Daily Energy Standup Episode #330 – Weekly Recap: Grid Exploitation, Banking Woes, Solar Ethics, AI Demands, OPEC-IEA Divide, and California’s Price Surge

In 2016, Alex de Vries read somewhere that a single bitcoin transaction consumes as much energy as the average American household uses in a day. At the time, de Vries, who is Dutch, was working […]

OPEC, IEA at most divided on oil demand since at least 2008

March 12, 2024 Mariel Alumit

Michael Tanner: [00:00:14] What’s going on? Everybody, welcome in to the special Saturday. March 16th, 2024 edition of the Daily Energy News Beat stand up weekly recap I am Stuart, I’m Michael Tanner, joined by Stuart. [00:00:28][13.8]

Stuart Turley: [00:00:29] Nice. [00:00:29][0.0]

Michael Tanner: [00:00:30] This has been a long day. [00:00:31][0.8]

Stuart Turley: [00:00:31] My game’s a tough week. [00:00:33][1.4]

Michael Tanner: [00:00:33] It’s been a long week, but a great week. We’ve had lots of great stories, lots of great things coming down. You know, we’ve had too many stories. It’s why we run out the weekly recap so you guys can get a flavor of some of the top stuff that have happened this week. [00:00:46][12.6]

Stuart Turley: [00:00:46] And this Saturday we’ve got Robert Bryce, his new. I had a great interview with Robert Bryce on his mini series juice. [00:00:55][8.6]

Michael Tanner: [00:00:56] Now we love Robert Bryce, great friend of the show. We’ve also got Doomberg and Chris Wright coming out, so please stay tuned for that. But remember guys, as always, all the stuff is brought to you by Energy News beat.com. Hit the description below. Visit us online. Take our survey. Take the dashboard. I’m turning it over to the weekly recaps too. We’ll see you on Monday, folks. [00:01:14][18.2]

Stuart Turley: [00:01:15] Green plating the grid how utilities exploit the energy transition. Raking in record profit. Michael, this is from Isaac or and Mitch rolling. They are the energy bad boys. And I get a hoot after reading their Substack. I highly recommend everybody, go out in and read what they’ve got going on. Here’s where they go through. This is one of the single best descriptions of why wind and solar is being pushed by utilities. Let me read this part for you, Michael. Utilities are never going to rival tech companies or biotech companies in terms of growth. But this is the best utilities growth environment that we’ve seen in decades. When you combine those two big macro themes of electric gation and clean energy, seeing utilities with growth like we haven’t seen many, many years, these just aren’t growth prospects for the next year or two. This is a growth that we can last for a decade or more. A lot of the clean energy goals and electrification goals are out there 20, 40, 20, 50. You look at the infrastructure investment that’s needed to get to these goals. It’s a long runway for utilities. Great quote. That’s why the utilities are a good investment. But here’s where a little bit later in here, they started describing on the asset and the depletion of assets on this. When you take a look at the 30 year mark on, energy, I’m in the, miss producer, if you could slide over the one with the green arrows and a, a downward. [00:03:03][107.2]

Michael Tanner: [00:03:04] Yeah, the depreciation schedule and utility, corporate profits over time are really interesting because what this is showing is the value of the plant over time relative to the corporate profits, which meaning as the longer you have a plant, the less profit is being made because you’re paying off more and more of the plant, meaning the depreciation is less offsetting your profit. So while at and what they go on to say is a plant that is fully paid off, has some of the lowest cost energy available to the consumer. But if you’re a if you’re a utility, it offers some of the worst economics from your standpoint. So there’s always a push to invest new money into capital, whether it’s working or not. Which is why you which is a really interesting point to show. This is why everybody’s been moving into wind and solar. They don’t care if it works or not, because them spending on infrastructure allows them to fully depreciate and take advantage of this kind of accounting trick, you know, and I love that this is where we’re at. We’re innovating by making by taking advantage of the accounting that, you know, real, you know, that’s using a business model that doesn’t stick around too long when you’re innovating on something other than at least a product. Can we now right now. Oh, we’re able to grow because of an accounting trick. Oh. Good luck. [00:04:25][81.1]

Stuart Turley: [00:04:25] Oh, they’ve done such a great job. And if you look down into the the map from the Smart Electric Power Alliance shows utilities have pledged to achieve 100% carbon free, net negative net zero reduce emissions. Mr. Producer, if you could slide this map in, take a look at that map. And net zero or carbon neutral. Look at that Big Ten area in there Michael. Look at all of California net negative. You’ve got either net zero or not net negative or 100% carbon free. You’re looking at the most expensive, electricity in the entire planet. The universe right there. [00:05:12][46.4]

Michael Tanner: [00:05:13] No, it’s it’s it’s crazy. The banks unrealized losses. [00:05:16][3.0]

Stuart Turley: [00:05:18] The banks unrealized in Q4. Securities held banks, bank failures in the dropping of bank account. This one is by, Wolfe Ritter at the Wall Street. He is a good cat. I like reading his articles and stuff. And so when you come in in here and you take a look. In Q4, unrealized losses on securities fell by 206, or 30% from the prior quarter to a cumulative loss of four, 178 billion, or 8.8%, of the 5.43 trillion in securities held by those banks. Unbelievable. These paper losses started piling up in 2022. So when you come down in here, the bank failures, the bank failure issue, Michael, is going to be some serious issues coming around a corner. Back in 1936, there were only five, failures without FDIC insured banks. In 20 and 21. No bank failed in 2018, no bank failed 26 and 2005 bank fail. And that was it. So each of the remaining of the 88 years some bank failed. In 1989, at the peak, 531 banks failed. Holy smokes. [00:06:44][85.9]

Michael Tanner: [00:06:45] Yeah. I think these, you know, these unrealized losses that he’s talking about, he does a good job in, in my opinion, of splitting them up. You have to think about there’s, there’s, there’s what we call mature, securities or losses that are held in these at, in these securities that are what are known as held to maturity, which means they’re not going to sell them ever. They’re going to hold them out until the life of that, you know, security or really it’s that ten year Treasury bond pays back. Because remember, there’s really only so many different ways of talking about government issued, bonds or Treasury securities. Those are specifically the ten and two year yield, which, you know, occasionally in the finance section, I’ll throw those numbers out. And that’s important to know because those are generally when they buy those treasuries, that’s what they’re talking about. So there are certain ones that are held in maturity. But then there’s also ones that are available that anybody can buy that they basically put on the market. Those actually those are make up of over half of the unrealized loss. So you gotta you know, so there’s on both sides of the coin here. You’ve got stuff going and you know, the accounting trickery or whatever between the held to maturity ones or the ones that are available is a little bit good. But yeah, I mean it’s going to get spicy. This is a again comes back to when. What does it mean when the Fed’s tightening monetary policy. They’re raising rates. I mean we all know that we’ve talked about you know we’ve talked about at nauseam about how that’s sort of that’s what that’s what’s happening over in China a little bit. And that’s what’s causing some of the stuff that’s going on is a little bit different over there because of the debt loads here. But we know that the fed has been very aggressive at raising rates. And it seems to be the the stock market is at all time highs are close to all time highs seems to be trending upward. But it definitely you know the tune over here is interest rates. Where will they go. Because if they continue to rise or stay at if these are long term levels of where interest rates are going to be, these unrealized losses are going to continue to pile up because we just came out an era of seven years or eight years of 0% interest rates, and that’s only going that it’s going to take a while to unwind. And it’s and and these unrealized losses will continue to persist, if only because that unwind is only in its infancy. [00:08:55][130.2]

Stuart Turley: [00:08:56] Yeah. And and I like, what he says down here at the bottom in 2024, some banks will fail. We pretty much know that. We just don’t know how many. If eight banks fail, that would be on par with 2015 and 2017. So, he’s pretty cool. Cat. [00:09:12][15.8]

Michael Tanner: [00:09:13] Yeah. No. Go go go check wall Street of follow. We appreciate that. [00:09:16][3.1]

Stuart Turley: [00:09:17] Hey, let’s get rolling around our buddies over there in China. Solar panels, supplier links to alleged abuses in China imperil U.S. climate goal. Michael, if you’re going to be in energy hypocrisy giant, you might as well start rolling out some serious solar panels. Let’s go ahead and let’s take a look at, Miss Producer, if you can slide in the graphic that’s titled U.S. Solar Panel Imports during Q two of 21. Michael, let’s take a look at this. The top five market, or 79% of our, panels come from China. Yeah. Look at that’s just not it’s pretty big. [00:10:04][46.8]

Michael Tanner: [00:10:05] And the rest of the world only gets 21%. [00:10:06][1.3]

Stuart Turley: [00:10:08] Yes. So when you sit back and take. Look. Holy smokes. Now let’s go down to the next chart. Largest owners of planned U.S. solar projects from 2020 2021 to 2025. Next era. Look at that. Bad. We’re talking 10,000, almost 11,000 kilowatt hours of solar going in. And you take a look at all of those. All of those companies are supporting, humanity abuse, as far as I’m concerned, without having some kind of, program in place. Here’s a quote out of it. The lack of transparency in China, in the deserved skepticism that some have towards documentation provided by Chinese companies, adds on an element of uncertainty that’s difficult to remove or solve. These humanity abuses on these folks are just horrific. [00:11:09][61.7]

Michael Tanner: [00:11:11] Yeah. It’s it’s it’s becoming hard to say. Solar is ESG. You can’t really say that. You you can’t, especially when you see data like this. So I think the the sheen is coming off. I think that’s, you know, probably why you see people shifting in the wind because they’re we’re still waiting for the wind. We’ll find out about where these wind fall. I’m sure the wind manufacturers are getting abused too. I’m sure, I’m sure. [00:11:38][27.2]

Stuart Turley: [00:11:39] And they. Yeah. And but the the sad part about the offshore wind is it’s killing the whales. Let’s see. Kill the people. Kill the whales. [00:11:46][7.8]

Michael Tanner: [00:11:47] You know my stance on whales. Kill them. [00:11:49][1.7]

Stuart Turley: [00:11:49] The obscene energy demands of a, you know, you gotta love a good story like this. When we sit back and take a look, there’s a fundamental mismatch between this technology. Environmental sustainability. Said the, devices, the virus. I’m hoping, the world’s most prominent AI cheerleader, Sam Altman, the CEO of open an AI, says, quote, I think we still don’t appreciate the energy needs of this technology. Really? Why are all these gigantic server farms being built? And he says, we don’t really understand. I think you’re going to need every single bit of storage that you’re going to need in server. [00:12:40][51.0]

Michael Tanner: [00:12:42] We need AI is going to be the thing of the future. It takes an incredible amount of power to train these models to deploy these models. Data centers are going to have to expand as long as individual stock chart is pointed like this. Yep. You’re going to see power go through the roof. So it’s always a catch 22 with these people. Oh we’re going to we’re going to transition. Oh well now we’re going to need us again. [00:13:08][25.7]

Stuart Turley: [00:13:08] Whoops whoops. And and now the IEA the International Energy Agency announced that energy related global CO2 emissions rose yet again. Of course data centers for now, or at least a small part. But they are increasing in percentages. Yeah. [00:13:32][23.9]

Michael Tanner: [00:13:33] So now I think if you you know, I think a lot of the Bitcoin community would tell you it’s, you know, growing these type of solutions. You know, deploying Bitcoin and deploying crypto mining is a way to solve this. I would agree to taking you know so there’s another side to this. But it is it is this how everything needs to go I well we’re going to need more power. [00:13:57][24.5]

Stuart Turley: [00:13:58] There is a difference between a data center and cryptocurrency data mining. There is a significant difference because I am a Bitcoin fan for this. One big, huge reason. Bitcoin mining when used with MP operators, allows them to use stranded natural gas, stranded energy that would have been wasted and then provide revenue to deliver lower cost energy to the consumers. I love me Bitcoin mining. When used properly. [00:14:34][35.8]

Michael Tanner: [00:14:34] Well, it’s a better revenue source for operators. [00:14:36][1.7]

Stuart Turley: [00:14:37] Who abs, you. [00:14:38][0.8]

Michael Tanner: [00:14:38] Know, especially when you have the arbitrage opportunity. The right now with natural gas at $1.70 and and bitcoin at whatever it is 70,000 or whatever. So but no, in terms of of the power needs for AI, it’s only going to go up. So, you know, everyone was talking about oil and gas demand is going away. Sam Altman says no, no, no, no, no, no. [00:15:02][24.2]

Stuart Turley: [00:15:03] There was one comment buried in that article and says, well, maybe I could figure out how to use less energy. I. What? Okay. Yes. [00:15:13][10.1]

Michael Tanner: [00:15:13] I hope the AI drives that person off a cliff. [00:15:16][2.2]

Stuart Turley: [00:15:16] That was not who he was. He was already removed from all investor relations. A job opportunities. He now. No investor job for you, man. [00:15:26][9.9]

Michael Tanner: [00:15:27] OPEC, IEA at most divided point on oil demand since at least 2008. This is an absolutely crazy story here. So top headlines out of Reuters producer OPEC and the IEA or the International Energy Agency. One of my favorite organizations are further apart than they have ever been for at least 16 years when it comes to their demand estimates, specifically on crude oil, the gap between the IEA, which represents all of the industrialized countries, and the OPEC, which is the Organization of Petroleum Exporting Countries, are so far off. It’s about a difference of 1% world oil demand. That basically backs into the IEA thinks we’ll have 1.2 million barrels, per day of demand increase. While in February, OPEC decided to say we think it’s going to be 2.25 million barrels per day. That again works out to a 1%, of world demand. Former head of the IEA’s Oil Markets division Neil Atkinson. He’s got a strong quote. The IEA has a very strong perception that the energy transition will move ahead at a much faster pace. Both agencies have backed themselves in with opposition, which is why they have the enormous gulf in demand for cash. You never like to see the two research companies boxing themselves into a corner. That’s really what you want out of your research facility. It’s unbelievable. The IEA did come out with a statement saying they were not going to comment on other organizations forecast, but, quote, we expect this to continue this year with mobility indicators suggesting that road and air traffic are stabilizing. OPEC doesn’t have any rules against it. They say we have been very steadily steady with our 2023 oil demand forecast. Many other forecasters have started low and they continually revised up their 2020 forecast. That’s out of OPEC’s Vienna office. OPEC will come and swing for the fences. They could care less. So you know, and again, who are you going to trust? The IEA, who clearly has been shown to have a political agenda. They would love the energy. You know, they would love demand to fall, you know, for a variety of reasons. OPEC, you know, while they also have an interest in demand going up, they’re a little bit more realistic. And I think this is a perfect time. Miss Produce, if you don’t mind showing up. This chart here OPEC optimistic on its demand for crude oil through 2024. I saw this in an S&P article. Look at the gap between them. Absolutely unbelievable. We got the lower line. That is Where SMP got it. The IEA is somewhere here. S&P is even lower. I mean who knows what they’re doing. OPEC’s on top IEA in the middle. So I mean what does this mean. It means the answer is probably somewhere in the middle. You know, if I were to draw a line, I would draw a dotted line in between because that’s probably where it’s going to end up. I bet both are wrong. It converges somewhere in the middle. The IEA has an incentive to say the energy transition is coming maybe quicker than expected, because they’re getting funding based upon that. OPEC could care less about funding. They’re getting it through oil production. So obviously they’re going to maybe be more in tuned with the oil markets. But also they’ll have an incentive to say oil demand will go up. But the answer is always somewhere in between. And it just goes to show you the the difference going on right now. And it really matters. And you got to trust who you’re getting your data from. Because you look at one, you see one thing, you look at another. You always got to take, you know, they call it a meta analysis. You really got to do a meta analysis, look at all the sources and come to Arco. Where does the majority of the data where’s that focus of that? You know, where’s the focus point of all that. All the different demand averages. So great article out of Reuters exploding. [00:19:19][232.8]

Stuart Turley: [00:19:21] Yeah. Energy prices in California. This is really, Miss Producer, if you could fly in electricity price increases in all sectors from 2008. The 2023 look at Texas, it went down. But look at California. It’s up almost 98% from 2008 to 2024. Yeah. Here’s where some numbers that aren’t in this article that matter, Michael, prices or market share of energy produced by wind and solar has gone up from 4% to 15% over the last, same amount of time period. Okay. But guess where most of that went? It’s in Texas and California, but Texas has actually been using coal, natural gas and nuclear. And so it’s kind of interesting to see how that all that happens in there. The transition, 1.75GW of utility scale solar and 14 gigawatt on residential rooftop solar, which is failing. So here’s where it gets really scary in the course. And the reason why grid scale batteries to backup renewable generators multiplies the cost of utility scale solar programs about $1 million per megawatt of rated grid capacity, with four hours of discharge duration, cost about $1.5 million per megawatt. These batteries can only last for four hours. Holy smokes. Okay, here’s the difference Texas has natural gas for backup and for standby in that they’re trying to put in no natural gas in batteries. That’s where it’s really coming in. So when you sit back and take a look, conclusion California leaders know that rising prices are a huge problem. Really? Does they think they actually. No, I don’t think they know. I got tickled when I read that one. Michael. [00:21:52][151.0]

Michael Tanner: [00:21:52] Yeah, I, I think the big I mean, it’s California doing California things. I mean, $1 million or $1.5 million per megawatt capacity or or hours. Oh, that’s that’s cost effective. [00:22:08][15.4]

Stuart Turley: [00:22:09] It’s not. And and and so the, the average price per. [00:22:14][5.3]

Michael Tanner: [00:22:15] Per megawatt. So it’s not, it’s a little bit different, but still that’s horrible. [00:22:19][4.0]

Stuart Turley: [00:22:19] The price per kilowatt hour, went from $0.03 to an average of $0.17 during that same time period in the US. What was the only difference in that whole time period? The addition of 15%, in the US. Renewables. Oh, wow. So 98% increase. And the average bill in California is horrific. Anyway, I gotta love that. [00:22:19][0.0][1292.9]