Sustainability Community

Enron after All: A History of Our Broken Energy Paradigm
Summer time reading for those interested in a bit of history:  fascinating article in the American Affairs journal Spring 2023 edition on the role of Enron and contributions to American energy, natural gas, renewables, and electricity restructuring.  Outlines the ongoing challenges for the industry and finance of moving away from fossil fuels towards renewables, and reliability of energy sources and dependency on natural gas etc - challenges which will no doubt continue as the transition towards a low carbon economy and alternatives are found.   See what you think!  James

A few paragraphs and conclusion stand out as copied below.  

Throughout the 1990s, by means of policy innovations, assets, trading schemes, and messaging, Enron formed what's become the dominant energy paradigm: renewables supplementing natural gas fostered by free markets to solve climate change. All that was missing were the infrastructure arrangements that would benefit those two technologies: electricity spot markets. 

...
 In the world of finance, environmentalists have launched boardroom coups that divest money from fossil fuels and invest money in renewables. This tactic flies under the banner of Environmental Social Governance, or ESG, investing. In 2020, $700 billion was allocated to ESG investments. Hostility toward fossil fuels has cut the enrollment of petroleum engineers in college by 83 percent over the last five years, jeopardizing the industry's future, and has fostered unwillingness among investors to commit capital to projects that one half of the American political spectrum and part of Wall Street wants to wipe off the face of the earth. It is becoming harder to produce natural gas even as our consumption of it has tripled since the 1970s.

 These factors spell trouble for the country's electrical system, especially in the deregulated markets. Electricity restructuring has made the grid more reliant on gas, which made up 38 percent of electricity generation in 2021.161 When gas prices spike, so do electricity prices. Moreover, the renewables push has made electricity more expensive and has depended on, rather than displaced, natural gas.162 Successive reports from the North American Electricity Reliability Corp. (NERC) have indicated that the changing resource mix-i.e., the massive onboarding of wind and solar-has started to create reliability problems for the American electricity sector.163 Grid operators echo NERC's concerns, as do some FERC chairs.164 Plus, it appears that natural gas's methane leaks undercut its emissions reductions.165 Finally, Enron's renewable energy credits have enabled companies to inflate their actual emissions reduc­tions, and renewables themselves tend to transfer wealth upwards via the credits that enable them.166

We live in the house that Enron built, and now the lights are starting to flicker.

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James Doyle
Director, Green Finance, Investment Management
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Good morning Community!
I hope you had a fantastic warm weekend and are gearing for a great week ahead.

I found this interesting report from Blackrock on renewable power growth. At COP28 in Dubai, nearly 130 countries committed to triple their renewable energy capacity by 2030. That would require maintaining the 17% average annual growth rate in renewables over the past seven years for the next 7 years.  This report also mentions where Blackrock sees large volumes in terms of deal flow in the space.

Key takeaways include:

• solar and wind industries hit record installations in 2023
• Drivers include: falling costs, policy support for the transition to a low-carbon ecnomy, and, increasingly, energy security
• solar and wind are starting to benefit from new green industrial policies in the U.S., EU and around the globa
• china's dominant position int he production of solar panels and components contributes to supply chain risks
• permitting and grid connections are perennial sticking points for infrastructure proejcts across many jurisdictions
• behind-the-meter energy generation is an opportunity, allowing regions and businesses to sidesteop utility-scale bottlenecks
• jurisdictions with fewer regulatory restrictions have seen a recent windfall of investment in renewable power

On a "consumer" level I do see many adverts now on how to install and use solar panels at home, i see many surveys power companies are conducting asking potential users about their preferrences. We know that in the US almost every building uses solar panels now. At the same time I think about Central Asia and its vast resources in terms of wind and solar that are not being used. 

It would be interesting to hear from those members who invest or have experience of investing in wind and solar in the UK and Europe or elsewhere in the world. Where do you see opportunities and potential? 

Are there members who have any experience or insights on solar/wind investment space in Central Asia?

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Aya Pariy
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Original Message:
Sent: 17-08-2023 14:52
From: James Doyle
Subject: Energy transition - US renewables and natural gas: Article - Enron after All: A History of Our Broken Energy Paradigm

Enron after All: A History of Our Broken Energy Paradigm
Summer time reading for those interested in a bit of history:  fascinating article in the American Affairs journal Spring 2023 edition on the role of Enron and contributions to American energy, natural gas, renewables, and electricity restructuring.  Outlines the ongoing challenges for the industry and finance of moving away from fossil fuels towards renewables, and reliability of energy sources and dependency on natural gas etc - challenges which will no doubt continue as the transition towards a low carbon economy and alternatives are found.   See what you think!  James

A few paragraphs and conclusion stand out as copied below.  

Throughout the 1990s, by means of policy innovations, assets, trading schemes, and messaging, Enron formed what's become the dominant energy paradigm: renewables supplementing natural gas fostered by free markets to solve climate change. All that was missing were the infrastructure arrangements that would benefit those two technologies: electricity spot markets. 

...
 In the world of finance, environmentalists have launched boardroom coups that divest money from fossil fuels and invest money in renewables. This tactic flies under the banner of Environmental Social Governance, or ESG, investing. In 2020, $700 billion was allocated to ESG investments. Hostility toward fossil fuels has cut the enrollment of petroleum engineers in college by 83 percent over the last five years, jeopardizing the industry's future, and has fostered unwillingness among investors to commit capital to projects that one half of the American political spectrum and part of Wall Street wants to wipe off the face of the earth. It is becoming harder to produce natural gas even as our consumption of it has tripled since the 1970s.

 These factors spell trouble for the country's electrical system, especially in the deregulated markets. Electricity restructuring has made the grid more reliant on gas, which made up 38 percent of electricity generation in 2021.161 When gas prices spike, so do electricity prices. Moreover, the renewables push has made electricity more expensive and has depended on, rather than displaced, natural gas.162 Successive reports from the North American Electricity Reliability Corp. (NERC) have indicated that the changing resource mix-i.e., the massive onboarding of wind and solar-has started to create reliability problems for the American electricity sector.163 Grid operators echo NERC's concerns, as do some FERC chairs.164 Plus, it appears that natural gas's methane leaks undercut its emissions reductions.165 Finally, Enron's renewable energy credits have enabled companies to inflate their actual emissions reduc­tions, and renewables themselves tend to transfer wealth upwards via the credits that enable them.166

We live in the house that Enron built, and now the lights are starting to flicker.

------------------------------
James Doyle
Director, Green Finance, Investment Management
------------------------------