The Raw Materials Challenge of the Green Energy Transition

17 09 2020

My friend Simon Michaux has been burning the midnight candle, doing some amazing research. THIS could be the most important video on why complex civilization will NOT see a green energy transition you’re ever likely to see. share widely…..


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24 responses

17 09 2020
Simon Michaux

Thanks Mate

17 09 2020
mikestasse

No, thank YOU for doing the hard yards and producing such amazing work….

17 09 2020
LEONARD DIECKMANN

Most humans are never fully present in the now, because unconsciously they believe that the next moment must be more important than this one. But then you miss your whole life, which is never not now. Eckhart Tolle

17 09 2020
Kika

Thanks for this. Have shared it with friends.

18 09 2020
Brandon Young

I think it is ultimately pointless going through the 6 scenarios proposed here. Instead we need to stop worrying about the details of which technologies and strategies will play a part in a transition to a negative emissions economy. We can leave that up to the markets, if we are clever enough to impose market incentives that drive overall emissions along any trajectory we might choose.

With a simple global price on all emissions, which creates an enormous pool of revenues to fund rebates for all activities which sequester carbon from the atmosphere – including the preservation and restoration of natural carbon sinks – the overall mix of strategies and technologies will optimise itself, without any need to try to pick winners at the collective level.

Businesses and investors that back successful new initiatives will profit while making great contributions to driving down emissions, and those that back old technologies and inefficient options will disappear over time. Capitalism can easily solve the problem of climate change, without intervention by governments, as long as market outcomes are controlled with incentives on the global scale to produce the optimal mix of economic activities.

22 09 2020
adam

This has to be one of the more delusional comments I have ever seen. Are you trying to troll?
I mean I suppose there’s no one stopping you, it just seems like a strange audience to try it in.
I guess dreaming the rich and technology will save you isn’t much worse than doing nothing.
Dream on Brandon. Power to you.

22 09 2020
mikestasse

I was going to say something like this myself but was waiting for backup. Thanks Adam….

22 09 2020
Brandon Young

No delusion here, just an appreciation for the real power of market incentives to change the behaviour of businesses. A price on emissions would certainly compel profit seeking businesses to minimise emissions in order to minimise costs, and those businesses that fail to do so would certainly sacrifice their own profitability and market share to more savvy competitors.

The same goes for raw materials. A penalty price on the consumption of critical raw materials would change the behaviour of markets and the businesses competing within them. To suggest that it wouldn’t, now that would be a delusion …

The important point here is that we do not need to debate and decide in advance how much the market should shift from fossil fuel powered cars and trucks to electric vehicles, or how much of the electricity supply comes from renewable energy sources. We just need to get the market incentives in line with the goal of moving to negative overall emissions, and profit-seeking business-as-usual will fill in the details.

If it is more profitable for business to act sustainably, then that is what will happen. If it is more profitable for business to act unsustainably, then that is what will happen. This is not a complex argument or a theory that should be beyond the comprehension of anyone. Businesses follow market incentives – they always have and always will. So, the way to change aggregate outcomes is to change market incentives.

This is simple logic. It would be interesting to see a counter argument that says businesses would not change their behaviour in order to adapt to new market incentives.

22 09 2020
mikestasse

The markets got us into this mess, they’re NEVER going to get us out. You can’t get out of a hole by digging deeper…

22 09 2020
Brandon Young

Markets with perverse incentives got us into this mess. Markets governed by our collective goals can achieve any outcome we collectively decide is in our best interest.

If we want to achieve the atmospheric carbon concentrations trajectory agreed in the Paris Agreement, all we need to do is set a global price on emissions that is fully distributed as revenues for carbon sinking. Profit motive will do the rest.

If the pricing signals are dynamic and automatically increase when markets are not responding quickly enough, then the incentives and disincentives will rise to levels required to overcome any and all market inertia. And when competition and innovation are vigorous enough to drive outcomes beyond our goal trajectory the pricing signals will automatically reduce.

This really is a very simple control system, a very basic element of systems engineering, but one that has never really been exploited to achieve particular market outcomes. Market outcomes are actually very easy to control, far easier than real world systems, because there is actually only one single force in effect – the profit motive – and it is easily guided using pricing signals.

22 09 2020
mikestasse

Market outcomes are actually out of control. Pricing signals don’t work under limits to growth constraints. The markets, or more importantly those who are supposed to steer them, have no idea what to do next. Uncertainty rules.

People either have money and park it in the stock market, or they have none and don’t know how to pay their next bill. That’s if they’re not living under a bridge and actually have bills to pay.

22 09 2020
Brandon Young

Yes, uncertainty currently rules, precisely because we currently have **uncontrolled markets**. That is why we need **goal controlled markets** to navigate this era of limits to growth.

We need to ration out the remaining finite resources for however long we want industrialised human civilisation to remain viable. We also need to ration out the damage we are doing to the natural world, and repair the damage already done that has destabilised the planet’s natural cooling system.

Pricing signals are the ideal tool to achieve all of these objectives and to make the transition to a more sustainable economy. Pricing signals are not really about what individual people do on a daily basis, but more about what the industrial system does in aggregate.

If there are large penalties on some industrial activities that work against our collective goals, and large incentives on some industrial activities that work towards our goals, then market behaviour will systematically and automatically change to exploit those new dynamics. The cost of working against our collective goals will be effectively priced in to every economic and political decision being made. Those who get it right will prosper, and those who get it wrong will not.

20 09 2020
Jonathan Maddox

This analysis is well done for the most part, but it does have some significant flaws that make its conclusions questionable, in the areas of finance and oil price, and in the scale of materiel required for a renewable energy transition.

Michaux is critiquing “Business as usual but with renewables and batteries” and saying it’s impossible; and so it is, but not really for the same reasons he emphasises. BAU is indeed impossible, with or without an energy transition. An energy transition to renewables, along with de-growth, is not impossible.

The financial system is not “saturated with debt”: it is *all* debt and it is supposed to be all debt, that is how it works and how it has always worked. Every debt is someone’s asset and vice versa. Private-sector debts may well be at record high levels but interest rates are also at record lows, and cannot be raised far, precisely because of the high level of private indebtedness. The public sector invariably stands ready to bail out a struggling private-sector financial system — at the top end, typically, leaving workers labouring with life-long obligations, but this is a political choice not a matter of inability to forgive debts or boost wages. Central banks and national treasuries have bottomless pockets in the currencies they issue. Their “debts” are not of a nature that puts creditors at risk, nor is there any expectation that they ever need to be repaid in full.

Global currencies are not “going the way of the Zimbabwe dollar”. Hyperinflation is invariably a consequence of some collapse in supply, such as WWI reparations, the Ruhr occupation and general strike in Germany in the 1920s, or the expropriation of Zimbabwean farms from successful commercial farmers only for the land to be awarded to paramilitary cronies without farming experience or commercial connections.

It’s absolutely true that commodity and wage price inflation is the norm since the abandonment of the gold standard, but modest inflation in the wider capitalist world since WWII is modest, managed, expected, intentional and necessary in order to avoid deflationary spirals whenever there is a credit cycle downturn. Periods of somewhat higher inflation have been temporary: the peg of most currencies to the price of gold also (roughly) pegged prices for other mineral commodities for four decades from the Depression until the 1970s, and the belated abandonment of that peg allowed decades’ worth of pent-up inflation to unwind even at the same time as OPEC began to wield its monopoly power, which increased energy costs (as measured in currency) throughout the economy, not least in the mineral sector. Despite supposed inelasticity in petroleum demand, this prompted a fuel switch in the electricity sector which had until the 1970s been dominated by petroleum in many countries (Australia was not one of them), to the other fossil fuels and to nuclear energy. Electricity has its limitations, but in a sense it is what made energy fungible in the 1970s and 1980s. Today, climate change is prompting another fuel switch in the electricity sector, and transportation is now able to take part as well through electrification.

The pandemic is a known black swan in its own right, an outlier but not an anomaly, and can’t be dismissed as such. There will be further pivotal events of this sort. We knew such a thing was possible, likely, even inevitable; we just couldn’t anticipate the timing. New zoonotic diseases have always hit people from time to time. We continue to encroach on the habitats of animals and pathogens we have not encountered before, and microbes continue to evolve. We have very nearly overrun the entire surface of the Earth, but that process has not concluded and we should not expect a complete end to new diseases even if we do. As we see climate change effects of ever greater magnitude, some of the climate-triggered events will be comparable in economic and social effect to the pandemic. Things are going to change dramatically: de-growth in the activities where energy consumption is most profligate today is imperative and inevitable.

The assertions that some oil prices are “too high for all consumers” and some are “too low for all producers” is a bit silly. Very high oil prices in 2008 showed not that no consumers could afford petroleum, but that oil demand is in fact far more price-elastic than had previously been assumed, and that even well-off users would forego certain consumption (especially for entirely discretionary or basically wasteful consumption like air travel for business meetings or holidays) if the price was high. Similarly, low oil prices are not too low for *all* producers. Certainly some businesses have gone bankrupt and the bankruptcies have led to curtailments and shut-ins, but the multinational “majors” and national oil companies have never been in such a position, not even when Cushing oil prices briefly went negative this year. They’ve allowed other limited-liability companies and naïve investors to take on most of the risk of the higher-cost marginal production.

Now to material costs of batteries for transportation energy. Michaux’ analysis of BEVs for road transport looks pretty good on the face of it. BEVs on the road use significantly less primary energy than do petroleum-driven vehicles. I think there’s no likelihood of replacing all today’s road vehicles, let alone the far higher number of read vehicles projected for later in the century, with BEVs powered by today’s lithium-ion chemistries. Mineral scarcity is one reason for this (manganese and cobalt are more of a limiting factor than lithium itself). I doubt very much that the number of vehicles on the world’s roads will continue to grow at all beyond the 2020s. However it *is* very likely that a large fraction of the road vehicle fleet will indeed be replaced with lithium-ion BEVs relatively soon, and that chemistries relying mainly on more abundant minerals, and/or making more efficient use of some of the scarce ones, will be developed to a standard suitable for vehicle use in coming decades.

While light-weight batteries are of course most desirable for road and (maybe) air transport, the lightest possible battery isn’t an absolute necessity for mid-sized vehicles with shorter ranges, or for very heavy vehicles, or for stationary energy. A promising mid-weight battery chemistry without mineral scarcity questions, for stationary energy and for vehicles of the scale of a delivery van, a short-haul truck or a city bus, is sodium-sulphur. This could be suitable for rail and short-haul shipping also, but is unlikely to be useful for long-haul trucking (because lighter batteries are needed) or shipping.

While there’s every likelihood of batteries playing a role in short-haul marine transport (indeed a few battery-electric ferries already exist), some relevant numbers are missing from the analysis of their appropriateness for trans-oceanic shipping: the longer the haul, the greater fraction of the ship’s weight must be taken up storing the energy to power the trip. No battery chemistry is light or compact or (perhaps most importantly) cheap enough to power long-haul shipping across oceans. Some kind of energy carrier with a lower cost per unit energy capacity, and higher energy density, would be required for long-haul shipping.

Michaux gives a nod here or there to biofuels, and I certainly think that fossil fuels and/or biofuels will continue to have a (diminishing) role in the fields of aviation, long-haul shipping and as the backup role in stationary energy, meeting shortfalls in those few weeks when the wind blows but little and the sun is in hiding), even as electricity takes over many of the other roles of petroleum. But in the end game for fossil fuels, it’s good to know that synthetic fuels (in the forms of hydrogen, methane, methanol, petroleum-lookalike Fischer-Tropsch alkanes, ammonia), produced with energy from wind and solar electricity, can be produced with methods that are already well-understood, at costs comparable to the costs of today’s fossil fuels. The quantities required, thanks to electrification elsewhere and de-growth everywhere, would be only a small fraction of today’s petroleum demand. The electricity needed to produce them would be substantial, but the overcapacity required to build a least-cost wind- and solar-based power grid should mean there are good seasonal surpluses when electricity for fuel production is available at very low cost. We’ll be making hay when the sun shines, and neither shipping nor aviation will need to use batteries.

22 09 2020
22 09 2020
mikestasse

Very low cost energy is breaking the energy sector. If we can’t afford to pay for energy, there won’t be any to buy.

22 09 2020
mikestasse

‘The financial system is not “saturated with debt”: it is *all* debt and it is supposed to be all debt, that is how it works and how it has always worked.”

That is not true. Once upon a time people had some equity in what they were buying or producing, now they don’t. The level of leveraging is now so high, there’s little to no funding left to consume, not a bad thing really, unless you are an economist…

23 09 2020
Simon Michaux

Hi everyone. The purpose of this work was to bring EU admin thinking back to reality. They think they can take he whole system EV (or hydrogen) in just 10 years. I have personally heard this in meetings. Their thinking is dictated by the need for 2% growth p.a. and phase out fossil fuels.
I was at a banker finance meeting discussing the future battery industry. It was openly discussed that whoever moves first will lose everything to whoever moves second and third. This is probably Tesla’s fate. These guys are all waiting for the European Investment Bank to invest and startup the ecosystem for components and battery manufacture in Europe. Then all private sector groups will just step in and take the market. They won’t move until they can make a killing and are all waiting like vultures. I personally heard one of the guys from Deutsche say “in 2008 they printed money to bail us out, they can print money for this”. The EC rep said that was not going to happen. The Deutsche guy then said “so we wait for you to come to your senses, we have plenty of ways of making money elsewhere like we always do”.

23 09 2020
Simon Michaux

Currently all battery development projects and discussions across all levels of action from universities to European Commission to private sector companies are heavily invested in lithium ion battery tech. They may look at alternatives briefly but then will force all work to be done on Li-ion chemistry. NMC-811 is considered the next widespread application. I am advising a private group in them investing in technology that is not Li-ion. The push back they got back from other commercial entities that was so savage that the project was shut down. “we understand what you are saying but we are so heavily invested in lithium chemistry, we cannot consider anything else, you are on your own”.

So market forces are indeed at work, where the market has a group think and a self funded eco chamber. The problem with this is society at large will industrially develop on a solution that will not work in a wide enough scope to be accessible for society at large. It takes time to re-engineer to a different solution. It will take years. Meanwhile supply and demand economic forces will result in disruption. This whole system thinks it can go back to oil and gas anytime they want if the EV thing does not work out. The purpose of this work is to get the right people actually looking at the practical logistics. When limitations become clear, steps can be taken to develop parallel systems.

23 09 2020
Simon Michaux

The oil price model I proposed to me is common sense. There is a point when the market cannot support a higher price. There is also a point where producers lose money and are not viable. This is basic price discovery. Supply and demand is a dynamic system that interacts. There comes a point when a market like oil becomes not useful anymore and we are required to go and find something else.

23 09 2020
Simon Michaux

The chart shown at 25:31 minutes shows how the metal price market changed structurally in early 2005. The 2008 GFC, a large economic correction did not resolve the volatility. Since then the whole system has been held up by quantitative easing, or the printing of money. There are many historical examples of where this kind of problem solving leads to. Hyperinflation is now a very real risk. That most central banks around the world are taking on more debt each year for some time now is a marker for this. This is the equivalent of living on our credit card. At some point the debt has to be paid. We are going backwards not forwards in debt profile. I have found over the years that many economists do not like this logic chain and insist that this is perfectly normal. Each to their own.

23 09 2020
Simon Michaux

These are the numbers, going steadily in one direction. Pure and simple. https://www.zerohedge.com/markets/global-debt-exploding-shocking-rate

23 09 2020
No name

Brandon Young, please elaborate. Describe the brave new world after the tweaked capitalism that you recommend has worked out its wonders. What is then the year, 2050? How does the civilization power itself? How does it feed itself without agricultural emissions? How many happy consumers will be there on the planet? Where did the emissions, biodiversity decline and loss of soil go? What happened to the carbon that has been already released into the environment?

24 09 2020
Brandon Young

I have posted a response but it hasn’t appeared yet. If it doesn’t make it past moderation I will post it on my site under Global Carbon Sinking Fund.

24 09 2020
Simon Michaux

The problem is the real system practical needs are not discussed openly. Any problem solving system you might propose cannot function without clear information

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