Top Public Companies In Energy Transition

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 research — 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 January-2023, it contains 324 differentiated views on 162 top public companies in energy transition.

Biofuel technologies: an overview?

Biofuel technologies overview

This data-file provides an overview of the 3.5Mbpd global biofuels industry, across its main components: corn ethanol, sugarcane ethanol, vegetable oils, palm oil, waste oils (renewable diesel), cellulosic biomass, algal biofuels, biogas and landfill gas.

For each biofuel technology, we describe the production process, advantages and drawbacks; plus we quantify  the market size, typical costs, CO2 intensities and yields per acre.

While biofuels can be lower carbon than fossil fuels, they are not zero-carbon, hence continued progress is needed to improve both their economics and their process-efficiencies.

Our long-term estimate is that the total biofuels market could reach 20Mboed (chart below),  however this would require another 100M of land and oil prices would need to rise to $125/bbl to justify this switch.

The data-file also contains an overview of sustainable aviation fuels, summarizing the opportunity set, then estimating the costs and CO2 intensities of different options.

Global decarbonization: speeding up or slowing down?

This 16-page report beaks down global CO2 emissions, across six causal factors and 28 countries and regions. Global emissions rose at +0.7% pa CAGR from 2017-2022, of which +1.0% pa is population growth, +1.4% pa rising incomes, -1.4% pa efficiency gains, -0.5% renewables, 0% nuclear, +0.2% ramping back coal due to underinvestment in gas. Depressingly, progress towards net zero slowed down in the past five years. Reaching net zero requires vast acceleration in renewables, infrastructure, nuclear, gas and nature.

Market sizing: what if CO2 abatement costs are distributed like US income?

Distribution of CO2 abatement costs?

How would CO2 abatement costs end up being distributed, if they matched the distribution of US incomes? Or to phrase it another way, what if all Americans hypothetically gave up precisely 3% of their household’s post-tax incomes, in order to decarbonize the country? 90% of all decarbonization would have to cost less than $80/ton. There would be a 600MTpa market for higher cost CO2 abatement at $80-135/ton (CCS?), a 60MTpa market for high cost CO2 abatement at $150-350/ton (DAC?), and a 6MTpa market for ultra-high cost abatement at $350-1,000+/ton (green hydrogen, e-fuels?).

CO2 abatement costs as a semi-liquid commodity?

Liquid commodity markets tend to have a single market price (e.g., $/bbl for oil, $/mcf for gas, $/Oz for gold), which is theoretically available to all producers, and tends to fluctuate around long-run marginal cost. Low cost producers earn excess returns selling at the market price. High cost producers may need to shut down when market prices cannot cover their variable cash costs. Very high cost producers usually do not get to develop their projects at all.

Is CO2 abatement a liquid commodity? Many readers will be familiar with our roadmap to net zero (note below), which is based on a cost curve of technologies that can decarbonize the world 3x over. We think it will be easiest to decarbonize the world by choosing as many options as possible from the lower-end of the cost curve, which yields an average CO2 abatement cost of $40/ton globally, an upper bound around $100/ton, and all of our various supply-demand models cohere with this decarbonization scenario for reaching net zero by 2050.

CO2 abatement is only a semi-liquid commodity in this roadmap. The global energy system is too complex for a ‘winner takes all’ approach to apply. Important considerations extend beyond simply cost. And there will always be a few downright lunatics who actually consider building small-scale wind turbines or drilling the bore-holes for a ground-source heat pump at their future home in Estonia, even though the CO2 abatement costs make their analytical eyes water.

Methodology: calculating the distribution of affordable CO2 abatement costs?

The purpose of this data-file is to quantify how CO2 abatement costs might end up being distributed, if they follow the income distribution in a typical, large, wealthy country such as the United States. Specifically, our data-file asks: “how would the US’s tolerable CO2 abatement costs be distributed, if every American committed precisely 3% of their household’s post-tax, per person income, to offset the nation’s CO2 emissions?”

To estimate this, we have downloaded data on US household incomes, percentile by percentile, converted into post-tax per person income, using data from the IRS, estimated the CO2 emissions in each income bracket (based on data and charts below). Then we simply calculate 3% of that post-tax per person income and divide by our estimate of CO2 emissions per capita in each income percentile (reference charts below).

US and UK travel-miles by category

Conclusions: market sizing for energy transition technologies?

20% of all US decarbonization, or 1.4 GTpa, must cost below $20/ton, if the distribution of CO2 abatement costs is to match the distribution of household incomes. This is because 20% of American households have a post-tax income per person below $10,000 per year. Generally, the lowest cost technologies in our roadmap to net zero are energy efficiency technologies, where the up-front costs of deploying these technologies are paid back by future energy savings. Many of these technologies are highly economic in their own right. As a rough conclusion, we expect over 20% of all the decarbonization will come from efficiency technologies, which matches our roadmap to net zero.

Half of all US decarbonization must cost <$45/ton, because the median American household earns $24,000 in post-tax, per person income, while the individuals in this household tend to emit 16 tons of look-through CO2 per person per year. There are still some forecasters in fantasy land (note below), thinking that the world can be decarbonized without paying for pragmatic decarbonization solutions, or rather by deploying technologies that cost several hundred dollars per ton, and would absorb over 30% of the average income of the median American. The best examples in the 4GTpa middle ground of pragmatic decarbonization technologies costing $20-80/ton of CO2 abatement include wind, solar, expanding power grids, scaling up natural gas and nature based CO2 removals.

Higher cost decarbonization technologies, costing in the range of $80-140/ton could scale up into the range of 600MTpa in the United States, if the distribution of CO2 abatement costs ends up matching the distribution of incomes, and we run up to the 99th percentile. This is an interesting number, because we think CCS and blue hydrogen are most often going to be in the range of $80-140/ton. And we have also estimated, in bottom-up analysis, that this is the kind of market size that US CCS could achieve (note below).

High cost decarbonization opportunities that cost around $150-350/ton could find a limited market of around 60MTpa (1% of total US decarbonization) if the distribution of CO2 abatement costs matches the distribution of post-tax incomes in the country. An example of a CO2 abatement technology in this approximate cost and size category might be DAC. Some buyers may be willing to pay a premium for DAC CO2 removal credits over reforestation removal credits due to higher perceived quality, especially around the dimension of CO2 permanence.

Ultra-high cost decarbonization opportunities that cost $350-1,000+/ton could find an even more limited market of around 6MTpa (0.1% of all decarbonization), if the distribution of CO2 abatement costs paid to decarbonize the United States matches the distribution of incomes. We think that green hydrogen will most likely fall in this abatement cost range, in the ‘upper 0.1%’ of CO2 abatement by cost; a kind of energy technology equivalent of the ‘upper 0.1%’ of households with a pre-tax income above $2.6M per year ($770k per household member). And indeed, there will probably be some niche deployments of green hydrogen. Some niches can also be economically interesting. And some rough maths is that 6MTpa of CO2 abatement from green hydrogen might require 1MTpa of hydrogen, absorbing 50 TWH of renewable electricity and supporting 18GW of electrolysers by 2050, while displacing 100 bcf of natural gas (0.3 bcfd, versus today’s 100bcfd US gas market). Whether these are big numbers or small numbers depends entirely on your mindset.

Energy transition: the fantasy of the perfect?

Energy transition fantasy crisis

This 14-page note explores an alternative framework for energy transition: what if the fantasy of the perfect consistently de-rails good pragmatic progress; then the world back-slides to high-carbon energy amidst a cascade of crises? We need to explore this scenario, as it yields very different outcomes, winners and losers compared with our roadmap to net zero.

Energy transition: the very hungry caterpillar?

energy transition stocks

The universe of energy transition stocks seems small at first. 50 clean tech companies have $1trn in combined value, less than 1% of all global equities. But decarbonizing the world is insatiable. Consuming ever more sectors. In our attempt to map out all of the moving pieces, we are now following over $15trn of market cap across new energies, (clean) conventional energy, utilities, capital goods, mining, materials, energy services, semiconductors.

Flaring reduction: screen of service and equipment companies?

companies that reduce gas flaring

This data-file is a screen of companies that reduce gas flaring emissions, either by avoiding routine flaring directly, or by reducing the ESG impacts of unavoidable flaring. The landscape is broad, ranging from large, listed and diversified oil service companies with $30bn market cap to small private analytics companies with <$10M pa of revenues.

Our screen explores a dozen companies that reduce gas flaring and can help to mitigate flaring; whether they are public or private, their size, headcount, focus, revenues, valuation, and an overview of their technology. But this is just a sample of names, to illustrate the breadth of the theme.

Breadth and the giant furnace model. There is a dangerous temptation to assume that oil industry flaring is simple. It is vastly, complex. Flaring rate by country range from effectively nil in industry-leading Norway and Saudi Arabia through to 0.7 mcf/bbl in the highest-flaring producing countries. And even where flaring does occur, beware assuming there is some kind of giant furnace in the desert of Texas where the shale oil industry ‘chooses to burn off waste gases’.

The reality is borne out by this screen. Avoiding flaring requires oilfield service equipment to separate out gas from produced oil. Moving it away from the well site then requires compressors, pipelines, small-scale LNG, CNG or using gas in basin, e.g., for dual-fuel rigs or frac services or in-basin power generation. Sometimes it is not possible to separate the gas, and fluids must be moved by multi-phase pumps. Sometimes wells are flowed back before gas infrastructure is available. Sometimes, despite extensive separation, gas still flashes off in storage tanks. Sometimes flaring is unavoidable, and the goal is simply to ensure all methane is effectively destroyed in the flare, and not leaked away.

The emissions tab contains a similar calculator for the CO2 intensity of flaring, depending on the gas-oil-ratio, percent of gas that is flared, combustion efficiency and timeframe over which methane emissions are considered. We believe that poorly-managed flaring operations from some oil production sites around the world will emit more CO2 than burning the resultant oil itself, due to methane slip. Whereas emissions from flaring are negligible for high-quality producers.

Decarbonizing global energy: the route to net zero?

Roadmap to Net Zero

This 17-page report revisits our roadmap for the world to reach ‘net zero’ by 2050, after integrating over 1,000 pieces of research from 2019 through 2022. Our updated roadmap includes large upgrades for renewables and energy efficiency; less reliance on new energies breakthroughs; but most of all, simple, pragmatic progress is needed as bottlenecks and shortages loom.

Energy costs of energy transition?

Energy costs of energy transition

Reaching net zero requires building wind, solar, grid infrastructure, energy storage, electric vehicles and capturing CO2. Energy is needed to build all of these things. The total energy costs of energy transition reach 1% of total global primary energy in 2025, 2% in 2030, 4% in 2040 and 6.5% in 2050. In other words, energy transition is materially easier to achieve from a period of energy surplus. You can stress-test numbers in this simple model.

We want to achieve an energy transition, by ramping wind and solar to 25% of the world’s total useful energy by 2050 (note here), building a global fleet of over 2bn efficient electric vehicles, constructing power grid and storage infrastructure, and capturing over 6GTpa of CO2 via various forms of CCS.

This data-file compiles our estimates for each category, quantifying (a) how many units do we want to build? (b) what is the energy cost per unit? (c) by simple multiplication, what are the total energy costs of each category in TWH and as a percent of global primary energy.

However, building all of these things absorbs energy. There are energy intensive materials in a solar plant. There are energy intensive materials in a wind-turbine. And in electric vehicles. Around two-thirds of the energy costs for expanded power grids is embedded in the aluminium of power cabling. Finally, energy storage consumes energy in the form of round-trip efficiency losses, while CCS consumes energy in regenerating amines.

By 2025, around 1,500 TWH of primary energy, or 1.0% of total global primary energy, will be needed specifically to construct these energy transition technologies. The near-term is most heavily weighted to solar, then wind, then electric vehicles.

The numbers grow ever larger as we extrapolate out into the future. The energy transition itself will consume 2% of the world’s primary energy by 2030, 4% by 2040 and 6.5% by 2050.

These are simply enormous numbers. The 2025 number is equivalent to the total primary energy consumption of a country such as Spain or Australia. While the 2050 number is equivalent to two Saudi Arabias worth of oil production.

It is clearly going to be easier to build the important assets and infrastructure needed in the energy transition from a position of energy surplus, and it is going to be more difficult (even, inflationary) if the world is suffering from sustained energy shortages. This is why we think restoring the world’s energy surplus is the most important ESG goal of the 2020s.

The data-file also contains energy balances for each theme in the energy transition. Wind is already in a position of large energy surplus, because wind plants require 50-70% less up-front energy to construct than solar plants (per unit of ultimate generation, e.g., in kWh). The solar chart below is also more finely balanced through the mid-2020s, because solar additions are still accelerating sharply (note here). EV growth is seen accelerating so sharply that building ever more EVs will absorb more energy than they save through the mid-2030s (note here).

The technology that looks most challenged on this roadmap is green hydrogen. Converting useful, rateable electricity into green hydrogen generates no energy savings. There are simply efficiency losses, due to entropy increases, over-voltages at the anode, storage, transport, fuel cells, etc. Our chart above has <0.1% of the world’s useful energy in 2050 coming from green hydrogen. But if the number were 10%, then the total energy requirements of the energy transition would literally double.

The technology that looks least challenged on this roadmap is natural restoration (note here). Nature based solutions may create a 20GTpa CO2 sink with long-term pricing around $50/ton. But planting trees is not an energy intensive activity. There is even an argument that it generates energy, although consuming this energy has varying CO2 credentials.

A key objective for the new energies industry is going to be deploying new technologies that can improve efficiency and lower the energy intensity of energy transition. Hence our own research is also delving into opportunities in energy efficiency.

What are the energy costs of the energy transition? You can stress test numbers in the data-file, flexing total wind and solar installations, total EV deployment, CCS deployment, grid storage, green hydrogen, and the energy intensity factors of each technology.

Energy units: life, the universe and everything?

Energy units

Energy is the glue of our universe. Literally everything is at some level an energy flow – from viewing this text, to the outcomes of wars, to matter itself – which can all be expressed in Joules and kWh. Hence this 16-page overview is a useful reference, to translate from any energy units to any others; for comparisons; and to understand the units in energy transition.

Copyright: Thunder Said Energy, 2019-2023.