Power grids: hell is a hot, still summer’s day?

Power outages during heatwaves

Ramping renewables to 50% of power grids is a growing aspiration in the energy transition. But in some markets, it may result in devastating blackouts during summer heatwaves, as power demand doubles exactly when wind, solar, gas, transmission losses and disruptions all deteriorate. This 15-page note assesses the causes, implications and mitigation opportunities.


In David Copperfield, Charles Dickens’s quasi-autobiographical novel of 1849, Mr Micawber famously summed up his household’s finances: “Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery”. So too with the grid. A small tilt from surplus to deficit results in blackout misery, costing billions in economic damages, and hardship for millions of people (pages 3).

High temperatures cause grid balances to deteriorate. Across every single line in our models. This is under-appreciated. It is mostly due to immutable laws of physics (which cannot be over-turned by policy-makers, try as they might). Hence our work aims to quantify these temperature sensitivities for cooling demand (page 3), wind (page 4), gas-fired power (page 5), solar power (page 6) and transmission losses (page 7).

A simple model is constructed, showing how a seemingly well-covered grid, which actually suffers from excess capacity most of the time, can thus fail catastrophically during a heatwave (page 8).

This is where power grids are heading. We outline our models and forecasts across the US, Europe, China and broader emerging markets (pages 9-10).

So what solutions exist? We fear that grids will grow more and more erratic amidst summer heatwaves. Hence we have reviewed 10 opportunities and implications, which may become interesting to investors and companies (pages 11-15).

Landfill gas: rags to riches?

Landfill gas opportunities

Methane emissions from landfills account for 2% of global CO2e. c70% of these emissions could easily be abated for c$5/ton, simply by capturing and flaring the methane. Going further, low cost uses of landfill gas in heat and power can also make good sense. But vast subsidies for landfill gas upgrading, RNG vehicles and biogas-to-jet may not be cost-effective. Our 20-page note reviews the options.


Methane emissions from landfills are broken down on pages 2-5. We explain why they are generated, including the degradation pathways of different waste materials. We also review the typical sizes and end-markets for existing landfill gas capture programs.

Different options exist to capture and avoid these emissions. We have assessed ten options in this note, to quantify the potential market size. Our carbon accounting framework is summarized on page 6.

Different options are then reviewed in detail. In each case, we calculate the costs and discuss complexities. This includes methane capture and flaring (page 7), methane capture and sequestering (page 8), use of raw landfill gas in heat, power or CHP (pages 9-12), cleaning up to pipeline spec (pages 13-14), further cleaning into CNG transportation fuels (pages 15-16) and biogas-to-jet (page 17).

Perspective is crucial. The ultimate carbon abatement costs of landfill gas projects hinge on whether a project has served to reduce methane emissions. We are doubtful that some of the largest and most complex RNG projects will be genuinely incremental. They may simply offtake methane that was being captured anyway or could have been flared at vastly lower cost. This challenge is explored on pages 18-19.

Will subsidies stick? We debate this question on page 20, along with policy suggestions and conclusions for companies.

Solar costs: four horsemen?

Could solar costs re-inflate?

Solar costs have deflated by an incredible 90% in the past decade to 4-7c/kWh. Some commentators now hope for 2c/kWh by 2050. Further innovations are doubtless. But there are four challenges, which could stifle future deflation or even re-inflate solar. Most debilitating would be a re-doubling of CO2-intensive PV-silicon. Our 15-page report explores re-inflation risks for solar developers.


Our current solar models are laid out on page 2, breaking down the capex costs of a new utility solar installation (in $/W) and the resultant levelized power prices required for various IRRs (in c/kWh).

But can solar costs deflate to 2c/kWh in the future? This is the base case assumption now factored into the IEA’s ‘roadmap to net zero’, which has solar generating 33% of all global electricity by 2050. If correct, this could unleash a very different roadmap to net zero than our own.

We outline four reasons we cannot see solar deflating to 2c/kWh on pages 6-15. The first three revolve around curtailment, geographic down-spacing and interest rates.

Photovoltaic silicon is the key focus on pages 10-15. This currently makes up one-third of a solar panel’s cost, and is one of the most CO2 intensive materials on the whole planet. Models must join up. Thus if the production of PV silicon itself needed to be decarbonized, then prices would easily rise by 2x, or more. The full analysis is broken out in the note.

Battery recycling: long division?

Battery recycling costs and challenges

Recycling lithium batteries could be worth $100bn per year by 2040 while supporting electric vehicles’ ascent. Hence new companies are emerging to recapture 95% of spent materials with environmentally sound methods. To be practical, the technology needs to be proven at scale, battery chemistries must stabilize and cheaper alternatives must be banned. Our 15-page note explores what it would take for battery-recycling to get compelling.


There are three aspirations for recycling electric vehicle batteries. They are outlined on pages 2-6, including an overview of future market sizing and companies.

How does it work? We have summarized the basic process for pyrometallurgical and hydrometallurgical recycling on pages 7-10, condensing the most helpful data-points from reviewing half-a-dozen technical papers.

The economics are outlined on pages 11-13, as we have modelled a hydrometallurgical facility that achieves c70% recovery of overall input materials, as our base case. Our commentary focuses on the best opportunities for cost deflation.

To get particularly excited by battery recycling, we would need to see improvements around half-a-dozen question marks, which are spelled out on pages 14-15.

Inflation: will it de-rail the energy transition?

Inflation from energy transition policies

New energy policies will exacerbate inflation in the developed world, raising price levels by 20-30%. Or more, due to feedback loops. We find this inflation could also cause new energies costs to rise over time, not fall. As inflation concerns accelerate, policymakers may need to choose between delaying decarbonization or lower-cost transition pathways.


The importance of costs on the roadmap to net zero evokes a surprising amount of debate. We re-cap these debates, including our own roadmap on pages 2-3. Recently, organizations such as the IEA have published a roadmap, which we believe will be c10x more expensive.

The inflationary impacts of energy transition can be compared for different levels of abatement costs. Hence we discuss the concept of abatement costs, including two paradoxes, on pages 4-5.

Top-down, we calculate that each $100/ton of CO2 abatement cost would likely lead to 6% aggregate price increases in the developed world, on page 6.

Bottom-up, we model that each $100/ton of CO2 abatement cost would lead to 2-70% price increases, across a basket of twenty different goods and commodities, on pages 7-8. The impacts are regressive and basic goods and staples rise more.

An additional source of inflation comes from supply-demand dynamics, as some materials will be dramatically under-supplied in the energy transition (page 9).

What does it mean for new energies? To answer this question, we bridge the impacts of all these cost increases in our models of wind, solar, hydrogen and batteries, on pages 10-12. There are surprising feedback loops, which could amplify inflation.

No brakes? We also find that the usual mechanism to slow inflation is blunted by the need for an energy transition, on pages 13-14. Hence if inflation accelerates, it could surprise by a wide margin.

Our conclusion is that policy-makers and companies should consider costs more closely, while there are measures for investors to inflation-proof portfolios.

Electro-fuels: start out as a billionaire?

Electro-fuel costs and opportunities

Electro-fuels are hydrocarbons produced primarily from renewable power, CO2 and water. They are reminiscent of the adage that ‘the fastest way to become a millionaire is to start out as a billionaire then found an airline’. Because all you need for 1boe of these zero-carbon fuels is 2-3 boe of practically free renewable energy. Abatement cost is $1,000/ton. At best this could deflate to $150/ton. An ambitious new industry is forging ahead. The opportunity and challenges are explored in this 19-page report.


There are three excellent reasons for wanting to commercialize electro-fuels, converting renewable electricity, CO2 and water into zero carbon fuels. They are spelled out on pages 2-4.

Renewable power is the first ingredient needed to produce electro-fuels. We outline how much power, and at what cost, on pages 5-6.

A carbon source is the second ingredient needed. We have created a CO2-sourcing cost curve, then modelled a CO2 electrolysis stack, on pages 7-9.

A hydrogen source is the third ingredient needed. Our assessment of hydrogen costs is re-capped on page 10.

Re-combining these building blocks into an electro-fuel will most likely follow one of three main pathways: Fischer-Tropsch, green methanol and/or alcohol-dehydration. We spell out each option, and its ultimate cost on pages 11-14.

Our best case scenario is refined on page 15-16. Because we have broken down the costs of electro-fuels into their component parts, we can assess what is required for a c$150/bbl or c$150/ton abatement cost, and is this realistic?

Leading companies are profiled on pages 17-19. We screened 15 companies in the space. Many are forging ahead with pilot projects, or developing superior technologies.

Ethanol: hangover cures?

Next-generation technologies for ethanol biofuels

Could new technologies reinvigorate corn-based ethanol? This 12-page  note assesses three options. We are constructive on combining CCS or CO2-EOR with an ethanol plant, which yields a carbon-negative fuel. But costs and CO2 credentials look more challenging for bio-plastics or alcohol-to-jet fuels. 


Challenges for the bio-ethanol industry are re-capped on pages 2-3, building off of our recent research. Hence how could new technologies fix the economics and carbon credentials of corn-based ethanol?

Our constructive outlook on ethanol + CCS is presented on pages 4-6. Ethanol plants have the unique advantage of a nearly pure CO2 stream from fermentation, allowing them to by-pass the costly and energy intensive amine process. The resultant fuel can be considered carbon negative. White Energy and Oxy are pursuing a project.

Our outlook for bio-plastics is presented on pages 7-10. Costs of bio-ethylene will likely be 2x higher than conventional ethylene, mainly due to running ethanol as a feedstock. Although encouragingly, ethanol dehydration could be 70% less energy intensive than ethane cracking.

Our outlook for alcohol-to-jet fuel is presented on pages 11-12. If our numbers are correct, some projects could result in 3-4x higher costs compared to conventional jet, despite minimal CO2 savings. Thus companies in this space are pursuing more novel pathways.

Emerging technologies: can you spot a fraud from patents?

Emerging technologies: can you spot a fraud from patents?

This 11-page note looks back at 175 patents filed by Theranos, which promised a world-changing medical testing technology, but ultimately turned out to be a fraud. The analysis has helped us create a new framework, which we will be using to assess new energy technologies, on a scale of 0-5. This matters for models of energy transition and for SPAC valuations.


300 companies have already raised $100bn via SPACs in 2021. Many are early stage. Hence how can we derive comfort around their technologies? We outline how patents can help with this process on pages 2-3.

Companies with few patents but many bold claims are easy to identify as ‘higher-risk’. We give a recent example from the hydrogen industry on page 4.

But companies with many patents and very bold claims are harder to identify. Specifically, Theranos filed over 175 patents. Some are very detailed. Others contain “experimental results” demonstrating their technology. Examples are given on page 5.

This note reviews Theranos’s patents, finding five signs which may have helped decision-makers to adjust their risking factors. We give examples of each sign on pages 6-10. For each sign, we explore a reassuring example from the patent literature, and a less reassuring example from the Theranos patent library.

Our conclusion is to start applying this new framework consistently, when appraising early-stage technology companies, as explained on page 11.

Ethanol: getting wasted?

Is ethanol from corn lower carbon?

30M acres of US croplands are used to grow corn for ethanol. Each acre prevents 2-3 tons of CO2 emissions per annum, for a CO2 abatement cost of $200/ton. However, if these same acres were reforested, they could absorb 2x more CO2, creating a 150MTpa CO2 sink; while at $15-50/ton CO2 prices, farmers in the mid-West could have higher earnings. Hence this 15-page note asks if the rise of carbon removals could re-shape US biofuels?


An overview of the US corn-to-ethanol industry is given on pages 2-4, covering the four main rationales for blending 40% of the corn crop into biofuels. But do these rationales stand up to scrutiny?

An overview of the ethanol production process is given on page 5, as this will be the basis for our economic and carbon modelling.

The economics of ethanol production are presented on page 6. We find the marginal cost of US ethanol is currently c40% higher than the cost of wholesale gasoline.

Carbon accounting is the main focus of this research note, and our numbers are laid out on pages 7-11. Looking category by category, we show that the CO2 prevented per acre of farmland is between 2-3 tons per annum.

Reforesting the same land could avoid 2x more CO2, we find. On pages 12-13 we ask ‘is it feasible?’, ‘is it economical?’ and ‘is there a market?’, We argue it is, in each case.

Our conclusions are laid out on pages 14-15. The rise of corporate carbon offsetting could re-shape the US biofuels industry, with implications for farmers, the ethanol industry and the US refining industry.

Carbon offset funds: the future of ESG?

Carbon offset funds

Reaching ‘net zero’ is impossible without nature based carbon removals. Hence this 17-page note argues corporations will increasingly create internal groups to procure carbon offsets, re-shaping the energy transition. We make three arguments, twenty predictions and draw a historical analogy from labor reforms in 1850-1950. Is this the future of ESG?


We draw a distinction between carbon reduction technologies and carbon removal technologies on page 2-4. It is not possible to get to ‘net zero’ via reduction technologies alone. Allocations are needed to carbon negative removal technologies too. Especially nature-based solutions.

What model will be best for corporations to procure nature-based carbon removals? On pages 4-5, we propose internal groups will be created to ensure these projects are real, reliable, additional, permanent and meet other organizational goals.

Our first line of evidence comes from assessing the increasing trend towards nature based solutions at 35 large organizations, profiled on page 6.

Our second line of evidence is a specific example in a hard to abate sector. Without nature-based solutions, abatement costs 100-200x more and even then, only 40% of CO2 can actually be abated (page 7).

Our third line of evidence is a specific example, a company targeting ‘net zero’ which has created exactly the kind of internal carbon offsetting division that we envisage. It states a goal to “help establish this market by sparking a paradigm shift as soon as possible”.

Other beneficiaries of the theme could be organizations that vet economical carbon removal solutions and sell this service onwards, or Energy Majors that commercialize ‘zero carbon energy’ by combining nature based solutions with their fuels (pages 9-10).

A historical analogy is given on pages 11-14. Correcting the 19th century’s imbalance between labour and capital did not come via dismantling capitalism, but via a series of mundane internal reforms from corporations, from safety measures to defined benefit pension funds.

Implications for the energy transition are given on pages 15-17, including twenty predictions for the future of ESG.

Copyright: Thunder Said Energy, 2019-2024.