I will try to add some color as concisely as I can from a big picture perspective. First, there is naturally a lot of focus on the emergence of EVs and its impact on the demand for electricity. But, there is also a huge demand for electricity with the emergence and growth of big tech companies (e.g., Google and Amazon). These companies are huge in the cloud data storage arena. This requires a huge amount of electricity use, and it never shuts off. A Ford factory or a steel plant requires a ton of electricity, but it can be powered down or shut off. Long story short, the amount of electricity use worldwide over the next 30 to 50 years, according to some reports, is going to increase by 60%. Emerging countries like India and China use and require a tremendous amount of energy.
So, this brings into question the sources of energy generation. Obviously, there is a ton of discussion around green energy sources like wind and solar. What many don’t realize is that the technology for wind and solar is not available today to operate as a base load operator. The transmission systems are not designed to operate with intermittent power supply. The proof of this can been seen within the last 12 months in Europe and even in Texas. The research into renewables will continue to progress and probably get better. A lot of time will be needed.
Now, we think about the transition to renewables. I will not bring my personal views on the matter into the discussion. It is well known that the current and previous democratic administrations have pushed the transition in a pretty rapid fashion. They are incentivizing this through huge tax credits. The current administration is currently trying to extend these credits. However, this transition costs huge amounts of money by building wind and solar farms and the transmission systems. Hundreds of millions and billions of dollars. The utilities finance these projects through rate hikes, which negatively impacts the ratepayers. More alarmingly, the current administration is influencing the continued transition to renewables through influencing the Fed and capital markets. These entities are being influenced against lending to fossil fuel producers (i.e., coal, natural gas, oil), which limits their growth and operating capacities.
There’s a lot here, and I could discuss the matter for hours in more detail. The global supply chain issues are in everyone’s mind. I suggest people track their utility bills over the next 6 months as the weather gets cold. I suggest people research all the uses of oil byproducts. I will reiterate people research the materials involved in developing EVs (specifically the batteries), where they come from, and who are currently the largest investors.
IMO, a key takeaway is the idea of base load generation and our current infrastructure.
