I'm Getting A Headache -- July 11, 2017

Updates

July 15, 2017: This is a great example of a writer suggesting that EVs run on electricity. I said the same thing in the original post. I was surprised no one caught my mistake. EVs do run on electricity, but better said, they run on whatever makes the electricity and right now, for the most part that's natural gas and/or coal. If your EV is running on electricity made by coal, I'm not sure one can say "electricity is ultimately more efficient than gasoline, and the growth of natural gas development and green technologies such as solar and wind have drastically reduced its cost." Running on coal certainly can't be more beneficial than running on natural gas or wind energy, at least according to the Algore crowd, but that's where most of the world's electricity ultimately comes from: coal.

Later, 2:24 p.m. Central Time: see first comment; includes this link. From the linked FT article:

Two of the world’s largest oil companies have hit back against predictions that electric vehicles threaten a collapse in demand for hydrocarbons and warned that global energy security would be at risk if investment is withdrawn from fossil fuels too soon. [See original post for a most ridiculous story.]

Saudi Aramco and Royal Dutch Shell acknowledged that a shift towards renewable energy — including battery-powered cars — was under way but said oil and gas would remain indispensable for decades to come. 

“There seems to be a growing belief that the world can prematurely disengage from proven and reliable energy sources like oil and gas, on the mistaken assumption that alternatives will be rapidly deployed,” Amin Nasser of Saudi Aramco told an energy conference in Istanbul. 

Addressing the same event, Ben van Beurden of Shell said the transition to low-carbon technologies would “take place over generations” rather than as a rapid “revolution”. 

It didn't take much pushback for Ben to start changing his tune. LOL.

Original Post

The headline caught my attention but then when I saw the source, I realized immediately the whole premise would be wrong.

The premise is this: EVs run on solar power. LOL.

Wrong. EVs run on electricity. And unless we are mandated to use the most expensive electricity available, utilities will provide and consumers will use the least expensive electricity, wherever it comes from: solar, wind, ocean waves, nuclear (fission or fusion), oil, natural gas, coal, hydroelectric.

Over at Bloomberg:

Remember peak oil? Demand may top out before supply does. The premise is this: if EVs become the norm, then oil won't be needed any more for transportation.

Patrick Pouyanne, CEO of Total SA, says demand will peak at some point in the 2040s, which is why the French energy giant he runs has been investing in solar power.

Ben van Beurden, CEO of Royal Dutch Shell Plc, has said the zenith could arrive a lot sooner, in the next 15 years or so, if electric cars became really popular.

“The energy transition is unstoppable,” Van Beurden told the St. Petersburg forum in early June. “In the most aggressive scenario, you can see oil already peaking in late 2020s or early 2030s.” In the time scale of the oil industry, where multibillion-dollar projects often take a decade or longer to come to fruition, that’s as close as it gets to saying “the day after tomorrow.”

If such forecasts prove right, oil prices are likely to remain low for a lot longer. That raises the possibility that some hard-to-reach deposits, like those in the Arctic, may never be tapped, turning what today are considered valuable reserves into assets of questionable worth. That worries big institutional investors such as BlackRock Inc. that manage mutual funds composed of energy stocks.

Maybe I'm missing something, but the whole premise seems wrong.

The premise is so wrong, I can't even begin to articulate it in a short post. All things being equal, EVs will increase the demand for energy, not decrease it. Many readers have written to tell me exactly that: EVs are an inefficient way of using energy.

Saudi uses oil to run their air conditioners because oil is so cheap for them. If demand for oil reaches a peak in 2040, long before the supply of oil reaches its peak ... I'm getting a headache.

Look at the cost of new intermittent farms compared to the cost of natural gas plants:

The capacity-weighted cost of installing wind turbines was $1,661 per kilowatt (kW) in 2015, a 12% decrease from 2013…The cost of utility-scale solar photovoltaic generators declined 21% between 2013 and 2015, from $3,705/kW to $2,921/kW…The average cost of natural gas generators installed in 2015 was $696/kW, a 28% decline from 2013…Construction costs alone do not determine the economic attractiveness of a generation technology. 

"Capacity-weighted cost" (I assume) means that the incredibly inefficiencies of wind and solar have been factored into the cost of these things. It's been my impression that folks "factoring" such inefficiencies err widely on the positive side.

Sometimes, the information is lost in translation (obfuscation; cluttered paragraph). Let's parse the indented paragraph into data points:

• wind: $1,661 per kW
• solar: $2,921 per kW
• natural gas: $696 per kW

Folks will argue that wind and solar will get cheaper as technology improves; but apparently, the same folks argue that won't be true for natural gas.

Solar is 5 times more expensive than natural gas (on a "capacity-weight basis"); solar is incredibly unreliable (Ivanpah proved that). 

My headache is getting worse.

The bottom line, if oil is so cheap because supply greatly exceeds demand (in 2040) folks will start burning oil to make electricity. The Saudis already do that.

The argument for EVs shifting gasoline consumption to "something else" works if that "something else" is coal or natural gas. But the gedankenexperiment using a supply-demand graph just doesn't work -- at least for me.

By the way, this is one of the reasons I quit subscribing to Bloomberg and when I find a copy at the library I tend to page through it quickly. Too much nonsense.