May 14, 2024 | Breakthroughs, Part 1: Three Potential Threats To Oil, Gas, Uranium

This is the first in a series about breakthroughs in energy and other sectors that might affect some of our basic investment themes. Heading in, keep two things in mind:

• The vast majority of breathlessly hyped developments in science and engineering never make it out of the lab. Scaling up turns out to be too costly, or the early research can’t be replicated, or a big company buys the patents and buries them. And the shiny new thing disappears without a trace.
• The breakthroughs that do end up working sometimes take a really long time to affect the broader economy, pushing their impact beyond the typical investor’s time horizon.

So why bother with such low-probability events? Well…

• Some breakthroughs do change the world quickly, and investors who see them coming have a chance to prepare. Digital cameras killed the photographic film business in a decade. Bitcoin would have been really nice to understand back when it was $10. And artificial intelligence — which barely existed two years ago — is already wreaking havoc (a separate post on that revolution is coming).
• The subject itself is fascinating. Google “breakthrough” combined with any consequential word — energy, warfare, cancer, longevity — and the result will be a day’s worth of dramatic science-fiction-level reading. There really are some amazing things being done out there.

Here are three to watch:

Hydrogen Storage

Hydrogen isn’t yet a major power source, but if it can be made cheaply and stored safely, it’s a potential replacement for expensive, dirty lithium-ion batteries, real competition for oil and gas, and a potentially nice compliment for nuclear power:

Breakthrough research enables high-density hydrogen storage for future energy systems

(Science Daily) – A groundbreaking development in efficient hydrogen storage has been reported by Professor Hyunchul Oh in the Department of Chemistry at UNIST, marking a significant advancement in future energy systems. This innovative research centers around a nanoporous magnesium borohydride structure (Mg(BH₄)₂), showcasing the remarkable capability to store hydrogen at high densities even under normal atmospheric pressure.

The reported material exhibits an impressive hydrogen storage capacity of 144 g/L per volume of pores, surpassing traditional methods, such as storing hydrogen as a gas in a liquid state (70.8 g/L). Additionally, the density of hydrogen molecules within the material exceeds that of the solid state, highlighting the efficiency of this novel storage approach.

Professor Oh emphasizes the significance of this breakthrough, stating, “Our innovative material represents a paradigm shift in the realm of hydrogen storage, offering a compelling alternative to traditional approaches.” This transformative development not only enhances the efficiency and economic viability of hydrogen energy utilization but also addresses critical challenges in large-scale hydrogen storage for public transportation applications.

Nuclear Fusion

The other nuclear power, thermonuclear fusion, has been 10 years away from changing everything — for the last 50 years. It’s apparently really hard to do. But recently, several researchers have proved that it’s possible:

Scientists successfully replicate historic nuclear fusion breakthrough three times

(CNN) – Scientists in California shooting nearly 200 lasers at a cylinder holding a fuel capsule the size of a peppercorn have taken another step in the quest for fusion energy, which, if mastered, could provide the world with a near-limitless source of clean power.

Last year on a December morning, scientists at the National Ignition Facility at the Lawrence Livermore National Laboratory in California (LLNL) managed, in a world first, to produce a nuclear fusion reaction that released more energy than it used, in a process called “ignition.”

Now they say they have successfully replicated ignition at least three times this year, according to a December report from the LLNL. Brian Appelbe, a research fellow from the Centre for Inertial Fusion Studies at Imperial College London, said the ability to replicate demonstrates the “robustness” of the process, showing it can be achieved even when conditions such as the laser or fuel pellet are varied.

Enhanced Geothermal Power

The deeper you drill into the Earth, the warmer it gets, and this temperature differential can be used to generate electricity. Iceland, which sits on a bunch of hot springs, gets most of its power this way. But in other parts of the world, the heat differential isn’t sufficient to compete with conventional fuels.

That might be about to change, as researchers adapt the fracking industry’s drilling tech to increase geothermal output and lower costs. If it works, “enhanced” geothermal might provide clean baseline power almost anywhere:

Geothermal Breakthroughs Show Big Potential

(TINC) – Today at the Stanford Geothermal Workshop, Fervo Energy published early drilling results from its Cape Station project that exceed the Department of Energy’s (DOE) expectations for enhanced geothermal systems (EGS). These results substantiate the rapid learning underway in the geothermal industry and signal readiness for continued commercialization.

Fervo began its drilling campaign at Cape Station, its 400 MW project in southwest Utah, in June 2023 and over the last six months has successfully drilled one vertical and six horizontal wells there, rapidly reducing drilling times from well to well as learnings have accelerated.

Fervo has consistently reduced drilling times and costs in horizontal, high-temperature, deep granite drilling. Though Cape wells are hotter and over 2,100 feet deeper than Project Red wells, Fervo drilled its fastest Cape well in just 21 days, a 70% reduction in drilling time from Fervo’s first horizontal well drilled at Project Red in 2022. This increase in drilling efficiency has translated into significant cost reductions, with drilling costs across the first four horizontal wells at Cape falling from $9.4 million to $4.8 million per well.

Modern oil and gas drilling equipment enabled this performance. Fervo used polycrystalline diamond compact (PDC) drill bits typically deployed in shale basins to cut through hard, abrasive granite, while mud coolers counteracted high subsurface temperatures that have historically derailed geothermal exploration. These results underscore the applicability of oil and gas technology to enhanced geothermal.

How Soon?

Will any of the above pan out? And if so, how soon? Right now, no one can answer either question. But since “yes” and “soon” are now at least possible, we should be paying attention.

John Rubino May 14th, 2024

Posted In: John Rubino Substack

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