Commentary

The CO2 credentials of long-duration batteries may be as bad as 0.35-2.0 kg/kWh, which is worse than gas peakers, or even than coal power. Grid-scale batteries are best deployed in high-frequency applications, to maximize power quality, downstream of renewables. But we were surprised to find that there is almost no net climate benefit from turning…

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Methane leakage rates in the gas industry vary by source and use. Across our build-ups, the best-placed value chains are using Marcellus gas in CCGTs (0.2% methane leakage, equivalent to 6kg/boe, 1kg/mcfe, or +2% on Scope 3 emissions) and/or Permian gas in LNG or blue hydrogen value chains (0.3%). Residential gas use is likely closer…

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Computation, the internet and AI are inextricably linked to energy. Information processing literally is an energy flow. This note explains the physics, from Maxwell’s demon, to the entropy of information, to the efficiency of computers.

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Our top three questions in the energy transition are depicted above. Hence we have become somewhat obsessed with analyzing the energy transition from first principles, to help our clients understand the global energy system, understand new energy technologies and understand key industries. 

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A highlight of 2023 has been going back to first principles, to explain the underpinnings of prime movers in the global energy system. If you understand the thermodynamics of prime movers, you will inevitably conclude that the world is evolving towards solar, semi-conductors, electro-magnetic motors, lithium batteries and high-grade gas turbines.

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After five years researching the energy transition, we believe it favors active managers. Within the energy transition, active managers can add value by ranging across this vast mega-trend, balancing risk factors in a portfolio, timing volatility, understanding complexity, unearthing specific opportunities and benchmarking ESG leaders and laggards.

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Real levelized costs can be a misleading metric. The purpose of today’s short note is simply to inform decision-makers who care about levelized costs. Our own modelling preference is to compare costs, on a flat pricing basis, using apples-to-apples assumptions across our economic models.

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Blue hydrogen value chains are starting to boom in the US, as they are technically ready, low cost, and are now receiving enormous economic support from the Inflation Reduction Act. But will this divert gas away from expanding US LNG, raise global LNG prices above $20/mcf and impact global energy markets more than expected?

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The thermodynamic efficiency of materials production averages 20%, within an interquartile range of 5% to 50%. There is most room for improvement in complex value chains. And very different energy costs for blue vs green H2.

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Investing involves being paid to take risk. And we think energy transition investing involves being paid to take ten distinct risks, which determine justified returns. This note argues that investors should consider these risk premia, which ones they will seek out, and which ones they will avoid.

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