Something useful about changing industrial priorities

 

Why the gusty North Sea could give Europe an industrial edge

Wind power is breathing life into a new green economy on its coasts

Jan 5th 2023

Fears about the fate of European industry abound. Russia’s invasion of Ukraine and the ensuing gas crunch have dealt it a cruel blow. basf, the world’s largest chemicals-maker, is shifting production away from its headquarters in Ludwigshafen in Germany. Nearly a quarter of the country’s revered Mittelstand firms are reported to be considering moving part of their operations abroad. And even as energy prices have fallen back, America’s protectionist and subsidy-laden Inflation Reduction Act is feeding fresh worries that industry might be lured away from the old continent.

Listen to this story.

 Enjoy more audio and podcasts on iOS or Android.

One unlikely bright spot is the part of Europe with the grimmest weather. As we report this week, a new economy based on renewable energy is taking shape in and around the North Sea. Rather as hydropower fuelled Lancashire’s cotton mills and cheap coal the Ruhr valley’s steel furnaces in the early days of industrialisation, the promise of cheap, abundant wind power is attracting industry and infrastructure to Europe’s northern coasts. If this fledgling economy thrives, it could give the continent a new, greener industrial edge.

The North Sea’s strong winds and relative shallowness together make it a huge basin of potential energy. Thanks to taller and more powerful wind turbines, more efficient undersea cables and other technological advances, it is now increasingly being tapped. A group of nine countries near this body of water has plans to install 260gw of offshore wind power by 2050—nearly five times that produced worldwide today, and enough to power all of the European Union’s nearly 200m households.

All this is breathing life into a new coastal economy. Esbjerg, a town in south-west Denmark that some consider the capital of the North Sea economy, now boasts companies that make equipment to build and maintain wind turbines. Many once supplied the offshore-oil-and-gas industry, but have shifted their attention to greener customers.

Nordic countries are beginning to attract energy-hungry battery plants and data centres. On Germany’s North Sea coast, a plan is afoot to build facilities to turn easier-to-transport ammonia into hydrogen, to fuel factories in nearby industrial parks. Even parts of steelmaking could eventually move north, as hydrogen replaces coal or gas in the manufacturing process.

For this economy to take off, though, Europe will need to focus its energies. A good start would be to cut red tape: getting a permit to build a new wind farm can take ten years, or even longer. Countries bordering the North Sea will need to work together to ensure that the seabed does not become overcrowded with cables and pipes and that infrastructure is looked after. The rise of the new coastal economy could be fiercely resisted in the old industrial heartlands. It will fall to governments to ease the transition.

A favourable wind

The pay-off will be handsome. Done right, the North Sea economy could be a model for other parts of the continent, including the Iberian peninsula, with its huge solar potential. Such shifts in its economic geography will not only help Europe achieve its climate ambitions and rebalance its energy mix away from Russia and other autocracies: they could even give rise to the sort of green corporate giants that Europe badly needs. ■

For more coverage of climate change, sign up for the Climate Issue, our fortnightly subscriber-only newsletter, or visit our climate-change hub.

This article appeared in the Leaders section of the print edition under the headline "Northern delights"

Short, smart article on investment - THIS COULD BE YOUR CONCLUSION!

Tim Worstall

Leave aside whether the whole enterprise is worth undertaking for a moment and consider this complaint about climate change in isolation:

British companies are lagging far behind their European neighbours in low-carbon investment after contributing only 3% of the continent’s €124bn (£104.2bn) green spending last year.

A report has revealed that German-listed companies invested 11 times more in low-carbon investments such as electric vehicles, renewable energy and smart energy grids than UK firms.

London-listed companies spent €4bn on green research and technologies compared with €44.4bn from German groups, including the carmaker Volkswagen, which invested more than a third of Europe’s total low-carbon spending in 2019.

There’s the obvious point that a maker of cars shifting to making battery powered cars is going to invest quite a lot in the process. And also that the major manufacturers of cars in the UK (say, Nissan and Jaguar Land Rover) aren’t actually listed in London which is going to rather skew those figures.

Instead concentrate upon the complaint there. Those people over there are spending more than these here, isn’t that terrible? The answer being no, not at all. What is wanted is a reduction in emissions, not lots spent on attempting to reduce emissions. We’re interested in the effectiveness, the end result, not the effort put in.

And the thing is, the UK has reduced and is reducing emissions rather more than Germany. That it’s doing so at lower cost shows that it is reducing emissions rather better than Germany.

Thus neatly proving one of the points made in the Stern Review. Planning is less efficient than market processes suitably prompted. Therefore we should use market processes suitably adjusted to deal with this problem, as with near all others, rather than planning. Because less efficient means more expensive and humans tend to do less of more expensive things, more of cheaper. Using the more efficient market processes - suitably adjusted - means that more climate change mitigation will take place. Use the system that reduces emissions more cheaply and more emissions reduction will take place.

That the UK reduces emissions more at lower cost than Germany means that Germany should be adopting our methods, not we Germany’s spending.

But then logic is in short supply in this discussion, isn’t it?

Innovation in the trucking industry - fuels:

Interesting analysis of different fuel options being explored in the bid to find cleaner engines. Think about the impact on the crude oil sector:

Yesterday we explained how there’s a coming contest in the crucial world of lorries.

On the one hand is Tesla, with its disruptive-but-familiar batteries. On the other is Nikola Motor, a smaller firm, which sees a future in hydrogen.

Today, we’re going to be trying to tease out a winner. It’s fair to say that it’s a tough call. History shows Elon Musk is a fairly dangerous guy to disagree with – because he’s got a long track record of being right about things. But in this particular instance, I can see a range of problems with his argument.

It’s fair to point out that current hydrogen production is barking mad. It may be zero emissions at the tailpipe, but the pollution still comes out somewhere. So, over the next five or ten years, I’d say that Musk is probably backing the right horse. At the very least, there’s a significant role for battery-powered trucks. That’s certainly true for the less demanding applications – shorter haul distances and lighter loads.

But, what about the longer term – and the trickier loads and runs?

Dare I say it, I think Musk may have made a bad call. I can’t see the impracticalities of batteries being easily overcome. Nobody wants to sit around, waiting for their rig to charge. If you’re on a trans-European run, that’s a real issue. Furthermore, the weight of batteries eats into the payload – requiring more trips, trucks and drivers. These issues will certainly delay wholesale rollout of electric trucks. They might not leave the door open for hydrogen, though. We could all stick to diesel for those trickier tasks – at least for the near term (notwithstanding the pressure on diesel’s role in air pollution).

There is, of course, a fairly obvious fix. Tesla may design trucks with swappable batteries. The presence of palletised facilities at many depots makes this an easy win. Just fork-lift out a dead battery and drop in a new one. Simples!

Another approach is to have on-road charging. This could use overhead wires, like trams (Siemens); or charging plates in the roadway (Highways England is testing these). They’re both possible, but they require expensive infrastructure. Slow battery charging means miles of roads to be upgraded. Accordingly, this is unlikely to happen without large-scale state support.

Even if electricity can be made to work practically, there’s still a catch. In the long run, this glitch might pose serious problems for Musk’s logic. As we move to a renewables-dominated economy, we’ll need to store energy for the winter. It’s difficult to imagine how we’ll do this without hydrogen. Sure, you can then turn hydrogen into a range of fuels (formic acid, DME, methane) – but you can’t escape the first step. Even if we don’t store energy for months as hydrogen, we have little choice but to make it in the first place. And, if you’ve got a hydrogen factory, then a bunch of passing truckers makes a pretty handy market. No need to build an expensive chemical plant on top.

So, I’m calling a draw on this one. Tesla, I suspect, may win in the short term. Nikola potentially has a better long-term vision, but whether it’ll be around long enough to fulfil it is an entirely different matter. Nikola may have significant long-run advantages over diesel (lower fuel costs, lower pollution), but this won’t translate into widespread adoption, without a decent fuelling network.

A complication for the above argument is that Tesla’s technology may be radically improved over time. One approach that I’m holding out for is ultracapacitors – the dark horse of energy storage. We’ll shortly be covering these in depth in Exponential Investor. In short, capacitors tend to have pretty rubbish capacity, but charge lightning-fast. If trucks could charge in a few seconds, then it might make the whole hydrogen hassle much less attractive. What’s more, the capacity constraints of capacitors may be solved in coming years. If that happens, we’d probably still need hydrogen in the economy, but there would be no need to put it anywhere near a truck.

But what of the incumbents?

Volvo is trying to push a fuel called dimethyl ether (DME). It’s not alone, and the fuel even has a trade association to fight its corner. DME is basically two molecules of methane, stuck together with an oxygen atom. On the plus side: it’s cleaner-burning than diesel; and better behaved than hydrogen in transport and storage. In fact, it’s not unlike liquefied petroleum gas (LPG). However, it currently relies on fossils for its manufacture. Ultimately, it could be made from renewably-produced hydrogen – but that’s comparably-costly to other power-to-fuels technology. I still remain to be convinced that it’s desirable to take one viable fuel (ie, hydrogen), and then make it into a variety of others. If you’re looking for a comparator, there’s some early work from the Delft University of Technology at using formic acid. This could be a simpler process, but it’s hard to tell where the challenges may lie.

Walmart is showing another vision of the future, with its 2014 WAVE concept truck. This is a battery-electric hybrid, with a gas turbine from Capstone to provide primary power. That’s a neat setup, as the response of the electric motor gets around one of the key problems with gas turbines: lag. Decades ago, manufacturers (eg, Rover) experimented with jet engines in cars. But the laggy throttle made them impractical. Beyond this, there were a host of other problems, such as a risk of debris intake. However, the WAVE turbine isn’t fuel-fussy, and it can use diesel or natural gas (you can even use tequila in a gas turbine car). Natural gas is a clean(ish) burning fuel – one that is already used in conventional engines, such as dustcarts. Further, “natural” gas can be synthesised from hydrogen – giving a route to low-cost sustainability, using existing distribution infrastructure. However, attempts to move turbine technology into land vehicles have been made many times, over recent decades. Whether in trains or cars, none has proved to be a winning combination. I can’t see much changing now.

So, in conclusion, I’d have to say that I’d expect Tesla’s tech to win this battle – at least in the short to medium term. Whether it’s actually Tesla that leads in electric trucks, I’m not sure. But the firm’s track record of early success makes that very likely.

In the longer term, however, it’s a different story. If ultracapacitors don’t arrive, then chemically-fuelled trucks will be here for a long time – and they won’t run on diesel forever. Nikola is making a reasonable play with hydrogen, but I think that the field is pretty wide open at present. Hydrogen is a good bet, in theory. However, current infrastructure is much more suited to fuels like natural gas or DME/formic acid. Picking winners here is hard. If you want a safe bet, back the growth of electric trucks. They won’t easily take the whole market, but they’ll find a role readily.

Energy storage & renewables

Energy Storage Tech Finally Starting To Compete With The Grid

     

By James Stafford
Posted on Thu, 19 November 2015 21:58 | 0

Critics of renewable energy always cite the fact that the sun does not always shine and the wind does not always blow. As such, the intermittency of renewable energy needs to be backed up by baseload power, which would need to come from natural gas, coal, or nuclear power.

The key to resolving the intermittency problem is energy storage, but batteries have thus far been too expensive to offer a viable solution. But that is quickly changing.

Energy storage technologies are now cost-competitive with conventional grid electricity in certain markets. That is not the claim of some environmental outfit, but the conclusion of an in-depth study from asset management firm Lazard.

Related: Elon Musk's Hyperloop: Expensive, But Doable

To be sure, there is still a ways to go before battery storage can compete on a mass scale. But Lazard finds that energy storage is actually a preferred option already in a few scenarios, such as replacing the need for major new transmission lines, or for circumstances where microgrids are needed. Lazard conducted its first levelized cost of energy storage. The analysis is complicated because storage can be valued in so many different ways. Energy storage not only can provide electricity during downtimes, but it can obviate the need to build new power plants. Or it can increase the reliability of the grid. These aspects make it difficult to come up with concrete cost figures, but Lazard lays out a range of cost scenarios. The bottom line is that energy storage is rapidly becoming cost-competitive.

Lazard also expects the cost of battery storage to decline significantly over the next five years, due to rising penetration of renewable energy and specific policies to support storage. At the same time, the aging power grid supports the economics of energy storage, as the costs of maintenance of transmission and the need for more power lines make energy storage competitive by comparison.

Related: Could The Tide Be Turning Against North American Natural Gas?

Moreover, major battery manufacturing facilities, such as Tesla’s gigafactory, are slated for completion, and the ramp up in battery production will bring down costs. Lithium-based batteries could see costs fall by 50 percent by the end of the decade, for example.

Taken together, Lazard arrives at a striking conclusion: energy storage could “be positioned to displace a significant portion of future gas-fired generation capacity, in particular as a replacement for peaking gas turbine facilities, enabling further integration of renewable generation.” These “peaker” plants tend to be much more expensive than regular power plants, and are only used when demand is at its highest. Over the next few years, it may no longer make sense to build peaker plants as batteries become the most cost-effective option.

There is often talk of a “utility death spiral,” in which rising electricity rates and falling renewable energy costs cause more ratepayers to abandon the grid. As fewer ratepayers are left to pay utilities, rates must go up to compensate, forcing more ratepayers to leave in an accelerated fashion.

Related: OPEC’s Bad Bet By The Numbers

Similarly, energy storage could see a virtuous spiral. More installations of batteries bring down costs. That allows more and more renewable energy to come online. The scaling up of both brings down costs even further, allowing for faster penetration. Meanwhile, the cost of transmission and of fossil fuel-based power generation are likely to go up.

In fact, according to Navigant, energy storage could grow from 196 megawatts today to over 12,700 megawatts by 2025.

Batteries will be helped along by public policy. For example, in Oregon, the major utilities will be required to install 5 megawatts of energy storage by 2020. Oregon is the second state, after California, to have a battery storage mandate. The law recognizes the multiple benefits that come with energy storage: Deferred investment on generation, transmission, and distribution infrastructure; reduced need for peakers; the ability to accelerate renewables deployment; improved grid reliability; and reduced price volatility.

All of those benefits are increasingly making battery storage a competitive force in electric power markets.

By James Stafford of Oilprice.com