Menu
The location was genius! What better way to illustrate the flawed thinking behind much of the renewable energy debate than to hold a conference designed to bring about the death of fossil fuels in one of the world’s carbon capitals, namely Dubai.
Since COP 1 in 1995, the share of primary energy worldwide provided by renewables has increased from 7.87% to 14.21% in 2022. The share of electricity generated by renewables has increased from 19.72% in 1995 to 29.55% in 2022.
In 2015 the Paris Agreement signed onto by 195 nations chose the goal of limiting average global warming to no greater than 1.5 degrees about pre-industrial levels – a benchmark generally considered to reference the years 1850 to 1900, a period pre-dating the widespread use of fossil fuels. The average global temperature during this period hovered around 13.5 degrees Celsius, or 56.3 degrees Fahrenheit[1]
The correlation of GDP growth with energy use is tight. Over the Last 20 years, spending on renewables has increased at a rate of 22.6% per annum, from $0.03T in 2004 to $1.77T in 2023.Sure The correlation with this spending and [any] kind of GDP growth is less obvious: world GDP growth over a similar period has been ~3.5%
Is the renewable energy thesis wrong – that a sustainable future of less global warming is the best, least expensive way to continue to enjoy the long-term benefits of inhabiting this precious planet? Should we simply surrender to the reign of hydrocarbons and learn to deal with the attendant warming as best we can?
The answer is unclear – but we should probably stop doing dumb stuff as we try to figure it out. Unfortunately, as highlighted by the excellent substack, 
the list of dumb things is lengthy. A personal favorite is the following picture:
It is, as the substack authors of environmental point out, the ultimate metaphor for Germany’s self-inflicted energy chaos: the utility RWE knocking down wind turbines to expand the Garzweiler lignite mine. Lignite, of course, is the lowest quality, dirtiest form of coal with the least energy-density usable for electricity generation on earth.
The substack authors are, perhaps, a little too gleeful about the whole subject. The entire effort is somewhat tongue-in-cheek and the irreverent description of the Inflation Reduction Act (“IRA”) is quite heretical to the principle raison d’être of Dakota Ridge Capital: assisting the investment community to leverage the investment incentives under the IRA!
Perspectives are important [describe the participation of the oil majors in the RNG business and how that could be differently messaged depending on bias]
The presence of nuclear as one of the favored asset classes in the IRA’s menu of incentives is encouraging and very much aligned with the resurgence of interest in the nuclear industry.
The analysis of the relative cost of different energy sources illustrated by the Department of Energy is an important reminder that the outcomes of certain well-funded initiatives such as The Climate Imperative need to be scrutinized for underlying motivation and broad political acceptability.
Among the things that President Biden polls well for, which in fact poll better than Biden himself, is the IRA. The reason, clearly, is the promise – disputed by many – that the IRA will address the problem of inflation.
Again, a useful chart from the DOE forecasts the projected cost of home heating in winter 2023 (interactive link here):
If renewable energy initiatives are to thrive, they must enjoy broad-based, bi-partisan support. The fact that many of the IRA’s benefits are accruing to so-called red states, is smart. Increasing the cost of energy as a bi-product of an energy mix shifting to renewables is not smart. Is it inevitable, or is there actually a way of integrating renewable energy into an energy transition plan that delivers a more robust and resilient power grid with cheap and abundant energy?
The answer must be “yes”. It will not, however, be achievable if that is not the defined goal. If the messaging is alarmist and continues to condemn companies that invest in and produce the hydrocarbons that have driven economic growth since the mid-19th century; if the goals and associated spending associated with the goal of achieving the 1.5% warming limit continue to be unrealistic; if the means – EVs for example – are not properly evaluated for their environmental impact (think batteries and mining); if key resources – hydrogen, solar and wind, on-and offshore – are not properly costed over their lifetime for efficiency of energy delivery; then the role of renewables in the energy transition will not achieve the political support it deserves because it will not deliver the benefits its advertises.
So, COP28 was well-located and its final communiqué a fair reflection of the weight of world opinion of the right balance in crafting a supportable way forward. It is not helpful for pundits such as Al Gore to assert angrily that a failure to ban hydrocarbons immediately is unacceptable. It is fine to focus attention on the continuing need to address the massive costs of a warming planet, but the pressure must be grounded in reality and common sense, tempered by a balanced perspective on affordability.
