Our latest snapshot takes a look at cobalt supply chain risks. Why should we care about cobalt? Because the price of cobalt, a key ingredient of the lithium-ion battery chemistry, has increased 152% since January 2016, 84% from January 2017 alone. Cobalt production will need to grow and grow fast if the world is to realize even moderate growth scenarios envisioned for electric vehicles and grid storage. Cobalt production is highly concentrated: the Democratic Republic of Congo (DRC) produced 62% of global mine production in 2016, and exported almost all of it to China.
Currently, there are over 250 cobalt projects in Australia, Canada, and elsewhere in various stages of exploration and feasibility. We focus on the commercial frameworks across the global cobalt value chains that would facilitate viable development of the resource. In the meantime, price may continue to increase. The news from DRC highlight the potential drivers: child labor, environmental damage, and political unrest. Also see Battery Materials Value Chains, released in April 2016 and Electric Vehicle Diffusion and Raw Materials Supply Chains, released in November 2016.
Other Current Research
Will natural gas demand in China and India grow as fast and high as some predict? We share the results of our assessment of commercial frameworks in each country that would facilitate the development of the necessary natural gas infrastructure (pipelines, storage, distribution networks, NGV infrastructure) in a detailed report released in April 2017 after two years of research.
Competitive electricity markets are struggling in an environment of low natural gas prices, subsidized renewables, and increasing interventions by governments to save baseload plants: a vicious cycle of subsidies. We argue that competitive markets were never given a chance from day one with energy price caps, mandated and subsidized intermittent resources, capacity markets, and limited demand participation. The increasing amount of out-of-market generation and ad-hoc adjustments further undermine the competitive design, which becomes more complex with every new tweaking. Perhaps it is time to consider a more simple but efficient and transparent alternative that would reveal the complete value and cost of different technologies. Watch this space for our future releases on renewables system integration costs and alternative market structures. In the meantime, did you ever wonder why retail cost of electricity has been increasing while wholesale prices are so low that they force many generation units to retire?
We are working on an update but the key messages for the U.S. upstream sector have not changed much from our previous release in March 2016: Upstream Matters! 2015 Update. Companies have spent well above cash flow from operations (77% more in 2016) to replace production and improve leasehold positions. With lower oil prices companies are working to adjust capital spending to fall within cash flows. However, the negative cash flow trend continues but capital markets may be losing interest except in select plays such as the Permian.
March 2-5, 2018 – MMF participated in the annual Windsor Energy Group consultation March 2-5, 2018. Held at St. Georges House, Windsor Castle the retreat brings together energy leaders and experts from British government, the foreign service community and invited industry and academic guests. The 2018 consultation and retreat, “Searching for a New Philosopher’s Stone” focused on disruptive forces on energy markets with fundamentals in flux. Dr. Michot Foss spoke on U.S. domestic oil and gas trends with implications for exports and disruptive commercial frameworks in key end use sectors like electric power.
December 12-13 – CEE held its 22nd Annual Meeting with the theme of “RISK and Uncertainty – A Return to EEEK!onomics.” Discussions concentrated around the price impact of geopolitical risks, emotions-based policy and regulatory decisions. The agenda and presentations can be found at our Think Corner.
November 13-15 – At the USAEE/IAEE 35th North American Conference, Dr. Tsai presented the impacts of wind generation on wholesale price and carbon emissions in ERCOT. Research indicates that wind suppressed electricity prices, albeit not as much as natural gas. Perhaps more unexpectedly, emissions from coal and natural gas plants increase in certain seasons in response to more wind. Contact Dr. Tsai for details.
October 3 – Dr. Gülen joined a panel at the North American Gas Forum to discuss risks and opportunities for natural gas demand in the electric power sector. Policy interventions undermine competitive electricity markets and create stranded costs for merchant generators, including gas-fired fleets; and the marriage between renewables and natural gas is not necessarily a happy one as many assume. Contact Dr. Gülen.
September – We closed two years of technical assistance for upstream oil and gas with Government of Mexico institutions. The program was implemented by Dr. Michot Foss with local partner Dr. Miriam Grunstein on behalf of the U.S. Department of State Energy Bureau. Seven short courses were provided to GoM professionals along with targeted consultations on critical aspects of commercial oil and gas development in the new reform environment. For more information, contact CEE.
September 20-22 – Dr. Michot Foss co-led the Exxon Mobil upstream commercial overview program in Houston with Dr. Britt Freund in partnership with McCombs School of Business-Texas Executive Education. The program is now in its sixth year.
September 6-8 – Dr. Tsai gave an invited presentation at the Electric Market Forecasting Conference in Las Vegas, NV. Dr. Tsai discussed the modeling methods for identifying the impact of wind on suppressing wholesale electricity prices.
August 9 – Dr. Michot Foss served on a panel for the Center for Houston’s Future energy salon.
July 26-28 – Dr. Michot Foss co-led the Exxon Mobil upstream commercial overview program in Calgary with Dr. Britt Freund in partnership with McCombs School of Business-Texas Executive Education.
July 12 – Dr. Gülen chaired the strategic session “Unconventionals – the new conventional" at the 22nd World Petroleum Congress in Istanbul, Turkey. Commercial development of unconventional resources globally depends on several interdependent factors, including attractiveness of fiscal terms, availability of expansive drilling supply chains, ability to expand midstream infrastructure, and availability of “cheap” capital.
June 15-16 – Dr. Michot Foss spoke on U.S. energy policy and politics at IX Congreso Anual Conjunto de Asociaciones del Sector Energético In Acapulco.
Electricity Restructuring: The Texas Story with contributions by Gurcan Gulen, 2009
A Citizen's Guide to National Oil Companies, jointly with the World Bank, 2008
Commentary on Part V- Western Hemisphere, by Michelle Michot Foss, Energy & Security 2nd Edition (Kalicki and Goldwyn), 2013, Woodrow Wilson Center