The Renewable Energy Credit Scam // Petroleus Shrugged // Energy-Starved EU Manufacturers Start to Shut Down

The Renewable Energy Credit Scam

How do all of those companies claim to be 100% renewable energy powered? Well, they aren't. And a new report sheds light on how this scam happens.

The problem begins with Renewable Energy Credits. The Verge reports, "A company receives a REC by paying to support renewable energy projects around the world. When brands say that they’re powering their business with 100 percent renewable energy, they’re typically still using electricity generated by fossil fuels; they’re just buying up renewable energy certificates to try to cancel out the environmental impact of their energy use."

These are like the new "indulgences," but instead of buying forgiveness and remission for your sins, you're buying the ability to tell people you haven't burned the fossil fuels you have in fact actually burned.

The report's authors looked at 115 companies from various industries including Microsoft, Ford, and Best Buy. "Combined," the Verge reports, "the companies reported reducing planet-heating pollution from their electricity by over 30 percent between 2015 and 2019." The researchers claim that report is overblown--by nearly two-thirds. The real number should be something like 10%.

RECs explain the discrepancy. When you flip on the light switch, it's impossible to tell where the juice is coming from--gas? Wind? Coal? RECs are supposed to signal "a company’s financial support for renewable energy projects." So, in some roundabout way, RECs are meant to bring more renewables online and absolve companies of the guilt of having burned fossil fuel. Want to burn gas in California? Just buy this credit that says you helped pay for renewables somewhere else and we'll pretend that never happened!

But "as renewable energy projects have become more common, prices of RECs have tanked. At the moment, certificates are arguably not a strong enough revenue source to incentivize energy companies to bring new renewable energy projects online."

Well, "It's a Barnum and Bailey world / Just as phony as it can be..."

Petroleus Shrugged

Why hasn't the American oil and gas sector responded to President Biden's urgings to ratchet up their production?

“When the White House started calling around in a panic, they thought shale oil production could grow sharply in the near term — like in a matter of months or quarters,” Bob McNally, head of consultancy Rapidan Energy told The Financial Times. “They were shocked to learn that that’s like asking for blood from a stone. It’s almost impossible.”

The reasons why it's impossible are several:

• Wall Street feels stingy after taking huge losses from oil companies dumping their revenue into growth. Shareholders want returns. "Investor demands are being heeded over those of the White House: the amount of cash generated by operators this year is set to be greater than the total earned over the past two decades," FT reports.

• High input costs. Frac sand prices have spiked as mines that were closed during the pandemic struggle to ramp up. "The cost of drilling rigs too has shot upwards, due to the general shortage in the market. Labour costs have also risen as many skilled workers have left the industry and are demanding premiums to return."

• Lagging recovery from pandemic negative oil prices which stopped the industry in its tracks.

But rigs and frac fleet numbers have improved. FT attributes this to smaller, private companies "which do not face the same shareholder pressure as their larger public counterparts." Moody's says that these private operators will crank up their capital spending by 49% and increase their output by 12%. "By contrast," FT reports, "public companies will increase their capital outlay by half that rate for a meagre 3 per cent production boost."

In reality, there's little the president can do to change the price at the pump in real-time--even in the best of times. But he can make things worse in the future. Biden's oscillations between pleading and condemning the industry haven't helped on that front.

Energy-Starved EU Manufacturers Start to Shut Down

European industry runs on cheap Russian energy. What happens when all that oil and coal goes away shouldn't surprise anyone. Some European factories are starting to shut down and lose out to competition "in the U.S., the Middle East, and other regions where energy costs are much lower than in Europe. Natural-gas prices are now nearly three times higher in Europe than in the U.S," reports The Wall Street Journal.

The outlook is grim:

• High energy costs are likely to hammer industrial production and economic growth.

• The EU's economists expect the German economy to contract during Q2. It's the largest economy in Europe and the biggest buyer of Russian natural gas.

• "Europe’s consumers are unlikely to pick up the slack, as high energy costs are filtering through into prices across the economy, sapping their purchasing power."

If European continues to deny itself Russian supplies then these problems will become long-term trends. And what happens when the cold comes howling back during winter? Europe will enter those dark days with diminished reserves and shakey economies. What we're seeing now may just mark the beginning. The problems date back to last year, before the Ukraine War, which has made this all much worse and more troubling.

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Conversation Starters

• Texas's electricity demand is skyrocketing during a heatwave. Officials say that the grid can hold, but these temperatures are abnormally hot this time of year and appear to be stress-testing ERCOT on a daily basis.

• California energy officials promise the state's not "backsliding" on its clean energy coals while its proposed reserve could be 5GW of natural gas. CAISO is facing a "1,700 MW capacity shortfall compared to meeting industry reliability standards. That figure could be as high as 5,000 MW if California experiences simultaneous extreme events, like regional heatwaves and large wildfires. And these challenges are occurring against the backdrop of several planned retirements, including the 2.2 GW Diablo Canyon nuclear plant and a suite of gas-fired plants in the coming years," reports Utility Dive.

• Libya's oil output has nearly ground to a halt. This will tighten the oil market, which has already seen $120 a barrel oil this year.

Word of the Day

Joule (J) 

The meter-kilogram-second unit of work or energy, equal to the work done by a force of one newton when its point of application moves through a distance of one meter in the direction of the force; equivalent to 107 ergs and one watt-second. (source)

Crom's Blessing