Today’s Blog – Tuesday 7th February 2017

Editorial

Energy news-flow in Australia just now – as it pertains to projects actually getting to a FID point – seems to be dominated by large scale solar projects.

Many of these have elements of on-site electricity storage components – at least having the option to add arrays of batteries in due course.  In our view this has a multi-pronged rationale – installing such batteries might actually be profitable in the future as battery costs come down – and of greater relevance in the short term, the option sends a positive message to politicians that the developers are at least trying to do something about solar’s intermittency.

It is in this context that we note recent media reports about the rapid completion of a battery storage project in California by Tesla- which has added 70 MW of battery capacity to the energy system.  With a four hour discharge capability, this facility can add 280 Mwh of power to the system when required.

The genesis for this Californian battery development was the shutting in of the Aliso Canyon underground gas storage (UGS) facility due to a well leak last year – with flow on consequences for the overall reliability of the State’s energy systems.

This news story led to an interesting debate on UK energy blog Energy Matters  over the weekend about the energy storage and deliverability capabilities of gas storage compared to current generation battery technology.

The numbers are illuminating – taking the UK’s Rough gas storage facility as the comparator for the Californian battery facility – Rough has 107,000 (no decimal place error) of the energy storage capacity and 28 times the deliverability rate of the array of new batteries.  To get to an apples versus apples figure by converting from pure energy to electricity equivalent (at say a 40% thermal conversion factor) we still have 42,800 times the capacity and 11 times the deliverability.  Its safe to conclude that batteries have a little way to go when it comes to industrial scale facilities.

Commodity prices

Crude prices fell overnight, with Brent down ~1.8% to US$55.81 and WTI down a bit less (~1.4%) to US$53.08.  The key factors on the day appeared to be a rising US dollar – and a recent pattern of Monday Blues – when Friday’s rising rig count was reviewed again with a more critical perspective.

Henry Hub was down slightly at US$3.05.

Governments, fracking, etc

The Australian media has recently been reporting that electricity retailer ERM Power has chosen to pay a penalty to the Federal Government rather than procure renewable energy certificates – an entirely rational and legal choice for it.

This has however led to some new adventures in jurisprudence from the relevant energy regulator, who has claimed this behaviour is against the “spirit” (should that be the “vibe”?) of the law.  And – it would take action such as “shaming” ERM using social media.

Why not instead ask the recipient of the funds paid by ERM (i.e. the Commonwealth) for them to be allocated to e.g. renewables R&D?

Company news – FAR

FAR announced today its prospective resource assessment (un-risked) for its Senegalese assets has increased to 1.5B barrels (gross to the JV).

In current market conditions no-one seems to care too much about such uncertain upside – but it would rather hear about the now long running dispute with Woodside Petroleum over FAR’s pre-emptive rights on Conoco’s asset sale to the latter.

Company news – DUET

Infrastructure company DUET has just secured an agreement with the Western Australian Government over the development of its proposed Tubridgi underground gas storage asset in the North of the State.

DUET quote a very cheap development cost for this asset of A$69M – which however appears to exclude the likely cost of cushion gas to pressure up the reservoir, which we estimate would cost around another A$200M.  Such gas could be blown-down at the end of asset life – but that would be many decades away.  NPV value anyone?

Quote of the day

From Australian classic movie, The Castle – in the summing up of a case in the High Court by bargain basement lawyer Denis Denuto:

“In summing up it’s the constitution, it’s Mabo, it’s justice, it’s law, it’s the Vibe and, no that’s it, it’s the vibe. I rest my case.”

 

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