Webber Research: Alternative Fuel Vehicle Rankings – Multi-Factor Model Update H122
If you’re a current Webber Research subscriber you can click here to access this presentation in our library. If you’re not yet a subscriber, please contact us at [email protected] for access information
If you’re a current Webber Research subscriber you access this presentation via our Client Login above. If you’re not yet a subscriber, please contact us at [email protected] for access information.
Alternative Fuel Analysis…Will History Repeat Itself?
In 1992 & 2005, the Department of Energy (DOE) created & amended the Energy Policy Act (EPA) that addressed fuel research and tax benefits for vehicle manufacturing.
Battery Electric Vehicles (BEV), Hydrogen (H2), Hybrids, Biofuels, Ethanol and Methanol were analyzed in 2005, but vehicle manufacturers supported gasoline hybrid vehicles due to technology and production constraints.
Since then, fuel cell technology and global, federal, & state emission guidelines have accelerated innovation and the market is now actively deciding transportation alternatives.
Small Vehicle Applications
BEV have taken a leading role in the small vehicle category with minimal competition from Hydrogen.
Hydrogen’s price, lack of infrastructure, and safety concerns highlight the risk associated with new fuel applications; however, Methanol may have an opportunity to fill this role.
The Roland Gumpert Nathalie markets an impressive range and methanol costs are comparative to BEV, but the $450k price tag limits it’s applications until manufacturing scales up to reduce cost.
Mid-Sized Vehicles and Truck Applications
Fuel energy density becomes a larger role as the size of a vehicle increases.
Fuel storage capacity, energy density, and vehicle efficiency play a large role in the range and cost for a vehicle.
Semi-Truck Range Is A Gating Issue For Future Fuels
New Semi-Truck concepts are ranging from shorter applications (<300 miles) to the long-haul market (>600 mile/day).
Daimler eCascadia seems to make sense for shorter applications and Hyliion’s Compressed Natural Gas (CNG) hybrid semi will likely apply well to long haul trades, if the marketing is as good as advertised.
EPD PDH 2 – Project Delay Analysis. In Q220, EPD announced a 3-month schedule slip (from Q123 to Q223), potentially limiting future change orders (i.e. cost escalation) related to COVID impact (based on typical EPC contract FM concepts).To reduce the COVID delay to only 3 months, we believe EPD implemented a schedule recovery plan that accelerated/compressed back-end construction activities to meet a Q423 COD forecast. (pgs. 10 – 13). We’ve independently estimated PDH 2’s slippage based on Q420 aerial project site images, with details found within our note… (pages 4 – 7).
Enterprise’s First ESG Guidance… : On October 28, 2020, EPD released their approach to ESG. In the report, EPD touts they are the largest Midstream producer of Hydrogen. With the addition of PDH2, Enterprise would increase their Hydrogen production by 140k tons/year, and we estimate ~150MW of electricity by incorporating fuel cells in their Mont Belvieu, TX facility.
Companies like SK are working with fuel cell manufacturers to integrate high temperature Solid Oxide Fuel Cells (SOFC) into PDH units to use the hydrogen produced to reduce operating costs….this could help EPD’s ESG potential.
Project Timeline Catch Up – Risks & Benefits: A schedule recovery plan can be costly and is not guaranteed to succeed. PDH 2 schedule recovery risks/benefits include: Risks– An EPC lump sum contractor (S&B) compresses the schedule & may cause inefficient construction & cost escalation. Benefits– The COVID delay started before site prep and avoided a de-staffing of the project. Based on limited on-site progress, S&B likely hasn’t spent much of their field budget & may have available contingency to support acceleration costs/inefficiencies.
W|EPC’s estimated timeline shows site labor and progress can support pulling activities back to Q223 with a probability of success of…. (pgs. 10-13)
W|EPC: Southern Company (SO) – Q420 Vogtle Project Monitor – Key Decisions That Could Haunt Cost Prudency
Key Takeaways: Vogtle Q420 Monitor – Key Decisions That Could Haunt Cost Prudency
Who Will Be Getting Stuck With +$2.1B In Cost Overruns? Once Vogtle Unit 4 reaches “fuel load”, Georgia Power/Southern Company (GP/SO) can request a cost prudency determination to push their portion of cost overruns (~$2.1B) into recoverable utility rates. (Page 4)
Regulators will determine cost prudency based on project data, testimony, and a simple question: What should a reasonable manager have done at the time of the decision? (Page 5)
We expect that process to be heavily scrutinized considering the scale of the overruns, and, in our opinion, some questionable GP/SO decisions. (Pages 4-5)
Decisions That Could Haunt GP/SO’s Prudency. We believe there’s a case to be made that multiple GP/SO management decisions ran contrary to industry standards, potentially contributing to ($) billions in cost overruns, including
A failure to either include or implement multiple EPC contract……(Page 7)
For the first 4-years of the project, GP/SO used only…..(Page 23)
In 2017, it appears GP/SO did not validate critical underlying EPC…..(Pages 9- 10)
Analyzing 12-Years Of GP & SO Testimony… (Pages 20 & 23)
Please join us for our next Client Call at 12pm EST on Monday 10/26, to review our Vogtle Project Monitor. Please reach out to us for access details.
Table Of Contents:
Key Takeaways – Page 2
Who Owns $2.1B In Cost Overruns? – Page 3
Georgia Public Service Commission 2018 Order – Page 4
Cost Prudency Definition & Process – Page 5
Decisions That Could Haunt GP/SO
LSTK Contract Mismanagement – Page 7
Bankruptcy – Parent Company Guarantee Settlement – Page 8
Jul vs. Sep 2020 – LNG Storage Tank…………………………..….Page 12
Module Yard Analysis………………………………………………….Page 13
Key Takeaways:
Delays At LNG Canada Continue to Build (Pages 4 – 7, 10 – 13)
Fluor reported ~27.5% Engineering, Procurement, Fabrication, & Construction (EPFC) progress in September, vs our current estimate of…
We believe Fluor’s 27.5% guidance implies module fabrication progress of ~45%, which is ~9x…
Fluor also referenced COVID-related project delays (without getting specific)
Our Current Delay Estimate:…..
Estimated Probability Of Maintaining Schedule:…..
Mind The Gap: There are several potential explanations for such a degree of progress variance…
Examining Fluor’s Goal of 2,500 On-Site Workers By Dec-20 (Pages 4, 8, 10 – 13)
Aerial images suggest meaningful concrete, structural steel, and significant construction activities have yet to start (beyond piling)…
Pre-COVID, Fluor’s reported onsite labor was higher than the project’s publicly reported staffing levels, leading to cost overruns (Pages, 4, 8)
Limited construction work fronts could constrain Flour’s ability to…
Kicking The Can Down The Road… LNG Canada Starting to Resemble Another Fluor/JGC Project… (Pages 4, 8)
In 3Q13, CPChem awarded Fluor & JGC a ~$6B EPC contract for an Ethylene Cracker in Texas. ~39-months later, Fluor/JGC announced the project would be over budget. The project was finished in mid-2018 (a year behind its baseline plan).
~23-months after FID, we believe the LNG Canada (JFJV) schedule is slipping and costs are…
Upstream Sources Of Hydrogen – Blue & Green (Pages 4 – 9) >95% of Hydrogen (H2) is produced using Steam Methane Reformer (SMR) technology that produces 7 units of CO2/unit of H2 (on average)
SMR w/ a carbon capture system (Blue H2) is the preferred option to environmentally manage excess CO2. (page 7)
Green H2 provides minimal CO2 but current technology limits Green H2’s cost competitiveness. (Page 6)
H2’s Sprint To Market Share… Current Leaders (Pages 17 – 21, 27 – 30) We analyzed 13 Technology Companies spanning 12 Process industries, including ThyssenKrupp, Air Products, Air Liquide, & KBR/Johnson Matthey…the clear technology leaders include…
Frozen Industries – Marine, Automotive, & H2 Transport (Pages 22 – 26) Outside factors (i.e. carbon neutral fuels, fuel cells, regulations, safety, & other downstream applications) will play a large role in selecting the midstream transportation choice for H2.
International Maritime Organization’s (IMO) mandates for reduced emissions has many ship builders looking at LNG, Ammonia, and/or Methanol; without a clear long-term winner (yet), many shipbuilders are frozen.
Fuel pumps (gas stations) must receive H2 from high-pressure storage vehicles, pipelines, or by converting Methanol or Ammonia to H2 at the fuel pump, with a number of implications.…(page 20)
Midstream For Hydrogen – H2 Transportation Options (Pages 10 – 16) Ammonia, Methanol, and Cryogenic H2 are used to transport H2 long-distances.
Ammonia is the clear favorite to…
Methanol is the best option for…
Cryogenic H2 technology/costs…