Transformer shortages: at their core?

The pricing of transformers has risen 1.5x in the past three years along with US imports of transformers by capacity more than doubling in the same timeframe.

Transformers are needed every time voltage steps up or down in the power grid. But lead times have now risen from 12-24 weeks to 1-3 years. And prices have risen 70%. Will these shortages structurally slow new energies and AI? Or improve transformer margins? Or is it just another boom-bust cycle? Answers are explored in this 15-page report.

Advanced Conductors: current affairs?

Comparison of old transmission line conductors and advanced conductor geometries.

Can today’s 7M circuit kilometers of transmission lines be upgraded to relieve power grid bottlenecks, thus avoiding the 10-year ordeal of permitting a new line? Raising voltage may have hidden challenges. But Advanced Conductors stand out in this 16-page report. And the theme could double carbon fiber demand?

Gas power: does low utilization entail spare capacity?

The US has >400GW of large gas-fired power plants running at 40% average annual utilization. Could they help power new loads, e.g., 60GW of AI data-centers by 2030? This 5-page note shows why low utilization does not entail spare capacity, and in turn, estimates true gas power spare capacity available for loads such as data-centers.

How much gas power spare capacity exists within the US power grid, and could this help to power the rise of AI or the rise of EVs, without having to construct new power generation?

To answer this question, we have aggregated EIA power market data across 1,850 active US gas-fired power generation facilities.

This 5-page note summarizes our key conclusions on the first page, followed by three pages of follow-up charts.

The note covers the generation capacity growth we are forecasting for AI and other new loads; the average utilization rates of gas generation by plant size (in MW) and by state; why low annual utilization cannot simply be translated into spare capacity; and our estimates for how much true spare capacity really exists within the US’s current fleet of gas turbines.

As a general rule of thumb, a typical US gas power generation facility runs at 40% annual utilization, which translates into 60% peak monthly utilization, 80% peak daily utilization and 100% peak hourly utilization.

This research note is available for TSE written subscription clients, while the underlying data behind our assessment of gas power spare capacity are linked below for TSE full subscription clients.

Arms race: defence versus decarbonization?

Global defence spending from 1960 to 2050 by region. Defence budgets are set to increase in the 2020s following Russia's invasion of Ukraine.

Does defence displace decarbonization as the developed world’s #1 policy goal through 2030, re-allocating $1trn pa of funds? Perhaps, but this 10-page note also finds a surprisingly large overlap between the two themes. European capital goods re-accelerate most? Some clean-tech does risk deprioritization?

Oklo: fast reactor technology?

Oklo is a next-generation nuclear company, based in California, recently going public via SPAC at a $850M valuation, backed by Sam Altman, of Y-Combinator and OpenAI fame. Oklo’s fast reactor technology absorbs high-energy neutrons in liquid metal and targets ultimate costs of $4,000/kW and 4c/kWh. What details can we infer from assessing Oklo’s patents, and can we de-risk the technology in our roadmap to net zero?

Oklo was founded in 2013, is headquartered in California, and has c50 employees. Sam Altman, of Y-Combinator and OpenAI fame, has been the Chairman of Oklo since 2015 and is CEO of the acquisition company, AltC, which has taken Oklo public via SPAC, with a listing on NYSE, while also raising $500M, at a valuation of $850M.

The company is named in homage to the Oklo mine in Gabon, where rock samples from 1972 uniquely seemed to show small quantities of U-235 naturally fissioning in the Earth’s subsurface, probably because of groundwater acting as a moderator.

Oklo plans to commercialize a liquid metal fast reactor, called the Aurora powerhouse, with 15MWe of power, using a mixture of recycled nuclear fuel and fresh fuel. It is also developing a 50MWe solution.

Illustration of the structural elements in Oklo's fast reactor.

In 2023/24, its published targets envisaged starting up a plant in the 2026/27 timeframe, which would be one of the soonest of the next-gen nuclear concepts we have screened.

The 15MWe plant is ultimately envisioned to cost “less than $60M” (versus $2-5bn for 300-1,000MW alternatives). This equates to less than $4,000/kWe. Including investment tax credits, Oklo materials thus see LCOEs for carbon-free baseload potentially as low as 4c/kWh. Numbers can be stress-tested in our nuclear cost model.

In April-2024, Diamondback Energy also agreed a 20-year PPA to procure 50MW of emission-free electricity for its operations in the Permian Basin.

Hence can we de-risk Oklo’s fast reactor technology, based on its patents? What details can we infer from the patents? (chart above). How does the patent library look on our usual patent assessment framework? And what challenges are we considering in our risking of this technology to meet new loads such as data-centers and as part of our roadmap to net zero?

Oklo’s design is a liquid metal fast reactor, a small, prefabricated, non-pressurized liquid-metal-cooled fast reactor, moving beyond the ‘light water reactors’ used for most nuclear plants historically. Specifically, this means it harnesses energy from fast neutrons, each with >1MeV of energy, as generated from fission, without using water or graphite moderators to slow them down to the 0.025eV energy level that promotes fission.

Instead, fast neutrons are reflected back within the reactor core, absorbed directly as heat in liquid metal, and can also breed more fissile isotopes (as opposed to light water reactors that only tend to use c5% of their nuclear fuel). Specific details can be guessed based on Oklo’s patents.

Cool customers: AI data-centers and industrial HVAC?

Chips must usually be kept below 27ºC, hence 10-20% of both the capex and energy consumption of a typical data-center is cooling, as explored in this 14-page report. How much does climate matter? What changes lie ahead? And which companies sell into this soon-to-double market for cooling equipment?

Energy intensity of AI: chomping at the bit?

Rising energy demands of AI are now the biggest uncertainty in all of global energy. To understand why, this 17-page note is an overview of AI computing from first principles, across transistors, DRAM, GPUs and deep learning. GPU efficiency will inevitably increase, but compute increases faster. AI most likely uses 300-2,500 TWH in 2030, with a base case of 1,000 TWH.

Midstream gas: pipelines have pricing power ?!

High utilization can provide hidden upside for transmission operators

FERC regulations are surprisingly interesting!! In theory, gas pipelines are not allowed to have market power. But they increasingly do have it: gas use is rising, on grid bottlenecks, volatile renewables and AI; while new pipeline investments are being hindered. So who benefits here? Answers are explored in this 13-page report.

Energy and AI: the power and the glory?  

The power demands of AI will contribute to the largest growth of new generation capacity in history. This 18-page note evaluates the power implications of AI data-centers. Reliability is crucial. Gas demand grows. Annual sales of CCGTs and back-up gensets in the US both rise by 2.5x?

Energy transition: key conclusions from 1Q24?

Top 250 companies in Thunder Said Energy research. What sectors and what market cap?

This note summarizes the key conclusions from our energy transition research in 1Q24 and across 1,400 companies in total. Volatility is rising. Power grids are bottlenecked. Hence what stands out in capital goods, clean-tech, solar, gas value chains and materials? And what is most overlooked?

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