Renewable energy and the diesel generator boom

If you missed Sam Volkering’s email yesterday, he’s asking for your help.

As I see it, his project is all about hitting the UK’s financial services industry where it hurts. But Sam is a little more positive about his initiative.

Speaking of me being cynical, a few days ago I claimed that the renewable energy boom would end up increasing emissions. I didn’t know that this is already true in many places.

Australia’s Herald Sun newspaper has the story. In a town called Rukua, Fiji, a Japanese company and the government teamed up to provide solar power solutions:

Understandably, all of Rukua was thrilled to get energy access and wanted to take full advantage. So more than 30 households purchased fridges.

Unfortunately, the off-grid solar energy system was incapable of powering more than three fridges at a time, so every night the power would be completely drained.

That led to six households buying diesel generators. According to researchers who studied this project, “Rukua is now using about three times the amount of fossil fuel for electricity that was used prior to installation of the renewable energy system.”

Oops.

This experience isn’t unique. When Greenpeace created the first 100 per cent-solar powered community in Dharnai, India, it provided locals with expensive power that drained the system’s batteries within hours. Dharnai residents protested at being given “fake electricity”, and demanded successfully that the government supply it with “real electricity” from the coal-powered electricity grid.

“Bloody plebs”, the politicians must’ve thought. “Give them a solar panel and they demand electricity…”

The profit opportunity is obvious. Wherever the climate change protestors and solar companies go, set up a company that sells diesel generators. You’re bound to make a mint.

But Fiji and India are far away. Different strange phenomenon are playing out here in Europe.

Did you know Sweden is producing less hydropower than it did in the early 80s?

Source: IVA

Call that a renewable energy boom?

Strangely enough, just as the global cooling period which began in 1945 stopped, and the Intergovernmental Panel on Climate Change (IPCC) was formed, Sweden’s hydropower capacity plateaued.

Perhaps Sweden isn’t quite the global warming renewable energy goody-two-shoes that we assume. Perhaps it’s just a hilly and wet place… Much like Britain is a place with lots of coal…

Here in Britain, our usage of coal isn’t the only thing that’s falling. Electricity generation itself is…

Source: Carbon Brief

At least the renewables boom here is real. That little green bit down the bottom.

And yet, consider what the Guardian discovered in 2015:

UK energy bill subsidies driving boom in polluting diesel farms

National Grid to offer a new set of subsidies to diesel generator operators under a scheme designed as insurance against the lights going out

Subsidies levied on household energy bills have helped drive a boom in polluting “diesel farms” across the UK to meet periods of peak electricity demand, the Guardian has found.

Almost a quarter of Britain’s back-up power under one programme for the National Grid is being provided by tiny fossil fuel power stations – some of which have been built on farmland by entrepreneurs.

The mini-power stations are brought into play by grid managers when there is a rapid surge in demand for power, for example when large numbers are watching major sporting events such as the World Cup or Wimbledon finals or during major TV events such as the final of Strictly Come Dancing.

Not so different to Fiji and India after all…

But what bothers me about this boom in renewable energy and diesel generators is what we discussed on Monday. Is it making us poorer and therefore less able to deal with dirty power in the end?

Falling overall electricity generation might suggest so.

But enough pessimism. What about profits?

Bloomberg has an interesting pitch. It’s all about flight shaming – the guilt people feel for emitting a lot of CO2.

This proves the point I made about the Kuznets curve on Monday. Wealthy people think about the environment first, so the key to helping the environment is… wealth.

Supposedly flight shaming is going to lead to a carbon capture boom. Flyers will be keen to offset their emissions (from flight fuel, at least) and will be willing to pay for it.

If you can discover a cost-efficient way to absorb CO2, you have something valuable to sell. The best technology (cheapest per unit of captured CO2) wins.

After the flight shamers, omnivores will be your next client. And then anyone who was duped by the government’s past climate-friendly policy of diesel subsidies. They should be just as gullible about reversing their past mistakes.

So carbon capture companies are set to boom. I’ve asked energy experts Kit Winder and James Allen about it. Stay tuned for their reply tomorrow, if I get one.

My third profit opportunity is also based on a policy of questionable credibility. The idea that, if we all invest in the stockmarket, we’ll all get rich enough for retirement.

I won’t dig into why this is flawed. One quick look at a population pyramid is enough to make you wonder who is going to buy all these assets which retirees plan to sell to pay for retirement.

The point I do want to focus on is what effect all this inflow of money has on stockmarkets. If everyone earning an income is ploughing money into stocks each paycheque, that’s going to move markets.

Especially if they do it at the same time.

Veteran trader Eoin Treacy reckons that’s exactly what’s happening. And he’s willing to share with you when it happens, and how to profit from the jolt it causes in financial markets.

So far, a few thousand people have signed up for his Rapid Money Masterclass. For free. Are you one of them?

Until next time,

Nick Hubble
Editor, Southbank Investment Research

Category: Energy

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