RE: Solar power's "bright future"

['Chris de Morsella' via Everything List]

 

 

 

From: everything-list@googlegroups.com 
[mailto:everything-list@googlegroups.com] On Behalf Of LizR
Sent: Tuesday, June 17, 2014 8:59 PM
To: everything-list@googlegroups.com
Subject: Re: Solar power's "bright future"

 

I hope so. I must admit I was a bit taken aback so I was kind of hoping someone 
here might contradict this guy!

 

Haha… okay let me have a go at it.

The authors assumptions seem to be fundamentally based off using what is a 
historically low price region for natural gas that has resulted from the 
massive capitalization of fracked natural gas wells over the last decade. The 
assumption that this price regime will continue is false – IMO – and he is 
plugging these low numbers into his model. 

The current shale (both oil & gas) boom in North America is unsustainable and 
there are increasingly clear signs – including clear market signals from the 
oil majors – that the boom times are coming to an end. The river of capital 
that has flooded into the upstream extraction sectors… the drillers has 
certainly generated a lot of transient economic activity and has resulted in 
quite a bit of gas and oil getting squeezed out. But the feeding frenzy is 
over; the hangover is just beginning. The majors have sobered up and realized 
that the return on capital expenditure is marginal at best. This boom was based 
on future production predictions drawn from past experience with traditional 
gas (and oil fields) and it was based on the long term predictions drawn from 
this source of well production data that the boom was justified and sold on. 

Fracked reserves are NOT the same as traditional free flowing reserves. This is 
becoming clear. Older fields – notably the Eagle-Ford in Texas – are beginning 
to show that instead the depletion rates for fracked wells is, in general much 
higher than that for traditional wells. The drop off from the first year peaks 
is dramatic and the costs associated with keeping a well producing year after 
year is much higher than was thought (naively or more likely blinded by greed).

His study is based on applying these historically low natural gas prices (in 
North America) into his economic costing model. I am arguing that this is a 
faulty premise and that the current era of low natural gas prices will be 
ending within a few years as the current stock of fracked wells ages and 
depletion begins its inexorable march down to the margins and not enough 
replacement wells are put in (there just is not enough available capital to 
sustain the kind of drilling rate that would be required; not to speak of other 
critical gating factors, such as the limited availability of usable water – 
much of the shale + Canadian tar sand deposits are in dry high areas of the 
continental land mass… and both extraction processes suck down huge amounts of 
water)

Once this very temporary era of relatively cheap natural gas comes to an end – 
as it will within five years or so – the fundamentals upon which he drew his 
conclusions will have dramatically changed.

It seems – and I only read it over once so I could be off the mark – that the 
study draws long term conclusions using a very temporary North American, gas 
supply and price environment that is soon drawing to an end… as it’s fossil 
costing baseline for natural gas.

Chris

 

 

On 18 June 2014 15:46, Russell Standish <li...@hpcoders.com.au> wrote:

On Wed, Jun 18, 2014 at 02:30:13PM +1200, LizR wrote:
> http://www.gsb.stanford.edu/news/headlines/Reichelstein-solar-2012.html
>
> Although the cost of solar has been dropping as mentioned he reckons we are
> 15 years away from it being viable for the average householder to install
> it.
>

Really that long? 2 years ago it was viable with the extraordinary
feedin tariff we got here (60c - about 3 times the cost of
electricity at the time, about twice what it is now). A ton of people
installed it at the time. (Well actually many, many tons, if you want
to be pedantic.) At the rate electricity costs are going up, I expect
it would be viable within 5 years, even assuming the cost of
photovolatics stays the same as it is now.

Cheers

--

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