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the guy who does the daily aggregation of articles for ASPO (assoc study of peak oil, ex CIA analyst tom whipple, has link to intriguing articlethat posits that oil companies have been divesting of oil fields and essentially 'renting" as they are rapidly declining assets
A Must Read: Guest Post by Ian Walker | Sifferkoll®
"....If you had been taking any notice you would have seen Big Oil have been selling of theirOil Fields and getting out of the oil field asset ownership market since September 2011.Is what I am writing true?
Why would they believe the Fossil Fuel Age has ended?
It is basic due diligence to find out what the big players are doing. So do a Google search for any oil company name and the phrase ”Oil field” and the words divest or sell. You will see evidence like the following: SHELL
Shell has been on a massive divestment strategy on its oil field assets, from Africa to the Far East since September 2011, though as it was already tracking the Black Swan...." and on. (it does go into LENR speculation but the divestiture seems real)(LENR low energy nuclesr reactors) and this is why prices are crashing
Some nice news from New York:
BUFFALO, N.Y. -- SolarCity's facility in Buffalo is expected to create about 3,000 jobs, but Wednesday, Senator Charles Schumer said there's potential for even more. He was in town talking about solar energy, and more specifically, a way to help companies better use a solar tax credit they already qualify for.
Schumer said currently, solar energy accounts for less than one percent of all U.S. electricity production.
"Our country has set a goal of 28 percent of our energy coming from renewable sources, solar, wind and others by 2030, so we have a long way to go, but that means more jobs, and more solar panels right here," said Schumer, D-New York.
Schumer said an important change needs to be made to the 30 percent federal solar investment tax credit; to incentivize businesses to start solar energy projects.
"The problem is, you can't take the credit til the deal is finished, so if it's a three-year project and I'm putting solar panels on my property, I've got to wait the three years."
Schumer is instead calling for the solar credit to follow the same rule as the wind credit, which would make it available to businesses and developers when their project begins.
Another problem is the tax credit is scheduled to expire at the end of next year, so Schumer wants to see it renewed for as long as possible, to benefit companies like SolarCity.
"We're always preparing as a company for the eventuality that the tax credit were to drop down or go away, but if folks want to see the jobs continue, the expansion and lowering of costs that come with scale, this is the most important policy for the entire solar industry," said Scott Hennessey, Regulatory Counsel and Federal Policy Director for SolarCity.
Schumer said he's going to use all his clout in congress to make this happen.
"This will help secure the domestic market that the panels from this plant will serve," said Hennessey.
BUFFALO, N.Y. -- SolarCity's facility in Buffalo is expected to create about 3,000 jobs, but Wednesday, Senator Charles Schumer said there's potential for even more. He was in town talking about solar energy, and more specifically, a way to help companies better use a solar tax credit they already qualify for.
Schumer said currently, solar energy accounts for less than one percent of all U.S. electricity production.
"Our country has set a goal of 28 percent of our energy coming from renewable sources, solar, wind and others by 2030, so we have a long way to go, but that means more jobs, and more solar panels right here," said Schumer, D-New York.
Schumer said an important change needs to be made to the 30 percent federal solar investment tax credit; to incentivize businesses to start solar energy projects.
"The problem is, you can't take the credit til the deal is finished, so if it's a three-year project and I'm putting solar panels on my property, I've got to wait the three years."
Schumer is instead calling for the solar credit to follow the same rule as the wind credit, which would make it available to businesses and developers when their project begins.
Another problem is the tax credit is scheduled to expire at the end of next year, so Schumer wants to see it renewed for as long as possible, to benefit companies like SolarCity.
"We're always preparing as a company for the eventuality that the tax credit were to drop down or go away, but if folks want to see the jobs continue, the expansion and lowering of costs that come with scale, this is the most important policy for the entire solar industry," said Scott Hennessey, Regulatory Counsel and Federal Policy Director for SolarCity.
Schumer said he's going to use all his clout in congress to make this happen.
"This will help secure the domestic market that the panels from this plant will serve," said Hennessey.
Interesting. Looks like building that plant in Buffalo might end up being an important political card on SCTY's hand, possibly more important than its pure economic implications.
jhm
Well-Known Member
The divestiture idea seems credible, but the LENR thesis is too far into conspiracy theory for my taste. It is simply irrelevant if some new energy source could emerge and fully power the earth by 2045 because this is the same timeline in which solar and wind can do the same thing, and these technologies are already having a direct economic impact.
Furthermore, the economics currently at play are sufficient to motivate astute investors to divest from oil. Consider that natural gas has entered a period of rapid price decline from mid-2008 through 2011. While oil and coal recovered from the oil crisis in 2008, natural gas continued to decline. During the recovery from 2009 to 2011 oil & gas and coal industry rebounded coming to a bubble in mid-2011. At that point in time, coal went into perpetual decline as coal sunk toward parity with natural gas. But also at that point oil & gas began to recover and climb. The important thing hear is that big oil got to witness what was happening to coal. The glut of natural gas was undercutting the price of coal. At this point an astute oil investor could read the writing on the wall. Oil would enjoy a few more years good prices while coal was gutted, but after after that transition, natural gas would continue to fall and undermine the price of oil. To be clear, in 2011 the price of oil was about 4 times higher than the price of natural gas on a per unit of energy basis. That kind of premium cannot last for ever.
Now we have to wonder why would the oil & gas industry rush headlong into a natural gas glut. Was there a deliberate aim to create a natural gas glut or did it just happen as the result of competitive forces? I don't think we need to invent some secret energy technology here. Rather, the threat of solar and wind was quite real. All sorts of alternative energy investments were flourishing through the energy crisis of 2008. We were in the midst of an oil war while the high price of all energy sources was throwing the global economy into a massive recession. We simply could not afford for energy to get so expensive that it destroyed productivity. So it is plausible to me that creating a natural gas glut could have been a strategic move to put the breaks on renewable energy. Specifically solar had been declining in cost per Watt by about 15% per year. So it was just a matter of time before the electrical market would be breached. This prospect would undermine the economics of conserving reserves holding out for a high price. In 2008 it could have been surmised that natural gas had only about 15 years left in the electrical market. Rather that watch untapped reserves lose value in the face of solar, the gas industry may have decided that they must bring as much reserves to market as possible within the time of economic relevance. If natural gas could undercut coal, it would serve two purposes. First it would bring those reserves to market. Second it might just slow down the advance of solar and wind. So this is the economics of divestment and it really requires no conspiracy to explain the phenomenon.
So the gas industry began to flood the market in 2008. In the US the oil industry begins ro frack like there's no tommorow. The coal industry gets undercut and enters perpetual decline in 2011. In 2014, the Saudis stop supporting the price of oil, and the economics of divestment are in full swing. Refiners will keep the price of gasoline and diesel high for as long as they can. Utilities will keep the retail price of electricity high as long as they can. But plug in vehicles and rooftop solar are really the only foil to their plan.
So the economics of divestment are upon us. The fossil industries are just trying to slow the pace of transition, but this is how we know we are winning. We don't need to get neutralized by conspiracy theory. The truth is out there with plenty of sunlight shining on it.
jhm
Well-Known Member
Oil and parity with natural gas
Today WTI crude oil closed at $40.70/bbl and natural gas at $2.71/MBtu.
So what price of oil would be a parity with natural gas per unit of energy? Well, the energy in a barrel of crude, the Barrel of Oil Equivalent (BOE), is 5.8 MBtu. Thus natural gas is $15.72/BOE = 5.8 MBtu/BOE × $2.71/MBtu.
So let's jus round this up and say that for about $16 of natural gas you can get the same amount of energy in one barrel of oil for about $40. Oil is trading at 2.5 times the price of natural gas per unit of energy, and this is not even considering the refining costs and additional energy needed to make usable fuels out of crude. Crude would need to drop another 60% to reach parity with natural gas. Differences in the distribution and refining costs may preserve some premium of oil over gas, but clearly there are opportunities to save money by switching from using oil based technologies to natural gas or electricity based technologies. Thus, substitution will continue to drive down demand for oil.
Today WTI crude oil closed at $40.70/bbl and natural gas at $2.71/MBtu.
So what price of oil would be a parity with natural gas per unit of energy? Well, the energy in a barrel of crude, the Barrel of Oil Equivalent (BOE), is 5.8 MBtu. Thus natural gas is $15.72/BOE = 5.8 MBtu/BOE × $2.71/MBtu.
So let's jus round this up and say that for about $16 of natural gas you can get the same amount of energy in one barrel of oil for about $40. Oil is trading at 2.5 times the price of natural gas per unit of energy, and this is not even considering the refining costs and additional energy needed to make usable fuels out of crude. Crude would need to drop another 60% to reach parity with natural gas. Differences in the distribution and refining costs may preserve some premium of oil over gas, but clearly there are opportunities to save money by switching from using oil based technologies to natural gas or electricity based technologies. Thus, substitution will continue to drive down demand for oil.
BoerumHill
not great not terrible
Rough day for the sector. CSIQ beat estimates but got hammered -20% off weak guidance. Like most shoppers I love a good discount & accumulated a little more today.
Patience is a prerequisite for owning SCTY. Great story, love the long view.
Re: Buffalo story upthread - Chuck Schumer may not be everyone's cup of tea, but by category definition the senior Senator from NY carries clout. He bikes around Brooklyn virtually every weekend; you can expect him to be a champion of alternative energy & sustainable transport
Patience is a prerequisite for owning SCTY. Great story, love the long view.
Re: Buffalo story upthread - Chuck Schumer may not be everyone's cup of tea, but by category definition the senior Senator from NY carries clout. He bikes around Brooklyn virtually every weekend; you can expect him to be a champion of alternative energy & sustainable transport
@JHM
you can look at the data on the ?exponential? growth of wind and solar in the last decade where you need semilog paper to graph a straight line. (I have been a firm beliverer in PV since way back in time and the "Douglas-Martin Sunscreens" and have had PV on my roof since 1999, and beklieve with my money
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@JHM, et. al. have you read the paper, "the economics of load defection" by RMI http://www.rmi.org/electricity_load_defection (free download) nice study on PV and batteries ala SCTY (apologize if previously mentioned)
I agree. I apologize for being remiss in not saying stop reading when you hit the line about LENR. the data for oil field divestiture seemed OK. something is going on.
you can look at the data on the ?exponential? growth of wind and solar in the last decade where you need semilog paper to graph a straight line. (I have been a firm beliverer in PV since way back in time and the "Douglas-Martin Sunscreens" and have had PV on my roof since 1999, and beklieve with my money
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@JHM, et. al. have you read the paper, "the economics of load defection" by RMI http://www.rmi.org/electricity_load_defection (free download) nice study on PV and batteries ala SCTY (apologize if previously mentioned)
TheTalkingMule
Distributed Energy Enthusiast
"We know we're winning"
Precisely. All the age-old alliances are breaking down in front of our eyes and the rats are scurrying purely in self-interest. OPEC is unhinged, we're barely talking to the Saudis. Once the world has had ample time to educate itself on all the options and the implications of those options, it's over.
The next great piece of entertainment will be watching the monied interests fight over financing distributed renewables before the traditional capitalist model breaks down. If there's no energy source to hoard, how am I going to hoard at all? BUY! BUY! BUY!
Precisely. All the age-old alliances are breaking down in front of our eyes and the rats are scurrying purely in self-interest. OPEC is unhinged, we're barely talking to the Saudis. Once the world has had ample time to educate itself on all the options and the implications of those options, it's over.
The next great piece of entertainment will be watching the monied interests fight over financing distributed renewables before the traditional capitalist model breaks down. If there's no energy source to hoard, how am I going to hoard at all? BUY! BUY! BUY!
Those are important comparisons to remember, Jim, but it's also critical to keep in mind where substitutions can be made. There are in North America, for example, very few electrical generating stations that haven't switched to nat gas from diesel or other crude derivatives {am excepting the many thousands of 3-50kW generators we still have scattered throughout Alaska - am listening to my neighbor's as I type this....
}. So where is substitution still possible?
*Fuel oil for space heating does remain important in some parts of the continent: northeast US, a little of eastern Canada, Alaska again. The construction of gas pipelines, from arterial down to home delivery, is however far more difficult (read: expensive) in long-developed regions than it has been where tens of millions of homes have been erected in the vast subdivisions of the post WWII era. That expense is an ever-present significant barrier to entry for the competing product.
*The revolution to turn esp. the US trucking industry to LNG definitely is one area where substitution could play a role; the most formidable player, however, Boone Pickens's Clean Energy Inc. (CLNE), has gotten almost nowhere in well over a decade of trying.
jhm
Well-Known Member
Yes, this is the basic theory. I'm still working out details.
My analysis suffers from the fact that I was using ETFs as a convenient way to prices. Unfortunately, UNG and USO are subject to contango, where futures prices tend to be at a premium to expected spot price. So these EFTs lose value more quickly than spot prices. So natural gas prices in 2015/7 fell to 2.84 from 4.63 five years earlier, a decline of 39%, while UNG fell to 13.04 from 51.024, a decline of 74%. Sellers of future obtaining an annual yeild of about 19% over the five years. Some of this yeild may be justified as storage costs, but I also suspect that this yield has also helped finance gas development and production.
This sort of contango also impacts USO and crude. By any metric however natural gas and oil have been falling, so the qualitative argument I have made is still intact. The basic idea is that if you are sitting on 50 years worth of reserves and a technology comes along that can make these reserves worthless in 20 to 30 years, you start drilling like there's no tommorow.
Its funny when watching the NV legislature video (in may) over the Nevada cap issue, the key proponent of the bill said they picked dec 31 date because the rooftop solar people they would hit the cap BY September and NV Energy said solar would hit the cap by March 2016. She she split the difference and chose dec 31. It is mind boggling how incompetent they are in Nevada. They just decided to split the difference instead of hearing the reasons why solar said BY September they will hit the cap(which has clearly happened). More deviously, NV energy said March 2016, when clearly that was massively way off. That's the fundamental problem of one company controlling the energy business of a state. They can say and do whatever they want and no one can challenge the validity, now they've purposely put local jobs at stake for their unlawful gain. The cap is now set to be hit on Saturday, which I'm betting it will be hit Friday or maybe even today. They are supposed to come up with an interim solution on Friday, so will be a very significant decision in a very real immediate way with significant consequences literally the moment the decision happens. If they continue with the current net metering rate, then solar sales continues as normal right away. If not, immediate layoffs will happen on Friday... You just can't support a sales infrastructure for current growth rates with no sales happening anymore, so the lay offs will come rapid fire. This entire conflict and crisis was manfuctured and supported by the NV legislature and including the Governor for not stepping A LONG time ago. This has antitrust written all over it. Not just that, it also has interstate commerce written all over it. The state of Nevada could see federal funds being frozen and or discontinued as a result in my opinion.
Arizona is now going to start its hearing process. Two of the new commissioners were given $3mln by the utiltiy for their campaigns for election... How perverse is that the utitlity can fund campaigns of the very people that are "elected" to oversee their conduct and protect consumers? Low and behold, both these commissioners voted against the solar supported and logical decision to conduct any rate changes for solar under.... Wait for it... The upcoming rate case review! Arizona has anti trust written all over it just for this reason alone. Ironic that ARizona is supposedly about free markets and free people, but yet is bought and does the bidding of unfree market monopoly that cares only for a few not Arizona's rate payer.
We we ought to see how APS plays this "hearing process." If rooftop solar is able to have an independent study conducted to evaluate the cost/benefit then they will surely win the net metering debate. If the utiltiy is able to control the cost/benefit study then it's a forgone conclusion, solar will be shutdown in he state. TEP has already started intimidating their rate base by sending out messages saying if you go solar, you may not be grandfathered and have to pay the new solar rates of you do(which is absolutely false and untrue). The commission just slapped them on her wrist and said don't do that... This is a clear breach of consumer rights and should have been fined and ordered to message all rate payers on what thy did. But yet nothing. This clearly a hostile environment condoned by he commission, legislature, and governor. Again, antitrust and commerce clause written all over it.
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jhm
Well-Known Member
Those are important comparisons to remember, Jim, but it's also critical to keep in mind where substitutions can be made. There are in North America, for example, very few electrical generating stations that haven't switched to nat gas from diesel or other crude derivatives {am excepting the many thousands of 3-50kW generators we still have scattered throughout Alaska - am listening to my neighbor's as I type this....
So where is substitution still possible?
*Fuel oil for space heating does remain important in some parts of the continent: northeast US, a little of eastern Canada, Alaska again. The construction of gas pipelines, from arterial down to home delivery, is however far more difficult (read: expensive) in long-developed regions than it has been where tens of millions of homes have been erected in the vast subdivisions of the post WWII era. That expense is an ever-present significant barrier to entry for the competing product.
*The revolution to turn esp. the US trucking industry to LNG definitely is one area where substitution could play a role; the most formidable player, however, Boone Pickens's Clean Energy Inc. (CLNE), has gotten almost nowhere in well over a decade of trying.
This is all true, but in a near zero sum game a few points of net substitution and really move prices. Certainly distribution costs drive a lot of local costs and lock out some opportunities for substitution. It is curious, however, for remote communities where natural gas may be too expensive to import, distributed solar may have an advantage. So in communities where alot of diesel is used for generation, oil competes more directly with solar than with natural gas.
I'd also point out that natural gas and oil both compete as feedstock for chemical manufactures. So the energy value is close to the availability of hydrocarbons.In the extreme, gasoline and diesel can be made from natural gas. So with a lot of chemical processing, natural gas can compete in the transportation fuel markets. It comes down to the prices of the feedstock and the cost of processing. The point here is that natural gas compete in many different markets, and there are many different tipping points where substitution starts to make sense. So while the vast majority of demand may be locked into one source or another, substitution happens at the margins, and this is where the price is set. This is why, for example, the price for gasoline remains high relative to crude. Gasoline demand is pretty locked in, far from the marginal demand that is driving down the price of oil.
Bottomline, Nevada hitting the cap tomorrow is adding to the immediate downward pressure on Scty right now. I expect Friday will be no different. If they continue the current net metering system in the interim between Friday and dec 31st, the stock will rebound somewhat next week, in my opinion.
California is a different animal. They have litterally the strongest renewable mandate(next to Hawaii) in he country. They will not get there without a strong rooftop industry. Given the year+ of lead time to hitting the caps, Solarcity has a pathway to compel the california commission that the rooftop solar(and battery storage) is the fastest, most cost effective preferred way to to get to those 2030 renewable goals. It has the duel benefit of being better for the environment, way over extended water supply and the consumers wallet. Good for sustainability and for the California economy. With the growth happening right now coupled with the comprehensive white paper on a DG priority for the California energy delivery structure added to the highly pro sustainable political landscape... California looks to be a massive win for rooftop solar in the next rate case/design discussion with the commission. Of course, the California utitlies are going to attempt what is going on in Arizona and Nevada, but in the end the roof top solar industry will end up on top, in my opinion.
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Great discussion about the rate decisions coming down above, I really appreciate the in depth analysis.
Do people here think that at some point SUNE becomes a buy at this super heavy discount, and if so, how low do people think?
I'm probably going to be loading up on more scty this Friday, assuming a small pop next week, and the low price of SUNE has my attention as well.
Do people here think that at some point SUNE becomes a buy at this super heavy discount, and if so, how low do people think?
I'm probably going to be loading up on more scty this Friday, assuming a small pop next week, and the low price of SUNE has my attention as well.
Foghat, Everything you have written is very informational. I agree with your sentiment. But in reality SCTY looks to be in big trouble at least in AZ and NV and will be in trouble in more states.
Look at this way - EVERYBODY knows prohibiting manufacturers from directly selling cars to consumers is just not fair or right. But these laws protecting the dealers still exist. If anything they were strengthened as Tesla became popular. We cannot take any victory for guarantee based on "rightness". To make matters worse SolarCity just doesn't have the mass appeal that Tesla has, to encourage people to fight on their behalf. We are ultimately at the mercy of the regulators/commissioners, legislature and the governors.
My big hope is that Management will find ways around this one way or the other or look for opportunities elsewhere. At this point investment in SCTY is really just a vote of confidence in management (not necessarily tied to a specific business model).
As you can tell, I am pretty down on SCTY right now. But I'm going to just sit in for a few years and re-assess.
That's what I did with JASO. Everybody here knew since two years ago that it is very much undervalued. But unfortunately it stayed undervalued all along and is undervalued even now. After a point I had to give up and get out... I have two more years for SCTY. End of 2017 is make or break.
Look at this way - EVERYBODY knows prohibiting manufacturers from directly selling cars to consumers is just not fair or right. But these laws protecting the dealers still exist. If anything they were strengthened as Tesla became popular. We cannot take any victory for guarantee based on "rightness". To make matters worse SolarCity just doesn't have the mass appeal that Tesla has, to encourage people to fight on their behalf. We are ultimately at the mercy of the regulators/commissioners, legislature and the governors.
My big hope is that Management will find ways around this one way or the other or look for opportunities elsewhere. At this point investment in SCTY is really just a vote of confidence in management (not necessarily tied to a specific business model).
As you can tell, I am pretty down on SCTY right now. But I'm going to just sit in for a few years and re-assess.
That's what I did with JASO. Everybody here knew since two years ago that it is very much undervalued. But unfortunately it stayed undervalued all along and is undervalued even now. After a point I had to give up and get out... I have two more years for SCTY. End of 2017 is make or break.
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