- The world is not transitioning away from fossil fuels
- Trillions spent on green energy won’t save us from carbon
- What we have learned from the energy transition so far
As part of the research for my upcoming book, Threat Zero: The Dark Side of Going Green and How Smart Investors Can Profit, I interviewed eight experts on why the energy transition will fail and how to profit from it. Things got off to an awkward start, however, when the first expert I interviewed claimed there was no energy transition taking place in the first place…
Mark Mills is a senior fellow at the Manhattan Institute, a faculty fellow at Northwestern University’s McCormick School of Engineering and Applied Science, a strategic partner with energy-tech venture fund Montrose Lane, co-founder of venture firm Digital Power Capital, and was chairman and CTO of public company ICx Technologies. Mills also briefly ran a battery company as interim CEO.
In an extraordinary presentation to Norway’s SKAGEN Funds, called “The Energy Transition Delusion: Inescapable Mineral Realities”, Mills pointed out that one study that examined how to complete the energy transition to green energy “completely glosses over the underlying question of where do the materials come from?” Perhaps because examining this question leads to some rather awkward conclusions about the energy transition…
But before we dug into those awkward conclusions, Mark told me something all of us should know, especially those who believe carbon emissions are going to destroy the planet…
The energy transition is underway. By 2050, we will have saved the world from fossil fuels as renewable energy takes over. Isn’t that right, Mark Mills?
I don’t know about saving the world, but we’re not replacing hydrocarbons, which everybody calls fossil fuels. I understand [calling them] that, but I’m partial to the word hydrocarbons. They’re not going away. Even the president of the United States, in a fit of, I don’t know, we’ll call it candour, during the State of the Union address this year, said [hydrocarbons] are going to be around for a while. And the secretary of energy went on the road and said the same thing of the “energy transition”. We have an admission about the reality that a lot of hydrocarbons are going to be needed for a long time.
It almost makes me worried, if the politicians are acknowledging it, whether it might not be true. But let’s move on to the report card of the energy transition so far as you see it, because a huge amount of money has been invested. Are we getting much return on it?
No, it’s a bad investment so far and it’s going to be a bad investment for a while yet. First because we haven’t really changed the structure of the world’s energy systems in any significant way. This is a Western-world affectation. The rest of the world is not really following us. And what we’ve done the last 20 years in Europe and the US collectively is spend between $5-$10 trillion so far to avoid using hydrocarbons. And this is the singular fact: 20 years ago, 86% of the world’s energy came from hydrocarbons. Today, 84%. So, you know, we got a 2% decline. It’s quite something, $5-$10 trillion, a pretty expensive transition.
Problem is, the word “transition” is not in evidence in the data. A 2% decline in global energy dependence on hydrocarbons isn’t a transition. It’s not an acceleration. It’s not a nascent transition. It’s not a transition at all. In fact, the absolute quantity of hydrocarbons consumed by the world over the last 20 years has increased by a quantity equal to adding six Saudi Arabia’s worth of oil production in energy equivalent terms. So both happened, right? We got lots more wind and solar, lots more electric cars. We’ve got lots more oil, gas and coal being produced and consumed. It’s an energy addition, not an energy transition, that’s been really going on for a long time.
Have we at least learned anything about the future based on the energy transition as it was attempted so far?
Yes, we’ve learned that pushing too hard with subsidies to add wind and solar to grids makes electricity more expensive for consumers. Consumers in Europe in particular are “enjoying” that. Consumers in American states where the share of wind and solar have risen significantly are also seeing higher electric rates. So we’ve learned that it’s very hard to change society-level structures of energy systems too hard, too fast. [Especially] on things that are fundamentally expensive. That is, at a systems level, they’re expensive. It has consequences, not least higher costs, but also lower reliability and greater fragility.
In fact, the story behind the challenge that Europe is facing after the Ukraine invasion, setting aside the immorality of the war and the attack, we’re just looking at the functional effect here. The fact that Europe has had such a difficult time adjusting is not just the loss of cheap gas from Russia and cheap oil, but the fragility of the system that Europe has built, which did not have the resilience and the ability to respond and shift fuels quickly. So we built lots of windmills and solar panels in Europe and England. They can’t be surged.
I mean, one of the problems of the real world we live in, whether they’re exogenous events from bad actors like the Russians, or they’re exogenous events from nature, or just accidents interrupting fuel supplies and energy systems, you need to have resilient systems. In an odd way, despite the impression that the sun is always there and the wind’s always there, the systems built based on them are more fragile. It’s more difficult to provide the high reliability, the high resilience which societies need to thrive and prosper.
If the energy transition so far is costing a vast fortune, for both governments and consumers, in return for an unreliable power grid and no results when it comes to cutting out fossil fuels, that suggests we are going to discover the hard way whether “the science” is right about climate change, while paying a whopping power bill for the show.
Only those investors who have prepared their portfolio for what’s coming won’t be left out in the cold. And so we’ve made it our mission to make sure Fortune & Freedom readers are in the know. More on that soon…
Until next time,
Editor, Fortune & Freedom