The pretense of a rapid transition to a fossil fuel free energy system is nonsense
The claim that most vehicles will be electrically powered by 2050 is a dream
The governments of Canada and the United States pursue a narrative that CO2 causes climate change and that a rapid worldwide transition to so-called “green energy” is necessary to prevent human extinction. In an earlier article, I pointed out that the result of ahieving the Net Zero objectives they espouse would cause human extinction with more certainty than anything CO2 can or would do at any level possible by combustion of all fossil fuels in existence on Earth.
A centerpiece of the “green revolution” or “Green New Deal” as it has been labeled in America is a shift from internal combustion engines (ICE) to electric vehicles (EV’s). I make no bones about it - EV’s are a robust technology that is here to stay and will one day power most vehicles. In a nutshell, EV’s are quieter, smoother and capable of more scintillating performance than any ICE vehicle can accomplish. The current state of the art vehicles produced by Tesla will leave my Mercedes in the dust without even trying. Anyone who has driven a top tier Tesla would agree that the speed, acceleration and elegance is hard to beat.
But the “transition” to EV’s requires materials not now and not likely to be available within the timeframe governments claim as “targets”. It is not hard to point out the holes in the rhetoric.
In an earlier article suggesting investors own some copper producers, I demonstrated that shortages of copper alone would be a gating factor in the production of EV’s. Basically, there is not enough copper to support the EV growth planned by the United States, Canada and many European governments. There are few alternatives to copper for the electric motors needed or the conduction of power to and from an expanded grid needed to power millions of EV’s.
Codelco data show the challenge of providing enough copper whch cannot meet forecast demand without many new mines most of which are stalled in regulatory processes. It often takes a decade for a potential mine to proceed from proven discovery to production through a morasse of environmental reviews and negotiations with indigenous peoples who claim ownership of the land whether they have any rights to do so or otherwise.
Some pundits claim lithium shortages will also be a gating factor, but they ignore the fact that lithium is a prolific element relatively easy to mine and growth in lithium supply should not be a serious limitation on EV adoption.
Cobalt and nickel are more serious obstacles. Both are widely used in the batteries that currently power EV’s and neither exists in enough quantity to support the promoted growth rates. The alternatives to these metals come at the expense of poorer battery performance. A quick look at each in turn paints the correct picture.
Cobalt
Shortages in current and projected supplies of key metals have been forecast by many experts including BNP Paribas who points out that available supplies come with geopolitical risks. The expected shortage of cobalt is extreme.
Wood Mackenzie sees demand for cobalt outstripping supply by 167% by 2030, and forecasts major shortages of nickel and copper as well.
Nickel
As shown in the graph above, Wood Mackenzie forecasts see demand for nickel outstripping supply by 65% by 2030. Sherritt Gordon, a relatively small nickel producer, sees the demand for nickel for EV’s consuming almost half the world’s supply by 2040. The company notes that about 70% of nickel being produced today is lower quality suitable for stainless steel but useless for batteries.
Promoters of the “Green New Deal” think spending trillions of dollars to fight nature will benefit mankind, but are too lazy to analyze whether their dream is even possible let alone beneficial. The 1 billion vehicles in use worldwide will remain ICE vehicles for decades to come despite the performance improvements they offer, and when they do become mainstream they will depend on electricity generated largely from fossil fuels until the world makes a serious effort to expand nuclear generation capacity. So-called “renewables” are not only costly, unreliable and a source of toxic waste, but also are intermittent and incapable of providing a stable grid without fossil fuel or nuclear backups. Hydro electric has been a boon to mankind but its growth is tapped out by a lack of potential reservoirs.
Grid Expansion
World electrical generating capacity today is an estimated 5.3 billion kilowatts (kW), about 80% of which derives from fossil fuels. Typical EV’s are powered by a 100 kWh battery capable of sufficient power to propel the vehicle for a range of about 300 kilometers (km). In North America, the average driver travels about 15,000 km each year, suggesting each EV will need to recharge itself the equivalent of at least 50 times a year. There are 1 billion ICE vehicles on the road today globally.
Do the math. 1 billion x 50 recharges x 100 kWh per vehicle is a demand for 3 trillion kWh of energy, or about 570 million kW of generating capacity added to existing grids. If that added generation were all renewables which on average provide power about 25% of the time owing to their need for sunshine or wind to power anything, the added nameplate capacity of 2.3 billion kW comprises about a 40% increase in global generating capacity without replacing any of the power generated by fossil fuels. Add “renewables” capacity needed to replace 4 billion kW of fossil fuel sourced power (another 16 billion kW based on the 25% uptime estimates) and the Green New Deal will require construction of over 18 billion kW of “renewable” generating capacity. That will serve solely to power existing energy usage and an EV fleet equal to the global vehicle fleet today.
Underdeveloped nations won’t want to be left behind. If the global economy grows by a hoped for 3% a year it will double in size in 24 years. Power consumption is directly linked to economic activity. 18 billion kW of generating capacity will fall short by half.
The U.S. Energy Information Administration (EIA) provides the estimated cost per kW to build new generating capacity by source, showing wind and solar costing between $1,391 and $1,796 with battery storage about double that.
18 billion kW of new “renewable” generating capacity will cost between $25 and $40 trillion dollars at 2019 cost levels, excluding battery storage costs. Accounting for inflation and economic growth, the “Green New Deal” would have a global cost of at least $100 trillion over the next 25 years. That cost ignores the capital cost of replacing wind turbines when they reach end of life or solar panels when damaged by the elements including snow and hail.
It is time for the Democrat politicians in America and the Liberal government in Canada to admit the Green New Deal is a Green New Dream incapable of taking place in the timeframe governments pretend are possible. Fortunately for the world, CO2 is harmless and we have plenty of fossil fuels left to develop.
Investors can profit from this outright silliness in left wing policies by holding stocks in mining companies and oil & gas producers who will benefit from policy induced shortages in both cases. For nickel and cobalt, I suggest Nickel28 (NKL.TO) - a royalty streaming company with interests in several large nickel and cobalt deposits already enjoying rapid growth in cash flows from an 8.56% carried interest in the large Ramu nickel cobalt mine in Papua New Guineau. For oil & gas, I suggest Spartan Delta (SDE.TO), Birchcliff Energy (BIR.TO), Peyto Exploration (PEY.TO), and Whitecap Resources (WCP.TO) in the mid-cap space and Cenovus (CVE.TO) for large cap exposure. All have significant free cash flow and limited debt risk with the exception of Peyto who in my opinion combines very low costs with excess debt and has more of a speculative appeal.