Yves here. This post makes one of the several points that Green New Deal and other Disney-colored no/low pain energy transition types pointedly avoid: that rising energy costs are not only unpopular but also cause political instabilty. Normura looked at food and energy costs as a percentage of total household costs in the Middle East around the time of Arab Spring, and them rising to an unaffordable level for too many on the bottom was a good predictor of large-scale protests.
Here, Larry Fink of BlackRock points out that greener energy sources are often higher cost in to less affluent citizens and countries. Even if the running rate might be cheaper, the cost of new equipment, starting with electric vehicles, is a hurdle many can’t surmount. And as we saw before UK energy subsidies kicked in, the cost of charging a car in the UK was higher at points in later 2022 than gassing up its internal combustion engine counterpart.
Mind you, yours truly is no fan of BlackRock. But Fink has been attempting to be out in front of the so-called ESG (Environmental, Social, Governance) investing fad. And as a fund manager, running overwhelmingly index funds.So BlackRock gets fees and is agnostic as to what it owns. If the end investors want a simple index, BlackRock can sell them that, or it it wants one with a tilt, such as fossil fuel companies excluded, BlackRock can make that for them too.
Fink uses the example of emerging economies likely to use more coal rather than convert much to green energy at current cost levels. He also alludes to the fact that one of the reasons the expected energy crunch didn’t materialize last winter was many households in Poland used their coal burning stoves….and apparently burned even more wood and other combustibles than usual. Note that in Poland, until 2022, the government subsidized newer gen coal stoves as environmentally friendly. Admittedly, households that took up the Clean Energy program were more likely to convert to gas furnaces and heat pumps, but still…
The article also depicts the EU as more able to bear the [presumed higher until Something Is Done] costs of clean energy which is narrowly true but conveniently sidesteps the big cost, that of deindustrialization. And there is seldom enough talk of current inadequate grid capacity and the question of the environmental costs of battery storage and other critical components of the presumed green buildout.
By Julianne Geiger, a veteran editor, writer and researcher for Oilprice.com. Originally published at OilPrice
There will be no energy transition unless we can find new technologies that bring down the cost of renewables, BlackRock CEO Larry Fink told Bloomberg’s Dani Burger on Friday at the Berlin Global Diague forum.
“We are not going to have a transition unless we can find technologies to bring down the competitive cost of renewables. We cannot do that.” Fink said, adding that BlackRock conducted a survey that showed 57% of their global investors are planning to put more money into decarbonization technologies.
“We saw what happened with elevated energy prices just two years in Germany and in Europe. You can’t have a transition.” Fink argued that when energy prices go up, emerging nations use more coal—because “life is more important than the future.”
“We need to reimagine finance,” Fink said, so finance can find ways of bringing billions and even trillions to emerging nations to help them decarbonize.
On the point that energy insecurity can be impossible for emerging nations to manage, other financial firms seem to agree. In late 2022, during Europe’s energy crisis, Europe’s energy security issues drove near energy poverty in the emerging world, Credit Suisse energy analyst Saul Kavonic said. While European countries and others may be able to pay a premium for energy, emerging nations cannot, and some already choose blackouts on a fairly regular basis because they can’t afford even today’s energy prices. And if they can afford some form of energy, it’s the lowest cost energy, such as coal, despite any green ambitions they might have.
Larry Fink oversees $10 trillion in assets for BlackRock, the world’s biggest asset manager. BlackRock was ridiculed by some late last year for calling on companies to invest through an environmental, social, and governance lens.
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If you go on sites about renewables and EVs they are always claiming that renewables are now cheaper than fossil fuels. But they do leave out the storage situation. You can sneak renewables in for a while without storage (turning natural gas power plants or hydroelectric on and off) , but at some point you need to start building pumped hydro and other things, and that increases the cost, and probably to more than fossil fuels.
But the issue is that something has to be done. Cost or not. At a minimum the developed world needs to convert as quickly as possible, regardless of the pain. But with a president elected for only 4 years I guess that will never happen. Can’t do the right thing if it gets you booted out of office.
RE: Cost or not.
It’s really a matter of political will, isn’t it, given that sovereign countries can print as much money as they’d like? Cost really shouldn’t matter – money does not grow on trees and is not a natural resource – so if Uncle Sugar can subsidize corn, for example, to the point it destabilizes the Mexican economy, they can certainly do it for energy too (maybe without the deliberate destabilization this time).
You last sentence nails the problem – zero political will from our pusillanimous pols.
Any subsidy to one group is at the same time an implicit tax on another. So if you subsidize renewables, you are also (implicitly, not directly) taxing carbon sources. This is true no matter what the source of the subsidy is, either direct taxes or money created by the government. At the very least, this sets up a political wrestling match between the competing groups for government succor. Some instability is baked in.
Then on top of this, you have Fink’s point, one echoed by others on this forum. Developing countries can’t afford the additional infrastructure, and poorer citizens feel more of the burden in terms of the % of their income.
While I am not a big fan of neoclassical economics, the idea of the “Theorem of the 2nd Best” from the subset called ‘Welfare economics’ bites very hard in this area. Basically, unless you can change the entire system, any attempt at changing one PART of the system is just as likely to make people worse off rather than better off. So many politicians, business leaders, and a few of our fellow citizens are more than comfortable with the devil they know, and are therefore unwilling to strike a new, bold path.
If a wannabe-president ran on doing the right thing to begin with, and ran on “how to” do it, and got elected on it; perhaps that president would not be de-elected after 4 years for starting to do it.
But that president would have to get elected on an unpleasant program of “how to” do it to begin with. Maybe if Carter had run and won on “cardigan sweaters and energy cutbacks” to begin with, he wouldn’t have been backlashed for introducing it AFter he was elected.
It would be more fruitful to speak in terms of Energy Return on Investment rather than price. The price of fossil fuels reflects only the cost of extraction, not any of the costs to society and “the future.” The same is true for replaceables like wind or solar. The externalities of extraction–habitat loss from expanded mining, geopolitical strains caused by where rare earths are located, and the costs of disposal or recycling–are not reflected in the subsidized price.
EROI is dropping for fossil fuels, but it still hasn’t reached the low level of renewables. A much lower EROI is in our future, which means that consumption levels must drop as well.
Fink is right that if The Market and the businessmen are left to decide on energy sources, there will never be a transition before we reach the chaos point.
Food riots have moved human history like nothing else.
The next Big thing will be hydrogen replacing diesel in agriculture, construction and shipping.
yes there is a problem and it is significant too – fossil fuel addiction is deadly and the oil companies knew it from studies Exxon did in the 70’s – geez, maybe instead of billions in profits and drilling and fracking everywhere those profits and shareholder value should be used in what meager repair of our environment is possible – Black Rock? Really? i believe in Santa, Easter Bunny, capitalism and the Stork too – it is a very complicated issue to resolve, in one sense, and a very easy one if direct action were applied – not holding my breath (with polluted air probably holding microplastics) –
This is almost silly. Assuming that Fink is quoted in context, CO2 generation is a first world, largely elite issue. Don’t speak about some theoretical nonsense of reimagine finance in the third world.
Classic case of do what I say, not what I do.
If you are talking about the global energy transition and your argument is what households in Poland did, you are missing the bigger picture. What happened due to the elevated fossil fuel energy price in the EU? Less gas use, less coal, more renewables. Larry has the basic idea right, but he has the bigger picture wrong. I’m betting he knows that, though, and is just talking his book.
https://www.carbonbrief.org/eus-use-of-fossil-fuels-for-electricity-falls-17-to-record-low-in-first-half-of-2023/
I don’t know where you get your facts. The EU clearly found that carbon use rose in 2022. First half 2023 is not a useful comparison period since the big use of coal is for heating in winter months.
From the EU Commission:
https://ec.europa.eu/eurostat/web/products-eurostat-news/w/ddn-20230622-2
As for Fink, he’s not talking his book because he had no book. BlockRock is not a stock-picker. It manages index funds. If anything he is talking against his book because BlackRock has been trying to position itself as an ESG leader (and selling index funds with certain seen to be bad categories excluded is a wee bit higher fee than the plain vanilla types). So talking down a pet green energy enthusiasm is going to ruffle the feathers of some of his allies.
I don’t like Fink but many of the criticisms of him and BlackRock are way off base due to not understanding his business.
“Electricity generated from coal collapsed by 23% and gas fell by 13%, compared with the same period a year earlier. ”
Same period a year earlier.
No book to talk? https://www.reuters.com/business/energy/blackrock-tells-uk-no-halting-investment-coal-oil-gas-2022-10-18/
You really don’t get that Fink as an indexer is agnostic, do you? His funds hold fossil fuel companies only to the extent they are in the relevant indexes. His funds rebalance more than daily. He gets paid on index replication at the cheapest cost.
Having said that, BlackRock so big that it does get special assignments from governments like the Ukraine reconstruction headfake. So he does have an interest in keeping his profile pretty high so that BlackRock looks like a solid corporate citizen.
He is therefore, like McKinsey, in the business of talking up leading edge conventional wisdom.
they’re smoking the really good stuff to be spouting this diarrhea of BS – absolutely agree it’s a classic case of do what I say, not what I do – tongues should be extricated with a sharp pointed tool –
“We need to reimagine finance,” Fink said
That’s a chilling thought. reimagine in what way?
Billions and trillions that BlackRock can take two and twenty on, plus a nice set of fees and without risk of course, or why would they do it?
‘There will be no energy transition unless we can find new technologies that bring down the cost of renewables, BlackRock CEO Larry Fink told Bloomberg’s Dani Burger on Friday at the Berlin Global Diague forum.’
Or how about backing off the use of so much energy. Talking about ‘new technologies’ is no different to waiting for wonder weapons to win you a war – and will have the same result. What drives me nuts is how as energy supplies become more and more critical to human civilization as they start to run down, we are ramping up more and more energy needs like it will last forever. Just look at the massive energy needs for the server farms for things like cryptocurrencies or AI or ChatGPT. The demand keeps ramping up.
You are correct. Everything currently designed and manufactured uses more energy. A hundred year old refrigerator uses less energy than a new one. I’ve been doing energy stuff since the mid-70s. In college, at the University of Idaho, my roommate and I had a solar tracking system that got electricity and hot water. I currently am living a 100% off the grid. A typical house in the US uses around 30-35 KW a day. I use less than 5 KW. Have a bank of L-ion batteries of 600 amp hours (around 5-7 days). This is about half a Telsa. One thing no one talks about is the amount of energy required to charge LI batteries. What I’m seeing, it takes 3-5 KW to store one KW of power. I’ve got state of the art stuff, all optimized to extent battery life and performance. If any one is interested, I’ll write an article. Also, it was cheaper to go off the grid, than connect to the power company.
I would love to see such an article.
We get 80% of our electricity from solar panels that we installed 10 years ago. When the RECs expire, soon, am considering some kind of battery storage system. But are there not old tech batteries that might, in the long run, be better than li batteries? (We have space in the garage above which the solar panels were installed).
The older longer lasting tech battery chemistry would be nicad or nickel iron instead of lead acid.
Nickel iron are only made in china. They are a very long lasting battery, but they take a lot of maintenance ( adding water) and are very low efficiency, roughly 80% or less. They do have a lifespan and depending on how hard you use them, they will require a complete rebuild in 15-20 yrs. It can be done at home but its chemically dangerous due to the potassium phosphate used as the electrolyte.
But they are really pricy and its why folks are going to lithium.
From an environmental point of view I think the nickel iron is probably the best. Not sure who’s selling them as the last company went bankrupt.
I have used lithium batteries a lot and they really are 90-95% round trip efficient.
Its very possible that the meter you’re using to measure it isn’t installed correctly or isn’t calibrated or something like that.
If they actually did use 3-5 kwh to store 1 kwh, then that is 2-4 kwh of heat, they would be very hot, so I suspect its a metering issue.
My son did the wire of the panels and inverters (from watching a bunch of youtube videos. Got tired of fighting with him over it. He was gone working for a couple of months. So I could fix things. The grid uses an earth return to the generator or substation. This why the neutrals and grounds and connected. When of the the grid they are separated. He had the battery charging ground to connected to neutral in the panel. So charging was feeding through the earth ground. He had some other circuits miss wired. Anyway, I pulled the battery log data from the inverters and your numbers are close. The rack mount batteries don’t have cooling fans. Temperature to warm or cold will mess with charge rate and power needed. Thanks for the note, I should of looked at the numbers after I fixed the wiring. To many things going on at the same time. Before winter I’ll have all inverters and battery backup in a more controlled environment.
This would be a very valuable and worthwhile article. Both the theoretical thinking behind how you did what you did and the technical details of all the particulars of how you did it would be welcome by at least some readers.
If we think of the typical house in the US as containing 4 people, that would mean 7.5 or nearly 8 KW per day per person. Since the typical house is on the grid, would it be possible for the typical house to get its usage down to less-than 5 KW per day? If it would, that would be a major reduction in electricity use.
Two small quibbles:
1)Energy = kWh, _not_ kW.
2)Efficiency of Li battery charge: Battery in-out > 90%. Once you factor in losses in cables, chargers and inverters, my experience finds that 70-75% total system efficiency is readily attainable. This means for every 1kWh of energy you extract at mains voltage, you need to stuff approx. 1.4kWh into the charger (from your PV panels).
Also, I would guess that if you have a 600Ah battery pack that lasts 5-7 days at 5kWh a day, that corresponds to about 28kWh (e.g. 24x 12V/100Ah LiFePO4 batteries in 48V series/parallel configuration).
Anything but the serious conservation of energy and less consumption, which is anathema to capitalism…
There is little investment in public transport here in the US, and a friend who frequently travels to Europe for work is telling me how travel by train and air within the EU has become degraded. In Italy after a flight was cancelled he was forced to take a 10.5 hour train train ride where he described the train as freezing cold with nothing to eat but from vending machines, no restaurant car etc. I asked him if it was just a problem in Italy, he said German trains are even worse with cancellations, lateness etc.
You make the point: capitalism. Sure, it is good to hear and reason within the point of view of the trillion dollar managers like Fink. Their class understands capitalism well. There is much to be learned by critically examining their world view and assumptions.
Alas, within the confines of capitalism anything that these trillionaire managers think they can conjure up to ‘fix’ the class struggle only exemplifies how deep that struggle has become.
Their delusion will be our epitaph.
On the political front I am reminded by a quote of Engels:
“It is a peculiarity of the bourgeoisie, distinguishing it from all other ruling classes, that there is a turning point in its development after which every increase in its means of power, that is in the first place every increase in its capital, only tends to make it more and more incapable of ruling politically.”
— Fredrich Engels
A few facts to counter Finks look at the world by only looking at Europe for heating which probably still heats with coal.
1. Solar is cheaper than coal generation of electricity. A couple of Community Choice Aggregators in the Bay Area signed a contract for solar AND storage for about $38/MWh, which is about 60% of the cost of coal.
2. Peaking gas generation electricity plants are being replaced with batteries because they are almost instantaneous and cheaper to run. Calpine tried to closed a fairly new plant because it was losing money but CAISO keep them on line for awhile longer.
3. The electric grid is becoming two-way instead of electric corporations providing all the electricity. This is referred to as a Virtual Power Plant VPP. Stored solar is being paid and sent back to the grid during peak hours. The Ford F-150 Lightning has two way charging as well as other electric vehicles.
4. Coal fired electric plants will almost all be gone by 2030 in Australia because they need to run at a 70% capacity factor to not lose money. Solar and wind are cheaper than coal so they provide more and more electricity and coal plants don’t run enough. A number of large coal plants have been shuttered in the US and a number of utilities are shutting them as they become unprofitable since the cheaper priced energy (wind and solar) is taken first.
5. Heat pumps are being promoted by governments because they are more efficient and don’t pollute but adaption is not fast even with incentives.
6. 40% of new cars in China are BEVs and will be 100% when the pollution laws on ICE cars kicks in at the end of the year. China generates enough solar electricity to provide for all their housing stock. Coal and fossil fuels are used by industry but they are now beginning to provide wind, solar, and maybe?? fusion for that.
7. Lithium is the current battery material but new sources are beginning to come online for cars and stationary storage. Sodium batteries have less environmental impact and will be cheaper.
8. Solar has dropped from $15/watt in 2008 to $2/watt installed today. The panels are down to $0.27/watt. Onshore wind has dropped and offshore wind is dropping. Both solar and wind are about half the cost of coal generated electricity. The fossil fuel state of Texas gets 22% of its electricity from wind and solar which is equivalent to that generated by coal.
9. While the financial industry would like to hang on to their profitable fossil fuel industry, those in the center see the future. Saudi Arabia and the UAE are building cities with 15GW solar plants, EV cars, and only solar energy for housing. MBS has dictated that 50% of housings electricity must come from solar by 2030.
Mr. Fink, I suggest you do some early-stage investing in companies that are building village-, farm- and household-scale production processes which produce the goods that households spend the bulk of their income on, such as energy, food, buildings, education, and health care.
You’ll vastly reduce consumption of fossil fuels, and cycle materials, and more importantly you’ll achieve major, lasting positive impact on CO2 loading.
All of these production processes (products) are desperately needed in the emerging economies, and that’s where the bulk of the CO2 will get generated if they don’t have an alternative.
Climate change is a global disaster. In a kleptocracy disaster capitalism designs and implements “solutions”. These solutions are designed for one purpose, maximize profits. They will always be the wrong , or at best least efficient, answer.
BlackRock have got the wrong model
It isn’t about ‘tech’.
It’s about the Oligarch Welfare State and Nanny Fed
Ahem
According to the IMF
Globally, fossil fuel subsidies were $7 trillion in 2022 or 7.1 percent of GDP
https://www.imf.org/en/Publications/WP/Issues/2023/08/22/IMF-Fossil-Fuel-Subsidies-Data-2023-Update-537281
This is an underestimate! For example we don’t know how much damage arises from fracking because of giveaways to the fossil fuel sector such as the Halliburton loophole.
Another example of the US oligarch nanny state is pretending that failed businesses haven’t failed, e.g. the $ 29 trillion that temporarily propped up the derivatives dogs dinner economy that clowns like BlackRock gormandise on
$29,000,000,000,000: A Detailed Look at the Fed’s Bailout by Funding Facility and Recipient
https://www.levyinstitute.org/pubs/wp_698.pdf
Uncle Sam needs an energy policy that isn’t tied to propping up the oligarch welfare state.
It is about profits, Not Oligarchs.
All is not gloom and doom. EVs are getting less expensive to own and run than Petrol cars.
Slapping a common use charging station needs to have an a mechanism process the property owner to collect money from the charger to offset the cost of the device and pay for the electricity.
Yes
I agree.
But the profits (supported by massive subsidies) will end up with the oligarchs.
I also agree that ‘ All is not gloom and doom’.
However, a key issue is honest accounting from the likes of BlackRock and the US government about the true costs of fossil fuel.
born in 41 outside of Birmingham in the UK, living 21 years in Birmingham, most houses heated with coal. The smog was so bad at times the bus conductor had to walk to one side of the bus and with one eye on the curb, for the trip to continue. New rules banned coal heat and many switched to gas (which was produced from coal ….in the gas works on the outskirts of the city. cleaner combustion certainly made a big difference.
People will of course do what they have to and can do, to keep from freezing.
This is a misleading discussion. What Fink is basically saying is that developed countries can’t make the energy transition because emerging countries can’t effort it. Aside from having no logical connection, emerging and poor countries don’t have to do the transition in the near term. ~69% of global greenhouse gas emission comes from USA, China, EU27, India, Brazil, Russia, South Korea, Japan, Saudi Arabia, Canada, Australia (https://edgar.jrc.ec.europa.eu/report_2023). These countries are either industrial powerhouses (GDP PPP) or just filthy rich (SA). These countries can afford the transition if they want to (I am open for debate in case of India and Brazil, but the core message is still the same). Heck, whole of Africa accounts for just ~4% GHG (https://www.statista.com/statistics/1287508/africa-share-in-global-co2-emissions/). If they don’t transition to green energy in the next 40 years so what? The can do it incrementally. If one powerplant needs replacement, just buy solar instead. No need to tear down working infrastructure.
Emerging economies have made clear they want to have first economy lifestyles and they do not accept the idea that the fact that advanced economies created global warming means they should wear an energy hairshirt. So for them, more costly energy is an obstacle to development and the betterment of the life of their citizens.
That’s why they should use old and tested methods e.g. fossil fuel, if it’s cheaper for them. My talking point is, that it doesn’t matter rather developing countries can afford green or not because they have just a small fraction of GHG emission share and in total, they just don’t matter. The countries that matter are all rich/industrialised to afford green infrastructure.
Maybe not so much reimagining finance as admitting that profit and productivity can no longer be extracted from the environment and society debt free. If finance included original sin, finance itself would start out with an equal burden of debt to match anticipated profits. And since finance is all fiat, the value of any commodity can also be fiated and construed to balance out both the debt to the environment and the happy profits. So where is the problem? All finance has to do is acknowledge the initial debt to the environment and society of whatever it is. The transition to net zero, or whatever it is being called, creates a big investment. Investments are meant to pay off over time. The payoff is survival. But, “nope, no we can’t afford that,” etc, etc. is insanely stupid. Especially so since our previous financial irresponsibility has already compounded us to the brink.