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Eamon Keane
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Eamon Keane has an undergraduate degree in Mechanical Engineering and a master's degree in Energy Systems, graduating both with first class honours. He has received the Institute of Mechanical Engineers Best Student Certificate, a Veolia Environment research scholarship and two IBM PhD... More
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  • Clean Energy Fuels Positioned To Benefit From Historic Oil/gas Ratio
    That sound you hear is the stampede of shale gas drillers away from dry gas plays. The irrational exuberance of shale gas drillers, chief amongst them Chesapeake's voluble Aubrey McLendon, is leading to an impressive destruction of capital. The long run marginal cost is significantly above the current spot price. With natural gas storage bursting at the seams, natural gas is reverting to its historical nuisance byproduct as drilling moves to liquid rich plays. While not sustainable in the long term, the present pricing situation presents opportuinities to displace coal generation and some oil in the transport sector.

    Both the gas/coal and oil/gas ratios are at record levels:
    oil gas coal gas ratio

    Sources: Natural Gas (NYSEMKT:EIA); Oil (EIA); Coal (EIA)

    Natural gas is now cheaper than coal on a per unit energy basis, and a btu of natural gas also yields more electricity than coal. Only half of coal plants have scrubbers, with older plants now facing the decision of whether to upgrade or to switch to natural gas. Central Appalachian coal at $60/ton is now selling below its mining cost of $65 -$75/ton, which means there is limited scope for coal prices to adjust downwards should fuel switching accelerate.

    The oil gas ratio is at record levels also, which has translated to large differentials between CNG and gasoline/diesel (making for compelling payback period calculations):
    average retail fuel price
    Source: Alternative Fuels Data Center; Clean Energy Fuels

    This presents an opportunity for Clean Energy Fuels if they can increase the volume of fuel they sell, as their margin per gallon of gasoline equivalent is currently in the range of 35c.

    alternative fuel consumption
    Source: Alternative Fuels Data Center; EIA Annual Energy Review 2010

    In 2010 2.4% of US primary energy consumption in the transport sector came from natural. With the possibility of a strike on Iran, the oil/gas ratio could go significantly higher, which may result in a knee jerk narrowing of the CLNE oil/gas ratio spread as hands are wrung about $4/gallon gas.

    clne oil gas ratio

    Disclosure: None

    Feb 28 6:19 PM | Link | Comment!
  • Will Offshore Wind Growth Boost Rare Earth Demand?
    Offshore has some wind in its sails of late. GE has purchased ScanWind to acquire its offshore designs and the European Wind Energy Association (EWEA) has just published a bullish report on offshore. EWEA have placed a European target of 40 GW by 2020 from a current installed base of 1.5 GW worldwide.
     
    This relates to rare earth metals because of the emerging use of Neodymium-Iron-Boron (NdFeB) magnets in the generators of wind turbines. Reliability is particularly important for offshore applications because servicing turbines in the water is problematic and expensive. Traditional Doubly Fed Induction Generators (DFIG) with gearboxes are prone to breakdown. Offshore operating and maintenance costs are variable depending on location but the UK experience with offshore DFIGs has seen O&M take up 23% of total costs. Of these, the gearbox and generator account for 42%. Thus as much as 10% of the capital cost is due to servicing the gearbox and generator.
     
    However Direct Drive Permanent Magnet (DDPM) generators have no moving parts and no gearbox and are therefore much less prone to breakdown. They are quickly becoming the turbine of choice for offshore applications.  DDPMs contain NdFeB, and lots of it. Jack Lifton suggests 1 ton NdFeB/MW however I have not seen a source for that. This source suggests 567kg/MW.
     
    This is of interest to investors in Great Western Mining Corp and other rare earth mining firms as it could be a major driver of growth in coming years. While the EWEA 40GW target may be ambitious, it should be noted that 100GW of offshore wind are at various stages of planning in Europe, with more in China and potential interest in the US also. That said, GE forecasts 30GW worldwide by 2020.
     
    I’ll take the middle of both estimates and assume 785kg/MW and 35GW installed worldwide by 2020 to get an idea of the possible demand from offshore wind. 35GW represents approximately 37% YOY growth in offshore out to 2020 – not entirely unreasonable since the world experienced a similar growth in onshore wind during the 90s.
     
    Those numbers suggest a total requirement of 27,475 tons of NdFeB by 2020 or 8,500 tons neodymium. The following graph distributes this with YOY growth out to 2020:
     
     
    Neodymium global production in 2007 was approximately 11,000 tons. Neodymium use for wind turbines at present is very small but should NdFeB become widespread in offshore wind, this would take up 18% of the 2007 total by 2020 (2000 tons Nd).
     
    There is a lot of research being conducted into making gearboxes more reliable. There is furthermore another generator option – the Direct Drive Synchronous Generator (DDSG) which like the NdFeB magnet variety has no gearbox and is almost as reliable. It has a 30% heavier tower top mass, though. It’s not a given that NdFeB will monopolise offshore generators, but it seems likely to take the lion’s share. GE has acquired ScanWind, which uses NdFeB, and other wind companies are also turning to NdFeB.
     
    I can find nothing that indicates that any wind manufacturers are aware of the supply chain issues associated with neodymium. For rare earth mining investors it is safe to assume, however, that in the coming years increased demand for neodymium will come from the wind sector. The extent of this demand remains to be seen.

    Disclosure: None

    Sep 26 9:10 PM | Link | 14 Comments
  • Review of Energy Storage Market Forecasts
    There is a lot of buzz surrounding energy storage at the moment. In my previous instablog I argued that storage is not needed to integrate renewables onto the grid. Further excellent discussion on the same question can be found here: Does Wind Need Energy Storage? Nevertheless there are other opportunities for storage, notably as an enabler of the smart grid. As such, many people are trying to forecast the future market potential of this area. Three prominent examples are:
    Energy Storage Technology Markets Pike Research (June 2009) [$3,500]
     
    A simplified, composite, view of their forecasts is presented below:
     

     
    After reading the executive summaries linked above, if you feel like dropping a few thousand bills on a report, you should go for the GreenTechMedia report.
     
    The Nanomarkets report appears quite woeful. Take for instance the following excerpt:
     
    As the percent of wind and solar on a grid passes above 10–15 percent instabilities can occur if there is no storage capacity. In fact, Ireland put a moratorium on the connection of new wind power to their national grid due to instabilities as the wind generating capacity exceeded 7% of overall grid capacity.”

    You could be forgiven for thinking Ireland abandoned wind. The moratorium referenced was for 6 months in 2003 when Ireland had 211MW of wind and was just getting to grips with wind integration. Today Ireland has 1,161MW which is actually 15% of grid capacity. Ireland is in fact aiming for 40% wind penetration with no storage.

    The Pike Research report states:

    While pumped hydro and CAES should persist as options and gobble up large amounts of dollars for a small number of projects, advanced Li-ion batteries will be the volume leader and the one technology with a clear and possibly astronomical growth trajectory.”
     
    Although generally reasonable, the report seems to place a bizarre emphasis on lithium-ion for grid storage. This is at variance with much reasoned analysis; see John Petersen’s articles for example.
     
    Finally the GreenTechMedia report seems to be the only one written by an expert in the area – John Kluza holds a masters in engineering from MIT and actually worked at a storage company (A123). Of the three, I recommend this report.
     
    The buzz about storage should, however, be tempered by the following quote from GreenTechMedia’s free SmartGrid report (July 2009):
    Unlike other sectors that will continue to grow step by step; a breakthrough in storage is still needed.”

    Disclosure: No Positions

    Sep 01 5:45 PM | Link | 4 Comments
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