Guest post by Rafe Champion. Trouble in RE paradise

I have been expecting a shakeout in the RE industry for some time because in Australia more and more providers are feeding into a static market. In recent years the demand in the grid has possibly even declined due to the flight of power-intensive industries although the demand for power is projected to increase a great deal in future due to population growth and the anticipated explosion of numbers of electric vehicles (not to be confused with the explosion of the EVs themselves.)

I think the inflated projections of the rise of EVs are rubbish but that is another story.

RE developers in Australia are frustrated by delays in connection due to inadequate infrastructure (poles and wires) and they want the taxpayers to kick in $20 billion of capital expenditure to get them out of trouble. According to our planners in AEMO and associated lobby groups this will pay for itself many times over in a decade or two. In their dreams. Long before that the industry will implode when the impossibility of the transition becomes impossible to conceal when Liddell and Eraring go off line.

The big news about the travails of the wind industry overseas is the increase in construction costs which could be as much as 30% over the last year. At first, it was a supply chain problem due to the pandemic, now the supply chain issues are aggravated by the war and worse is to come as the inflation rate in the economy at large flows into the wind industry. Worse again is the pinch on lithium and other rare earths that will also get a great deal worse.

Even before the latest round of inflation the offshore wind industry in Britain was in trouble. Inspection of the books of the leading wind providers found that the costs of deep-water construction and maintenance were much larger than expected.

All in all it is a fascinating time to watch the end game of the RE fantasy playing out although it has some way to run due to the amount of capital that the woke finance industry and people like Twiggy Forrest are prepared to commit – with some help from the taxpayers of course.

All of this is playing out against the background of the brutal realities of the geopolitics of energy and mineral resources. Mark Mills at the Manhattan Institute has been sending warning signals for years that the push for intermittent energy in the west could have drastic geopolitical consequences. Here he explains how the conflict in the Ukraine has brought the drastic consequences upon us ahead of schedule.

Naivete about energy realities robbed the U.S. and its allies of important “soft power” options and helped finance Russia’s aggression. In the near term, our choices are limited, but continuing down the same energy path is a formula for yet more problems in the future.

He notes that the EU and the US over the past two decades spent more than $5 trillion and made countless mandates to replace oil, natural gas and coal. This brought the hydrocarbon share of all energy use down by two percentage points to 84 percent while burning wood still supplies more energy than all the world’s solar panels and oil still fuels nearly 97 percent of all the world’s transportation.

While the west spent a great deal of money to phase out coal and gas, without going nuclear, Russia and China pressed on to develop their coal and gas resources and nuclear power as well.

Europe gets 25 percent and 40 percent, respectively, of all its oil and gas from Russia. For Germany, the shares are 35 percent and 70 percent, as well as 50 percent of its coal needs.

The pivot from Russia will be painful and retrieving the situation will take a long time – it is like turning around the Titanic.

Read the whole story, it is very important and it is too densely packed to summarize.

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April 15, 2022 at 06:02AM

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