Category Archives: uranium and nuclear

Cameco CEO reassures workers, investors over mine closure

Cameco CEO reassures workers, investors over mine closure

Saskatoon / 650 CKOM
Bryn Levy
Cameco CEO reassures workers, investors over mine closure

A worker at Cameco’s uranium milling operation in Key Lake, Sask. (Cameco)

Cameco president and CEO Tim Gitzel faced questions from media and investors in a wide-ranging conference call early Thursday morning.

The call came after the company announced Wednesday it was suspending operations at its McArthur River uranium mine and its uranium milling operation at Key Lake.

The move will see more than 800 workers placed on a temporary layoff.

Gitzel said the company made the decision in the face of a stubbornly weak global market for uranium.

In 2010, uranium was selling in the $60-a-pound range. The price tanked following Japan’s Fukushima disaster in 2011, and was hovering this week around $20-a-pound.

“The message is very clear that the market does not need more uranium. Behaving in a $20 market the same way we did when uranium prices were much higher, in our opinion, is neither rational nor sustainable,” Gitzel said during prepared remarks before he took questions.

Under current conditions, Gitzel said it made more sense to draw down the company’s inventory to meet its contract obligations, noting Cameco has contracts to sell uranium above market prices for years to come.

Gitzel stressed repeatedly throughout the call that layoffs at McArthur River and Key Lake would be temporary.

He said the company would continue to provide benefits for affected workers and would top-up their Employment Insurance cheques, all as part of efforts to retain staff through the shutdowns.

“These are good, solid people. We need them. (McArthur River) is going to keep running for 20 years,” he said.

Cameco investors will also be feeling some pain amid the poor uranium market conditions, with the company slashing the dividend paid on its stock to 8 cents per share as part of efforts to maintain its cash flow and keep servicing its debts. The dividend had previously been 40 cents per share.

Gitzel said all the company’s decisions were made with a view to maintaining Cameco’s long-term health.

In particular, he said the company was protecting its investment grade from rating agencies — a designation typically given to companies with a credit rating of BBB or better.

Gitzel said those investing in Cameco would be doing so because, in the longer term, the current low market price for uranium is unsustainable, with the company sitting on some of the lowest cost-of-production mines on Earth and well-positioned to take advantage of an eventual turnaround.

Asked if Cameco would consider selling off any of its ownership stakes in its mines, Gitzel gave a forceful vote of confidence in the long-term future for the industry in Saskatchewan.

“Sale of ownership? Not a chance. We’re not looking at that at all. In fact, if some Saskatchewan assets came available that were part of the joint ventures we’re in, we would look at purchasing them.”

The McArthur River and Key Lake shutdowns were expected to take about a month to complete, with some 200 workers kept on to maintain the sites following their anticipated closures at the end of January 2018.

Gitzel said it would also take about a month to get the facilities up-and-running again.

Sask. carbon reduction plan coming by end of year, says minister

Sask. carbon reduction plan coming by end of year, says minister

Feds have given provinces until 2018 to decide on their preferred option

Dustin Duncan

CBC News Posted: Oct 26, 2017 1:07 PM CT Last Updated: Oct 26, 2017 1:31 PM CT

The Saskatchewan government says its own tailored plan for how to reduce carbon emissions will be unveiled in the next month and a half.

But little else is confirmed about the highly-anticipated plan.

Environment Minister Dustin Duncan gave a brief update on the plan Wednesday, following a throne speech that doubled down on the province’s staunch opposition to the carbon-tax-or-cap-and-trade demand the federal government issued to provinces.

Duncan suggested that industry members will be warm to the Saskatchewan proposal once it’s released before the current session of the legislative assembly wraps on Dec. 6.

“We want to build in a great deal of flexibility for how industry is going to achieve the standards that we put in place,” said Duncan.

“We’re still working that through the process in terms of what type of flexible mechanisms will be in place.”

Duncan also said that the plan will “build on” the climate change white paper released by the province a year ago.

Besides calling on the federal government to redirect more than $2 billion earmarked for climate change measures in developing countries to research and innovation programs in Canada, the white paper also proposed charging a levy on large emitters.That money is to be used for new technology and innovation to reduce greenhouse gases.

Deadline looming

Duncan went on to refer to the plan as “a much more fulsome, well-rounded plan” than either a price on carbon or a cap-and-trade system.

Saskatchewan is cutting it close: the federal government has given provinces until 2018 to decide on their preferred option.

Duncan said Saskatchewan expects to hear from Ottawa about its tailored plan before the deadline.

The throne speech highlighted other ways the province has looked to cut its emissions, such as SaskPower’s intended aim to expand renewable power to 50 per cent of its total generating capacity by 2030.

The utility’s Boundary Dam 3 project, which the province poured $1.3 billion into, has cut the province’s carbon dioxide emissions by 1.6 million tonnes, taking the equivalent of 400,000 cars off the roads, according to the government.




Cameco reports quarterly losses due to weak uranium prices

Cameco reports quarterly losses due to weak uranium prices

Uranium company expects weaker earnings in 2017 than last year

CBC News Posted: Oct 27, 2017 7:43 AM CT Last Updated: Oct 27, 2017 7:43 AM CT

Cameco — one of the world’s largest uranium producers — reported on Friday a quarterly loss and cuts to its production outlook due to weak uranium prices.

The Saskatchewan-based company reported net losses of $124 million this quarter, and adjusted net losses of $50 million. That’s compared to a profit of $142 million at the same time last year.

“There has been little change to the market and we continue to face difficult conditions, with the average year-to-date uranium spot price down about 20 per cent compared to the 2016 annual average,” said president and CEO Tim Gitzel.

Revenue for the company fell 27 per cent this quarter, from $670 million in 2016 to $486 million for the three months ended Sept. 30.

The company’s uranium production volume and sales volume has also fallen. Cameco posted 3.1 million pounds of uranium produced for this year’s quarter, compared to 5.9 million pounds this time in 2016.

However, sales volume has only fallen one per cent from 9.3 million pounds last year to 9.2 million pounds this year.

Cameco also lowered production outlooks for the year from 25.2 million pounds to 24 million pounds, due to production delays at the Key Lake mine.

Cameco expects 2017 net earnings to be weaker than in 2016, but Gitzel said they continue to generate solid cash flows and expect them to exceed the $312 million reported in 2016 despite weaker earnings.




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


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.


“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)

Rick Rule, President and CEO of Sprott on Uranium Markets

Interview with Rick Rule, President and CEO of Sprott U.S. Holdings Inc.


Sept 24 2017

Rick Rule CEO of Sprott

Once again I had the pleasure of catching up with Rick Rule, and in this interview we talked about the Uranium market, Bitcoin, Gold, and the lessons he learned from his early mentor Peter Cundill. Enjoy!

Hi Rick, welcome back to The Next Bull Market Move. I’d like to start the interview with a question about one of your early mentors, Peter Cundill.

I understand he was an early mentor of yours at the beginning of your career, and I have recently been reading the book ‘There is always something to do’ which is about his investments and how he invested. What were the most valuable lessons your learned from him?

During the period of time that I was learning from Peter, he was focused on deep value opportunities of two primary types; net nets (companies where current assets exceeded all liabilities, and market cap) that were operationally cash flow positive, and companies with hidden, mispriced or redundant assets.

Peter loved closely held timber companies whose forest lands were selling for half of market value, or had real estate development potential. He called the cash flow positive net- nets, free bonds, meaning that you got the cash generating for free, after subtracting current assets from enterprise value.

Peter was of the habit of looking for extraordinary value, which was enabled by a tolerance for pain (a declining share price) and remarkable patience. He was not afraid to be right. Those bargains were seldom available in popular sectors, or favorable markets

‘Investors tend to follow trends and fashion rather that taking the trouble to look for value.’

This was a common theme of Peter’s, and a reason behind the long term success of most value investors. Most investors (maybe most people) believe themselves to be very cogent, rational beings, surveying the information landscape, accumulating facts, and weighing them objectively to reach reasoned conclusions.

Wrong! Most folks search for information that affirms their existing paradigms and prejudices, they look for justifications for comfortable narratives. Hence, trends in motion stay in motion, long after the circumstances that caused the trends cease to exist.

Value investors, including Peter, and certainly myself, are repeatedly guilty of the same sin, but we are taught to try to recognize it and guard against it. Peter’s guard was particularly successful, he was a pathological cheapskate, so he had a quantitative guard against fashion.

What are your thoughts behind Bitcoin and cryptocurrencies as a speculation? Will this space eventually turn into a dotcom mania like the late 1990’s?

Kerem, I’m the wrong one to ask, I don’t own a TV, and I can’t dress myself in stuff that matches! As a judge of popular culture, I’m your last choice.

That being said, I love the sector, in many regards. The technology, the “block chain” and the distributed ledger have the possibility to make many aspects of human culture, but particularly commerce and trade, much more efficient, while eliminating many of the supposed needs for government regulation and taxation.

As currencies, I’m a consumer of currencies, and mediums of exchange, and stores of value. A multiplicity of choice, competition between various currency systems to serve me better, is something I enjoy!

The ability to create and market an algorithm, and market it as a dream, converting the promoters ability to market the dream, in return for other peoples earned wealth will attract some very smart, and likely stupendously successful scam artists, who just like central bankers, will bill savers and investors out of billions of other currency units. Governments hate this, they want a monopoly on fraud and extortion, but in this circumstance, they are entering into a battle of wits, under armed.

Once again, the sentiment surrounding Uranium has fallen into pessimism and despair. Speculators have left the scene since the big run up we had at the beginning of the year. It seems to me that for the most part, investing early in bull markets involves patience and being able to handle a certain amount of boredom. When a market does nothing, no one is interested. When a market is rising, everyone is interested. Is Uranium following a similar path to the previous bull market you speculated in?

The early run up in uranium equities was a very interesting phenomenon in that it occurred on very low volume. I think two forces were at play. One, I believe a three year “bear market” wore out the sellers, they were out of inventory, and the shares had moved to stronger hands. At the same time, speculators with longer memories, of the last bull market, began to accumulate, in hopes of a repeat. The companies, stumbling on a funding window, which could and did save the sector from extinction, drowned the buyers in an avalanche of freshly issued equity.

I believe we need a period of sustained Japanese reactor restarts in order to have a uranium price response in the next two years. By 2020, the problem takes care of itself. Ironically, the longer it takes for the market to re-balance, the wilder the probable upside ride is on recovery. When you destroy productive capacity, which is what extended “bear markets” do, the industry is unable to respond to price increases by increasing supply, and we get those spectacular price spikes, like we did in the early part of the last decade.

What are your current thoughts on gold? Is the pullback we had over the last few years over?

My belief is that the most important factor in the gold price, is global faith in the purchasing power of the US dollar, and faith in US Treasury securities. The most important measure of this faith, that I’m aware of, is the US 10 year treasury yield, and more importantly, the delta between the 10 year, and the TIP.

If you have observed what I have observed, that gold trades inversely with the US 10 year treasury, and you observe that the US 10 year treasury has been in a 35 year “bull market”, with the yield falling from 15% to 2%, you might believe that the bond “bull market” is closer to the end, than to the beginning. If that is the case, gold, which I believe trades inversely, may be in a “bull market” which is closer to it’’s beginning, than it’s end.

Applying Cundill’s logic to the US 10 year treasury, it is simply not cheap enough to be attractive. Jim Grant refers to it as “return free risk”. I think gold will prevail over that type of competition.

Better yet, the gold quote has done better over the last twelve months, that the gold equities, and I believe the gold equities are poised to catch up.

And finally, give us an update on what Sprott is up to, and how investors can get in touch?

Sprott continues to refashion itself as a global merchant bank, and investment manager focused on natural resources and precious metals. We sold our broader market Canadian mutual fund business to that unit’s employees, which freed up a lot of capital, and sharpened our focus. We have a superb balance sheet (over $300,000,000 in working capital, with no debt), a very resilient business (we generated free cash flow in a sector where the most relevant measurement metric, the TSXV index declined by almost 90%,) and we manage to pay a 5.5% dividend on our common stock. Imagine what we can do in a favorable market.

We manage or administer in excess $10,000,000,000 on behalf of individuals and institutions worldwide, focusing on the sectors where we have spent three decades building our knowledge, and our brand; natural resources, and precious metals.

We would love for investors to visit our website and to stay subscribed to our free blog, “Sprotts Thoughts”, a journal of the best ideas inside and outside our organization.

As an added inducement to visiting us, if your readers will email me ( a copy of their natural resource portfolio, in text, not as an attachment, with both security name, and symbol, I will rate and comment on those portfolio companies, for free, and send my response back, by email.

Many thanks Rick.

Thanks for the visit.

The Next Bull Market Move

As Rick mentioned, feel free to contact him at for a no obligation portfolio ranking.

Here is Rick’s full Bio :

Rick’s twitter account: @RealRickRule

Here is the Sprott US media YouTube channel:




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


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.




Hurricane Harvey Makes The Case For Nuclear Power

Hurricane Harvey Makes The Case For Nuclear Power

SEP 1, 2017 @ 06:00 AM


Forbes at

Harvey over Houston

NASA satellite images show NASA-NOAA’s Suomi NPP satellite image of Tropical Storm Harvey sitting over Texas and the two nuclear reactors at the South Texas Project Nuclear Operating Company near Houston.

Hurricane Harvey made land fall in Texas this week and the flooding was historic. What is shaping up to be the most costly natural disaster in American history, the storm has left refineries shut down, interrupted wind and solar generation, caused a constant worry about gas explosions, and caused a chain of events that led to explosions and fires at the Arkema chemical plant that is only the beginning.

Over a fifth of the country’s oil production has been shuttered. Natural gas futures hit a 2-year high as did gasoline prices at the pump.

But the Texas nuclear power plants have been running smoothly.

The two nuclear reactors at the South Texas Project plant near Houston were operating at full capacity despite wind gusts that peaked at 130 mph as the Hurricane made landfall. The plant implemented its severe weather protocols as planned and completed hurricane preparations ahead of Category 4 Hurricane Harvey striking the Texas Gulf Coast on August 25th.

Anyone who knows anything about nuclear was not surprised. Nuclear is the only energy source immune to all extreme weather events – by design.

This nuclear plant has steel-reinforced concrete containment with 4-foot (1.2 meter) thick walls. The buildings housing the two reactors, vital equipment and used fuel have steel-reinforced concrete walls up to 7 feet (2.1 meters) thick, which are built to withstand any category hurricane or tornado. It can even withstand a plane flying directly into it.

Houston reactors

The two nuclear reactors at the South Texas Project Nuclear Operating Company near Houston, Texas has been operating at full capacity on Tuesday throughout the historic flooding and winds caused by Hurricane, then Tropical Storm, Harvey. Despite wind gusts that peaked at 130 mph as Harvey made landfall.

The plant is located 10 miles (16 kilometers) inland and at an elevation of 29 feet (8.8 meters) above sea-level. The facility is designed with watertight buildings and doors, with all buildings housing safety-related equipment being flood-proof to an elevation of at least 41 feet (12.5 meters).

‘We’ve got significant rain but flooding has not been an issue here,’ plant spokesman Buddy Eller said in a phone call about the reactors.

That the nuclear plant is just fine seemed to irk anti-nuclear groups who don’t want to see nuclear ever performing well, even if it helps the storm-wracked people of south Texas when other power sources are failing.

Three watchdog groups, the Sustainable Energy & Economic Development coalition (SEED), the South Texas Association for Responsible Energy and Beyond Nuclear recklessly urged politicians, the owners, and regulators to shut down the plant because of Harvey, even if it hurt residents, emergency workers and hospitals who desperately need that power.

But the regulators and the State would have none of that nonsense, understanding that these groups just peddle fear. The reactors provide 2,700 MW of power to 2,000,000 customers in the area.

U.S. Nuclear Regulatory Commission (NRC) staff are at the plant, constantly assessing the situation and safety aspects. ‘The South Texas Project reactors have been operating safely throughout Harvey and continue to do so,’ NRC spokesman Scott Burnell said. The reactors can be shut down quickly if something develops, but that’s not expected to be necessary.

Two-hundred and fifty storm crew workers, along with regulators, were running the plant and were set up with sleeping arrangements, food and water to weather the storm no matter how long it took. None of them were afraid, knowing how safe the reactors are.

No other industry was as prepared.

According to the online news source North American Wind Power, one large wind installation in the path of the storm sent all 39 workers home as the hurricane closed in, but operated remotely until the wind hit 55 mph. It then shut down automatically like all farms when wind speeds exceed their design limits. Most wind farms have not sustained much damage, but getting them back to capacity will be difficult.

The Nuclear Regulatory Commission also said Harvey does not pose a threat to the Waterford Nuclear Power Plant in New Orleans and the River Bend Plant near Baton Rouge.

We’ve seen this before. Last summer, a heat wave cooked Americawith extreme temperatures, affecting most energy production as well as causing fires and water shortages, sucking electricity like crazy to power the cooling necessary to avoid discomfort and even death. According to the National Weather Service, 122 million Americans were under heat alerts.

Fortunately, nuclear power didn’t mind, scoring record capacity factors of 96% and up, with no increase in price. Other energy sources did not fare so well and some gas plants gouged consumers just because they could.

In 2014, a Polar Vortex shut down natural gas and coal plants, and stopped wind turbines and solar generation. But nuclear performed wonderfully and provided more power to the hard-hit northeast than any other source.

Whether it’s hurricanes, floods, earthquakes, heat waves or severe cold, nuclear performs more reliably than anything else. There’s no better reason to retain our nuclear fleet, and even expand it, to give us a diverse energy mix that can handle any natural disaster that can occur.




Canada’s biggest threat to meeting GHG targets? Reluctance of Canadians to change their lifestyles

Canada’s biggest threat to meeting GHG targets? Reluctance of Canadians to change their lifestyles

Aug. 25, 2017

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Image: iStock

Canadians pay among the lowest prices for electricity in the world, and the chair of a Senate committee that has been holding fact-finding get-togethers with citizens who benefit economically from those low rates isn’t sure they’re willing to pay what Europeans do to decarbonize the country’s power sector.

“Environmentalists say we should be like Denmark and Germany,” says Sen. Richard Neufeld, a former B.C. provincial politician who chairs the Standing Senate Committee on Energy, the Environment and Natural Resources. The committee has been holding meetings on university campuses and elsewhere across Canada to gather information for a series of interim reports. It will release a final report later this year or in early 2018.

“Citizens of Denmark and Germany pay 45 cents a kilowatt-hour for electricity, compared to an average in Canada of eight to 10 cents. If consumers in Canada had to pay that, there would be a revolution,” Neufeld says.

Neufeld points to Ontario, where electricity rates have doubled since the provincial government phased out all coal-fired power and provided heavy subsidies to bring on more solar, wind and other more costly options, as what could happen in the rest of Canada if power rates skyrocket. The Liberal government in that province, which phased-out coal and turned to costlier alternatives, has consistently trailed badly in the polls.

The committee released a 59-page report, Positioning Canada’s Electricity Sector for a Carbon Constrained Future, in late March.

Neufeld, who was the mayor of For Nelson before serving as the MLA for Peace River North from 1991 to 2008 then being appointed to the Senate in 2009 by former prime minister Stephen Harper, should know how voters in Canada can react to governments they believe are no longer responding to their needs. The former Liberal B.C. government, which he represented in several cabinet posts, including as minister of energy, mines and petroleum resources, recently lost an election to a coalition of the New Democrats and the Greens after more than 15 years in power.

Neufeld, who represented an area of B.C. that is very economically reliant on oil and gas development and owned an energy-related business in the region, is unabashedly pro–fossil fuels.

He’s also concerned about the radical economic shift that would be required to meet Canada’s Paris Agreement commitment to cut CO2 emissions by 30 per cent by 2030 and what that would “hit Fred and Martha [i.e., average Canadians] in their pocketbook.”

He has said policymakers “must be mindful of passing down…costs to consumers and making it unaffordable.”

The committee’s deputy chair, Quebec-based Sen. Paul Massicotte, a former business executive who was appointed to the Senate by former Liberal prime minister Jean Chrétien in 2003, is more of an optimist about reaching the goal. It would require Canada, on track to emit 742 megatonnes of CO2 by 2030, to remove 219 megatonnes from its annual emissions toll.

Commenting on another report released by the Senate committee, Decarbonizing Transportation in Canada, he says “some minor changes to how we travel and how we ship goods could have a significant impact on our greenhouse gas emissions.”

Neufeld is not so sure.

“The rest of the world calls us energy hogs,” he says, but, given Canada’s climate, its extensive land mass and other factors, it’s unavoidable that Canadians will use more energy than more populous nations with a smaller geographic footprint.

“You can drive across Germany and Switzerland in a day,” he says. “You can’t do that in Canada.”

He says many of the younger Canadians the committee met with on university campuses, as well as the professors, hold an unrealistic view of the country’s electricity sector. “The students and professors all wanted to shift radically to the use of renewables, such as solar,” he says. “But how realistic is that in the Arctic, where they don’t get any sun for several months during the winter?”

In fact, according to the Senate report on Canada’s electricity sector, the country already has one of the cleanest power sectors in the world, with 80 per cent of its electricity coming from sources that do not emit greenhouse gases (GHGs). Almost 60 per cent of the country’s power comes from hydro, with nuclear power providing 16 per cent, and wind, solar and other renewables about 3.5 per cent.

The GHG-emitting power sources—which include coal-fired power, now being phased out in most parts of the country, and natural gas–fired power—are responsible for most of the remaining electricity.

Because Canada has such clean power sources, power is only responsible for 11 per cent of the country’s GHGs. It’s also only responsible for 2.5 per cent of global electricity consumption. In 2014, Canada used 550 terawatt-hours of power, with the industrial sector responsible for 43 per cent of total consumption and households for 33 per cent.

The Senate report highlights some steps that could be taken to make the power system even cleaner and more efficient, including the development of “smart grids” and power-sharing between provinces and between the U.S. and Canada.

The move toward a national carbon tax, along with regulations to phase out coal-fired power, will also lead to a lower carbon footprint from the sector, the report concludes.

But Neufeld, a conservative who worries about the impact of any further moves to decarbonize one of the world’s lowest-carbon power systems, insisted the Senators add that any such steps should be taken without creating “undue hardship” for Canadians from an economic standpoint.

“You can always do more,” says Neufeld, but he adds that Alberta and Saskatchewan, where much of the thermal power use in Canada is generated, simply have no logical alternative.

“They have very little hydro potential,” so they need to use fossil fuels.

Alberta has committed to shutting down its coal-fired plants by 2030, and Saskatchewan is also moving in that direction. While renewables will play an increasing role in those provinces, Neufeld says the shift should be gradual “without disrupting their economies.”




BHP’s New Chairman Heralds Era of Tougher Focus on Spending

BHP’s New Chairman Heralds Era of Tougher Focus on Spending

By  David Stringer

August 22, 2017, 6:02 PM CST August 23, 2017, 2:43 AM CST


BHP Billiton Ltd.’s moves to ditch its U.S. shale assets and halt a rush into the potash market signal an era of more disciplined spending under the top miner’s incoming chairman.

Montreal-born Kenneth MacKenzie, 53, who takes up the post next month, is viewed by investors and analysts as more likely to focus on investment returns, after influencing BHP’s decisions to exit shale and delay proceeding on the $4.7 billion first phase of the Jansen project in Canada.

“They are talking more now about prioritizing projects based on return on capital,” according to Craig Evans, a Sydney-based portfolio manager at Tribeca Investments Partners Pty., a BHP shareholder and one of the miner’s more vocal critics in recent months. “I’d like to think this is the emergence of a bit more rigor on capex — and that’s coming from the new chairman.”

MacKenzie, appointed to BHP’s board last September and credited for doubling the market value of Australia’s largest packaging company, Amcor Ltd., in a decade-long spell as chief executive officer that ended in 2015, has met in recent weeks with more than 100 investors on a global tour that’s taken in Australia, the U.S. and the U.K.

A willingness to listen to shareholders was again apparent in board changes announced Wednesday. Grant King, the ex-Origin Energy Ltd. CEO appointed as a director in March, decided not to stand for election later this year “owing to concerns expressed by some investors,” according to a BHP statement. Fellow director Malcolm Brinded also opted to step down from October.

The producer’s strategy shift shows “an emergence of the rhetoric we’re going to see from Ken, in terms of where things are going to need to sit on the priority scale to have capital allocated to them,” Tribeca’s Evans said in an interview Tuesday. Melbourne-based BHP declined to comment.

BHP’s shares added 0.2 percent to A$26.04 in Sydney on Wednesday. Its bonds also climbed, with the 750 million euros of hybrid notes rising almost 1 cent on the euro to 119 cents, the highest since they were sold in 2015, according to data compiled by Bloomberg. The company’s 3 percent bonds due in May 2024 climbed almost 1 cent to 116 cents, the biggest gain in more than a year.

BHP’s CEO Andrew Mackenzie set out plans to improve returns and capital allocation in a speech in May 2016 and insisted Tuesday in an interview with Bloomberg Television that the decisions on shale and potash had been under consideration for several years, and weren’t a response to investor activism.

Paul Singer’s Elliott Management Corp., which began a public campaign in April urging BHP to overhaul its portfolio and boost payouts, last week backed MacKenzie as a chairman likely to heed shareholders’ calls for improvements. Elliott didn’t respond to a request for comment.

While BHP forecasts capital expenditure will rise about a third to $6.9 billion in the 12 months through June 2018, it has pledged to hold project spending to less than $8 billion annually through 2020, a fraction of the $23 billion total it deployed at its peak in 2013.

Show Caution

The producer should toughen its spending criteria and only develop projects that will deliver returns above 15 percent, Sydney-based Deutsche Bank AG analyst Paul Young said in a report last week. Aside from mothballing Jansen, BHP should also show caution on a potential $5 billion expansion of the Olympic Dam copper mine in Australia, according to Young.

BHP wants to improve the company’s average return on capital employed to about 20 percent by fiscal 2022 from 10 percent in the year ended in June, Chief Financial Officer Peter Beaven said Tuesday in a presentation. “There is still much more to be done, and this is where we’re focusing our efforts,” he told analysts on a conference call.

 BHP capital returns Aug 2017

MacKenzie’s appointment to replace Jacques Nasser, who has led the miner’s board since 2010, shows “a radical shift in strategy,” Sanford C. Bernstein Ltd.’s London-based analyst Paul Gait wrote in a note last month.

“It’s difficult not to see that in some of these changes,” Gait said by phone on Tuesday. “A focus on returns, on better capital allocation and tighter investment criteria are going to play a huge role on his watch.”

“That’s what he is known for — his reputation is predicated on maximizing returns on capital, and holding management teams to account,” said Gait.

Wesfarmers Ltd.’s outgoing finance director Terry Bowen and ex-BP Plc executive John Mogford will be appointed to BHP’s board from October, the producer said in its statement Wednesday. Bowen’s tenure at Wesfarmers has been noted for “a focus on improved cashflow and cost efficiency,” BHP said.

Ex-Royal Dutch Shell Plc exploration chief Brinded, a BHP director since 2014, chose to stand down as a result of “ongoing legal proceedings in Italy relating to his prior employment,” BHP said. Shell and Eni SpA are the subject of scrutiny over the acquisition of an offshore oil field in the Gulf of Guinea.




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