The sun doesn’t always shine and the wind doesn’t always blow, but in Europe particularly, backup sources of power have been decommissioned. From AG Metal Miner at oilprice.com:
- Renewable energy has taken center stage in the global fight against climate change.
- The energy crisis in Europe has highlighted some of the challenges the world is facing in the global energy transition.
- It is becoming increasingly clear that fossil fuels will remain a key part of the energy mix for years to come.
In 2018, a pair of us on the MetalMiner team attended the “premier aluminum conference in Europe” — Aluminum 2018 Dusseldorf. Although Dusseldorf felt like a charming Ohio blue collar town with good beer, one of us left the event with a deep cough (obviously pre-Covid). Oddly enough, the weather alert app kept displaying daily ozone levels in the “high” or “extremely high” range. As a puzzled American, one of us appeared confused and the other, thankfully knowledgeable. The cough comes down to the type of energy now used in Germany, coal. MetalMiner’s European colleague quickly explained that after the Japanese Fukushima nuclear disaster, Germany implemented a plan to shut down its entire nuclear operations no later than 2022. In hindsight, that decision by Germany appears both foolish and ironic. Foolish because Germany has lost its negotiating power (pun intended) with Russia for which it relies. It’s ironic because the country already had “clean energy” but now must turn back to dirty energy to avoid blackouts.
In the meantime, while the world watches the Russian invasion and also the impact of sanctions, (we’ll venture a guess that they will have minimal impact), the MetalMiner analyst team discussed Europe’s energy situation and the impact on various metals markets.
On stability of the electric power grid in Europe
Have you ever stood in a field and felt a constant breeze for hours with no interruption at all? Well, we haven’t either. However, if you think wind comes and goes how about relationships with other countries like Russia? Perhaps one can conclude that renewables serve best as supplemental energy sources, certainly not primary sources. When Texas needed to fly helicopters with jet fuel derived from oil to thaw out windmills, clearly the grid did not perform as planned. This begs the question: will the move to green energy continue and will it pull up metals prices needed to support green energy initiatives? If the trend does not continue, one might expect a sharp reversal for several metals.
