Why The Energy Transition Is Hard

The energy transition is slow, for all the reasons regularly cited in this blog. Mike Cembalest provides further insight. Decarbonizing the transportation sector by switching to Electric Vehicles (EVs) is a goal in most developed countries. Its apparent imminence has damaged many reputations for forecasting acuity. Norway is a special case with 62% penetration of EVs in light vehicle sales. Taxes and subsidies heavily favor EVs; Norway’s electricity (97% hydropower) is 40-70% the cost of their European neighbors, and if Norwegians only bought EVs their subsidies would be the second biggest government expenditure.

U.S. EV penetration is low at 2%. Americans drive farther, enjoy cheaper gasoline and use less public transport than other countries. and trucks/SUVs are 75% of light vehicle sales. All the Tesla owners I know love them, but my small group of friends isn’t representative. Comparing the EV with its equivalent internal combustion engine counterpart (i.e. Ford F150 with the F150EV etc) shows EVs to be almost twice as expensive.

The energy transition comes with a substantial increase in power consumption, which is intended to be supplied with solar and wind. Sunny and windy places are often not where electricity consumers live – on top of which solar and windmill farms require substantially more land than conventional power plants. A report last year from Princeton University estimated that U.S. annual transmission investment would need to triple over the next three decades.

Massachusetts is trying to import hydropower from Quebec, but it first has to travel through New Hampshire where environmentalists recently persuaded authorities to deny construction of the necessary transmission lines. In Russell Gold’s Superpower (see our review here), he chronicled the challenges faced by Clean Line in getting windpower from Oklahoma to Tennessee. The book ended with the assets being sold to NextEra Energy (NEE), and after continued delays and expensive court battles the project was abandoned.

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Disclosure: We are invested in all the components of the American Energy Independence Index via the ETF that ...

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