In today’s issue:

  • An awkward new reality for net zero
  • Did markets ever take the energy transition seriously?
  • The world’s last anti-nuclear holdouts on the cusp of change

It is now downright fashionable to doubt net zero. Despite the apocalyptic consequences if we fail to reach it. And yet, everyone from political parties to journalists to think tanks have made the shift.

A report commissioned by the Department for Energy Security and Net Zero itself “casts doubt over decarbonisation,” summed up The Telegraph.

It pointed out that we are not on target to reach targets. We do not have the means of getting onto target. And the amount of change needed to reach the target is… awkward.

Australian academic Professor Stephen Wilson gave a presentation about net zero at an Australian university. He made what was, until recently, a career ending statement: “I don’t think this is going to work.” His reasons were based on simple engineering.

The Scottish government has abandoned its target to cut emissions by 75% by 2030. Which begs the question how 100% by 2050 remains plausible. And why have the target in the first place if it isn’t necessary to save the planet?

Oil and gas major Shell has abandoned some of its own net zero targets. This after selling millions of fake carbon credits.

Australia’s Grattan Institute laid out how “Keeping the Lights On” might look under net zero in a report. Here is a surprising excerpt:

There is mounting evidence that the National Electricity Market (the NEM) may not be able to deliver enough investment in low-emissions generation, storage, and transmission, when and where it will be needed.

Without that investment, Australia won’t reach net zero.

The UK government isn’t just rolling back emissions-cutting commitments. It is actively cracking down on the companies that claim to have gone green.

Consultant Wood Mackenzie put it all simplest: “achieving global net zero by 2050 looks increasingly in doubt.”

It’s good to see so many stop denying the obvious. Not to mention that we are now allowed to state the obvious.

But what does this change mean for investors?

An awkward new reality

First of all, it’s difficult to figure out just how much net zero was ever priced into markets.

I mean, it’d take many decades to build the electricity grid we’d need under net zero. And that grid wasn’t and isn’t being built, even today. That’s a difficult fact to ignore. Unless you try really hard.

It makes me wonder whether anyone really thought the renewables revolution would actually get off the ground. I mean, how can you build vast amounts of renewable energy, but forget about the grid to plug it into?

But they did. We now have eye-watering queues for energy projects to connect to a grid that doesn’t yet exist. That’s the topic of last month’s Fleet Street Letter issue.

Similarly, it’s not like oil and gas exploration stopped abruptly. Heck, the US is producing more oil and gas than any nation ever.

Nor did we see the ramp up in mining operations needed for net zero. It would require a mind-boggling amount of copper and other metals. But many face structural undersupply after cyclical underinvestment in future supply.

Why was no major company willing to spend the money to find the metals needed for net zero?

Yes, copper is on a tear of late. But that has coincided with the demise of net zero more so than its rise.

Last but not least, it’s not like governments have been busy winding down coal and gas power. The UK and German governments have been busy commissioning new gas power plants. And they’re the leading green virtue signallers of net zero. Well, they were.

So, I’m not convinced that financial markets ever took net zero seriously. Which implies its fading away won’t have much of an impact either.

And yet…

Shortages in everything

It seems to me that we have managed to set up the worst of both worlds. We’ve shut down vast amounts of fossil fuel energy in the presumption that a renewable energy system would replace it. But we didn’t build one.

In Texas, the grid manager ERCOT is warning of a “catastrophic failure” if more energy storage isn’t added soon.

In Germany, a town has called a halt to all electrification initiatives because the local grid can’t provide the power needed.

Copper shortages threaten to undermine construction of the vast international electricity grid required for renewables to cover for each other’s intermittency.

There’s a shortage of boats to lay cables and manufacturing capacity to build the equipment needed for electrification.

Technologies like hydrogen, carbon capture and storage, biofuels and much more all lag behind. But they’re central parts of the presumed energy transition.

It’s increasingly looking like net zero will be more like “absolute zero”. That’s the scenario that the FIRES group of universities worked on. The group’s analysis asked what net zero would look like under current technologies rather than the presumed ones of the future. And discovered you won’t be going on holiday or eating meat.

Of course, none of this is politically popular enough to survive an election. Which implies sudden change is coming. The question is, in which direction?

German and Australian opposition parties go nuclear

Consider, for a moment, how things might have played out over the past few decades had nuclear power been the focus of clean energy policies…

Our emissions would be dramatically lower.

Our electricity supplies would be stable.

Our electricity grid wouldn’t need mind-boggling expansions.

Europe would not have been reliant on Russian gas and the energy crisis of 2022 would not have occurred.

A lot of the inflation of 2022 would not have taken place.

Energy policy would not be at the centre of political debate or disagreement.

It sounds like quite a good place to be, if you ask me.

No pollster has asked. But they might not need to.

The opposition political parties in Germany and Australia have both turned pro-nuclear power. This is extraordinary. Those were two of the most anti-nuclear developed nations in the world.

Having exhausted all other options, they may finally be about to do the right thing.

Until next time,

Nick Hubble
Editor, Fortune & Freedom