Reddy Kilowatt was the creation of the electric utility industry in the 1930’s when it was trying to spur consumer adoption of electricity which, for many, was simply an abstract invisible commodity. Here is Reddy Kilowatt circa 1930:
By the end of WWII Reddy Kilowatt’s likeness was global and demand for electric power began to accelerate. RK got a face lift and gained 20 pounds and started wearing gloves like Mickey Mouse. Disney animators collaborated on a film short called “Reddy Made Magic” as electricity became the universal energy source powering America’s unstoppable growth.
That 1946 short film featured a theme song the last verse of which was a promise that was fulfilled throughout my youth: “I am always there with lots of power to spare because I am Reddy Kilowatt.”
That promise changed with environmental issues and by Reddy’s 50th birthday the electric industry began to champion environmental responsibility and clean energy, and Reddy got a green makeover.
The 3-mile Island nuclear power melt down in 2019 reversed the consumer’s unconditional demand for electricity and the demand for clean energy put Reddy Kilowatt out of business. It became evident that electrons came in four flavors: “somewhat risky” like nuclear, “somewhat dirty” like natural gas, “really dirty” like oil and coal, and “clean” like solar, wind, hydro and geothermal.
World leaders all collaborated on a clean energy goal of net zero emissions by 2030. Like most things political this mantra was ignorant about the intermittency (not available when you need it and hard to store) problems of relying on wind, solar, hydro, and geothermal alternatives to anchor net zero. They also forgot about mining and reserves for indispensable metals like copper, zinc, and nickel, all which are essential for electric vehicles and the electric grid in the United States.
As we prepare for net zero emissions by 2030, and the bright promise of electric cars, electric charging stations, and battery technology that will make your car a source of stored electricity to address peak power demands, a new realization is dawning on the green movement – there is not enough incremental green electric power from wind farms, solar panels, wind turbines, hydroelectric and geothermal to run data farms, power Artificial Intelligence, air condition hotter cities, and perform “proof of work” blockchain validations for Bitcoin. It appears that innovation has simply outstripped the capacity for generating clean electrons.
Reddy Kilowatt May Be Back In A Dirty Business
If Reddy Kilowatt is coming back in 2024 with an unconditional promise of abundant clean energy it will be purely political. If science is mixed in and geologists can expound on the limitations on reserves of critical basic minerals like copper (Cu), zinc (Zn) and nickel (Ni), the story will be about lack of preparation and scarcity of critical base metals. Here are some statistics from a study underwritten by the largest mining company in the world, BHP, in an article sponsored by “The Financial Times” on September 27, 2024, titled “Mining For A Low Carbon Emissions Future”.
“According to the International Energy Administration demand for critical minerals will dwarf current production. For example, the production of copper, zinc and nickel used in photovoltaic solar panels will need to increase 150% or more in a net zero emissions by 2050 scenario.” The BHP study further references a McKinsey research project that estimates “investments in mining, refining and smelting will need to increase between $3-4 Trillion by 2030 which is a 50% increase from the previous decade”.
For further evidence that clean electrons are scarce and will remain so, you need look no farther than the announcement by Amazon (NASDAQ: AMZN) and Microsoft (NASDAQ: MSFT) this month. In March 2024 Amazon announced that it had purchased a 960-megawatt data center campus from Talen Energy which is powered by an adjacent nuclear power plant operated by Susquehanna Power. With bitter irony, Microsoft (NASDAQ:MSFT) signed a long-term power purchase agreement with Constellation Energy to buy 835 kilowatts per year with 3-mile Island as a producer of clean, albeit not riskless, electrons.
Rhetoric aside, this is a watershed for net zero and a harsh admission by two dominant power users that there are not enough clean electrons to power data management and artificial intelligence. Further evidence of the changed opinion on nuclear is China’s recent reminder it is currently constructing 26 nuclear power units and Dominion Energy’s recent announcement it will investigate a small modular nuclear reactor solution for its power requirements at its North Anna Power Station.
Natural Resource Deficiencies
While Amazon and Microsoft have cleverly monopolized shuttered nuclear capacity, the rest of us are looking for some roadmap on this subject of scarce electrons. I know for certain that energy companies all claim there are not sufficient natural resources like copper (Cu), zinc (Zn), and nickel (Ni) to satisfy even the demand for EVs. An internal combustion car only uses 40 pounds of metal while a Tesla-like EV uses 440 pounds of copper, zinc and nickel. Environmentally sufficient clean electron technology as well as well functioning and dependable electric grids all over the world rely on copper.
That copper cannot be mined at a rate to meet demand. Coal fired power plants cannot be scrubbed enough to be brought back as a source of clean electrons. A national charging station network for Electric Vehicles has to be built from copper that simply cannot be mined to meet demand. Hybrid car solutions are the only feasible alternative and the subsidized promise of a revolution in fossil fuels for individual vehicles is short many hundreds of million tons of basic natural resources like copper, zinc and nickel.
The NEW GOLD?
Copper, Zinc and Nickel don’t look pretty but they are likely going to dominate our conversations about clean energy and our electric grid for years to come.
The above commentary is for informational purposes only. Not intended as legal or investment advice or a recommendation of any particular security or strategy. Information prepared from third-party sources is believed to be reliable though its accuracy is not guaranteed. Opinions expressed in this commentary reflect subjective judgments based on conditions at the time of writing and are subject to change without notice.
