It is obvious that alternate energy is very challenged. Natural Gas our cleanest burning fuel needs to be a dominant form of energy. Flaring natural gas needs to be greatly diminished. Hi-speed rail needs to replace overland flights. Farming needs to follow the Dutch model: climate-controlled and pesticide-free. We need to make a massive switch to mass transport and downsize vehicles. Our forestry practices need to be drastically changed. Mining for batteries needs to be done environmentally neutral.
Given that our energy system was decarbonizing per unit of energy long before the adoption of Green energy policy, do you believe that we should be spending $5-7 trillion per year on more clean energy?
Why not just let the energy system continue on the same trend as it was in the late 20th Century? We will eventually get to the same place anyway..
Hi Michael, I think you already know my answer to this. :-) Yes, I think it is worth spending more money to make this happen faster so that we reduce the terminal stock of carbon in the atmosphere / oceans. But I also believe - and I think this is your position too - that we need to ensure we don't have tunnel vision and are also ensuring that living standards, particularly in developing countries, continue to increase, and that there can be a tension between those two things.
If we were talking about a few billion dollars, I could see that point of view, but we are talking about $5-7 trillion per year to do what we could get anyway for many trillions less at a later date. Your preferred option would make it the largest peace-time project in human history.
How is spending that kind of money not tunnel vision? How could it not have a dramatic negative impact on living standards, particularly in developing countries? We have already seen close to economic stagnation in Western Europe since 2007, which I believe Green energy policies play a substantial role in causing.
Particularly, when there are dramatically cheaper options that enable the rest of that money to be spent on solving other problems.
The 5-7 trillion isn't net. Would subsume the 2trillion or so spent per year on the existing (fossil) system and there is a decent chunk of it that is EV purchases, which displace existing car purchases. I do agree with you that there is a strong and unhelpful ideological commitment to wind and solar above all else, and a general lack of acknowledgement that coal-to-gas switching has been the biggest driver of power sector emission reductions in the US, way above wind and solar. I also agree with you that Europe's energy policies are extremely suboptimal, including shutting down domestic responsible production of natural gas only to be dependent on imports from production we can't control. (Although Europe has a proxy for the global coal tax via the carbon border adjustment mechanism.)
There are probably cheaper ways that we could get to where we need to go, but it isn't very burdensome in the context of the global economy, especially in light of the potential consequences of climate change if not addressed urgently.
I am glad that you address the excesses in current policies. That gives you credibility in my eyes.
But you are actually advocating spending far more than what is being spent now (a little over 1 trillion per year). That seems to be the opposite of what your observations about the excesses of current policy should come to.
How would $3-5 trillion net per year not be very burdensome in the context of the global economy? That would still likely be the largest peace-time project in human history.
You are in the finance industry. You must know that spending $3-5 trillion net would have massive impacts. And those are just the direct costs. Slowing down economic growth would probably have a much bigger cost, particularly for developing nations.
And, yes, there are dramatically cheaper ways, including my option. I calculate $148 billion for USA, and something on the order of $1.5 trillion for the entire globe. Most likely, nuclear and hydro will also need to play a major role, so that would push up the cost overseas.
Why would a finance guy endorse spending something on the order of 10x to get to the same place? We can accellerate the coal-to-gas switching that you acknowledge has been the biggest driver of power sector emission reductions in the US, way above wind and solar.
I'm not saying that I'm delighted about spending more than we need to, just that I'm aware it's unlikely to happen in the absolute optimal way from a systems cost perspective (not that that shouldn't be advocated for), but we should get there by hook or by crook. I'm aligned with you that we should do more to kick off some sort of learning curve around nuclear in the West, and I'm cautiously optimistic things are shifting there ($148 billion would go a long way to getting a fleet of SMRs and a supply chain stood up!). The latest number I have seen by the say (from BNEF) suggested about 2 trillion spent on energy transition last year - biggest buckets were EVs, renewables, power grids, and manufacturing capacity.
On developing countries - I think they should be given help to develop their natural gas resources. Increasing wealth in those countries is probably the biggest single factor for resilience and adaptation as well as being an intrinsic good.
But the key is that you refuse to consider expanding natural gas, which is an obvious cost-effective alternative in North America. If you want to get there "by hook or by crook" in North America, natural gas is obviously the most cost-effective energy source to replace coal. It is far cheaper and faster than nuclear. SMRs are currently not cheaper than traditional nuclear and have no supply chain. Solar and wind cannot decommission coal plants at scale.
Yes, I agree that the energy system is very unlikely to be changed in an absolutely optimal way. But you are endorsing a plan that is extraordinarily unoptimal. No policy is better than a very bad policy. Again, the world was already decarbonizing before Green energy policies were adopted. And that was largely due to the spread of natural gas, nuclear and hydro. SMRs are not currently cheaper than tradition nukes, and solar and wind cannot decommission coal plants at scale.
The Green plan that you seem to endorse costs an order of magnitude greater than transitioning coal to a blend of natural gas, nuclear, and hydro. The exact blend will vary based on geography and local cost structure.
And my plan is much easier to apply to Asia than Green policies. That region has half the population and the lion's share of carbon emissions.
The key point is that you appear to refuse to consider rapidly expanding natural gas to quickly eliminate coal. I do not see how this can be explained by finances. It is obviously being driven by ideological assumptions that fossil fuels are evil, and natural gas is a fossil fuel, so it should not be considered at all. I am not saying that you believe that, but it is clearly a central assumption in Green energy policies.
I can see that mentality with climate activists, but someone who is in Energy finance should know better.
1. Sustainable aviation fuel / efuels – do you have thoughts as to the long-term destiny of long-haul aviation? My understanding is that battery-powered airplanes are unlikely to ever be able to address flights of more than a few hours at most. Do you expect to see hydrogen-fueled planes (also a technology challenge to my understanding, especially for very long routes), efuels eventually finding a way (perhaps requiring a strong push from regulators), or long-haul flights just keep burning fossil fuels in perpetuity?
(My personal expectation / hope is on efuels; full disclosure, I'm a minor investor in Terraform Industries which is in a related market.)
2. I see geological hydrogen mentioned increasingly often, but haven't paid close attention. What is the reality factor and time scale here? How much do we currently know about the feasibility and scale of this resource, and when might we start to see production?
3. Green hydrogen through electrolysis: if for whatever reason geological hydrogen doesn't pan out at scale, isn't electrolysis inevitable? Is there another option out there? (At minimum to replace current hydrogen production, and potentially for other applications such as efuel feedstock, seasonal energy storage, etc.)
If cheap, dispatchable electrolysers become a thing (see Terraform Industries again), then electrolysis could rely on cheap renewable sources in areas that aren't easily connected to the grid, and/or power that would otherwise be curtailed, rather than competing with other uses of clean electricity.
1. SAF - it seems that the vast vast majority of miles flown will remain on liquid fuels for a long time to come. That either points to SAF or CDR offset (probably DAC as a high quality removal). Neither of those are high-leverage use of low-carbon electrons, both require a huge amount of capital investment, but, if I had to bet, my money would be on DAC ultimately winning because you don't need to hook up the whole supply chain. In either case, aviation is really in the "expensive to abate" category and it seems that we collectively lack to will to do it / pay for it any time in the near future. Terraform is an interesting company and I've been following Casey's blog for a while. The key insight, as you know, is honing in on the low LCOE for solar modules and skipping all of the system costs by not needing grid connection. Reasonable people seem to disagree on the realism of their cost estimates, but it any case, I would put that in the exception category of places where you have abundant renewable resources without the ability to easily connect to a demand centre.
2. Geological hydrogen - it isn't a done deal, there are still challenges, but it is very real. High reality factor! Timescale - always hard to predict, but should see a lot of progress in the next couple of years including production. At least that is what Koloma is shooting for. Scale of the resource is potentially absolutely massive, to the tune of many billions of tonnes of low carbon hydrogen.
3. Green hydrogen - in the eventual zero carbon society, it is inevitable that grey hydrogen will be replaced by low-carbon hydrogen, although I think methane pyrolysis is much more likely to be scaled up, so not inevitable that it happens through electrolysis. Again, there will be exceptions where electrolysis projects make sense, but, at scale, those will nearly all be powered with Chinese electrolysers, so as an investment theme - definitely NOT hot! (Maybe Terraform can to manage to compete with the Chinese, but that is a hard beast to slay.)
It is obvious that alternate energy is very challenged. Natural Gas our cleanest burning fuel needs to be a dominant form of energy. Flaring natural gas needs to be greatly diminished. Hi-speed rail needs to replace overland flights. Farming needs to follow the Dutch model: climate-controlled and pesticide-free. We need to make a massive switch to mass transport and downsize vehicles. Our forestry practices need to be drastically changed. Mining for batteries needs to be done environmentally neutral.
Given that our energy system was decarbonizing per unit of energy long before the adoption of Green energy policy, do you believe that we should be spending $5-7 trillion per year on more clean energy?
Why not just let the energy system continue on the same trend as it was in the late 20th Century? We will eventually get to the same place anyway..
Hi Michael, I think you already know my answer to this. :-) Yes, I think it is worth spending more money to make this happen faster so that we reduce the terminal stock of carbon in the atmosphere / oceans. But I also believe - and I think this is your position too - that we need to ensure we don't have tunnel vision and are also ensuring that living standards, particularly in developing countries, continue to increase, and that there can be a tension between those two things.
If we were talking about a few billion dollars, I could see that point of view, but we are talking about $5-7 trillion per year to do what we could get anyway for many trillions less at a later date. Your preferred option would make it the largest peace-time project in human history.
How is spending that kind of money not tunnel vision? How could it not have a dramatic negative impact on living standards, particularly in developing countries? We have already seen close to economic stagnation in Western Europe since 2007, which I believe Green energy policies play a substantial role in causing.
Particularly, when there are dramatically cheaper options that enable the rest of that money to be spent on solving other problems.
For example, my proposal for USA here:
https://frompovertytoprogress.substack.com/p/a-simple-and-cost-effective-plan
And for a far cheaper plan for the globe:
https://frompovertytoprogress.substack.com/p/lets-leverage-american-lng-exports
The 5-7 trillion isn't net. Would subsume the 2trillion or so spent per year on the existing (fossil) system and there is a decent chunk of it that is EV purchases, which displace existing car purchases. I do agree with you that there is a strong and unhelpful ideological commitment to wind and solar above all else, and a general lack of acknowledgement that coal-to-gas switching has been the biggest driver of power sector emission reductions in the US, way above wind and solar. I also agree with you that Europe's energy policies are extremely suboptimal, including shutting down domestic responsible production of natural gas only to be dependent on imports from production we can't control. (Although Europe has a proxy for the global coal tax via the carbon border adjustment mechanism.)
There are probably cheaper ways that we could get to where we need to go, but it isn't very burdensome in the context of the global economy, especially in light of the potential consequences of climate change if not addressed urgently.
OK, then $3-5 trillion net.
I am glad that you address the excesses in current policies. That gives you credibility in my eyes.
But you are actually advocating spending far more than what is being spent now (a little over 1 trillion per year). That seems to be the opposite of what your observations about the excesses of current policy should come to.
How would $3-5 trillion net per year not be very burdensome in the context of the global economy? That would still likely be the largest peace-time project in human history.
You are in the finance industry. You must know that spending $3-5 trillion net would have massive impacts. And those are just the direct costs. Slowing down economic growth would probably have a much bigger cost, particularly for developing nations.
And, yes, there are dramatically cheaper ways, including my option. I calculate $148 billion for USA, and something on the order of $1.5 trillion for the entire globe. Most likely, nuclear and hydro will also need to play a major role, so that would push up the cost overseas.
Why would a finance guy endorse spending something on the order of 10x to get to the same place? We can accellerate the coal-to-gas switching that you acknowledge has been the biggest driver of power sector emission reductions in the US, way above wind and solar.
I'm not saying that I'm delighted about spending more than we need to, just that I'm aware it's unlikely to happen in the absolute optimal way from a systems cost perspective (not that that shouldn't be advocated for), but we should get there by hook or by crook. I'm aligned with you that we should do more to kick off some sort of learning curve around nuclear in the West, and I'm cautiously optimistic things are shifting there ($148 billion would go a long way to getting a fleet of SMRs and a supply chain stood up!). The latest number I have seen by the say (from BNEF) suggested about 2 trillion spent on energy transition last year - biggest buckets were EVs, renewables, power grids, and manufacturing capacity.
On developing countries - I think they should be given help to develop their natural gas resources. Increasing wealth in those countries is probably the biggest single factor for resilience and adaptation as well as being an intrinsic good.
But the key is that you refuse to consider expanding natural gas, which is an obvious cost-effective alternative in North America. If you want to get there "by hook or by crook" in North America, natural gas is obviously the most cost-effective energy source to replace coal. It is far cheaper and faster than nuclear. SMRs are currently not cheaper than traditional nuclear and have no supply chain. Solar and wind cannot decommission coal plants at scale.
https://frompovertytoprogress.substack.com/p/can-increased-windsolar-retire-us
Why not focus on the low-hanging fruit first? And this gives a solid foundation for "electrify everything" later.
https://frompovertytoprogress.substack.com/p/why-solar-wind-undermines-evs
Yes, I agree that the energy system is very unlikely to be changed in an absolutely optimal way. But you are endorsing a plan that is extraordinarily unoptimal. No policy is better than a very bad policy. Again, the world was already decarbonizing before Green energy policies were adopted. And that was largely due to the spread of natural gas, nuclear and hydro. SMRs are not currently cheaper than tradition nukes, and solar and wind cannot decommission coal plants at scale.
The Green plan that you seem to endorse costs an order of magnitude greater than transitioning coal to a blend of natural gas, nuclear, and hydro. The exact blend will vary based on geography and local cost structure.
And my plan is much easier to apply to Asia than Green policies. That region has half the population and the lion's share of carbon emissions.
https://frompovertytoprogress.substack.com/p/can-increased-windsolar-retire-asian
The key point is that you appear to refuse to consider rapidly expanding natural gas to quickly eliminate coal. I do not see how this can be explained by finances. It is obviously being driven by ideological assumptions that fossil fuels are evil, and natural gas is a fossil fuel, so it should not be considered at all. I am not saying that you believe that, but it is clearly a central assumption in Green energy policies.
I can see that mentality with climate activists, but someone who is in Energy finance should know better.
Great analysis as usual. A few questions:
1. Sustainable aviation fuel / efuels – do you have thoughts as to the long-term destiny of long-haul aviation? My understanding is that battery-powered airplanes are unlikely to ever be able to address flights of more than a few hours at most. Do you expect to see hydrogen-fueled planes (also a technology challenge to my understanding, especially for very long routes), efuels eventually finding a way (perhaps requiring a strong push from regulators), or long-haul flights just keep burning fossil fuels in perpetuity?
(My personal expectation / hope is on efuels; full disclosure, I'm a minor investor in Terraform Industries which is in a related market.)
2. I see geological hydrogen mentioned increasingly often, but haven't paid close attention. What is the reality factor and time scale here? How much do we currently know about the feasibility and scale of this resource, and when might we start to see production?
3. Green hydrogen through electrolysis: if for whatever reason geological hydrogen doesn't pan out at scale, isn't electrolysis inevitable? Is there another option out there? (At minimum to replace current hydrogen production, and potentially for other applications such as efuel feedstock, seasonal energy storage, etc.)
If cheap, dispatchable electrolysers become a thing (see Terraform Industries again), then electrolysis could rely on cheap renewable sources in areas that aren't easily connected to the grid, and/or power that would otherwise be curtailed, rather than competing with other uses of clean electricity.
Hey Steve - great questions!
1. SAF - it seems that the vast vast majority of miles flown will remain on liquid fuels for a long time to come. That either points to SAF or CDR offset (probably DAC as a high quality removal). Neither of those are high-leverage use of low-carbon electrons, both require a huge amount of capital investment, but, if I had to bet, my money would be on DAC ultimately winning because you don't need to hook up the whole supply chain. In either case, aviation is really in the "expensive to abate" category and it seems that we collectively lack to will to do it / pay for it any time in the near future. Terraform is an interesting company and I've been following Casey's blog for a while. The key insight, as you know, is honing in on the low LCOE for solar modules and skipping all of the system costs by not needing grid connection. Reasonable people seem to disagree on the realism of their cost estimates, but it any case, I would put that in the exception category of places where you have abundant renewable resources without the ability to easily connect to a demand centre.
2. Geological hydrogen - it isn't a done deal, there are still challenges, but it is very real. High reality factor! Timescale - always hard to predict, but should see a lot of progress in the next couple of years including production. At least that is what Koloma is shooting for. Scale of the resource is potentially absolutely massive, to the tune of many billions of tonnes of low carbon hydrogen.
3. Green hydrogen - in the eventual zero carbon society, it is inevitable that grey hydrogen will be replaced by low-carbon hydrogen, although I think methane pyrolysis is much more likely to be scaled up, so not inevitable that it happens through electrolysis. Again, there will be exceptions where electrolysis projects make sense, but, at scale, those will nearly all be powered with Chinese electrolysers, so as an investment theme - definitely NOT hot! (Maybe Terraform can to manage to compete with the Chinese, but that is a hard beast to slay.)