Steve Saville | Oct 25, 2022 05:00AM ET
The root of Europe’s energy crisis is under-investment or outright dis-investment in nuclear energy and natural gas production/storage/transportation combined with over-reliance on intermittent and relatively inefficient forms of renewable energy. Russia’s invasion of Ukraine and the anti-Russia sanctions exacerbated the problem, but the problem was evident prior to this year. A policy course correction therefore would be appropriate (to put it mildly), but it won’t happen anytime soon.
When private companies go in the wrong direction they lose money and either change direction or go broke, but after it becomes clear that a government has gone in the wrong direction the typical response is to go faster in that direction. This is because doing otherwise would require an uncomfortable public admission that mistakes have been made or a practically impossible public admission that the political ideology underpinning the chosen direction is wrong. In the case of the shift towards increasing reliance on renewable energy, the latter (a public admission that the underlying political ideology is wrong) would be required, which is why we shouldn’t expect it. Instead, we should expect acceleration along the wrong path.
Signs of acceleration along the wrong path are not hard to find. Examples include the recent increase from 32% to 45% in the official European target for the renewable energy share of total energy, requiring a doubling of the renewable energy share within the next eight years, and the government of Victoria, Australia, recently announcing a goal to become 95% dependent on renewables by 2035.
It is not possible to achieve the renewable energy targets being set by governments, but nevertheless it’s reasonable to expect that great efforts will be made to achieve them. Here are some of the likely effects of these efforts:
As investors/speculators, we can’t do anything about the adverse social and environmental consequences of the accelerating trend towards ‘renewables’. However, we can attempt to profit from points 1, 3 and 5.
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