Car Talk

Car Talk, the February issue of TerraJoule.us, discusses the plausible deployment rates of electric vehicles (EV) and autonomous vehicles (AV) in the context of a changing transportation market where the current dream is to detach automobiles from personal ownership. To counter some of the current excitement over an imminent revolution in transportation,  we show that existing solutions, like public rail transport, have been successful already in competing away marginal demand for automobiles, and oil. Overall, when we look at comparable infrastructure buildout rates for wind and solar technology, and the exceedingly slow rate so far of EV adoption, TerraJoule.us concludes that transition in mobility will run into familiar resistance points before the scaling process truly begins.

In the second essay of this month’s issue, “Oil’s New Problem”, we note the global oil market now is entirely dependent on demand changes in Non-OECD economies. And we wonder, if after 15 straight years of market share losses, whether energy transition has finally caught up to oil.  Conversely, with a flood of exceptionally cheap energy from all sources fanning out into the world—oil, coal, LNG, wind, and solar—it seems probable that this massive cost reduction will convert to stimulus by next year.

Relatedly, in the continuously updating TerraJoule.us Global Grid Decarb Monitor, projections for marginal growth from wind and solar are raised for 2017. A better economic outlook drives one part of this revision, but the normalizing effects of recent tax policy changes from the US will smooth both markets as we cross through next year, into the end of the decade. We also raise substantially the total growth rate of new power generation, from all sources, in the 2017 forecast.

Finally, The TerraJoule.us Transition Index, composed of 70% ETFs and 30% individual equities, stands at 91.59 having started the new year at a notional value of 100. The Index plays a favored super-theme of TerraJoule.us: that the global economy is transitioning away from liquid fossil fuels, to the powergrid. And, that the costs of fossil fuel extraction and combustion increasingly place the energy-capture technologies of wind and solar power in a favorable position.

–Gregor Macdonald, Editor of TerraJoule.us – A Journal of Energy Transition.

Energy Constructors

The energy landscape in 2016 opens up on a pair of notably mismatching trends. One, is that global energy supply from all sources is once again poised to advance, past current levels of demand. While last year’s oversupply plagued the oil market, this year’s expansion will concentrate on the power sector, as a more globalized natural gas market gets underway, and as new wind and solar capacity soars–from a higher base.

Second, is that a new wall of capital is now forming to invest in low carbon assets, in the wake of COP21, and spurred on by the nascent divestment movement. But despite strong growth rates in renewables, the volume of capital both today and in the future looks to overwhelm available projects.

The newly expanded TerraJoule.us probes deeply into both trends.

Energy Constructors, the January issue, explains that energy transition is increasingly an infrastructure and technology event, in which both fossil fuel extraction but especially solar power are touched by the effects of innovation. A new feature, The TerraJoule.us Global Grid Decarb Monitor, indicates that once again, combined wind+solar will greatly impact global power markets, accounting for a full third of total new generation this year. Meanwhile, new writer Justin Ritchie explores the looming migration of capital, seeking to shed fossil fuel exposure, as prices fall and the policy complex whirs into action. Ritchie shows that just in the past year, the number of portfolios looking to adopt new climate-friendly criteria has jumped substantially.

Finally, in light of the TerraJoule.us view that the engineering and technology phase of energy transition is now ready to fly, we are launching a new TerraJoule.us Transition Index, composed of 70% ETFs and 30% individual equities. The Index will be rebalanced quarterly, after its start on January 1, 2016. Overall, the Index intends to play a favored super-theme of TerraJoule.us: that the global economy is transitioning away from liquid fossil fuels, to the powergrid. And, that the costs of fossil fuel extraction and combustion increasingly place the energy-capture technologies of wind and solar power in a favorable position.

–Gregor Macdonald, Editor of TerraJoule.us – A Journal of Energy Transition.

The Coal Question: December Issue of TerraJoule.us

Each issue of TerraJoule.us contains: a Main Essay, the Model Portfolio, the Data Brief, and a link to a Downloadable Podcast. Gregor Macdonald, Editor.

Readers may purchase each issue individually, through Ganxy.com: Purchase.

Podcast: This month’s podcast is open only to subscribers and purchasers of the issue.

Model Portfolio: There are no changes to the model portfolio this month.

“TerraJoule.us eBook – The Coal Question – December 2015” on Ganxy

Transition Rates: November Issue of TerraJoule.us

Each issue of TerraJoule.us contains: a Main Essay, the Model Portfolio, the Data Brief, and a link to a Downloadable Podcast. Gregor Macdonald, Editor.

Readers may purchase each issue individually, through Ganxy.com: Purchase.

Or, readers may also take a 12 month subscription through Gumroad.com: TerraJoule.us Monthly eBook  Annual Subscription.

Podcast: This month’s podcast is open only to subscribers and purchasers of the issue.

Model Portfolio: There are no changes to the model portfolio this month.

“TerraJoule.us eBook – Transition Rates – November 2015” by by Gregor Macdonald – Editor on Ganxy

Solar the Dangerous: October Issue of TerraJoule.us

Each issue of TerraJoule.us contains: a Main Essay, the Model Portfolio, the Data Brief, and a link to a Downloadable Podcast. Gregor Macdonald, Editor.

Readers may purchase each issue individually, through Ganxy.com: Purchase.

Or, readers may also take a 12 month subscription through Gumroad.com: TerraJoule.us Monthly eBook  Annual Subscription.

Podcast: This month’s podcast is open to the public. Listen freely here at SoundCloud.

Model Portfolio: There are no changes to the model portfolio this month.

“TerraJoule.us eBook – Solar the Dangerous – October 2015” by Gregor Macdonald – Editor on Ganxy

Slow Globe: September Issue of TerraJoule.us

Each issue of TerraJoule.us contains: a Main Essay, the Model Portfolio, the Data Brief, and a link to a Downloadable Podcast. Gregor Macdonald, Editor.

Readers may purchase each issue individually, through Ganxy.com: Purchase.

Or, readers may also take a 12 month subscription through Gumroad.com: TerraJoule.us Monthly eBook  Annual Subscription.

Podcast: This month’s podcast is for readers only.

Model Portfolio: There are no changes to the model portfolio this month.

From this month’s issue:

We know that GDP is a less than perfect measure of a country’s economic performance. We also know that GDP transforms over time, moving from capital intensive manufacturing to intellectual and digital goods. This is why energy consumption can both instruct, but also mislead, when hunting for clues in the economy. That said, global oil consumption in 2014 according to IEA Paris rose just 710 thousand barrels per day, or about 0.77%. BP Statistical Review Data concurs: global oil consumption grew just 0.76% last year. (It should be noted these growth rates are much lower than agency forecasts produced throughout 2014). Closer inspection reveals that US oil demand has never recovered—but has stabilized at lower levels—since the high consumption years of last decade. Despite this, the US has grown GDP roughly from 13 to 17 trillion over the past decade. It’s the position of TerraJoule.us that the best framework to understand this achievement is through the lens of energy transition. The US is using 1) less total energy, and 2) shifting to the powergrid, as part of a large and new pursuit of natural gas and wind and solar. And there’s at least some evidence that the US is being paid dividends for this transition. While the US will once again not come anywhere close to achieving the FED’s inflation target of 2%, job gains run at a steady pace, and there’s some early indication the labor market is starting to tighten. This may sound underwhelming, but vs. the world the US truly stands out.

“TerraJoule.us eBook – Slow Globe – September 2015” by by Gregor Macdonald – Editor on Ganxy

Never Nine Billion: August Issue of TerraJoule.us

Each issue of TerraJoule.us contains: a Main Essay, the Model Portfolio, the Data Brief, and a link to a Downloadable Podcast. Gregor Macdonald, Editor.

Readers may purchase each issue individually, through Ganxy.com: Purchase.

Or, readers may also take a 12 month subscription through Gumroad.com: TerraJoule.us Monthly eBook  Annual Subscription.

Podcast: This month’s podcast is for readers only.

Model Portfolio: There are changes to the model portfolio this month. Please see this month’s issue for details.

From this month’s issue:

Since the late 1990’s, Andrew Revkin of the New York Times has been helming a column (now a blog, really), called Dot.Earth. The premise of the blog has long been that world population will surpass nine billion. For sure, global population will continue to grow form its present 7.4 billion in absolute terms. And, the associated problems that will come with that expansion—everything from carbon output to the decline of available arable land and water—will worsen before a gentle improvement (in absolute terms) takes hold.

What is significant now, however, is that the world’s five most populous nations (previously mentioned) which represent nearly 50% of total global population, have a weighted average fertility rate that has fallen below 2.0. Compiling fertility data from myriad sources, TerraJoule.us finds the weighted average fertility rate for China, India, US, Indonesia, and Brazil has fallen to 1.92. Whether or not the data you, or others, may choose shows slightly different rates for these top five countries, the fact remains that the trends in the two most populous countries—China and India—are clear.

Interestingly, however, some still make the case that high fertility rates in Africa—especially in countries like Nigeria —pose a continuing risk that global population will begin a new rate of advance. That is just wrong. Africa’s population stands at 1.1 billion, and is characterized by very high fertility rates. What we’ve learned is that high fertility rates are at risk of falling, not rising. Indeed, a core thesis of The Gates Foundation is that upgrading health and access to electricity is the trigger for high fertility rates to decline. As the foundation correctly points out, it is a myth that saving lives leads to overpopulation. In fact, the opposite is true. And as electricity, technology, mobile communications, and health care are more broadly distributed in Africa, the final remaining set of high fertility rates will fall.

Accordingly, it is the position of TerraJoule.us, that the trajectory of global population growth to the year 2050 indicates a peak that never quite reaches 9 billion. If this is the case, the slow growth documented by TerraJoule.us will become entrenched for decades to come.

“TerraJoule.us eBook – Never Nine Billion – August 2015” by Gregor Macdonald – Editor on Ganxy

China’s Not Done: July Issue of TerraJoule.us

Each issue of TerraJoule.us contains: a Main Essay, the Model Portfolio, the Data Brief, and a link to a Downloadable Podcast. Gregor Macdonald, Editor.

Readers may purchase each issue individually, through Ganxy.com: Purchase.

Or, readers may also take a 12 month subscription through Gumroad.com: TerraJoule.us Monthly eBook  Annual Subscription.

Podcast: This month’s podcast is open to all readers, and can be heard at SoundCloud.

Model Portfolio: There are no changes to the model portfolio this month.

From this month’s issue:

Global energy consumption grew at an amazingly small 0.946% in 2014—a confirmation of last year’s weak macro growth signals, and surely the cause of price declines in coal, iron ore, copper, natural gas, and of course, oil. (TerraJoule.us remains baffled how IEA.org could have continued to claim such large oil demand increases in Q3 and Q4 of 2014, given macro conditions). In the EU, some of the energy demand declines were severe—as nearly as large as declines in stagnant Japan, or civil-war ravaged Ukraine. From an energy standpoint, the EU remains in a long recession (and recent developments in Greece will not help.). Meanwhile, former Non-OECD fast grower Brazil also remains mired in a sluggish forward path, with total energy consumption growing only 7.11 Mtoe. That said, despite last year’s slow global growth (and slow carbon emissions output as well) which country once again led the world in energy demand? China. Net global energy demand growth was recorded at 121.5 Mtoe in 2014 according to the latest data from BP. But China accounted for the largest segment of that advance, with 73.98 Mtoe of energy consumption growth. Close behind was of course India, which is now successfully hitting higher GDP levels under Modi. (see: India Unleashed, June 2014 issue of TerraJoule.us). As China continues to lead the world in absolute levels of energy consumption growth, we should take a look at the composition of that growth. How is China faring in its efforts, for example, to reduce coal?

“TerraJoule.us eBook – China’s Not Done – July 2015” by Gregor Macdonald – Editor on Ganxy

Coal Dread: June Issue of TerraJoule.us

Each issue of TerraJoule.us contains: a Main Essay, the Model Portfolio, the Data Brief, and a link to a Downloadable Podcast. Gregor Macdonald, Editor.

Readers may purchase each issue individually, through Ganxy.com: Purchase.

Or, readers may also take a 12 month subscription through Gumroad.com: TerraJoule.us Monthly eBook  Annual Subscription.

Podcast: This month’s podcast is open only to purchasers and subscribers.

Model Portfolio: There are changes to the model portfolio this month. See this month’s issue for details.

From this month’s issue:

Over the past three years the global production of coal has come achingly close, in energy terms, to matching the global production of oil. These two energy sources have crossed paths once before: starting in the 1940’s, during WW2, oil began to make rapid market share gains on coal. By the early 1960’s, oil would overtake coal to claim the crown as master energy commodity. But as you can see in the chart below, coal’s steady production today above 3800 million tonnes oil equivalent (Mtoe) has nearly caught oil’s production levels around 4000 Mtoe. Part of coal’s gain has come from oil’s stagnation: oil has lost market share every years for the past 15 years… And yet, one rarely hears talk of the Death of Oil. Nor, have we seen the kind of crushing market sector shrinkage in the global oil sector that’s been sustained in the global coal sector. The Death of Coal is either a premature thesis, or one that is wrongly scaled to the actual, true size of the problem…That said, global coal forecasts from IEA Paris and EIA Washington need to change, and should model two cases going forward. In the current case, slow global growth allows renewables and natural gas to exploit small demand growth for new energy capacity. In a second case, global growth revives, and despite continued fast growth rates in renewables, energy demand rebounds to existing capacity—much of which is still served by coal. Indeed, one of the ironies of a world transitioning to the powergrid is that it offers a great opportunity for renewables to enter the existing platform, but alas, provides continual opportunity for coal to serve as the backbone for global electricity.

“TerraJoule.us eBook – Coal Dread – June 2015” by Gregor Macdonald – Editor on Ganxy

Energy and the US Dollar: May Issue of TerraJoule.us

Each issue of TerraJoule.us contains: a Main Essay, the Model Portfolio, the Data Brief, and a link to a Downloadable Podcast. Gregor Macdonald, Editor.

Readers may purchase each issue individually, through Ganxy.com: Purchase.

Or, readers may also take a 12 month subscription through Gumroad.com: TerraJoule.us Monthly eBook  Annual Subscription.

Podcast: This month’s podcast is free. Listen here at SoundCloud.

Model Portfolio: The TerraJoule.us model portfolio is down -1.63% since inception and is up +13.12% in 2015. There are no changes to the model portfolio this month.

From this month’s issue:

Imported energy as a share of total US energy consumption last year fell to just 11.16%, continuing a dramatic downtrend since 2005, when dependency stood at 30%. This is  nothing short of a revolutionary trend-change, especially when you consider the gargantuan energy consumption of the US, which stands just shy of 100 quadrillion btu per year. Because US energy consumption overall has either bottomed, or is set to advance at least a little, the next dramatic move lower in the energy deficit will come in 2017, as LNG exports really get underway. TerraJoule.us believes global currency markets have not yet discounted these coming changes. Viewpoints overall about energy use, production, renewables, and global trade remains firmly anchored to an era that ended roughly a decade ago. Moreover, it’s astonishing that anyone who was watching markets a decade ago could possibly think the US Dollar is headed for trouble today. The US will become energy independent by 2019, according to the TerraJoule.us forecast. While the swings in fossil fuel trade are the driver for this change, the gains in renewables that will start hitting harder in the latter part of the decade will perfect and ensure this new era. Energy independence has typically been a subject for geo-political analysts. However, for our purposes, it’s the effects on the US Dollar and the impact on energy transition more broadly which are the main concerns for energy-focused investment, and the energy mix to 2020.

US Energy Spread- Imported Energy as a Share of Total US Consumption 2005-2014 |  Forecast 2015-2020

“TerraJoule.us eBook – Energy and the US Dollar – May 2015” by Gregor Macdonald – Editor on Ganxy