Summer 2024 Energy News Wrap-Up
So long summer! Peter and Jackie are back in the studio and are discussing the energy news from the past few months.
They kick off the podcast by discussing political developments in the United States and Canada. Then, they examine the drop in clean energy stocks over the summer and the weaker market sentiment, including the rapid decline in BC’s low carbon fuel standard (LCFS) credit price. Lastly, they discuss the low prices for natural gas in Alberta, which averaged only $C 0.60/GJ in August.
Content referenced on this podcast:
- Canary Media “US Clean Energy Investment is Soaring Thanks to Climate Law” (August 16 2024) and Clean Investment Monitor: Q2 Update
- BC Low Carbon Fuel Standard (LCFS) price history, scroll to the Credit Market Data Section to download.
- ExxonMobil Global Outlook: Our view to 2050 (August 2024)
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Episode 250 transcript
Disclosure:
The information and opinions presented in this ARC Energy Ideas podcast are provided for informational purposes only and are subject to the disclaimer link in the show notes.
Announcer:
This is the ARC Energy Ideas podcast with Peter Tertzakian and Jackie Forrest. Exploring trends that influence the energy business.
Jackie Forrest:
Welcome to the ARC Energy Ideas podcast. I’m Jackie Forrest.
Peter Tertzakian:
And I’m Peter Tertzakian. Welcome back after, I don’t know, what is it, about six weeks Jackie? Since-
Jackie Forrest:
That’s right.
Peter Tertzakian:
… mid-July, but it only takes six weeks for the world to turn upside down. I think if you think about what’s happened since our last podcast in mid-July, and now Donald Trump was shot and came close to being assassinated. President Biden stepped aside from the Democratic nomination, and now Kamala Harris is running for US President for the Democrats.
Jackie Forrest:
Yeah, lots of change there.
Peter Tertzakian:
And that’s just the US.
Jackie Forrest:
Yeah, unfortunately in Canada, nothing’s changed. Fortunately, or unfortunately, depending on your perspective.
Peter Tertzakian:
Well, it has been fairly quiet in Canada during this whole time, or maybe the news flow from Canada is just completely overwhelmed with this sort of thing. Events in the Middle East, events in Ukraine, Russia and beyond. So, that’s what we’re here to talk about.
Jackie Forrest:
Yeah, for sure. Well, and just one more point on Canada. I mean, we did have this federal by-election that happened. I think that was happening around before we stopped in July, and there was some rumors that maybe we’d see a change in the prime minister, but no news yet. No, but there is, interestingly enough, September 16th is another by-election this time in Montreal. So, that will be kind of interesting because that’s a Liberal stronghold. I’m looking at that by-election. I’m sure there’ll be a lot of coverage of that.
Peter Tertzakian:
Yeah. Seems a lot of people are going to look, and the election is next year slated for next year in October.
Jackie Forrest:
Yes.
Peter Tertzakian:
As we get closer to October, it’s going to start the clock, the one-year countdown, and we get into that window. And not that our elections here in Canada are nearly as long as those in the United States, but still there’s a lot of anticipation of this election given the nature of the polarized situation between the Liberals, the NDP coalition and the CPC.
Jackie Forrest:
Conservatives, and I think there’s a couple more by-elections coming, so that’ll be interesting. I also think that timeline is interesting because there’s a number of policies that are expected to be rolling out here, and I think the time is running short for those to get past things like the Clean Electricity Regulations and potentially oil and gas cap.
We won’t get into too much detail, but there’s another big election in British Columbia happening in October that I think is interesting because while it was viewed early on that the NDP would have a good chance here, it’s looking like things are changing and news today-
Peter Tertzakian:
Well, it just changed as we started recording this podcast. We have the BC United Party that has just suspended its campaign and is joining forces with a BC Conservative Party, which had already been gaining a lot of momentum over Premier Eby’s NDP. So that’s a very fluid situation. Somewhat of a… well, I won’t even say somewhat, it’s a big turnaround situation in terms of polling and momentum over the course of the last, I don’t even think it’s been a year in terms of how there’s been such a switch in the populace in supporting the Conservatives over the NDP. I mean, it’s not a foregone conclusion that the NDP is going to lose, but it’s definitely very much in play right now.
Jackie Forrest:
And could have big implications. There’s a lot of policy in BC. We actually had Ellis Ross who is an MLA for the BC United Party on our podcast, talking about things like, how did he describe it? Policy is killing industry in BC. It seems that the Conservative leader, John Rustad, I’ll give you a quote that he had in November. He talked about, “The NDP’s climate policies are taxing people into poverty, and they don’t do anything to change the weather.” So, it may be quite different in terms of the take on climate policy and what that might mean for energy.
Peter Tertzakian:
And overall policy. Well, I think we should get someone from BC to talk about this here in the next few weeks because this is going to be highly consequential.
Jackie Forrest:
Yeah, let’s do that.
Peter Tertzakian:
Okay. Well, what do you want to talk about? I mean, we’re going to have plenty of opportunity this fall to talk politics in the lead up to the US election, these by-elections, the BC election, and as I said, leaning into the federal election dynamics a year out. So, let’s dispense with politics here for a moment and talk more about energy demand and the theme of data center demand keeps coming up.
Jackie Forrest:
It does, and it continued to grow this summer, continued to see more articles. So, I wanted to highlight a couple of interesting things. There was a Catalyst podcast with Shayle Kann. I listened to that one fairly regularly, that talked about one electric company in the US, AEP, saying that there’s 80 gigawatts in the demand queue right now, predominantly from data centers. That’s just one. Put that in perspective. That’s like eight times the demand of Alberta on an average day, and there’s obviously some fluff in that, but real concerns around what the potential demand is from data centers.
And related to that, this summer we started to get some of these sustainability reports out from companies like Google and Microsoft, and they’re admitting that their emissions are going up, not down, even though they made these very ambitious targets around reducing their emissions, the greenhouse gas emissions are going up because they’re bringing on more data centers. Well, here’s them from Google’s 86-page report. They talked about that emissions are up 13% year over year and up 48% since 2019. That’s on Scope one, two, and three. So, that includes the emissions that are associated with the power they may import to their sites and the equipment they import.
But they did say this. “As we further integrate AI into our products, reducing emissions may be challenging.” And then Microsoft, emissions went up 30% from 2020 due to data-centric expansion. This is Scope one through three, and they talked about that building all these data centers is contributing to these higher emissions. So, not only is it increasing GHG emissions, it’s increasing the electricity demand and that, we haven’t seen any issues of that yet in the United States where we’re starting to see brownouts and things like that, but I’m wondering if that’s maybe coming.
Peter Tertzakian:
Well, no. So here, I think it’s a good point because there’s a lot of talk about it, but it hasn’t really manifested itself yet. Over the last few weeks in the summer, I had opportunity to talk with a data center expert, and he was rattling off all these incredible stats. Like Microsoft alone is commissioning one new data center every three days. Now, I don’t have the validation of that number, but let’s just assume it’s true. And that’s just Microsoft, let alone Amazon and Meta and all these other AI type companies.
The thing is though, that these are being commissioned or sanctioned or getting the FID. What he told me was by the time they’re actually built and commissioned; it takes three to four years. So, we are not likely to see this really starting to ramp up until I would say two to three years from now, because the whole AI phenomena started to really gather momentum about a year and a half ago.
Jackie Forrest:
Right. Well, and I’ve heard that some of the equipment is quite long lead time as well.
Peter Tertzakian:
Long lead time, yeah.
Jackie Forrest:
So yeah, maybe it’s still coming because it is interesting. We talk about grid bottlenecks and all these problems, but yet it hasn’t manifested itself in brownouts, but maybe that’s coming in the next few years.
Peter Tertzakian:
Well, it’s coming, and I mean, there was an article a couple of days ago also now, the other dynamic at play, which had somewhat subsided, and that is the whole Bitcoin mining side of things, which we used to talk about how energy intense it was, and it still is. And that now that Bitcoin is, I think it’s above 60,000 US or 65,000 US dollars, once again, incentive to be mining Bitcoin.
Jackie Forrest:
A really good use of energy.
Peter Tertzakian:
A really good use of energy. So, now we have Bitcoin demand surging from the power perspective. We have these mega server farms from the AI perspective surging, and I think you’re really going to see it in a couple of years but prepare for it today.
Jackie Forrest:
Right, right. Get your battery in your garage, like Peter. I did want to point out one interesting news. Not only we’re going to need more distribution, but we’re going to need more generation. So, I don’t know if you caught this recent news at the end of August, Michigan nuclear power plant that was decommissioned now announced it’s going to restart. It’s getting money from the Biden government in the US, $1.5 billion, plus other money from the state.
It’s 800 megawatts and it can come on fairly quickly. And while $2 billion or so, I think when you look at the combined funding of it, seems expensive, it’s very, very small amount of money compared to the brand-new nuclear plant, Vogtle, that was built in the United States. So, I think that’s interesting. Maybe there’s some other low-cost generation out there. I don’t know how many opportunities there are like this, but it is interesting that this is, I think, the first of its kind in the world where you have a mothballed plant that’s getting restarted in the nuclear space.
Peter Tertzakian:
Yeah, it makes a lot of sense. I mean, I really don’t know the details about that, but what I do know is that the bulk of the expense in nuclear power plants is a massive amount of concrete and steel. You need to shield the radiation and the reactor core and the whole operation and pouring all that concrete is what takes all this time and expense to do it. So, if you already have that, it’s like renovating an old house, reinforcing the walls, changing things out I guess, and bringing it back online which strikes me could be a lot cheaper as they’re indicating. Although having renovated a house myself, I am not sure.
Jackie Forrest:
Sometimes you get scope creep.
Peter Tertzakian:
The scope creep could be intense.
Jackie Forrest:
Well, we are going to talk more about this. We’re going to have Rob West on the podcast soon and he’s done some great research on this. So we’ll come back to this topic.
Peter Tertzakian:
When is he? He’s next week?
Jackie Forrest:
Next week. Yeah.
Peter Tertzakian:
Okay, good.
Jackie Forrest:
Well, let’s talk about another topic that we watched over the summer. Clean tech stocks have really struggled over the summer. I’m just going to give you some stats here. So the WilderHill, which is a basket of a bunch of different kind of clean energy companies. Everything from EV charging to fuel cells, hydrogen companies, batteries, just a whole big basket.
Peter Tertzakian:
Green utilities, yeah.
Jackie Forrest:
It’s down about 10% since the start of June. We compare that to other indexes over that time, the Dow Jones is up 7%. The Nasdaq composite index is up about 7% as well. All of these indexes did have a big dip in early August. I don’t know if you paid attention to that. You were maybe enjoying your holidays.
Peter Tertzakian:
No, no. I paid attention.
Jackie Forrest:
There was this scary dip of all stocks around August 5th. Most of them bounced back except for clean tech. Clean tech sort of didn’t bounce back.
Peter Tertzakian:
Yeah, I think this is notable. And the 10% drop since June is not really the headline in my opinion. The real headline is many of them touch their 52-week lows. But actually, the real story is that many of these indices and clean tech stocks that have been around for a long time, many of them are actually at 10-year lows, like 10 year before this latest fall. I was noting that many of them were sort of at six or seven
year lows. Now we’re at 10-year lows. And this has major consequences because this indicates that the likelihood of large amount of private capital going into these sorts of companies is really diminished over the course of the last several months. I mean, the point is it’s going to be very hard for these companies to raise capital, and therefore many of these companies are going to be increasingly or exclusively dependent upon government subsidizations or government financings, because if the private capital isn’t there, then it’s very difficult to grow. And I think it’s also important to talk a little bit about why this situation has occurred.
Jackie Forrest:
Yeah, and a lot of people ask me that this summer, and it’s not like there was one big catalyst like August 5th or something like that. The individual companies may have catalysts. But one idea is, well, there’s just been a lot of negative headlines in general for delays. New EV plant cancels electric three row SUV. You get a lot of that kind of news. But that in itself, I don’t think is the full story. But I wanted to highlight a study that just, well, it’s not really a study, it’s more like an article that came out from McKinsey & Company. I’ll put a link to it in the show notes. And it’s titled The Energy Transition: Where Are We Really? And it talks about the fact that it’s just the deployment of capital is a lot slower than people would’ve expected. And it talks about the fact that there’s so many proposed projects in the queue, but only a small fraction of them are actually reaching a Final Investment Decision.
And so, a bunch of these companies have all these plans and people have expectations about how much money they’re going to make, but these projects just never reach a Final Investment Decision, never get the capital they need. So, here’s some quotes. “More than 1000 blue and green hydrogen projects in the United States have been announced since 2015, but only 15% have a Final Investment Decision. Offshore wind, one gigawatt of installed capacity so far versus 30 gigawatts, which was the Biden target by 2030.” There isn’t even that many in the queue, but they have 17 gigawatts of announced projects, but 90% have no FID. So, you’ve got just a whole bunch of people that have projects in these companies. And the companies may have been valued on the fact that these projects were going to be constructed at some point, but it’s taking longer. And therefore these companies are kind of like the value of them is getting less over time maybe that’s another-
Peter Tertzakian:
Well, from an investor perspective we’ve talked a lot about it on this podcast, is that the uncertainty of whether or not investors are going to make money from these sorts of companies is becoming increasingly, well, the companies are becoming increasingly nervous. The investors are becoming increasingly nervous. The ability to price policy risk is becoming even more blurry with upcoming elections including the US election. So, there’s a tremendous amount of uncertainty. And investors are basically saying, well, I don’t know how to price the uncertainty. The default is not to invest. And so, the capital freezes up, and if there isn’t any private capital or there’s a significant diminishment of private capital as we’ve seen, then the transition slows down, which is really what the McKinsey article is talking about.
Jackie Forrest:
And it actually talks about three main barriers. One is the business case, economic returns, and that for clean energy, a lot of that is around policy. And if that’s uncertain the economic well….
Peter Tertzakian:
Well, it’s beyond policy. I mean, I think the thing is that ultimately energy investments have to stand on their own without policy. They basically have to give a return back to investors in a free market sense.
Jackie Forrest:
Although a lot of them do require that. And that gets to the next point, which is the very not cost competitive yet, although the gap is narrowing, in many of these areas, they do need that subsidy to be competitive. And then another one is many of these areas are just not tested at scale. They don’t have reference companies that have done this before. And a lot of investors say, I’d rather not be the first one, first of its kind sort of project. I’d like to see that. So, I think that’s part of it.
Now, there is some other positive news, so you think it’s all negative, but I was just reading it very interesting, and I’ll put a link to this report from Clean Energy Monitor, which looks at public and private spending in the United States on clean energy. And in the first half of 2024, they estimated that there was $147 billion or 30% jump compared to the same period the previous year. And to put that in perspective, in the full year of 2021, which was before the climate bill, the IRA passed, total spending for the whole year was 141 billion.
Peter Tertzakian:
Right.
Jackie Forrest:
So not all these projects are getting FIDs, but some are, and there is growth. There are some companies that are growing. It’s just not what people expected.
Peter Tertzakian:
Well, there’s growth still. It’s not like the sectors shut down or anything. There’s growth, but the growth has been moderated. It’s not accelerating as exponential as it was before. In fact, some of these trends have leveled out. And also, a lot of the clean energy investments continue to go into the very upstream. In other words, solar farms, wind farms and so on and downstream into EVs and batteries and what have you. But it’s really the infrastructure in between. For example, things like hydrogen or biofuel refineries or all the other types of things that have to be repiped and rewired. Those are the things that are not really attracting capital right now. Which goes further to the hydrogen investment comment that you made earlier that was in the report.
Jackie Forrest:
Yeah, they actually had comments on biofuels and carbon capture in terms of lots of projects not reaching final investment. Talking about biofuels while we’re on this topic of policy and biofuels for those that weren’t following the British Columbia Low Carbon Fuel Standard credit market, it’s worth pointing out there’s been a major change there. And of course, this policy, for those that aren’t aware, it’s been around for over 10 years, it’s really underpinning a lot of clean energy investing, not only in BC, but even here in Alberta because people can create lower carbon products and then get credits for them within the BC Low Carbon Fuel Standard.
And it’s been a very highly priced credit market. In fact, as of first half of 2024, the price averaged about $450 a ton. So that’s a pretty highly priced market. However, the price has really collapsed. It’s dropped to about half of that in July. And the reasoning for that, and this is coming from a corporate press release, is that there’s a lot of subsidized US renewable diesel now coming into the market. And so, it’s sort of oversupplying the market and it’s causing these credit prices to go down. But for companies that were depending on this for their revenues, for their products, it’s really impacted them.
Peter Tertzakian:
Well, I think this is an example of the volatility and the risks embedded within our carbon markets. I mean, there are some companies I noticed that are dependent upon these carbon credits. Their stock prices fell by 80% in one day.
Jackie Forrest:
And the thing is, you’re depending on this for your revenue. So, if it goes down by half, then that’s going to really change your outlook for profit. Maybe you’re not even going to have profit anymore. People talk about things like not doing carbon capture storage because we have a market-based price and it can go up and down, but this is what they’re worried about. And California, if you go back not so long ago, they had a big change in the carbon pricing as well associated with their clean fuel standard. This is one of the issues as investors look at this space, being dependent on these market-based policies creates risk.
Peter Tertzakian:
It does create a lot of risk. It’s really become constraining because there are four sources of capital for clean energy companies, internal cash generation. Now, some of them can generate cash, but many of them are still in their embryonic form where they’re burning a lot of cash or don’t have enough revenue and therefore cash flow to finance their operations and grow. So that’s number one. Number two is the investor market, capital markets. And we’ve talked about how the stock prices have fallen dramatically. So that avenue is generally closed. There’s government incentives. Those still exist.
But then the fourth source is carbon credits and relying on carbon credits to fund your operations has been essential for many of these companies. And when this sort of thing happens in the carbon markets, basically that avenue is closed. And so out of the four, the only one that’s left standing is the government incentives. And as we know, the government cannot fund the entire energy transition. Now, this is not necessarily a long-term thing, but I would say over the course of the next year at least, because it takes time to recover from these sorts of shocks, I think that it’s going to be a very uncertain environment given also the political uncertainties that are out there.
Jackie Forrest:
Well, commodities have had a few major crashes too. Look at oil in 2020 or 2014, and markets do work. So, I do think that these low prices are going to result in less over supply or less diesel coming into the market. So, I think it will sort its way out. But it does take some time for sure. When it comes to these market-based things like carbon markets that have volatility, so do commodities and people still invest in them too.
So, I think it’s getting kind of more comfort in them. I do still look at that spending data. There is still more money being spent on clean energy this year, at least the first half compared to the previous. So, there’s still opportunity in clean energy. I think you just really have to pick your spots.
Peter Tertzakian:
Well, I think there’s going to be a lot more opportunity because it’s not necessarily a long-term thing. It looks rather dire at the moment, candidly. However, there has been hundreds of billions spent on R&D and there’s a lot of very interesting things that are incubating. And I think there are going to be some technological surprises that are going to come at us in the next couple of years that will probably rekindle some segments of the clean energy market and attract capital again, and potentially get another broad-based spark and potentially a rally into the system.
But I think over the course of the next, certainly six months to a year, it’s going to be slow.
Jackie Forrest:
But the good news is for those people that do want to deploy capital, companies are valued much more fairly today than they were a few years ago. Now, talking about volatility, it’s not just carbon markets. Have you seen what’s been going on with Alberta gas prices, AECO, this summer?
Peter Tertzakian:
Talk about volatility and collapse in prices.
Jackie Forrest:
The average price for August is about 60 cents a gigajoule. So, we talked about carbon markets in BC halving. Now we’re talking about 25% of the price of what you were getting even a year ago. So, 60 cents is crazy low. Unfortunately, we continue to have these low prices for gas in Alberta. It’s kind of becoming just the normal thing. It’s interesting to me, we haven’t seen much coverage of these extremely low gas prices. No articles in the newspapers or things like that. But the story is that we’ve just got a lot of gas in storage. Our storage tanks are very, very full.
And at the same time, we haven’t seen Canadian producers respond by curtailing their production very much. There’s been a little bit of news. ARC Resources announced about 0.25 BCF per day of dry gas shut-ins due to low prices. You’ve seen some other companies defer new capital spending or very small curtailments, but there really hasn’t been much of a supply response to these very low prices.
Peter Tertzakian:
No, I think it really speaks to something that we’ve talked about as gain on the podcast. And that is the ability of the natural gas side of the industry to bring large volumes of natural gas to surface at really low prices. And so, the oversupply that we see is just incredibly downward pressurizing on the broad market.
Jackie Forrest:
I think that’s true. But I also think some of the Canadian producers have some unique circumstances compared to the US. We have seen some curtailment in the US even though their pricing is low, but still quite a bit higher than in Alberta. But I think what makes us unique in Alberta is some of our producers don’t sell at AECO, so they’re not affected. And then many of them produce a lot of valuable liquids like condensates with the gas and therefore, well, they don’t like getting low gas prices. The condensates are still making it worth their well to keep producing.
So, I think there’s some other dynamics there too. But I do think when you look at the size of the storage glut, if we don’t get a very cold winter this year, it could stick around for a while. Hopefully LNG Canada starts up mid next year and that helps get rid of this glut. But it’s a pretty serious amount of gas and storage that we have.
Peter Tertzakian:
This whole discussion really makes me a little uneasy about the whole energy complex. I’ve been feeling this way for a while. When you have situations where, for example, on the clean energy side, it’s more challenging to finance. Here on the natural gas side, the price signals really are suggesting very weak. There’s no real incentive to invest. Meantime, there’s just this incredible surge of demand coming from the AI and Bitcoin and just broad-based energy demand growth. And it just speaks to a really unhealthy situation.
And then on top of that, you have the geopolitics of the world, we’re on a very vulnerable ledge when it comes to the events in the Middle East, it wouldn’t take much, in my opinion, for the price of oil to go through the roof again depending on how the situation there evolves. We’ve talked about that a lot. And so the whole energy complex to me is a very potentially unstable area right now. As we set ourselves up from this point over the course of the next couple of years, the supply side is not in good shape.
Jackie Forrest:
Especially because we need way more investment to reach these low-carbon goals or even to meet the growing demand. This is a good point to talk about that new Exxon 2050 outlook, just came out recently.
Every year they put out an outlook and there’s very few groups that do outlooks anymore. Everyone does scenarios. We’ve talked about this quite a bit, but an outlook is actually what they think is reasonably going to happen. They talk about electricity demand almost doubling by 2050, and we’re not investing, as I can see, nearly enough. I mean, that’s what that McKinsey article is saying as well. We’re not even close to investing at the level we need to reach that 2030 goal. Forget about 2050. But they’re also talking about gas and oil demand in 2050 being similar today.
The overall mix changes quite a bit over time as demand grows significantly but they still have oil and gas demand similar to today. And they have some kind of interesting points that if we don’t invest in new oil supply, because there is a decline in oil. Oil naturally declines if you don’t invest new money and they talk about 15 million barrels per day each year lost if you were to invest in new supply. They’re predicting that there’s going to be quite an energy shortage.
And this whole narrative that we’re moving off oil and gas and we’re moving to clean energy is not really incenting people to put money into oil and gas, but at the same time, they’re not putting enough money into clean energy to grow it at the pace required to displace that oil and gas. So anyway, their report, it’s worth… I’ll put a link to it.
Peter Tertzakian:
It’s worth putting a link to it. And the predictable detractors come out and say, “Oh, well it’s an oil and gas bias. It’s an oil company.” Okay, fair enough. But at the same time, ExxonMobil is a global corporation that really sees at the ground level what’s going on in all the various countries around the world. And whereas we have our blinders on in this part of the world, the whole developing, particularly the Asian subcontinent and other parts of the world that are growing, I mean, it’s just… then on top of that, you layer on, again, the AI and the electricity to demand. I just feel like, again, this ExxonMobil report along with others, they’re not the only ones that are making these demand side predictions and also cautioning on where is the supply going to come from at a time when it’s increasingly difficult to finance more supply, whether it’s oil and gas because of divestment movement and all that kind of stuff, or whether it’s clean tech because of all the things we talked about, it’s just kind of a setup for a very unsettling next couple of years.
Jackie Forrest:
And potentially higher energy prices all around.
Peter Tertzakian:
Yeah, potentially. I mean, yeah, we’ve got very low natural gas prices, but if we’re not building, say natural gas-fired power generation, then we don’t have electricity.
Jackie Forrest:
Exactly. And we’ll talk about that with Rob, but he’s predicting a lot of this data center-
Peter Tertzakian:
Rob West.
Jackie Forrest:
Yeah, Rob West, who will be a guest on soon, but a lot of this data center demand, he believes, is going to have to be met by natural gas because it’s needed fairly short time from now, and there aren’t really a lot of alternatives for base load power. And there is the option to make it clean through carbon capture storage eventually too. But anyway, it does imply, like he’s talking about potentially 18 BCF per day of demand growth by 2030, maybe half of that in North America. And so we are going to need some supply investment for that.
Peter Tertzakian:
See, I don’t think the 18 BCF a day is an issue. I mean, as I said, the new drilling technologies and completion technologies are such that you want a BCF a day, you can probably create a BCF a day in six weeks by drilling, I don’t know how many wells.
Jackie Forrest:
Yeah, and with the right price signal.
Peter Tertzakian:
With the right price signal. That’s not so much of the issue in meeting the electricity demand. The issue in meeting the electricity demand is actually creating the power generation ability, the conversion of the energy and the natural gas to electrical power, that’s the issue. And doing it in a climate compliant way by using CCS or what have you, which requires permitting, requires engineering studies, FIDs, as does the power plant in an era where there’s an increasing burden of climate policy and regulatory drag, that it just creates a situation of paralysis, in my opinion, on many dimensions, capital constraints, regulatory drag.
Jackie Forrest:
Well, and even the CCS projects-
Peter Tertzakian:
And the CCS projects.
Jackie Forrest:
… there’s not very many of them that have actually been done. So now you’re in the, is this the first of its kind project and what’s the risk profile associated with that? How long does it take?
Peter Tertzakian:
Yeah. And then, I mean, I think there is the whole phenomenon also, we talked about Bitcoin and AI, but the other elephant in the room is air conditioning because of the rise in the temperatures in the summers that’s happening, the huge demand for air conditioning also in developing countries where they never had air conditioning before. So it just seems like there’s a perfect storm starting to emerge here really far on the horizon, I mean, really far, say, two to three years out. It doesn’t seem like that long, but as I said, we took a six-week break and the whole world changed, it seems.
Jackie Forrest:
That’s right. Well, at least there’s lots for us to talk about. And I think this fall we’re going to have a really exciting set of topics to cover. Some of these topics that we’ve touched on today, we’re going to dive into more detail as we get into our fall episodes.
Peter Tertzakian:
Yeah, there’s going to be no shortage of things to talk about, whether it’s technical or political or otherwise.
Jackie Forrest:
You know what we forgot to ask you though, Peter, what did you do this summer in your break?
Peter Tertzakian:
Well, actually I had a staycation with my family, so it was very pleasant. I didn’t get caught up in traveling around because it was, I think, once again, a very busy travel season for a lot of people. So, staying close to home. And we had our son, and his family join us from overseas, so it was very pleasant.
Jackie Forrest:
That’s good. I had a great summer too.
Peter Tertzakian:
Yeah.
Jackie Forrest:
I explored just our backyard here in the Rocky Mountains, and I really enjoyed it. Did my very first backcountry trip, survived that. I saw at least three bears, not just on that trip, but over the summer.
Peter Tertzakian:
Oh, good.
Jackie Forrest:
Survived that. So, it was a great summer. It was nice to have a break, but it’s nice to be back.
Peter Tertzakian:
Well, even though we’re recording this in late August, I refuse to believe that summer’s over yet, so we should still have several good weeks, I think, of hiking and enjoying the local circumstances.
Jackie Forrest:
Yeah. Well, we’ll do that, but we will still be recording the podcast too.
Peter Tertzakian:
Absolutely.
Jackie Forrest:
Well, we hope you had a great summer and we’re happy to be back. And if you enjoyed this podcast, please rate us on the app that you listened to and tell someone else about us.
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