The Energy Transition Delusion

Strap in, we’re going for a ride…

In August 2022 a report titled “The “Energy Transition” Delusion: A Reality Reset” was published on the Manhattan Institute’s website.

https://www.manhattan-institute.org/the-energy-transition-delusion

Bottom Line Up Front (BLUF):

Strategic chairman of a venture capital fund that is heavily invested in oil and gas slams solar/wind/battery (SWB) technology.

First thing I need to admit- I am obviously biased, the name of my company contains ‘solar’ and I am obviously a big fan of the shift to as much solar power as is reasonable.

I don’t ‘sell solar’- but I do sell information in the form of subscriptions to the Tucson Solar Insider and I have a book in development aimed at helping homeowners navigate the world of solar power for their homes.

The irony of a ‘solar guy’ criticizing an ‘oil guy’ for criticizing solar isn’t lost on me…

Actually, I’m kinda having fun with this one- I’ve got a bit of a grin just thinking of how bald faced openly biased this actually will be.

Second-

I cannot agree more with the author on the subject that our entire global energy complex is not going to be replaced by SWB any time in the near future. I agree with his analysis that SWB tech is an additive to the existing infrastructure, not a replacement.

That’s about where our agreements end (although I am impressed at the sheer volume of content, discussion, and well formulated arguments in the ‘report’).

I’m not going to (but I could) spend a lot of time on obvious contradictions like:

Claiming Natural Gas “has soared past a decadal high” and then later claiming that electricity prices should have gone down- “those rates should have declined because of the collapse in the cost of natural gas and coal—the two energy sources that, together, supplied nearly 70% of electricity”)

Instead, for today, I am just going to cover the assertions made in the appendix and my opinion (yes, that ironic biased opinion we spoke about earlier…).

“Appendix: Top 10 Energy Truths”

First, to be fair, these ‘truths’ are offered in support of the idea that (my words/summary) it is impossible to eliminate the use of hydrocarbons. It also attempts to support the idea that forcing/mandating adoption of SWB technologies would have consequences.

So, there are some very logical arguments that need to be discussed, however…

I don’t buy it.

1. “Energy Transformations are Slow”

Right out of the gate, a baffling assertion that because the adoption rate of SWB has been slow that means it is impossible to shift to SWB technologies? The assertion that burning wood still supplies more energy than all the worlds solar panels means what, exactly?

So, because oil and nat gas (and wood) had centuries of a head start on solar, that means solar can’t be adopted?

Got it.

2. “Economic Growth Creates Demand for More Energy”

The point, paraphrased- wealthy people consume more energy. As wealth increases, so does demand on electricity.

Umm… you mean there will be an increase in demand on energy supply so we should abandon the idea of adding SWB technology so that there is more energy supply options?

This one doesn’t even support the assertion that it would be impossible to shift completely to zero-carbon energy sources or there would be consequences to pushing for a faster adoption of SWB.

I can’t see the connection, can you?

3. “Shale Technology Is History’s Biggest Energy Revolution”

Ok, let’s just agree that is true. Shale tech injected incredible energy supply into global energy markets.

So what?

Just because we found a way to get at more oil and natural gas is supposed to mean it is impossible to shift to SWB tech (or pressing to shift faster would have ‘consequences’)?

This one sounds like something I’ve hear before about taxi companies thoughts on Uber and Lyft.

4. “Green Energy Isn’t Carbon-Free”

This one is a REALLY good one. Lots I agree with here…

But, in keeping with the theme of bias, the chart offered shows a comparison between a diesel powered and electric powered vehicle’s carbon dioxide emissions over miles driven.

It shows that at aero miles driven, the EV is at about 12 or 13 tons where the diesel is about 5 or 6 tons. Batteries, motors, etc. require more metals that require more mining- so the manufacture of the car ‘costs’ more.

The problem with the graph is that it then shows a sloping upward line of emissions for both, with the diesel slightly faster. This assumes the EV is charged with legacy fossil fuels instead of with SWB technology and completely dismisses the fact (in their graph) that the diesel eclipses the EV in emissions at around the 75,000 mile mark.

*checks uncle G*

The average age of vehicles in the US is 12+ years, the average milage for a car is 12-15K per year, 12 years times 12,000 miles/year = 144,000 miles…

So the long term emissions of an EV, even if charged with legacy oil/nat gas/coal, for the average age/lifetime of the average car on the US roads handily beats the diesel cars- but this is a reason why it is impossible to shift to SWB tech.

Got it.

5. “Energy Tech Can’t Emulate The Digital Tech Performance Curve”

This rather disingenuous argument, even if true- has no bearing on the possibility of adopting SWB tech, other than the rate might be slower.

The assertion is that electronics underwent exponential growth (leading to smaller and smaller components) and since battery tech hasn’t thus far shown a reduction in battery size- at that same pace- that means SWB tech can’t be adopted.

No, it means batteries are still bigger than we’d want not that batteries are so big that it isn’t possible.

This one actually grates me a little more than I’d like to admit… Exactly who says that battery technology progression MUST match the progression of any other technology, much less computing technology?

6. Energy Transition Hardware Radically Increases the Demand for Minerals”

Ok. Fair point.

There is a lot of items to consider in the impacts on the mining industry for the precious metals associated with making the shift…

But when we made the shift to computers, I didn’t hear anyone stating we couldn’t because it would cause a similar increase in demand for minerals…

Point being, we’re using materials one way or the other and shifting to SWB tech will shift some (not all) of the demand to minerals. Let me guess, the shifting of the demand away from legacy oil/natural gas isn’t the problem, is it?

I concede however- shifting to SWB will not be ‘clean’ when viewed through the lens of the natural resources being mined and the equipment being manufactured.

7. “Energy Transition Policies are Inflationary”

Since #6 wasn’t clear/strong enough of a reason, let’s restate it again in #7.

The shift of demand for various minerals will cause a rise in prices of those minerals…

While I am not an economist, I am familiar of the ‘supply vs. demand’ concept and think I can agree that an increase demand in a thing will cause a rise in price of that thing.

But I’ve never heard of a thing being ‘impossible’ because the demand for it was too high?

8. “Green Energy Isn’t Cheap”

This one is fun. Other than it is a re-statement of #7, it fails to deliver on it’s title…

The issue is that from the start of SWB tech until now, many efficiencies in manufacturing and technology have allowed for a very appreciable drop in prices. So much so (the author asserts) that there are little to no further advances and therefore the SWB gear prices will be dominated by the raw material prices.

Two things stand out here to me.

A- this is an assertion that SWB tech has no further advancements to be made

B- the shift in demand to the minerals won’t cause realignments in the mining industries

I have faith in both because there are smart people in both industries and I’d rather not bet against the ingenuity they’ve already shown…

9. “China is the OPEC of Green Energy Minerals”

Good point, I think?

A seemingly vast majority of mines and processing plants that produce the minerals central to SWB tech are in/owned by China.

I guess the idea here is that if we shifted completely to SWB tech then we would be dependent on China…

Maybe. Maybe we’d see the mining industry shift a little in the US and other countries? Who knows how that will play out, but one thing I think dominates here is:

We love getting our oil from OPEC, so that means we can’t get our minerals from China?

10. “Markets and Consumers Want Reliably Cheap Energy”

???

Let me get this straight…

Since we all want cheap and reliable energy, we should NOT try to add sources of energy to the list of possible sources?

We should NOT try to increase the supply of energy because we want cheap energy?

Come on. Really?

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Ok, I admit.

I’m biased…

What do you think about these ‘truths’?

Am I off base?

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One final thing before I get off my soap box.

I’ve highlighted my bias, so to be fair, I thought I’d share a bit about the author’s (potential) bias.

Mr. Mills is, among other things, a ‘Strategic Partner’ in Montrose Lane- a venture fund heavily invested in the oil/energy industry including shale (and to be fair, there are some solar/wind tech mixed in there in one or two of the portfolio companies).

This venture fund has a strong financial tie to the expansion of oil/nat gas and has a portfolio of companies that include:

Ambyint- “Ambyint, a market leading in AI-powered optimization of the oil and gas industry…”

https://www.ambyint.com/about-us/our-company/

Engage- “Engage was built specifically for the O&G industry by a ream of industry experts”

https://engagemobilize.com/midstream/

I could go on, but think I’ve made my point…

The ‘paper’ was a very well written from the point of view of what appears to be an oil and gas industry investor.

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If you’ve made it this far- Thanks!

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Be Good!

Curtis