Another Boring Commentary on Fossil Fuel vs Reality of Renewable Energy

I feel like I'm preaching to the choir, an analogy that works when writing this on a Sunday.

At SeekingAlpha there is another essay on oil vs renewable resources, dated November 14, 2010.

For newbies, two things:

• I am inappropriately bullish on oil; and,
• I consistently argue that folks are not being told the truth about renewable energy.

Here are some interesting tidbits from that SeekingAlpha article written by Dian Chu, apparently an expertise in Asian finance.

1. Peak oil will occur between 2010 and 2030. Renewable replacement technologies will become available around 2040.  (That's ten years too late.)

Comment: my investing lifetime ends a bit sooner than that (although I will pass my portfolio down to my children and grandchildren). However, all indications are that there will be a real shortage of oil before 2020, and very likely a perceived shortage by 2015. See earlier commentaries at this blog. I think Ms Chu's focus on 2030 - 2040 does a disservice to investors and policymakers. It is too easy to blow off this analysis because it talks about something twenty to thirty years from now. My hunch: we will see a foreshadowing of 2030 - 2040 by 2015, and Bakken investors might see nice returns well before that.

2. Ms Chu argues that "despite the excitement and hype surrounding a future of clean energy, a majority of current technology simply [fails economically and / or] lacks the infrastructure for a mass deployment ... even with government subsidies, tax breaks, and outright mandates."

Comment: Yup. I agree. Look at MDU trying to recoup costs associated with its two wind farms. It's not going well with regulators and the request for a rate increase will go over even less well with rate payers.

3. Ms Chu notes that the supply chain of renewable technologies is not as green as we've been led to believe. Much of the renewable energy technology depends on rare earth elements which results in radioactive material as a waste by-product.

Comment: Yup. Ms Chu points out that uranium/radioactive waste by-products to support renewalble energy projects will make the Canadian oil sands look like "green energy."

4. And, then my favorite. Because of the unpredictable nature of wind, utilities buying into wind farms must also build fossil fuel power plants to back up their wind farms when the wind ain't blowin' or when the wind is blowin' too hard and they need to feather the turbines (disconnect them from the generators so they don't damage the hardware). As an example, Ms Chu points out that "in China, the city of Juiquan ... needs to build 9.2 gigawatts of new coal-fired generating capacity as backup power for the 12.7 gigawatts wind turbines due to be installed by 2015. More wind farms would need more coal-fired power plants, with little or possibly no carbon reduction."

Comment: Yup. Why not just build the "clean" coal-powered plants and forget about the wind farms in the first place? Oh, that's right. Wind farms make us feel good; and, speculators can trade carbon credits. "Clean coal" is not an oxymoron. "We're" working on it in North Dakota near South Heart, a town significantly smaller than Juiquan.

Ms Chu reminds us that, according to the International Energy Agency (IEA), the demand for oil, the price for oil, and global dependence on OPEC will continue to rise through 2035. As noted above, I can't get my hands around a date 25 years in the future. I think we will see a foreshadowing of all this a lot sooner.