Green

Hawaii’s blessing is also its curse.

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So successful has the state’s switch to renewable energy been that at times the small island grid systems are creating too much energy, or conversely, others are generating too little. Unfortunately, the significant swings in power supply cause enormous system management problems. Hawaii is not alone of course, the islands display a microcosm of what most countries with a significant proportion of renewable power generation suffer: coping with the variability of renewable power supply.

According to the WSJ, though, the smaller the grid the harder it is to manage and they don’t get much smaller than Hawaii’s. Every island has its own grid, none of them connected to any other, compared to the US mainland where just three grids cover 48 states.

The larger the grid, the more capacity it has to absorb fluctuations in power levels. The islands still burn oil for 70% of their power pushing power costs to 34 cents per kilowatt-hour; as a result there has been a massive adoption of solar panels and wind turbines. On Oahu 13% of residential utility customers have solar panels, unprecedented in the US, even compared to green California or super sunny Arizona.

Source: WSJ

Source: Wall Street Journal

In Hawaii, at any time, up to a third of power could be coming from renewables. If a cloud passes, power levels fluctuate significantly. On Maui, the WSJ reports peak electricity demand is about 200 megawatts. The island has 150 megawatts of renewable capacity, half of it consisting of wind turbines. That means sometimes as much as 75% of power generated comes from variable sources like the wind and sun.

Fortunately, recent changes to the local grid make the power being produced more manageable and sensors give utility operators a little more warning when sunshine or wind levels rise or fall but the biggest benefits will come from being able to store excess power.

Being able to smooth out peaks and troughs by storing and releasing power will enable the existing grid to cope much better with changes in supply and existing conventional generators to operate more efficiently. It’s staggering that it has taken this long for utilities to install significant storage capacity, the problem is well known elsewhere but rarely as acute as in Hawaii. One of the utilities is seeking bids to create 300 mw of energy storage on the most populated island, Oahu. With such favorable economics and such acute power management challenges, the surprise is that it’s taken this long.

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The job of 3D-printing the world’s first office building is being tackled and 27 states have filed a lawsuit against the EPA over new clean water rules.

3D-Printed Office Building

Plans have been made to 3D-print a 2,000-square-foot office building – along with the furniture for its clients. Shanghai design company Winsun Global will work with architecture firm Gensler, structural engineer Thornton Tomasetti and construction manager Syska Hennessy Group on the project and plans to use reinforced concrete, fiber-reinforced plastic and glass-fiber-reinforced gypsum in a 20-foot-tall 3D printer. The project should require up to 80% less labor and could reduce construction waste by as much as 60%.

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Winsun previously 3D-printed a house and an apartment building using similar materials and methods.

27 States Suing EPA

Several lawsuits have been filed by 27 states against the Environmental Protection Agency‘s expanded water rules. The states are concerned that the EPA violated the Clean Water Act and other laws when it extended its authority. The separate suits are expected to be combined into one case in federal court.

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Silicon is essentially sand. But for use in semiconductors and solar panels it needs to be refined to a purity of 99.99999 %. This makes the second-most abundant resource in the world a commodity as its availability is limited by worldwide refining capacity.

Free Download: Latest Metal Price Trends in the June MMI Report

We have long lamented the trade war going on over refined silicon over the last few years. Big companies such as German-based multinational Solarworld, Inc., want higher prices, saying their panels are of higher quality than those offered by smaller, mostly Chinese, producers.

US Factory Capacity Increasing

Installers in US markets are reaping a windfall by using the cheaper panels for installations that are subsidized by states such as California and the low cost of the cheap imports. While it was kind of funny to see Solarworld wrap itself in the flag when it successfully petitioned the Commerce Dept. for tariffs on Chinese panels, and then Chinese silicon, itself, Solarworld has simultaneously stepped up its US presence and seems to be willing to fight for the US market.

Meanwhile, Elon Musk's SolarCity, an entirely American-owned operation, is building a massive $5 billion
"gigafactory" in Buffalo, NY. When the silicon solar panel factory is completed and running full-tilt (projections within two years), it will be the biggest solar panel plant in North America. To run at full speed, the plant will need an elaborate network of suppliers and service firms to support it.

Is Domestic Demand There Yet?

Is there enough solar demand for companies like SolarCity and SolarWorld to get their prices increases AND see sales grow? A significant price spike in silicon in the renewables MMI this week is certainly a step in the right direction. The tariffs placed on Chinese panels and silicon seem to be having the desired effect, as well. The European Union renewed similar duties this week, essentially stifling Chinese exports to the West with high tariffs in both markets.

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The renewables market lost ground again this month, going from being an unspectacular but steady market to just an unspectacular one. It's even now from the range it had been hovering in since last November.

Renewables_Chart_June-2015_FNL

The monthly Renewables MMI® registered a value of 58 in June, a decrease of 3.3% from 60 in May.

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What's concerning is that while we certainly didn't expect renewables to break out and hit new highs this year, they've actually lost significant ground compared to late 2014 when the range hovered between 60 and 70. 58 is a new all-time low. We can only chalk this drop up to more incentives for end-use products using silicon in the solar market and the overall weakness in the rare earths market for neodymium.

In California this month, a state cap-and-trade program is now giving away crystalline silicon photovoltaic panels to low-income homeowners. While this will certainly help adoption, it won't do any favors to companies such as SolarWorld, Inc. which are trying to bring prices of the panels, and silicon itself, up to achieve higher profit margins.

Silicon will also inevitably feel the pinch from a wave of mergers in the semiconductor industry that will force the involved companies to adopt better procurement and lean operations principles.

The more interesting renewable market is that of grain-oriented electrical steel. While the US GOES price actually went up this month, the GOES M3 price, a much better indicator of actual purchasing activity, went down. More on that tomorrow.

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We at MetalMiner have long covered the US domestic policy front as pertains to US manufacturing industries, and time and again, we hear industry experts extolling the virtues of “all-of-the-above” strategies, rather than unilateral regulatory decrees.

So is the federal government, in conjunction with individual states, pursuing “all-of-the-above” strategies to their fullest potential when it comes to US energy policy?

As the final rule of the EPA Clean Power Plan gets closer to being finalized (word on the street: it’s happening this summer), we got an insider perspective from Michael Whatley at Consumer Energy Alliance on the issues for US manufacturers surrounding the potential effects of the final rule. Below is a condensed and edited version of our conversation.

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One could, and many will, dismiss the International Monetary Fund report “How Large Are Global Energy Subsidies,” as so much drivel, that, while there are undoubtedly costs to burning fossil fuels, due to health and pollution, the energy industry also pays huge amounts of taxes and provides low economic cost energy that allows our economies to function.

Why Manufacturers Need to Ditch Purchase Price Variance

Whatever we may or may not think of the validity of this argument we should remember the IMF rarely deviates from the thinking of the US Treasury. If the IMF have gone public with this approach it will have widespread support among influential circles.

Subsidies and Energy

The basis for the IMF’s case is that fossil fuel companies have been allowed to keep huge profits while dumping the consequences on the rest of society, and that the only way to dissuade this practice is to tax the fuels sufficiently to compensate society, an analytical approach developed by Arthur Pigou, an early 20th century economist according to the London Telegraph newspaper.

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We have already written this year on the risk to the fossil fuel industry posed by potential carbon taxes. Consensus that such taxes are coming seems to be building surprisingly quickly, helped, it must be said, by a historic agreement between the USA and China to work together to agree on emission targets and add momentum for an agreement to emerge from the COPS21 conference planned in December in Paris.

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The most noise is, not surprisingly, coming from fear that trillions of investments in fossil fuels, principally coal but also oil and even natural gas, could become uneconomic if some form of carbon tax is agreed upon. Probably more because of this worry than any more altruistic notion major investors are already beginning to turn their backs on coal in particular. The latest is the world’s largest sovereign wealth fund, Norway’s $916 billion fund has decided this week to pull any investments from companies whose business relies more than 30% on coal according to the FT.

Divesting ANY Business

The crucial point here is “any business,” so not just mining companies but power generators will be hit. The fund says it is trying to alter behavior in these firms, but if you are a major European power generator you have billions invested in coal-fired power production. That is some super-tanker to turn around quickly.

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Thanks to fees from its state cap-and-trade law, Northern California homeowners will soon start receiving completely free crystalline silicon photovoltaic solar panels.

Why Manufacturers Need to Ditch Purchase Price Variance

Oakland nonprofit Grid Alternatives is using $14.7 million raised through the state’s cap-and-trade system to install the panels in lower income neighborhoods for free. The fees were paid by industries whose emissions exceeded the state "cap" set by the new law. The fees were donated by state to Grid and the money came out of the Greenhouse Gas Reduction Fund (GGRF), also established by the cap-and-trade law.

Silicon was the biggest mover this week on our renewables MMI, as well.

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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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