The Energy Transition (LOL)

The Energy Transition is Over - we’ve arrived and it’s not pretty

Neil Winward

May 28, 2024

I have spent 100s of hours reading about energy from some of the most insightful and well-informed analysts, such as

and

. I recommend their work. This is merely a high-level look.

Are We Making Progress?

Here is what you need to know:

If transition means transition towards renewables, we have made hardly any progress.

The Intermittency Problem

The so-called nirvana of renewable energy - and by this, I don't mean nuclear - collapses under the weight of intermittency. The average utility-scale solar capacity factor—the amount of actual energy produced over the total theoretical energy — is 25%. So, you need to build 4x the amount of solar power to charge batteries to provide power when the sun doesn't shine.
Here's a comparison of the capacity factors of different energy sources:

The true cost of intermittent resources such as solar and wind is the cost of building and maintaining the resources that can be turned on at a moment’s notice to back up the renewables. Because those resources cannot spread the cost of their operation across a full day, they have to be compensated by allowing them to charge a higher rate when they are turned on. Or they are used to charge the batteries needed to smooth out the intermittency of solar and wind.

What About Nuclear?

I mentioned nuclear. Nuclear’s biggest problem is PR. As the excellent researchers at @DoombergT note in their article Frame of Reference: "Unique among the primary energy providers, the civilian nuclear power industry has been the subject of a decades-long propaganda campaign whose aim is to stoke irrational fear to the point that the general population loses faith in the technology altogether."
The real problem with nuclear power is that it gives mankind a tool for unlimited growth, and the de-growth crowd (I am talking about you, Club of Rome) doesn't like that.
The analysts at Bloomberg reported on the aftermath of the Fukushima disaster: For all the concern back in 2011, the United Nations Scientific Committee on the Effects of Atomic Radiation in 2015 concluded that the main effect on the Japanese public from the Fukushima disaster was on mental health. Presenting nuclear as a uniquely dangerous option, at a time when it has never been more important to combat climate change, only leaves us more dependent on burning coal and gas, as Japan has been forced to do to make up for its nuclear shortfall.”

AI is Going to Eat the Grid

Let's take AI as the poster child of growth in energy demand:

The consulting firm Enervus has projected a huge growth in power demand:

The demand is clear - Nvidia told the market about its growth forecasts, and they're LARGE. The problem is the EPA will choke the infant before it walks. Its most recent regulation - which will spend years in the courts - aims to shut down coal and constrain natural gas.

It is profoundly unwise to shut down so much power generation when we need so much more. The FERC (Federal Energy Regulatory Commission) commissioners are concerned:

And the CEO of one of the nation's main grid operators, MISO is on record:

My guess—and yours, too, probably—is that Microsoft and Amazon are going to get their data centers. So, they are going to push for nuclear. They are co-locating, where they can, with base load power plants, nuclear or fossil fuel and they are doing deals with large scale renewable operators. They know they will need power wherever they can find it.

What Do Market Returns Tell Us?

We have all heard that the stock market IS Nvidia at the moment, but take a look at this chart for 2024 YTD.

The orange line is NVIDIA, the darling stock up 114% YTD. The purple line is VISTRA, an integrated retail electricity and power generation company that retails electricity and natural gas to residential, commercial, and industrial customers. It's up 165% YTD. VISTRA is not as sexy as NVIDIA, except if you care about returns.
Now look at this one for Brookfield Renewable Partners - Brookfield just did a deal with Microsoft to establish 10GW of renewable energy to power its data centers - with batteries. Brookfield is up 8.14% YTD. Not as sexy as VISTRA.

How Much Grid Expansion is Planned?

In order to plug in all this new capacity, we are going to need to build out more transmission:

The expansion of capacity is such that in terms of capacity, the backlog in transmission interconnects is 2,600 GW. That is larger than the installed capacity of all power plants currently operating in the US.

Developing World

Stepping outside the US, the developing world will not be held back by the constraints of the EPA. Look where nuclear is being built quickly:

However, although they are full-speed ahead on nuclear, they are not letting up on coal because they can't afford to. They are competing with each other and the rest of the world to grow - and they don't care about the EPA.

The Problem with EVs

In the meantime, we are focused on EVs as a big part of the transition strategy. But EVs are a niche product.

And, because they are a niche product:

Why Are We Transitioning?

Why are we so focused on renewables and transitioning away from the resources that can reliably provide us with the power we need? CO2 is the thing that everyone is afraid of. Except that, as explained in…

CO2 is not obviously a bad thing that is obviously causing a problem, although I realize that this will trigger some hating...

And it is not obvious that we are headed into the hottest period in the history of the planet (more hatred)

The debate about statistics is long and highly political, with all sides bringing pictures to support their arguments.

I am no different. I will simply note that the extreme recency bias of focusing on the post-Industrial Revolution era seems misguided. It also seems misleading to base statistics of warming trends on measuring points that were once rural and are now urban - the so-called heat island effect.

The movie reference above casts characters who, while eminent with good credentials, are able to speak more freely because they are at the end of their careers and do not have to rely on complying with a particular narrative for their advancement.

They are, in a sense, uncancellable. Give it a watch before YouTube takes it down!