Tag: power

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FACTS of life: upside for STATCOMs & SVCs?

Upside for STATCOMs

Wind and solar have so far leaned upon conventional power grids. But larger deployments will increasingly need to produce their own reactive power; controllably, dynamically. Demand for STATCOMs & SVCs may thus rise 30x, to over $25-50bn pa. This 20-page note outlines upside for STATCOMs and who benefits?

This 20-page research note is about controlling reactive power in increasingly renewable-heavy grids. We believe this theme is going to become increasingly important, but it has been overlooked, for two reasons, laid out on pages 2-3.

What is reactive power? After reviewing hundreds of technical papers and patents, our ‘best explanation’ is set out on pages 4-7, to explain concepts such as real power, reactive power, power factor, power triangles, phase angle and VARs.

Lean on me. Wind and solar assets inherently produce no reactive power and may even have consumed it. This was fine in the early days, as renewables assets could rely on the large and controllable output of reactive power from spinning generators. But regulations are tightening. And if renewables are to dominate future grids, replacing spinning generators, then they will increasingly need to produce their own reactive power (page 8).

FACTS = Flexible AC Transmission Systems. We review different options for renewables to control reactive power on pages 9-14. The discussion covers switched capacitor banks, synchronous condensers, upsized inverters, Static VAR Compensators (SVCs) and Static Synchronous Compensators (STATCOMs). In each case, we review the costs ($/kVAR), advantages and challenges for each technology. We think STATCOMs are taking the lead to back up large wind projects.

Market sizing for STATCOMs and SVCs market suggests that a 30x ramp-up is not mathematically inconceivable. If wind capacity additions ramp from 100 GW pa to 300-500 GW pa, and we install 0.5 MVAR/MW of STATCOMs/SVCs at an average of $160/kVAR, then this would become a $25-50bn pa market. Huge numbers. Worked examples and quotes from technical papers are also given (page 15-16).

Who benefits? Leading companies in STATCOMs and SVCs are profiled on pages 17-20, after reviewing 2,500 patents. The market is incredibly concentrated, with two leading large-caps, and a handful of smaller and interesting semi-pure plays. Our screen is linked here.

To read more about the upside for STATCOMs & SVCs, please see our article here.

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Capacitor banks: raising power factors?

Wind and solar power factor corrections

Wind and solar power factor corrections could save 0.5% of global electricity, with $20/ton CO2 abatement costs at typical facilities in normal times, and 30% pure IRRs during energy shortages. They will also be needed to integrate more new energies into power grids. This 17-page note outlines the opportunity in capacitor banks, their economics and leading companies.

Reactive power is needed to create magnetic fields within ‘inductive loads’ like motors, electric heat, IT hardware and LEDs. But it is wasteful. 0.8-0.9 x power factors mean that 10-20% of the flowing current is not doing any useful work; it is simply amplifying I2R resistive losses; and if it is not compensated, then voltage drops can de-stabilize the grid.

All of these statements might seem a little bit confusing. Hence, after reading hundreds of pages into this topic, our ‘best explanation’ of the physics, the problem and the solution are set out on pages 2-6 of the report. We would also recommend the excellent online videos from the Engineering Mindset.

Power factor correction technologies are seen accelerating for three reasons. Saving electricity is increasingly economic amidst energy shortages (pages 7-8).

Second, they will enable greater electrification for around 30% less capex (pages 9-11).

Third, the rise of renewables will see large rotating turbines (especially coal) replaced with distributed generators that inherently offer no reactive power (wind and solar). This is not a “problem”. It simply requires conscious power factor correction (pages 12-14).

What challenges? Capacitor banks are likely to be the lowest cost solution for power factor correction, but they are also competing with other technologies, as reviewed on page 15. For ultra-high quality grid-scale wind and solar power-factor corrections, we think there is greater upside in STATCOMs (note here).

What opportunities? Leading companies are profiled on pages 16-17, based on reviewing patents, and include the usual suspects in power-electronic capital goods.

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Nuclear fusion: what are the challenges?

challenges of nuclear fusion

Nuclear fusion could provide a limitless supply of zero-carbon energy from the 2030s onwards. Thus 30 private companies have raised $4bn to progress new ideas. But the goal of this 20-page note is simply to understand the challenges of nuclear fusion, especially deuterium-tritium tokamaks. Innovations need to improve EROI, stability, longevity and ultimate costs.

The purpose of this note is to help decision-makers understand nuclear fusion, simply, in plain language, assuming that you are reasonably literate in science and economics, but do not have a pre-existing degree in nuclear physics.

Binding energies of atomic nuclei are a fundamental force shaping our universe. They explain why some atoms release energy as they fission, and some atoms release energy as they fuse. It is easy to quantify ‘how much energy’ using pages 2-3 of the report.

So is it a real and feasible energy source? We outline why it is on page 4. But what are the fourteen nuclear fusion challenges that a reactor will need to overcome?

Heating up nuclear fusion fuel is covered on pages 4-7, covering possible fuel selections, the ‘Coulomb barrier’ for achieving fusion, and heating methods that can surpass 100M C temperatures.

Confining plasma is covered on pages 8-9, explaining how super-conducting magnets can levitate a stream of super-heated, charged particles. Or not.

Ignition of plasma. What happens to the reaction products? How do you harness the heat? Without the reactor melting? Without other safety issues? We answer these questions on pages 10-12.

Practical considerations for running a fusion reactor are: How do you source, purify and inject fuels to the reactor? What energy gain factor is needed? What maintenance requirements and costs? How flexible will the reactor be? Can reactors be down-sized? We answer these questions on pages 13-17.

Economic considerations. Limitless energy does not necessarily mean cheap energy. At the moment, we think fusion could reach commerciality in the 2030s, but it will ‘split the global CO2 abatement cost curve’ into two. Effectively there would be no need for abatement options costing more than $200-300/ton creating an effective ‘cap’ on all future energy prices.

Our patent review of Commonwealth Fusion, a private fusion company that raised $1.8bn in Series B funding, is linked here.

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Back-stopping renewables: the nuclear option?

Nuclear power can backstop renewables

Nuclear power can backstop much volatility in renewable-heavy grids, for costs of 15-25c/kWh. This is at least 70% less costly than large batteries or green hydrogen, but could see less wind and solar developed overall. This 13-page note reviews how flexibility in nuclear power can backstop renewables, and sees nuclear growth accelerating.

Four types of volatility in renewable-heavy grids are described on page 2 and will require a back-up.

There are limitations for batteries in hydrogen, in smoothing this volatility, as discussed on pages 3-4.

What about nuclear? An improving economic rationale is noted on pages 5-6, prompting us to re-visit the possibility of flexible nuclear plant operation.

Technical issues for maneuvering large nuclear power plants, scaling their output up and down, are laid out from first principles on pages 7-11, including minute-by-minute ramp-rates and the largest challenge, which is cold-starts.

The economics of nuclear flexibility are calculated on page 12, showing costs around 15-25c/kWh for a new Western greenfield facility, which is less than large batteries and hydrogen.

Our conclusions around how nuclear power can backstop renewables volatility – and who benefits – are summarized on page 13.

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Electric motors: variable star?

Variable frequency drives energy transition

Variable frequency drives precisely control motors. Amazingly they could reduce global electricity demand by c10%. We expect a sharp acceleration due to sustained energy shortages, increasingly renewable-heavy grids and excellent 20-50% IRRs. Hence this 14-page note reviews the opportunity and who benefits.

There are 50bn electric motors in the world consuming half of all global electricity. They are inefficient because their speed is determined principally by the frequency of the AC power grid. The physics and electronics of this inefficiency are outlined on pages 2-4.

Variable frequency drives use similar power-electronics technology as the renewables revolution, to precisely control electric motors, ensuring they do not run faster than is needed. We outline how they work and case studies of their energy savings on pages 5-7.

Excellent economics are laid out on pages 8-10. We see IRRs in the range of 20-50% and payback periods in the range of 1-5 years, depending on power prices and CO2 prices.

Improved resiliency in renewable-heavy grids is a further advantage, protecting against voltage sags, lack of inertia, trips and motor degradation. There may even be an opportunity for demand shifting. These issues are explored on pages 11-12.

Leading companies are described on pages 13-14, including their market shares, proportionate concentration to the theme and product offerings.

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Transformers: rise of the beasts?

Transformers for renewable energy

A transformer is needed to step the voltage up or down at every inter-connection point in the grid. Hence this 14-page note explores how renewables and EVs will expand future transformer markets. The main challenge is that the need for smaller, simpler units may exacerbate margin pressure in an already competitive industry. So who is best-placed?

It is sometimes said that ‘electrification is the future’ or that the 21st century energy system will primarily be about ‘moving electrons’. So how do you actually “move electrons”? The physics of power distribution and transformers are explained on pages 2-6.

What is changing in the energy transition is that renewables and EV chargers are being added to the grid. Each inter-connection likely requires a transformer. The market impacts are quantified on pages 7-10.

What costs and consequences? We break down the cost of transformers on pages 11-12, with upside for specific raw materials. Recent raw material inflation has already increased transformer costs c12% in 2021. Deploying more renewables will create mild inflation in transformer costs (in c/kWh) for downstream power consumers.

Who benefits? The commercial landscape is explored on pages 13-14, including a screen of leading companies that manufacture transformers. The market is competitive. Hence we focus on who might be better-placed.

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Shifting demand: can renewables reach 50% of grids?

Shifting demand for wind and solar

25% of the power grid could realistically become ‘flexible’, shifting its demand across days, even weeks. This is the lowest cost and most thermodynamically efficient route to fit more wind and solar into power grids. We are upgrading our renewables ceilings from 40% to 50%. This 22-page note outlines the growing opportunity in demand shifting.

Renewables would struggle to reach 50% penetration of today’s grids, due to their volatility. Pages 2-7 quantify the challenges, which include capacity payments for non-renewable back-ups, negative power pricing >20% of the time, >10% curtailment and 30% marginal cost re-inflation for new projects.

But a greater share of renewables would help decarbonization. This objective is explained on page 8, showing the relative costs and CO2-intensities of electricity technologies.

Renewable electricity storage is not the solution. It is costly and thermodynamically inefficient, which actually dilutes the impact of renewables. Costs and efficiency losses are quantified for batteries and for hydrogen on pages 9-11.

Demand shifting is a vastly superior solution. Pages 12-17 outline half-a-dozen demand-shifting opportunities that have been profiled in our research to-date. Companies in the smart energy supply chain are also noted and screened.

What impacts? We model that up to 25% of the grid can ultimately be demand-flexible, while this can help accommodate an additional 10pp share for renewables in the grid, before extreme volatility begins to bite (see pages 18-19).

Europe leads, and we now assume renewables can reach 50% of its power grid by 2050, with follow-through consequences for our gas and power models (page 20).

Our global renewables forecasts are not upgraded, as the bottleneck on a global basis is simply annual capacity additions, which must treble between 2020 and 2050, in our roadmap to ‘net zero’. (pages 21-22).

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Vertical greenhouses: what future in the transition?

Vertical greenhouses in the energy transition

Vertical greenhouses achieve 10-400x greater yields per acre than field-growing, by stacking layers of plants indoors, and illuminating each layer with LEDs. Economics are exciting. CO2 intensity varies. But it can be carbon-negative in principle. This 17-page case study illustrates how supply chains are localizing and more renewables can be integrated into grids.

The first rationale for vertical greenhouses is to grow food closer to the consumer, which can save 0.6kg of trucking CO2 per kg of food. Eliminating freight is much simpler than decarbonizing freight (pages 2-4).

The second rationale for vertical greenhouses is that they are 10-400x more productive per unit of land, hence they can free up farmland for reforestation projects that absorb CO2 from the atmosphere (pages 5-6).

The third rationale for vertical greenhouses is that their LED lighting demands are flexible, which means they can absorb excess wind and solar, in grids that are increasingly laden with renewables. They are much more economical at achieving this feat than batteries or hydrogen electrolysers (pages 7-10).

The overall CO2 intensity of vertical greenhouses depends on the underlying grid’s CO2 intensity, but the process can in principle become carbon negative (pages 11-13).

Interestingly, we also think vertical greenhouses can smooth our volatile power grids by demand shifting.

The economics are exciting. We model 10% IRRs selling fresh produce at competitive prices, with upside to 30% IRRs if fresher produce earns a premium or operations can be powered with low-cost renewables when the grid is over-saturated (pages 14-15).

Leading companies in vertical greenhouses and in their supply chain are discussed on pages 16-17.

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Prevailing wind: new opportunities in grid volatility?

UK wind power

UK wind power has almost trebled since 2016. But its output is volatile, now varying between 0-50% of the total grid. Hence this 14-page note assesses the volatility, using granular, hour-by-hour data from 2020. EV charging and smart energy systems screen as the best new opportunities. Gas-fired backups also remain crucial to ensure grid stability. The outlook for grid-scale batteries has actually worsened. Finally, downside risks are quantified for future realized wind power prices.

This rise of renewables in the UK power grid is profiled on page 2, showing how wind has displaced coal and gas to-date.

But wind is volatile, as is shown on page 3, thus the hourly volatility within the UK grid is 2.5x higher than in 2016.

Power prices have debatably increased due to the scale-up of wind, as shown on page 4.

But price volatility measures are mixed, as presented on pages 5-6. We conclude that the latest data actually challenge the case for grid-scale batteries and green hydrogen.

Downside volatility has increased most, as is quantified on pages 7-8, finding a vast acceleration in negative power pricing, particularly in 2020.

The best opportunities are therefore in absorbing excess wind power. EV charging and smart energy systems are shown to be best-placed to benefit, on pages 9-10.

Upside volatility in power prices has not increased yet, but it will do, if gas plants shutter. The challenge is presented on pages 11-13, including comparisons with Californian solar.

Future power prices realized by wind assets are also likely to be lower than the average power prices across the UK grid, as is quantified on page 14. This may be a risk for unsubsidized wind projects, or when contracts for difference have expired.

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Geothermal energy: what future in the transition?

Levelized costs of different geothermal energy projects are highest for deep geothermal and lowest for the best hotspots.

Drilling wells and lifting fluids to the surface are core skills in the oil and gas industry. Hence could geothermal be a natural fit in the energy transition? This 17-page note finds next-generation geothermal economics can be very competitive, both for power and heat. Pilot projects are accelerating and new companies are forming. But the greatest challenge is execution, which may give a natural advantage to incumbent oil and gas companies.

The development of the geothermal industry to-date is summarized on pages 2-4. We also explain the rationale for geothermal in the energy transition.

The costs of geothermal projects can be disaggregated across wells (page 5), pumping (page 6-7) and power turbines (pages 8-9). We draw out rules of thumb, to help you understand the energy economics.

The greatest challenge is geological complexity, as argued on page 10. It is crucial to find the best rocks and mitigate execution risks.

Base case economics? Our estimates of marginal costs are presented for traditional geothermal power (page 11), next-generation deep geothermal electricity (page 12) and using geothermal heat directly (page 13).

Leading companies are profiled on pages 14-16, after tabulating 8,000 patents. We also reviewed incumbent suppliers, novel pilots, and earlier-stage companies.

We conclude that geothermal energy is a natural fit for incumbent oil and gas companies to diversify into renewables, and arguably a much better fit than wind and solar (page 17).

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