Daily Energy Standup Episode #295 Weekly Recap: 2023’s Renewable Challenges, Hydrogen on the Horizon, and Unraveling Davos

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2023 – The Year The Renewables Bubble Burst

January 20, 2024 Stu Turley

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Video Transcription edited for grammar. We disavow any errors unless they make us look better or smarter.

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Michael Tanner: [00:00:14] What’s going on, everybody? Welcome in to the weekly recap edition of the Daily Energy News Beat. Stand up here on this gorgeous January 27th, 2024. As always, humble correspondent Michael Tanner, joined by Stuart Turley. Awesome week. Lots of great stories. [00:00:28][14.3]

Stuart Turley: [00:00:29] Oh, unbelievable. And then on Sunday will be releasing Carolina Ortega from, milestone. She is talking about scope three emissions and how to even track scope one and scope two with some pretty cool solutions. [00:00:48][18.5]

Michael Tanner: [00:00:49] Interesting. Well, I’m not trying to track my scope three emissions, so. [00:00:52][3.0]

Stuart Turley: [00:00:52] No, I just have to use scope when I brush my teeth. Otherwise, you know, it’s just. [00:00:56][3.9]

Michael Tanner: [00:00:57] It’s better than a lot of jokes you could have said. So. We appreciate that, guys. Really appreciate you hanging with us, especially here on this weekend. check us out again www.energynewsbeat.com. All the news and analysis you here come from there. Dashboard.energynewsbeat.com. Everything you need to know is in the link below. Otherwise I’ll turn it over to the weekly recap. We’ll see you Monday folks. [00:01:15][18.1]

Stuart Turley: [00:01:16] 2023 the year the renewables bubble burst. Michael. It’s been I’ve never seen this much animosity towards renewable coming up I mean and renewables are not available. But let’s go ahead and take a look at this article. It’s pretty crazy. Why did energy, clean energy take the biggest hit? Wind and solar are more exposed to cost of capital in interest rates. Oh, well. [00:01:46][29.4]

Michael Tanner: [00:01:46] First off, why is that? It’s. You got to take out debt to use it. [00:01:49][3.3]

Stuart Turley: [00:01:50] Oh, yeah. Oops. And cash flow. Oops. And here’s the other thing. Are characterized upfront by capital expenditure with low operating costs. Hogwash. This one I disagree with. Solar PV costs jumped at 23% from 2022 to 2023. Wow. There was also a slowdown in the secondary market, a 71% drop in transactions between investors and developers. Part of this was due to the horrific backlog, regulatory problem. [00:02:28][38.0]

Michael Tanner: [00:02:29] What’s interesting is I think let’s let’s stick on this secondary market. Why is this important? Why is the secondary market important? Well, because the secondary market is where people like I mean, not me and you, Stu, but businesses who aren’t necessarily in the development space and now have an opportunity to invest. Basically, let’s say, stew, you and I have a company, meaning me, and you sell shares directly to one of our friends, family or fools. Okay? They give us some money. [00:03:00][30.9]

Stuart Turley: [00:03:00] If they say. [00:03:01][0.8]

Michael Tanner: [00:03:02] They are fools. Okay, then they have a stock certificate, quote unquote, a secondary transaction. Is them taking the fools, taking that sell that stock port or, you know, stock certificate and selling it to somebody else. That’s called the secondary market, which is what is that? That’s the free market valuing that stock certificate. Think about me. And you convinced somebody to give us 100 grand. We give them 10,000 shares. That’s us really selling them. It’s it’s why we joke the friends, family and fools around when you raise money. Who who invests in small businesses, friends, family, fools. But the secondary market is much more indicative of what I would call the free market optimization of finding an optimal price for something, aka pricing securities correctly. Primary markets. There can be arbitrage opportunity. So when you see secondary markets collapse, what does that mean. There’s no market for anything. The original primary transaction was so overpriced that now there’s not even a secondary market for people like, you know, for example, who the Carolina Panthers, owner David Tepper. Where did he make all his money? Junk bonds. What are junk bonds? Secondary market transactions, buying up debt of certain companies that was issued to others, that was issued by banks and are now being traded on the open market. Those guys see arbitrage opportunities to come in and purchase. There’s none of that going on here. I, I don’t mean to harp on it, but I thought this was the most interesting part. And analysis in this article. [00:04:36][93.3]

Stuart Turley: [00:04:36] I love what you’re saying because I missed right over that. I mean, I just went right over both of my ears. Great job. Did you just get another score on the game? [00:04:46][9.4]

Michael Tanner: [00:04:46] No, I was just signifying that every. Oh, yeah. Right over your head. [00:04:49][3.2]

Stuart Turley: [00:04:50] You can’t even it. Okay, let’s go to the next part. [00:04:53][2.7]

Michael Tanner: [00:04:53] Oh, no. I think it’s important because they also talk about what’s on the horizon for 2024. In this. [00:04:58][4.5]

Stuart Turley: [00:04:58] Article. That was where I was going. And when you talk about this, although the investment sediment has changed in fossil fuels in the meantime have become somewhat fashionable again as energy security. He has been. Reprioritize the energy transition and investment in the clean energy has not slowed down. I disagree. It’s about to take a hammer in the back of the head. U.S. 1.7 trillion was invested into clean energy in 2023, 65% more than into fossil fuels. Wood Mackenzie expects 710GW of new wind and solar capacity to be built across Europe by 2020 2030. I disagree with that totally. I think that as we come back around into this, people are done and they have got to get some more affordable, energy. Here’s my prediction, Michael. Hydrogen and energy storage. I believe that hydrogen is going to be the next big carbon capture, and hydrogen is going to push, solar and wind up on the side. Solar and wind are now being documented. Everybody is running away from it. Everybody’s going to be running to hydrogen, even though I don’t think it’s ready for prime time yet. The carbon capture and carbon taxes is where wealth distribution is going to be big in 2024. [00:06:27][89.0]

Michael Tanner: [00:06:28] Yeah. No, absolutely. I mean it’s cleared the renewables. And but I think what I like about this article is it shows specifically why the renewables bubble burst. What happened in 2023? The fed stopped 0% interest rates. The ERA observed no more. Much like the er the. [00:06:49][21.1]

Stuart Turley: [00:06:49] O zero and no $0 for you. [00:06:52][2.6]

Michael Tanner: [00:06:53] But it’s true. I mean, I can tell you firsthand examples of people who I know in the real estate business who had a strategy that was based upon 0% interest rates. Well, when you can’t go out and refinance your property, whether you’re a real estate investor or whether you’re a huge capital developer, well guess what? You’re you’re in big trouble. It’s it’s an interesting reason. One of the reasons why the shale boom and bust was so different was because, sure, there was a a decent amount of debt that was lost because there was a bunch of debt raised money, drilled into these unproductive wells. So there’s a lot of equity. There was a lot more equity destroyed in the oil and gas business. We’re in the renewables business. It’s all debt. There’s no real equity being put into this because it’s so easy to get financing for renewable energies. Every bank wants to go out and finance an offshore wind farm. Or right now, offshore wind is probably holding up the best comparative to on onshore solar and onshore wind. Those two have taken a huge hit in terms of, right at equity or excuse me, debt implosion. So it really the story for renewables that is that it’s not the technology necessarily that’s failing. It is. But really what’s happening is the financing behind it has collapsed because it’s not profitable. [00:08:08][75.2]

Stuart Turley: [00:08:08] Right. And plus there’s about 19 other things on there. But Egypt’s gas and LNG global challenges and global ambitions. This is over at the folks over there at our, back. They are fabulous. We’ve got doctor, Robert Brooks and Cyrus Brooks, who I’ve had the pleasure of interviewing both of them, and they are phenomenal. They are a natural gas, commodities firm that they have around the world. Market fundamental analysis tool. You gotta go check them out. Egypt has, 62% of their grid is supported by natural gas. And, Mister producer, if you could fly in, Israeli gas fields, this is the Leviathan field. And you take a look at Cyprus, you take a look at, Israel and Egypt, those pipelines coming over, our, the proposed existing LNG plant and then the existing LNG plant and then the optional new pipelines right now from the Leviathan field. They have to go to Israel and then over to, Egypt. And it would sure make a lot more sense just to go straight over. So if it does, happen, it would make sense. Now for local consumption, if you take a look at they have plans to assist in the development on the offshore Gaza marine field, approved by in Israel. And if it would, it would help Gaza achieve energy independence as well. There’s a lot going on in this article, and we need to go ahead and follow up back, with, our back and really help, go through this in more however taking. A look at LNG, exports. This could actually be a big player there. The Davos consensus is finally cracking. This is a funny story when we take a look about the fallout of Davos. There are several different things I think that we’re seeing in a society that Davos is really kind of concerned that their narrative has been broken. One of the leaders is said we’ve lost the media. No, you didn’t lose the media. The media, the people left the media, the wide mainstream media. People are tired of it. So you took it to the too far to the next level in order to go ahead and say, wait a minute, this is the way we’re going to go. People are now tired of that. It also took $40 billion and Ellen to go ahead and give everybody their own voice. And people are not watching TV. They’re not watching, streaming services. They’re watching podcasts. And so the bulk reports, percolating out of the WEF, have been scornful, revealing a pro, proposed program of enlightened elite global governance is not going quite as planned. That’s a great way to say it. Stephen Schwarzman, CEO of the financial services Blackstone, mused that he didn’t think the United States prepared for further deficits and open borders. They are also believing that Trump is going to be the Republican nominee and stands, really, really good chance of being elected. It’s not whether or not you’re a Democrat or you’re a Republican. The Americans want American first. I don’t really care if you’re a Republican or if you’re a Democrat. I am a Christian male, and I am wanting absolutely America and our children first. If you’re a Democrat and you’re a Republican and you don’t have God country children first, I really don’t really care about you anymore. And that is the way the rest of the United States is coming along. So, when we take a look at Davos, this is a really good article on, what’s coming around the corner. $2 billion in subsidies and only two TV stations to open. Holy smokes Batman. Michael, you know, I still can’t believe all these years ago, you and I were going, hey, man, that’s a couple million dollars deal. That’s a big deal. Then we went to, hey, what’s a few billion between friends? Now we can’t even get a charger installed. Insane number billion. This. This is unbelievable. The government rollout of EV chargers has been a slow motion affair. And, 7.5 billion in funding from the 2021 infrastructure particulars bill. Transportation. Secretary Pete Buttigieg said we have a chance to lead the world in the EV revolution. Let’s go through some of the numbers. Half the money will be spent where no one can be afford it. Let’s see. EV sales 1.1 million, actually, 1.2. The number down here. There’s 1.7 million EVs in the total U.S. out of 292 million vehicles. That’s a percentage rate of point five a percent. Wow. Yikes. Yeah. Only 6% in the US. One EV for their next vehicle. It’s not going to happen. [00:14:21][372.5]

Michael Tanner: [00:14:22] That’s right. I mean, what’s a. It just goes to show you, any time the government is investing, there will be overruns. But 2 billion for an EV station. [00:14:31][9.3]

Stuart Turley: [00:14:32] Oh, yeah. I got a hammer. This is a $2, $2 billion pen right here, right now. And it’s the insurance that is absolutely going nuts. It goes. What about repairs? What about insurance? We started the insurance thing several months ago, and it started really going nuts in, Europe. But how fast is eventually? I love that quote. Never, never. I think I know a good guy that knows some things about mines. I believe there’s a school in Colorado. Oh, yeah, Colorado School of Mines. Pay attention to copper before it derails the energy transition. I don’t think there’s going to be a transition. It’s going to take a revolution. But the problem is that copper is going to be needed for just electrification of everything. There is a huge. The CEO of Glencore, Gary Nagle, has warned about an impending massive copper desert fit deficit if the Pacific. Boy, that’s a, Oklahoma way to talk and stress that the world is not fully prepared for it. The Blanca two expansion Chile, experienced significant cost overruns and construction delays. We’re not going to have it. Construction. You have. The South America is not going to be the resources where we we’re going to need it. [00:16:06][94.9]

Michael Tanner: [00:16:07] You’re just the problem is this. And this is why I think it’s important for somebody to hear this from somebody like Gary Nagle. I mean, I’m no fan of Glencore. They’re probably one of the more rough, large traders in the world. You know, they’re a physical commodities trader. And you guys just go look up how much they’ve paid in fines. I think you can we can all look we can all Google Glencore fines. You know, they used to you know, they used to be you know, fill in rich, you know, rich and go and we all know what happened there. But my point is these guys do have their pulse on the physical commodities market and how they. [00:16:43][36.6]

Stuart Turley: [00:16:44] How their, their, orders were stolen. All our copper. [00:16:48][3.9]

Michael Tanner: [00:16:49] That was in inches. That’s a different that’s that’s a story we covered a few months ago. But yes. So what what what things like Glencore, Trafigura, a vital they’re physical commodities trader. So what do they do? They take the commodity from somewhere and they bring it somewhere else. Well, what companies like Glencore have now gone out and done is they’ve gone out and bought the source production. Glencore is really big in the minerals and mining space. Trafigura is a little bit bigger, when it comes to oil. So along with vital, Glencore also does a lot of coal. So they know. But what he’s saying is even if we wanted more coal, more copper, we can’t get it because these projects can’t get approved. All of the projects that we’re currently investing in, overruns, meaning they’re Neville, they’re they won’t necessarily pay out, which means you’re never going to get financing, you know, and, you know, with on a six and a half on a six, you know, there’s recent study Zesco. They found that these large scale project delayed by an average of 4.3 to 6.3 years, that’s on top of a seven year production site. So you’re talking over a over I mean, it’s incredible how long this is. It’s a decade and a half to get something like this done. And yet we think we’re just going to increase the amount of copper supply by three times that. I mean, you want to talk about getting me worked up. [00:18:15][85.9]

Stuart Turley: [00:18:17] I kind of threw that in there intentionally is knee. Let’s see. School of mines got his master’s. [00:18:22][5.1]

Michael Tanner: [00:18:23] But he’s got nothing to do with that. More so than. [00:18:25][1.8]

Stuart Turley: [00:18:25] The one you don’t like. Incompetent boobs trying to make an energy transition using copper when they can’t even do it, right? Well, no, I’m all for. [00:18:36][10.5]

Michael Tanner: [00:18:36] I’m all for using copper. I think we just have to be very clear specifically about, okay, if we’re going to move into a post fossil fuel world, what does that actually look like? You know, I, I, we were on a call with a client today stewing and cracked me up because you get to sell the dream. You’re the politician. You know, I actually have to live in reality and make things happen. So that’s where my focus is. If you sort of fight because it’s true, you know, there are people that are allowed to sell the dream. Sell the dream of rules. I’m all for the dream, but now we have to come back and live in reality and figure out, okay, what can we actually do today? And then what are the the actual steps one foot in front of another. They’re going to get us to the end. [00:19:17][40.5]

Stuart Turley: [00:19:18] You’re the old, boots on the ground kind of guy. [00:19:20][2.6]

Michael Tanner: [00:19:20] Yes. I’m the I am the boots on the ground I am, I am infantry. [00:19:24][3.2]

Stuart Turley: [00:19:27] Attack that hill! Hey, let’s go to the next one here. This one’s really, really cool one. It’s a really short one from our buddy over there, Steve Reece. For natural gas, it’s. Buckle up and hang on for 2024. Over at Reece Consulting. They have absolutely. Measure. They know natural gas. He is an industry thought leader. And, Michael, I have to give him a shout out. He looked at one of my podcasts and put a comment on LinkedIn. Steve Reece, I can’t wait to hug. Yeah, Nate, for this comment. He goes, dude, you’re sporting one heck of a dome hat. You. For for even for our podcast listeners, I got a little bit of a flesh hairline. [00:20:17][49.7]

Michael Tanner: [00:20:20] It’s really shiny. [00:20:20][0.6]

Stuart Turley: [00:20:21] It’s really, I. I don’t waste much in my hair cutting anymore, but let me go through some of these. If market forecaster Craig, this is a quote from Steve natural gas producer. And we’ll take it on a chin in 2024, before the heavens part in gear started turning and new LNG export terminals adding capacity in 2025. So Steve is taking into consideration some of the issues that the Biden administration is working on this and that regulatory thread that we were talking about is going to be a widespread impact. Listen to this quote. In an ironic twist to a milder, winter, a weeklong freeze this month trigger the cancellation of five LNG, cargoes to set sail from Louisiana and Texas. Cheniere energy requires a 40 day notice for cancellations. Gas storage is up to its eyeballs. I love Steve. Anyway, so. [00:21:29][67.3]

Michael Tanner: [00:21:30] We love Steve Reese. He’s. He’s one of the smartest people and most informed people when it comes to the midstream business, because this is what he’s done for 40 years. [00:21:38][8.2]

Stuart Turley: [00:21:39] Oh, and, he he calls it like he sees it. And he is a trusted resource to CEOs all around the world. [00:21:47][8.3]

Michael Tanner: [00:21:48] I think the only other thing I saw in the oil and oil space, too, I thought was, was hilarious was, diversified energy. They’re one of the largest owners, of U.S. oil and natural gas wells. They’re being targeted by a short seller claiming the company may not have enough money to meet its obligations to plug inactive wells. This one you can find entered diversified energy faces short seller attack from ESG focused snow cap. What’s interesting is this snow capped research, their London based act was an activist investor who focuses specifically on ESG government matters, went ahead and released a 39 page report. And I mean, I will have the report on the website. It’s absolutely brutal what it breaks down. So to give you guys an idea, let’s introduce Diversifies Energy’s business model. And now this is, you know, straight up off their website. So they go ahead and acquire mature, low productive oil and gas wells. They’re the largest oil and gas or owner of oil and gas wells in the country. More than Exxon, more than Chevron, more and more than everybody. What they do is they don’t drill new wells. They claim to extend the life of operating lives via, quote, smarter asset management. Next, they delay, well, retirement and associated plugging costs by pushing out those cost as much as 50 years. Again, they do not engage new drilling or exploration, instead must replenish any declining production with new acquisitions. And they securitize wells with amortizing debt to support higher leverage. All that means. So Cap research says these guys suck. So give you just to give you an idea what they’re claiming, what they’re claiming is a few thing. They’re claiming that they’re self-reported discretionary cash flows. They’re being used basically they’re using not well what they claim is this I’ll I’ll pull up the slide here. I want to make sure I sell this right because we’re about to body these people. Wow. Where is it? [00:23:43][115.4]

Stuart Turley: [00:23:43] Here. I it just done it. When you said that, it dawned on me what was going on. That is a that’s worse than a Ponzi. [00:23:51][7.3]

Michael Tanner: [00:23:51] So here to give you guys an idea when they are calculating. So one of the chief things that they claim snow cap says is that, oh, the dividend that they’re giving out, they’re $150 million a year of dividends is nowhere near what they’re going to be. They’re not going to nearly be able to sustain that, because their methodology for calculating, dividends was based off adjusted EBITDA, a non-GAAP numbers based, instead of basing it upon cash from operations and adds back new debt issued for acquisitions despite excluding debt repayments in in line with its declining EBITDA. That also means that instead it basically they calculate. All that being said, if you recalculate discretionary class flows based in 2022, it’s a 73% difference and not in a good way, folks. Diversified energy if you have any investment in them. I don’t give investment advice, but I’d seriously look into getting rid of absolutely incredible 39 page story. I mean, stew didn’t even read the report. He sees what’s going on right now. [00:24:56][64.6]

Stuart Turley: [00:24:57] You just read the thing and it just dawned on me, this is not good. [00:25:01][3.8]

Michael Tanner: [00:25:02] No, it’s absolutely not. Shares are down as much as 20%. We’re down as much as 20% in the day. But they only are. 3%. You know in into diversifies defense. They did come out and say report contains numerous inaccuracies. Ignore specific financial and operational results and sustainability action designed for the sole purpose of negatively impacting the share price for the short sellers benefit. I mean, the 65,000 oil and gas wells is it’s a lot. It’s more than everybody. And they’re based out of Birmingham, Alabama. Bama they don’t drill wells, which is just crazy. [00:25:34][32.4]

Stuart Turley: [00:25:36] No. You know, that goes back to what we talked to, to our clients about oil and gas. Not all oil and gas investments are the same. And do your homework. [00:25:48][11.5]

Michael Tanner: [00:25:49] I love that you’re just like, no, no, I’m good. [00:25:51][2.4]

Stuart Turley: [00:25:53] Is. [00:25:53][0.0]

Michael Tanner: [00:25:54] You know what? I’m the same way. You. No. I’m good. [00:25:57][3.0]

Stuart Turley: [00:25:57] Yeah. I’m just like, Holy smokes. That’s just unethical. [00:26:02][4.2]

Michael Tanner: [00:26:03] It’s extremely unethical. Well, it’s extremely unethical. Oh, so absolutely unbelievable. Stu. We’ll see how it plays out. [00:26:03][0.0][1506.8]

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