What Green Energy Advocates Have Failed to Understand

The inflation in goods and services we are experiencing in the United States have many unintended consequences. One of those is that labor and material cost increases make the transition to green energy far more difficult to achieve. We see this in many recent decisions by private sector companies and reactions by the public to green energy initiatives:

• Ford Motor Company has announced that it is scaling back its production of electric vehicles at its Michigan production plant because its production and distribution costs are so high that it loses $32,000 per EV that it sells. Its losses will worsen because of the increased compensation it agreed to pay UAW workers, who are struggling to keep up with inflation in their daily lives.https://finance.yahoo.com/news/ford-lose-4-5-billion-173612802.html#:~:text=As%20Reuters%20reported%2C%20Ford%20lost,June%202023%2C%20per%20Cox%20Automotive.
• GM announced that it would cut back EV production because of higher costs and lower demand.https://www.foxbusiness.com/markets/evs-profit-potholes-major-us-automakers-gm-ford
• Danish company Orsted has cancelled two New Jersey offshore wind projects because of higher interest rates, supply chain issues, and higher labor costs. https://www.npr.org/2023/11/01/1209986572/offshore-wind-energy-new-jersey-orsted#:~:text=In%20a%20setback%20for%20the,projects%20are%20canceled%20in%20N.J.&text=Wayne%20Parry%2FAP-,Land%2Dbased%20wind%20turbines%20spin%20in%20Atlantic%20City%20N.J.%20on,problems%20and%20high%20interest%20rates.
• Public opposition to offshore wind projects has increased because of the concern that they might result in the death of whales and in negative impacts on fisheries. This opposition, which comes from another part of the environmental movement, is raising the carrying cost of projects.https://www.forbes.com/sites/davidblackmon/2023/02/27/bidens-offshore-wind-dreams-face-rising-controversy-opposition/?sh=387ff7c13c94
• Lithium, a core material for the green energy economy, will face severe shortages as early as 2025, which will probably significantly increase prices. This, in turn, will increase production costs on electric vehicles.https://www.cnbc.com/2023/08/29/a-worldwide-lithium-shortage-could-come-as-soon-as-2025.html

This is not what the Biden Administration or green energy advocates expected or hoped would happen. Why is this happening?

Ed Conway's recently published book, Material World, provides an explanation. Many material inputs for the green energy economy, especially lithium, but also silicon chips created from special types of sand, require huge amounts of fossil fuel energy in production or refining. When green energy advocates cause government officials to reduce oil, natural gas, and coal production by withholding permits, the major energy inputs into the mining and production of vital green energy materials significantly increase in price. This point has been succinctly made in the MIT Climate Portal.

https://climate.mit.edu/ask-mit/how-much-co2-emitted-manufacturing-batteries#:~:text=Currently%2C%20most%20lithium%20is%20extracted,CO2%2Demitting%20fossil%20fuels.

This is not just true of lithium. It is true of all materials used in battery production and in the production of steel used in building wind farms and solar panels.

https://www.panparks.org/are-fossil-fuels-used-to-make-solar-panels/

While the downstream effects of these green energy sources have lower CO2 emissions, the process of getting to this outcome requires huge fossil fuel inputs. According to Conway, the Chinese, who produce and export most of the green energy minerals, like lithium and cobalt, use huge amounts of coal in their process of converting the materials they mine to usable materials for the green energy economy. Similarly, as shown in the diagram above the title, silicon chips require a lot of fossil fuel energy, often from coal.

In short, there is significant interdependence between low-cost fossil fuels and the production of what is needed for the energy transition. Nuclear power is a clean energy source, but renewable energy advocates have failed to understand that it might be a better option for electricity generation than renewables because it avoids the intermittency problem of wind and solar energy.

Power density is an unchangeable part of the energy equation. Coal, oil, and natural gas deliver far more power for the same material mass than do wind or solar power. Converting raw materials into usable components of electric power systems requires exceptionally high power density. When we reduce the supply of fossil fuels relative to demand, we increase the cost of the components necessary for green energy delivery systems like wind turbines or solar panels.

Government subsidies are not the answer today because they either must come from tax increases or increased borrowing, which then increases interest costs. There is no "magic bullet" solution to this problem. The more materials and components we source in order to increase the production of renewable energy, the more we will need low-cost and highly abundant fossil fuel sources as inputs to those production processes.

Nuclear power is a partial solution, as is the power of hydrogen, but both carry with them long lead times to get online. Hydrogen also requires significant amounts of fossil fuel energy to make it "green."

https://www.foodandwaterwatch.org/2022/10/24/the-dirty-side-of-green-hydrogen/?gad_source=1&gclid=CjwKCAiAsIGrBhAAEiwAEzMlC5czKIq9q2hOAMn2U1dHTW9QgM5n04pwJ4uQ5cM5mPCHo6kRxdcA-BoCg2cQAvD_BwE

The other issue with all these "green energy" alternatives and the materials and components needed to produce them is that they require huge quantities of water in the production and refining processes. Water is a scarce resource in many parts of the world, because our ability to recycle water to make it clean for human consumption is inadequate. Fossil fuel production causes more water pollution, but we need to do a better job finding alternatives to fossil fuel energy sources to improve water quality.

Conclusion

There appears to be an inevitable interdependence between the process of transitioning to clean or green energy and the fossil fuels needed to make those processes sufficiently cost-efficient.