Blain’s Morning Porridge, 25 March 2022 – The Crisis Approaches; Energy Security and the Nuclear option.
“Is atomic energy a force for good or evil? I can only say, “as mankind wills it.”
This morning: Energy and Food Security are intricately linked – and constitute the biggest and most immediate “no-see-um” threat markets have faced in decades. It’s time to get real about addressing energy transition and security, and climate change by accepting Nuclear energy is the most viable solution in the time left us.
Earlier this week I listened to the United Nations Secretary-General Antonio Guterres declare we are “Sleepwalking into a Climate Catastrophe”.
It was a NSS moment (No S**t Sherlock) – but is anyone listening? It’s difficult to find much decision-level attention for perspective at the moment. The immediate consequences of the Ukraine invasion dominate front and centre. Nor was anyone paying much attention when the Secretary General also warned of “a spiral into a global hunger crisis.”
The UN is not awash with credibility after its ineffectiveness to address the invasion of Ukraine, but Guterres made a good point. Energy Security has emerged as the biggest No-See-Um moment in decades. (To be fair, I warned about it last year: People are going to die this winter – BP is up 22% since I made that call.)
The new Food and Energy crises are intricately linked. Russia precipitated it in the expectation Europe would cave into Putin’s demands because he perceived their floundering energy security gave him an edge. Wrong. As a result, the globe is waking up to unparalleled Food and Energy shortages.
Food and Energy are clear and immediate threats. Climate change is long-term. Guess which one governments are more worried about?
Energy and Food scarcity will likely be more destabilising and dramatic for markets than the debt crisis of 2007-2008. They will make the GFC (Global Financial Crisis) look a storm in a teacup. This will be a Real World crisis – one that can’t be solved by simply printing loads of money, and consequentially generating the windfall financial asset inflation of the last 12 years that is now unravelling. The energy crisis is going to trigger a host of very real and very painful consequences for the global economy. Take a look at the riots and food hoarding sweeping Spain this week for clues.
Like all “good” crises, this one has been quietly fermenting for years. Ukraine has simply crystalised it in plain sight.
Today: global energy comes from 30% Coal (declining), 30% Oil (flat), 25% Gas (flat), while all the renewables (including Nuclear and wood) contribute less than 15%. Coal is the easiest to convert, but Gas produces around 60% less emissions. Even without the Ukraine crisis we were looking at a growing energy deficit as we transition from fossil fuels – 4% this year according to my chum Rob West at Thunder Said Energy (the top energy transition analyst in the multiverse).
The energy shortfall is set to widen – caused by increasing energy demands and years of under-investment. We will be short of up to 10% of global energy consumption by 2030. The assumption we could stop fossil and replace it overnight with solar and wind… was misguided. We’re not re-discovering it takes time to drill gas and there simply isn’t enough space for that many windmills.
The only way Energy Scarcity can be addressed in the medium term is higher prices for those that can afford it, and fuel poverty for those who can’t. Some countries can mitigate the pain – many can’t.
The democratic governments of the West are concerned with re-establishing their strategic energy and food security they foolishly gave up in favour of cheapest-to-deliver “globalisation” supplies. The most obvious example was reliance on Russia. Don’t forget – the UK decided to give up maintaining a strategic gas storage reserve in favour of buying on the open market. (It was a classic PBI moment: Policy by Idiots.)
Things will be bad in the West. They will be worse elsewhere. Autocratic dictators are going to be entirely focused on containing the social unrest that will erupt when the lights go out and food runs out. Addressing the immediate consequences of the war on inflation, and factors like the global scarcity of fertilizer, are now paramount. The West will succeed better because we have the institutions and market mechanisms to cope – but they will still be impacted by unfolding food and energy crises elsewhere.
Re-establishing energy security in the short-term is critical, but it’s a bit like patching-up a sinking ship. It we focus on the immediate threat only we may still crash into the iceberg of climate change… In which case… its glug..glug.. all round.
At this point the Trumptards will stop reading – I have dared to question their wisdom that climate change is a hoax. When it comes to Climate Change, I absolutely go with the science. Smart people who know stuff by learning and discovering it – rather than read it on a spurious site on the internet – tell me temperatures will rise, the weather will become more chaotic and sea levels will rise. Not ideal. But I’m not going to bet against them being right.
Climate change gets worse the longer we delay addressing it. Thus far policy has been to talk a lot about it, encourage investment into supposed green energy solutions, and hope it sort of happens. Enough of Gabfests like COP26. We need proper policies towards Energy Transition.
Food and Energy scarcity bites today. In contrast, the “frog-in-a-pan-of-water-on-the-hob” analogy applies with it comes to climate change. Because you don’t feel it day-to-day, it’s confused by ill-informed climate rage protestors and climate-change deniers who’ve bought the fake-news propaganda.
Because we are so credulous, and climate change can be sold with cute photos of pengiuns and polar bears, it’s become a marketing angle and opportunities for well meaning hippies and a host of shysters shilling EVs to Green Bonds while hiding under ESG false flags. They all claim to be the new, new thing that will protect the environment… but ultimately many will prove to be roads to nowhere. (Regular readers will know my thoughts on lithium batteries… don’t get me started.)
Understand this critical point: Climate Change policy failure has led us to this moment of energy scarcity. Underinvestment in Energy security from traditional sources, and delusional policies based on hopes new tech will replace fossils, mean we face at least a decade of energy scarcity. And we have to replace the missing energy capacity with any available energy…
The reality is brutal. We have a limited number of decades to reverse the damage and mitigate carbon dioxide. End of. Yet, for all the talk, the debate, and the protests – THERE IS NOT, AND NEVER HAS BEEN, A PROPER TRANSITION PLAN. That is clear PBI.
No Government has ever faced up to presenting or costing a real transition plan to replace fossil energy with clean power. Instead, the West is letting the market chase multiple uncoordinated rushes to replace Internal Combustion Engines with Batteries (even though the carbon savings are debatable), to rely on Alternatives like Wind and Solar, and vague hopes and expectations that hydrogen power will sort everything. Let a thousand weeds grow and hope some of them work is again: PBI!
We are dancing our way through a minefield. It’s Time to Get Real.
We need non-carbon power and energy security. There is only one real solution – and it won’t be cheap. Stop the dither and hopes around wind and solar.. (They can be part of, but can’t be, the whole solution.) It’s time to invest seriously in a Nuclear Future. It solves two problems: future energy security and addresses climate change.
From my humble seat in the backwaters of finance, it seems bleeding obvious. I was there in the 1970/80s protesting about the construction of the Torness nuclear station. I had a Nein Danke Nuclear sticker on the car. Now I accept there isn’t another viable solution. Yes, I know 34% of Uranium comes from Russia… but Germany and Belgium get it and are keeping plants open.
We need to
i) build and extend immediate nuclear capacity with current designs,
ii) design new intermediate nuclear strategies such as smaller, cheaper mini-nukes and more efficient scale plants, and
iii) make Fusion a priority with an investment of money and resources on a scale that dwarfs the Manhattan project to develop the atom bomb 80 years ago.
No country can do it alone. The UK will have to suck up to Europe or America.
Nuclear is not without problems – fuel supply, construction, decommissing costs, and safety risks, but we need power. If not we face economic catastrophe and burgeoning social unrest… global famine will just fuel the flames.
For politicians – it’s a wake-up moment. Let’s have less Rishi Sunak nonsense about balanced budgets, austerity spending and higher taxes. Let’s get real about the immediate energy crisis and real about the future – or we simply won’t have one…
Let’s make nuclear the core of our Energy future – then we can go back to biffing the Russians.
Finally… The French were obviously very upset by my comments about Renault. They have declared War on the Morning Porridge. (Well, its easier than taking on Russia.) Yesterday they fought back as BNP warned: “Spiralling prices risk sparking riots across Britain”, says the third least bad bank in the land of the Gillet-Jaune..
Bring it on CESM.
Five Things to ruin the weekend.
Torygraph – Rishi Sunak branded a “fiscal illusionist” as claims unravel
FT – Traders warn of looming global diesel shortage
Guardian – War in Ukraine will lead to food shortages in poor countries, says WTO boss
WSJ – Fertilizer Prices Surge as Ukraine War Cuts Supply, Leaving Farmers Shocked
BBerg – Morgan Stanley Flags EV Demand Destruction as Lithium Soars
Weekends are for whimps. I’m off to Cairo tomorrow. They work on a Sunday, so no weekend for me.. But you have a great time and enjoy yourselves… while I sing along to the Chorus from Aida..
Bill Blain
Strategist – Shard Capital
27 Comments
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Have you got a Smart Meter Bill ?
And , where do we keep our savings?
Under the bed ?
I have been advocating the development of min-nuclear power plants for a long time, not only because they should be able to be standardised then built more quickly, but also because their out-put can be ramped up and down to meet demand rather than reserved for base-load such as the likes of Sizewell=; after all a nuclear submarine would be a sitting duck if the skipper had to give 12 hrs notice of requiring full power!
Some feedback from Cairo in your next Porridge might be pertinent to this post as the 105 million or so Egyptians are almost completely dependent on Russian/Ukrainian wheat for their bread which is their main staple.
So basically Bill, what you’re saying is there’s a giant ship called the klusterfuck coming straight towards us ?! 🤔🤷♂️
Well…. yes.. we have difficult waters to navigate, but with our usual inventiveness and ability to not listen to bureaucrats at the critical moments we shall muddle through… but it will be messy.
Nuclear has the same problem that wind and solar have, namely a huge fossil fuel footprint. The extraction and processing of Uranium is very fossil fuel intensive. It is also a finite resource that won’t last beyond that of oil and gas.
I have little doubt that all our energy resources (that can be extracted at an energy profit) will be dug up and consumed eventually, including fissile elements like Uranium. By the end of this century we will be back to an agrarian society based round energy we can grow.
Russia will be the last industrial society standing by virtue of its large energy resources unless the world goes MAD. Western Europe has decided, with a little help from the US, to enter the energy decent early.
“Energy we can grow” was a very clumsy way of putting it. I meant sunlight energy harvested in photosynthesis. That gives us energy directly as food, concentrated and then burnt as wood or leveraged by using cattle to give us more power. Millions years of stored sunlight used up in mere 400 years. A brief flowering of mankind that enabled us to reach for the stars before we tore ourselves apart in a mad max dystopian world of Iraq, Libya, Syria, Afghanistan and now Ukraine.
Bleak… but to the point.. So what we going to do about it?
Very bleak.. and I think we will find a way round it…
True, we probably will find a way around it, though the cost of our dithering is still undefined. What I particularly like is how succinctly you have articulated the problem. The climate change problems are very real, while most of the posed “solutions” are not, and the dreamy, unrealistic approaches of many regarding renewables only serve to give environmentalism a bad name.
Uranium, I probably agree, and would only add that the Athabasca region of northern Saskatchewan, Canada (Cameco’s main supply source) alone has enough Uranium in the ground to meet over 100 years of current demand, so no worries about Russia or Kazakhstan as suppliers.
“Canada (Cameco’s main supply source) alone has enough Uranium in the ground to meet over 100 years of current demand”. The key part of this statement is “current demand”. How years will there be left if the whole world increases its nuclear capacity? Increase world demand by a factor of 10 reduces the resources in Canada to only 10 years.
I think Eduardo is accurate but being optimistic on the timeline (of the end of the century). A brutal “energy decent” is what lies before us. And what that means is unimaginable change. Rather than worry about electric cars for private transportation, we’ll be lucky to feed ourselves.
Always nice to read a cheerful Scot. I agree that of the many possibilities nuclear is the only one that can be developed quickly enough to make a difference to the supply profile. In time, it may be overtaken by one of the others, nuclear fusion (the most intellectually attractive), hydrogen, big mirrors in space, and so on; but we have no idea which of these others will work or can scale up. I don’t trust any government to chose what to back, perhaps they could create an investment fund that will match private investment in low emission energy technology with public funds and give them tax advantages. There must be minimum rules about what qualifies, or we will have years of delay while the civil servants create forms to fill and reasons to refuse. And that is only in the UK.
One seldom mistakes a Blain for a ray of sunshine…
Most of my ‘Green’ friends think that they have done their bit by driving an ECar and taking re-useable shopping bags to the local shops. They think that by eliminating fossil fuels for heating and vehicle fuels the planet can be saved.
Sitting here in a normal Canadian home I see every surface painted or varnished (oil): carpets, upholstery, curtains etc containing synthetic fibres (oil); plastic electric, kitchen and bathroom fittings, also computers, radios, and TVs (oil). Outside, cars whizz by(steel = coal and plastics = oil) on roads (Tarmac = oil).
The whole World can now dress cheaply, thanks to synthetics derived from oil. Just imagine having to go back to natural fibres for our over-populated planet. There isn’t enough wool, cotton, flax, linen or fig-leaves to clothe even a small fraction of us. It will be a long time before we can do without fossil fuels, I’m afraid.
See my comment above on waste and consequences. THis is very useful!
Love this latest post. Wish I’d spent more time chatting to you in the HSBC days when I had the chance.
Don’t worry Andy – HSBC.. really nice kind people. They destroyed me. (tee hee…)
One snag with nuclear which was first directed at Thorium fans is that the energy might be lower CO2 but its still energy and a good chunk of that will eventually end up in heat or warming, and it is global activity that is the problem, plus look at the basic mechanics of nuclear, post reactor we have heat which is used to boil water to drive turbines, do hope we don’t start building cooling towers. Maybe the Malthusians & Globalists are right.
I would be in favor of nuclear power as a transition energy source in the United States as long as there was a facility designed and promised to be completed to take the nuclear waste. I don’t think that the mini-nuclear power plants are a good idea for two reasons. First I don’t think that it is a good idea to have nuclear power plants dotting the countryside as security risks for terrorists. Second the operation of a nuclear power plant requires more costly expertise for maintenance, record keeping, training, etc. and it is most likely more cost efficient to have one larger facility than multiple smaller facilities with these systems duplicated.
Why do you say Climate Change when all the bad things that will happen are all related to Global Warming? Oh yeah, it’s not getting hotter. And, uh, the Maldives are not underwater. Maybe one of these years.. (Actually we’re overdue for an Ice Age, if you really want to follow the Science.)
Best Regards,
Trumptardian
But seriously, it’s time to phase out Carbon-based technology. Just, as you say, have a PLAN. “Hope” is not one of those…
At least there’s one lefty on the planet with a functioning brain. Keep up the good work.
Dear Steve
You cant be a Trumptard – he/she/it would have written “I stopped reading when I saw…”
I do get the arguments against climate change, and have read my economic histories on how a mini-ice age in the 15th century underlay the reformation and rise of Europe and the West…
But… as a banker I have to look at the risks (that climate change is real) and hedge accordingly.
Bill
My concern is that even ‘new’ nuclear has too much baggage, expense and time to get going.
It may still be Tomorrow’s World stuff today, but ultra-deep geothermal must surely be a realistic possibility & would be ideal for redeploying legacy O&G/fracking capital, knowledge and manpower.
These guys have an interesting take on it, and the Quaise CEO Carlos Araque gives great interview. Would love to invest in them. A couple of links for any downtime in Cairo:
https://www.quaise.energy/
https://newatlas.com/energy/quaise-deep-geothermal-drilling-questions/
https://podcasts.apple.com/ca/podcast/quaise-energy-carlos-araque-on-core-knowledge-podcast/id1584915910?i=1000539846649
https://www.texasgeo.org/geo-s-history
What about the world’s colossal garbage problem? No one even talks about it. Consumers are trying to recycle properly, but are continuously bombarded with more and more packaging, more and more plastic, more and more wax covered paper, more litter, more polution….. And when we do properly recycle, it should be in plastic bags, which themselves are not practically recyclable. When do we start charging the packaging industry for forcing consumers to use unwanted plastics? I feel recycling and our current refuse problems are our biggest hurdles as a global society. Thoughts?
Hi Peter
This is a great point.
THe biggest crisis is toxic pollution and that is something ESG should absolutely be focused on – like the mining and recycling of lithium for instance.
PLastic in the ocean – massive crisis not not only destroying the ecosystem, but also in our food chain. We need a rethink on plastic treatment – which is why a petrotec we are financing is going to have a recyc lab as a key component.
Landfill and waste energy can be greatly improved.
THe problem is creating martket solutions to make these happen. When it comes to shareholder returns – did more lithium. When it comes to stakeholder benefits, ie the community, it needs a focus.
I can feel a porridge on this subject coming on..
Bill
I don’t know if my type of observation is welcome in this mix. It certainly isn’t among my family. But with respect to climate change, it’s like standing square in a RR crossing and discussing what to do about the oncoming train as you are about to become a hood ornament on a semi-tractor trailer. I have long believed that assessing climate change is really simple.
Assuming it is a thing, there is no proof that it is an existential threat to man.
Assuming it is an existential threat to man, there is no indication mankind is willing to recognize it.
Assuming mankind is willing to recognize the threat, there is no indication that mankind can set aside other issues and do anything about it. People would rather die than reduce their living standard. Literally.
And assuming mankind is willing to do something about it, there is no proof he can.
I am a fatalist and it isn’t from intellectual laziness. It is actually liberating. As a fatalist, everything makes sense. I am not inclined to argue over which wall we should place the cannon at the Alamo. To me the signs are so obvious, that is feels a waste of valuable time to list them. The first to board the half empty lifeboats of the Titanic must have felt foolish. “And leave my jewels?!” I try to imagine the moment when Captain Smith looked out over the bow at the icy black water of the North Atlantic and had his “come to Jesus” moment. Almost certainly ahead of everyone else onboard.
The term “the perfect storm” is being used more and more in analyzing the future. If all the other political, social and economic shenanigans weren’t enough, I see the Russia/Ukraine incident as 1939 all over again. A month ago, Ukraine was a pit of corruption (true) in the media. It was ultimately economic war that induced Japan to attack America, whereupon American rained hellfire and damnation down on Europe. Those damned world wars just won’t go away. My guess is that if you don’t live in small town in the country among like-minded and like-cultured people, and if you haven’t stored or you can’t grow food or protect yourself, at this point, you’re pretty much f***ed. At least sooner than those who have. You’ll be in good company.
Sorry for being so long winded. Captive audience. To the future!
Thanks for this – appreciate it…
In the very short term, if China and India continue to expand their purchases of Russian oil and gas (presumably at a huge discount, but good for their economies), we should surely be able to buy what they would have bought in the marketplace from other sources, at a more normal market price? I’m sure there is a fallacy in that but I can’t see it at the moment!