Energy transition disruption might bite the SEC
The SEC has proposed that the companies it regulates start reporting what it calls “climate related risks.” In addition to the speculative physical risks from supposed climate change, these risks include the very real damage that the so-called energy transition could cause.
“Transition risks” are specifically included the proposal. My impression is that the newly green SEC is thinking about the risk of not joyously joining the transition. But this is a real opportunity for American business and industry to detail how destructive this forced transition would be if it continues on its resent course.
Here is a short list of just some of the most destructive transition risks. They are far more real than the model based climate change risks, so firms really should assess them.
Electric power blackouts. The way State and utility planning is going massive, prolonged and frequent blackouts are almost inevitable. Reliable coal fired power is being phased out, replaced with intermittent wind and solar. In net zero states and at the federal level gas fired power is also planned for elimination.
In no case do these State and Federal plans include the enormous amount of energy storage needed to make wind and solar reliable. So as things stand the transition will lead to very unreliable power, which means destructive blackouts.
Blackouts hurt pretty much every business, but some much more than others. It would be good if each firm explained their specific risks. Not that there is much they can do about them in many cases, especially when they cause supply chain disruptions.
Electricity and natural gas shortages and price spikes. The European energy crisis makes clear that horrendous price spikes are likely to precede blackouts. This is good news in a way because price spikes, while damaging, are not nearly as bad as blackouts and they can lead to remedial actions that prevent those looming blackouts.
The likelihood of price spikes increases with the fraction of wind and solar in the system. This growth requires a corresponding increase in both standby gas fired generation and the gas to fire it when wind and solar fail. There are a lot of low wind nights, and a significant number of low wind, cloudy weeks in most of the country.
We are talking about very large, long term natural gas storage. If the gas runs short the price explodes, which then drives up the price of juice as well. The European crisis was not caused by a lack of wind. It was caused by a lack of reserve gas.
Where wind and solar are essential, the gas and gas generation reserve has to cover the lowest possible output, which is a rare event. This very long term standby generating capacity and huge gas reserve is a major cost of depending on wind and solar power. No state or utility is planning on this cost.
Firms that depend heavily on a lot of gas or electricity are at major risk of transition induced price spikes. This is clearly happening in Europe right now.
General price spikes. Major, protracted spikes in the price of natural gas, and especially in the price of electricity, are quickly translated into widespread product and service price increases. Given that a central feature of the energy transition is electrification, this will become increasingly the case.
Even firms that are not heavy users of electricity or natural gas need to consider how vulnerable their suppliers are, all the way back the supply chain.
Economic disruption. Ironically the SEC proposal actually mentions in passing the significant potential for transition induced economic chaos. In an incredible footnote they point out that the transition could wreck the economy, saying this:
“(There are) risks associated with a transition towards a low-carbon economy, particularly if the transition is disorderly, which could have a destabilizing effect on the global financial system.“
The transition is certainly disorderly and will continue to be so. Perhaps these risk reports should explore the possible effect on the firm of a destabilized global financial system. That might get people to finally understand just how risky this pointless energy transition really is.
In conclusion, the SEC registered firms should seriously consider reporting the very real threats posed by the so-called “energy transition”. It just might get the SEC, the Biden Administration and the Democrats to see how incredibly dangerous to America this climate game has become. It should certainly get the attention of the investors.