Energy economics and rocket science with Casey Handmer(complexsystemspodcast.com)
complexsystemspodcast.com
Energy economics and rocket science with Casey Handmer
https://www.complexsystemspodcast.com/episodes/solar-economics/
44 comments
For those prefering a direct audio link:
<https://chrt.fm/track/993DGA/media.transistor.fm/bec9beab/c9...> (MP3)
<https://chrt.fm/track/993DGA/media.transistor.fm/bec9beab/c9...> (MP3)
Listened to this yesterday. Super enjoyable. Made the point that electricity in the future will be consumed much closer geographically to where it is generated than today - and so we probably don’t need huge interconnects - but much less close in time (because batteries).
This has considerable geopolitical implications. Fossil fuels are very mobile, so one can be flexible in siting energy-intensive industries.
But in a solar world, heavy industry will be at those places with the best solar resource. If you live in a renewable energy armpit, like say the eastern parts of Europe, your heavy industry is out of luck.
But in a solar world, heavy industry will be at those places with the best solar resource. If you live in a renewable energy armpit, like say the eastern parts of Europe, your heavy industry is out of luck.
> renewable energy armpit
armpit? What is that supposed to mean exactly? (I consider myself a near native English speaker...) A bad place to be in I suppose, but never heard this phasing.
armpit? What is that supposed to mean exactly? (I consider myself a near native English speaker...) A bad place to be in I suppose, but never heard this phasing.
I think usually it is “X is the armpit of Y”, for example NJ is the armpit of America: https://knowswhy.com/why-is-nj-called-the-armpit-of-america/
I assume least desirable place in this context.
Source: https://www.merriam-webster.com/dictionary/armpit
Source: https://www.merriam-webster.com/dictionary/armpit
That's right. It's one of the worst areas in the world for renewable energy. The solar resource is relatively bad, and away from coasts wind isn't great either.
Casey Handmer's company is creating synthetic hydrocarbons from renewable energy. Here is a good video where he gives a tour of the company and talks about its goals: https://www.youtube.com/watch?v=NngCHTImH1g.
Curious what people think about the idea of synthetic hydrocarbons? It is a seemingly obvious idea that I hadn't heard about until recently, as long as you can use energy efficiently to create the synthetic hydrocarbons.
Curious what people think about the idea of synthetic hydrocarbons? It is a seemingly obvious idea that I hadn't heard about until recently, as long as you can use energy efficiently to create the synthetic hydrocarbons.
There are a few companies doing it.
Prometheus Fuels is another, they have been on HN previously :
https://news.ycombinator.com/item?id=31264388
They have a cool website :
https://prometheusfuels.com/
There are some companies that want to use nuclear power , Valar Atomics is one :
https://www.valaratomics.com/
The cost estimates seem to be 4-10 times as expensive as fossil fuels.
Prometheus Fuels is another, they have been on HN previously :
https://news.ycombinator.com/item?id=31264388
They have a cool website :
https://prometheusfuels.com/
There are some companies that want to use nuclear power , Valar Atomics is one :
https://www.valaratomics.com/
The cost estimates seem to be 4-10 times as expensive as fossil fuels.
> The cost estimates seem to be 4-10 times as expensive as fossil fuels.
Importantly, this cost is expected to decrease precipitously as the cost of solar energy declines exponentially and as the the conversion technology continues to improve through iteration and economies of scale.
Importantly, this cost is expected to decrease precipitously as the cost of solar energy declines exponentially and as the the conversion technology continues to improve through iteration and economies of scale.
That's very true.
Also, over the next century the cost of fossil fuel extraction will increase and the price of synthetic and fossil fuels will get much closer at least.
If there was a tax reduction for carbon neutral fuels they could become cost competitive even more rapidly.
Kerosene for aviation and diesel for ships, trucks and mining are good candidates for synthetic fuels.
Also, over the next century the cost of fossil fuel extraction will increase and the price of synthetic and fossil fuels will get much closer at least.
If there was a tax reduction for carbon neutral fuels they could become cost competitive even more rapidly.
Kerosene for aviation and diesel for ships, trucks and mining are good candidates for synthetic fuels.
The problem with synthetic hydrocarbons isn’t energy abstractly its capital vs energy costs. The more hours per month of electricity you want the more you end up paying on a per kWh basis.
So if you’re fine turning all the equipment off most the of time you can get really cheap power, but having a 1 billion dollar facility including its workforce doing nothing 70% of the time is expensive. On the flip side if you want 24/7 operation you end up with much higher per kWh rates.
So if you’re fine turning all the equipment off most the of time you can get really cheap power, but having a 1 billion dollar facility including its workforce doing nothing 70% of the time is expensive. On the flip side if you want 24/7 operation you end up with much higher per kWh rates.
One of the most exciting things not really mentioned elsewhere in the thread (as far as I see!) is that you can make synthetic hydro carbons wherever you want.
If you wanted to have a refueling airport in the middle of the ocean, you could put up a bunch of renewable energy generation (expensive!), use that energy to produce jet fuel (this handwaves a lot / might not be feasible as stated), sell jet fuel that you haven't had to transport
Similarly, while our global logistics are incredible, some of the cost of oil etc is that we need good systems for transporting it (pipelines, ships). Instead, imagine producing it on location.
Finally, my favorite model for new technologies (not really useful if you believe the Weinersmith "A city on Mars" thesis) is: will this technology be useful on Mars or the moon?
Eg Hyperloop makes much more sense if you already are operating in a vacuum
From that lens, I think technology like this is pretty useful to create.
If you wanted to have a refueling airport in the middle of the ocean, you could put up a bunch of renewable energy generation (expensive!), use that energy to produce jet fuel (this handwaves a lot / might not be feasible as stated), sell jet fuel that you haven't had to transport
Similarly, while our global logistics are incredible, some of the cost of oil etc is that we need good systems for transporting it (pipelines, ships). Instead, imagine producing it on location.
Finally, my favorite model for new technologies (not really useful if you believe the Weinersmith "A city on Mars" thesis) is: will this technology be useful on Mars or the moon?
Eg Hyperloop makes much more sense if you already are operating in a vacuum
From that lens, I think technology like this is pretty useful to create.
Synthetic hydrocarbons will likely fail, simply because of the same reasons vertical farming failed. Once you're spending money on infrastructure to capture solar energy, losing 80% to inefficiency, before piping into your vertical farm via LEDs (losing another 50% to 80%), a farmer who draws free sunshine will outcompete you because he's using free energy while you're spending millions to power a small factory sized farm; energy isn't free.
Likewise, Casey's idea (Terraform Industries) requires solar energy to convert air and water to natural gas. It'll cost 10x the price of the gas Qatar & Saudi Arabia pump out of the ground essentially for free. These technologies won't be viable until humanity is pressed harder and prices (for food or fuel) climb.
Likewise, Casey's idea (Terraform Industries) requires solar energy to convert air and water to natural gas. It'll cost 10x the price of the gas Qatar & Saudi Arabia pump out of the ground essentially for free. These technologies won't be viable until humanity is pressed harder and prices (for food or fuel) climb.
You seem very confident in your position, and I am reminded of the confidence of people exclaiming solar power would never take off back when commercially available PV efficiencies were in the single digit percentages. Going from 8% to 24% effectively tripled PV panel output on a per area basis, even though it sounds like just a 16% increase.
Given your confidence, I assume you are aware of efficiency bottlenecks and their associated fundamental thermodynamic limits.
What do you believe is the bottleneck, and what thermodynamic principle limits it?
At renewable farm scale everyone has read about negative pricing etc, so it seems there will always be a niche to profit from.
How can you predict in advance the capex investment cost in advance of future developments?
Pumping up fossil fuel certainly comes with costs (even when excluding moral and future costs), think of employees, securing facilities against attack, etc.
Given Western divestment from Russian fossil fuels, on non-economic grounds, why couldn't we similarly some day divest from fossil fuels?
> It'll cost 10x the price of the gas Qatar & Saudi Arabia pump out of the ground essentially for free.
What a bizarre statement, 10x 0 = 0.
If you want to educate people how you believe electroreduction of CO2 to be a dead end, please give scientific and economic evidence that renewable fuels could never become cheaper than sourcing and or distributing fossil fuels.
Given your confidence, I assume you are aware of efficiency bottlenecks and their associated fundamental thermodynamic limits.
What do you believe is the bottleneck, and what thermodynamic principle limits it?
At renewable farm scale everyone has read about negative pricing etc, so it seems there will always be a niche to profit from.
How can you predict in advance the capex investment cost in advance of future developments?
Pumping up fossil fuel certainly comes with costs (even when excluding moral and future costs), think of employees, securing facilities against attack, etc.
Given Western divestment from Russian fossil fuels, on non-economic grounds, why couldn't we similarly some day divest from fossil fuels?
> It'll cost 10x the price of the gas Qatar & Saudi Arabia pump out of the ground essentially for free.
What a bizarre statement, 10x 0 = 0.
If you want to educate people how you believe electroreduction of CO2 to be a dead end, please give scientific and economic evidence that renewable fuels could never become cheaper than sourcing and or distributing fossil fuels.
Their thesis is probably that solar electricity will soon be (as an example) 1/10th the price of natural gas electricity and that they believe they can get 10-30% storage/conversion efficiency. Therefore, the price of synthetic natural gas will be cheaper than current natural gas.
There are a number of acknowledged assumptions in that model and other potential problems that may make their thesis incorrect, but you have raised none of them so far nor directly refuted the thesis.
There are a number of acknowledged assumptions in that model and other potential problems that may make their thesis incorrect, but you have raised none of them so far nor directly refuted the thesis.
No.
Parent directly challenged the model because of thermodynamic loss and expense v. substitutes.
E-fuels is contingent on subsidies, and you can't just wand away costs with a renewables price decline. These plants require firmed up renewables supply shape that a solar or wind farm can't provide alone. What's that mean? $$$
Another thing, most of the metal in these facilities doesn't have a price decline curve. The ramp to parity is long and level.
Parent directly challenged the model because of thermodynamic loss and expense v. substitutes.
E-fuels is contingent on subsidies, and you can't just wand away costs with a renewables price decline. These plants require firmed up renewables supply shape that a solar or wind farm can't provide alone. What's that mean? $$$
Another thing, most of the metal in these facilities doesn't have a price decline curve. The ramp to parity is long and level.
First, they did not seem to make a thermodynamic loss argument. They made that argument for vertical farming versus regular farming to argue that the inputs to regular farming are cheaper because they are not harvesting solar energy with extra steps. That is a perfectly cogent argument because the inputs are the same in both cases. You can not make the same argument for solar energy versus drilling costs without making the reader fill in a ridiculous number of gaps in the argument.
Even assuming they did obliquely try to make a thermodynamic loss argument, it is irrelevant. Thermodynamic efficiency is not really related to electricity costs except indirectly otherwise we would all be using ultra-expensive 30% efficiency solar panels instead of cheap as dirt 10-20% efficiency solar panels. It is a contributor, but the core question is price efficiency of the non-"drilled hydrocarbon" energy commodity.
The thesis is that non-subsidized solar energy-derived electricity will be cheap enough relative to hydrocarbon synthesis efficiency that it will be cheaper to synthesize than drilling it out of the ground (at current prices). There are many ways to reject that thesis, of which you present at least a few, but the comment I was responding to did not bring them up.
Given their other responses, they keep acting as if the thesis is: "We will make synthetic hydrocarbons that are 10x more expensive than harvested hydrocarbons, but we expect people to buy them anyways for reasons" which is obviously a strawman. The point of the discussion is entirely in whether it will be 10x more expensive, where one side claims it will be cost-competitive and the other side disagrees. To that end, here are some options including ones you brought up that at least provide potential counter-arguments for the actual point under contention:
1. Solar energy is actually non-viable, but subsidies make it, incorrectly, seem viable.
2. Solar energy will not continue to become cheaper exponentially and reach a low enough price.
3. Solar energy will become very cheap, but synthesis will be too cost-inefficient anyways.
4. Synthesis is cost-efficient on a per-unit basis, but requires capital intensive processes that only pay back if continuously active which solar can not provide.
5. Synthesis is only efficient at the margins right now. There is actually a lot of cheaply accessible hydrocarbons that can accept price reductions and still remain viable. All you will actually displace is a tiny edge of barely profitable hydrocarbons until there are even more significant cost reductions.
6. Solar energy cost reductions will also reduce hydrocarbon harvesting costs in a relative proportion that keeps harvesting viable.
7. They just suck at execution.
8. Something else.
Even assuming they did obliquely try to make a thermodynamic loss argument, it is irrelevant. Thermodynamic efficiency is not really related to electricity costs except indirectly otherwise we would all be using ultra-expensive 30% efficiency solar panels instead of cheap as dirt 10-20% efficiency solar panels. It is a contributor, but the core question is price efficiency of the non-"drilled hydrocarbon" energy commodity.
The thesis is that non-subsidized solar energy-derived electricity will be cheap enough relative to hydrocarbon synthesis efficiency that it will be cheaper to synthesize than drilling it out of the ground (at current prices). There are many ways to reject that thesis, of which you present at least a few, but the comment I was responding to did not bring them up.
Given their other responses, they keep acting as if the thesis is: "We will make synthetic hydrocarbons that are 10x more expensive than harvested hydrocarbons, but we expect people to buy them anyways for reasons" which is obviously a strawman. The point of the discussion is entirely in whether it will be 10x more expensive, where one side claims it will be cost-competitive and the other side disagrees. To that end, here are some options including ones you brought up that at least provide potential counter-arguments for the actual point under contention:
1. Solar energy is actually non-viable, but subsidies make it, incorrectly, seem viable.
2. Solar energy will not continue to become cheaper exponentially and reach a low enough price.
3. Solar energy will become very cheap, but synthesis will be too cost-inefficient anyways.
4. Synthesis is cost-efficient on a per-unit basis, but requires capital intensive processes that only pay back if continuously active which solar can not provide.
5. Synthesis is only efficient at the margins right now. There is actually a lot of cheaply accessible hydrocarbons that can accept price reductions and still remain viable. All you will actually displace is a tiny edge of barely profitable hydrocarbons until there are even more significant cost reductions.
6. Solar energy cost reductions will also reduce hydrocarbon harvesting costs in a relative proportion that keeps harvesting viable.
7. They just suck at execution.
8. Something else.
> First, they did not seem to make a thermodynamic loss argument.
You're missing the point.
Power-to-X fuels are fundamentally energy destructive versus alternatives. And feedstock cost prices declining enough to achieve fuel price parity isn't a safe bet. That's the parent's argument.
edit:
Terraform is baiting people with very optimistic cost structures. They're promising $2.5/kg H2 and DAC at $250/ton CO2. These figures are astronomically low. Then, wait-- it's for 1MW of PV electric supply. That's not scale. This facility can turn on/off when the sun is/isn't shining? Anything to solve that is more money.
You're missing the point.
Power-to-X fuels are fundamentally energy destructive versus alternatives. And feedstock cost prices declining enough to achieve fuel price parity isn't a safe bet. That's the parent's argument.
edit:
Terraform is baiting people with very optimistic cost structures. They're promising $2.5/kg H2 and DAC at $250/ton CO2. These figures are astronomically low. Then, wait-- it's for 1MW of PV electric supply. That's not scale. This facility can turn on/off when the sun is/isn't shining? Anything to solve that is more money.
I've read through his thesis on his blog. There are several flaws in his analysis. The most glaring is in the cost of natural gas, for which he uses the most pessimistic value possible (that during the Ukraine war shortages) and then compares it to the most optimistic price of solar. A fairer comparison would take the cost of production and shipping of gas (which is very cheap) and compare that to the cost of synthetic gas. But if you do that synthetic gas is always more expensive than natural gas. Furthermore, many of his cost assumptions rely on government subsidies. Yes, it is possible to get cheap synthetic gas if the government subsidises it. But no, this is not a scalable product.
Even if you ignore this problem, his thesis still only makes sense if we live in a world which massively overbuilds solar panels. Some of this other pieces talk about covering the world's oceans in solar panels, which, frankly, makes little overall economic sense.
Even if you ignore this problem, his thesis still only makes sense if we live in a world which massively overbuilds solar panels. Some of this other pieces talk about covering the world's oceans in solar panels, which, frankly, makes little overall economic sense.
When you're projecting future costs of solar, you should be using very optimistic estimates, right?
The analogy to vertical farming is a tempting one, but ultimately misleading. There is a crucial difference between TI-produced natural gas and Saudi-produced gas: the former is carbon neutral, the latter isn't.
For every molecule of CH4 TI creates, they're pulling a molecule of C02 out of the atmosphere to do it. When you burn a CH4 molecule from a Saudi well, you're moving carbon from the ground into the atmosphere.
For every molecule of CH4 TI creates, they're pulling a molecule of C02 out of the atmosphere to do it. When you burn a CH4 molecule from a Saudi well, you're moving carbon from the ground into the atmosphere.
Will you pay 10x for synthetic fuel? And if you do, for moral reasons, you will be driven out of the market by those burning cheaper fuel. Just like the cultured meat startups have learned, established players won't let you take away their subsidies and drive them out of business.
Big Oil has rivers of money to lobby and make sure carbon-neutral fuel startups can't legislate them out of the market.
Big Oil has rivers of money to lobby and make sure carbon-neutral fuel startups can't legislate them out of the market.
The fuel need not be 10x as expensive if you mine at the natural sources of hot CO₂. Which are steel-making furnaces, cement-making furnaces, and, well, carbon-burning power plants. All these industries can provide you with plenty of CO₂, reliably, at a zero or negative cost.
This makes the synthesis much more efficient, because you need far less energy and space to capture the CO₂.
Even if all power plants could turn carbon-free, steelmaking and production of cement cannot, they involve CO₂ as a key chemical step. Until 100% of steel is recycled, and concrete is replaced entirely by something else, you will still have stable, rich sources to run your synthesis off of.
This makes the synthesis much more efficient, because you need far less energy and space to capture the CO₂.
Even if all power plants could turn carbon-free, steelmaking and production of cement cannot, they involve CO₂ as a key chemical step. Until 100% of steel is recycled, and concrete is replaced entirely by something else, you will still have stable, rich sources to run your synthesis off of.
Scales poorly, and these C02 feeders can ruin your business overnight by imposing or jerking up fees once your operation is even remotely viable. What are you going to do? Teleport your facility?
The location advantage then becomes your greatest disadvantage.
it's just like installing solar in parts of the Sahara. Land is cheap and sunshine is abundant. Until an Al-Qaeda affiliate seizes one of your solar farms or the local government is overthrown and the coupists are trying to extort you. Now, how much will you spend hiring mercenaries to retake and occupy a foreign country, even if you discount international backlash?
The location advantage then becomes your greatest disadvantage.
it's just like installing solar in parts of the Sahara. Land is cheap and sunshine is abundant. Until an Al-Qaeda affiliate seizes one of your solar farms or the local government is overthrown and the coupists are trying to extort you. Now, how much will you spend hiring mercenaries to retake and occupy a foreign country, even if you discount international backlash?
Scales poorly — any oil well has a particular debit, naturally limited. So will this.
The conflict of interest is real. This is why I expect the same companies that produce the CO₂ to process it into fuel. Say, steelmakers need a lot of pure oxygen, this is why they sell the liquid nitrogen they produce along the way. Similarly they extract and sell a number of metals that occur in the input ores in low concentrations and are not worth mining by themselves.
Regarding Sahara, the things are sadly as you described. But large industries are usually in politically more stable areas.
The conflict of interest is real. This is why I expect the same companies that produce the CO₂ to process it into fuel. Say, steelmakers need a lot of pure oxygen, this is why they sell the liquid nitrogen they produce along the way. Similarly they extract and sell a number of metals that occur in the input ores in low concentrations and are not worth mining by themselves.
Regarding Sahara, the things are sadly as you described. But large industries are usually in politically more stable areas.
There is probably a market for 2-4x more expensive carbon-neutral aviation fuel. Most other fuel-consuming vehicles are better off going in a different direction, batteries or hydrogen fuel cells.
Probably. but, aviation margins are currently around 2.7%, while fuel constitutes 20% of their operating cost. Even if an airline switches a few of its aircrafts to 4x costlier carbon-neutral fuel, it's just so they can brag about it in their annual climate responsibility reports.
It is going to be hard to adopt 2-4x more expensive fuel across your fleet, just because.
It is going to be hard to adopt 2-4x more expensive fuel across your fleet, just because.
> "Big Oil has rivers of money to lobby and make sure carbon-neutral fuel startups can't legislate them out of the market."
I'm not trying to take an endorsing position on e-fuels, but wanted to note Prometheus talked in one of their interviews and argued they would work around tensions with 'big oil' not via legislation but having direct customer relationships with competitive price commitments:
From interview of Rob McGinnis ( https://curiositypodcast.substack.com/p/future-of-sustainabl... ) of Prometheus Fuels:
"We have not gone to raise money from anybody in oil and gas. We've always said we wanted to go to our customers and form relations with them. So that's why a car company and a shipping company, for example. And we did LOIs with airlines. The ones that got published was with American Airlines. We said we'd give them 10 million gallons of jet fuel for one cent less than the spot price of Jet A."
I'm not trying to take an endorsing position on e-fuels, but wanted to note Prometheus talked in one of their interviews and argued they would work around tensions with 'big oil' not via legislation but having direct customer relationships with competitive price commitments:
From interview of Rob McGinnis ( https://curiositypodcast.substack.com/p/future-of-sustainabl... ) of Prometheus Fuels:
"We have not gone to raise money from anybody in oil and gas. We've always said we wanted to go to our customers and form relations with them. So that's why a car company and a shipping company, for example. And we did LOIs with airlines. The ones that got published was with American Airlines. We said we'd give them 10 million gallons of jet fuel for one cent less than the spot price of Jet A."
It makes no difference. Saudi Arabia won't stop pumping gas because it's not carbon neutral.
edit Depleting their entire reserves of gas would be stopping because it's unsustainable, not because it's not carbon neutral. Also that sounds like a really bad idea.
edit Depleting their entire reserves of gas would be stopping because it's unsustainable, not because it's not carbon neutral. Also that sounds like a really bad idea.
Running out of gas in the ground will do that though.
We will not run out for hundreds to thousands of years.
We also can't afford to stop using it by "running out" since that implies we burned it all.
We also can't afford to stop using it by "running out" since that implies we burned it all.
Sadly there seems to be reserves[1] for quite a long time. The real question is how much of the reserves are profitable to exploit.
1. https://en.wikipedia.org/wiki/List_of_countries_by_natural_g...
1. https://en.wikipedia.org/wiki/List_of_countries_by_natural_g...
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Inevitably the solution to the anti-profitability of running (essentially) a gas power plant in reverse is government subsidies. Amazing how otherwise "efficient market" folks can forget market wisdom the moment big change is needed in big industries.
The touted advantage is that instead of market-driven electrification of multiple sectors you only need one big silver bullet technology, however these are futile systems that actually reduce the total amount of energy available to society (vs electrification which does the opposite). And since the pricing signals are messed up by subsidies you can't invest in the economically optimal amount of energy efficiency. This is precisely the opposite of the sort of activity we might want to subsidize.
Handmer has some great writing on space subjects, but on this we're going to disagree.
The touted advantage is that instead of market-driven electrification of multiple sectors you only need one big silver bullet technology, however these are futile systems that actually reduce the total amount of energy available to society (vs electrification which does the opposite). And since the pricing signals are messed up by subsidies you can't invest in the economically optimal amount of energy efficiency. This is precisely the opposite of the sort of activity we might want to subsidize.
Handmer has some great writing on space subjects, but on this we're going to disagree.
"will likely fail" is a surprising claim when it's not clear to me that vertical farming won't still have a chance to succeed
For vertical farming, the question at the limit shouldn't be comparing solar and a farmer directly using sun, it should be: can we vertical farm on land that was unsuitable for farming? Is the cost of land increasing while the cost of solar decreases?
For vertical farming, the question at the limit shouldn't be comparing solar and a farmer directly using sun, it should be: can we vertical farm on land that was unsuitable for farming? Is the cost of land increasing while the cost of solar decreases?
The cost of land in the city for living on is increasing much faster then the cost of rural agrarian land.
Which we absolutely should not destroy to try and build skyscraper vertical farms on.
Which we absolutely should not destroy to try and build skyscraper vertical farms on.
Casey is awesome!!!
The actual answer to this is "target" monetary inflation. That is, increasing the money supply at a slightly faster rate than the increase in productivity makes prices rise at a fixed pace.