A fund manager source sent me a fascinating link to a news story today, one which speaks very clearly to what I think is one of the great disruptions of our modern age – the decarbonisation of the modern economy.

The note was from Reuters news service, accessible on Google HER or here – https://finance.yahoo.com/news/general-electric-scrap-california-power-204042157.html

I’ve pasted in the main core of the story below:

NEW YORK (Reuters) – General Electric Co said on Friday it plans to demolish a large power plant it owns in California this year after only one-third of its useful life because the plant is no longer economically viable in a state where wind and solar supply a growing share of inexpensive electricity. The 750-megawatt natural-gas-fired plant, known as the Inland Empire Energy Center, uses two of GE’s H-Class turbines, developed only in the last decade, before the company’s successor gas turbine, the flagship HA model, which uses different technology. The closure illustrates stiff competition in the deregulated energy market as cheap wind and solar supply more electricity, squeezing out fossil fuels. Some utilities say they have no plans to build more fossil plants.

It also highlights the stumbles of Boston-based GE with its first H-Class turbine. The complex, steam-cooled H design takes hours to start, suffered technical problems and sold poorly, experts said. “We have made the decision to shut down operation of the Inland Empire Power Plant, which has been operating below capacity for several years, effective at the end of 2019,” GE told Reuters. The plant “is powered by a legacy gas turbine technology … and is uneconomical to support further.”

According to the manager who sent me the note “ this is a sign of things to come for large baseload generation in places with a lot of renewables, in my view, and confirms something that is not being modeled by consultants yet for the UK market despite over 50% low carbon generation.  In their place, batteries and peakers will become essential parts of the energy mix.

Now we can add all the usual caveats. That GE lost its way and had come up with a design for its turbines that wasn’t fit for purpose. That may all be true but it does leave me with one key question. A while ago I was driving near a mothballed power station near where I lived. It sits on the Solent and is like its peers a giant hall full of turbines that don’t make financial sense anymore. Curious I wondered why the owner of said power station didn’t just rip out some of the turbines from the hall and connect a bunch of batteries instead. Turn the generator into a next gen back up source of power. If you wanted to be even more expansive I suppose you could build a high power line from the various offshore projects off the south coast straight into the power station.

One source who knows the power sector well thought it would never happen. “These guys are engineer/operators. They don’t really get the new way of running batteries and they don’t have the right capital stack to do this kind of thing. Their cost of capital is too great”. Thus I think there’s a good chance that the GE plant won’t make the shift to batteries either. Its just not in GEs core competence to manage the transition.

The wider question though is that gas was supposed to be the stepping stone to a zero carbon future. But it looks increasingly likely that this stepping stone might not be needed. I imagine there are plenty of big gas power plant operators looking at this decision and thinking they might be next. If GE can’t make it work, how can anyone else?

But if we remove gas, shut the last coal-fired stations and still don’t build enough nukes, where’s the base load going to come from ?? Connectors and batteries are all that remains.