Powering Prosperity

There is one absolute when it comes to having a prosperous nation.

It can't be done without power.

Energy is necessary to power productivity which, in turn, is the fundamental building block behind prosperity.

The energy most critical in the modern age is electrical generating power.

Consider this scatterplot graph that compares electricity consumption and income per capita.

Credit: https://toddmoss.substack.com/p/killer-graphic-shows-why-high-income

High-income, low-energy countries simply do not exist.

This relationship will almost surely be amplified in coming years as Artificial Intelligence and Robotics become the primary drivers of future productivity and prosperity.

Both are heavily dependent on electrical generating capacity.

That is particularly true for AI that requires massive amounts of power to operate.

Credit: https://x.com/MarioNawfal/status/1975831025369686063

It has been estimated that one simple ChatGPT query consumes 10x the power of a Google search. 

In five years it is estimated that the data centers in the U.S. that power AI will need 100GW of electrical generating capacity to operate. That is about 8% of the total generating capacity in the U.S. right now. 

Add to that all of the EV plug-ins that the automakers are pushing and you can see we are heading for problems in powering everything that needs electricity.

We are already seeing the effects of a power squeeze in our electricity prices.

The average retail price for electricity for residential use has increased nationally by 38.4% since January, 2021 according to data from the U.S. Energy Information Administration.

In the previous decade ending January, 2021, electricity prices had only increased 16.1%.

It is undoubtedly not a coincidence that ChatGPT was first introduced in 2022.

The Biden administration and Democrats wanted to bet everything on powering America's future prosperity on renewables like solar and wind.

$1.2 trillion in support for green energy initiatives were included in the "Bipartisan" Infrastructure Bill of 2021 and the misnamed Inflation Reduction Act of 2022.

The United States is in need of increased power generating capacity in all forms but to place all bets in such a small sector was completely irresponsible.

Nothing for nuclear, additional gas pipelines or clean coal technology?

This is despite the fact that over 75% of our current power generation still comes from natural gas, nuclear and coal despite advances in renewables over the last decade.

Credit: https://www.energy.gov/eere/vehicles/articles/fotw-1365-october-21-2024-us-net-generation-electricity-relied-record-use

Even though coal's share of electricity generation has decreased from over 50% to 15% in the last 25 years, solar and wind still make up a smaller share than coal in supporting the electric grid roday.

The reality is that if it had not been for natural gas there is no way we could have replaced the amount of coal generating power plants over the last 15 years and maintained an adequate supply of electricity.

For context, here is how China is powering its electric grid. 

It does not have the advantage of large natural gas reserves so it has relied heavily on coal in addition to wind and solar to meet its needs.

This is why the chart below on carbon emissions looks the way that it does.

It also totally exposes the height of lunacy of the efforts of those who promote "net zero" policies to combat GLOBAL climate change. The last I checked China and India are also part of our world.

In fact, even if the United States and the EU were at NET ZERO right now global emissions would be higher today than they were in 2006---a decade before the Paris Climate Change Accords were instituted.

Source: https://ourworldindata.org/grapher/annual-co2-emissions-per-country?country=USA~IND~CHN~OWID_EU27

The trend for solar and wind projects is strong but there is no way these sources will be able to provide what is necessary by themselves to meet projections of future demand based on current technology. 

It is clear that we need an "all of the above" strategy on power generation in the same way that Donald Trump emphasized ta similar approach to energy production in his first term.

Trump understands that the United States does not have an economic future without accessible and affordable energy.

He has also already issued executive orders to build more gas pipelines, set a goal to increase nuclear power capacity by 300GW by 2050 and to open up federal lands for coal exploration.

You can be assured that none of this would have been done with Kamala Harris or any other Democrat in power.

While there are challenges in the United States in providing the necessary affordable power generation needs, the situation in Europe is far, far worse.

For example, domestic electricity costs in the UK and Germany are more than double what they are in the United States.

The countries that have been most fervent in pursuing a "net zero" future on carbon emissions are likely to find they are also pursuing a "net zero" future on prosperity.

Europe not only has uncompetitive electricity prices but is also hampered by a massive regulatory environment, declining births and an unsustainable pension system in many countries.

Despite this, EU President Ursula von der Leyen announced this week that they are implementing a new AI strategy to strengthen Europe's digital independence and reduce its reliance on the U.S. and China.

Source: https://www.ft.com/content/ea3d20ed-5b42-45ce-8155-67ef472ae9df

Color me skeptical that the EU will be successful in this effort for all the reasons I listed above starting with electricity costs but also considering how far they are already behind the major AI players in the U.S. and China.

I don't seem to be the only one who is skeptical.

Link: https://x.com/WallStreetMav/status/1975217725619556666

 

More than ever, electricity generation will power future prosperity.

The only question remaining is how long will it be before the climate change fanatics and net zero acolytes are relegated to the dustbin of history for their lunacy?