End Of Renewables Craze Is Near
Renewables have stalled out in California and Germany :: UK announces it will frack for natural gas :: South Korea cuts renewables to fund nuclear
The global energy crisis appears to have strengthened Western political leaders' resolve to continue and accelerate the transition toward green energy. Last month, U.S. President Joe Biden signed legislation to spend $370 billion on wind, solar, electric cars, and other forms of green tech. California legislators and regulators recently decided to spend $54 billion on clean tech, restrict oil and gas drilling, and ban the sale of internal combustion cars by 2035. And the President of the European Commission affirmed yesterday the European Union’s “massive investments in renewables” because “they are cheap, they are home-grown, they make us independent.”
But appearances can be deceiving. In truth, the energy crisis is rapidly exposing the limits of renewables and the need for fossil fuels. Recognizing the political threat of high gasoline prices, Biden has released so much petroleum from the public’s Strategic Petroleum Reserves that they are at their lowest level in nearly 30 years. Six days after California regulators banned the sale of internal combustion engines, the state’s grid operator urged residents not to charge their electric vehicles from 4 pm to 9 pm for fear of blackouts. And European governments will spend over $50 billion this winter on new and refurbished coal and natural gas supplies and equipment.
Officially, governments and corporations are still moving ahead with significant investments in renewables and electric vehicles (EVs). Globally, solar installations in 2022 will rise at their fastest pace in nearly a decade. Toyota and Honda announced they would spend $2.5 billion and $4.4 billion, respectively, on EV battery manufacturing in the U.S., Piedmont Lithium said it would build a plant to process lithium for EVs. in Tennessee, and First Solar announced $1.2 billion for a new U.S. solar panel factory. California will spend $6.1 billion on EVs. And Europe has not pulled back from the $210 billion in new money it promised to invest, primarily in renewables, over the next five years.
But other data complicate that picture. Fossil fuels remain 82% of global primary energy, down from 83% in 2019 and 85% in 2017—solar and wind supply just 5% of global energy. And there are so few EVs that they reduce petroleum consumption by just a half percent of global demand.
Meanwhile, places with heavy renewables penetration are reaching their limits. The amount of zero-carbon electricity California generated declined by 10% over the last decade because of less hydroelectricity from drought and the 2011 closure of the San Onofre nuclear plant, which was 9% of the state’s total electricity generation. In Germany, the total amount of electricity from renewables declined in 2021, even as overall electricity consumption rose.
California invested billions in batteries to prevent blackouts and is thus proof that batteries are no substitute for natural gas. To store just 12 hours of electricity for the U.S. would cost $1.5 trillion, notes analyst Mark Mills in an essential new Manhattan Institute report, “and that scale of storage would still leave the nation regularly third-world dark.”
And rising energy prices, public debt, and the far higher materials requirements of renewables will make them prohibitively expensive, in many places, over the next decade. Wind, solar, and batteries require 1,000% more steel, concrete, and glass; 300% more copper; 700% more rare earths; and 4,200%, 2,500% and 1,900% more lithium, graphite, and nickel, respectively, than fossil fuels, to produce the same amount of energy, according to International Energy Agency and others.
Why is that? And what does it mean for the future of energy?
Go Ahead, Make Their Day
Yesterday, 40 CEOs of European metal companies warned of the “existential threat” to their industries due to energy shortages and the "extra raw materials needed to shift away from fossil fuels.” They noted that “50% of the EU’s aluminum and zinc capacity has already been forced offline due to the crisis….Producers face electricity and gas costs over ten times higher than last year, far exceeding the sales price for their products. We know from experience that once a plant is closed it very often becomes a permanent situation, as re-opening implies significant uncertainty and cost.” [My emphasis]
What about simply sourcing materials from China? China’s market share of renewables and EV minerals is already twice OPEC’s share of oil, notes Mills, drawing on data from the IEA and others. The U.S. depends on imports for 100% of 17 renewables and EV-critical minerals; for 28 others, imports account for more than 50% of domestic demand. China already dominates solar and battery production. Minerals are 60%–70% of the cost of producing solar panels and lithium batteries.
