Green

ast week UGI Energy Services announced plans to build a liquefied natural gas production facility in Wyoming County, Pennsylvania.

Why Manufacturers Need to Ditch Purchase Price Variance

The facility will draw Marcellus Shale gas from UGI’s Auburn gathering system, then chill it to produce up to 120,000 gallons per day in liquid form. While we have regularly reported the slowdown in both new shale oil and LNG projects in the US this year — and the subsequent cutbacks in oil country tubular goods production — investments are still being made, in the US and overseas, in drilling.

Plants, Projects Planned

Bloomberg Business reported this week that Anadarko Petroleum Corp. selected a group of developers including Chicago Bridge & Iron Co. for a potential $15 billion LNG project in Mozambique.

CBI’s joint venture with Japan-based Chiyoda Corp. and Saipem SpA, based in Italy, will work on the onshore project that includes two LNG units with 6 million metric tons of capacity each, Anadarko said Monday. Construction plans also include two LNG storage tanks, each with a capacity of 180,000 cubic meters, condensate storage, a multi-berth marine jetty and associated utilities and infrastructure, according to Texas-based Anadarko, which says it will make a final investment decision by the end of the year.

Last week, the Department of Energy gave Cheniere Energy Inc. final approval for the nation’s fifth major export terminal at Corpus Christi in Texas, which will ship the fuel from 2018.

What’s Driving Infrastructure Investment?

While oil prices have bounced back from lows seen earlier this year, it’s certainly not the market that’s driving these investments. While high-cost projects, such as those in Canada’s oil sands, have been canceled by oil exploration companies, relatively inexpensive projects with a quicker path to payback, such as these LNG projects, are still being funded.

The payback is diverse and not confined to domestic home heating. LNG has been priced at a fraction of diesel prices for the last four years. Domestic trucking (18-wheelers and other heavy consumers of diesel) have yet to make a large-scale commitment to LNG, and most places where fuel is dispensed have yet to put in expensive infrastructure to handle the product, but there has been enough success for UGI to justify committing resources to its adoption.

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Most of our commodity metals posted gains this month. Even laggards such as the Construction and Raw Steels MMIs were able to post at least a flat month and avoid a loss. Only the markets that were generally flat to down before commodities’ big downturn, Rare Earths and Renewables, lost ground this month.

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The big question, is, then are these metals’ prices truly going back up or are we merely experiencing temporary gains with the downward trend soon to continue? It honestly may be too soon to tell.

We have seen several commodities fall much lower this year after outside-influenced one-month rallies. As my colleague Raul de Frutos wrote regarding the copper market this month, “we know that trying to guess the bottom is a terrible strategy to take.”

The Dollar and Oil Prices

The big outside influence, of course, is actual weakness in the US dollar, the first real weakness seen this year.
The oil price reduction that has kept most commodities low this year has moderated, with oil hitting $60 a barrel this week. A 0.7% fall in the dollar index was the biggest drop of 2015.
Further weakness in the dollar throughout the rest of the year would give a bigger boost to commodities and foreign markets.

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Like most of the US solar industry, I have been watching for the tipping point in silicon photovoltaic panel installation and energy costs since the early 2000s.

What the EPA’s Clean Power Plan Means For More Than Just Solar

It's long been-promised by proponents of renewable energy, so I was a bit skeptical in December when it was again predicted to cause a disruption taking market share away from coal and other traditional energy providers in the US market and cause mass adoption of solar as a home heating/cooling and electricity technology.

I also don't immediately buy into the ability of the EPA Clean Power Plan to convert those millions of consumers to home-based solar generation purely based on changes in law that mainly effect producers and not consumers of energy.

Classic 'Solar Tipping Points'

Some great moments in the solar tipping point so far:

  • In 2012 ThinkProgress gave us three handy charts which showed why solar "has hit a tipping point."
  • In 2011 the tipping point supposedly happened for 3rd party residential panel ownership in California, the largest adopter market state... and that did nothing for material costs or even made a speed bump in demand for the dirtier technologies.
  • Even back in 2005, silicon crystalline solar photovoltaic panel technology "hit a tipping point" to supposedly make solar a much more viable energy generation technology. 10 years ago. Yet the demand for materials has still not risen much ever since we began tracking prices in 2012.

The monthly renewables MMI® registered a value of 60 in May, a decrease of 1.6% from 61 in April. The decrease is on par with the generally flat "terse investor frown" trend the index has tracked since its inception so, while it's not disconcerting, it doesn't give great hope for prices of raw materials for silicon panels or wind turbines to rise in the short term, either.

No Increased Demand for Raw Materials

A lot of the metal inputs of these technologies are suffering their own price problems due to market gluts that have nothing to do with solar or wind adoption, particularly steel plate.

The most promising development for solar generation is that it's now cheaper than gas in 47 states, but there's no evidence that that will spur on solar adoption in a place like, say, Minnesota where it's dark much of the day and snowmelt will ruin your roof-mounted panels every winter.

Silicon, itself, is rising in both demand and price as semiconductor and energy use is definitely on the upswing in mature markets. The adoption problem continues to be the scale of the industry. Powering California, Texas, the rest of the West and Florida will not deliver the amount of panels on roofs needed for consistent power generation for utilities and grid owners to divest in backup generation technology. It also won't deliver the amount of homes and commercial businesses generating electricity necessary to push raw material prices up significantly.

Paypal, SpaceX, Cars, Why Not the Solar Tipping Point?

Enter Elon Musk, sensing a business opportunity, and this month's announcement from Tesla Motors that it's expanding its li-ion battery business to homes and commercial properties interested in using a modified version of the automaker's batteries to store solar power generated during the day for their homes' use at night. Hey guys, another tipping point!

It's true that Tesla's advance is economical, necessary and fills a major need in the market: the ability to store energy collected from the panels at night in places where daylight doesn't extend beyond 8 PM. It could also resolve the orientation battle now being waged in California between utilities and homeowners by taking a decision on where stored power goes out of utilities' hands.

Actual Renewable Materials Prices

Still, as we are cautious about the markets we cover, I will wait to see if Tesla's battery business takes off and provides a boost for silicon solar demand. We've been promised a tipping point before. Now, how about that SpaceX IPO, Elon?

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In January 2015, Saudi Arabian company ACWA Power surprised industry analysts when it won a bid to build a 200-megawatt solar power plant in Dubai that will be able to produce electricity for 6 cents per kilowatt-hour.

Why Manufacturers Need to Ditch Purchase Price Variance

That price was less than the cost of electricity from natural gas or coal-fired power plants, a first for a solar installation. Electricity from new natural gas and coal plants would cost an estimated 6.4 cents and 9.6 cents per kWh, respectively, according to the US Energy Information Agency.

Technological advances, including crystalline silicon-solar photovoltaic panels can now convert higher percentages of sunlight into energy and have made solar panels more efficient. As a result, we may be seeing a long-awaited rise in the price of silicon used for the panels, microchips and semiconductors. The week's biggest mover on the weekly Renewables MMI® was the price of silicon, which saw a 7.4% increase.

Last week, manufacturer SolarCity began construction on a $900 million, 1 million-square foot PV panel factory in Buffalo, as well.

The price of silicon rose 7.4% on the renewables MMI last week.

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Deepwater Wind began construction off the coast of Rhode Island on a five-turbine wind farm that will, eventually, have the ability to power 17,000 homes.

Why Manufacturers Need to Ditch Purchase Price Variance

The 30-megawatt, $290 million wind power project began construction this week 18 miles off the coast of Rhode Island, but, itself, is a much smaller project than the stalled Cape Wind farm project originally planned for the area around Cape Cod in Massachusetts.

US Wind Power Lags

Offshore wind projects are common in Europe and a real driver of renewable energy success there. The fact that the US is only starting to get into the offshore game is a testament to how the regulatory framework and maturity of the renewable energy industry are both lagging here in the states.

The death knell for the proposed 130-turbine Cape Wind project may have come early this year when the two largest electric utilities in Massachusetts backed out of a plan to buy most of the power that was slated to be generated by the proposed turbine project, the latest casualty of what can only be described as an environmentalist civil war over whether to place turbines off Nantucket Sound.

Green vs. Green

The Humane Society, the International Fund for Animal Welfare, the International Wildlife Coalition and and others are against the project. On the other side are groups that might normally be considered allies, including the Natural Resources Defense Council, the Union of Concerned Scientists and Greenpeace.

Opponents, such as environmental lawyer Robert F. Kennedy, Jr., say the natural environment of the Sound should be preserved and that the industrial nature of the turbines would spoil views from the shore. They also say that native birds would be decimated by the 40-foot-tall turbines.

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The price estimate of discarded metals; including gold, silver, iron and copper, according to the UN’s Global E-Waste Monitor 2014 report is $52 billion in 2014, alone.

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The gold itself was valued at about $11.2 billion. Some researchers, according to the report felt that in many cases, it made sense to recover the metals.

More Scrap Recycling Needed

Not much was diverted for recycling. Only about one-sixth of last year’s e-waste was moved from landfills for reuse, according to the report.

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The United Nations (UN) recently put out a listing of countries and regions dubiously leading in the generation of electronic or e-waste.

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E-waste, for this discussion, includes electronic and electrical equipment. Everything from printers and computers to discarded cell phones, calculators and other personal electronics was counted by the UN. Even vacuum cleaners, toasters, electric shavers, video cameras were included in the total as all were dependent on being plugged into a wall.

US, China, Dubiously Top E-Waste List

India found itself in the 5th spot, having discarded 1.7 million metric tons of electronic and electrical equipment in 2014. The US (7.1 million mt) followed by China (6 million mt) topped the “Global E-Waste Monitor 2014,” report compiled by the United Nations University (UNU). Together, these two were responsible for about 32% of the total e-waste.

Regionally, most e-waste in the world last year was generated in Asia at 16 million mt. The top three Asian nations with the highest e-waste generation in absolute quantities were China with 6 million mt, Japan with 2.2 million mt and India with 1.7 million mt.

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I always think it harsh, particularly for those of us sitting in northern Europe often under leaden skies, that the Middle East is not only blessed with vast reserves of cheap and easy to extract oil and natural gas, but even more limitless supplies of sunshine.

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When the oil runs out they will become the powerhouse of the world again, but this time generating electricity. True sandstorms in desert areas are a source of considerable maintenance and repair cost, but clearly aren’t a major hindrance as solar and wind farm investments have boomed in 2014 driven increasingly by economics, not subsidies.

Japan and China Investing in Renewables

After all the hand wringing we have done over the years about subsidies paid to wind farms, it comes as a welcome development to report that some 95 gigawatts of increasingly economic renewable generating capacity was created in 2014 at a cost of $270 billion, led by China and Japan who combined, invested $75 billion in solar power.

This is the largest level of new renewable capacity (not including hydro-electric) in one year, at least in terms of GW of capacity. The previous higher spending year, 2011, resulted in lower levels of installed capacity because costs were so much higher then.

Lower Costs

According to the Financial Times, equipment costs have fallen 75% since 2009 while large solar construction and connection costs have fallen by up to 65% in the last four years and solar panel efficiencies are rising making such projects increasingly attractive.

Thierry Lepercq, chairman of Solairedirect, a French company that has 57 solar parks built or under construction around the world said, “We’re generating power at lower prices than other energy sources in Chile, India and South Africa.”

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Steel mill utilization rates dropped to below 70% in March and have stayed there. U.S. Steel, ArcelorMittal and Evraz have all idled mills, while many others have cut utilization amid weak steel demand (particularly anything exposed to oil and gas tubular markets) and high inventories of flat steel products.

Steel imports are still arriving, but will slow sharply in the second quarter and through the remainder of the year as US steel prices are no longer priced significantly above markets in the rest of the world. Weaker-than-expected US manufacturing data will also mean that it will take some time to work those inventories off. As such, we don’t expect US steel mills to reboot until September or so.

Weak Demand

Weak demand and plentiful supply means a continuation of low prices.

However, the fundamental position is driven by the competition with pig iron – scrap’s core substitute. Here iron ore continues to slide as China acts to protect its own producers while international suppliers’ output piles up. The bankruptcies/closures seen so far (Atlas in Australia, Cliffs in Canada) are nowhere near enough to balance the market.

Until a bigger supply response is seen (and there will have to be one at some point), the price will move inexorably downwards. Despite the downward adjustment of scrap prices seen so far this year, it is still more cost-effective on a global basis to make steel using iron ore than scrap. That will mean further weakness for scrap-based electric arc furnaces around the world as they switch to either pig iron or billet as their primary raw material. If global scrap prices fall again, US exporters will sell more to the domestic market and hence our concern that $250 per ton is not the floor for US scrap prices.

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Ontario, Canada just decided to undertake a cap-and-trade approach in reducing their greenhouse gas emissions, joining its Frenchier neighbor Quebec and the US state of California under the so-called Western Climate Initiative and its cap-and-trade program, to invest further in a green future.

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It remains to be seen how Canada’s oil sector – and a host of other industrial sectors, especially those with operations in Ontario – will fare under the cap-and-trade scheme.

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