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

Oil Control: April 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 -7.23% since inception and is up +7.52% in 2015. There are no changes to the model portfolio this month.

From this month’s issue:

Last year, for the first time in history, over 50% of the world’s oil supply was consumed outside of the OECD. It’s ironic, and yet understandable, that 2014 was the year this structural change—in process for over a decade—finally completed itself. With global oil supply steady—and slightly increasing, even, in the second half of the year—a faltering of demand clearly hit oil prices, sending them on a 6 month tumble. But with OECD oil demand steady,  it’s not that Non-OECD demand fell but rather that demand growth in the Non-OECD was clearly not strong enough to handle the constant inching up of global supply. Data from the broader energy system in China, the top Non-OECD economy, bears out this theme. Demand growth for electricity in China has actually been slow enough the past 24 months that it’s allowed renewables—hydropower, wind, and solar—to storm into the gap, thus depressing coal consumption. Were the Chinese economy growing more strongly, renewables would not be taking such a large share of marginal growth. Meanwhile, the growth phase slated to come in India is just getting started. Thus, suppliers of global commodities continue to face the now familiar interregnum where China’s growth is slower, but no single or collection of economies is ready to take the baton. Early data suggests both Chinese and Indian oil demand last year rose by roughly 2-3%. That’s positive, but it’s not enough demand at the margin to kick the oil futures market into higher gear. Oil prices now are completely at the whim of demand changes in the Non-OECD. Is that good or bad news?  |  see: Share of Global Petroleum Consumption: OECD vs Non-OECD 2005-2014.

“TerraJoule.us eBook – Oil Control – April 2015″ by Gregor Macdonald – Editor on Ganxy

Cheap Energy to the Rescue: March Issue of TerraJoule.us

Slide1Each 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. To listen, head over to SoundCloud.

Model Portfolio: The TerraJoule.us model portfolio is down -9.95% since inception and is up +4.80% in 2015. There are no changes to the model portfolio this month.

From this month’s issue:

The magnitude of China’s slowdown has become rather pronounced, and is best observed in the progress of its electricity generation. For much of the last decade, China’s annual growth in electricity generation ran in the double digits—sometimes as high as 12% per annum. For the period 2004-2014, however, that average growth rate has now fallen to 9.44%, as slower years following 2010 have pulled the average downward. TerraJoule.us has been able to source China’s data through October of 2014, and annualizing those figures indicates that China’s power generation growth has fallen to just 4.2% in 2014, compared to the prior year. There are a couple of ways to think about this trend. First, the more general weakness in global demand is reflected in China’s weaker manufacturing sector. Second, this is precisely the slow growth that makes it possible for renewables to gain market share, as coal lags. And finally, the world economy simply awaits China’s next advance in energy consumption. While many think this is a secular slowdown, the example of the US after its heavy industrial phase is instructive. The US consumer economy actually drove energy demand for many decades, after 1960, which saw demand nearly double over the following 40 years. There remains significant upside risk, therefore, in China’s energy demand over the next next several decades.  |  see: China Electricity Generation in TWh 2004-2014.

“TerraJoule.us eBook – Cheap Energy to the Rescue – March 2015″ by Gregor Macdonald – Editor on Ganxy

Renewables at the Zero Bound: February Issue of TerraJoule.us

Slide1Each 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 restricted to purchasers and subscribers.

From this month’s issue:

Depending on your position in the market, the recent and rapid growth of California wind+solar power generation is either joyous, or havoc-inducing. As you can see in the chart below, using the most recent data, combined wind+solar are increasing their share in California quite steadily, in a market that is mostly flat, and without growth. | see: Annual CA Power Generation in Thousand MWh: Ex-Wind+Solar (black) | Wind+Solar(checked) 2010-2014. 

As recently as 2010, combined wind+solar were providing just 6,848 thousand MWh (megawatt hours) in an annual market that generated  nearly 205,000 thousand MWh. But now in 2014, (annualized through the first three quarters), combined wind+solar generation has reached 25,650 thousand MWh in a market that really hasn’t grown—still slightly above 200,000 thousand MWh per year. The implications are clear. Combined wind+solar now provide 12.82% of California’s power generation from all sources. (Note: Although the 2014 data is annualized through the first 3 quarters the full year data will show additional growth and thus additional market share from combined+wind and solar generation). 

Moreover, as has begun to happen in Europe, combined wind+solar even from low penetration levels have started to eat the lunch of the utility sector. The two renewable energy sources are increasingly doing the heavy lifting powergrids require during peak loads: providing the electricity needed as the world turns to power for cooling, and as a greater portion of global GDP runs on the back not of oil, but MWh. Exciting, but also intimidating!

“TerraJoule.us eBook – Renewables at the Zero Bound – February 2015″ by Gregor Macdonald – Editor on Ganxy

Tyranny of Price and Energy Equity Outlook 2015: January (Double) 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 restricted to purchasers and subscribers.

From this month’s issue:

…And again, you can hear the call of the sirens: they are saying there is downside risk from here when natural gas is at $3.00 per million BTU and when WTI is near $52.00 a barrel. OK. Let’s consider that. US natural gas production just reached another all time high. But LNG exports are coming within 12 months. Meanwhile, drilling activity is dropping hard in the US, and in places like the North Sea there’s talk of a jobs and drilling massacre. Wellhead prices in Canada have also fallen way below spot. Let’s consider the chart below: the TerraJoule.us forecast is that supply will be at best flat year-over year in 2015, with about .7 mbpd (half the 2009 supply drop) at risk. Nota Bene: the risk of an actual supply drop will grow as the year goes on because, as previously discussed, the pipeline of project cancellations is still growing…

 

“TerraJoule.us eBook – New Year’s Double Issue – Tyranny of Price and Energy Equity Outlook 2015 – January 2015″ by Gregor Macdonald – Editor on Ganxy

Energy and the Currency of Nations: 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.

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

Podcast: Please enjoy this month’s podcast for free, at SoundCloud: TerraJoule.us December podcast.

From this month’s issue:

The United States has heroically tripled exports of energy over the past ten years, with more volumes coming as LNG terminals come online between 2016-2021. True, the bulk of these exports currently are in the form of petroleum products, which is a testament to US industrial capacity and infrastructure—not surplus oil. But that’s OK. To coal and petroleum product exports the US will soon add LNG and by 2020, this will tack on another 3.5 – 4.0 quadrillion BTU of exports. It is not inconceivable therefore, as US oil consumption will continue to stagnate and US coal exports will, contra forecasts, start to grow again, that by 2025 the US could be exporting 20 quads of energy per year. That would put the US Dollar in a position of extreme strength, and for those who are already looking to make a case for a secular USDollar strengthening trend, the structural shift in US energy exports adds credibility to that thesis. Indeed, although the US has emerged from the great recession with a much higher level of government debt, now approximately 18 trillion, this still is dwarfed by wartime debt to GDP levels from the country’s history. Indeed, with US GDP at roughly 17 trillion, the relationship is a benign 1 to 1 and this is reflected in the decided unconcern expressed towards the price of US Treasury debt, and again, US Dollar strength. It is a surprise to many that the US economy, while certainly riddled with inequality, has emerged strongest of all globally from the crisis. Energy production is playing a large role in that story.

 

“TerraJoule.us eBook – Energy and the Currency of Nations – December 2014″ by Gregor Macdonald – Editor on Ganxy

Investing for Energy Transition: 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: Please enjoy this month’s podcast for free, at SoundCloud: TerraJoule.us November podcast.

From this month’s issue:

No country better illustrates the three phases of energy transition than the United States, which was damaged initially by the energy shock, then struggled and stagnated for five years, and is now starting recover. An excellent way to measure this story has been to follow energy expenditures, which rose sharply on oil’s initial repricing, crashed during the crisis, rose again during the early part of the recovery, and are now falling.  | see: US Annual Energy Expenditures as a Percent of GDP 2004-2014. The United States has been busily constructing new wind and solar capacity, and taking advantage of its very cheap and plentiful supply of natural gas. All the while, Americans have been dumping their demand for oil—which remains expensive despite the recent seasonal decline from $100 to $80. Accordingly, energy expenditures as a percent of GDP are in a four year downtrend, and at 8% are back to levels last seen in 2005. A reminder: upfront costs for the deployment of wind and solar can be high, but the ROI starts immediately and actually increases as time moves forward. The US is now vying with China to be the biggest world mover in the buildout of wind+solar. This pathway will pay increasing dividends as time progresses. We should expect the downtrend in energy expenditures to continue, with gains distributed to the US economy in the form of wealth and GDP.

US Annual Energy Expenditures as a Percent of GDP 2004-2014

Also in this month’s issue:

The model portfolio as of 31 October 2014 is down – 4.26% since the inception date,  April 1, 2013. The portfolio remains fully invested. There are no changes this month to the portfolio’s composition. 

“TerraJoule.us eBook – Investing for Energy Transition – November 2014″ by Gregor Macdonald – Editor on Ganxy