Green Rot

“Deep-pocketed institutions are concluding that many climate investments won’t pay off as quickly, or as lucratively, as they’d hoped,” Bloomberg wrote, citing hedge fund executives.”

“Green rot”, by IRINA SLAV

IRINA SLAV

OCT 28, 2024

∙ PAID

Investments in wind and solar, and hydrogen, and batteries, and EVs are rising. They’re rising fast and that’s a really great thing because the planet’s warming and the only way to stop this warming is by investing even more in wind and solar, and hydrogen, and batteries, and EVs.

That’s the messaging that’s been pouring out of every corporate media outlet, every NGO, and every bank with transition ambitions. The trajectory of those investments was assumed to remain uninterrupted and upward — anything else went against dogma, which is an offence punishable by media death in this day and age. Alas, there is rot in the message, and that rot is fast becoming unmanageable because even corporate media is talking about it increasingly often. I guess the stink became impossible to ignore.

It was Bloomberg of all media that recently reported some truly horrible news. Hedge funds were growing sour on the transition, it said last week. Of 500 funds surveyed, more were betting against transition technology than were betting on it. Also, more funds were betting on oil and gas than were betting against them. Weird, right? Also, absolutely unexpected.

Here’s a quote: “Despite the promises, clean energy and green technology stocks have lagged far behind the broader market. Deep-pocketed institutions are concluding that many climate investments won’t pay off as quickly, or as lucratively, as they’d hoped,” Bloomberg wrote, citing hedge fund executives.

The outlet also cited the chief executive of one Swiss-based hedge fund as saying, adorably, that his team and he “have been looking for an inflection point for years” but “we don’t see the inflection as yet.” Wanted: Inflection point for transition technologies that forego the paws of physics and I am not correcting this typo because it is so fitting.

Rot is setting deeper in the greenhouse of the transition and it is spreading faster. Because not only are hedge funds growing cold towards the inflection-pointless transition exercise, but coal demand of all things horrible is about to keep rising instead of playing along and dying already. Oh, and Big Oil just returned to Libya of all places. Must be masochism. Either that, or the transition is doomed.

Eni and BP are returning to their exploration block in Libya and starting to drill, the Libyan state oil company said last Friday. The two had left the country ten years ago amid all the fighting but are now returning — just months after the latest political dispute between the rival governments literally decimated oil production. It only rebounded recently and there are no guarantees whatsoever there won’t be more outages down the road and yet BP and Eni are returning.

It could be that these supermajors have missed the thrill of field outages and oil export terminal blockades. It could be that they have money to spare on high-risk investments. Or it could be that they disagree with the IEA and its projected peak oil demand before 2030.

Outrageous as the latter suggestion is, it might be the most realistic of the three. Because the IEA itself recently revised its outlook for none other than coal demand — and the revision was upward.

Bloomberg’s Javier Blas detailed the scandalous move by one of the transition crusade’s brightest stars. Demonstrating a shocking lack of mercy, he wrote that “It wasn’t a small revision: Coal consumption in 2030 is now estimated 6% higher than only a year ago. That may sound small, but it amounts to adding the equivalent of the consumption of Japan, the world’s fourth-largest coal burner. By 2030, the IEA now believes coal consumption will remain higher than it was back in 2010.”

Indeed, the IEA said in its latest World Energy Outlook that “In the STEPS, the outlook for coal has been revised upwards particularly for the coming decade, principally as a result of updated electricity demand projections, notably from China and India. Total coal demand is 300 million tonnes of coal equivalent (Mtce) or 6% higher in 2030 than in the WEO-2023. Even with this revision, coal demand declines by an average of 2% each year through to 2050.”

STEPS stands for stated policy scenario and the coal demand projection is put in a box on page 101 of the report. Much closer to the beginning, however, the IEA Does the Messaging: “Clean energy momentum remains strong enough to bring a peak in demand for each of the fossil fuels by 2030,” it wrote in the executive summary of the report.

“Demand for energy services is rising rapidly, led by emerging and developing economies, but the continued progress of transitions means that, by the end of the decade, the global economy can continue to grow without using additional amounts of oil, natural gas or coal.” And they believed what they wrote, too, because they actually expect electricity demand growth to slow down in the future. If it doesn’t, the “transitions” are toast. A mouldy one.

In fact, as shocking as it may sound, the IEA people may be right in expecting lower electricity demand. As Blas detailed in his column, the ironic twist of the transition has been the fact that the rush to electrify everything has resulted in greater electricity demand that could not — and cannot — be satisfied by windosolar, so gas and coal stepped in. But as that electrification stumbles and falls, demand growth may naturally ease. Except in data centres, of course.

Let’s have a quick look, which is a lie because I have half a dozen recent headlines to offer. “Sluggish demand for electric vehicles haunted South Korean battery maker LG Energy Solution Ltd., dragging its profits down by almost 40% from a year earlier,” Bloomberg told us today.

“European gas prices have climbed to their highest level of the year, as a production outage in key supplier Norway exacerbates market concerns over tensions in the Middle East,” the FT quipped.

“Sweden's Northvolt is trying to sell off its stockpile of battery-making materials, three sources familiar with the matter said on Thursday, as the company tries to shore up its finances after reining in its ambitions,” Reuters intoned.

“The mismatch between increasing supply of renewable power and electricity demand that is struggling to grow, coupled with depressed wholesale power prices, threatens future investments in the sector, [Spain’s] renewables lobby APPA warned on Friday,” Reuters again reported, today.

Meanwhile, “Airlines offering flights to and from Japan are facing a fuel shortage caused by streamlining in the country's oil distribution sector, forcing them to give up on adding flights or new routes despite rising travel demand,” per Nikkei.

Elsewhere, “The European gas industry has walked away from an agreement on retraining and support for hundreds of thousands of workers to prepare for the transition to cleaner energy, in a setback for EU decarbonisation plans,” per the FT.

Also, “Share prices of US and European clean hydrogen companies have collapsed while projects have been delayed as the industry battles lower than expected demand, regulatory uncertainties and growing investor scepticism.” It’s a train wreck.

The biggest punch, however, came from Reuters: “Utilities in the United States have relied on fossil fuels to generate a larger share of electricity than their counterparts in China since June, seriously undermining U.S. claims to be a leader in energy transition efforts.” So, about those data centres…

Google is currently developing AI that will do online research and online shopping for you. That’s what’s driving electricity demand higher — the sprint to Wall-E world. Well, that and rising living standards in countries that have not yet evolved enough to realise their biggest problem is carbon dioxide and methane emissions.

They have not become enlightened enough to appreciate the climate breakdown crisis looming over us all and start using less energy, the cheeks. And there’s no forcing them, not now, not with speculative investors giving up on the inflection points that never were.

What we have instead, is an infection point at the paws of physics. A lot of infection points, in fact. In the absence of adequate antibiotic treatment, these are going to grow and deepen, and spread the rot. A climate breakdown is not going to happen but the transition breakdown is imminent. There could be no other outcome, really, not when the transition essentially boils down to forcing people to pay for the sun to shine, as ever so eloquently detailed by eugyppius. The crusaders should have watched those paws. They have claws that kill

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