Biden presidency: our top ten research reports?

energy transition during Joe Biden's presidency

Joe Biden’s presidency will prioritize energy transition among its top four focus areas. Below we present our top ten pieces of research that gain increasing importance as the new landscape unfolds. We are cautious that aggressive subsidies may stoke bubbles and supply shortages in the mid-2020s. Decisions-makers will become more discerning of CO2. As usual, we focus on non-obvious opportunities.


(1) Kingmaker? There are two policy routes to accelerate the energy transition. An escalating CO2 tax could decarbonize the entire US by 2050, for a total abatement cost of $75/ton, while unlocking $3.5trn of investment. The other approach is with subsidies. This is likely to be Biden’s preferred approach. However, giving subsidies to a select few technologies tends to crowd out progress elsewhere. Who gets the subsidies is arbitrary, and thus ensues a snake-pit of lobbying. It is also more expensive, with some subsidies today costing $300-600/ton. Finally, subsidies will only achieve limited decarbonization on our models. Our 14-page note outlines these ideas and backs them up with data, to help you understand the policy landscape we are entering.

(2) Bubbles? The most direct risk of aggressive subsidies is that we fear they will stoke bubbles in the energy transition. Specifically, we have argued a frightening resemblance is appearing between prior and notorious investment bubbles (from Dutch tulips to DotCom stocks) and many of the best-known decarbonization themes today. It is driven by an expectation that government policies will grow ever more favorable, thus technical and economic challenges are being overlooked. Our 19-page note evaluates the warning signs, theme by theme, to help you understand where bubbles may be likely to build and later burst.

(3) Overbuilding renewables is a potential bubble. Our sense is that Biden’s policy team prefers to subsidize renewables today and defer the resultant volatility issues for later. But eventually, we model that this will result in power grids becoming more expensive and more volatile, which could end up having negative consequences, both for consumers and industrial competitiveness. More interestingly, we find expensive and volatile grids have historically motivated installations of combined heat and power systems behind the meter, which can also cut CO2 emissions by 6-30% compared to buying power from the grid, at 20-30% IRRs. The reason is that CHPs capture and use waste heat. Thus they achieve c70-80% thermal efficiencies, where simple cycle gas turbines only achieve c40%. The theme and opportunity are therefore explored in our 17-page note below.

(4) Over-building electric vehicles? Subsidies for EVs are also more likely under a Biden presidency. This is widely expected to destroy fossil fuel demand. Indeed a vast scale-up of EVs is present in our oil demand forecasts helping global oil demand to peak in 2023. However, our 13-page note finds this electrical vehicle ramp-up will actually increase net fossil fuel demand by +0.7Mboed from 2020-35, with gains in gas exceeding losses of oil. The reason is that manufacturing each EV battery consumes 3.7x more energy than the EV displaces each year. So there is an energy deficit in early years. But EV sales are growing exponentially, so the energy costs to manufacture ever more EVs each year outweighs the energy savings from running previous years’ EVs until the EV sales rate plateaus.

(5) Under-investment in fossil fuels? A sticking point in the presidential debates was whether President Biden would ban fracking. An impressive understanding of the energy industry was shown by his response that instead “we need a transition”. However, some have commentators continued fearmongering. We think the fearmongering is overdone. Nevertheless, at the margin, Biden’s presidency may reduce investment appetite for oil and gas. In turn, this would exacerbate the shortages we are modelling in the 2020s. A historical analogy is explored in our 8-page note, which looks back at whale oil, a barbaric lighting fuel from the 19th century. Amidst the transition to kerosene and electric lighting, whale oil supply peaked long before whale oil demand, causing strong price performance for whale oil itself, and very strong price performance for by-products such as whale bone.

(6) Under-investment in oil? Our oil market outlook in 2021-25 is published below. New changes include downward revisions to US shale supplies (particularly from 2022), increased chances of production returning in Iran, and increased production from Saudi Arabia and Russia to compensate for lower output in the US. Steep under-supply is seen in 2022, over 1Mbpd, even after OPEC has exited all production cuts. Restoring market balance in 2024-25 requires incentivizing an 8Mbpd shale scale-up. We do not believe Biden’s policies will block this shale ramp, but they may help its incentive costs re-inflate by c$5-15/bbl, particularly if Trump-era tax breaks are reversed.

(7) Under-investment in gas? Where US shale growth slows, there is clearly going to be less associated gas available to feed US LNG facilities. But there may also be a lower investment appetite to construct US LNG facilities. This matters because our 12-page note below finds gas shortages are likely to be a bottleneck on decarbonization in Europe, which compounds our fears that Europe’s own decarbonization objectives could need to be walked back. Specifically, Europe must attract another 85MTpa of global LNG supplies before 2030 to meet the targets shown on the chart. This is one-third of the 240MTpa risked LNG supply growth due to occur in the 2020s, of which 100MTpa is slated to come from the United States. There is no change to our numbers yet.

(8) Lower carbon beats higher carbon? We are not fearmongering that oil and gas investment will stall under a Biden presidency. But we do believe that investment in all carbon-intensive sectors will proceed somewhat more discerningly than it would have under Trump. Low-carbon producers will be more advantaged in attracting capital, while higher-carbon producers will be penalized with higher capital costs and lower multiples. In order to help you rank different operators, we have assembled a data-file covering 13Mboed of production from major US basins, operator-by-operator (below and here) alongside our broader screens of CO2 intensity, which span across 30 different sectors, such as LNG plants, refineries, chemical facilities, cement and biofuels (here).

(9) Mitigating methane? Biden’s presidency will likely re-strengthen the EPA. Our hope is that this will accelerate the industry’s assault on leaking methane, which is a 25-120x more powerful greenhouse gas than CO2. Methane accounts for 25-30% of all man-made warming, of which c25% derives from the oil and gas industry. If 3.5% of gas is leaked across the value chain, then debatably gas is no greener than coal (the number is less than 1% in the US but can be greatly improved). Our 23-page note evaluates the best emerging technology options to mitigate methane. We are excited by replacing high-bleed pneumatics, as profiled in our short follow-up note (also below). We also see shale operators accelerating their quest for ‘CO2-neutral’ production (note below).

(10) The weatherization of 2M homes is a central part of Joe Biden’s proposed energy policy. Hence we created a data-file assessing the costs and benefits of different options. The most cost-effective way to lower home heating bills is smart thermostats. They can cut energy use c18%. Leading providers include Nest (Google), Honeywell, Emerson, Ecobee. Second most cost-effective is sealing air leaks. GE Sealants is #1 by market share in silicone sealants. Advanced plastics would also see a modest boost in demand. More questionable are large and expensive construction projects, which appear to have larger up front costs and abatement costs per ton of CO2.

Energy transition: is it becoming a bubble?

Energy transition becoming a bubble?

Investment bubbles in history typically take 4-years to build and 2-years to burst, as asset prices rise c815% then collapse by 75%. In the aftermath, finances and reputations are both destroyed. There is now a frightening resemblance between energy transition technologies and prior investment bubbles. This 19-page note aims to pinpoint the risks and help you defray them.


Our rationale for comparing energy transition to prior investment bubbles is contextualized on page 2, based on discussions we have had with investors and companies in 2020.

Half-a-dozen historical bubbles are summarized on pages 3-4, in order to compare the energy transition with features of Dutch tulips, the South Sea and Mississippi Companies, British Railway Mania, Roaring Twenties, Dot Com bubble and sub-prime mortgages.

Five common features of all bubbles are considered in turn on pages 5-16. In each case, we explain how the feature contributed to past bubbles, and where there is evidence of the feature in different energy transition technologies.

Important findings are that many themes of the energy transition can achieve continued deflation or profitability, but not both; while a combination of increasing leverage and curtailment on renewables assets could leave many assets underwater.

Implications are drawn out on pages 17-19, including five recommendations for decision-makers to find opportunities and avoid the most dangerous aspects of bubbles surrounding the energy transition.

What oil price is best for energy transition?

best oil price for energy transition

It is possible to decarbonize all of global energy by 2050. But $30/bbl oil prices would stall this energy transition, killing the relative economics of electric vehicles, renewables, industrial efficiency, flaring reductions, CO2 sequestration and new energy R&D. This 15-page note looks line by line through our models of oil industry decarbonization. We find stable, $60/bbl oil is the best oil price for energy transition.


Our roadmap for the energy transition is outlined on pages 2-4, obviating 45Mbpd of long-term oil demand by 2050, looking across each component of the oil market.

Vehicle fuel economy stalls when oil prices are below $30/bbl, amplifying purchases of inefficient trucks and making EV purchases deeply uneconomical (pages 5-6).

Industrial efficiency stalls when oil prices are below $30/bbl, as oil outcompetes renewables and more efficient heating technologies (page 7).

Cleaning up oil and gas is harder at low oil prices, cutting funding for flaring reduction, methane mitigation, digitization initiatives and power from shore (pages 8-9).

New energy technologies are developed more slowly when fossil fuel prices are depressed, based on R&D budgets, patent filings and venturing data (pages 10-11).

CO2 sequestration is one of the largest challenges in our energy transition models. CO2-EOR is promising, but the economics do not work below $40/bbl oil prices (pages 12-14).

Our conclusion is that policymakers should exclude high-carbon barrels from the oil market to avoid persistent, depressed oil prices, and stabilize oil at the ‘best oil price for energy transition’ (as outlined on page 15).

Energy Transition: Polarized Perspectives?

energy transition polarized perspectives

Last year, we appeared on RealVision, advocating economic opportunities that can decarbonize the energy system. The “comments” and reactions to the video surprised us, suggesting the topic of energy transition is much more polarized than we had previously thought. It suggests that delivering an energy transition will need to be driven by economics, whereas polarized politics are historically dangerous.

realvision.com/tv/shows/the-expert-view/videos/decarbonization-the-divestment-death-cycle

The fist 50 comments from our RealVision interview are tabulated below. 17 were positive and enthusiastic (thank you for the kind words).

But a very surprising number, 16 of the comments, attacked the science of climate change. It is perhaps not a fully fair represenation, as those with extreme views are more likely to post comments in online forums. But 30% dissent is still surprisingly high. Read some of these comments, and it’s clear that fervent opinions are being expressed. Even moreso on our youtube link.

6 of the comments also challenged the politics behind energy transition, expressing concerns that some politicians are evoking fears over climate change in order to justify policies that are self-serving and only tangentially related to the issue.

These attacks are from an unusual direction. Living in New Haven, CT, we are more used to being criticised for seeing a continued, strong role for lower-carbon and carbon-offset fossil fuels in the decarbonised energy system (chart below).

Indeed, another sub-section of the comments argued that our views did not go far enough. 6 of the comments called for a greater emphasis on nuclear or hydrogen and continued vilification of traditional energy companies. Our economic analysis suggests economics will be challenging for hydrogen, while nuclear breakthroughs are not yet technically ready. But one commentator, for example, dismissed this analysis and said our views must be “ideologically driven”.

https://thundersaidenergy.com/downloads/hydrogen-opportunities-an-overview/
https://thundersaidenergy.com/downloads/next-generation-nuclear-the-cutting-edge/

Mutual animosity was also clear in the comments section of the RealVision video. One comment reads “you are completely delusional..sorry that you got fed the wrong info by these fraudsters in suits and their little girl puppet. You’ll wake up to reality one day.” Another reads “let our kids and future generations figure it out like we had to from our forefathers!”. At last year’s Harvard-Yale football game, the protesters met any such criticism from the crowd with a chant of “OK boomer”.

Deadlock? Others in the comments section tried debating the climate science. One statement was criticised as a “typical ‘we know better’ argument”. Another commenter opined that all peer-reviewed scientific literature is “fraudulent”. The most sensible comment in the mix noted “very little space left between ‘Greta Evangelists’ and equally fanatical ‘haters'”. This appears right. It is a polarized, poisonous, deadlocked debate.

Historical parallels? Over the christmas break, I enjoyed reading James McPherson’s ‘Battle Cry of Freedom’, which described the gradual polarization of ante-bellum America, in the 25-years running up to the US Civil War. One cannot help seeing terrifying similarities. Animosity begat animosity. Eventually the whole country was divided by an ideology: abolitionists in slave-free states versus the unrepentant slave economies.

Ideological divides are also deepening in the energy space. 40% of world GDP has now declared itself on a path to zero carbon. What animosities will emerge between these carbon-free states and the unrepentant carbon economies?

Economic opportunities in energy technologies remain the best way we can see to deliver an energy transition without stoking dangerous animoisities. They will remain the central theme in our research in 2020, and we are aiming to stay out of the politics(!). Our RealVision video is linked here.

Global gas: catch methane if you can?

methane leaks

Scaling up natural gas is among the largest decarbonisation opportunities on the planet. But this requires minimising methane leaks. Exciting new technologies are emerging. This 30-page note ranks producers, positions for new policies and advocates developing more LNG. To seize the opportunity, we also identify c25 early-stage companies and 10 public companies in methane mitigation. Global gas demand should treble by 2050 and will not be derailed by methane leaks.

This overview note was first published in 2019, then updated in Feb-2021 and September-2022, to add further case studies, companies and market updates. It contains all our latest views on methane mitigation, in a single, comprehensive resource.


Pages 2-5 explain why methane matters for climate and for the scale up of natural gas. If 3.5% of methane is leaked, then natural gas is, debatably, no greener than coal.

Pages 6-9 quantify methane emissions and leaks across the global gas industry, including a granular breakdown of the US supply-chain, based on asset-by-asset data.

Page 10-11 outlines the incumbent methods for mitigating methane, plus our screen of 34 companies which have filed 150 recent patents for improved technologies.

Pages 12-13 outline the opportunity for next-generation methane sensors, using LiDAR and laser spectroscopy, including trial results and exciting companies.

Pages 14-15 outline the opportunity for next methane sensors, using AI and other ambient data, with a case study that likely offers detection costs below $10/ton CO2e.

Pages 16-18 cover the best new developments in drones and robotics for detecting methane emissions at small scale, including three particularly exciting companies.

Pages 19-20 outline next generation satellite technologies, which will provide a step-change in pinpointing global methane leaks and repairing them more quickly.

Pages 21-27 covers the changes underway in the oilfield supply chain, to prevent fugitive methane emissions, highlighting interesting companies and innovations.

Page 28-29 screens methane emissions across the different Energy Majors, and resultant CO2-intensities for different gas plays.

Page 30 advocates new LNG developments, particularly small-scale LNG, which may provide an effective, market-based framework to mitigate most methane.

Our underlying data-files into methane mitigation are also available to be viewed individually, in chronological order, covering company screens, technology reviews and leakage rate data.

Robot delivery: Unbelievable fuel economy…

fuel economy of Robot delivery

Stand on a street corner in Tallinn, in the summer of 2019, and you might encounter the scene below: not one, but two autonomous delivery robots, comfortably passing one-another.

The fuel economy of these small electric machines is truly transformational, around 100x better than a typical motorcycle (the trusty workhorse of take-aways past), around 200x better than a typical car and around 400x better than a typical pick-up.

Large implications follow for energy supply and demand, if such delivery-robots take off…

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Starship is the company commercialising the robots above, backed by the co-founders of Skype, lightly aiming to “revolutionise food and package deliveries, offering people convenient new services that improve everyday life… instant delivery works around your schedule at much lower costs”.

Over 50,000 deliveries have been completed by April-2019, including trials in California, Tallinn, George Mason University, and Milton Keynes. Based on the chart below, we estimate the fleet is traversing c400km/day. In some locations, the costs are as low as c$2/delivery, with an ambition of reaching $1/delivery as the technology scales.

What does it mean for energy demand? Take a Ford F-150 which achieves 17mpg. You can achieve a 4x fuel-economy uplift by electrifying it. Another 2.5x uplift comes from lowering the mass to 30kg. Another c40x net uplift comes from decreasing the average speed of travel to 3-5kmph. These numbers can be calculated, approximately, from the physics, in our data-file of fuel economies by vehicle type.

Direct energy economics are calculated below, based on the battery disclosures for one of Starship’s robots. A single delivery robot is implied to achieve an unheard-of c200miles/kWh. Matching the maths above, this is indeed 100-400x better than alternative transportation technologies which we have profiled.

Creation or destruction? The numbers above augur poorly for long-run demand of liquid transportation fuels. In cost terms, it is very difficult to compete with these vehicles’ incredible efficiency. What is unclear is whether such delivery vehicles destroy old demand, or create new demand, per “Jevons Paradox” that more efficient energy technology has historically increased energy demand.

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Our conclusion is to have found further evidence that transportation technology is evolving. Forward thinking energy companies will be preparing for the change, as evidenced by their patents, their projects and their venturing.

Lost in the Forest?

co2 sequestered by forests

In 2019, Shell pledged $300M of new investment into forestry. TOTAL, BP and Eni are also pursuing similar schemes. But can they move the needle for CO2? In order to answer this question, we have tabulated our ‘top five’ facts about forestry. We think Oil Majors may drive the energy transition most effectively via developing better energy technologies in their portfolios.


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(1). Forests should sequester 5T of CO2 per acre per annum, which is the average figure in half-a-dozen technical papers that we reviewed. However, the rates in these studies vary from 1-25 Tons per acre per annum, depending upon the species, the latitude and the rate of harvesting. Forests grow fastest in their early stages, and so paradoxically, to maximise CO2 sequestration, it may be necessary to cut them down periodically (and then re-plant).

(2). The world emits 1T of CO2 per acre per annum, which means that for forestry to absorb all of the world’s CO2 emissions, an incremental 20% of the world’s land mass must be given over to planting new forests. An extremely high number. Global carbon emissions run at 34bn tons per annum, while the world’s total land area is 37bn acres (c150M sq km).

(3). It matters where you plant. The chart above also shows a problematic skew in the world’s carbon emissions. If developed Asian countries (Japan, Korea, Singapore) wanted to offset all of their emissions by planing forests, they would need to access land areas that are c3.5x larger than their entire territories. Likewise, India and China would need to access areas equivalent to 60-80% of their own borders. To move the needle, large new forests would need to be planted in the countries on the right hand side of the chart. For the full data series, please download our data-file.

There are select opportunities in the mix, which Oil Majors can pursue. Perhaps the largest come from irrigating and afforesting desert areas. Not only are these areas large, but forests in hot areas have a tendency to grow more quickly and release more moisture, which in turn seeds clouds, which in turn reflects more sunlight and cools the planet.

(4). Environmental question marks? Forests clearly sequester CO2, but the precise climate science is surprisingly complex. Leaves absorb more sunlight than other types of land cover, increasing albedo, and warming the planet mildly. Trees can also release compounds called isoprenes, which reacts with nitrogen oxides in the air to form ozone (a greenhouse gas), while lengthening the lifespan of atmospheric methane (another greenhouse gas). Similarly, trees in tropical forests can seem to act as a conduit for soil to convey methane into the atmosphere. This deepens the need for “the right kind” of forestry investment, based on science.

(5). Capital may be better spent elsewhere? Most of the estimates we have encountered point to $20-100/ton of costs for sequestering CO2 using forests. This is competitive with other current forms of CCS (chart below, data here). However, we are also researching next-generation carbon capture technologies, which are much more competitive, below $20/ton.

To illustrate the same point another way, photosynthesis’s energy efficiency is around 0.5-1%, compared to today’s solar cells at c17% and next-generation perovskites reaching c35% (chart below). So ramping up next-genration solar could yield greater decarbonisation per unit of land area.

While we think Majors have a deep role to play in driving the energy transition, it will most likely be though game-changing technologies, which also unlock multi-billion dollar economic opportunities, per our recent note here.

References

Caldecott, B., Lomax, B. & Workman, M., (2015). Stranded Carbon Assets and Negative Emissions Technologies Working Paper. Stranded Assets Programme.

Gorte, R. (2009). U.S. Tree Planting for Carbon Sequestration. Congressional Research Service

Lenton, T.M., 2010. The potential for land-based biological CO2 removal to lower future atmospheric CO2 concentration. Carbon Management 1(1), 145–160.

Lewandrowski, J., Peters, M. & Jones, C. (2004). Economics of Sequestering Carbon in the U.S. Agricultural Sector, USDA Economic Research Service, Technical Bulletin TB-1909

Popkin, G., (2019). How much can forests fight climate change? Nature 565, 280-282

U.S. Environmental Protection Agency (2005). Greenhouse Gas Mitigation Potential in U.S. forestry and Agriculture, EPA 430-R-05-006, Washington, DC.

BP (2019). BP Statistical Review of World Energy

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Aerial Ascent: why flying cars fly

Aerial vehicles in energy transition

Aerial vehicles will do in the 2020s what electric vehicles did in the 2010s. They will go from a niche technology to a global mega-trend that no forecaster can ignore. The technology is advancing rapidly. Fuel economies and costs will both be transformational. Aerial vehicles accelerate the energy transition.

These conclusions are all explained in depth, in our new, 20-page insight…


Pages 2-3 demonstrate the need for aerial vehicles, as urban mobility has begun deteriorating, after 200-years’ of progress.

Page 4-5 recap the military development of drones, stretching back to the late 19th Century, accelerating with the US’s Predator and Reaper programmes.

Pages 6-9 identify leaders among 110 companies, employing 50,000 people, which have now flown over 40 aerial vehicles; from start-ups to aerospace heavy-weights.

Pages 10-11 describe average flight parameter across the different vehicle concepts we screened, including speeds, range, payload and fuel-economy of aerial vehicles

Pages 11-13 show electric vehicles leading on the metrics above, with unparalleled fuel economies, which we replicated, bottom-up via the equations of flight.

Pages 13-14 shows the future is battery powered for aerial vehicles, at today’s battery densities, creating a vast opportunity for fast-charging infrastructure.

Pages 14-18 calculate exceptional economics can be attained, comprehensively bridging to levels that are 65-85% below today’s ground-transportation.

Pages 19-20 summarise the hurdles, presenting the best counter-evidence we can find to legal, regulatory and “adoption” pushbacks.

Oil Companies Drive the Energy Transition?

Refineries become bio-refineries

There is only one way to decarbonise the energy system: leading companies must find economic opportunities in better technologies. No other route can source sufficient capital to re-shape such a vast industry that spends c$2trn per annum. We outline seven game-changing opportunities. Leading energy Majors are already pursuing them in their portfolios, patents and venturing. Others must follow suit.


Pages 2-3 show that today’s technologies are not sufficient to decarbonise the global energy system, which will surpass 100,000TWH pa by 2050. Better technologies are needed.

Pages 4-6 show how Oil Majors are starting to accelerate the transition, by developing these game-changing technologies. The work draws on analysis of 3,000 patents, 200 venture investments and other portfolio tilts.

Pages 7-13 profile seven game-changing themes, which can deliver both the energy transition and vast economic opportunities in the evolving energy system. These prospects cover electric mobility, gas, digital, plastics, wind, solar and CCS. In each case, we find leading Oil companies among the front-runners.

Why the Thunder Said?

Perovskite Efficiency Gains

Energy transition is underway. Or more specifically, five energy transitions are underway at the same time. They include the rise of renewables, shale oil, digital technologies, environmental improvements and new forms of energy demand. This is our rationale for establishing a new research consultancy, Thunder Said Energy, at the nexus of energy-technology and energy-economics.

This 8-page report outlines the ‘four goals’ of Thunder Said Energy; and how we hope we can help your process…


Pages 2-5 show how disruptive energy technologies are re-shaping the world: We see potential for >20Mbpd of Permian production, for natural gas to treble, for ‘digital’ to double Oil Major FCF, and for the emergence of new, multi-billion dollar companies and sub-industries amidst the energy transition.

Page 6 shows how we are ‘scoring’ companies: to see who is embracing new technology most effectively, by analysing >1,000 patents and >400 technical papers so far.

Page 7 compiles quotes from around the industry, calling for a greater focus on technology.

Page 8 explains our research process, and upcoming publication plans.

Copyright: Thunder Said Energy, 2019-2024.