Twisting into knots

If the energy transition was music, it would probably be Beethoven’s Fifth Symphony. If you listen to this magnificent work, you can practically hear the divide between hopes, ambitions, and realities, the increasingly distinct warnings that things are not going according to plan and how it would all end on one decisive, unambiguous note of, well, finality.

If the transition was a machine, its danger indicators would be flashing red right now. Here’s a taste. Europe's Industrial Nightmares Are Coming True. European carmakers brace for a deeper and longer downturn. UK's last coal plant shutdown bodes well for US LNG exports. I’m tempted to say “ And it was all going so well,” but it really wasn’t. It is astonishing how many people believed it was, though.

“We’ve all assumed that things would normalise but they are taking a turn for the worse. All of a sudden there is an acceleration in negative factors and the magnitude of the deterioration is big,” one Jefferies analyst told the FT for the above-linked article on European carmakers.

Indeed, they assumed —people being paid to analyse the state of industries, taking into account all relevant factors — assumed all was going well with the transition. People whose profession it should be to see actual reality and not wishful thinking delusions, assumed actual reality matched the delusion.

“Electric vehicles are already displacing nearly 1.8 million barrels of oil every day – roughly the same amount as Mexico consumes. Despite some bumps on the road when it comes to their deployment, that number is set to double by 2027, and triple by 2029, causing oil use in the road sector – the largest demand center for oil – to peak in three years, according to BloombergNEF’s Road Fuel Outlook.”

That outlook came out in early September. It is a blatant rejection of factual developments in the EV space — and part of what made the basis for the above assumptions. A couple of weeks later, Bloomberg came out with what I can only call a study in propaganda, where the deterioration in the car manufacturing industry was acknowledged, albeit grudgingly, and the author tried to spin the story in the only possible way: admit things are going to hell but make sure to tone down the bumps on that road while amplifying the message that climate change and emissions are more important and ICE cars are evil.

Here are a few choice quotes. “This year, the EV transition is having a wobble,” the article claimed and yes, that’s one way of putting it but perhaps it is not the most accurate way when we’re talking about double-digit declines in sales. When there are double-digit declines, we’re talking about a slump, not a wobble.

“In Europe and the US, the shift to EVs effectively went into reverse, as cars with exhaust pipes took a growing share of overall sales.” Ah, yes, evil old exhaust-piped cars that have nothing going for them to offset the exhaust spewage — except lower prices, greater reliability and, let’s admit it, easier, cheaper maintenance.

“In Europe, the drop in sales has coincided with the removal of government subsidies.” Now this one deserves applause. The direct, obvious causal link between the removal of subsidies and the drop in sales is being presented as a coincidence. I marvel at the degree of arrogance necessary for the production of that statement.

“Without those, EVs are still proving too expensive compared with equivalent fuel-burning cars,” the very next sentence says. Notice the “fuel-burning” reference, possibly in hopes to invoke an image of hellfire, and the more subtle use of the word “still”, seeking to suggest that there may have been a world, in which subsidised EVs can be more expensive than non-subsidised EVs. It sounds like a diversion tactic. Either that or the author wasn’t sure about the appropriate use of “still”.

The study ends on a relatively high note. European carmakers are preparing to launch cheap EVs to rival Chinese ones. They’re launching them this year and next. “In that optimistic scenario, EVs could grab as much as 24% of the European market next year,” the Bloomberg author writes, adding that this is “according to T&E, which advocates for clean transport and energy.”

This is how we end up with “European carmakers brace for a deeper and longer downturn”. Because professionals whose job, it bears repeating, is to distinguish between what is possible and what is impossible, for some reason choose to believe that impossible things are possible.

These professionals chose to believe that the post-pandemic downturn was over and that the cost of living crisis was over when it was clear it was only worsening. They chose to believe — for months on end — that Germany was not in trouble, that its economy could still grow, despite the massive increase in energy costs, until they were forced by facts to admit growth was over for the time being.

It’s not just Germany, either. In a surprisingly sober look at the state of European industry, Bloomberg columnist Lionel Laurent wrote this week that massive subsidies for transition companies have failed to deliver, pointing to troubled Northvolt and an Intel factory project that got delayed, even after securing a stunning 10 billion euro in subsidies. The reason for the delay? You wouldn’t believe it: cost cuts.

“Europe’s elites face some difficult choices — not least whether to keep throwing good money after bad in a sector like batteries, where more than half of European projects are at risk of cancellation or delay,” Laurent wrote, adding that the latter information comes from… why, that very same T&E, the lobby group.

This is what happens when you get your information from a lobby group. “From a pricing perspective, 2025 could be a very difficult year in Europe,” Daniel Schwarz, a car analyst at Stifel, told the FT. “They have to sell more electric cars. People don’t want them. They have to provide more discounts for these cars.”

The disaster in EVs is, of course, not an isolated, trend-bucking, occurrence. It is indicative of where the whole transition is going. UK's last coal plant shutdown bodes well for US LNG exports, Reuters columnist Gavin Maguire wrote this week, saying “the [closure of the UK’s last coal plant] also elevates natural gas to the UK's most essential power fuel, and means the country will likely need to boost gas imports going forward even as power firms continue to roll out renewables and other forms of clean power output.”

That certainly sounds very nationally secure and energy secure, too. Why have dirty local production when you can import cleaner foreign energy supply at premium prices? It makes perfect sense. And so does the latest brainchild of UK climate secretary Ed Miliband who might yet turn into my new favourite climate crusader.

Ed has had an idea of how to avoid blackouts when the UK grid becomes even more wind and solar heavy. Are you ready? Flywheels. Ed wants to put up giant flywheels all over the country to store excess energy to use when wind and solar don’t produce anything. The flywheels will be kept in “frictionless vacuum” in order to avoid the loss of energy while, you know, the wheels turn, which is how they store energy — for very short periods of time.

I personally see absolutely nothing wrong with the idea. Or, indeed, the Dutch government’s idea of charging electricity generators for supplying that electricity to the grid. Because grid-related costs are on the rise for some mysterious, unfathomable reason.

“The ACM [the local market regulator] has calculated that costs for all users of the net will rise from 7 billion euros annually at present to 15-25 billion annually” by 2040. But it’s worth it, I’m sure. Too bad those grid tariffs might discourage new investment in even more wind and solar. Let’s just listen to some music.