Europe’s Cold Winter Threatens Energy Supplies

We all know Mother Nature saved Europe’s behind last year, but that won’t be the story this year. So, let’s break down the potential impacts on energy supplies across Europe.

With cold temps settling in much earlier than last year, those energy stockpiles won’t last too long. Europe has reduced its dependence on Russian energy, but can the continent’s new energy suppliers keep up with demand?

We will see this energy diversification’s effectiveness put to the test very soon, and any disruptions could carry global implications. This will likely serve as an ‘aha’ moment for countries that source energy from far away and poke holes in that vulnerable system.

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First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.

Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.

And then there’s you.

Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.

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TranscripT

Hey, everybody. Peter Zeihan here. Coming to you from Colorado. It is the 5th of December. You’ll be seeing this the following week. And today I want to talk about the weather in Europe and what it’s setting up for us. Unlike last winter, which was one of the warmest winters on record in Europe, winter has come a little bit early across the continent, and it’s a little colder than normal.

We are in roughly the thirties to the forties in Berlin at about ten degrees warmer than that in Paris, about ten degrees colder than that in Kiev. So much more typical, maybe a touch on the colder side. The problem we have, of course, is that the Europeans have gotten most of their energy from the Russian space and they’re in the process of trying to phase that down to zero.

And they’ve had a relative success in doing that. Lots of hiccups, of course, But, you know, it’s a big place.

They’ve done this by doing two things. Number one, they’ve shut down some of their heavier industry, although some of that did come back on this lot online this summer. They’ve also grabbed a lot of natural gas from the United States. The Norwegians have really bellied up to the bar with some new projects and then they’ve gone into kind of what you might consider their near abroad, places like the Middle East and basically and West Africa and just taken everything.

That means that if you are a country that used to get things from those zones and I’m thinking here about Southeast Asia or East Asia or Africa, you’re now getting your crude from further and further away. And this is going to spell some interesting things this this winter. The Europeans lucked out last year because they had such warm weather that they were able to keep energy prices under control and only had to go through a few controlled brown and blackouts if they were to have a really harsh winter.

We’re going to put to the test all the things they put into place over the last year and a half since the Ukraine war. And it’s too early to say that that’s going to be wildly successful or horrible. But what we do know is that because they have reoriented their supplies from further away now and everyone else is now having to get stuff from you and further away.

For example, the anything that the Russians are exporting right now typically goes still out to the western ports on the Black Sea and the Baltic Sea, then goes all the way around Europe and then through Suez or around Africa. But to get to East Asia, for example, which is, you know, a for almost as far actually I think it’s a little further than halfway around the planet.

It is a big place, especially when you throw in Africa anyway. It means that if there is a disruption for any reason, we’re not just looking at the Europeans having problems this time around, it could be much bigger. Something to keep in mind is that there are very, very, very few countries on the planet who have the ability to project maritime power.

The top of the list, of course, is the United States. But the U.S. is in its own energy bubble, so it’s really a non-factor. The second one is Japan. They’ve got the second largest long reach Navy in the world. The United Kingdom is clearly in the third place. The French are clearly in fourth place. And after that, it’s kind of a mix of regional navies.

The Japanese get a lot of credit for having a lot of ships, but most of their ships are these very small 2000 ton Corvettes that really can only sail a few hundred miles. So they may have a lot of vessels, but they don’t have a lot of weight and they certainly don’t have a lot of reach. So in any scenario where there’s not enough energy, either because of a disruption somewhere or a strike or a war, the Europeans are perfectly capable of using their regional navies.

And I’m here thinking like the Spanish navy, the Turkish Navy, the Italian Navy, in addition to the French and the Brits to go into their near abroad and ensure the oil and the natural gas comes to them. And it helps that the United States isn’t going to be a security problem from an energy point of view, and it helps that Norway is hooked up by pipe.

No one else has that. So if you have a disruption, the United States is fine, the Europeans are fine, and the Japanese have the reach and the friendship with the United States to make things happen. No one else does. So we’re now entering a situation where harsh winter anywhere in the world can generate an energy crisis or a military conflict anywhere in the world can generate an energy crisis, or a political spat anywhere in the world can generate a energy crisis, and it makes for a much more vulnerable system because it’s not like you can go next door.

You now have to go several countries away or maybe even a couple of continents. And for most of the world, that has never been an option. And for the countries where it is, they’re the ones that have the military to make sure it works. So it’s not so much that I am worried about Europe this winter, although I’m not not worried.

We haven’t put any of this to the test. I’m worried about everybody else because the Europeans have the capacity to use multiple tools to try to address their problems and they’ve got allies to help. No one else can claim that.

 

Generating Geothermal Energy Using Shale Technology

The Google-backed company, Fervo Energy, has launched two geothermal projects that use preexisting shale technology and infrastructure to generate electricity. Could this be a partial solution to the looming electricity shortage?

The pilot project in Vegas is too small for me to place any bets, but the next project in Utah aims to be on par with other large power plants. This technology allows us to tap into the Earth’s crust, detect and access hot zones where they might not typically be found, and develop a reliable and dispatchable energy source.

Again, don’t go counting those chickens until we hear back on whether this project was a success or not. In the meantime, we’ll appreciate this technology as a refreshing solution in light of a rather hefty need for power supply expansion.

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First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.

Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.

And then there’s you.

Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.

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TranscripT

Hey, everybody. Peter Zeihan here. Coming to you from the Denver International Airport, where I am waiting for my flight. It’s my last business trip of the year, so it’s kind of exciting. Anyway, it’s early December, and the news is that in late November, a new project for geothermal launched near Vegas. And by launch I mean began operations. And I’m just starting drilling.

It’s Furbo energy. It’s backed by Google. We don’t have any data on what their cost point is because, you know, it’s Google and as a pilot project. But Google has been sufficiently excited about it to go ahead and launch another project in Utah. The one that’s in Vegas is only about three and a half megawatts, enough for about 2600 homes.

So very, very small scale by really any power plant standard. But the next one is going to be 400 megawatts, which puts it up there with some of the larger power plants in the world, assuming that it is spec, geothermal is awesome where it works because you can tap heat within the crust to generate steam and use the steam to generate electricity.

It’s green. It doesn’t have any chemical issues. And one of the best things about geothermal is you can use it either for surge or for baseload. You just decide when you’re going to use it, which makes it a lot more reliable and dispatchable than, say, solar or wind would be. Because, you know, the earth is pretty much always hot.

That’s part one. Part two, what makes this interesting is that it’s not a typical geothermal project. So normally with geothermal, you’re tapping something like a geyser or hot water worth a hot spot that’s relatively close to the surface, usually within just a few hundred feet. But this is the first project that’s been attempted in so far successfully that uses shale tech to go after a different sort of geology.

So rather than letting the earth put something that’s up close to the surface that only happens in a few places, it’s almost exclusively in the Rockies. And as you guys know, the Rockies are not exactly densely populated. So geothermal with the old style is only providing about 0.4% of overall American electricity supply. But with the shale tech, you can drill down, in this case, 7000 feet into a hot spot that is nowhere near the surface.

And that means assuming this works and works at scale, that means we can do this everywhere where there’s shale, where there’s not geologic activity. You’re not going to do this in the San Andreas Fault, obviously. Let me do a better job of explaining that the two things that make shale technology really appropriate for geothermal and you know why it works in general is, number one, you’ve got really good acoustical detection by using some version of sonar and you can bounce sound waves off of different types of formations at different levels within the formation and map them out from the inside out.

That’s how they know exactly where to go to the petroleum rich strata when they’re doing oil and gas production. And then second, drilling has advanced in courtesy of shale. So you go down and then laterally in order to access whatever the specific layer is that you don’t have in a straight line. So it’s like you can go up into like the fingers of a curved hand.

So you apply this to geothermal and really what you’re looking for impermeable zones that are really, really hot, and you can pick that up with the acoustics. So by taking these technologies, you can go to the best, densest, hottest material possible in order to then run your liquid into it, which it then captures the heat, which can then be used to generate electricity that is potentially a game changer.

One of the big problems the United States is going to be facing over the course of the next decade is a massive, massive shortage in electricity. Even if we don’t do the green transition, even if all we do is reshore a lot of manufacturing to deal with a post China world, you’re talking about conservatively expanding the power supply by 40%.

50% would make me feel a lot better. That includes processing for things like aluminum and lithium and the rest. You know, that’s a lot of power. We haven’t had that kind of power in decades. The green transition would have problems on top of that. And so if we can take something like geothermal and existing technologies that are now off the shelf and apply them at scale in all 50 states, now you’re talking about a very different sort of math, because these things can, in theory, come online pretty quickly.

And so those of you who follow the shale sector know it only takes 6 to 12 weeks to bring a shale project online. And most of that is involved in the drilling and the fracking. Oh, that’s exactly the technology we would be applying to geothermal. So obviously it’s not a complete plug and play. Electricity is different from generating oil or gas, but the the technology and the ways that confusion are very promising.

We’re just waiting from Google to find out what the numbers are, to know if this is economically viable or not. And that’s the whole point of the Utah project. Okay. That’s it. Take care.

 

Modular Nuclear Reactors Are Not the Future of Energy

A while back, I talked about a few technologies I was most hopeful for – small modular nuclear reactors being one of those. Click below to watch that video…

Understanding the Limits of Innovation

Unfortunately, we’ll be drawing a line through it (for now).

As we enter a period of capital scarcity and top-heavy demographics, many companies working on these modular nuclear reactors have been forced to abandon ship. This complication adds another layer of complexity to the growing energy demands of the next decade.

So, if you were hoping to go off the grid with a reactor strapped to the back of your truck in 2030, it might be time to change your plans…

Prefer to read the transcript? Click here

Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:

First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.

Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.

And then there’s you.

Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.

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TranscripT

Hey everyone. Good morning from chilly Colorado. It’s a balmy ten degrees today. I got some bad news. So for those of you who’ve been following me for a bit, you know that over the summer I recorded a video of the five technologies that I was most hopeful one for. The issue we’re facing is that we’re entering into a period of extreme capital dearth and a shortage of people in their twenties and thirties, while the twenties, people in the twenties, in the thirties, and the folks who get together to imagine the future and develop the technology and a lot of cheap capital is required to bring it to mass manufacture.

And without those two factors, the pace of technological change that we’ve been used to seeing these last 2025 years is going to slow considerably. And that’s before you consider any sort of general dislocation because of demographic aging or drops of consumption or breakdowns in globalization. So the pace is way too slow, incredibly. And the question is which technologies are kind of already at the hub, where they’re just right on the edge of mass manufacturing mass application.

And one of the technologies that I identified was something called small modular nuclear reactors. The idea is you have a reactor that’s small enough to fit on the back of a semi-trailer and you can just plug it in to any other power system. So if you’ve got a coal plant, for example, that you were looking to decommission, you can pull one of these in or two of these based on the size, you know, up to ten and just plug them in and they’re good to go.

And the 20% of electricity that the United States gets from nuclear currently could continue in perpetuity. Well, over the course of the last couple of weeks, the companies that were involved in building the prototype of abandoned the project. They say the numbers no longer make sense. They couldn’t get enough sponsors. So if this technology is going to continue, it’s going to continue at a later time with different players in an environment of even sharper limitations on technological development and capital availability, which means it’s probably not going to happen this decade at all, which means the 20% of the electrical grid that is supplied by nuclear right now is going to fade away because with a

couple of exceptions, all of those reactors are older than I am and I turn 50 very, very soon. So not only do we need to massively increase the amount of power generation, we have to double the size of the industrial plant as the Chinese break apart, and we need even more power in order to do the green transition and maybe move to a more electric future.

We also have to replace 20% of our total energy supply, which is at the moment all baseload, which is something that wind and solar can’t come up with or can’t work with because they’re too intermittent. So we just saw our overall challenge for the next decade become inordinately more difficult unless of course, someone picks up this technology very, very soon.

Sorry. All right.

Ask Peter: Can Thorium Solve the Nuclear Problem?

Note: This video was recorded over the summer during one of Peter’s hikes.

Thorium is a potential substitute for uranium-based nuclear power, but will it solve our nuclear problems? If thorium could help with the proliferation of plutonium and make it harder to create weapons on the backend, adoption of more nuclear power might be easier….but thorium isn’t our knight in shining armor.

Here’s the grossly over-simplified uranium nuclear process: you take the usable uranium and separate it from the other isotopes, then convert it into something like a fuel rod, then it’s placed in a reactor which generates heat which spins a turbine. (Like I said, grossly over-simplified) Once that’s done, one of the waste materials is called plutonium.

The process with thorium is a bit more involved and requires different infrastructure, but you still end up with plutonium. Sure, it’s marginally less of the bomb-making stuff and in a bit more complex compound mix, but there’s STILL plutonium.

While this is an interesting tech that should be explored by countries with a bunch of thorium (like India), this doesn’t solve our proliferation issue. Plus, there’s still an entire set of other problems that need to be considered, such as disposal and storage.

Barring the development of fundamentally new tech, nuclear power might be losing its place in the US energy mix. As a result, growth in electricity production will be seriously hampered even if all this new Greentech works perfectly.

Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:

First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.

Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.

And then there’s you.

Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.

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Lithium: The False Profit of Electrification

Note: This video was recorded over the summer during one of Peter’s hikes.

Lithium has played an important role in the green transition and remains a crucial resource for the future of electricity; however, it’s not going to be all sunshine and rainbows for lithium…

While lithium is the primary option for electric vehicle batteries, its low energy density and safety concerns leave much to be desired. Unfortunately for us, lithium is pretty much the only option at this point. There remain some much-needed breakthroughs in the battery chemistry space, but even if those happened tomorrow – reaching mass production would take at least a decade.

The lithium supply chain is no clean sheet either. Chile and Australia are the top producers, but between nationalization efforts in Chile and a slower extraction method used in Australia – disruptions are pretty standard. The bottlenecks don’t end there. Processing capacity is concentrated in China, and with collapse right around the corner, get ready for a whole new slew of problems.

If I controlled the flow of investments into this sector, I wouldn’t be dumping billions of dollars on lithium production. Instead, I would allocate funds to the physical science research to develop a better battery chemistry. Diversifying our battery technologies is the only way to make the green transition stick without hindering global progress toward sustainable energy solutions.

If we put all of our eggs into the lithium basket…We’ll have a long road ahead of us.

Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:

First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.

Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.

And then there’s you.

Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.

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Why Green Energy Can’t Satisfy Electricity Demands

Would you try to fly a kite when there’s no breeze? Or try to surf when there are no waves? If you answered ‘no’ to those questions – CONGRATS – your basic analytical skills are much better than those tasked with the green energy buildout. Now we just need to test your math skills…

With a resurgence of manufacturing and industrialization in the US, electricity generation needs will skyrocket. I’m all for green energy, but it needs to be done the right way, in the right places, and with the right energy infrastructure to support it.

Conservative estimates show electricity demand increasing by more than 50%, and the green transition will complicate that even further. I’m still a Green, but no matter how hard we try – green energy isn’t going to solve this problem alone.

Prefer to read the transcript? Click here

Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:

First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.

Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.

And then there’s you.

Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.

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Transcript

Hey Everybody. Peter Zeihan here coming to you from northern Indiana at the Nipsco coal power plant. That is not a nuclear cooling towers, just coal cooling tower. This power plant is on schedule to be decommissioned around 2025 and then replaced with wind and solar. But I don’t know how many of you guys have been to northern Indiana, but this is neither a windy nor sunny area.

More to the point, if things go with the Chinese and to a lesser degree the Europeans in the direction that I think it’s going to. And if the Americans decide they still want stuff, the industrialization wave that’s coming here is going to be unlike anything we’ve seen before. And it’ll be a lot faster than what we did in World War Two.

But it also means that we need to generate a lot more electricity wherever that comes from, because manufacturing takes more power than services. And doing the processing for things like lithium and steel and the rest takes a lot more power than it does for normal manufacturing. So we need to conservatively increase the power plant in the country and transmission capacity by at least half.

And there’s only been one year since 1960 where we’ve increased power generation in the country by more than two and a half percent. And that’s what we did the year we were coming back from COVID. So that was just turning things back on as opposed to actually generating more. So I’m not saying that coal’s the future or anything like that.

I’m just saying we need a lot, a lot, a lot, a lot, a lot more. And that assumes we don’t do the green transition because if we electrify transport, then we need to double the power plant. And honestly, we need to do this before the end of the decade. So chop, chop.

Why Rising Capital Costs Could Kill Greentech

The Greentech industry has reaped the benefits of cheap capital for years, but that’s all changing as demographics take a turn and investment patterns start to shift.

Financing Greentech projects requires a boatload of upfront capital, and if the cost of that capital rises, the viability of those projects has the inverse effect. This means the Greentech space will be in hot water even if economic growth holds steady.

Sure, Biden’s Inflation Reduction Act will help the US a bit, but there’s no replacing private investments. This isn’t an isolated issue either; if countries with solid Greentech potential want to see their industries thrive, we will need to see some major breakthroughs.

Prefer to read the transcript? Click here

Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:

First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.

Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.

And then there’s you.

Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.

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Transcript

Hey everyone. Peter Zeihan here coming to you from Mexico City. And today we’re going to talk about some of the challenges that are facing the green tech space. If you’ve been following stock tickers in New York in general, you’ll know that there’s been a lot of pushback from the financial world about everything that has to do with wind and solar and interconnections, not just in the United States, but on a global basis with many communities getting sticker shock and changing some of their plans.

Now, this, of course, is going to be a story that’s going to look a little bit different everywhere. But there is a common theme, and that has to do with capital. One of the things that really sets green tech apart from any other power generation, whether it’s in transport or the generation itself, is that you have to pay for it all up front.

The the system is different. So like if you’re going to build a coal plant or a natural gas burning power plant, most of your cost over the life of the facility is going to be the fuel. Actually setting up something that, you know, burns it is not all that complicated from an expense point of view. But with solar and with wind, where the fuel is free, all of the expense is upfront, or at least two thirds of the total versus less than a fifth for most conventional systems.

And that means it has to be financed. Now, from 2000, literally from 1997 until very, very recently, that has not been a problem because we’ve been living in an environment of absolutely dirt cheap capital, and it’s been a demographic moment. The baby boomers were in their forties, fifties and early sixties, and in that time frame in your life, your expenses have gone down, but your incomes are high and they’ve been socking away all the money that they’ve got to prepare for retirement.

All that capital makes it into various different investment opportunities, whether it’s T-bills or the stock market. It makes it very easy for people, for corporations, for governments to borrow at scale. Well, as of the fourth quarter of 2022, the majority of the United States is baby boomers. The majority of the world’s baby boomers had moved into retirement, and they’ve liquidated their savings and they’re not generating any more.

And they’ve moved their savings into less prospective projects. So a lot more cash, a lot more government debt, a lot less things like stocks and bonds. And that means that the cost of capital has already gone up for everyone. And we’ve seen mortgage rates just in the United States double in the last 18 months. And for large projects like wind turbines and solar panels, we’ve seen it closer to a tripling now over, say, a ten year payback, which, you know, is just kind of a good benchmark.

That means that the interest costs have gone up to the point that the overall payback is going to be at least a quarter higher than it was just a year and a half ago. And if you have to finance your GreenTech project, all of a sudden you’re facing an expense that you weren’t having to deal with before. Now, this, to a degree, this sort of overbuild and retrenchment happens with any industry as people kind of grasp the realities of that.

Maybe solar and wind aren’t as great for our community as we thought they were going to be. But the capital that’s going to hit everyone everywhere, it’s going to slow economic growth on a global basis. And for projects that are very capital forward, like green tech, it’s absolutely going to retard the progress of everything. And the United States, we’ve got this little thing called the Inflation Reduction Act that the Biden administration was able to get through Congress, which is basically a green plan that is going to help a lot with making the finances of green tech a little bit better.

But it was never going to replace private capital. It’s just going to supplement. And now, since we need 25% more minimum, probably closer to half again more by the time we get to 2026, it’s going to be able to start seeing some of the edges off, but not fundamentally change the problem. But if you’re in other countries, I’m thinking here, places that have good green tech potential, places like Argentina or South Africa or Mongolia or Greece or Mexico.

That borrowing difference is everything. And unless we have a significant breakthrough in the economics and the physics of solar and wind in the next couple of years, it’s just not going to cut it. So my recommendation remains the same that it’s been for the last three years. We know the texts in their current form won’t get us to where we think we need to go, which means we need better technology.

And until we develop that, the rest of this is just kind of spinning in place.

European Sanctions Cause Russian Natural Gas Collapse

Most of Europe has been working to reduce dependency on Russian natural gas, and boy, did they deliver. Russia’s natural gas state monopoly, Gazprom, has just reported its lowest output levels since 1978.

Sanctions targeting piped natural gas have effectively cut off supply to Europe, and the exisiting infrastructure cannot be easily redirected. While Russia has alternative natural gas sources and facilities, the limited workforce and technical challenges make these options difficult to maintain.

European sanctions are working well, and these efforts may permanently sever ties to Russian natural gas with little impact on their own systems. The Russian natural gas industry is facing an unprecedented fall from grace, but not all industries have been impacted equally…

Oil, however, is a completely different beast. We will deal with that tomorrow…

Prefer to read the transcript? Click here

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Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.

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Transcript

Hey everyone. Peter Zeihan here coming to you from Colorado. And the news today is that Gazprom has announced its full year output levels. Gazprom is the Russian natural gas state monopoly, and it is the lowest that it has been since 1978. So. Well, pre-dating the Soviet collapse. And the reason is pretty straightforward. The Europeans have tried to cut their dependency upon Russian natural gas to zero.

And at least in terms of the piped natural gas, they’ve been pretty successful. Now, this is something that is not exactly a shock to people who are familiar with the industry. There are many aspects of the sanctions that are working better than others. This is one of the ones that definitely working better. And the reason is the nature of natural gas itself.

Natural gas is a gas, and it takes a specialized system to produce it, to transport it, and to export it. And if there is a gap anywhere along the system, whether it’s insurance or the pipes or the pumps or the legalities or whatever it happens to be, the whole thing stops and it can’t easily be redirected. And in the case of the Russian stuff that goes to Europe, almost all of it comes from an area called Uruguay, which has been in production now for a half century, goes down a couple thousand miles of pipes through Ukraine and Belarus, into Poland, Germany, Slovakia, Hungary and the rest.

And since this can’t be redirected. When the Europeans stopped taking deliveries, the Russians had to, bit by bit by bit, shut everything down. There are other natural gas options that the Russians have. There’s some that comes from eastern Siberia, well east of the Urals, that goes south into China. There are a couple liquefied natural gas facilities, one on Sakhalin Island, primarily, which goes to Japan and one of the small peninsula, which primarily gets shipped to Europe.

And those are still working mostly. But we should expect even those to go off line in the not too distant future. The problem is, is that those other facilities, the Yol, Yamal, LNG, Sakhalin, LNG, and it’s called Comvita, which is a field in the general vicinity of Irkutsk out near Lake Baikal. Those are all much more technically challenging, and the Russians didn’t do any of the work to bring them online.

That was almost exclusively done by foreigners with British major BP being the single largest player. But the Japanese Mitsui Mitsubishi are involved in Stockland as well as ExxonMobil, and most of those companies are now gone. The Japanese are still involved in Stockland, but ExxonMobil and BP are just cut their losses and left completely. And the Russians do not have the technical skills necessary to maintain those projects in the long term.

As for whether or not the Russians can come back, you know, that’s an open question. The Russians used to be the best in the world when it came to ice production and tundra production. But that was in the Soviet period. And the Soviet industrial educational system collapsed around 1985 and the Russian birthrate collapsed in a similar timeframe. So not only do they have a significantly fewer people who could theoretically be trained up in engineering the system that trained them is born.

So the youngest people who have the full suite of, say, petroleum engineering and reservoir management experience are now in their early sixties, and there just aren’t that many of them left. And for the last 20 years, most of the meaningful maintenance work that has been done in places like here in Hawaii, most of the worked on improving recovery rates has been done by foreigners with BP and ExxonMobil and to a lesser degree, the Germans and the Dutch being the major players.

That’s all gone. So Uruguay being a mature zone could probably be brought back as a significant production zone if you applied shale technologies in mass. But as the Americans have shown, shale works in areas that are relatively close to population centers because it requires a significant amount of labor. And it doesn’t work very well in places that freeze solid because you need a lot of water.

And Uruguay is a thousand miles from anything that matters. So that will probably never come back online because the Russians can’t do it themselves. And the technologies that might allow it to work simply are inappropriate for the geography in the case of exports to Europe. They are now down by 85% compared to the start of the war. What is left is just a trickle that is going to three countries Czech Republic, Slovakia, Hungary, who really don’t have any alternatives to taking natural gas supplies from the Russians, which is one of the reasons why Hungary, Slovakia and to a lesser degree Czech Republic have been the three countries that have been most opposed to the sanctions

regimes in general, and most of the exceptions that have been carved out of the sanctions regime involve those three countries. That’s not going to change this year. That might start to change next year as the Europeans are building up lots and lots of lots of interconnections so that they can cut their links to Russia. Natural gas for good.

And when that happens, all that will be left of the Russian natural gas industry is what’s going through the domestic markets. And perhaps cyclin LNG because the Japanese are involved there. And that’s completely separate political question. But that is crazy because you’re talking about the world’s largest producer and largest exporter of natural gas vanishing from global markets in less than four years.

And that is absolutely unprecedented. Honestly, it’s more than a mild shock that the price shocks that the Europeans have felt at this point have been so mild. They really have been able to bring in liquefied natural gas from other suppliers, most notably a Persian Gulf in the United States. This has put a lot of price pressure on everyone else who used to get natural gas from those locations.

But to this point, I got to hand it to the Europeans. They have put together a sanctions regime that at least in part, is doing exactly what they hoped. Jeremy. Russia now exports, cutting Russian income without unduly shocking their own system. I honestly did not think they could pull this off, but so far so good.

Ask Peter: Is Hydrogen the Future of Energy?

Is the hydrogen economy really the future? Or Is it all a farce? I don’t want to get too far ahead of myself, but it’s somewhere in between…

All the math and science behind using hydrogen checks out. And yes, it removes the carbon question from the equation, but where do you get the hydrogen from? Ideally, we would use clean energy sources to separate water molecules, but that’s too energy intensive for solar and wind to get us there this century. We could source it from fossil fuels, but it would be more carbon-intensive than what we do now. So no utopia for us quite yet.

Some bridge technology uses ammonia to create hydrogen, but it’s not all sunshine and rainbows. Ammonia comprises one nitrogen and three hydrogen atoms; unfortunately, nitrogen is critical for much of the world’s fertilizers. And when you have to choose between having food with dirty energy or starving to death w/ clean energy…the answer is pretty straightforward.

So while this is interesting technology and SHOULD be experimented with, that does NOT mean we should start implementing this tech at scale. We’re working with finite resources here, so the tech needs to be thoroughly vetted and proven before we take that next step.

Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:

First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.

Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.

And then there’s you.

Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.

Support medshare's ukraine fund
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Is the LK-99 Superconductor the Key to Green Energy?

Today’s video comes to you from the peak of Mount Evans.

Is the superconductor of every Green’s dreams finally here? I hate to burst your bubble, but the LK-99 is just too good to be true.

Despite their claims, these ‘new’ studies on LK-99 have largely been dismissed by the scientific community due to inconsistencies in the methodologies used. In reality, we haven’t gotten any closer to the superconductors we’ll need for the green transition to stick.

One of the big problems with green energy comes down to transmission. Once your solar panels or wind turbines generate all this power, you still need to get it to the people who will use it. If you can’t do that, then what’s the point?

While this might not be the answer to our superconductor needs, at least this topic will get some new eyes on it and much-needed attention. And who knows, maybe it will even kickstart policy reform…

Prefer to read the transcript of the video? Click here

Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:
 
First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.
 
Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.
 
And then there’s you.
 
Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.

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TRANSCIPT

Hey everybody. Peter Zeihan here coming to you from the peak of Mount Evans. Behind me is Mount Bear Start and Square Top. And behind that, Geneva and Silver and Decatur and treasurer and all the others. Today we’re in talk about something a lot of you have written in about, and that is the 99 superconductor information that has recently been leaked onto Twitter and Reddit.

The idea of a superconductor is it doesn’t lose any of its throughput regardless of distance. And if you can do that over long distances, you can transfer power from anywhere to anywhere relatively easily and cheaply. That’s the idea anyway. The short version for Elk 99 is that it’s probably nothing. The reports in question date back over 15 years, and the only thing that’s new is that they were leaked and they were put online and a number of institutions within Korea, because that’s where the first tests were done.

I’ve already come out and saying that at best they’re flawed, but none of them have ever been replicated, including by the team that did the original report. So there’s probably nothing here. It’s just that it’s getting a little bit of fresh air all of a sudden. Now, if you want to bet on semiconductors, I welcome you to to it.

It’s one of the materials science breakthroughs that we really need if we’re going to make the green transition stick. One of the problems we have with the green transition is that you can generate a lot of solar in the southwest and a lot of wind power in the Great Plains, but that’s not where most of the American population lives.

And even in the United States, where people only, only live, a couple thousand miles away from those zones, that’s much better than you’ve got in, say, Europe, where you’d have to basically go to the great Eurasian steppe for wind and into the Sahara for solar. So if you can solve the semiconductor and the transmission problem, great. There’s also another issue in the United States, because it’s hard to transmit power.

And, you know, very, very, very, very loose rule of thumb. If you transport power about 500 miles, it costs almost as much to do that transmission because of the loss as it does to generate the power in the first place. So you’re generally not going to send electricity very far. What that means is in the United States, most electrical concerns, all the utilities are local.

So each town or each county has their own. There are very few large utilities in the United States. And if you want to make solar and wind work at scale, you either need larger and larger and larger entities, or you need the ability to transfer power across jurisdictional lines, especially state and grid boundaries. Superconductors would, in theory, allow us to do that technically, but we still need the legal structure to do it.

Now you can do high voltage lines, which will double, triple, maybe even quadruple the distance. You can send power in an economically viable manner. But until you can cross those boundaries, it doesn’t really matter. So what we need now, even before we get superconductors, is a multiple acts of Congress to break down the legal jurisdictions to allow power to be sent long distances.

And as soon as Congress does that, a number of states will sue. Because right now this has been a local and a state legal prerogative. So we need a significant legal overhaul before we can really do the green transition, even if we did have superconductors. So I’d say start now and get the laws changed. And then hopefully we can have that physical science breakthrough that is necessary to do this at scale and over distance.

Okay. That’s it. Take care.