I wasted 20 years of my life chasing utopian energy.
Utopian energy is an imagined form of energy that’s abundant, reliable, inexpensive, and also clean, renewable, and life-sustaining. But utopian energy is as much a fantasy as a utopian society. Seeking the fount of perfect energy allows us to pretend there aren’t real-world tradeoffs between, say, banning fossil fuels and helping people in impoverished nations or between using solar and wind power and conserving natural habitats.
For years, I chased utopian energy. I promoted solar, wind, and energy efficiency because I felt like I was protecting the environment. But I was wrong! Feeling like you’re doing the right thing doesn’t mean you are. I just couldn’t admit it. My sense of identity was tied to my false beliefs about energy—myths that blinded me to what really does—and doesn’t—help the planet.
I’ve loved the outdoors since I was a teenager. I led mountaineering expeditions in Alaska, spent months backpacking in the Rockies, and climbed in national parks. My wilderness experiences led to my desire to protect these beautiful areas. I saw that a lot of people who tried to solve environmental issues worked in academia, nonprofits, or government, but they often failed to understand what it actually took to get things done in the real world. I didn’t want to be one of those people. I wanted to make a real difference.
I believe that to fix something, you need to understand it and that hands-on experience is the only way you can gain understanding. So I started building my knowledge and skills from the ground up.
I went to work in construction to build energy-efficient homes, and I started a company that built composting systems for cities and businesses. I became executive director of an organization that championed green building policies and became CEO of a consulting firm that commercialized clean energy technologies and ran energy-efficiency programs. I then founded a software startup to help promote green home upgrades, and I led business development for a company making wireless power technology.
I learned how to see things not just the way environmentalists do, but also the way utilities, governments, builders, engineers, lenders, and manufacturers see them.
But by 2008, I started to see cracks in my beliefs. The Obama administration had earmarked billions of dollars in federal funding to create jobs in the energy sector, and my company won multi-year contracts valued at over $60 million. Creating jobs and making buildings more energy-efficient were worthy goals. But the project was an utter failure. It didn’t get anywhere close to achieving the goals that the government had set. But what was really shocking to me was how the government refused to admit the project had failed. All of its public communications about the project boasted about its effectiveness.
I started to realize that I had accepted as true certain claims about energy and our environment. Now I began to see those claims were false. For example:
I used to think solar and wind power were the best ways to reduce CO2 emissions. But the biggest reduction in CO2 emissionsduring the past 15 years (over 60%) has come from switching from coal to natural gas.
I used to think that the world was transitioning to solar, wind, and batteries. This, too, was false. Trillionsof dollars were spent on wind and solar projects over the last 20 years, yet the world’s dependence on fossil fuels declined only 3 percentage points, from 87% to 84%.
I used to believe nuclear energy was dangerous and nuclear waste was a big problem. In fact, nuclear is the safestand most reliable way to generate low-emission electricity, and it provides the best chance of reducing CO2 emissions.
It’s now clear I was chasing utopian energy. I was using green energy myths as moral camouflage, and I was able to believe those myths as long as I remained ignorant about the real costs and benefits of different energy sources.
I’ve dedicated most of my life to protecting the environment. But I was wrong about the best ways to do it. I thought I was acting morally and protecting the well-being of people and the planet. In fact, I was harming both.
If we’re serious about tackling climate change, protecting the environment, and helping people climb out of energy poverty around the world, we need to stop chasing utopian energy. Instead, it’s time to be honest about all the costs and benefits of every energy source—wind, solar, natural gas, coal, oil, and nuclear.
Here are eight principles that can help us evaluate energy options that will give us the best chance to bring about successful energy reform that protects both people and the planet.
1. Security: Does an energy source enable a country to maintain its autonomy? Controlling access to critical minerals and natural resources to make affordable, reliable energy is a precondition for liberty and self-determination. Relying on energy imports or minerals from other countries puts a nation at risk.
2. Reliability: Can people and businesses reliably access energy when they need it? A reliable energy system provides power 24/7/365.
3. Affordability: Is the energy source easily affordable for households and businesses? The cost of energy affects the cost of everything else. If energy is not affordable, businesses can’t make the products we want, and people will freeze to death in their own homes.
4. Versatility: How many different kinds of machines can the energy source power? We need energy to power machines that mine, drill, pave, fly, cut, pump, filter, transport, compact, excavate, grade, and lift.
5. Scalability:How many people can use the energy source across how many places? Wind, solar, and water resources are often located far away from where people live and work, making it difficult and expensive to transport the energy to where it is needed.
6. Emissions:What are the energy source’s effects on air pollution, GHG emissions, and water quality? Sources of emissions include mining, transportation, and electricity production.
7. Land use:What are the energy source’s effects on wildlife, habitat, farmland, viewsheds, and coastlines? For example, a typical 1,000-megawatt US nuclear power plant needs little more than 1 square mile to operate. Solar farms need 75 times more land to produce the same amount of energy. Wind farms need 360 times more.
8. Lifespan:How long will a source produce energy? Nuclear plants can operate for over 80 years and run for 100 years if they are well-maintained. By contrast, solar panels and wind turbines last only about 20 years.
I’m still on a mission to protect the beautiful landscapes I fell in love with when I was a young man. And I’m still committed to raising worldwide living standards, reducing pollution, and lowering greenhouse gas emissions. But my firsthand experience has exposed the futility of chasing utopian energy sources. I’ve learned the mainstream narrative about what we should do to protect the environment will never accomplish those goals.
Now, my mission includes sharing what I have learned to promote energy sources that can be truly productive and lead to a path of actual, effective change.
Utopian energy fantasies are turning California (CA) into a dystopian nightmare. CA’s energy policies amount to a bold suicide plan worthy of a collective Darwin award.
Traditional Darwin Awards honor people who improve the human gene pool by unintentionally removing themselves from it—like the guy who fatally attempted DIY bungee jumping from a bridge shorter than his bungee cord.
I propose another category of Darwin Awards for entire groups of people (teams, companies, countries…) whose foolish behavior curtails their existence. Examples include Enron, Venezuela, and the former Soviet Union.
Venezuela, for instance, enacted policies that killed its economy. It went from being one of the world’s richest oil economies to being an economic and political wasteland with 77% of its population living in extreme poverty.
CA has adopted a bold energy suicide plan that will earn it a place alongside Venezuela. If CA stays on its current energy trajectory, many businesses will close or move out of state in the next 20 years. People will flee, and the real estate market will crash.
CA residents who can’t leave will face higher taxes, power rationing, and limited access to clean water. Weekly blackouts will likely force households and businesses to pay two electric bills: one to the utility, and another to black-market syndicates that operate diesel-fired generators.
Supporters of CA’s plan complain that it’s unfair to honor CA with a Darwin Award for an imagined future that hasn’t yet (and might not) come to pass. But Californians don’t have to wait 20 years to feel the pain. They’re feeling it now.
CA has the highest poverty rate in America, and rising energy cost is a growing part of the problem. From 2010 to 2020, CA’s electricity rates rose almost seven times faster than the US average. Over 3.3 million CA households have past-due utility bills that together total $1.2 billion.
CA’s decision to shift energy production to solar and wind has made energy prices soar and increased the fragility of its electrical grid. The unreliability of solar and wind power was among the three primary factors causing CA’s blackouts in 2020.
Things are going to get worse. CA leaders decided to prematurely shut down Diablo Canyon–the state’s last remaining nuclear power plant—even though nuclear power is the safest, most powerful, and most reliable way to generate low-emissions electricity.
Diablo Canyon accounts for nearly 10% of CA’s electricity production. Its 2025 shutdown will leave a gaping hole in CA’s baseload power. Policymakers hope to fill the hole with a mix of solar, wind, and batteries. But that hope is unrealistic for five reasons.
Solar and wind are unreliable. The sun doesn’t always shine, and the wind doesn’t always blow.
Batteries cost too much. CA has only 3% of the battery storage it needs to replace 280 gigawatt-hours/day of natural gas during the summer. CA’s policies depend on a technological miracle to produce cheaper batteries.
Using batteries to back up solar farms doubles the number of solar panels required. You need one set of panels to supply power to the grid while the sun is up, and another to charge batteries for when the sun goes down.
CA can’t build transmission lines fast enough to meet its mandate of 100% renewable power by 2045. Current grid capacity needs to almost triple in size, but Californians fiercely oppose constructing power lines, which makes building them practically impossible.
The cost of converting the grid to run on solar, wind, and batteries is $500B to $1T. Households will face a hard choice between paying thousands of dollars a month for electricity or suffering energy poverty.
On top of all that, CA’s electric grid wasn’t designed to charge millions of electric vehicles.
But the state will require nearly 1 million new cars and passenger trucks sold in CA each year to be zero-emission by 2035.
More than 50 CA cities and counties have adopted building codes to restrict natural gas. Banning natural gas and attempting to electrify everything concentrates energy risks on the grid–a grid that wasn’t designed to shoulder the additional load now carried by natural gas during the winter.
CA currently imports about 28% of its electricity from other states. On hot days, the neighboring states will need the energy themselves, so CA will be forced to cut power to homes and businesses.
Expensive energy also means expensive water. Nearly 20% of CA’s electricity use goes to pump and treat water. Farmers in the San Joaquin Valley won’t be able to afford to irrigate their crops. CA will go from being the breadbasket of the world to importing most of its food.
CA’s energy policy is supposed to be a model for the world. It is. It’s a model of what not to do. CA’s energy policies all but guarantee high energy prices, power blackouts, and a crashing economy. These policies are why CA truly deserves a Darwin Award. Every day spent chasing energy fantasies causes unnecessary suffering.
What CA Needs To Do:
Renew licenses for Diablo Canyon nuclear power plant
End subsidies and incentives for solar and wind
Build new efficient natural gas power plants (and hydro and geothermal where possible)
Natural gas and nuclear power will be the big winners in the energy sector over the next 20 years. They have a competitive advantage over solar, wind, hydro, geothermal, coal, and oil. That advantage, combined with market factors, sets up rare investment opportunities to hold high-quality energy companies and buy natural gas and uranium futures.
People in different parts of the world—from Sacramento to Frankfurt to Beijing—are currently experiencing higher energy prices and shortages. Three main factors are at work here:
Increased demand,
Policies aimed at reducing climate risk,
Current market incentives.
Global demand for energy is increasing. Energy fuels all the benefits of modern life: healthcare, education, transportation, communication, and economic growth. Developed countries don’t want to give up those benefits, and developing countries want more of them. As a result, the demand for energy will continue to increase over the next 20 years.
But supply isn’t currently increasing to meet that demand. Concerns about climate risk have led to corporate and government incentives that channel money away from oil and gas production toward solar and wind power, and environmental activists in Europe and the U.S. have successfully slowed the development of nuclear power. Investors lost money betting on the energy sector over the last decade, so the stock market has been rewarding energy companies for strengthening their balance sheets and returning cash to shareholders instead of investing in new long-term projects.
But things are poised to change. Energy runs on a predictable cycle like other commodities. As demand for energy increases, the price of energy also increases because supply is limited. Higher prices attract producers to invest in new production. New production kicks into overdrive because companies start competing to produce more. This competition leads in turn to oversupply: prices crash, and producers stop investing. Supply then gets tight; prices start rising again, and the boom-bust cycle continues.
We are at the beginning of a new cycle. The supply shortage we’re currently experiencing will likely last the remainder of this decade. Investors will find rare opportunities to capitalize on growth.
Global demand for energy is increasing
Energy is the lifeblood of modern civilization, the driving factor behind human progress and human flourishing. Our food, water, housing, transportation, communication, healthcare, and economic development all depend on harnessing energy.
Energy isn’t limited to generating electricity. It is needed for transportation, heating, and producing most of the materials and products we rely on: plastics, fertilizer, computers, medical equipment, mobile phones, cars, and airplanes–all currently made from oil and natural gas.
The world is hungry for energy. Global energy consumption more than doubled between 1971 and 2020,[1] and it’s projected to increase nearly 50% by 2050.[2] It’s clear that we’re going to need a lot more energy than we’re generating now. Some people believe that when we learn to harness new sources of energy, we will stop using our current sources. But that has never been true. Historically, whenever we learned to harness a new energy source, we did not stop using the sources we previously relied on (Figure 1).
Figure 1: Harnessing new energy sources did not replace energy sources we used before.
Future demand for energy isn’t going to be evenly distributed around the globe. Over 3 billion people—40% of the Earth’s population—currently live in energy poverty.[3] Most of the increased future demand for energy is going to come from providing these people with the energy they need and deserve. This is especially true in Asia where standards of living are rapidly increasing.
Navigating climate risk
Climate risk is a real problem because warming temperatures likely increase the severity of floods, droughts, heatwaves, hurricanes, and fires. But it’s important to keep things in perspective.
There are better and worse ways of managing climate risk. Many investors falsely believe we are transitioning to a world that runs on solar energy, wind power, and batteries. But solar and wind power are unreliable: the sun doesn’t always shine, the wind doesn’t always blow, and batteries are too expensive to store enough energy to power the electrical grid.[4] Efforts to shift to solar and wind power inevitably lead to energy shortfalls and increased energy prices for consumers. Solar and wind are useful for certain niche applications, but they don’t scale well and end up distracting us from more effective ways of reducing climate risk. I wrote more about the problems with solar power in another article: “Solar’s Dirty Secrets.”
Pushing to phase out fossil fuels and nuclear energy without a realistic plan to replace them has resulted in rising energy prices, power blackouts, and fuel shortages in Europe, the United States, and parts of Asia. And it has made people more vulnerable to climate risk by curtailing their access to energy.[5]
Wealthier countries are in general more resilient and better able to adapt to climate risk. The global population grew from 2 billion people in 1900 to 7.7 billion today.[6] Yet deaths due to natural disasters have plummeted over 95% during the last 100 years as the world has gotten wealthier (Figure 2).[7] One way of mitigating the human impact of climate risk is to reduce energy poverty and invest in forms of energy that continue fueling economic growth.
Figure 2: Fewer people have died from natural disasters as the world has grown more wealthy.
Market incentives contribute to supply shortages
The energy sector is currently underinvested because many investors lost money betting on it over the past decade. In the early 2000s, a breakthrough in new horizontal drilling technology led to an oil and gas boom, and investors began pouring money into new exploration. Production started to rise in 2008, and the next seven years marked the fastest increase in oil and gas production in U.S. history. But this boom led to global oversupply, causing prices to crash and investors to lose money and stop investing (Figure 3).
Demand eventually ate up the surplus supply, and energy prices are once again increasing. But investors remain gun-shy: they’re reluctant to pour money back into new exploration and production, and the stock market continues to reward energy companies for paying dividends rather than investing in exploration or innovation. As a result, long-term projects are getting pushed into the future.
Figure 3: Underinvestment in supply contributes to current energy shortages.
The supply squeeze is going to last longer than many investors think. Solar and wind aren’t going to meet our energy needs, and the current lack of investment in the energy sector will contribute to energy shortages and higher prices.
The investment case for natural gas and nuclear energy
All energy sources have tradeoffs. Natural gas and nuclear power are no different. Nevertheless, they rise to the top of the best energy options when you consider the alternatives and their tradeoffs.
Burning coal and oil generates pollution and greenhouse gases.
Solar and wind power are unreliable; they increase energy prices for consumers and don’t scale well.
Hydroelectric dams and geothermal plants can’t be built in all the places people need energy because not all places have suitable water and geothermal sources.
Biofuels require an enormous amount of land, water, and chemicals and cause air pollution.
Nuclear and natural gas are reliable, affordable, and produce low emissions. They’re not perfect. But their shortcomings are more manageable than the alternatives, and their advantages can’t be beat.
The biggest advantage is that nuclear and natural gas are both extremely reliable sources of power (Figure 4). Nuclear is, in fact, the most reliable of all energy sources.
Figure 4: The capacity factor of a power plant tracks the time it produces maximum power throughout the year.
In addition, both nuclear and natural gas reduce greenhouse gas emissions. Nuclear power plants don’t emit any greenhouse gases or air pollution while operating. And natural gas produces about 50% of the carbon dioxide and just 10% the air pollutants that coal does.
Contrary to what many investors think, the biggest greenhouse gas reductions over the past 15 years haven’t come from increased solar and wind power, but from shifts away from coal and toward natural gas.[8]
Moreover, nuclear and natural gas have the highest power densities of all energy sources, so they require less land to operate than other energy sources. Consequently, both help preserve natural ecosystems.
Natural gas is flexible and helps grid operators ramp power plants up and down quickly to accommodate changes in demand, and it provides an essential backup for intermittent power sources like solar and wind.
In addition, natural gas continues to be essential for heating, cooking, and producing fertilizer, steel, fuel, motor oils, plastics, detergents, cosmetics, and many other products.
The biggest concern with natural gas is that it emits methane, a greenhouse gas. But it’s possible to capture the methane before it escapes and thus decrease the amount released into the atmosphere.
Nuclear is the safest, the most powerful, and the most reliable way to generate electricity. Once the reactors are built, they are relatively cheap to operate. Countries that rely heavily on nuclear power have below-average retail electricity prices.[9] And nuclear plants can operate for 80-100 years if they’re well maintained.[10]
The biggest problem facing nuclear power is lack of will. The public’s misperception about nuclear’s safety is based on irrational fear. People think nuclear power plants are dangerous for the same reason they think airplanes are more dangerous than cars: they’re swayed by emotion rather than the evidence.[11] Just as airplanes are far safer than cars, nuclear is far safer than other energy sources.[12][13] This fear has nevertheless resulted in the E.U. and U.S. having very strict regulatory and financing hurdles that make the process of building nuclear plants slow and expensive.[14] But it doesn’t have to be.
Japan built a nuclear reactor in just over 3 years.[15] France built over 50 nuclear reactors in 15 years and currently gets 70% of its electricity from nuclear power.[16] And China plans to build 150 nuclear power reactors in the next 15 years at about one-third the cost of recent projects in the U.S. and France.[17]
The future of energy
Many investors feel confused by the myriad divergent messages they’re hearing about renewable energy and climate risk. Their uncertainty is why energy stocks are trading at historic lows. But one thing is certain: people are going to continue needing energy. When we weigh the costs and benefits of different energy sources, nuclear and natural gas are the inevitable winners in the energy sector. Their advantages are enormous, and their shortcomings can be managed. In fact, managing the shortcomings creates part of the investment opportunity: developing better, cheaper methods to produce energy.
It’s difficult to find investment opportunities with tremendous financial upside that also advance human flourishing and protect nature. And it’s rare to be positioned so well to capitalize on future growth. Don’t miss out!
[13] Environmental Progress, “Nuclear energy accidents, although rare, have led to fatalities in operators, first responders, and civilians,” Environmentalprogress.com, https://environmentalprogress.org/nuclear-deaths
