Questioning The Sustainability Of Biden’s Brave New Green World

A Biden administration official who heads up the Department of Energy’s Loans Program office complained this week that U.S. government and industry were not investing nearly enough in ‘clean’ energy programs and projects to meet the administration’s climate change goals. The official, Jigar Shah, speaking in an episode of the CERAWeek Conversation series sponsored by IHS Markit

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, estimated total U.S. investment currently to be roughly $200 billion per year, but then stated that the total annual spending needs to be more like $1 trillion.

“The pace at which we are deploying climate solutions is wholly unacceptable,” he said, continuing on to say that “We perennially have too much money and not enough projects. The vast majority of people are still waiting for the government to tell them what a risk-free approach looks like. That’s not how it works. It’s not risk-free.”

These comments deserve critical examination, since they are quite remarkable when placed into the context of the real world as it exists today.

Shah’s comment that the DOE “perennially have too much money and not enough projects” was made in the context of a current federal budget deficit that is projected to exceed $3 trillion during this fiscal year alone. While even noting that a deficit exists has become cause for attack by America’s cancel culture these days, reality insists nevertheless that DOE actually does not have “too much money,” or really any real money at all to spend on its loan programs. In the real world, Mr. Shah’s budget actually consists purely of debt that will be held either by the Federal Reserve Bank or by other countries, like China or Saudi Arabia.

The second aspect of Shah’s remarks that jumps out is the sheer immensity of the numbers at play. Few ordinary human beings have the ability to truly grasp how much a billion dollars really amounts to, yet the current administration – and the Trump administration before it – tosses around the concept of “investing”, i.e., borrowing trillions of dollars here and trillions of dollars there as if they were talking about peas or kernels of corn. Money really does not grow on trees, but you might believe it does to listen to the way federal officials so casually discuss spending trillions.

For all the criticism Elon Musk has taken for leaning on federal loans and other subsidies in order finally make Tesla

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a going concern, a 2020 study showed that Tesla had taken in a total of about $2.4 billion in such subsidies since 2014. To most Americans, that’s a lot of money, but in the world Mr. Shah inhabits, it’s a veritable pin prick, a drop in a bucket so immense that all of U.S. industry apparently cannot begin to fill it. To its credit, Tesla is one of a handful of subsidy recipients that actually repaid its federal loans, and did so ahead of schedule.

Let’s also look at this remark from Mr. Shah: “The vast majority of people are still waiting for the government to tell them what a risk-free approach looks like. That’s not how it works. It’s not risk-free.”

Ok, so, companies are confused right now on which is the right way to jump to get into this ‘clean’ energy brave new world, and are looking to minimize risk. Is that really any surprise? How can it be, really? Over the last 6 months, I’ve documented examples from several different critical minerals mining companies whose efforts are crucial to the success of any ‘clean’ energy transition, but who find it near impossible to convince the federal government to issue needed permits in anything resembling a timely manner.

Those are the lucky mining companies, believe it or not. Others find it difficult to even get to the stage of being held up by the feds. Witness the recent example of Piedmont Lithium, a company that has found a rich source of the critical mineral lithium in North Carolina. Last year, Piedmont signed a strategic supply agreement to provide Tesla’s battery manufacturing operations with lithium from these deposits, yet the company is currently having a hard time moving past roadblocks set up by local residents and a county government.

All of these roadblocks and delays are taking place in the context of a reality in which U.S. needs for lithium and other critical minerals like cobalt and nickel are projected to multiply by a factor of at least 7 by 2030, just 8-1/2 years from today. The question must inevitably become, where is it all going to come from if governments in the U.S. refuse to allow these critical minerals to be produced here?

Perhaps this is a part of what led Bank of America

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to issue a new study this past week that finds that EV battery technology will find itself in a “sold-out” state as soon as the year 2025. “Our updated EV battery supply-demand model suggests the global EV battery supply will likely hit [a] ‘sold-out’ situation between 2025-26, with its global operating rates reaching above 85%,” the report says.

In a regulatory and cultural environment such as this, is it any wonder then that companies are confused about what represents a realistic, achievable path to become relevant and sustainable in the Biden administration’s brave new Green New Deal world?

The point here is obvious: We can provide Mr. Shah with all of the billions – or hey, why not trillions? – in borrowed money for his loan program that we want, but if governments at all levels don’t quickly start providing clarity and clearing paths for these industrial operations needed to make this ‘clean’ energy transition truly sustainable, then Mr. Shah will still be complaining about a lack of takers in 2024 when his boss must stand for re-election.