Fracking vs. the Green New Deal and the dumbing down of climate politics

By David Callaway, Callaway Climate Insights

“Good morning, is your power on?” “Yes, we’re good. How about you?” “Yes, but we’ve got the batteries charging.” So goes the casual conversation in Northern California this week as another wildfire scare descends on the area with unprecedented heat and late summer wind gusts — and our local PG&E (PCG) utility cuts power to tens of thousands.

Concern over the power grid has been a fact of life here at least since the days of Enron two decades ago. But according to the International Energy Agency, it’s going to become a bigger thing around the world, as centralized grids struggle to keep up the rapid transition to renewable energy.

“Electricity grids could prove to be the weak link in the transformation of the power sector, with implications for the reliability and security of electricity supply,” the IEA said in its annual report this week, adding that the requirement for new transmission and distribution lines will be 80% greater than in the past 10 years.

Investment in those lines is hard to see, given weak utilities in many countries. South Africa’s Eskom comes to mind. Meanwhile, we’re already starting to see power outages spreading in the U.S. due to severe weather. Utility stocks in the U.S. are among the weakest performers year-to-date, as power usage has slumped during Covid-19.

The investment will need to come from elsewhere, including the growing battery sector. The IEA paints a grim timeline for results, made all the harder by the pandemic. As winter approaches in the Northern Hemisphere (U.S. predictions above), the grid will become the topic of increasing concern, and not just in California.

More insights below. . . .

ZEUS: Trump, Biden and the fallacy of fracking

. . . . Fracking good. Green New Deal bad. No fracking jobs will be lost. The dumbing down of these issues for campaign sound bites ignores the radical transformation happening in the energy industry, no matter who wins the presidential election next month. For Wall Street’s part though, a quick look at the charts of clean energy ETFs vs. traditional energy ETFs tell a story just now making its way into the national polls. Joe Biden won’t kill fracking any more than Donald Trump will save coal. They’re already gone.

We will hear about the Green New Deal for a long, long time, no matter who wins in three weeks. Fracking, probably not so much. Industries evolve like everything else. Horse rustling gives way to auto manufacturing; trains to planes; vinyl to streaming; rotary to mobile. No industry will be disrupted in the next 20 years like energy.

The International Energy Agency said in a major report this week that solar would is the fastest growing form of energy and that together with wind and hydropower, renewable energy would support 80% of energy needs in a decade. Coal, oil and natural gas will predictably decline, and with them, the jobs that have carried American blue-collar workers for more than a century will transition to the next big thing — clean energy. . . .

Read the full ZEUS column

Oil trader Trafigura bets on renewables as energy market changes

. . . . Oil trader Trafigura came late to the renewables market, but a new joint venture to create Nala Renewables is expected to change its mix, creating a third business pillar alongside oil and gas, and its mining operations. Darrell Delamaide in Washington, D.C. speaks with Julien Rolland, the Trafigura executive tasked with running the new business in one of the biggest transitions in the fossil fuel industry.

At the same time, Trafigura is moving into energy trading, and has set up desks in Geneva and Houston, with another coming in Singapore, where the company is registered.

“We are currently trading electricity through financial instruments,” says Rolland. Once it has built up its capacity, however, the company will also trade physical energy. The financial instruments don’t distinguish between power from renewable sources and others, but physical trading will give Trafigura the opportunity to focus on those sources. . . .

Read the full story

. . . . Strange bedfellows: Kudos to Citigroup (C) and Bank of Montreal (BMO) for being the only two banks to make the Wall Street Journal’s excellent new list of 100 top global sustainable companies (Subscription required). The list was notable for the number of hardware companies on it, with Sony (SNE) taking top honors. But I was more surprised by the presence of seven oil and gas companies (all European; two from Italy) and five electric and utility companies (most from Asia, especially Japan). . . .

. . . . Solar eclipse: One big hurdle for the solar industry is the import tariffs imposed by the Trump Administration two years ago. This past weekend the administration threatened to raise them again. Greentech Media reports successful passage may make it hard to reverse them, even if Joe Biden does win. . . .

. . . . “Stop me before I kill again”: We’ve come a long way since former President Ronald Reagan said trees kill more people than automobiles, prompting one sign maker at a presidential motorcade to hang this gem above from a tree along the route. Now, President Trump has signed on to the One Trillion Trees Initiative, a forest preservation strategy, which apparently both parties support. OK, so can we agree we’re all for trees? . . .

. . . . No word from Nikola Corp. (NKLA) or General Motors (GM) on their deal since a short-seller cratered Nikola stock this past summer with accusations of fraud, prompting the ouster of the electric vehicle company’s founder and a re-evaluation of its investor deal with GM. But the short-seller, Hindenburg Research, turned up again this week with a report on Canadian recycler Loop Industries that bashed the shares by a third with similar allegations. Loop, which is still reportedly pre-revenue, gamely defended its technologies. As a former CEO myself, I know the feeling of unfairness when your stock is targeted by a short-seller. But in this changing world of climate solutions, every bit of new information helps investors separate the truth from the greenwashing. Stay tuned. . . .

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