In today’s issue:
- The capitulation phase of the green bubble
- The worse things get, the more they’ll spend
- The next great failure
It’s been three years since I warned investors, “Don’t Join The Children’s [Climate] Crusade.” And one year since identifying “Net Zero’s Metallic Dissonance”. In short, there isn’t enough metal to build all the gear we’d need to reach net zero anyway.
The warnings proved quite timely. The green bubble, or Grubble as I called it, popped in 2021. And it’s only got worse since.
Bloomberg profiled the biggest victim recently:
Betting On the Energy Transition Has Turned Painful for UK’s Impax
The world’s largest publicly traded fund manager that focuses on sustainability reported its largest-ever outflows in the first half of 2024.
We call this the capitulation phase of a bubble.
More recently, commodity prices have fallen as governments and companies began to abandon their vast net zero projects. Even lithium crashed.
Now that net zero’s failure has gone mainstream and even politicians are admitting they can’t reach the emissions targets they legislated, investors have begun to ask the next big question.
Will climate change kill us all?
Actually, they seem to be wondering how to profit from the failure of net zero, renewables and green tech.
The boom was easy to invest in. Wind, solar, hydrogen and EV companies went berserk. For a while…
With those companies’ projects falling by the wayside so fast I can no longer keep up, what is going to boom in their stead?
Here are five opportunities to consider…
- Fossil fuel stocks
This one is obvious. The more renewables fall short, the more we’ll need fossil fuels like gas and coal. Or both, as the Germans are busy doing.
The more electric vehicle (EV) sales fall short, and the more hydrogen projects are abandoned, the more oil we’ll need.
The only question is where these fossil fuel resources will come from. British soil or foreign soil? And Labour are busy deciding that.
But while the UK turns against fossil fuel exploration, development and production, other countries are changing their minds. This creates opportunities for investors.
- The worse things get, the more infrastructure they need to build
Renewable energy needs a lot of infrastructure to make it viable. Especially high voltage cables to connect disparate parts of the country, and different countries.
The idea of this is to combat intermittency. It’s always sunny and windy somewhere. So we just need to be able to move power around.
The companies that produce, install and manage all this infrastructure are already making a fortune. “Electric Cable Companies Are Making a Killing From Green Energy,” reports Bloomberg.
But the boom has only just begun. That’s because, the worse renewable energy performs in practice, the more such infrastructure we will need to make up for it.
For example, when the Europeans discover that their continent tends to share the same weather patterns, they’ll also discover that their interconnected grid won’t help them much with intermittency. They’d need to connect to solar projects in Africa to actually achieve proper diversification.
The Australian government just approved a truly vast solar project that may one day be connected to Singapore. I used to fly between the two twice a year thanks to my parents’ divorce agreement. It’s a long way… and so it would be one hell of a construction contract.
Unfortunately, high voltage cable capacity is sold out for years…
- Lithium batteries bonanza
How many blackouts per year is acceptable to you?
It’s a genuine question. No energy system is perfect. The real question is how much we spend to minimise the occurrence of failure.
Unfortunately, renewables-based grids require a lot more spending than most because they create new challenges. The intermittent energy they produce must be stored for when production falls. The question is, how?
Conveniently, renewables are already reaching enough penetration to produce more power than some places need. The result is negative electricity prices at peak production times.
Batteries are, for now at least, the obvious way to arbitrage the two scenarios. They can turn negative electricity prices at high noon into profits at midnight.
So far so obvious.
But there’s an added benefit to batteries not many people know about. For the moment, it is actually dominating battery companies’ revenue.
You see, renewables don’t just provide intermittent power. They also create unstable power. Or, as engineers call it, “dirty electricity”. That’s the subject of the most recent issue of The Fleet Street Letter. I can’t reveal more here – it’s for subscribers’ eyes only.
But I suspect you’ll be hearing a lot more about this in the mainstream media in coming years. And lithium batteries are the solution that’ll boom on the back of it.
- Small-scale nuclear power
As our electricity grid falls apart, more and more large-scale power users will want to go it alone. And small modular reactors (SMRs) are the first plausible way for them to produce their own electricity in a green way.
It’s no secret that the world’s data centre owners are keen on the idea already. They need a steady supply of huge amounts of power.
But if this works for Amazon, Google and OpenAI, why wouldn’t this extend to the towns and cities of the UK too?
While the government and civil service in Westminster are busy ruining the country’s energy policy, the towns and cities of the UK could solve the problem on their own.
We could be on the cusp of an energy revolution – a revolt against the government’s grid.
And now for the controversial one… amongst Fortune & Freedom readers, anyway…
- We won’t be able to decarbonise everything
Net zero is controversial amongst climate alarmists because it permits some emissions as long as we can offset them. But the carbon credits market is in turmoil. Not a week goes by without some sort of scandal.
Does planting trees really reduce carbon, or do the trees just release it when they die? Do the carbon projects in Indonesia really exist? Is paying a farmer not to emit carbon really an offset?
There are few credible cost-efficient ways to offset your pollution. But, whatever they are, these will come to define the success of net zero.
If they are cheap, we will be able to go on living our lives. They’ll just be a bit more expensive as we have to offset the carbon for everything we do.
But if we can’t find a way to offset carbon cheaply, we will have to choose. Either abandon net zero or cut our standard of living.
So, whoever has the best carbon offset technology could soon become the most important company on planet earth…
The next great failure
My money remains on net zero simply coming up short, by a long shot. But it’s not the failure you really need to be worried about right now. Markets have priced it in, to some extent. And something bigger is brewing.
You’ve had two warning shots already. The recent plunge in markets, driven by the Japanese yen. And the bond market chaos of 2022.
Until next time,
Nick Hubble
Editor, Fortune & Freedom
