Category Archives: miscellaneous

Saskatchewan’s economy will lead the country in GDP growth in 2018 and 2019 – RBC

RBC projecting Sask. economy to rebound in 2018 and 2019

Projecting a 2.7% growth in both years due to agriculture, with help from oil and gas

CBC News Posted: Dec 12, 2017 10:30 AM CT Last Updated: Dec 12, 2017 10:30 AM CT

Rebounds in the agricultural and mining sectors along with rising investment spending will be the main factors behind the economic rebound in 2018 and 2019, according to the RBC forecast.

Rebounds in the agricultural and mining sectors along with rising investment spending will be the main factors behind the economic rebound in 2018 and 2019, according to the RBC forecast. (Courtesy Paul Dornstauder)

Saskatchewan’s economy will lead the country in GDP growth in 2018 and 2019, according to RBC’s economic forecast.

 

RBC is projecting a growth of 2.7 per cent both years, if all goes well.

The economy is expected to receive a boost from the agriculture sector, with some help from oil and gas in the strengthening energy sector.

“Our view is that rebounds in the agricultural and mining sectors along with rising investment spending will be the main factors accelerating overall GDP growth over the next two years,” the report says.

Capital spending and the construction industry may have a good year, due to improvement in the mining sector as well.

Potash, after a decline in production in 2016, has increased so far this year thanks to a strong global demand and key contracts with China and India, the report says.

In addition, the bank is forecasting employment in the province to rise by half a percentage point and the unemployment rate to remain at 5.7 per cent next year.

Equalization payments – 2018-19 – something’s wrong with this system

As Brad Wall posted on Facebook . . .

Equilization payments 2018-19

Quebec is cutting income taxes, sending cheques to parents, and will balance their budget.

Wondering where they got the money?

This year, Quebec is receiving $11.7 BILLION in equalization, which makes up 11% of their total revenue. That’s $650 MILLION more than last year.

Saskatchewan taxpayers are contributing $580 million to equalization just this year and again receive ZERO dollars in equalization as our finances struggle with the challenge of stubbornly low commodity prices.

Something isn’t right.

GOVERNMENT INTRODUCES COAL-FIRED ELECTRICITY REGULATIONS

GOVERNMENT INTRODUCES COAL-FIRED ELECTRICITY REGULATIONS

Government of Saskatchewan logo

Released on December 6, 2017

Regulations Are Next Step Toward Equivalency Agreement With The Federal Government

As committed to in Prairie Resilience: A Made-in-Saskatchewan Climate Change Strategy, the Government of Saskatchewan today passed regulations on coal-fired electricity as a next step toward an equivalency agreement with the federal government.

Under an equivalency agreement, the Government of Canada would accept that Saskatchewan meets or exceeds federal standards, enabling the province to regulate its own emissions from SaskPower’s fleet of coal-fired power plants.  The regulations passed today are a necessary step in the equivalency agreement process, which was announced in principle in November 2016.

Government also proclaimed portions of The Management and Reduction of Greenhouse Gases Act, which enabled reporting, verification and compliance powers, and will enable drafting of new regulations and standards to further support Saskatchewan’s comprehensive approach to climate change.

“The Act and Regulations are fundamental to the province’s climate change strategy,” Environment Minister Dustin Duncan said.  “These regulations are the next step for the province to complete an equivalency agreement to provincially regulate electricity emissions.”

Without an equivalency agreement, federal regulations would require all coal-fired units that do not meet a stringent performance standard to close at the end of their economic life, or by 2030, whichever comes first.

Under pending federal regulations, SaskPower would be required to regulate emissions on a unit-by-unit basis.  However, with an equivalency agreement in place, SaskPower would have financial and regulatory flexibility to continue operating coal units past their federal shutdown date by outperforming federal emission reduction requirements on a fleet-wide basis.  Under provincial regulation, future electricity emissions are expected to outperform federal expectations.

“SaskPower welcomes an agreement that will recognize that we have captured and stored 1.75 million tonnes of carbon dioxide since successfully launching carbon capture sequestration on Boundary Dam 3,” SaskPower CEO and President Mike Marsh said.  “We are also developing greener ways of generating electricity.  Having flexibility will allow us to deliver reliable and moderately-priced electricity and meet growing demand with a diversified generation portfolio that includes wind and solar.  We’ve set an aggressive target of up to 50 per cent generation capacity from renewables by 2030.”

The Ministry of Environment and SaskPower continue to work with Environment and Climate Change Canada to finalize the equivalency agreement and ensure provincial regulations are accepted in lieu of federal coal-fired electricity regulations.

The Management and Reduction of Greenhouse Gases (General and Electricity Producer) Regulations take effect January 1, 2018.  A final equivalency agreement is expected by 2019.

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For more information, contact:

Darby Semeniuk
Environment
Regina
Phone: 306-787-0143
Email: darby.semeniuk@gov.sk.ca

SaskPower
Media Relations
Regina
Phone: 306-536-2886
Email: mediarelations@saskpower.com

Saskatchewan Mining Association supports Government of Saskatchewan’s Climate Change Strategy

MEDIA RELEASE

Monday, December 4, 2017

FOR IMMEDIATE RELEASE

Regina:  The Saskatchewan Mining Association (SMA) is supportive of the Government of Saskatchewan’s Climate Change Plan which was released earlier today.  While the Saskatchewan Plan has a lower emissions threshold than the Federal Climate Change Plan, the sector-based, multi-faceted approach will ensure the ‘Made in Saskatchewan Plan’ is effective in reducing GHG emissions while ensuring the sustainability of Saskatchewan communities.

As Canada transitions to a low-carbon economy, the Saskatchewan Climate Change Plan features flexible compliance mechanisms, including adoption of innovative and best in class technology that will allow mining to continue to be a pillar of Saskatchewan’s economy while continuing to provide clean energy and food to the world.

The Saskatchewan mining sector is particularly sensitive to a price on carbon as it represents an additional direct cost for producers that international competitors aren’t paying. “Ensuring the mining sector remains globally competitive is vitally important to Saskatchewan, particularly in this period of low commodity prices,” said Pam Schwann, SMA President.    “We need to be mindful that, as we work to reduce GHG emissions, mining investments and jobs are not being exported to other international jurisdictions that don’t have the robust environment and safety regulatory framework that exists in Saskatchewan and Canada.”

Saskatchewan’s mining operations account for 3% of provincial GHG emissions. “Our members are committed to bringing our expertise to the table and working with the province to reduce GHG emissions from the mining sector.”  said Schwann.

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About SMA

Saskatchewan Mining Association is an industry-driven organization representing the mining and mineral exploration industry with over 25 mining operations in the province.

SMA advocates on behalf of members on issues related to provincial and federal regulatory changes, develops and supports educational outreach programs, organizes and hosts public outreach and membership events.  Please visit http://saskmining.ca/

 

For more information please contact:

Pam Schwann, P. Geo, MSc

President, Saskatchewan Mining Association; (306) 757-9505

Young men in Sask. making more with apprenticeships than bachelor’s degrees: Stats Can

Young men in Sask. making more with apprenticeships than bachelor’s degrees: Stats Can

Sask. deviates from Canada-wide trend, in which those with apprenticeship certificates make 11% less

By Micki Cowan, CBC News Posted: Nov 29, 2017 11:54 AM CT Last Updated: Nov 29, 2017 6:12 PM CT

The number of young men getting apprenticeship certificates in Canada jumped nearly three percentage points since 2006.

The number of young men getting apprenticeship certificates in Canada jumped nearly three percentage points since 2006. (Shutterstock)

Young men in Saskatchewan are increasingly looking to make their fortunes in the trades, according to a new Statistics Canada report released Wednesday — and they seem to be making a bit more here than those with university undergraduate degrees.

Statistics Canada found that last year, 7.8 per cent of men in the country had an apprenticeship certificate, up from 4.9 per cent in 2006.

The proportion of men between 25 to 34 with certificates was even higher in resource-rich Prairie provinces like Saskatchewan.

Here, 11.9 per cent of young men had trades certificates last year, which was the second-highest proportion among provinces in Canada.

Anne Neufeld, vice-president academic of Saskatchewan Polytechnic, said the numbers indicate that more people are seeing the trades as a viable career option.

“There are many people who really like to work with their hands — they like to work outdoors, for example. So these trades opportunities are very, very attractive for these individuals, and their long-term career prospects are very, very strong,” Neufeld said.

She said 94 per cent of graduates from Saskatchewan Polytechnic’s programs have jobs within six months.

“So we’re not only attracting them, we’re graduating them, they’re finding well-paid jobs and they’re staying in the province to support the economy,” she said.

Fortune seeking

In Saskatchewan, the report found men were also making more money with apprenticeship certificates than with bachelor’s degrees — bucking the Canadian trend.

The median annual earnings for apprenticeship certificate holders in Saskatchewan was $86,059, compared with $84,825 for those with a bachelor’s degree.

Neufeld said Saskatchewan Polytechnic graduates’ starting salaries are just under $50,000 per year.

Canada-wide, men with apprenticeship certificates earned 11 per cent less than men with bachelor’s degrees.

Women’s trades stats lower

The percentage of women with apprenticeship certificates across the country is still much lower than men. According to the Stats Can report, that number has been stable since 2006 at less than two per cent.

Saskatchewan has more women with trades training, but the proportion dropped in the past decade from 2.7 per cent to 2.3 per cent. However, more women have a bachelor’s degree or a more advanced degree, with that number going from 24.6 per cent to 35 per cent.

‘We need to first create the role models.’– Anne Neufeld, Sask. Polytechnic

Neufeld said her school is prioritizing getting more women into the trades, although she said that takes time.

She noted that she is the first female vice-president academic the school has ever had.

She said boys often have an uncle or father in the trades they can look up to.

“Our goal is that we can have young girls and women who would have an aunt, a mother, an older sister in that field — so we need to first create the role models, and then I believe that will attract more girls and younger women into this fabulous career choice,” she said.

One method the school is using is summer camps that allow school-aged girls to give carpentry or welding a try.

Across Canada, women with apprenticeships had lower earnings than those with degrees, according to Statistics Canada.

The report said this shows women are apprenticing in lower-paying trades. Nearly three in 10 women chose hairstyling as their apprenticeship, with median earnings of $34,319.

Nebraska approves alternative route for TransCanada’s Keystone XL

Nebraska approves alternative route for TransCanada’s Keystone XL

NATI HARNIK/THE CANADIAN PRESS

SHAWN MCCARTHY AND JEFF LEWIS

Kinder Morgan pipe

NOVEMBER 20, 2017

TransCanada Corp. has received a new hurdle in its effort to complete its $8-billion (U.S.) Keystone XL pipeline after Nebraska’s Public Service Commission approved an alternative to the company’s preferred route through the state.

Nebraska’s Public Service Commission ruled on Monday that TransCanada’s Keystone XL can be built along a “mainline” route, which shifts the line east of its preferred path.

The company announced earlier this month that it had secured adequate commitments from crude oil shippers on the proposed line. TransCanada must now assess it will proceed with construction given the approval of the mainline route.

Keystone XL will deliver up to 830,000 barrels per day of crude from Alberta to Steele City, Neb., where it will connect with an existing pipeline network to the U.S. Gulf Coast. Alberta oil producers are hopeful that added pipeline capacity will accommodate expanding supply and bring them better prices and cheaper transportation costs.

TransCanada has been attempting to win approval for Keystone XL for nearly 10 years; it was turned down by then-president Barack Obama in 2015, only to be revived by President Donald Trump last March.

The Keystone XL project has faced a barrage of criticism from environmental activists and some landowners for nearly a decade. Activists – including some Indigenous leaders – are threatening to mount mass protests against the pipeline.

At the hearing before the commission, TransCanada argued its preferred route was far superior to the one that the commission approved on Monday. It said its preferred path had fewer ecological sensitive areas, fewer stream crossings and crosses the range of fewer threatened or endangered species.

The company will now have to obtain easements from landowners, after securing rights from 90 per cent of landowners along its preferred route. The mainline alternative is also longer which, in additional to other factors, will add to the costs. As well, it is unclear whether the federal approval for the KXL project covers the route approved by the state commission.

“If the Keystone XL pipeline were to follow the mainline in its entirety, it would require considerably greater length in the overall pipeline route than the preferred route currently uses,” the company argued in its submission to the commission. “This additional length would cause greater environmental impact and render the route inferior to the preferred route.”

Despite the hurdles, some analysts hailed the decision as a qualified victory for TransCanada.

“Nebraska’s decision today greatly diminishes the political risk for the project, likely clearing the way for increased volumes of Western Canadian heavy crude to reach the Gulf Coast,” Zachary Rogers, analyst at Wood Mackenzie consultancy, said in a note. “The pipeline’s commercial viability is strengthened as declining heavy oil production in Mexico and ongoing Venezuelan risk has recently tightened the heavy-crude market in the Gulf Coast.”

Tesla battery production releases as much carbon dioxide as eight years of gasoline driving

Tesla battery production releases as much carbon dioxide as eight years of gasoline driving

by  DAVID BOOTH  | NOVEMBER 10, 2017
http://driving.ca/auto-news/news/motor-mouth-a-few-more-inconvenient-truths-about-ev-co2-emissions

gas gauge

It was a huge announcement, greeted with much fanfare. Ford, BMW, Mercedes-Benz and the VolkswagenGroup have joined together to build an automobile-recharging network throughout Europe, one they hope will allow uninterrupted EVing all throughout the continent by 2020. Better yet, said recharging stations will be of the ultra-fast 350 kilowatt variety, which are the ne plus ultra of battery rebooting, rendering an almost complete recharge in but 15 minutes or so. Now, never mind that there are currently no car batteries — no, not even Tesla’s — that can withstand such an onslaught of electrons without blowing up, or that the first cars (mondo expensive Porsches and Audis) that will be 350 kW-capable won’t be released until 2019; the formation of what’s called the IONITY consortium is a development worthy of front page, extra bold headlines.

But, like all things EV, it seems like it’s only the rah-rah, let’s-plunge-headfirst-into-something-we-haven’t-fully-calculated optimism that gets the media’s attention. A little more sobering is a recent study by the University of Michigan that calculated the “well-to-wheels” production of automotive greenhouse gases depending on a) the source of the electricity used to recharge said electric vehicles and b) the rough country-by-country breakdown of those sources. And, to make it easier for simpletons (that would be Yours Truly) to understand, rather than quantifying the difference in kilowatt-hours, BTUs or some other archaic scientific quantum that would mean nothing to the average motorist, authors Michael Sivak and Brandon Schoettle converted the entire equation to a miles per gallon equivalent. By Sivak’s estimation, for instance, a battery-powered electric car fueled by electricity generated by coal gets the equivalent of 29 US miles per gallon. Ditto for oil-powered generation. On the other hand, solar power is good for 350 mpg, nuclear 2,300 mpg and hydro a whopping 5,100 miles for every blessed gallon of gasoline.

The beauty, then, of Fuel Sources for electricity in the individual countries of the world and the consequent emissions from driving electric vehicles is that it gives an easily understood quantification of the benefit of converting cars from gasoline to electricity depending on what sources each country uses to generate all that electricity. Put even more simply, the numbers Sivak et al have determined are the break-even point: If gasoline-powered cars can achieve these magical fuel economy numbers, then they will pump out less C02 than BEVs. If they can’t, then EVs have the advantage.

First, the good news, at least for we Canuckians: According to U of M’s calculations, thanks to our cornucopia of green energy sources, gasoline cars would have to average 1.4 litres per 100 kilometres to match the CO2 reduction available from BEVs. That’s 169.5 miles per gallon. Needless to say that’s an unattainable goal, even the most optimistic motorhead not daring to posit such a breakthrough. Score one for the Great White Frozen North then when it comes to EVs.

But, before you go getting all smug, note that we’re not anywhere near the top. Pride of place atop the potential CO2 reduction sweepstakes goes to — cue drum roll — Albania. Yes, with 100 per cent of its electricity generated by hydro power, it gets a perfect 5,100 mpg score. Never mind that there’s probably not a dozen people in the once-totalitarian agrarian state that can afford a Tesla; at least the potential is there. Ditto for Paraguay, Nepal, the Congo and Ethiopia, which are next in line. Indeed, it is in 7th place Norway that one finally sees some convergence between fuel economy equivalency (1,820.6 mpg) and the ability to afford an expensive EV.

But even Norway is a drop in the greenhouse gas reduction bucket. And the numbers for the world’s largest economies are not nearly as energizing. The breakeven point for the United States, for instance, is 55.4 mpg (4.2 L/100 km). With 33 per cent of its electricity supplied by coal and another third by natural gas, if America’s fleet of gasoline-powered vehicles could average 4.2 L/100 km or better, they would actually produce less CO2 than electric cars. Now, to be sure, the current average consumption is about twice that, but 55 miles per gallon is still the number former president Obama was touting as attainable by 2025 (albeit with some loopholes). And, let us not forget, the current president is promoting coal production, so Sivak’s magical number may become be easier to attain.

Worse yet is China, the country many environmentalists are currently touting for its massive push toward EVs. Because so much of its electricity is coal fired, its break-even point is 40 mpg (5.9 L/100 km), a number my new 2018 Accord easily achieved on a recent trip to Ottawa. Somehow that doesn’t gel with the narrative being proposed of China as green siren.

But according to the U of M team, even that calculation doesn’t fully account for a BEV’s total C02 production. According to Sivak, building a BEV results in 15 per cent higher emissions than manufacturing a similarly-sized conventional automobile. For larger vehicles — cue Teslas and upcoming Porsche/Audi products — with larger batteries, the difference is even greater; 68 per cent. Indeed, according to a recent Swedish report, Tesla battery production releases as much CO2 as eight years of gasoline driving. Yes, according to the IVL Swedish Environmental Research Institute, manufacturing every kilowatt-hour of lithium-ion battery storage — the Model S has up to 100 kW-hr — releases 150 to 200 kilograms of carbon dioxide into the atmosphere. In other words, a Model S has accounted for about 17.5 tons of C02 even before it has used a mile of coal-fired electricity.

In other words, the American — and certainly the Chinese — government might be better off spending those hard-to-come-by tax dollars on cleaning up its coal production rather than converting all our cars to batteries.

 

Which industry best creates wealth and reduces poverty in Canada? Resources (as usual)

Which industry best creates wealth and reduces poverty in Canada? Resources (as usual)

Mark Milke: What’s in the ground helped produce a dramatic increase in living standards over the last decade

Special to Financial Post

October 24, 2017
7:30 AM EDT

oil project

With the recent cancellation of TransCanada’s Energy East pipeline — after the company spent $1 billion in attempts to jump through ever-changing regulatory and political hoops — it is time to remind ourselves as Canadians where much of our country’s recent economic uptick originated.

Answer: In resource exploration and extraction.

This was illustrated again recently, just before the TransCanada announcement, with Statistics Canada’s recent release of key census data. The data revealed how median Canadian household income rose to $70,336 by 2015, up almost $6,900 from $63,457 in 2005 or nearly 11 per cent.

The provincial breakdowns are even more revealing than the national figure. Median income went up by $20,161 in Saskatchewan (37 per cent), $18,151 in Alberta (20 per cent) and $15,068 in Newfoundland and Labrador (29 per cent).

In contrast to these booming provinces, manufacturing in Central Canada took a hit

As Statistics Canada noted, “An important factor in the economic story of Canada over the decade was high resource prices.” The agency further observed how “that drew investment and people to Alberta, Saskatchewan and Newfoundland and Labrador, boosted the construction sector, and more generally filtered through the economy as a whole.”

In contrast to these booming provinces, manufacturing in Central Canada took a hit. Incomes there barely rose: Quebec saw a modest $4,901 rise (8.9 per cent) and Ontario was a national laggard with incomes increasing by a paltry $2,753 between 2005 and 2015 (only 3.8 per cent higher).

Which is where a caveat should be added to the Statistics Canada commentary that “high resource prices” explain significantly increased incomes. High resource prices — be they for oil, gas, lumber or minerals — help, but only if a province or region allows its resources to be explored, extracted and then shipped to market.

The Maritimes mostly sat out the boom in resource prices

The Maritimes mostly sat out the boom in resource prices because, for example, Nova Scotia and New Brunswick banned onshore exploration and extraction of natural gas. That was unlike Saskatchewan, Alberta and northern British Columbia.

Unsurprising then, New Brunswick’s median income in 2015 was $59,347, the lowest among all provinces. It did record 15-per-cent growth over the decade, but that statistic looks less impressive given New Brunswick’s low point in 2005 and its still-lowest ranking today. As a comparison, New Brunswick’s median income in 2015 was almost $8,000 lower than in Newfoundland and Labrador, where incomes soared by almost double that of New Brunswick. A lack of private sector investment in a profitable energy resource sector will do that.

Quebec provides other examples, both of foregone opportunities and the potential for income growth, when governments say “oui” to Canada’s comparative advantage in resources instead of “non.”

Quebec missed much of the benefit of higher resource prices because of political opposition to oil and gas

Quebec missed much of the benefit of higher resource prices because of some local and political opposition to oil and gas development. But of note, when the resource sector was allowed to thrive in Quebec, it did. As Statistics Canada observed “several metropolitan areas in resource rich areas had relatively higher income growth.” They include Rouyn-Noranda (+20.4 per cent), Val D’or (+18.0 per cent) and Sept-Îles (+13.4 per cent). That’s more “green” in the pockets of workers.

The lesson should be obvious: One comparative economic advantage for Canada is in natural resources. And this matters not just for faster-growing median incomes but also for drops in poverty. For example, resource-friendly Newfoundland saw the St. John’s low-income rate fall to 12 per cent from 16 per cent. Saskatoon’s low-income rate fell to 11.7 per cent from 15.2 per cent.

In contrast, Ontario, affected by the loss of 300,000 manufacturing jobs, recorded dramatic increases in poverty rates. That includes London (where low-income rates rose to 17 per cent by 2015 from 13.3 per cent in 2005) and Windsor (up to 17.5 per cent from 14 per cent).

It is clear from the data that resources are a critical driver of employment and incomes

Some people would still respond to all this with the old line that Canadians should seek to be more than “hewers of wood and drawers of water” (a phrase that wrongly depicts the forestry and hydro sectors as backward). That notion makes little sense because Canadians can and do invent, run and expand businesses in every sector, from hi-tech, to green sectors to tourism and finance, in addition to resources. But it’s clear from the data that resources are a critical driver of employment and incomes in Canada.

Insofar as politicians overlook resource advantages and hobble the sector with endless, ever-changing regulation, they ignore how what’s in the ground helped produce a dramatic increase in Canada’s living standards over the last decade.

To belittle or even attack Canada’s comparative advantage in resources is to neglect the positive effect this sector has on Canadian living standards. Snubbing opportunities in developing natural resources comes at the expense of additional jobs and better incomes for the poor and the middle class.

Mark Milke is an author and energy analyst.

 

 

 

BHP presents united front against activist Elliott at AGM

 

BHP presents united front against activist Elliott

Reuters Staff

OCTOBER 19, 2017 / 11:23 AM / UPDATED AN HOUR AGO

By Barbara Lewis and Zandi Shabalala

LONDON, Oct 19 (Reuters) – The new chairman of BHP , the world’s biggest miner, threw his weight behind his CEO on Thursday after attacks from activist investor Elliott Advisers prompted speculation that the end of Andrew Mackenzie’s tenure was imminent.

Pressure has mounted on BHP and its chief executive since Elliott went public in April with its criticisms of the miner’s strategy.

“Any suggestion there is a set timeline around Andrew’s tenure is simply false and without merit,” Chairman Ken MacKenzie told reporters after his first AGM since taking office at the start of September.

Asked by a shareholder whether it was Elliott or the BHP board that was running the company, the chairman replied that “MacKenzie and Mackenzie” were running BHP, though he did not specify the order of the pair who share the same names but with slightly different spelling.

At least five representatives from Elliott Advisors, which holds 5 percent of BHP, attended the London meeting but did not ask questions from the floor.

Elliott declined to comment on Thursday, though it has welcomed the new chairman’s appointment.

Chairman MacKenzie said he had met more than 100 shareholders across eight countries, which he said gave him confidence, though he added that there are areas where the company needs to sharpen its focus.

He reiterated that work is in progress to sell shale assets, which is one of Elliott’s main demands, and that further action would take place to refresh the board of directors.

SKILLS REVIEW

“We recognise that the board needs to continue to evolve to take into account the rapidly changing environment in which we operate. So we will undertake a review of the board’s skills and experience requirements during this financial year,” he said.

BHP’s London share price has risen nearly 7 percent since the start of the year, about half as much as that of its main rival Rio Tinto.

Both the chairman and the CEO said they were striving to maximise shareholder value and that meant that shale assets would be sold only at the right price.

“We will be both urgent and patient as we examine all the options,” CEO Mackenzie said. “We have to get the timing right to maximise shareholder value.”

BHP’s big rival Rio Tinto suffered a setback this week when the U.S. Securities and Exchange Commission (SEC) charged the company and two of its former executives with inflating the value of coal assets in Mozambique and concealing critical information. The company said it would defend itself vigorously against the allegations.

Chris LaFemina, a mining specialist at Jefferies bank, said he had preferred Rio over BHP for the past two years.

“While our preference has not changed, BHP’s competitive position has modestly improved,” he said in a note.

“New chairman Ken MacKenzie seems willing to push for significant strategic changes at BHP … after years of unacceptable underperformance of its share price versus Rio‘s.” (Editing by Elaine Hardcastle and David Goodman)

Offshore wind 6 times more expensive than nuclear power when wind’s required battery storage is factored-in

The key item is, “The headline “Offshore wind now cheaper than nuclear power” is very much in the UK news following the latest offshore wind auction in the UK where the lowest bids came in at £57.50 / MWh, well below the Hinkley C strike price of £92.50. But baseload nuclear, which delivers all the time, can’t be compared directly with intermittent wind, which delivers only when the wind blows. To make an apples-to-apples comparison we have to convert wind generation into baseload generation by storing the surpluses for re-use during deficit periods. Doing the math, offshore wind works out to be 6 times more expensive than nuclear power.”

The real strike price of offshore wind

September 20, 2017 by Roger Andrews

http://euanmearns.com/the-real-strike-price-of-offshore-wind/

 

Hinkley still scores on reliability and low carbon ….. but the extent to which its costs are obscene is now plainer than ever. In Monday’s capacity auction, two big offshore wind farms came in at £57.50 per megawatt hour and a third at £74.75. These “strike prices” …..  are expressed in 2012 figures, as is Hinkley’s £92.50 so the comparison is fair. As for the argument that we must pay up for reliable baseload supplies, there ought to be limits to how far it can be pushed. A nuclear premium of some level might be justified, but Hinkley lives in a financial world of its own, even before battery technology (possibly) shifts the economics further in favour of renewables …..

Thus spake the Guardian in a recent article entitled Hinkley nuclear power is being priced out by renewables.

What the Guardian says is, of course, nonsense. Comparing non-dispatchable wind directly with dispatchable baseload nuclear is not in the least “fair”. Barring Acts of God baseload nuclear is there all the time; wind is there only when the wind blows. We can level the playing field only by comparing baseload nuclear generation with baseload wind generation, and the only way of converting wind into baseload is to store the surpluses generated when the wind is blowing for re-use when it isn’t. To compare offshore wind strike prices directly with nuclear strike prices we therefore have to factor in the storage costs necessary to convert the wind into baseload, and this post shows what happens to wind strike prices when we do this using the “battery technology” favored by the Guardian. It finds that battery technology does not “(shift) the economics further in favor of renewables”. It prices wind totally out of the market instead.

The two offshore wind farms in question are Hornsea Project 2 (1,386MW) and Moray East (950MW). The project cost for Moray is given as £1.8 billion, or £1,895/kW installed. The project cost of Hornsea Project 1 is given as £3.36 billion, which relative to the 1,218 MW capacity gives £2,759/kW installed. N0 project cost is given for Hornsea Project 2. Moray is 77% owned by EDP Renewables (EDPR) and 23% by Engie. Hornsea is 100% owned by DONG. The locations of Moray and Hornsea are shown below:

wind map

To conduct an analysis we have to estimate how much storage will be needed to convert the wind generation from Hornsea and Moray into baseload generation, and to do this we need to know what wind output from these wind farms will be. There are no readily-accessible data for operating UK offshore wind farms, but on the other side of the North Sea are Denmark’s offshore wind farms, and the P-F Bach data base provides hourly generation data for them. So I used Bach’s Denmark data to simulate generation from Hornsea, the larger of the two wind farms, assuming that the results would be reasonably representative. I picked January 2015 as an example month and factored the generation from Danish wind farms in that month up to Hornsea levels relative to installed capacities, which in this case aren’t very different (1,271MW total in Denmark at the beginning of 2015 and 1,386MW at Hornsea). The results are shown in Figure 1:

wind generation graph 1

Figure 1: Hourly generation from Denmark’s wind farms in January 2015 factored up to match Hornsea 2

Strong winds during the first half of the month were largely responsible for the overall 60% capacity factor during the month – respectable for a wind farm. However, the wind blew less strongly in the second half and died away almost to nothing on the 21st and 22nd.

The next step was to convert the spiky wind output into baseload, which requires that surplus generation during windy periods be stored for re-use during deficit periods so that the generation curve comes out flat. Surpluses and deficits were quantified relative to an 825 MW threshold, which is the amount of continuous baseline power Hornsea generates when generation is flat-lined. Figure 2 shows wind generation surpluses and deficits relative to this threshold:

wind generation graph 2

Figure 2: Hourly wind generation surpluses and deficits relative to 825MW of constant baseload output, January 2015

How much storage, which according to the Guardian will be supplied by batteries, will be needed to flatten out these surpluses and deficits? I estimated this in two ways. First I simply accumulated the surpluses and deficits, starting with the batteries discharged, and came up with the battery charge status plot shown in Figure 3. Driven by the generation surpluses in the first half of the month the batteries charge up, reaching a maximum capacity of 95,800 MWh on January 18. Thereafter the deficits set in and the discharges begin, and by the end of the month the batteries are back to being 100% discharged:

wind generation graph 3

Figure 3: Hornsea hourly battery charge status based on accumulation of hourly surpluses and deficits, January 2015

Next I ran the hourly wind generation data through Dave Rutledge’s more sophisticated storage balance algorithm, which starts with the batteries fully charged. The resulting battery charge status plot is shown in Figure 4. 95,800 MWh of battery charge – the same amount as before – is needed at the beginning of the month to keep the batteries charged up until the end of the month, although by the time the end of the month arrives they again have no charge left:

wind generation graph 4

Figure 4: Hornsea hourly battery charge status based on Rutledge storage balance algorithm, January 2015

Beginning with the batteries fully charged, however, creates a complication. During the first half of the month the batteries remain fully-charged for most of the time, and any surplus generation when they are fully-charged has to be curtailed because there’s nowhere to put it. Figure 5 shows the impacts. The curtailment that occurs during the first half of the month amounts to 16% of total monthly generation, and as a result Hornsea delivers an average of only 693MW to the grid instead of the 825MW it would have delivered if the batteries had been discharged rather than charged at the beginning of the month:

wind generation graph 5

Figure 5: Hourly wind generation sent to grid and curtailed based on Rutledge algorithm, Hornsea, January 2015

How to handle this complication? Strictly I should go back and tweak the algorithm until I get an optimum combination of baseload output and battery storage, but in this case it isn’t worth the effort. Why not? Because as we shall shortly see the impacts of the added cost of battery storage on the strike price are so large that even crude approximations are meaningful. So I will run with the 95,800 MWh storage estimate (although it’s almost certainly an underestimate. It assumes 100% charge-discharge efficiency and no battery degradation with time and there is also a high probability that it would increase if time-frames longer than a month were considered.)

Now to economics, and another approximation.

A wind farm gets its fuel for free and maintenance costs are comparatively low; the lion’s share of downstream costs comes from servicing the debt on the initial investment. Here I assume that effectively all of these costs come from debt service, meaning that there will be a direct relationship between the strike price and the initial investment. With this assumption all we have to do to estimate a “batteries included” strike price is add the cost of the batteries to the initial investment and factor the strike price up in proportion. When we do this for Hornsea this is what we get:

Initial wind farm investment = £3.9 billion:  I factored the Hornsea Project 1 cost (2,759/kW installed) up in proportion to the increase in installed capacity (1,396 MW for Hornsea 2 vs. 1,218 for Hornsea 1). This gave a total project cost for Hornsea 2 of £3.85 billion, which I rounded up to £3.9 billion.

Cost of battery storage = £35.4 billion: 95,800 MWh of lithium-ion batteries at current prices of around US$500/kWh – £370 at current exchange rates – gives a total cost of 95,800,000 kW * £370/kWh = £35.4 billion.

Cost of wind + battery storage = £3.9 + £35.4 = £39.3 billion

Strike price with batteries included = £579.42/MWh: The strike price increases in proportion to the increase in total investment, i.e. from £57.50/MWh to 39.3/3.9 * £57.50 = £579.42/MWh.

Since as noted earlier the 95,800 MWh storage requirement is almost certainly an underestimate – and quite possibly a large one – we can reasonably conclude that Hornsea’s strike price will be at least six times higher than Hinkley’s £92.50/MWh when the two are compared on an apples-to-apples basis using the Guardian’s battery storage option.

What does this factor-of-six difference tell us? Actually not much, because the comparison is academic. No one is ever going to outlay £35.4 billion to install battery storage at a £3.9 billion wind farm. Backup gas, not battery storage, is presently the only option for smoothing out erratic wind generation, and estimating how much this might add to the Hornsea strike price would be a complex undertaking, although I might give it a shot in a later post.

What it does tell us is that adding even a comparatively small amount of battery storage to a wind (or solar) project could kill it economically, which is probably what motivated the Guardian to make the comment about putting limits on how much “we” have to pay for “reliable baseload supplies”. And in the clean, green, environmentally-conscious, demand-managed, smart-meter-monitored, grid-interconnected, one-hundred-percent renewable world of the future the Guardian envisions we won’t need reliable baseload supplies anyway.

 

 

 

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