Old Black (and Blue) Energy Kings Still Rule
Do you know what is the ultimate sign that rates of technological progress have been steadily declining in the last 50 years?
The ultimate sign is that the “average” U.S. voter, the incumbent U.S president, and the U.S. presidential election candidates do not care about recent developments in the field of electric vehicles (operational since the 1880s), artificial intelligence tools (operational since the 1960s), or anti-obesity drugs (available since the 1900s).
However, they do care about recent developments in the price of crude oil that went mainstream in the second half of the 19th century (see Picture 1 below).
Furthermore, even oil (“black gold”) and natural gas (“blue gold”) look progressive against the backdrop of rising demand for coal (“black diamond”), which was the main source of energy that fueled the industrial revolution in the developed world over the past 300 years (see Reference 1 and Picture 2 below).
According to Bloomberg: “The dirtiest fossil fuel still powers the world. Talk of its demise is greatly exaggerated.” This is because today coal is one of the major sources of energy for the industrial revolution in the developing world (see Picture 3 below).
If developed countries try to persuade developing countries to use less coal, oil, and natural gas to combat pollution, they can expect to be asked to reduce their consumption too. Opposites attract, as they say.
Developing countries are well aware that the level of economic development and well-being is directly linked to the level of energy consumption (see Picture 4 below).
Furthermore, the increased use of some of the latest technological innovations – electric vehicles, electric heating, artificial intelligence tools and devices as well as crypto infrastructure – leads to a further dramatic increase in electricity consumption (see Picture 5 below).
Struggling Renewables
To become dominant any source of energy should be CHEAP and RELIABLE.
Renewable energy sources – solar, wind, wave – are gradually becoming cheaper. But, unfortunately, they are still unreliable because we still cannot overcome major technological challenges in the process of developing and manufacturing batteries for long-term renewable energy storage.
Even the Nordic region with its favorable climate conditions for renewable energy sources has been struggling. As analysts point out: “Declining profitability for renewables developments is threatening green growth in the Nordic region, with flexibility provided by the likes of batteries and hydrogen production required to boost investment… Hydrogen will come, though not as soon as we previously expected since costs remain high.” (see Reference 2 below)
On a global scale, “development costs for hydrogen and renewables projects increased significantly during 2023, and on top of this, developers have struggled to secure funds. These novel and relatively unproven technologies, often targeting new customer groups, are understandably considered risky prospects. With funding difficult to come by, costs on the up and regulatory decisions still in the air, project delays and cancellations have been widespread – a pattern which is likely to continue.” As a result, “…It’s striking that just 2% of global announced capacity is under construction or operational.” (see Reference 3 below).
In short, the major problem with hydrogen is that it is still too expensive. Blue hydrogen could cost the equivalent of around $250 a barrel of oil according to Saudi Aramco’s CEO. He pointed out that “…it is very difficult to identify any off-take agreement in Europe [ for blue hydrogen ]. Even the customers in Japan and Korea are waiting for government incentives. Until they get these incentives, it’ll be costly for them to pursue that blue hydrogen. This is a very expensive program. It’s a lot of capital and you need customers. So we will not sanction a project without securing an off-take agreement.” (see Reference 4 below).
As recent history shows, it is better not to hope for a renewable-based miracle since miracles do not tend to happen. “Hope for a miracle but don’t rely on it,” as the old proverb says.
Hydroelectric power plants are the most successful sources of renewable energy. However, the issue of long-term hydroelectric energy storage has not yet been effectively resolved. Pumped hydroelectric energy storage facilities account for 32.6% of total installed generating capacity in Switzerland and 18.7% in Austria. But in large economies these storage percentages are still very low: 8.8% in Japan, 3.2% in Germany, 3.0% in the United Kingdom, 2.2% in India, 2.1% in the United States, 1.9% in China, 0.8% in Russia (see Reference 5 below).
It is true that ethanol has been actively used as a renewable source of energy in Brazil for 40 years. But the thing is that Brazil is a huge country with climate conditions that are favorable for agriculture. This means that its experience is not relevant for the vast majority of countries around the world.
We can recall a boom in biofuels in the pre-crisis period in the 2000s. Back in February 2007 “The Economist” asked the question, “Can biofuels save Europe, or the planet?” The newspaper continued that “when all else fails, agree on biofuels. That has been the reassuring mantra of European Union energy policy, plagued by disagreements on unbundling over-mighty power firms, haggles over carbon trading and worries about dependence on Russian gas.” (see Reference 6 below).
However, just four months later in June 2007, “The Economist” published another article stating that “every morning millions of Americans confront the latest trend in commodities markets at their kitchen table. According to the United States Department of Agriculture, rising prices for crops—dubbed “agflation”—has begun to drive up the cost of breakfast.” (see Reference 7 below).
My conclusion is that 17 years later we are still looking for answers to the same questions. I am sure that even ChatGPT would be confused.
What Is the Color of Uranium?
I have always thought that the color of uranium is silvery white. However, a heated discussion within the European Union in 2022 proved that I was wrong. France, Finland, and most Eastern European countries argued that it was green. Germany and Austria were categorically opposed and insisted that it was actually red.
It looks like the farther you live from a nuclear facility and the fewer other sources of energy you have, the greener is the color of uranium. And vice versa. My ironic observation was that it was a very interesting medical phenomenon: if the European Union eye doctors concluded that the color of uranium was closer to “green” then, perhaps, it would be the next financial market craze in line with crypto, NFTs, meme, and EV stocks. (AI stocks were just a fringe trend at that time). If that happened, Germany would feel embarrassed: three nuclear plants in that country were switched off at the end of 2021, while the three last remaining nuclear power plants were taken offline on April 15, 2023. This was why the European Union eye doctors would have very tense discussions with the two respective groups of patients who saw the same substance in a different color.
Probably, IT and AI billionaires have had enough of this “red/green” discussion. For example, Bill Gates has invested $1 billion into a nuclear power plant in Wyoming (see Reference 8 below). This new facility was designed by the Gates-founded TerraPower. The same NPR report modestly mentions that “…And for strategic reasons, the U.S. government is helping with the first-of-the-kind costs.”
The AP adds that the U.S. Department of Energy is actually funding half the costs of TerraPower’s project, which includes the cost of designing and licensing the reactor (see Reference 9 below).
Thus, the U.S. eye doctors have concluded that the color of uranium is certainly green. Investors agree by bidding up the price of uranium (see Picture 6 below). I expect the E.U. ophthalmologists to follow suit at some point in the future.
Undoubtedly, the general public is still wary of nuclear power plants after the Three Mile Island accident in the United States in 1979, the Chernobyl accident in the Soviet Union in 1986, and the Fukushima accident in Japan in 2011.
But there is currently no cheap and reliable alternative to nuclear energy. We can recall the situation in Europe in 2022, when the wind speed on the North Sea coasts fell to historic lows, Norwegian hydro power reservoir filling levels were below normal due to dry weather, while French nuclear power plants were undergoing scheduled repairs. All this at a time of heightened geopolitical tensions with Russia, one of the main suppliers of natural gas to Europe. As a result, the market price for European natural gas and German power rose 4 times in less than 3 months. The price is much lower now, but it is still 3 times higher compared to the pre-pandemic period (see Picture 7 below).
My Attempt at Energy Futurology
Personally, I hope that rising energy prices will finally help achieve a breakthrough in the field of personal energy generators. The idea that you can use your body as a source of energy, while walking, running, cycling, working out, or swimming, sounds very exciting. And it is definitely green. I am sure even Germany would agree to that statement, while all doctors would be happy too.
If the current trend of energy prices remains intact, then, perhaps, in the future we will need to take a walk or to work out in order to generate the sufficient amount of energy for our mobile devices. Perhaps, we will be even able to trade this personal energy with our friends or colleagues. The more you move, the more energy you have… I love it!
Maybe it sounds a bit ridiculous. But just look what this gentleman expected back in 1953 regarding the way we would use our phones in the future (see Picture 8 below). Probably his prophecies were ridiculed too…
What are the political consequences of the current low rates of technological and economic progress? And what can we expect in the future?
In Part 5 we will explain what lies behind a seemingly chaotic political scene around the world and various paths of development our civilization might take. To be continued…
References:
1. “Old King Coal Remains Omnipotent and Omnipresent”, Javier Blas, Bloomberg Opinion, July 25, 2024.
2. “Profit Slide Could Curb Nordic Green Investments – Forecast”, Olav Vilnes, Montel News, May 29, 2024.
3. “Big Ambitions But Slow Progress: Global Hydrogen Market Developments in Q4 2023”, Murray Douglas and Greig Boulstridge, Wood Mckenzie, February 6, 2024.
4. “Aramco Weighs LNG Exports as Hydrogen Talks Prove Tough”, Matthew Martin and Fahad Abuljadayel, Bloomberg News, May 10, 2023.
5. “Electricity Storage and Renewables: Costs and Markets to 2030”, The International Renewable Energy Agency, October 2017.
6. “Burned by the Sun”, The Economist, February 22, 2007.
7. “Biofuelled”, The Economist, June 21, 2007.
8. “Bill Gates Is Going Nuclear: How His Latest Project Could Power U.S. Homes and AI”, Obed Manuel and Steve Inskeep, NPR, June 14, 2024.
9. “In Wyoming, Bill Gates Moves Ahead with Nuclear Project Aimed at Revolutionizing Power Generation”, Jennifer McDermott, The Associated Press, August 15, 2024.
