Will fusion cause a financial crisis?

[Warwick]

http://www.guardian.co.uk/environment/2011/jul/12/high-carbon-investment

The author suggests that due to climate change, legislative actions that compromise the profitability of the fossil fuel sector are inevitable, one way or another. He notes that “If you look specifically at the UK, five of the top 10 companies in the FTSE 100 are almost exclusively high-carbon and together account for a staggering 25% of the index’s entire market capitalisation.” and then speculates “When markets wake up to the real value of high-carbon assets, the chaos wrought and value lost could be devastating.”

A large number of institutional investors, including pension funds, are carrying large amounts of stock in companies like BP and Exxon. There are also some retail banks which have large amounts of corporate assets, especially in these supposedly safe blue-chip companies – we’re still a long way off any kind of Glass-Steagall law, on both sides of the pond. Would fusion trigger a re-evaluation of high carbon assets, leading to a banking collapse that would dwarf the previous one (indeed, possibly be beyond the reach of authorities to bail out)?

I thought I’d throw this out here for discussion.

[tcg]

This is an important question, and the DPF may well contribute to a vastly changed economic environment, but different for each carbon source.

Let us imagine that for the moment that the promise of fusion, and wind, and solar is realized. We would still have considerable use for oil as a source for lubricants, feedstocks for plastics and drugs, asphalt, even. If we stop burning it in cars, the diminished use will be matched by the diminishing supply. Natural gas already has a huge application in the production of ammonia through the Haber process for Nitrogen fertilizers and other chemicals, and this will continue, although fracking the world to get it may not be necessary. Notice that so far these uses do not involve burning and liberation of CO2.

Coal would likely be the big looser, though. There is hardly any use for it but to be burned for electrical production, and there is a lot of it still out there. There is already a growing resistance to the environmental costs, but there are some very powerful interests pushing for its continued use.

Some may look to laws and government regulations to channel whatever change may occur, but I feel that the economic forces would be far more powerful. Anyone who can produce electricity cheap both financially and environmentally will have the world seek him out, and the competition will be holding a bag full of air.

The economic disruptions to come from such changes would be hard to calculate — massive change can bring both pleasure and pain. However, we are rapidly approaching a time when we may not have much choice in the matter. The economic and environmental costs of our current way of energy production are spiraling upward unsustainably, and it would be better to step toward something better while we can still choose where to set our foot.

The big investors with a large carbon footprint in their portfolio would probably fight such changes for a while, and then quietly slide out of their compromised investments. There is a special line on the IRS form for such things.

[Lerner]

I think they don’t need our help to create a new financial crisis. Just about ALL financial assets are vastly overvalued–debt obligations, stocks. commodites–expecially oil–real estate, etc. The “08 crash did not wipe out anywhere near all this fictious value. A more extensive crash is almost inevitable and I will be very surprised if it holds off until FF is an economic factor. That said, I have always thought that FF’s success would be bad for thsoe who own oil gas and financial corporations. It will need a poltical fight to ensure that those losses are incurred by the very few people who own the vast majority of those assets and are not pushed onot the majority, as has been the case so far with the costs of the ’08 crash.

[Warwick]

Natural gas already has a huge application in the production of ammonia through the Haber process for Nitrogen fertilizers

Thanks for replying to my post.
What about the environmental impact of using Nitrogen fertilisers though? Using them has resulted in large % of freshwater sites being overrun with green algae that pretty much suffocates the ecosystems. I’d rather see the back of it. Cheap, eco-friendly freight might help with that, I’d hope.
Oops, now I’m off-topic on my own topic.

(I have to admit I have used 2 cans of Miracle Gro for my agapanthuses this year. But if everyone did the same I reckon we’d be OK.)

[Warwick]

Just about ALL financial assets are vastly overvalued—debt obligations, stocks. commodites—expecially oil—real estate, etc.

I’d agree about commodities, although this speculation started for a reason. There’s money washing around and it has to live somewhere, so it stupidly fled to gold, and asinine legislation demanding biofuel use in the West sparked anticipation of a global food shortage. Both of these are now bubbles, plainly. Real estate I’m not so sure about since this comes up against the labour theory of value – houses in some places became so cheap that they are not incomparable to their rebuild cost…

It will need a poltical fight to ensure that those losses are incurred by the very few people who own the vast majority of those assets

In global terms the owners of BP, Exxon, RWE are few. As a proportion of people in developed countries, I think they’re ubiquitous. Most people with an occupational pension scheme, most people with a savings account, most people with insurance policies. If some kind of Glass-Steagall had been reenacted by now in response to the banking crisis, this would have changed a lot of course: maybe by now, the biggest investors would be the institutions of high finance, acting on behalf of those who can afford to lose it.

I suppose there are two separate issues here really. One is that people investing money on behalf of the everyday citizen shouldn’t be exposing themselves to the risks of high finance (making governments have to guarantee those risks while the rich make high profits out of them — a case of “privatise the profits, nationalise the losses”). The other issue is that holding equity in large oil and coal companies may not be seen as a high risk strategy at all, but in reality they are quite high risk.

[vansig]

Lerner wrote: Just about ALL financial assets are vastly overvalued

wouldn’t this actually be an indicator that the currency is worth less than what people expect?

Fusion will not cause a financial crisis, because any alternative energy takes time (decades?) to roll out.

[Lerner]

No, because financial assets are valued in tersm of how much money they can produce per year, so the currency is factored out. The problem is that all assets have high price/earning ratios. A typcial asset earns maybe 5% per year, but prfit rates are say 10% per year. The difference can only be asset apprecation–a bubble that will pop. You can measure price and earning in cocunuts not dollars it does not matter the ratio reamins the same.

Since oil prices are supported only by monoploy control over supply, if a bubble price still exits when and if FF is actually commercialized, prices could fall extremely rapidly in antcipation of the breaking of that monoploy, much faster than FF would actually affect supply. I doubt that demonstating scientifc feasiblity would do that as commercialization woudl still be veiwed by traders as highly uncertain and far off.

[Francisl]

vansig wrote:

Just about ALL financial assets are vastly overvalued

wouldn’t this actually be an indicator that the currency is worth less than what people expect?

Fusion will not cause a financial crisis, because any alternative energy takes time (decades?) to roll out.

The speed of deployment will depend on the cost, complexity and robustness of the technology. Since the DPF units are basically generators, they could replace or supplement existing generators. The quickest adoption would occur at the factory and community level. This suggests that big power plants at coal fields and long distance power transmission lines would be the most affected.
The smart money will move out of coal and into capacitor production, local power distribution and related items.

[dennisp]

I think it’ll be a crisis but in the Chinese sense, which includes “opportunity.”

Given the low capital cost, much lower energy cost, and miniscule environmental impact of FF, I think it will roll out quite rapidly.

Given such low energy costs, oil and methane could be produced from the CO2 in the atmosphere at lower cost than it can be pumped out of the ground. Refineries might stay in business but anyone providing raw fossil fuels will be in big trouble. Anyone who’s too heavily invested in them will be sorry, too.

Meanwhile, the rest of the economy will get a huge boost. Energy prices affect everything.

[Tulse]

dennisp wrote: Given such low energy costs, oil and methane could be produced from the CO2 in the atmosphere at lower cost than it can be pumped out of the ground.

My guess is that the cost of FF would have to be [em]extremely[/em] low to meet that criterion, although I’d welcome some hard numbers.

[dennisp]

Here’s a report from Los Alamos on a project called Green Freedom, to create fuel from atmospheric CO2: http://bioage.typepad.com/greencarcongress/docs/GreenFreedom.pdf

Their design uses existing technology and a Gen III fission plant, which accounts for over half the cost. Since the capital cost is high, they assume a substantial profit margin. Even so, they say it can be competitive at $4.60/gal. Less than that assuming certain modest improvements, but let’s go with $4.60, with $2.30 for the fission plant. If FF delivers a 10x cost improvement, that gives us about $2.50/gal gasoline.

Another approach: To simply pull concentrated CO2 from the atmosphere, Klaus Lackner’s system costs about half a kwh per kg CO2, which is a little over twice the minimum required by physics: http://www.inference.phy.cam.ac.uk/withouthotair/c31/page_245.shtml

One gallon of gasoline is equivalent to 37 kwh, and has 2.5 kgs carbon, which is the amount you get from about 7.5 kgs CO2. So getting CO2 from the air contributes under 4 kwh to the cost.

Another option to turn that CO2 into fuel is the Fischer-Tropsch process:
http://en.wikipedia.org/wiki/Fischer–Tropsch_process

I haven’t found how efficient it is, but since it’s been used commercially, I’m assuming it can’t be too horrible. Let’s say it’s only 25% efficient, requiring 160kwh per gallon of gasoline.

Electricity cost in the U.S. is about ten cents per kwh, and about half that for the cheapest electricity from coal. If FF gets that price to one cent, that gives us an estimate of $1.60 per gallon of gasoline, plus profit and capital cost of the chemical plant.

At least one person on the forums has claimed that the x-rays from a FF plant could be used to convert CO2 to hydrocarbons directly. I have no idea how efficient that would be.

Gas taxes in my state total 50 cents per gallon (state plus federal), with a retail gas price around $3.50/gal currently. It looks to me like FF/CO2-sourced fuel could easily compete.

[vansig]

i doubt overall efficiency of this highly endothermic process is anywhere near as high as 25%.
there are several steps, and it generates quite a lot of unwanted byproducts, so, yields will be low.

i’m guessing 6% is more realistic. (compare photosynthesis, which is ~3% overall).

even so, any alternative energy that produces lots of waste heat may make this feasible.

[dennisp]

Photosynthesis is an interesting counterexample but doesn’t seem all that relevant, to me. We’re not relying on diffuse sunlight for energy, and we’re making oil, not sugar.

It’s hard to see how Los Alamos could estimate $4.60/gal at only 6% efficiency.

Using older processes:

We could start with the Sabatier reaction, which turns CO2 and hydrogen into methane and water, using a catalyst.
http://en.wikipedia.org/wiki/Sabatier_reaction

This is a very efficient reaction…this paper claims 95% efficiency:
http://www.ncbi.nlm.nih.gov/pubmed/11892751

The next step is steam reforming, which converts methane to carbon monoxide and hydrogen, using a nickel catalyst. This is between 70% and 85% efficient:
http://en.wikipedia.org/wiki/Steam_reforming

The final step for liquid hydrocarbons is Fischer-Tropsche:
http://en.wikipedia.org/wiki/Fischer–Tropsch_process

Using Fischer-Tropsch to generate liquid fuel from biomass has about 40% efficiency. I haven’t found numbers yet for pure syngas.
http://www.greencarcongress.com/2011/05/manganaro-20110516.html

The Los Alamos approach uses an entirely different process, see the link posted above for details. Initially, carbon dioxide is absorbed into a potassium carbonate solution to form bicarbonate ions. An electrolytic processes pulls the CO2 out of solution, and water electrolysis provides hydrogen. From there, they synthesize methanol, followed by a methanol-to-gasoline conversion developed by Exxon.

These numbers aren’t nailed down as well as I like but 6% efficiency seems unduly pessimistic. The initial collection of CO2 doesn’t take that much energy, according to the sources I’ve mentioned, and after that it’s just a matter of applying industrial processes that have been in commercial use for decades. The Germans used Fischer-Tropsch in WWII.

Waste heat is a good point…people have talked about using the waste heat from thorium reactors to desalinate seawater. It could just as well be used to make fuel.

[dennisp]

Also worth mentioning: at 6% efficiency, a gallon of gas would require 683kwh to produce. That’d be prohibitive at a penny per kwh, but if FF were to cost a third of that, we’d still be competitive.

This page estimates FF energy as low as a twentieth of a cent per kwh:
https://focusfusion.org/index.php/site/article/will_is_really_be_inexpensive

At that price, with a mere 6% efficiency for the chemical process, the energy required to make a gallon of gasoline would cost 34 cents.

The Los Alamos document mentions a price of $4.60/gal, with half being energy. However, with two potential improvements to the chemical process, they estimate $3.40, including capital costs and profit, giving us $1.10 not counting energy.

Nuclear power runs around 8 cents per kwh, but let’s assume they think their GenIII nuclear will be as cheap as coal (5 cents), and FF achieves a fifth of a cent. That gives us an energy price of ($2.30/25) 9 cents per gallon. In my area, gas tax totals 50 cents/gal, giving me about $1.70/gal at retail. If we’re more conservative and figure the non-energy cost at $2.30, we’re still at $2.90/gal retail.

[annodomini2]

I personally believe that even if a device along the lines of Focus Fusion was available today, it will still take 20-30years before it overtakes all other sources.

If they were to replace existing power stations, this would take time, the existing systems represent a huge investment buy the operators.

Governments may want to encourage the take up of the technologies for their ‘climate change’ projects and programs.

Many homes in colder latitudes require large amounts of heating during the colder months of the year, many of these use wood, coal, gas or oil for heating.

Replacing these systems in these homes is not cheap, not everyone will have the money available to convert to electricity overnight.

Additionally people are not going to go out and buy electric cars overnight;

1. The technology for electric vehicles is not mature enough for a large volume mass market.
2. Significant investment in a vehicle by the individual and the manufacturers.

Aircraft take many years to design and develop and again existing machines have received huge investment from manufacturers and operators.

The only game changer technology wise would be if the device was small to tiny and comparable size, weight power output to an equivalent battery.

This could potentially have a greater impact especially if cost effective for the purchasers.

As soon as the device is announced the price of it’s fuel would rocket, it’s likely to take some time for the market to sort itself out.

What you will see is a steady, but drastic shift in the capital expenditure points on energy.

[Author]

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