Blain’s Morning Porridge 16th March 2022 – Guest Post: Miles Morland – How Green is your Telsa
“You can have any colour you want as long as its black.”
This morning: Markets and Politicians share many common traits – they over enthuse on the upside and fail to grasp hidden costs and dangers. The Morning Porridge is resolutely in favour of climate change mitigation, but the current headlong plunge into renewable energies and lithium batteries has the potential to end up an environmental and market disaster.
Something different for readers this morning – for the first time ever I am delighted to open the Porridge to an outside contributor.
The following is a guest comment from my chum, mentor, and market sage; Miles Morland. Miles is one of the most successful investors into Africa – he is chairman of DPI, a leading African private equity firm he founded fifteen years ago. He has spent over thirty years investing in frontier markets. He is very suspicious of “experts”.
I’ve often written how markets are just an enormous voting machine based on what people think today, but not on what we discover to be fact tomorrow. Yesterday I was fascinated by a twitter thread where a large number of folk were extraordinarily enthusiastic on how Electric Vehicles are the only way to save the planet.
I shall let Miles debunk their arguments:
How Green Is Your Tesla?
By Miles Morland
A friend recently sent me a speech about electric vehicles, wind and solar power. It told me things I didn’t know and made me think. I pirated most of the speech for what is written below. (Big thanks to the person I pirated it from.) It may tell you things you don’t know.
A battery is, in Tesla’s words, just an energy storage system. Batteries do not make electricity, they store electricity produced elsewhere, some produced by wind and solar but primarily by coal, uranium, natural gas, or diesel. An electric vehicle (EV) is consequently not a zero-emission vehicle. Its emissions mirror the emissions of the energy source that is being stored in its batteries. Storing the power in a battery to power an electric car after the pollution of its production has taken place makes it as polluting as a vehicle directly powered by hydrocarbons.
61% of the electricity generated in the U.S. is from plants fired by fossil fuels and 20% by nuclear, therefore it follows that 60% of EVs in the US are powered by fossil fuels, of which a third is coal, and 20% by nuclear energy. It takes the same amount of power to move a gasoline or diesel-powered vehicle as it does an electric one. The question is what produces that power? To reiterate, the power does not come from the battery. The battery is only an energy storage device, identical to the fuel tank in a car.
There are two types of batteries, rechargeable, and single-use. The most common single-use batteries are A, AA, AAA, C, D. 9V, and lantern types. These dry-cell species use zinc, manganese, lithium, silver oxide, or zinc and carbon to store electricity chemically. All these batteries contain potentially toxic metals. Rechargeable batteries differ in their internal materials, usually lithium-ion, nickel-metal oxide, and nickel-cadmium.
The percentage of batteries that are recycled varies from around 5% of lithium-ion in the US to 50% of portable batteries in the EU. Worldwide numbers are impossible to come by but it is probable that fewer than 25% of batteries are recycled. I have seen a report that 16 billion batteries were thrown away in 2020. That’s a lot of landfill.
This is what happens to a battery that is not recycled. All batteries are self-discharging. That means that even when not in use, they leak tiny amounts of energy. When a battery runs down and can no longer power an object, most people consider it dead. It is not. It continues to leak small amounts of electricity. The chemicals in the battery cause pressure to build inside the battery’s metal casing, and eventually it cracks and the chemicals leak out. Everyone has seen this leaking in a torch or small appliance that has not been used for a long time. The leaking chemicals are toxic. Every battery in a landfill site will eventually leak toxic chemicals, including the rechargeable ones.
Electric cars are in their infancy. Most are almost new. Few are on the scrapheap yet. It is easy for the manufacturers to say, as Tesla do, that the car batteries will be recycled. But in ten years’ time when there are millions of clapped out cars whose batteries are failing, how many of those are going to be taken by their owners to a recycling plant? Quite a lot. But there will be quite a lot that aren’t.
Many people are excited about “clean” electric cars and the renewable revolution, using wind and solar power. These technologies share highly destructive embedded environmental costs.
Everything manufactured has two costs associated with it, embedded costs and operating costs.
Embedded costs can be best understood by looking at an example of food, say, beans or kale. The first cost is the diesel fuel used by the tractor to plough the field, till the ground, harvest the crop, and transport the beans or the kale to the food distributor. Not only is the diesel fuel an embedded cost, so too are the costs to build the tractors, combines, and trucks. Almost certainly, the field will have been treated with a nitrogen fertilizer made from a hydrocarbon, probably gas from Ukraine or Russia. There will also be energy costs for irrigation and there will be high water usage. Next are the energy costs of the distribution process and supermarket for lighting, power and heating. If the beans are to be canned then there will be additional costs for steel, a further embedded cost. Making the steel can requires mining taconite, shipping it by boat, extracting the iron, placing it in a coal-fired blast furnace, and adding carbon. Finally, there is the fuel cost for your car to go to the supermarket.
Those are the embedded costs in the kale and broad beans you plop in your supermarket basket. How about the embedded costs in an electric vehicle and its battery?
First, the car body, chassis, and wheels have exactly the same embedded costs in terms of energy, metals and plastic as a Range Rover.
Then you have the battery. A Tesla S battery weighs 540 kg, over half a ton. It contains 10kg lithium, 25kg nickel, 20kg manganese, 15kg cobalt, 80kg of copper, and 180kg aluminium, steel, and plastic. Inside are over 6,000 individual lithium-ion cells.
Every one of those components has to be mined from the earth, often with difficulty and at great expense, needing chemicals and a large quantity of fresh water for the refining process. For instance, to manufacture each Tesla battery requires 10 tons of brine for the lithium, 14 tons of ore for the cobalt, 2 tons of ore for the nickel, and 10 tons of ore for copper. In summary, 220 tons of the earth’s crust need to be dug up for each half-ton Tesla battery. It’s probable that 6m electric cars will be produced in 2022. That’s 1.2 billion tons of earth that will have to be dug and scraped up just to make their batteries.
Each Tesla battery has 15kg of cobalt, two-thirds of which is mined in the DRC in mines with significant pollution. Some of the mines employ children and unprotected workers who can have their lives shortened by handling this toxic material. Of course, we don’t know these unfortunate people but their human costs must be factored in to the cost of driving your “clean” electric car.
People have talked for a long time about building big-scale batteries to store electricity generated in off-peak times from wind and solar, in theory an excellent idea. California, it’s always California, is now building the largest battery in the world near San Francisco. It will store energy generated exclusively by solar and wind. The politicians claim that this is the ultimate “clean energy” project to replace “dirty” hydrocarbons and nuclear. In reality the project is creating an environmental disaster.
Solar arrays need chemicals to process silicate into the silicon used in the panels. To make pure enough silicon requires processing the silicon with hydrochloric acid, sulphuric acid, nitric acid, hydrogen fluoride, trichloroethane, and acetone. The process also needs gallium, arsenide, copper-indium-gallium-diselenide, and cadmium-telluride, all toxic. Silicosis, a potentially fatal disease is a constant hazard to the workers. And the panels cannot be recycled.
The embedded cost and environmental destruction caused by wind turbines is only now being appreciated. The average windmill weighs 1700 tons (the equivalent of 23 houses) and contains 1300 tons of concrete, the manufacture of which gives rise to horrendous environmental concerns, 295 tons of steel, 48 tons of iron, 24 tons of fibreglass, and the hard- to-extract rare earths neodymium, praseodymium, and dysprosium. Each blade weighs 35 tons and will last 15 to 20 years, at which time it must be replaced. Used blades cannot be recycled. Wind turbines kill birds, bats, sea life, and migratory insects, and, as I’ve seen on the Norfolk coast where there are two giant wind farms in sight of me, the boats servicing the farms did an efficient job of chopping up the famous Blakeney seal colony with their propellers.
Going green has directly resulted in cutting off financing for hydrocarbons and nuclear energy, making much of the world reliant on Russia and Saudi Arabia for energy as the western world has cut back on oil and gas exploration and ceased to invest in nuclear. This is particularly true in Europe. The Ukraine crisis has underlined the consequences of this policy.
Politicians who talk about net-zero by a certain date are either deluded simpletons because they are unaware of the embedded costs of wind and solar energy, and the huge environmental costs of producing an electric car or they are liars. There may be a place for these technologies, but you have to look beyond the myth of zero emissions. It is probable that electric vehicles and wind power will be as unpopular in 2035 as hydrocarbons were in 2015, once people have faced up to their huge embedded environmental costs.
At best, wind and solar, and electric vehicles are a way station on the road to a genuinely clean solution. Will that be hydrogen? Maybe, but not tomorrow. Is it something at an earlier stage of development? Something we can only guess about today? Almost certainly. Humankind is infinitely resourceful. “Going Green” sounds wonderful, ask Greta Thunberg, a wonderfully persuasive and committed woman, but when you look, as she doesn’t, at the real hidden and embedded costs, you can see that Going Green is unacceptably destructive to the Earth’s environment.
We will find a way. We just haven’t done it yet.
In 1894, a study was done on energy consumption in London which caused the Times to predict that in fifty years’ time every street in London would be under nine feet of horse dung ( https://www.historic- uk.com/HistoryUK/HistoryofBritain/Great-Horse-Manure-Crisis-of-1894/ ). Transport then in London was entirely by horses being ridden or drawing carts, hansom-cabs, and buses. Each horse produced over 20 lbs of dung and two pints of urine a day with imaginable environmental results.
No solution seemed possible until Henry Ford found an economical way of producing cars, St Petersburg introduced the first electric tramway, diesel buses became a reality, and the electric-powered Underground spread its tentacles through the city. In fifty years’ time the unacceptable environmental costs of hydrocarbons, wind, and solar will seem as distant a threat as horse dung does today.
Porridge Subscribers are very welcome to submit articles for publication – the rules are simple: be factual, have an opinion, and focus on markets and implications. No diatribes.
Publishers – I am sure Miles will be very happy for any interested parties to carry this article – but please check with me first!
Bill Blain, Strategist – Shard Capital.