Energy Sector

[lnofeisone]

This is why I have a sliver of TELL (less than 0.5% position). At some point either gov't or another party will give them the $$ they need.

[cubsfan]

^^^^ @PelagicSuch a great article re: energy usage.  This is what happens when you let Greta Thornburg

and a bunch of idiots like AOC dictate your energy policy. 

 

Let's not build a pipeline to New England for cheap & plentiful Natural Gas in Pennsylvania,

but instead pay 6X that rate to important LNG.  You get what you vote for.

Edited June 7, 2022 by cubsfan

[Ulti]

https://oilprice.com/Latest-Energy-News/World-News/Environmentalists-Challenge-EU-Backed-Projects.html

[Castanza]

1 hour ago, Ulti said:

https://oilprice.com/Latest-Energy-News/World-News/Environmentalists-Challenge-EU-Backed-Projects.html

There is no pleasing the religious climate crowd. They don't see the world as it is which makes it impossible to reason with them. Fact is, life has to go on and no amount of solar and wind can easily or readily provide enough energy for even half the baseload. Not to mention the decades or more it will take to implement such infrastructure all while ignoring the unintended consequences of massive strip mines, recycle refuse, solar fields, etc. 

 

Nat gas and nuclear is the clear path forward. Unless Musk discovers Unobtanium on Mars, there is no other way to keep up with current energy demands and trends. 

[rkbabang]

16 hours ago, Castanza said:

There is no pleasing the religious climate crowd. They don't see the world as it is which makes it impossible to reason with them. Fact is, life has to go on and no amount of solar and wind can easily or readily provide enough energy for even half the baseload. Not to mention the decades or more it will take to implement such infrastructure all while ignoring the unintended consequences of massive strip mines, recycle refuse, solar fields, etc. 

 

Nat gas and nuclear is the clear path forward. Unless Musk discovers Unobtanium on Mars, there is no other way to keep up with current energy demands and trends. 

 

Nat gas should be thought of as holding us over until enough nuke plants can be built.  I can't understand the loony environmentalist left's opposition to nuclear.  A closed nuclear fuel cycle is the safest and cleanest energy source we have.  Our stockpile of so-called "spent" nuclear fuel contains a truly massive amount of useable energy that we are doing nothing with, and more is being created by our existing plants every year.  Yet they're yammering about fcking windmills. smh.

 

https://www.cnbc.com/2022/06/02/nuclear-waste-us-could-power-the-us-for-100-years.html

 

[Value_Added]

3 minutes ago, rkbabang said:

 

Nat gas should be thought of as holding us over until enough nuke plants can be built.  I can't understand the loony environmentalist left's opposition to nuclear.  A closed nuclear fuel cycle is the safest and cleanest energy source we have.  Our stockpile of so-called "spent" nuclear fuel contains a truly massive amount of useable energy that we are doing nothing with, and more is being created by our existing plants every year.  Yet they're yammering about fcking windmills. smh.

 

https://www.cnbc.com/2022/06/02/nuclear-waste-us-could-power-the-us-for-100-years.html

 

Nuclear is the best, cleanest and safest option yet many unregulated plants still need subsidies to remain competitive.  Energy prices now would make them profitable but this is likely not permanent and they will need subsidies to continue running far into the future.  They are very CapEx heavy requiring high staffing numbers, numerous regulatory guidelines above and beyond what’s required at gas plants, special safety ratings for almost all equipment, etc…. I work for Constellation at one of their nuke plants so I am biased and very pro nuclear.  However, having the risk of early retirement due to poor economics makes you wonder what the future holds for nuclear as a whole in the U.S.  Currently we are hoping for federal policies to displace state policies for the long term.

 

 

 

 

 

 

[rkbabang]

5 minutes ago, Value_Added said:

Nuclear is the best, cleanest and safest option yet many unregulated plants still need subsidies to remain competitive.  Energy prices now would make them profitable but this is likely not permanent and they will need subsidies to continue running far into the future.  They are very CapEx heavy requiring high staffing numbers, numerous regulatory guidelines above and beyond what’s required at gas plants, special safety ratings for almost all equipment, etc…. I work for Constellation at one of their nuke plants so I am biased and very pro nuclear.  However, having the risk of early retirement due to poor economics makes you wonder what the future holds for nuclear as a whole in the U.S.  Currently we are hoping for federal policies to displace state policies for the long term.

 

 

 

 

 

 

 

How much of that capex has to do with over regulation and the fact that we are still using basically 1950s light water reactor technology?

 

[Ulti]

Its unfortunate that there has been so much bickering on both sides of the political isle ...#$%^ them all.....infrastructure, power grid and some rational thought on energy upgrades(pipelines) would have been much better done with cheap money over that past few years...At least Berkshire has been doing this... And get rid of this esg shit\ carbon tax so autocrats don't get the $$ is the way to go.

https://www.thebalance.com/carbon-tax-definition-how-it-works-4158043

however ,how do you penalize bad actors who violate to carbon tax rules?

[cubsfan]

@Value_Added Nice post on nuclear. You know the business. Construction of new stuff is many times higher than in the '80's. Seems incredibly safe now - and efficient. What are the subsidy issues, if you don't mind expanding?

[Value_Added]

4 minutes ago, rkbabang said:

 

How much of that capex has to do with over regulation and the fact that we are still using basically 1950s light water reactor technology?

 

I don’t have an exact percentage on that but I can shed a bit of light on it.  Without going into great detail, almost everything in a nuclear plant has an abundance of regulation associated with it.  This ranges from staff to equipment…especially safety related equipment.  While staffing isn’t a CapEx, some if not most of the components being replaced fall under CapEx (some fall under SG&A expenses). Anytime a component or piece of equipment is replaced and/or modified, regulation deems it must be rated for specific requirements that make it safe for nuclear plant use. A lot of the components are highly specialized to nuclear plants and are purchased from companies who specialize in making these components and they have significant costs associated.  For example, while I’m not familiar with requirements at O&G plants, I can say with high certainty that if a nuclear plant needed a valve versus a gas plant, our regulations would cause drastic price increases to deem that valve “nuclear grade”.  Regulations are intertwined in nearly  every aspect of operations.  However, nukes generate a whole lot of very reliable base load power and some make boatloads of money during peak summer and winter seasons even with the associated costs.

 

 

[Spekulatius]

I am sympathetic to the view on nuclear energy here, but this is an investment forum and we should talk about what is likely going to happen, not what we think should happen, because it's "right".

 

FWIW, i see very little support for nuclear from both ends of the political spectrum. I don't think it's matter of political spectrum.

 

This is the reality:

https://theintercept.com/2019/02/06/south-caroline-green-new-deal-south-carolina-nuclear-energy/

Edited June 8, 2022 by Spekulatius

[SharperDingaan]

Nukes are subsidized because they don't pay the full cost of insurance. They are self insured against nuclear accident, waste disposal, decommissioning, etc. by you and I - so that the electricity they generate is affordable for general use. While the tech itself has both matured and miniaturized (sub/warship power plants, satellites, etc.) - in the public domain, the centralized power plant in a remote location remains the preferred option.

 

It is extremely stupid to put nukes in the Alberta oil fields (Cenovus CEO) - no matter how safe they are. It simply creates a terrorist threat; as a single adverse black swan event now risks contaminating the worlds 3rd largest oil field. Nukes are a good choice - but located on Canadian Shield, and the electricity produced moved to the Alberta oil fields via dedicated power lines. Nukes + national grid upgrades = less CO2 emission in the oil fields + less CO2 emission as EV replaces IC vehicles. Canada meets its CO2 reduction targets quickly.

 

We may hate the environmentalist, but without them we would not have carbon taxes, or the coming plastic taxes. Put a tax on pollution, and you can make the business case for investment in its removal. Green Tech as a sustainable, versus the current unsustainable extraction based business model.

 

SD

[Value_Added]

1 hour ago, cubsfan said:

@Value_Added Nice post on nuclear. You know the business. Construction of new stuff is many times higher than in the '80's. Seems incredibly safe now - and efficient. What are the subsidy issues, if you don't mind expanding?

I’d like to make it known that I am in a position which has no inside knowledge or decision making on CapEx spending or regulatory actions.  However, I am aware in a broad sense of the operations and economics.

 

Again, I work for Constellation (was recently spun off from Exelon) which is mostly present in IL as far as nuclear power goes but they also have plants in New York, Maryland, Pennsylvania, and New Jersey.  
 

IL, NY, and NJ all have subsidies in place to keep nuclear plants operating and without these subsidies, some of the nuclear plants within these states would likely close due to the economics.

 

It has been a common theme in the industry to shutter money losing plants and it appears this will be the case until the power market offers higher prices or subsidies become more permanent.  All subsidies currently in effect are state level and have expirations ranging from 2025 - 2029.

 

Each plant has a different cost structure but a goal would be to keep operating costs to about $25/MWh.  Some plants are there, some are nowhere near this number.  Single unit plants cost drastically more to run due to lack of scale efficiencies and will never meet that cost.  
 

There were times in recent past in which our market had negative power prices causing us to effectively pay to have our power taken. During these times we essentially down power to cause a demand spike which increase prices. A nuclear plant isn’t designed to increase and decrease on demand and it is a slow and in depth process which takes lots of focus and perfect execution each time we do it.

 

The market is much better now with inflation running rampant but is it sustainable?  If not, some sort of subsidy will need to exist far into the future in the states which are unregulated.  Natural gas is so difficult to compete against.  As a quick example… nuclear plant takes roughly 600 - 900 employees to run and the fuel isn’t cheap and the cost and time to build is absolutely off the charts due to regulation and the nature of the technology.  Constellation recently built a gas plant in Texas which produces the same amount of power as a large nuclear plant (1200 MWe), costs a fraction of money and time to build, and takes less than 30 employees to operate.  
 

The playing field isn’t even close to level but it is what it is.  Input costs such as fuel and staffing are out of the hands of the plant just as much as the power prices received from the power produced.  The regulations will never disappear in nuclear and I don’t see them lessening much either. Electricity is a commodity and nuclear plants are expensive to operate so the only advantage they have is being a strong player in the ESG world or the fuel source becoming hugely cheaper than that of natural gas.  But is ESG just a fad?  
 

How do you value a company like CEG?  I personally can’t and don’t own the stock because of it (even with a stock purchase plan).  It’s very complex as can be seen by their 10k being 800 pages.  They do have substantial value in regards to barriers to entry.  They are valued at an EV of about $26 billion currently and there’s absolutely no way a competitor could recreate their assets with even $100 billion.  But is that really value when your producing and selling a commodity from a highly regulated plant?  If one can figure out the future of green energy in America, it could be a great play.  At this point in time I think there’s high certainty of a nuclear presence in the future.  But what will it look like?  

Edited June 8, 2022 by Value_Added

[JRM]

3 hours ago, rkbabang said:

How much of that capex has to do with over regulation and the fact that we are still using basically 1950s light water reactor technology?

 

All of the nuclear plants in the US are 1950\1960's technology, designed in the 1970's, and brought online in the 1970's\1980's.

 

The cost is due to the number of people required to run the plant, both on-site and offsite.  As mentioned previously, the amount of paperwork and testing required to maintain\replace a safety related component is extensive.  This "paperwork pedigree" may be performed by a contractor or third party who doesn't directly work on-site.  

 

Not to mention almost everyone on-site is making six figures.  Licensed operators are making $130k+ with overtime easy.  

 

When I worked at a nuclear plant (5 years ago) we were in the $35 per megawatt range for a single unit.  If we were operating in a de-regulated environment there would be a lot of pressure to shut us down.

[rkbabang]

20 minutes ago, JRM said:

All of the nuclear plants in the US are 1950\1960's technology, designed in the 1970's, and brought online in the 1970's\1980's.

 

Imagine trying to run a datacenter with massive buildings containing 1960s computers because that is what the government regulations mandated and complaining that computers are just too expensive and need so many people to run.

 

[Castanza]

3 hours ago, Spekulatius said:

I am sympathetic to the view on nuclear energy here, but this is an investment forum and we should talk about what is likely going to happen, not what we think should happen, because it's "right".

 

FWIW, i see very little support for nuclear from both ends of the political spectrum. I don't think it's matter of political spectrum.

 

This is the reality:

https://theintercept.com/2019/02/06/south-caroline-green-new-deal-south-carolina-nuclear-energy/

 

Depends how long your view is. Kuppy has recently made some interesting remarks regarding nuclear investment. Bill Gates is working on new reactors (and he always has the ear of WB). So to say there is no reason to look at nuclear from an investment point of view is a bit short sighted (but I agree it may not be actionable outside of a nuclear ETF). Energy plays are almost always far looking because the transitions are slow and full of regulatory hurdles. 

 

What is your high level view on energy over the next 20 years? More solar and wind combined with nat gas?

[Value_Added]

15 minutes ago, rkbabang said:

 

Imagine trying to run a datacenter with massive buildings containing 1960s computers because that is what the government regulations mandated and complaining that computers are just too expensive and need so many people to run.

 

Systems within the stations can be upgraded to modern/newer technology and often are.  Mods are common and while they create more reliability and have better safety measures, they typically are very expensive due to the engineering requirements needed and rarely do they allow you to reduce staffing…nor do they create a power up-rate to allow for more power generation.  A perfect example of a huge maintenance capital expense.  
 

Even modern nuclear plants such as the Westinghouse AP1000, require extensive staffing to operate due to the “tech specs” mandated from the NRC.  

Edited June 8, 2022 by Value_Added

[cubsfan]

^^ Great education on Nuclear. Thank you!

 

I wonder how US costs compare, say to France?

Edited June 8, 2022 by cubsfan

[james22]

5 hours ago, Spekulatius said:

I am sympathetic to the view on nuclear energy here, but this is an investment forum and we should talk about what is likely going to happen, not what we think should happen, because it's "right".

 

FWIW, i see very little support for nuclear from both ends of the political spectrum. I don't think it's matter of political spectrum.

 

This is the reality:

https://theintercept.com/2019/02/06/south-caroline-green-new-deal-south-carolina-nuclear-energy/

 

Yeah, but: reflexivity?

[Spekulatius]

4 hours ago, Castanza said:

 

Depends how long your view is. Kuppy has recently made some interesting remarks regarding nuclear investment. Bill Gates is working on new reactors (and he always has the ear of WB). So to say there is no reason to look at nuclear from an investment point of view is a bit short sighted (but I agree it may not be actionable outside of a nuclear ETF). Energy plays are almost always far looking because the transitions are slow and full of regulatory hurdles. 

 

What is your high level view on energy over the next 20 years? More solar and wind combined with nat gas?

Yes, that and probably energy savings (better insulation mandate) and heat pumps for jokes. I think shingles that double up as solar cells could work too.

 

If we do get a real energy crisis and extended high priced things may be possible that do not seem palatable now, including nuclear power.

[Ulti]

http://www.gasprocessingnews.com/news/freeport-lng-fire-cuts-key-source-of-us-gas-supply-to-europe,-asia.aspx

[Sweet]

The government of the United Kingdom looks set on going down the route of ‘small modular nuclear reactors’.

 

Rolls Royce is in this space and believes these SMRs are cost efficient and scalable to meet net zero requirements of the future.

 

https://www.rolls-royce.com/innovation/small-modular-reactors.aspx#/

Edited June 10, 2022 by Sweet

[Value_Added]

28 minutes ago, Sweet said:

The government of the United Kingdom looks set on going down the other of ‘small modular nuclear reactors’.

 

Rolls Royce is in this space and believes these SMRs are cost efficient and scalable to meet net zero requirements of the future.

 

https://www.rolls-royce.com/innovation/small-modular-reactors.aspx#/

Constellation is actually partnered with Rolls-Royce to aid in the study and potential operations of the SMR’s.

[hasilp89]

https://www.wsj.com/articles/mexico-energy-cfe-obrador-11655000527
 

interesting look into Mexico’s energy sector and how amlo is screwing things up. Doesn’t seem like it will end well. 

[Sweet]

Forward looking to 2023 supply and demand balances.
 

https://www.bloomberg.com/opinion/articles/2022-06-13/the-oil-price-shock-will-reverberate-into-next-year