Utility To Replace N-Gas Peaker Plants With Energy Storage

Duane M. Tilden, P.Eng                          November 10, 2018

The main caveat of Energy Efficiency is to do more with less. Energy Efficiency is low-lying fruit, easy to harvest. For utilities and the grid there are many advancements coming that will allow us to enable a more resilient and sustainable electrical transmission system connecting providers, consumers, and prosumers.

Electricity Prosumers & Renewable Energy

“Active energy consumers, often called ‘prosumers’ because they both consume and produce electricity, could dramatically change the electricity system. Various types of prosumers exist: residential prosumers who produce electricity at home – mainly through solar photovoltaic panels on their rooftops, citizen-led energy cooperatives or housing associations, commercial prosumers whose main business activity is not electricity production, and public institutions like schools or hospitals. The rise in the number of prosumers has been facilitated by the fall in the cost of renewable energy technologies, especially solar panels, which in some Member States produce electricity at a cost that is the same or lower than retail prices.” (1)

What is a Peaker Plant?

Peaking power plants, also known as peaker plants, and occasionally just “peakers”, are power plants that generally run only when there is a high demand, known as peak demand, for electricity.[1][2] Because they supply power only occasionally, the power supplied commands a much higher price per kilowatt hour than base load power. Peak load power plants are dispatched in combination with base load power plants, which supply a dependable and consistent amount of electricity, to meet the minimum demand.” (2)

As more renewable energy projects are added to provided base load power, in an absence of electricity when renewable sources of electricity are inactive a greater reliance is put on peaker plants to make up energy shortfall . However, as improvements in energy storage solutions gain traction through capacity and competitive costing it is now possible to replace fossil fuel powered peaker plants with energy storage.

Public Utilities Commission of the State of California (CPUC)

In a recent decision the State of California has proceeded with plans to develop and procure electrical storage solutions for the Public Utility as an alternative to aging natural gas peaker plants. A net reduction in carbon emissions by eliminating fossil fuel consumption.

Energy Storage California 2018

Table 1 – Summary of Pacific Gas and Electric’s (PG&E’s) energy storage power purchase
agreements (PPAs)

“Approval of PG&E’s landmark energy storage solicitation is the most significant example to date of batteries taking the place of fossil fuel generation on the power grid.

Energy storage has helped decrease the California’s reliance on gas for years, particularly since 2016, when regulators ordered accelerated battery procurements to counteract the closure of a natural gas storage facility outside Los Angeles.

The PG&E projects, however, are the first time a utility and its regulators have sought to directly replace multiple major power plants with battery storage.

The projects would take the place of three plants owned by generator Calpine — the 580 MW Metcalf plant and the Feather River and Yuba City generators, both 48 MW.

​Calpine and the California ISO last year asked the Federal Energy Regulatory Commission to approve reliability-must-run (RMR) contracts for the plants, arguing they are essential to maintain power reliability. The one-year contracts would see California ratepayers finance the continued operation of the generators, which are losing money in the ISO’s wholesale market.

FERC approved the request in April, but California regulators were already planning for when the plants retire. In January, they ordered PG&E to seek alternatives to the generators, writing that the lack of competition in RMR contracts could mean higher prices for customers. ” (4)

 

References:

  1. European Parliament Think Tank – Electricity Prosumers
  2. Peaking_power_plant
  3. Resolution E-4949. Pacific Gas and Electric request approval of four energy storage facilities with the following counterparties: mNOC, Dynegy, Hummingbird Energy Storage, LLC, and Tesla.
  4. Storage to replace California Peaker Plants
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Zip Code 00000

Quote

via The 50 Year Underground Coal Mine Fire

“In this part of Pennsylvania, a mine town gone bust is hardly news. But there is none whose demise has been so spectacular and observable. Centralia has been on fire, literally, for the past four decades.

The Centralia mine fire began in 1962 when a pile of burning trash ignited an exposed seam of coal. The fire soon seeped down into the lattice of old mine tunnels beneath town. When it was founded in 1866, Centralia’s ocean of underground coal, aptly named the Mammoth Vein, meant limitless wealth. But once the fire began, it came to mean endless destruction.

This abandoned section of Route 61 runs smack through one of Centralia’s so-called hot zones. In these areas the underground fire directly affects the surface landscape. The traffic that used to flow over this section of road has been permanently detoured several hundred yards to the east. Thanks to a recent snowfall, the tracks of other visitors are obvious — that is until the snow cover abruptly ends. It’s as if someone has drawn a line across the road. On one side there’s snow. On the opposite side there’s bone-dry asphalt. The road’s surface is not exactly warm. But the asphalt is definitely not as cold as it should be on a chilly day in the Appalachian Mountains. In the roadside woods, all the trees are dead, baked to death by the subterranean smolder. Even their bark has peeled away.

Further in, a crack 50 feet in length has ripped through the highway. Puffs of white gas steadily float out. I step to the edge of the crack. It’s about two feet wide and two feet deep, filled with garbage and chunks of broken pavement. Then the wind shifts slightly, and a gas cloud bends in my direction. I cover my nose and mouth with the collar of my jacket. Standing on the roof of this inferno has suddenly lost its appeal. I turn and walk back to my car.”

http://wapo.st/1eMhdGq

Related image

Heating Efficiency and Proper Sizing

An excellent piece on sizing heating equipment for the home. Check out this blog, many years of experience shared… a tribute to a life’s work.

York Central Tech Talk

This weekend I got an email from my nephew who lives in New Hampshire. He recently moved into a home and they finished the basement and attic. Now, he had a contractor come in and he was telling him that he needed  an additional 50,000 BTU larger boiler to heat the house. Since he knew I retired from heating and air  conditioning, he wanted my opinion. My first question to him was, ” How did the contractor determine that he needed an additional 50,000 BTU’s to heat the new areas?” Then I asked, ” Did he do a load calculation? Was he basing it on how many feet of new baseboard radiators he was installing? What water temperature is the existing boiler operating at?”  The existing boiler may be large enough to handle additional baseboard radiators. I told him that basements usually are not included in load calculations so that…

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Supercritical Carbon Dioxide – A Plan to Eliminate 25% of Existing Power Plants

Duane M. Tilden, P.Eng                           October 26, 2018

Is it possible that we can drastically reduce the existing fleet of power plants by 25% or more? Yes, this does seem to be a rather extravagant claim considering how many power providers or utilities such an increase in energy efficiency in output will impact.  Examining the United States as our example:

As of December 31, 2017, there were about 8,652 power plants in the United States that have operational generators with a combined nameplate electricity generation capacity of at least 1 megawatt (MW). A power plant may have one or more generators, and some generators may use more than one type of fuel. (1)

So, reducing the existing fleet by 25% would enable us to decommission approximately 2,163 of these plants.  This plan would require the examination of the total supply chain to optimize these reductions whilst maintaining the integrity of the existing distribution network. A significant project having enormous impact on the economy and meeting carbon reduction strategies on a global scale.

Supercritical Carbon Dioxide (SCCD) Turbines

In previous posts I have discussed the technology of SCCD turbines for power production and how this system can be used for a wide variety of power production and energy extraction methods. A recent article published by Euan Mearns with commentary delves even deeper into this technology to discuss the global impacts of increased power production efficiency on reducing carbon emissions.

GHG’s, carbon, NOx, pollution, waste heat, entropy effects, and consumption of resources are all commensurately reduced when we systematically increase power production energy efficiency at the plant level. An improvement of energy efficiency at the system level has a profound impact in output capacity or input reduction. For example, if we can increase the efficiency by 10% from 30% to 40% in conversion, the output of the plant is improved by 4/3 or 33% or inversely, the input requirement will reduce by 3/4 or 25%.

Power Plant Energy Efficiency

To measure the energy efficiency of a thermo-electric power plant we use the heat rate. Depending on the quality of the fuel and the systems installed we convert heat energy into electrical energy using steam generators or boilers. We convert water into steam to drive turbines which are coupled to generators which convert mechanical motion into electricity.

Examination of data provided will be simplified using statistical averages. In 2017 the average heat rates and conversion efficiencies for thermal-electric power plants in the US (2) are given as follows:

  • Coal: 10465 Btu/Kw – 32.6%
  • Petroleum: 10834 Btu/Kw – 31.5%
  • Natural Gas: 7812 Btu/Kw – 43.7%
  • Nuclear: 10459 Btu/Kw – 32.6%

Examination of the US EIA data for 2017 shows us that currently Natural gas is 11.1% more efficient than Coal in producing electricity while consuming 25.4% less fuel for the same energy output.

So we already have proof that at a plant level, energy efficiency gains in consumption are leveraged by smaller improvements in the thermodynamic cycle. For natural gas power plants the current state of the art is to use a combined cycle combustion process which is not employed in other thermo-electric power plants.

HOW A COMBINED-CYCLE POWER PLANT PRODUCES ELECTRICITY (3)

This is how a combined-cycle plant works to produce electricity and captures waste heat from the gas turbine to increase efficiency and electrical output.

  1. Gas turbine burns fuel.

    • The gas turbine compresses air and mixes it with fuel that is heated to a very high temperature. The hot air-fuel mixture moves through the gas turbine blades, making them spin.
    • The fast-spinning turbine drives a generator that converts a portion of the spinning energy into electricity.
  2. Heat recovery system captures exhaust.

    • A Heat Recovery Steam Generator (HRSG) captures exhaust heat from the gas turbine that would otherwise escape through the exhaust stack.
    • The HRSG creates steam from the gas turbine exhaust heat and delivers it to the steam turbine.
  3. Steam turbine delivers additional electricity.

    • The steam turbine sends its energy to the generator drive shaft, where it is converted into additional electricity.

Image result for combined cycle power plant

Figure 1. Schematic of Combined Cycle Gas/Steam Turbine Power Plant with Heat Recovery (4)

Comparing Combined Cycle Gas Turbines with SCCD Turbines

The study of thermodynamic cycles is generally a domain studied and designed by engineers and physicists who employ advanced math and physics skills. The turbine is based on the Brayton cycle, while steam turbines operate on the Rankine cycle. The Rankine cycle uses a working fluid such as water, which undergoes a phase change from water to steam. The Brayton cycle is based on a single phase working fluid, in this case combusted natural gas.

Both SCCD turbines and Gas Turbines operate on the Brayton cycle, however, they use different working fluids and requirements based on operating conditions. The gas fired turbine takes in air which is compressed by the inlet section of the turbine and natural gas is combined with the compressed air and ignited. The hot expanding gasses turn the turbine converting heat to mechanical energy. A jet engine operates on the Brayton cycle.

For a combined cycle gas turbine some of the waste heat is recovered by a heat exchange system in the flue stack, converted to steam to drive  a second turbine to produce more electricity and increase the overall energy efficiency of the system.

In the case of an SCCD the turbines working fluid is maintained in a closed loop, continually being heated through a heat exchanger from a source and run in piping through the turbine and a compressor. Secondary heat exchangers for recuperation and cooling may be employed. These are all emerging technologies undergoing serious R&D by the US DOE in partnership with industry and others.

Closed Loop SCO2 Recompression Brayton Cycle Flow Diagram

Figure 2. Closed Loop SCO2 Recompression Brayton Cycle Flow Diagram (NETL)

 

Technology Development for Supercritical Carbon Dioxide (SCO2) Based Power Cycles

The Advanced Turbines Program at NETL will conduct R&D for directly and indirectly heated supercritical carbon dioxide (CO2) based power cycles for fossil fuel applications. The focus will be on components for indirectly heated fossil fuel power cycles with turbine inlet temperature in the range of 1300 – 1400 ºF (700 – 760 ºC) and oxy-fuel combustion for directly heated supercritical CO2 based power cycles.

The supercritical carbon dioxide power cycle operates in a manner similar to other turbine cycles, but it uses CO2 as the working fluid in the turbomachinery. The cycle is operated above the critical point of CO2so that it does not change phases (from liquid to gas), but rather undergoes drastic density changes over small ranges of temperature and pressure. This allows a large amount of energy to be extracted at high temperature from equipment that is relatively small in size. SCO2 turbines will have a nominal gas path diameter an order of magnitude smaller than utility scale combustion turbines or steam turbines.

The cycle envisioned for the first fossil-based indirectly heated application is a non-condensing closed-loop Brayton cycle with heat addition and rejection on either side of the expander, like that in Figure 1. In this cycle, the CO2 is heated indirectly from a heat source through a heat exchanger, not unlike the way steam would be heated in a conventional boiler. Energy is extracted from the CO2 as it is expanded in the turbine. Remaining heat is extracted in one or more highly efficient heat recuperators to preheat the CO2 going back to the main heat source. These recuperators help increase the overall efficiency of the cycle by limiting heat rejection from the cycle. (4)

Commentary and Conclusion

We already are on the way to developing new systems that offer significant improvements to existing. Advancements in materials and technology, as well as other drivers including climate concerns and democratizing the energy supply. Every percentage of increase in performance reduces the consumption of fossil fuels, depletion of natural resources, generated waste products and potential impacts on climate.

SCCD systems offer a retrofit solution into existing power plants where these systems can be installed to replace existing steam turbines to reach energy efficiency levels of Combined Cycle Gas Turbines. This is a remarkable development in technology which can be enabled globally, in a very short time frame.

References:

  1. USEIA: How many power plants are there in the United States?
  2. USEIA: Average Operating Heat Rate for Selected Energy Sources
  3. GE: combined-cycle-power-plant-how-it-works
  4. https://www.netl.doe.gov/research/coal/energy-systems/turbines/supercritical-co2-turbomachinery

 

Oldest Nuclear Power Plant in US to be Retired – The 60 Year Decommissioning Process

When a nuclear plant retires, it stops producing electricity and enters into the decommissioning phase. Decommissioning involves removing and safely storing spent nuclear fuel, decontaminating the plant to reduce residual radioactivity, dismantling plant structures, removing contaminated materials to disposal facilities, and then releasing the property for other uses once the NRC has determined the site is safe.

According to Exelon, Oyster Creek will undergo a six-step decommissioning process. The typical decommissioning period for a nuclear power plant is about 60 years, so parts of the Oyster Creek plant structure could remain in place until 2075. (1.)

retired nuclear power plants and nuclear power plants that have announced retirement

Since 2013, six commercial nuclear reactors in the United States have shut down, and an additional eight reactors have announced plans to retire by 2025. The retirement process for nuclear power plants involves disposing of nuclear waste and decontaminating equipment and facilities to reduce residual radioactivity, making it much more expensive and time consuming than retiring other power plants. As of 2017, a total of 10 commercial nuclear reactors in the United States have been successfully decommissioned, and another 20 U.S. nuclear reactors are currently in different stages of the decommissioning process.

To fully decommission a power plant, the facility must be deconstructed and the site returned to greenfield status (meaning the site is safe for reuse for purposes such as housing, farming, or industrial use). Nuclear reactor operators must safely dispose of any onsite nuclear waste and remove or contain any radioactive material, including nuclear fuel as well as irradiated equipment and buildings. (2.)

References:

  1. America’s oldest operating nuclear power plant to retire on Monday
  2. Decommissioning nuclear reactors is a long-term and costly process

Energy Efficiency of Power Production: How Supercritical Carbon Dioxide Turbines Operate

Duane M. Tilden, P.Eng.                                    Sept 1, 2018

Foreword:

This is another article in an ongoing series of reports on the technological development of supercritical carbon dioxide in the power production and energy efficiency sectors of industry, power plants and utilities.

dodge-sco23 supercritical CO2 turbine

Figure 1. Size comparison of Supercritical Power Turbine to Conventional Steam Turbine (1)

Abstract:

The ever increasing search for improving energy and power production efficiency is a natural quest as developments in technology seek to be utilized to improve operations and supply cost effectively. The technologies behind the utilization of supercritical carbon dioxide and other such fluids have long been established. We are furthering our exploration into this sector of power production developing new technologies along the way to a smarter economy and modernization of infrastructure.

The Principle of Operation

Supercritical fluids can play an important role in developing better electricity generators because of their liquid- and gas-like properties. A supercritical fluid is an optimal working fluid because it has a temperature and pressure above its critical point, meaning that it doesn’t have a definite liquid or gas phase. Consequently, the slightest changes in pressure or temperature cause huge changes in the material’s density.

With any supercritical fluid, the ease of compressibility goes up, explains Stapp, so it becomes something more like water. Because supercritical CO2 also compresses more easily than steam, the amount of work done during the compression phase—normally accounting for 25 percent of the work performed inside the system—is dramatically reduced; the energy saved there greatly contributes to the turbine’s overall efficiency.

“We expand it like a gas, and pressurize it like a liquid,” says James Pasch, principle investigator of the Supercritical Carbon Dioxide Brayton Cycle Research and Development Program. “You can do this with any fluid, but supercritical carbon dioxide matches really well with ambient temperatures.”

Carbon dioxide is optimal for this application because it doesn’t go through a phase change at any point during the cycle. Its critical temperature, 88 degrees Fahrenheit, is very close to ambient temperature, which means the heat emitted by the turbine is the same temperature as the surrounding environment. Supercritical carbon dioxide is also very dense; at its critical point, the fluid is about half the density of water. So, in addition to being easier to compress, less work is required to cycle it back to the heat source for re-expansion.

The Brayton Cycle also offers direct environmental benefits. For one, it’s carbon neutral. The system takes carbon dioxide out of the air and puts it in the recompression cycle loop. Just as important is the fact that the system limits water usage by minimizing discharge, evaporation, and withdraw.

“That’s a big deal for the southwest,” says Gary Rochau, manager of Sandia’s Advanced Nuclear Concepts Department. Sandia’s generator can work in places where water is in limited supply. This puts it on par with the Palo Verde Nuclear Power Generating Station, a nuclear power plant in Arizona that uses recycled waste water as cooling water, saving groundwater and municipal water supplies for other uses. (2)

Figure 1. Illustration of a Supercritical CO2 Turbine [Peregrine Turbine Technologies] (2)

Advances in Materials and Technology

GE Reports first wrote about Hofer last year when he 3D printed a plastic prototype of the turbine. His team, partnered with Southwest Research Institute and Gas Technology Institute, has since submitted the design to the U.S. Department of Energy and won an $80 million award to build the 10 MW turbine. The turbine features a rotor that is 4.5 feet long, 7 inches in diameter, and only weighs 150 pounds. The engineers are now completing a scaled-down, 1 MW version of the machine and will test it in July at the Southwest Research Institute.

The idea of using CO2 to power a steam turbine has been around for a while. It first appeared in the late 1960s, and an MIT doctoral student resurrected it in 2004. “The industry has been really interested in the potential benefits of using CO2 in place of steam in advanced supercritical power plants,” Hofer says.

By “supercritical” Hofer means efficient power stations using CO2 squeezed and heated so much that it becomes a supercritical fluid, which behaves like a gas and a liquid at the same time. The world’s most efficient thermal power plant, RDK 8 in Germany, uses an “ultrasupercritical” steam turbine operating at 600 degrees Celsius and pressure of 4,000 pounds per square inch, more than what’s exerted when a bullet strikes a solid object.

Hofer says that the steam power plant technology “has been on a continuous march” to increase efficiency and steam temperature, but once it tops 700 degrees Celsius, “the CO2 cycle becomes more efficient than the steam cycle.” Hofer’s turbine and casing are made from a nickel-based superalloy because it can handle temperatures as high as 715 degrees Celsius and pressures approaching 3,600 pounds per square inch. “You need a high-strength material for a design like this,” he says.

 Figure 2. GE Global Research engineer Doug Hofer is building a compact and highly efficient turbine that fits on a conference table but can generate 10 megawatts (MW), enough to power 10,000 U.S. homes. The turbine, made from a nickel-based superalloy that can handle temperatures up to 715 degrees Celsius and pressures approaching 3,600 pounds per square inch, replaces steam with ultrahot and superpressurized carbon dioxide, allowing for a smaller design.

The hellish heat and pressure turn CO2 into a hot, dense liquid, allowing Hofer to shrink the turbine’s size and potentially increase its efficiency a few percentage points above where state-of-the-art steam systems operate today. “The pressure and fluid density at the exit of our turbine is two orders of magnitude higher than in a steam turbine,” Hofer says. “Therefore, to push the same mass through, you can have a much smaller turbine because the flow at the exit end is much denser.”

Hofer’s design uses a small amount of CO2 in a closed loop. “It’s important to remember that this is not a CO2 capture or sequestration technology,” he says. Hofer says that the technology, which is being developed as part of GE’s Ecomagination program, could one day start replacing steam turbines. “It’s on the multigenerational roadmap for steam-powered systems,” he says.

By virtue of becoming more efficient, the technology could help power-plant operators reduce greenhouse gas emissions. “The efficiency of converting coal into electricity matters: more efficient power plants use less fuel and emit less climate-damaging carbon dioxide,” wrote the authors of the International Energy Agency report on measuring coal plant performance. (3)

Previous Blog Posts on Supercritical Carbon Dioxide:

  1. https://duanetilden.com/2016/11/11/transitioning-oil-gas-wells-to-renewable-geothermal-energy/
  2. https://duanetilden.com/2016/03/13/supercritical-co2-used-for-solar-battery-power-system/
  3. https://duanetilden.com/2015/04/23/doe-invests-in-super-critical-carbon-dioxide-turbine-research-to-replace-steam-for-electric-power-generators/
  4. https://duanetilden.com/2013/10/29/supercritical-co2-refines-cogeneration-for-industry/
  5. https://duanetilden.com/2013/10/29/supercritical-co2-turbine-for-power-production-waste-heat-energy-recovery/
  6. https://duanetilden.com/2013/10/29/waste-heat-recovery-using-supercritical-co2-turbines-to-create-electrical-power/

 

References:

  1. supercritical-carbon-dioxide-power-cycles-starting-to-hit-the-market/
  2. supercritical-carbon-dioxide-can-make-electric-turbines-greener
  3. ecomagination-ge-building-co2-powered-turbine-generates-10-megawatts-fits-table/

Study Finds BC Pension Fund Manager is Funding Climate Agreement Breach

A study* released by the Corporate Mapping Project (CMP), a watchdog organization indicates that public pensions could be overly invested in the fossil fuel industry. This is a concern as international agreements signed by Canada are directed to reducing emissions, while public money is invested in an agenda that requires growth and production in a sector which is in decline.

Image result for kinder morgan pipeline

Figure 1. Map of proposed expansion current pipeline and tanker route – Kinder Morgan / Trans Mountain Pipeline. (1)

 

Image result for kinder morgan pipeline

Figure 2. Map of impact of refinery facilities and proximity to conservation areas, a University, a Salmon spawning inlet, residential housing and major transport routes. (1)

 

The area that will be impacted by the growth of the facility are diverse and vulnerable. This is not a brownfield development, and in fact is on the side of a mountain and part of a larger watershed. Serious consideration should be given to relocating the facility or decommissioning.

There are alternate locations better suited for this type of high hazard industrial facility, away from sensitive areas and remote from populations and high traffic harbours. Why are these alternatives not being discussed?

Here’s a snippet taken from the introduction of the report and their findings. How can we stop carbon emissions when local investing strategies are in the opposite direction? Are public pension funds safely invested and competently managed? Likely not.

 

CMP researchers Zoë Yunker, Jessica Dempsey and James Rowe chose to look into BCI’s investment practices because it controls one of the province’s largest pools of wealth ($135.5 billion) — the pensions of over half-a-million British Columbians. Which means BCI’s decisions have a significant impact on capital markets and on our broader society.

Their research asked, “Is BCI is investing funds in ways that effectively respond to the climate change crisis?”

Unfortunately, the answer is “No.” BCI has invested billions of dollars in companies with large oil, gas and coal reserves — companies whose financial worth depends on overshooting their carbon budget — and is even increasing many investments in these companies.

As another recent CMP study clearly shows what’s at stake. Canada’s Energy Outlook, authored by veteran earth scientist David Hughes, reveals that the projected expansion of oil and gas production will make it all but impossible for Canada to meet our emissions-reduction targets. The study also shows that returns to the public from oil and gas production have gone down significantly. (2)

 

*This study is part of the Corporate Mapping Project (CMP), a research and public engagement initiative investigating the power of the fossil fuel industry. The CMP is jointly led by the University of Victoria, Canadian Centre for Policy Alternatives and the Parkland Institute. This research was supported by the Social Science and Humanities Research Council of Canada (SSHRC).

References:

  1. kinder_morgan_pipeline_route_maps
  2. fossil-fuelled-pensions

The Mind of a Market – Part 1

Author: Duane M. Tilden, P.Eng.                      Date: July 2, 2018

The arrow of time points forward; past events are irreversible

Foreword:

This article, has grown and is expanding as I write. Being my own editor I have to make decisions, so that in order to expedite publishing I am breaking the material down into parts. The idea behind this article is to explore what makes the cryptocurrency market move and the psychology behind the market, a collection of minds or “hive-mind“. We will use references from the stock market and investing community, social sciences, finance, engineering and other realms of thought and application.

I would like to postulate that collectively CC markets are populated by a type of person who has a basic understanding of the fundamentals of Bitcoin, blockchain and smart contracts, online interaction and the use of app’s, purchasing and trading, banking, stock markets, economics and other needed basics to make the ecosystem have value and meaning to the user.

Or perhaps, the user is in the process of learning these fundamentals, as such having desire and ability to learn new concepts and be able to employ them digitally is necessary for success. There are learning curves to be surmounted; patience, persistence and diligence are required. In any event I invite seasoned pro, novice or the curious to follow my explorations into the world of crypto.

Image result for whale

Photo #1: National Geographic – Migrating Whales

What is the Cryptocurrency Market?

The cryptocurrency market is dominated by a few major assets, most notably Bitcoin which has a current dominance factor of 42.6%. Reviewing listed CC assets listed on the website coinmarketcap.com we find the use of charts and graphs useful in understanding how values and prices fluctuate over time in these markets. I have used these charts in previous articles, listed below is the current Total Market Cap of $257 Bn, which has recently increased by $21 Bn since Friday, June 29th.

Total Crypto Market Cap Jun 24 to Jul 1 2018 #1

Figure 1: CryptoCurrency Total Market Cap Chart – June 24 to July 1, 2018

For the sake of simplicity, my analyses is generalized in nature. Individual traded assets have their own utility and value based on a multiplicity of factors, some of which may be intangible. When deciding which assets to choose for holding and trading there are many of those factors which become important when considering risking investment over time. We will delve into this issue in another post, all part of the due diligence process.

Over the past decade, blockchain technology has captured the imagination of technologists around the world, and in the past year Initial Coin Offerings (ICOs) of cryptocurrency tokens have exploded in popularity. In just the first four months of 2018, ICOs raised $6.3 billion USD in funding, 18% more than in all of 2017. (1)

As we can see from the excerpt taken from the CPA Ontario website ICO’s raised $6.3 Bn in funding for the first quarter of 2018. For argument’s sake we can extrapolate a value of $30 Bn for the year, or even more to $50 Bn if we assume more issues later in the year. However, considering the total trading values in active markets we can by inspection see that the ICO market is small compared to values traded on exchanges. Total Market Cap can increase by over $20 Bn or more in a day (2), and daily volumes also can vary in the same range of about $10 to $20 Bn over 24 hour periods.

As a final note, not all transactions in cryptocurrency need to be done through an exchange, and private transactions are not included in TMC analysis, although it is fair to assume that trade values of these transactions will be made close to current market prices. When trading on exchanges one must always be aware of the market depth compared to order size, which can cause significant run up in price when a large transaction is made on the market. One reason why experienced traders generally make smaller incremental buys or sales to limit market distortion and costs as well as profit from large trade orders which run up the market temporarily.

Modeling Generalizations

For the sake of most of my market reviews there are certain generalizations which I make, first is I exclude ICO’s as a minor influence on the market as a whole. Those who intend to issue ICO’s would be wise to incorporate market analysis and timing as part of their marketing strategy. Starting an ICO in a soft market will be more difficult when money is tight for investors, as an example.

The second generalization I make is to limit reviews generally to the top 25 listed CC’s by market capitalization. From past analysis I have found that over 80% of capital is contained in the top 25 while the remaining 1500+ listed account for the remaining 20% Total Market Cap. Movements of these coins may be important to the individual trader, however as factors that may move the whole market their sphere of influence is generally limited.

Thus, as we can see, the above reductions will simplify future modeling of cryptocurrency markets by eliminating ICO’s and examining global movements of the top 25 listed cryptocurrencies, of which Bitcoin currently dominates with a MC of $108 Bn USD, followed by Tether, Ethereum, EOS, Bitcoin Cash, Litecoin, etc.

Who are the Players in the CryptoCurrency Markets?

First there are the digital assets or cryptocurrencies, which we already discussed in general and of which there are many. However, we have reduced this population down to a usable quantity for analytical and discussion purposes by reducing the market to the top 25 and ignoring the effects of ICO’s on the market. Next to be discussed is the user base, which is a generalization for investors, holders, developers, traders, speculators and the consumer marketplaces. Some of these markets are more developed than others as more people learn the benefits of cryptocurrency, the blockchain and distributed ledger technology.

As both sides of the markets have grown we will examine the effect of exchanges and how this third component enables the other two components to interact much like how a third leg is necessary to the utility and stability of a stool. These virtual cryptocurrency exchanges have many similarities to the stock market as both represent an asset the basis of which are distinct and separable, frequently representing commodities or utility previously considered intangible.

Demographics of the User

Is it possible to identify the “average” or “normal” user, and thus be able to establish some trends or behaviours that can be predicted? Let us explore this concept further.

One Bloomberg News article found online mentions a survey which found 5% of 5700 adults surveyed owned Bitcoin.

Nearly 60 percent of Americans have heard or read about the world’s largest cryptocurrency, according to a joint SurveyMonkey and Global Blockchain Business Council poll of more than 5,700 adults conducted in January. But only 5 percent of people actually own the digital coin.

Those few Bitcoin investors are of a fairly consistent demographic. An overwhelming 71 percent of them are male. The majority — 58 percent — are young, between the ages of 18 and 34 years old. And unlike the broader U.S. population, nearly half of them are minorities. (3)

Another survey is more thorough providing demographics on users interviewed in their surveys. It also provides interesting feedback as to the nature of existing resistance to adoption as seen below in Figure 2. Something which should be paid particular interest.

Finder

Figure 2. Table of Reasons – Resistance to CryptoCurrency Adoption

Other interesting demographic information can be examined such as age groups, gender, income level and ethnicity of those surveyed may provide useful information. For example who are those most likely to invest in Bitcoin or other Cryptocurrencies? This survey compares Millennials, Gen X and Babyboomer generations.

Millennials and Generation X

A similarity between the results of the Finder survey and the survey by LENDEDU is that Millennials are the largest group invested in cryptocurrency followed by Generation X.

The survey by Finder found that among those who purchased cryptocurrency there are:

  • 17.21 percent of Millennials surveyed,

  • 8.75 percent of Generation X surveyed.

Finder

Figure 3. Table of Crypto Investors by Age Group (4)

 

Summary Comments – Part 1

In order to make sense of our examination of the cryptocurrency market we have used scientific methods of reduction to group together data in meaningful ways and thereby reducing workloads. The generalizations, rules or assumptions are that the market is fairly well represented by the movements of the top 25 listed cryptocurrencies, and that ICO’s are a separate market which has little effect on the main market.

The current model is a spreadsheet analysis of price and total market capitalization of the top 25 cryptocurrencies as listed on Coinmarketcap.com for a particular time period. Cycles in capitalization may be uncovered through data analysis. Also opportunities in markets and penetration. Current surveys indicate populations which require more attention and information for wider adoption which are useful for marketing campaigns.

 

Part 2 (To be Continued)

  • Trading Exchanges and Price Movements
  • Whales and Institutions
  • Trading Levels, Trust and the Nash Equilibrium
  • Time Frames, Cycles and Risk
  • Geographical and Geopolitical Factors

 

References:

  1. navigating-the-brave-new-world-of-cryptocurrency-and-icos
  2. weekly-market-cap-surges-50-billion-cryptocurrency-prices-continue-to-rise/
  3. a-look-at-who-owns-bitcoin-young-men-and-why-lack-of-trust
  4. how-many-americans-really-own-crypto-skewed-results-of-polls-and-surveys

 

 

Market Sentiment Analysis of Candlestick Charts

Author: Duane M. Tilden, P.Eng.                       Date: June 23, 2018

To become a successful trader in markets, such as cryptocurrency trading, one has to develop strategies which will give them the greatest probability of success, or for most, a profit.

How much risk and reward is up to every trader, as well as the selection of digital assets held and quantity. There are short, medium and long term goals and various methods of achieving each one of these objectives.

One tool that is very useful for developing short term trading strategies which can return a profit to the trader, is understanding Candlestick charts.

Figure 1: Anatomy of a Candlestick (1)

Anatomy of a candlestick

For reading and developing trading strategies, understanding the mechanics of a candlestick chart can lead to opportunities in trading assets to maximize ROI (return on investment), or to determine when to buy and sell assets.

How to Read a Single Candlestick (2)

Each candlestick represents one day’s worth of price data about a stock through four pieces of information: the opening price, the closing price, the high price, and the low price. The color of the central rectangle (called the real body) tells investors whether the opening price or the closing price was higher. A black or filled candlestick means the closing price for the period was less than the opening price; hence, it is bearish and indicates selling pressure. Meanwhile, a white or hollow candlestick means that the closing price was greater than the opening price. This is bullish and shows buying pressure. The lines at both ends of a candlestick are called shadows, and they show the entire range of price action for the day, from low to high. The upper shadow shows the stock’s highest price for the day and the lower shadow shows the lowest price for the day.

Bearish and Bullish Candlesticks

A candlestick represents the price activity of an asset during a specified timeframe through the use of four main components: the open, close, high and low.

The “open” of a candlestick represents the price of an asset when the trading period begins whereas the “close” represents the price when the period has concluded. The “high” and the “low” represent the highest and lowest prices achieved during the same trading session.

There is much more to reading and understanding candlestick charts than is covered here. This brief has informational links to where more information on patterns and indicators, and advice on how to use these patterns to make decisions in trading.

Bottom Line (2):

Investors should use candlestick charts like any other technical analysis tool (i.e., to study the psychology of market participants in the context of stock trading). They provide an extra layer of analysis on top of the fundamental analysis that forms the basis for trading decisions. We looked at five of the more popular candlestick chart patterns that signal buying opportunities. They can help identify a change in trader sentiment where buyer pressure overcomes seller pressure. Such a downtrend reversal can be accompanied by a potential for long gains. That said, the patterns themselves do not guarantee that the trend will reverse. Investors should always confirm reversal by the subsequent price action before initiating a trade. (Read more in Candlestick Charting: Perfecting The Art)

References:

  1. crypto-trading-101-beginners-guide-candlesticks/
  2. using-bullish-candlestick-patterns-buy-stocks

Microgrids and the Blockchain – Transforming the Energy Supply

Author: Duane M. Tilden, P.Eng.           Date: June 10, 2018

In the transition from the centralized utility is the development of the Micro-grid.  The Micro-grid offers many benefits to society, including; (a) use of renewable energy sources that reduce or eliminate the production of GHG’s, (b) increases in energy efficiency of energy transmission due to shortening of transmission distances and infrastructure, (c) improved municipal resilience against disaster and power reductions, and finally, (d) promotion of economic activity that improves universal standard of living. (1)

The Brooklyn Microgrid Experiment

A Network of Energy Cells (2)

In order to be successful, blockchain platforms and microgrids require a regulatory framework. In New York State, such a framework is provided by “Reforming the Energy Vision” (REV). The platform’s objectives are to minimize the vulnerability of the power supply system that became visible during Hurricane Sandy, to use more sources of renewable energy, and to reduce costs.

The Brooklyn Microgrid is a good test case for these objectives. “A microgrid is a nucleus that sets the stage for an energy future consisting of networks of energy cells,” says Stefan Jessenberger from Siemens’ Energy Management Division. “Blockchain also supports this process, because it makes it much easier to conduct energy trading within cells.”

Siemens Digital Grid, next47, and LO3 Energy all believe in the potential of blockchain-based microgrids, because this technology can be used wherever there are decentralized energy sources. “Our experiences with the Brooklyn Microgrid will certainly flow into future projects,” says Kessler.

 
Image #1: A Canal in Brooklyn, New York (5)

The Future is Now

But something else is happening to the grid as energy generation changes – the rise of microgrids. These smaller grid systems are linked to localised power sources, often referred to as “distributed generation” sources. For example, a handful of buildings in a city with their own solar panels might be connected to nearby residences.

In fact, that is exactly the model that LO3 Energy has experimented with in its Brooklyn Microgrid project. Customers signed up to it can choose to power their homes via a range of local renewable energy sources. People with their own solar panels can sell surplus electricity to their neighbours, for example. It’s a peer-to-peer network for electricity.

To ensure that accurate records of these transactions are kept, LO3 has opted to use blockchain distributed ledger technology. This means the microgrid’s accounting is decentralised and shared by everyone on the network.

“It’s virtually unhackable,” says founder and chief executive Lawrence Orsini, explaining that tampering with these records is almost impossible because of the fact that everyone has their own, regularly updated copy of the ledger.

LO3 is now rapidly expanding with a series of other projects around the world. One is based in South Australia, where Orsini explains there is already a lot of distributed generation going on – and plenty of grid stability issues. Users can now experiment with LO3 to get access to electricity from solar-fuelled batteries nearby when needed. (3)

Physical and Virtual Microgrids

Challenging the traditional electrical supply model are microgrids. The “microgrid” term normally refers to a localised grid that can disconnect from the main grid and operate autonomously. It uses local sources of energy to serve local users, integrating the supply of energy from various producers, including local power generators and providers of renewable energy such as solar power. Consumers with their own energy production capabilities (wind turbines or solar energy systems) can sell their surplus energy production back to peers in the microgrid, on a pay-per-use basis (becoming ‘prosumers’).

While physical microgrids are still rare, we do observe the development of virtual microgrids using peer-to-peer energy trading. Blockchain is just one element in the transformation of electricity supply, providing Distributed Ledger Technology (DLT) to members of a peer-to-peer energy network, or microgrid. It offers [or ‘provides’] a reliable, lower-cost digital platform for making, validating, recording and settling energy transactions in real time across a localised and decentralised energy system.

With increasing demand for more flexible energy supplies we expect a continued increase in the number of virtual microgrids and a gradual movement towards true, physical microgrids along 4 stages […] (4)

“This project…, is the first version of a new kind of energy market, operated by consumers, which will change the way we generate and consume electricity.”
New Scientist (5)

References:  

  1. microgrid-as-a-service-maas-and-the-blockchain/
  2. smart-grids-and-energy-storage-microgrid-in-brooklyn
  3. http://www.wired.co.uk/article/microgrids-wired-energy
  4. energy-and-resources/articles/will-microgrids-transform-the-marke.html
  5. http://brooklynmicrogrid.com/