It All Started with a Green Dream

And now a perennial truth about politics… 

Nearly everything that looks amazing on a white board, usually ends up being pretty disastrous in practical application. 

Take the Paris Climate Accord for example…

The Paris Agreement is a legally binding international treaty on climate change. It was adopted by 196 Parties at COP 21 in Paris, on 12 December 2015 and entered into force on 4 November 2016.

Its goal is to limit global warming to well below 2, preferably to 1.5 degrees Celsius, compared to pre-industrial levels.

To achieve this long-term temperature goal, countries aim to reach global peaking of greenhouse gas emissions as soon as possible to achieve a climate neutral world by mid-century.

By the Climate Action Summit of 2019 — the annual global climate change party otherwise known as COP 25 — 77 countries and over 100 cities committed to achieving a net zero emissions policy by 2050. Billions of dollars were pledged by global governments to various green initiatives.

Germany was determined to go all in on this effort…

Germany’s Big Green Bet

In January 2019, the government announced its plan to close down all 84 of its coal fired power plants (which accounted for 40% of Germany’s electric power at the time) by  2038 and shift primarily to renewable energy sources. 

“This is an historic accomplishment,” said Ronald Pofalla, chairman of the 28-member government commission, at a news conference in Berlin following a marathon 21-hour negotiating session that concluded at 6 a.m. Saturday. The breakthrough ended seven months of wrangling. “It was anything but a sure thing. But we did it,” Pofalla said. “There won’t be any more coal-burning plants in Germany by 2038.”

The plan undoubtedly looked great on the whiteboard. And through 2020, the year of pandemic lockdowns, things were working out pretty well. 

For Germany, 2020 was a banner year in the production of renewable energy. Clean energy sources—wind farms and solar arrays as well as hydroelectric and biogas plants—ratcheted their share of power consumption up to 46 percent, nearly equaling that of coal, gas, oil, and nuclear power combined.

Then, of course, the lockdowns eased… and winter 2021 arrived.

Suddenly energy production from renewable sources fell off.  By way of explanation, German Statistics Officials stated the obvious: 

“A lack of wind from January to March this year sharply reduced the amount of electricity produced by Germany’s wind turbines.”

This failure on the part of renewables pushed demand for fossil fuels, which by now were in short supply, through the roof. Utilities were forced to switch back to coal to generate electricity. And carbon costs, which had soared by 80% over the year, simply added to the pain.

“Gas supply is short, coal supply is short and renewables aren’t going great, so we are now in this crazy situation,” said Dale Hazelton, head of thermal coal at Wood Mackenzie Ltd. “Coal companies just don’t have supply available, they can’t get the equipment, the manufacturers are backed up and they don’t really want to invest.”

Enter (and Exit) Russia

By the end of 2021, the EU and especially Germany were in dire need of some source of energy to power their countries. It was Russia to the rescue. Suddenly blessed by the Biden administration — apparently the only pipeline Biden doesn’t hate — the Nord Stream 2 pipeline was greenlighted for completion. This would have supplied Germany with all the cheap Russian natural gas they needed.

Then Russia invaded Ukraine… and sanctions ensued. Sort of.

Despite universal condemnation of their aggression, oil and natural gas carve outs were written into the sanctions. You can understand why…

The European Union imported nearly €100 billion ($110 billion) worth of Russian energy last year. Russia supplies about 40% of the bloc’s imports of natural gas, and about 27% and 46% of its imported oil and coal respectively.

And, depending on how things play out, this sets up a big potential advantage for the United States.

I’ll share the opportunities and what to be on the lookout for in your next letter…

Make the trend your friend,

Bob Byrne
Editor, Streetlight Daily