5 ms·

GE bet on fossil fuels and lost $200B misjudging renewable energy transition

35 points by woodandsteel 7y ago

danans 7y ago
Interesting to note the timing of the start of their stock decline (starting in late 2016)[1] and their bet on increased demand for fossil fuel based generation equipment. It's almost as if they thought the current US administration would be able to stem or reverse the tide of the economics shifting towards favoring renewables. 1. From the original article: http://ieefa.org/ieefa-report-ge-made-a-massive-bet-on-the-future-of-natural-gas-and-thermal-coal-and-lost/ http://ieefa.org/ieefa-report-ge-made-a-massive-bet-on-the-f...
southern_cross 7y ago
The "lost $200B" refers to market value (capitalization), which these days is mostly smoke and mirrors anyway - so not actual losses in a "profit and loss" kind of way. Also, other articles have gone into great detail about how GE's good numbers over recent years-to-decades have largely been the result of financial engineering anyway, and eventually that kind of thing catches up with you, so matter how well your individual business divisions are actually doing. Problems in their energy division may have very well been the straw that broke the camel's back, though.
- woodandsteel 7y ago
  You are correct that this is only cap value. However, it reflects management decisions that have put GE in a poor position to compete commercially in the new world of renewable energy. The key question is if GE will be able to get back on course fast enough. The larger issue is that renewable energy is not just some impractical idea the tree-huggers came up with that is of no importance to serious investors and businesses. Now it is for real. For some evidence, do a google search on fossil fuels stranded assets.
  - southern_cross 7y ago
    I'm probably far more well-informed on the matter of renewables that you are. And I just read another article on so-called stranded assets and such, one which (IIRC) called out Shell as being a "leader" in moving away from fossil fuels, but which I interpreted as "Shell probably won't be around too much longer". Fun facts about renewables which most people are pretty clueless about: 1. "Nameplate capacity" (the amount of energy produced under ideal conditions, which is what is always quoted in the press) is not at all the same as "actual average capacity", which as a rule of thumb may typically only be 25% of nameplate, give or take. 2. Storage capacity (battery, pumped hydro, etc.) is not at all the same as actual generating capacity, although the renewables folks like to conflate the two. 3. Actual hydropower was generally considered evil ("Because dams are bad!") until the renewables folks decided to make it their own, in order to make their numbers look better than they actually would be otherwise. 4. Individual windmills are apparently only going to last about half of their originally expected lifetimes - 10 to 15 years instead of 20 to 30 years. Not sure about solar, but I think that's generally holding up much better. 5. On the other hand, solar doesn't necessarily generate as much power as expected, even in "ideal" areas like deserts, due to dust accumulation on panels and such. Even Google infamously overestimated the generation capacity of at least one of its desert solar thermal towers by something like 2/3, based on estimated cloud cover vs. actual cloud cover. (How does something like that even happen?) And apparently a lot of solar panels which have already been installed were oriented the wrong way. That is, due South (as was originally the thinking) instead of due West, which is what the "duck curve" indicates is actually the best orientation. I could go on, but that seems sufficient. BTW, GE's troubles date back to at least the heyday of GM Financial, which is well before the whole current energy thing had any traction. Apparently it was routinely being used as something of slush fund in order to gloss over problems elsewhere. (This was an open secret within the financial community and even occasionally joked about in the financial press.) And IIRC, there are/were several billion dollars of future potential insurance liabilities which somehow just conveniently got "forgotten about" at one point. Oops!
    - woodandsteel 7y ago
      I want to ask you about something. But first I want to say that renewable energy is immensely more practical than it was a decade ago, and it is going to continue to improve. Beyond that, there are strong forces pushing its adoption. Besides global climate change, there is air pollution and the desire of many countries to become independent of expensive fossil fuel imports. My question to you is what is your view of anthropogenic global climate change? Do you think it is a hoax or real and a grave danger? And if the latter, then what do you think should be done?

35 points by woodandsteel 7y ago

Interesting to note the timing of the start of their stock decline (starting in late 2016)[1] and their bet on increased demand for fossil fuel based generation equipment. It's almost as if they thought the current US administration would be able to stem or reverse the tide of the economics shifting towards favoring renewables. 1. From the original article: http://ieefa.org/ieefa-report-ge-made-a-massive-bet-on-the-future-of-natural-gas-and-thermal-coal-and-lost/ http://ieefa.org/ieefa-report-ge-made-a-massive-bet-on-the-f...

southern_cross 7y ago

The "lost $200B" refers to market value (capitalization), which these days is mostly smoke and mirrors anyway - so not actual losses in a "profit and loss" kind of way. Also, other articles have gone into great detail about how GE's good numbers over recent years-to-decades have largely been the result of financial engineering anyway, and eventually that kind of thing catches up with you, so matter how well your individual business divisions are actually doing. Problems in their energy division may have very well been the straw that broke the camel's back, though.

woodandsteel 7y ago
You are correct that this is only cap value. However, it reflects management decisions that have put GE in a poor position to compete commercially in the new world of renewable energy. The key question is if GE will be able to get back on course fast enough. The larger issue is that renewable energy is not just some impractical idea the tree-huggers came up with that is of no importance to serious investors and businesses. Now it is for real. For some evidence, do a google search on fossil fuels stranded assets.
- southern_cross 7y ago
  I'm probably far more well-informed on the matter of renewables that you are. And I just read another article on so-called stranded assets and such, one which (IIRC) called out Shell as being a "leader" in moving away from fossil fuels, but which I interpreted as "Shell probably won't be around too much longer". Fun facts about renewables which most people are pretty clueless about: 1. "Nameplate capacity" (the amount of energy produced under ideal conditions, which is what is always quoted in the press) is not at all the same as "actual average capacity", which as a rule of thumb may typically only be 25% of nameplate, give or take. 2. Storage capacity (battery, pumped hydro, etc.) is not at all the same as actual generating capacity, although the renewables folks like to conflate the two. 3. Actual hydropower was generally considered evil ("Because dams are bad!") until the renewables folks decided to make it their own, in order to make their numbers look better than they actually would be otherwise. 4. Individual windmills are apparently only going to last about half of their originally expected lifetimes - 10 to 15 years instead of 20 to 30 years. Not sure about solar, but I think that's generally holding up much better. 5. On the other hand, solar doesn't necessarily generate as much power as expected, even in "ideal" areas like deserts, due to dust accumulation on panels and such. Even Google infamously overestimated the generation capacity of at least one of its desert solar thermal towers by something like 2/3, based on estimated cloud cover vs. actual cloud cover. (How does something like that even happen?) And apparently a lot of solar panels which have already been installed were oriented the wrong way. That is, due South (as was originally the thinking) instead of due West, which is what the "duck curve" indicates is actually the best orientation. I could go on, but that seems sufficient. BTW, GE's troubles date back to at least the heyday of GM Financial, which is well before the whole current energy thing had any traction. Apparently it was routinely being used as something of slush fund in order to gloss over problems elsewhere. (This was an open secret within the financial community and even occasionally joked about in the financial press.) And IIRC, there are/were several billion dollars of future potential insurance liabilities which somehow just conveniently got "forgotten about" at one point. Oops!
  - woodandsteel 7y ago
    I want to ask you about something. But first I want to say that renewable energy is immensely more practical than it was a decade ago, and it is going to continue to improve. Beyond that, there are strong forces pushing its adoption. Besides global climate change, there is air pollution and the desire of many countries to become independent of expensive fossil fuel imports. My question to you is what is your view of anthropogenic global climate change? Do you think it is a hoax or real and a grave danger? And if the latter, then what do you think should be done?