity, in many regions, linked to the rise of AI.

At the micro level, there is a strong correlation between income levels and different underlying forms of energy consumption, within wealthy nations, as shown on pages 5-6.

At the macro level, there is also a strong correlation between income levels and underlying forms of energy consumption between nations, where demand markers are still rising steadily, as shown on pages 7-8.

We argue that a shift in global Manufacturing almost fully explains the apparent slowdown in energy demand in wealthier countries. This argument is illustrated in six different ways on pages 9-14.

Manufacturing GDP is 8x more energy intensive than Services GDP. Underlying energy demand is still rising steadily with incomes in the developed world, once we factor in the energy that is embedded in an ever-increasing share of imported products, whose manufacturing we have found convenient to outsource to the emerging world, especially China.

Can GDP decouple from energy demand? Only if you are comparing apples and oranges. Underlying energy demand clearly rises with incomes. Global energy demand will continue rising with global GDP. But where the energy is used depends on which countries do the manufacturing.

Manufacturing activity is thus the crucial variable for the future of energy demand. We see this in our breakdown of global energy demand. And we do see more global manufacturing ahead amidst the largest manufacturing project in human history, aka energy transition.

Many factors drive global energy demand from one year to the next: macro conditions, weather, prices and policies. We still think that efficiency gains (for converting primary energy into useful energy) will step up from 0.8% pa historically to 1.2% pa globally as part of the energy transition. But we do not find much evidence that energy use flatlines beyond some magic income threshold.

Who is impacted if vehicle sales, EVs or ICE volumes surprise? Autos are a $2.7 trn pa global market, a vast 2.5% of global GDP. 15% is gross margin for OEMs. The other 85% is spread across vehicle value chains, encompassing metals, materials and capital goods. Hence this 14-page note highlights 200 companies from our database of 1,500 companies. Some are geared to ICEs. Some to EVs. And some to both.

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Our research in 3Q24 has wondered whether EV sales might saturate at 15-30% of developed world vehicle sales through 2030, due to total costs of ownership and challenges reaching cost-competitiveness. This means our latest vehicle forecasts only see 40M EV sales in 2030, down from 65M envisaged a year ago.

The aim of this 14-page report is to look through our companies database, which covers 2,500 mentions of 1,500 companies in value chains that matter for energy transition. Specifically for vehicle value chains, which companies are geared to ICEs, geared to EVs, or to both?

Automotive OEMs are most directly geared to vehicle purchasing decisions, as our screen of global OEMs finds that the top twenty largest auto producers have adopted very different strategies towards electrification, as discussed on pages 4-5.

Our best ideas into the themes and companies that are geared to ICEs are outlined on pages 7-9. We highlight three companies in detail, amidst a broader discussion of c25 companies.

Our best ideas into the themes and companies that are geared to EVs are outlined on pages 10-12. It is astounding how many industries’ story is now tied to the long-run ascent of EVs.

Another idea that we discuss is the possibility of consumers simply owning more vehicles overall: EVs for clean urban mobility AND ICEs for longer distance travel with larger payloads. (It is interesting how many clients have written in, off the back of our broader EV research in 3Q24, to highlight how they have purchased EVs as the second, third… or in one case, sixth (!) vehicle within their households).

Our best ideas into the themes and companies that are geared to greater vehicle ownership are on pages 12-13. It is fascinating that one of these themes in vehicle value chains overlaps with our thesis into power grid bottlenecks and advanced conductors.

If one thing stands out to us from reviewing the companies in these various value chains, it is the danger of distraction. How many companies have diverted resources away from improving their core products, in order to enter new markets, with uncertain strategies, uncertain costs, uncertain demand, uncertain competition? This concern is not just for vehicle value chains, but across the energy transition. This highlights the importance of energy transition research, data and analysis in corporate decision-making.

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LFP batteries are fundamentally different from incumbent NMC cells: 2x more stable, 2x longer-lasting, $15/kWh cheaper reagents, $5/kWh cheaper manufacturing, and $25/kWh cheaper again when made in China. This 15-page report argues LFP will dominate future batteries, explores LFP battery costs, and draws implications for EVs and renewables.

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2024 has offered up some exceptionally low battery prices. Most build-ups suggest lithium ion batteries should cost $110-130/kWh. Yet the pricing on Chinese LFP batteries has been reported at $50-80/kWh.

This has become a huge controversy that matters for the electric vehicle outlook, the costs of electric vehicles, the renewables+batteries outlook, and by extension the demand for other energy sources, such as gas peaker plants or long-term oil demand, and the equipment and materials suppliers in all of these value chains.

LFP cathode chemistry is fundamentally different from NMC, and can genuinely drive $20/kWh deflation across battery supply chains. This is a crucial point. Hence the chemical and performance differences of NMC vs LFP are outlined on pages 2-4.

LFP battery costs are lower, specifically because of these chemical and performance differences. Cost savings on the materials side are quantified on page 5, while cost savings on the cathode manufacturing side are quantified on page 6.

Chinese manufacturing of LFP batteries is the biggest reason for the downwards shift in the battery cost curve. Some of this simply reflects lower costs for heavy industrial activity in China and is structural. But we also show how the exceptionally low pricing of 2024 is likely to reflect temporary dislocations, on pages 7-11.

Our forward-looking cost estimates are informed by this analysis, covering global NMC cells, global LFP cells, Chinese LFP cells in 2024, and Chinese LFP cells in 2025+, all in $/kWh terms. These numbers are outlined and discussed on page 12.

How will cheap Chinese LFP impact the EV outlook? We re-evaluate the cost premium of EVs versus ICEs, on page 13.

How will cheap Chinese LFP impact the outlook for renewables and grid-scale batteries? We re-evaluate storage spreads on pages 14-15.

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Could PGMs experience another up-cycle through 2030, on more muted EV sales growth in 2025-30, and rising catalyst loadings per ICE vehicle? This 16-page note explores global supply chains for platinum and palladium, the long-term demand drivers for PGMs in energy transition, and profiles leading PGM producers.

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Our electric vehicle outlook has been revised down twice in 2024, due to market saturation, and our updated outlook for EV costs. A year ago, we hoped that EV sales would quadruple, from 14M BEV and PHEV sales in 2023, to 65M units in 2030. We now expect closer to 40M EV sales in 2030. Key observations are re-capped on pages 2-3.

65% of global PGMs are used in the catalytic converters that give today’s ICE vehicles 20-100x lower emissions of CO, NOx, unburned hydrocarbons and particulates compared with 50-years ago. Hence could fewer EVs and more ICEs change the outlook for PGMs in energy transition?

PGMs comprise six silver-white metals, which co-occur in nature and have remarkable catalytic properties: platinum, palladium, rhodium, ruthenium, iridium and osmium. To help understand the industry, this report outlines PGM supply-demand (page 4), pricing (page 5) and use in vehicle catalysts (pages 6-7).

PGM use per ICE vehicle is expected to rise, for three key reasons, which are outlined on pages 8-9. They are linked to the changing vehicle mix, emerging world air standards and increasing deployment of hybrids and turbocharged engines within ICE passenger vehicles.

Hydrogen vehicles do not play a large role in our roadmap to net zero, but present an interesting ‘what if’. Each hydrogen truck contains 4x more PGMs than a typical diesel truck (pages 10-11).

Forecasts and sensitivities for global PGMs in energy transition could see another upcycle through 2030, while the long-term outlook depends upon the ultimate share of EVs and hydrogen vehicles in the 2030-50 fuel mix, as quantified on pages 12-13.

Leading producers of PGMs are profiled on pages 14-16. Eight companies control 90% of global mining, refining and recycling. Mostly mid-caps. Many are trading at 2-15-year lows, due to weak market expectations for PGMs and weak recent PGM pricing, while those that have pivoted towards battery metals have recently profit-warned.

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Conclusions in the report are strongly linked to our recent outlook for EV adoption in 2025-30, which is also shown below.

Electric vehicles: saturation point?