In today’s issue:

  • Renewable energy is like an EV without a charging station
  • The penny drops, into coal investors’ pockets
  • National Grid’s plunge is just the beginning

Should’ve listened to mum. Instead, we’ve jumped off the fossil fuel cliff… purely because politicians told us to.

Supposedly there’s something better waiting for us somewhere down below. But as we take the plunge, I’m getting worried enough to ask one of life’s deep philosophical questions…

If a wind turbine spins, but there is no one around to use its power, does it still generate energy?

The answer is, we may find out the hard way.

National Gridlocked

Two weeks ago, National Grid announced it needs more money to help fund the expansion of the power grid. A lot more money.

The £6.8 billion rights issue is the largest fundraising by a European non-bank entity in 15 years. And, let me tell you, just getting compared to broke European banks is revealing enough.

A rights issue gives existing shareholders the chance to buy more shares in order to recapitalise the company. It’s bad news, because existing shareholders are diluted… unless they agree to buy more.

But that’s just the start of National Grid’s funding woes.

National Grid also plans to sell assets to pay for the new grid infrastructure spending. And the particular assets they chose to divest are rather intriguing: a liquefied natural gas terminal in Kent and a US renewables business.


Aren’t those precisely the assets needed in the energy transition?

Canary in a wind farm

The stock market passed its judgement on National Grid in dramatic fashion. Its shares were down over 10%. But that was only the beginning.

Investors soon realised that National Grid’s woes are systemic. Building the impossible is impossibly expensive regardless of who does it. And so the sell-off quickly spread to other energy transition-related sectors of the market.

The online magazine Business Matters summed it up like this: “More than £6 billion was erased from the London stock market’s energy and water sectors after National Grid revealed plans for a major fundraising effort.”

Yes, it’s amusing that stocks lost what National Grid hopes to gain in its rights issue. But I’m sure that’s just a coincidence.

The size and breadth of the drop can’t be explained by the extraordinary 35% discount under which the rights issue allows National Grid shareholders to invest.

Perhaps investors panicked about the overall cost to which National Grid is exposing itself. The £6.8 billion is just the equity component of the new spending.

National Grid is planning a £60 billion electricity grid investment programme over the next five years. Which amounts to almost double the previous period’s expenditure.

And that is barely the beginning of an energy transition’s worth of infrastructure that must be built to make renewable energy look viable.

My question is, what happens if it doesn’t get built?

Like an EV without a charging station… stranded

That’s how I described renewable energy in a recent issue of The Fleet Street Letter.

My analysis concluded that the energy transition’s electricity grid upgrade amounted to the largest infrastructure project in history.

It’ll cost a mind boggling $21.4 trillion over the next 26 years alone. That’s 20,900% more expensive than the previous world record holder. A record that took 100 times longer to complete. And yet, the plan is to build something 3,800 times larger in size.

In other words, I don’t think it’s going to happen. Not that we won’t try. Which is what we positioned our subscribers to potentially profit from.

But, like I said, what does it mean if we fall short? What if we can’t get the grid built in time for net zero?

Right now, governments are banking on the construction of vast amounts of renewable energy capacity. Otherwise they wouldn’t be mad enough to shut down the power stations we rely on.

But the new renewables require rather a lot of other supplementary things in order to provide stable power. Huge electricity storage capacity like batteries, pumped-hydro and hydrogen, for example. That challenge is big enough. But there’s a more immediate one.

Amidst the rush to renewables and storage for their energy, the electricity grid infrastructure we need seems to have been forgotten, until recently. And the fate of National Grid shareholders is a sign of what’s to come as reality strikes. It’s a reckoning of monumental proportions given the scale of the task.

The amount of money, resources, manpower and landowner compensation payments we would need to build the grid that renewables rely on is truly mind-boggling. But without it, many planned renewables will be as useful as a wind turbine without a connection to the grid.

You may accuse me of being overly philanthropic, but I’m also worried about the returns that renewable energy investors can expect from the vast amounts of projects that’ll be competing for space on a sub-standard electricity grid.

Wait… what was National Grid divesting from again? A renewables business?

Do they know something we don’t about the grid they’re supposed to build?

Horse without a cart

It’s as if we’re planning to build new cities without adequate roads. Something governments do have a lot of experience with. But not in the good sense.

Some might think a 15-minute city sounds like a good idea. But they are probably also the type that considers a traffic jam an effective way to encourage public transit.

This has things precisely backwards. We build roads to suit people’s needs. We don’t presume people’s needs should change to suit the roads we build.

The same applies to energy policy. You build energy supply to suit demand. You don’t force people to adjust their energy use to suit supply. It puts the very purpose of providing energy backwards. Meeting human needs are the goal. Not hitting the targets of five-year plans, as I thought we’d learned the hard way.

But we didn’t. The energy transition makes the same mistake. It places a goal ahead of consumers’ demands.

Until now, we’ve had a strange proclivity to build electricity generation capacity in places where it is needed. But this badly misled us. How we produce power now matters more than whether it is delivered in a cheap and reliable way to a place it is needed.

We haven’t had to move power around the country at scale. But under renewables, we will. Hence the need for vast cables to be constructed around the UK, beneath Russia’s submarines.

We’ll also have to connect wind power plants built in increasingly bizarre locations to the grid. And connect our grids internationally. Not to mention upgrading the existing grid infrastructure to handle the greater and more variable electricity demand.

All of which rests on the decision to rely on power generation that is variable and cannot be built where we choose. Challenges we haven’t had to deal with before at the national scale. And that are unnecessary, even if you accept net zero, given the carbon-free nature of nuclear power.

The penny drops, into coal investors’ pockets

As the scale of the electricity grid upgrade dawns on National Grid shareholders, the next reckoning is already underway.

Over the past few weeks, I’ve seen a series of announcements which prolong coal’s role in our energy system.

In Australia, the government decided to sacrifice the fate of the planet by keeping the notorious Eraring coal power station going after all. To give you some context, this would be a bit like Sir Keir Starmer announcing the privatisation of the NHS.

The Australian media was reliably subdued. Despite urging for years that Eraring must be shut to save the planet.

“US slows plans to retire coal-fired plants as power demand from AI surges,” reports the Financial Times. So artitifical intelligence is more important than the planet’s survival?

In Germany, it’s almost time for the annual tradition announcing that coal power will be extended for “another winter”. They need the heat, despite coal being shut because of global warming.

It’s a good reminder that nothing is as permanent as a temporary government programme. Especially when they’re trying to shut it down.

Even the most renewables obsessed man I know has changed his tune.

Until next time,

Nick Hubble
Editor, Fortune & Freedom