https://mailchi.mp/b5a058bb108f/electric-cars-risk-becoming-uninsurable-199212?e=0b1369f9f8
Net Zero Samizdat
The Daily Telegraph, 21 October 2023
RDN News, 19 October 2023
Reuters, 19 October 2023
4) China restricts exports of graphite, key mineral used for making EV batteries
Investopedia, 20 October 2023
5) After $280 billion wipeout, green stocks confront soaring debt costs
Bloomberg News, 20 October 2023
6) Merryn Somerset Webb: The Tyranny of ESG has run its course
Bloomberg, 20 October 2023
7) Philip Pilkington: The green-energy bubble is about to burst — and thanks to Biden, taxpayers will suffer
New York Post, 19 October 2023
Bloomberg, 21 October 2023
9) Greenpeace loses legal challenge to UK’s new North Sea oil and gas licences
Reuters, 19 October 2023
10) Hostile political attitude to North Sea oil and gas threatens energy security
Watt-Logic, 20 October 2023
The Daily Telegraph, 21 October 2023
Electric cars risk becoming effectively uninsurable as analysts struggle to put a price on battery repairs, the researcher for the car insurance industry has said.
Jonathan Hewett, chief executive of Thatcham Research, the motor insurers’ automotive research centre, said a lack of “insight and understanding” about the cost of repairing damaged electric car batteries was pushing up premiums and resulting in some providers declining to provide cover altogether.
Electric cars can be particularly expensive to repair, costing around a quarter more to fix on average than a petrol or diesel vehicle. Experts have previously warned electric vehicles are being written off after minor bumps because of the cost and complexity of fixing their batteries.
Mr Hewett said: “The challenge is that we have no way of understanding whether the battery has been compromised or damaged in any way.
“The threat of thermal runaway means that a catastrophic fire can take place if the cells of the battery have been damaged in a collision.
“What we’re struggling to understand at the moment is how we approach that diagnostic technique.
“It’s like a doctor trying to understand what’s wrong with you without any notes or an X-ray.”
John Lewis Financial Services stopped providing car insurance for electric cars last month for new and existing customers, as its underwriter Covéa analysed risks and costs.
Aviva removed insurance products for the Tesla Model Y earlier this year before restoring them several months later.
Vehicle repair costs rose 33pc over the first quarter of 2023 compared to 2022, helping to push annual premiums to record highs, according to the Association of British Insurers.
Average electric car insurance costs rose 72pc in the year to September, compared to 29pc for petrol and diesel models, according to Confused.com.
Mr Hewett said premiums would eventually begin to level out and match those of petrol and diesel cars once actuaries had the tools needed to better understand the risks of insuring electric cars, saying the issue would likely be “short term”.
However, he added: “The battery is an extremely expensive component of an electric vehicle and until we find efficient ways of dealing with it we have the challenge of high premiums for electric vehicles, which nobody wants.”
Some customers are now being quoted over £100 a week to insure their electric vehicles, with others reporting premiums doubling or tripling compared to a year before.
One reason attributed to the steep rise in the cost of electric car repairs stems from recommendations for electric cars to be kept 50ft apart in repair yards over fears they might explode.
Government guidelines suggest electric vehicles with damaged batteries should be “quarantined” from other cars due to the risk of battery fires, which are typically harder to put out than fires in petrol or diesel cars.
The London Fire Brigade has warned that fires involving lithium batteries are the fastest-growing fire risk in London, after it was called out to 87 e-bike and 29 e-scooter fires in 2022.
Paris’s transport operator withdrew 149 electric buses from operation last year after two ignited on separate occasions.
The website Tesla-Fire.com lists 25 reports of Teslas catching fire globally since the beginning of 2023.
Thatcham Research said insurers would need to spend an additional £900m a year on quarantine facilities for damaged cars as a result of the safety measures by 2035, as more battery-powered vehicles take to the roads, with the changes forecast to add £20 a year onto all car insurance premiums.
Conservative MP Greg Smith, who sits on the Commons transport committee, said: “[The lack of battery diagnostics] is yet another reason why electric vehicles aren’t remotely suitable for the mass market yet and why we should be looking to other technologies, like synthetic fuels and hydrogen, that will be more reliable and friendly to the planet.”
RDN News, 19 October 2023
Nearly half of households with non-Tesla electric vehicles (EVs) made an internal combustion engine (ICE) vehicle their next auto purchase, according to a new analysis.
It doesn’t necessarily mean they sold their EV, as it could also indicate they purchased an additional family vehicle that is gasoline powered.
S&P Global Mobility said its findings indicated that the fuel type loyalty rate for mainstream EV households was 52.1% through July of this year. That figure represents those who remained true to EVs after buying their initial one.
“Between Tesla picking off EV intenders, and the draw of internal combustion strengths such as towing and payload, legacy ICE automakers face a battle to increase EV loyalty as they transition,” S&P Mobility said. “Doubling down on EVs to expand their lineups might be the required path to ensure continued loyalty to brand and fuel type.”
Tom Libby, S&P Global Mobility’s associate director for loyalty solutions and industry analysis, said the results aren’t likely to be welcomed by automakers embracing the EV market.
“The OEMs are spending huge amounts of money to develop EVs,” Libby said. “The last thing they want is for an EV owner to go back to ICE.”
The report attributed the “loyalty struggle,” in part, to an overall decrease in consumer willingness to purchase an EV. S&P data indicates that overall consumer consideration for buying an EV has dropped to 52% from an 81% high in 2021.
Reuters, 19 October 2023
Tesla (TSLA.O) on Wednesday joined General Motors (GM.N) and Ford (F.N) in being cautious about expanding electric vehicle (EV) production capacity, citing economic uncertainties and underscoring fears of a slowdown in demand.
Tesla CEO Elon Musk said he was worried that higher borrowing costs would prevent potential customers from affording its vehicles despite substantial price cuts, and that he would wait for clarity on the economy before ramping up its planned factory in Mexico.
“People hesitate to buy a new car if there’s uncertainty in the economy,” Musk said on a post-earnings call where he also talked about “paycheck-to-paycheck” pressures on American workers. “I don’t want to be going into top speed into uncertainty.”
Musk’s comments came after warning bells from other automakers and EV startups. It sent shares of Tesla down 8% Thursday as well as shares of other EV makers.
4) China restricts exports of graphite, key mineral used for making EV batteries
Investopedia, 20 October 2023
China’s Ministry of Commerce on Friday curbed exports of graphite, a critical mineral used in the production of lithium-ion batteries for electric vehicles (EVs), which could accelerate a shortage of the mineral as EV demand soars worldwide.
The move, attributed to national security concerns, comes just days after the U.S. imposed new restrictions on exports of high-tech semiconductor chips to Chinese companies and their overseas units, escalating a trade war that has been brewing since 2018.
A shortage of graphite could present problems for EV makers worldwide, particularly at a time when consumer demand for EVs is booming. In 2020, the World Bank forecast graphite demand could soar 500% over the next three decades as EVs and other clean energy technologies become more widely adopted.
As such, EV makers like Tesla (TSLA), Rivian (RIVN), and Lucid Motors (LCID), along with traditional automakers that have developed their own EV models in recent years, could be at risk of production shortages. Kearney, a consulting firm, has warned that EV makers will need to drastically curb their reliance on Chinese graphite to reduce the risk of shortages and qualify for U.S. government subsidies.
5) After $280 billion wipeout, green stocks confront soaring debt costs
Bloomberg News, 20 October 2023
There appears to be no end in sight for the multi-billion dollar rout in renewable energy stocks, as a surge in borrowing costs threatens to squeeze returns in the sector for years to come.
The industry received a fresh blow on Friday, after a sales warning from equipment provider SolarEdge Technologies Inc. sent shares in solar stocks across the US and Europe tumbling as much as 25%.
Until recently expected to displace oil-and-gas companies from mainstream investment portfolios, clean energy stocks have instead become a no-go zone for many. Investors have been pulling money out, wiping over $280 billion from the market capitalization of green stocks globally since their August 2022 peak — not quite boom-to-bust but a dramatic unraveling nonetheless for a market that was all the rage at the turn of the decade.
Now, with the yield on the 10-year US Treasury bond creeping toward 5%, their fortunes could be about to take another hit. Higher yields make it costlier to fund the huge investment that clean energy requires, giving investors reason to fret about returns.
On top of that, the pace of decarbonization is in question and oil’s march back toward $100 a barrel is renewing interest in fossil fuels. Add all that up and it’s got investors asking if it’s worth waiting around for green energy stocks to pay off.
“If companies are rolling out capacity and raising debt, but power prices and profitability are falling, that’s not a combination markets like,” said Sharon Bentley-Hamlyn, a fund manager at Aubrey Capital Management. “Our exposure to the renewables sector is considerably lower than at this time last year.”
SolarEdge Technologies sank as much as 25% in US premarket trading on Friday after it warned its third-quarter revenue will come in below its previous guidance range. Other firms in the sector, including Enphase Energy Inc., Sunrun Inc., SMA Solar Technology AG and Meyer Burger Technology AG also tumbled.
6) Merryn Somerset Webb: The Tyranny of ESG has run its course
Bloomberg, 20 October 2023
The idea of ESG has been changing since the day it was just a twinkle in a marketer’s eye. Now it’s heading into its inevitable end game.
In 2021, almost two-thirds of respondents said they considered environmental, social and governance (ESG) factors when investing. In 2022, that number was 60%, and this year it’s 53%, according to the annual ESG Attitudes Survey from the Association of Investment Companies. Asked why they were over ESG, the top reason given was that performance was more important.
Next up: greenwashing. In 2021, only 48% of investors said they were “not convinced by ESG claims from funds.” That number is now up to 63%. The same investors look like they are putting their money where their mouths are: The most recent data from the Investment Association showed a third month of outflows from the Responsible Investments category — a record £448 million ($547 million) in August.
Anyone in doubt about the market’s attitude toward ESG investing today need only look at the share price of Impax Asset Management Group Plc. It rose 33 times from late 2015 to late 2021 — and is down 70% since. Bubble, bubble crash.
The exodus makes complete sense. That’s partly about performance. It’s a lot easier to feel pro-ESG when it’s making you a big pile of money, as it was three years ago. It’s harder when you are underperforming — and when the stuff you were told is absolutely not OK to touch with a barge pole is doing just fine. Note that the S&P Global Clean Energy Index is down 30% year-to-date and 12% over three years (low interest rates don’t suit the kind of long-duration companies that make up this sort of index). Meanwhile, the S&P 500 Energy gauge is flat year-to-date but up 43% over the last three years. In the UK, shares of Shell Plc hit an all time high this week.
But it’s not just about performance. It’s also about the constantly changing definitions of ESG. Remember how defense stocks used to be Not OK. No longer. As soon as Russia invaded Ukraine, it became clear to all but the most ideologically blinkered that having adequate national defense is the very definition of a social good (assuming you believe in democracy and freedom, of course). In a war, defense is about as ESG as you can get. It is also one of the few areas where, sadly, you can be sure the money will keep pouring in: Right now only 11 members of NATO spend 2% of GDP on defense. That will change as everyone recognizes that short-term higher defense spending is the only option and that the long-term deterrence it provides is the best economic insurance money can buy.
The sands have shifted in energy investing, too. Is it good governance and a social essential to provide energy security to your population? Of course. Does that, in the short- and medium-terms at the very least, involve fossil fuels? Of course. But in the longer-term it also involves an awful lot of digging, something that now makes mining full-on ESG.
7) Philip Pilkington: The green-energy bubble is about to burst — and thanks to Biden, taxpayers will suffer
New York Post, 19 October 2023
President Joe Biden has a dream — and it’s about to turn into a nightmare for American taxpayers.
America is “willing to do the hard work to limit global warming to 1.5 degrees Celsius,” he declared at April’s Major Economies Forum on Energy and Climate Change.
To hit this target, per the scientists with the president’s ear, greenhouse gases must peak before 2025 and fall 43% by 2030.
Yet fossil fuels account for around 77.6% of US primary energy production.
So how does the president intend to reach his dream of “net zero” carbon emissions by 2050?
“I’ve signed a thing called the Inflation Reduction Act,” he said in his speech, “the single largest investment in fighting climate change in history, which will reduce annual carbon emissions by 1 billion tons by 2030.”
Biden let the cat out of the bag: The act has very little to do with inflation, much less about reducing it.
Rather, with $6 allocated to renewable-energy projects for every $1 allocated to American manufacturing, the IRA is a big fat green-energy bill masquerading as industrial policy.
It’s not too much of a stretch to say the IRA is simply a repackaged version of the Green New Deal Democrats touted in the 2020 presidential-election campaign.
But Biden’s signature piece of domestic legislation is coming under pressure from Wall Street. The green bubble is about to burst.
While some might accuse the IRA as smacking of socialism, this is not quite true.
The legislation does pick winners and gives them tax breaks and subsidies. But these tax breaks and subsidies do not last forever.
At a certain point, the industries the bill subsidizes must be tested in the free market.
Because of the subsidies, however, these industries tend to be fragile when subjected to market pressures.
But when the IRA was passed in August 2022, the markets still seemed excited about the prospects for renewables firms.
This enthusiasm took off when the economy came out of lockdown.
Everyone was glad to finally get out of the house, and investors started to look around for the next big thing.
They thought that since the government was willing to intervene so aggressively in response to the COVID-19 outbreak with society-wide lockdowns, maybe the next big intervention would be in response to climate change.
Buoyed by this enthusiasm and ever-larger gobs of money the Federal Reserve forced into the system, renewables stocks took off like a rocket.
At its peak in January 2021, the S&P 500 Global Clean Energy Index had risen by around 325%.
It was against the backdrop of a soaring market for renewables stocks that Team Biden drew up plans for the IRA.
But everything has changed.
As interest rates have risen and excess money gets removed from the financial system by the Federal Reserve, markets are waking up to the fact many renewables’ companies are hothouse plants addicted to cheap credit.
The S&P Clean Energy Index is down 31% since the start of 2023 — and 59% since its early-2021 peak.
In 2023’s third quarter, global renewable energy funds have seen a record $1.4 billion in outflows.
The big green party on Wall Street is over, killed off by the party-poopers at the Federal Reserve.
Bloomberg, 21 October 2023
Recent import contracts run beyond EU’s net zero deadline
Two days after the European Union declared it will push for a global phase-out of most fossil fuels well before 2050, Shell Plc signed a 27-year agreement to buy Qatari liquefied natural gas for the Netherlands.
It’s not the first multi-decade deal to tie the bloc to dirty fuels beyond its targeted deadline — just last week France’s TotalEnergies SE signed a similar contract. The agreements highlight the challenge in reconciling the EU’s ambition to reach climate neutrality by 2050 with its need to ensure energy security after last year’s historic crisis.
“Energy companies seem to be betting Europe will need more gas than politicians predict,” said Christian Egenhofer, senior researcher at the Centre for European Policy Studies.
While Europe has made strides in replacing the cheap Russian gas imports that used to power its economy — mostly by buying liquefied versions of the fuel from places like the US or Qatar — jump-starting its transition to cleaner alternatives has proved difficult.
Governments across the region have prioritized expanding renewables after Russia’s invasion of Ukraine underscored Europe’s need for independent sources of energy, which also cause less damage to the environment.
But high borrowing costs and uncertainty about the commercial viability of some technologies have stalled investments and raised questions about the reachability of Europe’s climate goals.
9) Greenpeace loses legal challenge to UK’s new North Sea oil and gas licences
Reuters, 19 October 2023
LONDON, Oct 19 (Reuters) – Britain’s decision to authorise new licences for oil and gas exploration in the North Sea was lawful, London’s High Court ruled on Thursday, dismissing a legal challenge by Greenpeace.
The environmental campaign group had argued Britain’s failure to assess the greenhouse gases produced by consuming oil and gas – so-called end-use or downstream emissions – rendered its offshore energy plan unlawful.
But lawyers representing Britain’s Department for Energy Security and Net Zero said at a hearing in July that ministers were not required to assess end-use emissions, though they nonetheless considered them.
Judge David Holgate rejected Greenpeace’s case on Thursday, saying in a written ruling that the decision not to assess end-use emissions was not irrational.
A Department for Energy Security and Net Zero spokesperson welcomed the decision.
10) Hostile political attitude to North Sea oil and gas threatens energy security
Watt-Logic, 20 October 2023
Kathryn Porter & James Porter
Despite the recent high-profile approval of the Rosebank oil field in the North Sea, the picture for domestic oil and gas production remains bleak.
The Conservative Government has recently spied an opportunity for re-election by deferring the costs of the energy transition at a time when many voters are worried about the high cost of living.
But it clings to the populist windfall tax on UKCS production, which was intended to neutralise complaints about high energy company profits, but in reality, harms independent producers while barely impacting the majors. Meanwhile the Labour Party is committed not only to retaining this harmful tax, it also wants to stop new licencing in the region, preventing new fields from being developed.
These policies are both short-sighted and counter-productive. No-one thinks the UK is going to stop using fossil fuels any time soon, so if we reduce domestic production, we will simply increase imports. Imported energy typically has higher production and transportation emissions, and reduces our energy security, which is unwise at a time of global uncertainty.
Falling North Sea production is worrying
According to the latest Annual Economic Report by Offshore Energies UK (“OEUK”), North Sea oil production has fallen at its fastest rate in a decade as the windfall tax deters investment, and companies fear a further deterioration in the market outlook should the Labour Party win the next General Election. Crude oil output fell by 13% in the first six months of this year compared with the same period in 2022, to a record low of 16.2 million tonnes, roughly a quarter of what the UK produced at its peak in 1999.
