The energy transition’s no joke

There’s an old joke, Irish I believe, that goes like this.

An Englishman is lost in the green countryside of that aforementioned beautiful land – totally lost. He’s trying to get to Cork, and commits to asking the next person he sees for helpful directions.

A farmer appears and this chap follows through on his plan admirably, enquiring, “Ahoy pal, you there, sir, could you possibly tell me how to get to Cork?”

Irishman: “Well… I wouldn’t start from here.

Lately, I’ve been speaking to a lot of major figures involved in studying the energy transition, and it’s fascinating because they all say very different things about how it plays out.

This is all building up to something a bit special that I’ve been working on by the way – more on this in the coming weeks (I hope!).

One reckons we need to re-focus on nuclear power, pointing to the incredible successes of France and Sweden on that front.

Another really loves the idea of decarbonising the production of oil and especially gas, because something many people don’t realise is that we can actually make our fossil fuels so much cleaner just by cleaning up the process of extracting and refining them.

A third is really focused in on electrification and digitisation, while others are very keen to increase awareness of the circular economy – recycling, diet, farming practices, and more.

They all agree on one thing though.

The energy system as we know it is gone, gone forever.

What are some of the big questions that remain?

One that really splits opinion is nuclear.

Taunted as being able to offer prices “too cheap to meter” back in the 1950s, it has never delivered on that potential.

It is surrounded by myth and mystery. What’s fusion, what’s fission? What happened at Chernobyl, Three Mile Island, and Fukushima?

The thing is, the more I read about nuclear, the safer and better it seems.

Lots of people fear it, and don’t want it near their homes.

So it needs to be pitched right – but some communities actually really like having it there, which is a fact which surprised me. It turns out that if a nuclear plant is in a certain place, aside from getting clean and reliable electricity, but the government compensates you for having it with better schools and roads and the like. Seems in many ways like a win-win.

New nuclear remains so expensive, that’s the thorn in our side. Our current plants must be maintained I believe, and we shouldn’t copy Germany’s disastrous decision to shutter all its nuclear and turn back to coal instead.

I’m not yet convinced by the building of new nuclear though. Hinkley Point is a bad example because it’s a one-off, but most new nuclear plants like it (looking at you, EDF) have been massively delayed and hugely over budget, leading to far higher costs for the consumer.

Hinkley Point was given an inflation-linked price of £92/MWh back in 2013 (ie, it’s risen to well over £100 now), while the wholesale price in the UK has flickered between £40 and £55/MWh over the last decade. That’s simply not going to bring the public along for the ride.

Policy is another interesting topic, especially right now as governments are looking to spend their way out of the current crisis.

One emerging realisation being discussed is the way in which policy creates its own momentum.

Fossil fuel companies used to just focus on their own problems – retaining subsidies, permissions and the rest. Top lobbyists those oil majors, don’t forget.

But they started to realise that once “green” policies were enacted, they began to compound. A measure supporting solar with a certain subsidy will give rise to growth in that sector. Suddenly there are construction companies, businesses, workers, utilities, homeowners and mayors who all have vested in solar, and that becomes quite a powerful driving force for future policy.

That’s how policy creates its own momentum. Oil companies have woken up to this powerful fact, but they’re quite late to the party.

Germany’s push for solar in the mid 2000s was a poor move economically, it was so expensive at the time – but it got the industry off the ground and now its flying, with new contracts breaking records for the cheapest electricity ever.

Here in the UK, our major source of Climate expertise is the CCC – the Climate Change Committee. It advises the government and helps map and forecast our progress. It’s a treasure torove of data, and its latest report came out in the last week or so.

How about these three belting charts:

I’ve talked a lot about carbon here, but it’s important to remember it’s not the only greenhouse gas (GHG).

Take this chart, which shows global GHG emissions since 1990:

 Source: Committee on Climate Change (CCC)

We shouldn’t forget about F-gases, nitrous oxide or methane. The shipping industry brought in its IMO 2020 regulations at the start of this year, which tackle another underappreciated GHG – sulphur. It drastically lowers the limits on sulphuric content of exhaust fumes from the global shipping fleet – meaning tankers have to use a cleaner fuel, or bring in exhaust fume scrubbers to clean up their waste.

That chart might make you a bit weak at the knees – look how much worse things are getting!

But here’s the tonic for that concern:

Source: CCC

What this shows is that the UK has grown its GDP significantly over the last three decades while simultaneously reducing our emissions. This feat demonstrates that continued global economic growth doesn’t have to be an additive to the climate crisis. The two don’t have to be attached.

The reason this is so important is that we must not think we can deny developing and poorer nations from advancing economically.

We should be doing everything we can to help that, but in a way which mirrors our own progress – without coal, with better efficiency, with more solar and wind, perhaps nuclear, decarbonised gas, circular economies in power, nutrition, and farming – and everything else that the real experts from the top of this article are focusing on.

And here’s how we’ve achieved that here in the UK by the way. Sadly, it’s not uniform progress – quite the opposite, but it means we do have plenty of opportunities left from an investment perspective:

 Source: The CCC

It shows that we have done brilliantly, through the dash for gas and the sidelining of coal, to reduce carbon emissions from our power generation sector.

That being said, there is still enormous work to do in decarbonising things like road transportation – which is probably why the government is phasing out sales of petrol vehicles by 2035, and today announced a swathe of measures to encourage electric vehicle (EV) charging infrastructure, battery manufacturing, and R&D.

Buildings too are also a key area for concern – the energy efficiency of our building stock is not great but could be a lot better. Insulation, double glazing, better roofing, heat pumps, solar roofs… all these things could dramatically improve the efficiency of our energy system in the UK, and tackle the problem from the demand side, rather than the supply side.

And look how far along aviation is. One of the hardest sectors to decarbonise. Boris today talked again about this “Jet Zero” idea where the UK will be the first country to build a plane that has net-zero carbon emissions. No great need to worry about this one quite yet though, it’s a heck of a long way off.

Waste, buildings, shipping and road transport look like being the next dominos to fall – those are the spaces we should watch above all.

And those are some of the spaces James Allen and I look at for the Exponential Energy Fortunes service, where we help investors to find and invest in the most exciting stocks for the energy transition.

From electric vehicle startups, to hydrogen fuel cells, solid-state batteries, solar and wind technologies, power plants, and more, James and I are scanning this space every hour of every day to find the best technologies, patents, processes and more.

Our latest one is potentially tapping into Tesla’s latest project to get cobalt out of its batteries. You may remember my article on the battery sector – where there are huge concerns about child labour and mining conditions for the metal in the Democratic Republic of Congo.

But one company has found a way to make cobalt-free batteries safer, longer lasting and higher performing through an innovative manufacturing process, and has secured its advantage with strong patents.

Current and new subscribers are set to benefit first, will you be among them?

All the best,

Kit Winder
Editor, UK Uncensored

PS Follow me on Twitter for some of the best content that passes my way over the course of each week, in a very easily digestible form.

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