Here’s a Reality Check on So-Called Green Energy… And It’s Not What You Think

Guest Post by Chris MacIntosh

China has the world over a barrel in more ways than we have been led to believe.

It isn’t so much that China has the biggest resources of these minerals. Rather it has the refining capacity to produce these materials. Note that most of these “lesser known base metals” don’t occur naturally on their own (like copper or tin), rather they occur concurrent with other minerals and are essentially a by-product of refining common base metals. Of course, refining minerals is a messy, polluting, and energy intensive business that few countries want to engage or allow. In doing so, they open themselves up to national security issues.

All rather interesting, but what I’d like to point out is that there exists the probability that this all becomes weaponised. Reducing or entirely eliminating supply of these critical resources to “non-friendly” nations is increasingly becoming a real threat. That in itself would entail significant supply disruptions, higher costs of production (much higher), and subsequent acceleration of stagflation.

The New vs the Old Economy

We thought we had it all before with the TMT bubble of 2000 (goodness, that is now 24 years ago). But history has been rewritten highlighting the extreme performance of one theme against another. Real assets are more out of favour compared to financial assets than at any time since the 1920s. Some random charts we found on the information superhighway providing illustrative view of what we’re saying.

Any relationship in the chart above to the one below?

OK, let’s put it another way. What if the US 10-year yield is 10% 10 years from now? How do you think real assets would have performed vs financial assets?

Just a reminder of how out of favour materials and energy are compared to the broader market. Granted this is over a year old, but not much has changed since then.

We recall a couple of years ago when Tesla had a greater market cap than the S&P 500 energy sector and Microsoft had bigger market cap than the S&P Materials and Energy sectors combined. Seems like not much has changed on a global scale.

Taking out Saudi Aramco, Microsoft, and Apple have about the same market cap as the global energy sector.

A Think Piece on Solar Panels

Finally someone who has dug deep into the assumptions:

You really have to read the article. It’s a humdinger. But first, a warning to the tree huggers who buy the concept that paying more taxes to multiple home owning, jet setting globalists in order to eliminate a gas that is 0.04% of the atmosphere and for which all plants are dependent upon. My friends and colleagues over at International Man said it well:

But back to the report. Check out these snippets:

Last August, in an amalgamation of “The Green New Deal” meets “Build Back Better,” President Joe Biden’s Inflation Reduction Act gifted the renewables industry with billions of dollars worth of taxpayer-funded subsidies.

What few backing the bill realised was that the largest beneficiary would likely be China due to its expansive grip on the global solar photovoltaic (PV) industry. Worse than that, it might end up misdirecting the world’s clean energy efforts into dirtier than appreciated energy technologies because of the country’s ongoing dependence on coal-fired energy.

In essence, the IEA are basing their assumptions of how much CO2 is produced in manufacturing solar panels based on European energy data rather than Chinese energy data. China relies on coal more intensively than Europe:

the IPCC claims solar PV is 48 gCO2/kWh. But, as we’ll see below, a new investigation started by Italian researcher Enrico Mariutti suggests that the number is closer to between 170 and 250 gCO2/kWh, depending on the energy mix used to power PV production. If this estimate is accurate, solar would not compare favourably with natural gas, which is around 50 gCO2/kWh with carbon capture and 400 to 500 without.

Here is the conclusion:

A picture emerges of an aspirational Western industry captured lock, stock, and barrel by secretive, coal-loving Beijing. It’s a worry for the West’s economic development, never mind energy security and climate action. If solar is anything to go by, the great transition seems less based on data than a mixture of blind faith and vested interests.

Perhaps the broad populace will awaken to this blind faith when electricity prices go through the roof and standards of living decline significantly. Either way, the truth will eventually come into plain sight.

Reports of Its Death Are Greatly Exaggerated

Here’s a very useful resource:

https://yearbook.enerdata.net/coal-lignite/coal-world-consumption-data.html

Take a look at global consumption of coal in 2022:

China, India, Russia, Indonesia, South Africa, Turkey (and other emerging nations) make up about 86% of world coal consumption. Don’t be expecting them to buy into the “Net Zero” narrative anytime soon (this side of 2050 at least). Either way, coal consumption will continue to rise in line with global GDP. There is no other way around this. That is unless those countries are willing to see a deterioration in standards of living… which, as I sit in Turkey, I can tell you ain’t gonna happen without a fight.

By the way, here is global oil production by country.

Notice the importance of the US… or should we say US shale, because some 66% of US oil production is accounted for by shale oil. If shale is indeed peaking (or perhaps it has already peaked) as we believe it is (we’ve written about this previously and extensively), then we have ourselves a unique and long-performing investment opportunity.

Editor’s Note: The Western system is undergoing substantial changes, and the signs of moral decay, corruption, and increasing debt are impossible to ignore. With the Great Reset in motion, the United Nations, World Economic Forum, IMF, WHO, World Bank, and Davos man are all promoting a unified agenda that will affect us all.

To get ahead of the chaos, download our free PDF report “Clash of the Systems: Thoughts on Investing at a Unique Point in Time” by clicking here.

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