Energy economics: an overview?

Overview of Energy Economics

This data-file provides an overview of energy economics: 90 different economic models constructed by Thunder Said Energy, in order to help you put numbers in context.

Specifically, the model provides summary economic ratios from our different models across conventional power, renewables, conventional fuels, lower-carbon fuels, manufacturing processes, infrastructure, transportation and nature-based solutions.

For example, EBIT margins range from 3-70%, cash margins range from 4-85% and net margins range from 2-50%, hence you can use the data-file to ballpark what constitutes a “good” margin, sub-sector by sub-sector.

Likewise capital intensity ranges from $300-9,000kWe, $5-7,500/Tpa and $4-125M/kboed. So again, if you are trying to ballpark a cost estimate you can compare it with the estimated costs of other processes.

Renewables stand out. Despite high capital intensity (34% of revenues, 2x the average), once constructed, they also have the highest cash margins (76%, also 2x the average).

Low-carbon fuels and manufacturing/materials are similar. Both tend to have c20% average EBIT margins, after deducting 70-75% opex and c5-10% capex shares. This makes sense, as low-carbon fuels are effectively “manufactured” energy products.

The most exciting opportunities can also be picked out. They are clustered in the top-left of the chart, with high EBIT margins, low capital intensity and low costs once they are up-and-running.

Full data are available in the data-file below. To read the overview of energy economics send to our distribution list, please see our article here. All of the underlying economic models that feed into this data-file are available here.

Top Public Companies In Energy Transition

Some of the top public companies in energy transition are aggregated in this data-file, looking across over 1,000 items of research into the energy transition published to date by Thunder Said Energy.

The data file should be useful for subscription clients of Thunder Said Energy, if you are looking for a helpful summary of all of our research to-date, how it reflects upon public companies, and links to explore those companies in more detail, across our other research.

Specifically, the file allows you to filter different companies according to (a) listing country (b) size — i,e., small-cap, mid-cap, large-cap, mega-cap (c) Sector — e.g., energy, materials, capital goods, OEMs (d) TSE resarch — and whether the work we had done made us incrementally more optimistic, or cautious, on this company’s role generating economic returns while advancing the energy transition.

A back-up tab then reviews all of our research to date, going back to 2019, and how we think that specific research conclusion might impact upon specific companies. This exercise is not entirely perfect, due to the large number of themes, criss-crossing a large number of companies, at a large number of different points in time. Hence the observations in this data-file should not be interpreted as investment recommendations.

The screen is updated monthly. At the latest update, in September-2022, it contains 285 differentiated views on 148 top public companies in energy transition.

Top Private Companies In Energy Transition?

Some of the top private companies in energy transition are aggregated in this data-file, looking across over 1,000 items of research into the energy transition published to date by Thunder Said Energy.

The data-file was last updated on the website in September-2022, and contains 55 companies, out of several hundred that have crossed our screens. It should be useful for subscription clients of Thunder Said Energy, if you are looking for a helpful summary of all of our research to-date, how it reflects upon private companies, and links to explore those companies in more detail.

For each company, we have used apples-to-apples criteria to help compare and contrast their advantages, opportunities and challenges,

(1) Economics should be able to support double-digit cash margins, long-term growth and IRRs that are well above 10%. We assess economics across over 130 different economic models.

(2) Technical readiness means that a technology can be de-risked, and does not face a long pathway towards commercialization. We have also published an overview of technical readiness levels.

(3) A technical edge means that a company has some kind of moat around its product. Often, we assess this by reviewing the company’s patents.

(4) Decarbonization credentials denote whether the company’s technology will abate large amounts of CO2, or conversely, smaller amounts of CO2. Again, this will likely be based on our economic models and CO2 screening work.

(5) Depth of analysis. For some companies, we have simply noted them in passing, while researching specific aspects of the energy transition. For others, we have written entire, deep-dive research notes, helping us to understand these companies in more detail.

The data-file also contains a short, two-line description follows for each of our top private companies in the energy transition, plus links to our wider research, which will outline each opportunity in detail.

Silver producers: leading companies?

Silver producers leading companies

Half of the world’s 28kTpa global silver market is controlled by 17 public companies, with silver output ranging from 0.1 – 2.0 kTpa. This data-file is a screen of silver producers, in order to identify leading companies, especially as there may be demand upside from growing solar demand.

There are no pure-plays. The average company in the screen is c25% exposed to silver. 40% of the output is from gold-silver producers (c45% average silver exposure), 20% from gold producers (20% exposure), 25% is from copper producers (11%) and the remainder is from other and more diversified metals companies.

Our roadmap to net zero shows upside for demand in many of these metals, but they also differ in their defensiveness, gearing to the business cycle and defensiveness. In a concentrated market with sharp upside potential, there is always a debate whether you want to own the bottom of the cost curve (around $10/Oz; most resilient, highest margin) or the top of the cost curve (around $25/Oz; re-rating as they move from ‘out of the money’ to ‘in the money’).

CO2 intensity is surprisingly high, most likely around 150-200 kg/kg, with upper estimates as high as 500 kg/kg of CO2 per unit of silver; which stems from the very high processing intensity of very low ore grades (4-400 grams/ton).

To read more about silver producers leading companies, please see our article here.

STATCOMs and SVCs: leading companies?

This data file looks for leading companies in STATCOMs and SVCs by aggregating all Western patents that refer in their title, abstract or claims to “STATCOMs”, “Static VAR Compensators”, or similar.

We have aimed to evaluate the leading companies in these evolving FACTS opportunities, stabilizing the voltage and reactive power of renewables, especially wind projects.

Overall, the space is concentrated, with only a handful of companies have a diversified product offering here. Two pure-play Capital goods companies stand out as the leaders. A third Western company is close behind, growing via acquisitions.

Strong competition is also seen from Japanese, Korean and increasingly Chinese manufacturers. We also identified half-a-dozen relatively concentrated pure-play companies, some listed, some private.

HVDC transmission: leading companies?

Leading companies in HVDC

Leading companies in HVDC. The global HVDC market is around $10bn per annum in 2021, growing at 7-11% per annum, with the goal of inter-connecting large renewables projects and stabilizing larger grids for the energy transition.

Numbers vary by project, but it might typically cost c€100-600 M to connect a large and remote renewables project to the grid or run a typical HVDC inter-connection line, including underground HVDC cabling that weighs 35kg/meter, plus associated, switchgear, power electronics, ancillary equipment and EPCI.

This data-file reviews the market leaders in HVDC, based on 5,500 patents filed over the past decade. A dozen companies stand out, with c$40bn of combined revenues from power transmission projects, equipment and materials.

In other words, the space is relatively concentrated across this small group of companies, although the companies are themselves relatively un-concentrated, with just c30% of the average one’s revenues coming from power transmission.

There are clear leaders in overall HVDC, in power cables and in input chemicals, in our view.

Recent Commentary: To read more about leading companies in HVDC, please see our article here. Our outlook on HVDC transmission is constructive, with costs and energy  penalties that are materially lower than batteries or hydrogen (note here).

Graphite producers: leading companies?

Graphite companies and downstream refining facilities

This data-file screens 15 companies that are developing graphite mines and downstream refining facilities, to upgrade their output into highly pure spheronized graphite that can be used as an anode material for lithium ion batteries and electric vehicles.

In each case, we have summarized the company’s listing, founding, size, concentration towards graphite, patents, project parameters and other key details.

There is a large landscape of junior mining companies here. However in our view, leaders will be those with the ability to integrate and demonstrate strong environmental performance, which will also correlate very closely with economic performance in this sub-industry.

To read more on leading graphite companies and downstream refining facilities, please see our article here. For our insight  on graphite opportunity in energy transition, see our article here.

Coal miners: a screen of Western companies?

In normal times, thermal coal producers have debatable ESG credentials, owing to being the highest carbon fossil fuel, and 2-3x higher CO2 intensity per MWH of useful energy than natural gas.

However, in 2022-25, we could be in a market where deployment of important energy transition technologies is being held back by energy shortages, which pull on the demand for thermal coal; and also metals shortages, which in turn pull on the demand for metallurgical coal. We might not go so far as to call coal an ESG investment.

Nevertheless, this data-file aims to screen 15 Western coal producers. This group produces around 500MTpa of thermal coal and 100MTpa of metallurgical coal from the US, Canada, Europe and Australia. Most companies have been cutting capacity and phasing back activity. In turn, this creates potential to ramp back c100MTpa of production amidst very deep energy shortages, equivalent to c400TWH of useful energy.

The screen highlights each company, its size, concentrated to coal, its asset base and other details around its longer-term strategy.

Power-MOSFETs for EV charging: a screen?

This data-file screens companies that make power-MOSFETs, especially for EV charging and new energies applications. These are the transistors used to convert AC inputs into safe, fault-free and high-power DC charging outputs.

The screen covers six of the leading public companies, each with 5-25% market share, making the industry relatively concentrated. We also profile the leading public producer of silicon carbide input materials.

In each case, we outline the company’s size, geography, focus, patents, market share and key notes on EV fast-charging MOSFETs.

Decarbonization targets: what do the data tell us?

The most comprehensive and useful online resource we have found to track different companies’ net zero commitments is The database is freely downloadable under a Creative Commons license. However, we have attempted to clean it up in this data-file, including some additional fields and analytics.

The result is 630 companies that have pledged to reach some definition of ‘net zero’. Although the commitments are somewhat skewed towards easier-to-decarbonize sectors, such as financials (22%), TMT (6%), professional services (5%), retail (5%), healthcare (4%).

The average year to achieve this is 2044, although again, it varies by sector, and easer-to-decarbonize sectors tend to have sooner-dated targets.

A key question is credibility. 20% of the companies are deemed to have unclear decarbonization objectives and 45% are assessed to lack a clear plan to reach their goals (interestingly, energy companies scored above average on both of these metrics, at 16% and 27%, which squares with our own experience that some sectors are working hard to tackle CO2).

Another key question is scope. We were impressed to find that 50% of companies are including Scope 3 emissions in their decarbonization targets.

Finally, the list is substantively composed of large public companies, of which 40% are in Europe, 30% are in the US, 15% in Japan, c5% in both Australia and Canada. Clearly if you are a large public company, operating in these geographies, then investors are increasingly going to start ‘marking you down’ if you do not have clear decarbonization targets. On the other hand, private companies and emerging world companies are vastly under-represented in this data-file, which will re-awaken old fears over industrial leakage, and re-iterates the need for practical and economic decarbonization.

In the spirit of open source data, our clean-up of the database is free to download, in case it is useful for you, or helps inform your own company’s decarbonization targets.

Copyright: Thunder Said Energy, 2022.