Report Insights- Thunder Said Energy

February 24, 2022June 28, 2024

Energy shortages: priced out of the world?

Energy use and CO2 emissions per capita versus GDP per capita. The bottom 4bn people consume 10x less energy per capita than the top 1bn.

Deepening energy shortages in 2022-30 could devastate low-income countries, geopolitically isolate the West, and de-rail decarbonization. This 13-page note evaluates the linkage between energy consumption and income over the past half century and quantifies what a ‘just transition’ would look like.

The reason for this research note is that we see energy shortages deepening throughout the 2020s. This suggests someone will need to curtail energy use. What if the answer is low-income consumers in low-income countries? (pages 2-3).

Key trends from 50-years of global economic development are drawn out on pages 4-6, after tabulating 60,000 data-points, across 25 key countries and regions. The depressing conclusion is around 10x ‘energy inequality’ between the top 1bn and the bottom 4bn.

Our analysis on energy shortages in low income countries most likely under-states the degree of energy use inequality, for methodological reasons, discussed on page 7.

What is a ‘just transition’? Our answer is laid out on pages 8-9, finding a balance between economic development and energy usage.

Constructive options. The biggest bottleneck for a just ‘energy transition’, clearly, definitively, is a lack of energy investment, especially renewables and natural gas. Shortly followed by greater efficiency initiatives in the West (pages 10-11).

Our conclusions and questions over the future of world economic development amidst the energy transition are laid out on pages 12-13.

To read about some of our ideas on how to cure emerging energy shortages in the gas and power sectors, please see our article here.

February 17, 2022March 30, 2023

EV fast charging: opening the electric floodgates?

power electronics for electric vehicle charging

This 14-page note explains the crucial power-electronics in an electric vehicle fast-charging station, running at 150-350kW, to charge up an entire EV in 10-30 minutes. Most important are power-MOSFETs, comprising c5-10% of charger costs. The market trebles by the late 2020s. We explore who benefits?

The importance of electric vehicles in the energy transition is re-capped on page 2, including the key numbers. But who are the ‘shovel-makers’ that will benefit if charging stations get over-built?

The simple power electronics for electric vehicle charging are outlined from first principles on pages 3-5, explaining the key parameters of fast-chargers being deployed today.

The AC/DC rectifier stage has moved towards power-MOSFETs, and away from simple diode bridges. We explain what this means, and why it is happening, on pages 6-8.

The DC/DC rectifier stage is crucial for safety and reliability, and has also moved towards using power-MOSFETs, as explained on pages 9.

Hence an EV fast-charger is going to have 15-200 high-spec power MOSFETs. Silicon carbide is a crucial enabler, and has been accelerating since it was adopted by Tesla (page 10).

Costs and complexities are explored on pages 11-12. Specifically, we have assessed the pricing of individual companies’ MOSFET gates, to quantify input costs for EV fast-chargers.

Who benefits? The note ends with a screen of seven public companies, which make power-MOSFETs, silicon carbide materials and/or have a technical edge, in this fast-expanding market.

We compared the economics of EV charging stations with conventional fuel retail stations here.

February 10, 2022December 28, 2022

Falling towers: how will energy shortages play out?

If global energy supplies run short, then someone has to curtail demand. Europe is in the firing line, with 7% of the world’s people, using 17% of its energy, of which 65% is imported. So this 13-page note searches for the ‘least bad’ options to cut demand. We do not think the lights will go out. But energy shortages in Europe may cause more energy intensive industries to shutter and never return.

Our outlook for global energy markets is that the world is already 2% under-supplied in 2022, while the under-supply looks likely to continue deepening, each year, out to 2030. Our assumptions, and possible resolutions, are explained on pages 2-4.

Europe’s energy use will likely need to be curtailed, if energy supplies run short. Hence we have disaggregated Europe’s energy demand across 25 different end-uses, versus their contribution to European GDP and payrolls, on pages 5-7.

Where could we cut demand? We explore each option in turn, on pages 8-11, including granular data across 125 different economic models. This shows which industries are most at risk of deeper and deeper curtailments.

The best constructive solutions would be pragmatic policies, a re-prioritization of gas, and a massive step-up in efficiency improvements. The best options across all of our research are summarized on pages 12-13.

Subsequent research on energy shortages in Europe is linked here, and research on how the energy crisis could devastate low-income countries is linked here.

February 3, 2022April 25, 2023

Electric vehicles: chargers of the light brigade?

This 14-page note compares the economics of EV charging stations with conventional fuel retail stations. They are fundamentally different. Our main question is whether EV chargers will ultimately get over-built, as retailers look to improve their footfall and accelerate the energy transition. This means prospects may be best for charging equipment and component manufacturers.

To set a baseline, this note starts by reviewing the economics of conventional fuel retail stations, covering their typical costs, throughputs, fuel margins and convenience retail margins, on pages 2-4.

More electric vehicles are needed in the energy transition. Our estimates of volumes, oil market implications, and CO2 credentials are refreshed on page 5.

So how do the economics compare for EV chargers versus conventional fuel retail? We outline our numbers for an EV ‘fast charging station’ on pages 6-9, covering barriers to entry, throughput volumes, utilization factor aspirations, required margins, ultimate energy costs, and retail incentives. Electric vehicle chargers can also provide demand shifting services to help backstop increasingly renewable-heavy grids.

This market structure is what makes us think EV chargers could ultimately get over-built, and this idea is fleshed out on page 10.

Could EV charging technology change in the future? We review the three technologies we would be watching on page 11.

Which companies are best-placed? We close with observations on better-placed companies, on pages 12-14, including specific examples from our patent reviews.

January 27, 2022June 10, 2024

Nuclear fusion: what are the challenges?

Nuclear fusion could provide a limitless supply of zero-carbon energy from the 2030s onwards. Thus 30 private companies have raised $4bn to progress new ideas. But the goal of this 20-page note is simply to understand the challenges of nuclear fusion, especially deuterium-tritium tokamaks. Innovations need to improve EROI, stability, longevity and ultimate costs.

The purpose of this note is to help decision-makers understand nuclear fusion, simply, in plain language, assuming that you are reasonably literate in science and economics, but do not have a pre-existing degree in nuclear physics.

Binding energies of atomic nuclei are a fundamental force shaping our universe. They explain why some atoms release energy as they fission, and some atoms release energy as they fuse. It is easy to quantify ‘how much energy’ using pages 2-3 of the report.

So is it a real and feasible energy source? We outline why it is on page 4. But what are the fourteen nuclear fusion challenges that a reactor will need to overcome?

Heating up nuclear fusion fuel is covered on pages 4-7, covering possible fuel selections, the ‘Coulomb barrier’ for achieving fusion, and heating methods that can surpass 100M C temperatures.

Confining plasma is covered on pages 8-9, explaining how super-conducting magnets can levitate a stream of super-heated, charged particles. Or not.

Ignition of plasma. What happens to the reaction products? How do you harness the heat? Without the reactor melting? Without other safety issues? We answer these questions on pages 10-12.

Practical considerations for running a fusion reactor are: How do you source, purify and inject fuels to the reactor? What energy gain factor is needed? What maintenance requirements and costs? How flexible will the reactor be? Can reactors be down-sized? We answer these questions on pages 13-17.

Economic considerations. Limitless energy does not necessarily mean cheap energy. At the moment, we think fusion could reach commerciality in the 2030s, but it will ‘split the global CO2 abatement cost curve’ into two. Effectively there would be no need for abatement options costing more than $200-300/ton creating an effective ‘cap’ on all future energy prices.

Our patent review of Commonwealth Fusion, a private fusion company that raised $1.8bn in Series B funding, is linked here.

January 20, 2022November 11, 2022

US LNG: new perceptions?

Perceptions in the energy transition are likely to change in 2022, amidst energy shortages, inflation and geopolitical discord. The biggest change will be a re-prioritization of US LNG. At a $7.5/mcf delivered price, there is 200MTpa of upside by 2030, which could also abate 1GTpa of global CO2. This 15-page note outlines our reasoning and conclusions.

Pragmatic solutions are increasingly needed in the energy transition, in order to avoid painful energy shortages, double-digit inflation and geopolitical discord. We review each of these challenges on pages (2-6), concluding that a 50-60% decarbonization solution (i.e., LNG) is increasingly going to seem better than no solution.

Meanwhile, on the other side of the Atlantic Ocean, there is an industry with the capability to supply 200MTpa of incremental gas to Europe (26bcfd), flexibly, for a competitive price point of $7.5/mcf, ramping up in the late-2020s. We outline the economics on pages 7-8.

The CO2 credentials are for 50-60% lower CO2 per unit of delivered energy versus coal. Each MTpa of LNG avoids around 5MTpa of net CO2 emissions. And we expect most of the LNG will be ‘Clear LNG’ with no embedded Scope 1&2 emissions (page 9).

The challenges and bottlenecks for achieving this US LNG ramp are addressed on page 10-14, again integrating across our models. The capex, materials, labor and land bottlenecks are all at least 95% less demanding than an equivalent energy ramp from ‘renewables only’.

Our conclusions are spelled out on page 15, ending with a discussion of ‘who benefits’ from the theme.

Further research. Our outlook on 300 offtake contracts across the global LNG industry is linked here.

January 13, 2022June 14, 2023

Glass fiber: what upside in the energy transition?

What opportunities for glass fiber in the energy transition? Glass fiber makes up 50% of a wind turbine blade, lightens vehicles and insulates homes for 30-70% energy savings. Hence we see demand rising 3.5x in the energy transition. To appraise the opportunity, this 13-page note assesses the market, costs, CO2 intensity and leading companies.

6% of the global glass market is sold in the form of fibers, a mesh of 4-40μm thick filaments. They can be used directly as an insulation material, or woven into a fabric and embedded in a polymer resin matrix, yielding ‘fiberglass’. These production processes are summarized on pages 2-3.

Applications in the energy transition are then quantified on pages 4-7, including for wind turbine blades, insulation of homes, light-weighting vehicles and substituting for higher-cost and higher-carbon alternative materials. This underpins our forecast for 3.75x market growth.

The energy economics of producing glass fiber are modelled on pages 8-10, in order to quantify the marginal cost, cost breakdown, energy intensity and CO2 emissions of glass fiber product.

The biggest challenge for the industry is industrial leakage, as we find that some product made in the emerging world can undercut the West by c50% on price, despite having 2x higher CO2 intensity (page 11).

The company landscape is summarized on pages 12-13. There are four main listed companies (2 in China, 2 in the West). Interestingly, private equity firms have recently been buying up European pure-plays.

January 6, 2022November 11, 2022

Renewables: can they ramp up faster?

How fast can wind and solar accelerate, especially if energy shortages persist? This 11-page note reviews the top ten bottlenecks that set the ‘upper limit’ on renewables’ capacity additions. Seven value chains will tighten enormously in the coming years. Paradoxically, however, ramping renewables could exacerbate near-term energy shortages.

Our growing fear for 2022 is that a full-blown energy crisis may be brewing. The most ‘obvious’ solution is going to be to accelerate renewables. Hence this note models out a hypothetical scenario where the world tried to scale up renewables about 5x faster, adding 1TW pa of new wind and solar capacity each year (page 2).

Capex is the first bottleneck, as our scenario would require almost $2trn of spending on wind and solar, which is 3x total global energy investment from the past half-decade. This is a lot of capital, but not a show-stopper in our assessment (page 3).

Materials are more challenging, and we map out the total demand pull on global steel, copper, silicon, fiberglass and carbon fiber; and we also discuss the CO2 and energy intensity of each of these materials in turn (pages 4-7).

Specialized supply chains tighten most. We identify three specific industries which would effectively see unlimited pricing power in our scenario (pages 7-8).

Energy paybacks present the biggest paradox. It takes 2-years for the average wind and solar asset to repay the energy costs of manufacturing and installing it. Hence in the near-term, a very rapid ramp-up of renewables would tend to exacerbate energy shortages (page 9).

Land and labor are often cited as bottlenecks on ramping up renewables, but we do not think these are material barriers, by contrast to the others (pages 10-11).

Our conclusion is that appetite to scale renewables will rise sharply in 2022. It will
not resolve near-term energy shortages. But inflation will accelerate in ‘bottlenecked’
parts of the supply chain. Investors can help by debottlenecking those bottlenecks.

December 30, 2021December 27, 2022

Energy crisis: ten themes for 2022?

We are all hoping for ‘normalization’ in 2022. But what if the world is instead entering a full-blown energy crisis, as severe and persistent as the first ‘oil shock’? This 21-page note lays out ten hypotheses, drawing on history. Everything we know about energy transition may change this year.

The purpose of this research report is to explore three enormous questions that are increasingly on our minds:

(1) How would the world look different if the record gas and power prices seen in winter-2021/22 were not some isolated blip, associated with supply chains ‘going a bit funny’ amidst COVID, but the start of a structural and sustained energy crisis?

(2) What evidence might we see in 2022, to confirm (or disprove) whether we are on this dangerous path?

(3) What are the consequences of a sustained energy crisis for decision-makers, for energy transition and for the world in 2022-23?

Analogies with historical energy crises are drawn on pages 2-7, focusing in particular on their causes and consequences. The oil shock of 1973-74 makes for a fascinating case study to compare and contrast with 2021-22.

Escaping from energy under-supply is the focus on pages 8-13, as we present updated outlooks for coal, oil, gas and renewables investment. So far, fantasies for perfect, hypothetical future energy have de-railed the appetite for good, real and ready CO2 reductions. But emerging from the 2021-22 crisis will change the narrative around energy transition.

Inflation is seen reaching double-digit levels in 2022, if we are in an energy crisis. Recession has also followed 60% of past energy crises. Rate rises would help dampen inflation, but compound the risks of recession (page 14).

Mitigating the crisis creates opportunities in efficiency technologies (pages 15-17), nuclear (page 18) and non-cyclical transition commodities (page 19). Hence we outline these opportunities in depth.

Emerging from the crisis will re-prioritize practical and economical pathways to net zero. The leading themes likely to gain ground in 2022 are laid out on page 20.

Wild-cards and tail-risks are also rendered more probable by deeply under-supplied energy markets, and the note ends with some scary speculations on page 21.

December 9, 2021February 28, 2023

Decarbonizing global energy: the route to net zero?

This 18-page report revises our roadmap for the world to reach ‘net zero’ by 2050. The average cost is still $40/ton of CO2, with an upper bound of $120/ton, but this masks material mix-shifts. New opportunities are largest in efficiency gains, under-supplied commodities, power-electronics, conventional CCUS and nature-based CO2 removals.

Important note: our latest roadmap to net zero is from 2022, published here. But this note remains on our website, for transparency into our views at the end of 2021.

This note looks back across 750 of our research publications from 2019-21 and updates our most practical, lowest cost roadmap for the world to reach ‘net zero’. Our framework for decarbonizing 80GTpa of potential emissions in 2050 is outlined on pages 2-3.

Our updated roadmap is presented on pages 4-6. Most striking is the mix-shift. New technologies have been added at the bottom of the cost curve. Other crucial components have re-inflated. And we have also been able to tighten the ‘risking factors’ on earlier-stage technologies, thus an amazing 87% of our roadmap is not technically ready.

The resulting energy mix and costs for the global economy are spelled out on pages 7-8, including changes to our long-term forecasts for oil, gas, renewables and nuclear.

What has changed from our 2020 roadmap? A full attribution is given on pages 9-10. Disappointingly, global emissions will be 2GTpa higher than we had hoped mid-decade, as gas shortages perpetuate the use of coal.

A more detailed review of our roadmap is presented on pages 11-18. We focus on summarizing the key changes in our outlook in 2021, in a simple 1-2 page format: looking across renewables, nuclear, gas shortages, inflationary feedback loops, more efficiency gains, carbon capture and storage and nature-based carbon removals.

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