You can't grow economically if you can't keep the lights on. Steady and reliable power is essential.

Regrettably, that may be easier said than done in an America caught halfway to the green transition.

Let us explain.

We mentioned last week that in the first ever edition of this newsletter we stressed that our incoherent and uneven approach to combating climate change could leave us vulnerable to real disappointment.

One summation of the dominant plan might be:

Massive renewable energy subsidies and not much else.

Basically, we have worried that this approach would the US both economically and strategically vulnerable and at risk of expensive mistakes that could very rapidly become fuel for a political movement against the green transition.

At the time, we didn't think that either the transition or the wisdom of massive green subsidies got nearly enough serious discussion. It was just taken as a given that we were "going green now" and that this was an unalloyed good thing especially after President Biden won the 2022 election.

Because of all these concerns, we worried that many of the Western climate change policies, as they were presently constructed, were "baking in" some serious structural risks into the US energy grid.

Namely, we could find ourselves enjoying:

• a more vulnerable grid

• more expensive energy costs and

• also a strategic dependency on foreign fossil fuel producers that do not give a hoot about climate change.

We have written on this topic every 3-4 months since, often pointing some obvious flaw with our masterplan (or lack thereof) for combating climate change in the West. Some times these risks have occurred (see our recent German piece on shutting down nuclear power) while other times we have been wrong (Europe's warm winter and impressive scrambling avoided a crippling economic crunch post-Russian invasion of Ukraine) but in general we remain concerned overall.

Our worries only deepened last week week when we read the North American Electric Reliability Corporation's "2023 Summer reliability assessment."

It made for gripping reading. That alone is a problem. Energy reliability should never be interesting much less gripping.

In short, the NERC argues that well over 2/3rds of the US energy grid are at "very elevated" risk of summer outages.

The report basically demonstrates why the US is slowly but surely traipsing down a very dangerous path. Like Germany, we could find ourselves very vulnerable to a nasty tradeoff: accept brown or blackouts or instead scramble to burn far more polluting fuels as an "emergency" to keep the lights on, businesses open and the ACs humming.

It isn't really an emergency when your own short sighted decisions brought you to this point but that is another argument.

On the critical point, the map looks like this:

The report's authors go on: "if summer temperatures spike and become more widespread, the U.S. West, Midwest, Texas and Southeast, New England and Ontario (in Canada) may experience resource shortfalls."

The CEO of the NERC added:

This report is an especially dire warning that America's ability to keep the lights on has been jeopardized.

That doesn't sound great....

Another way to summarize the report is:

We had better hope the wind continues to blow this summer.

There are numerous points to make here:

1. The first is that we have no idea just how bad the summer could be weather wise but it isn't great to have the vast majority of your country at risk of rolling black or brown-outs regardless of whether they happen or not. "Cross your fingers and hope" isn't an acceptable strategy for any serious country.

2. The second: tight supply doesn't just mean the possibly of outages, it also means higher costs. The failures of our climate policies to build a robust and resilient grid is also costly to the economy and to household finances just recovering from inflation. Meanwhile, coal profits continue to rise!

3. Third, as we have already mentioned: the stretched tight grid may need to resort to Germany-style "emergency" coal or expensive oil burning power plants to keep the lights on. So, our carbon emissions will also continue to rise.

4. Lastly and least appreciated, the risk of a sustained political backlash is rising. You think the right is anti-climate change now, wait until regular people don't have power during the long, hot, American summer.

The biggest problem might be that politicians - especially in blue states - will likely blame any power outages on climate change to try and make the argument that this only underlies the risk of not moving faster towards a fully renewable future.

That may be a very big mistake and not just in terms of energy reliability. We aren't sure that people are buying this argument as the evidence piles up that our strategy is leaving us - California style - with higher costs and illusory green gains.

Additionally, there is the important question about whether the gradual politicization of energy policy will be good for the overall national energy grid we all rely on.

Hint: It is very unlikely.

Since its beginning this newsletter has warned that the sloppy and uneven climate change complex from renewable subsidies to "ESG" risk creating a perfect political storm that could both hurt the campaign against climate change and make it more difficult for companies to build, service and maintain a strong and efficient energy grid.

Well, our vulnerable energy grid isn't just a Trojan horse for anti-green politics but also potentially a catalyst for further decoupling between red and blue states,

The political whirlwind is now in evidence all around us. That isn't great, for the climate or for a better energy grid, most likely. But more importantly is the economic consequence of energy backlash. There is already a significant and long running movement from northern and coastal high tax states to southern and sunnier states for tax reasons. Think of the flow from New York or Connecticut to Florida or South Carolina or California to Tennessee or Arizona or Texas.

That was only accelerated by Covid, of course. But what if energy policies begin to diverge as well? We risk having the same divergence only accelerate over the cost and availability of energy as well. People need to be able to afford to live but they also need to have steady and reliable power. That is even more the case for businesses, big or small.

Politicians elsewhere have noticed what residents have confronted for years: that California has both the country's most expensive energy and one of the most unreliable grids. That is a terrible place to be.

That may cause some states to think very carefully about following the Golden State down the same path of high green subsidies. Texas got a powerful wakeup call about their poor energy grid in the winter of 2022 that we also covered but since then they are thinking very carefully about how to build out their grid since.

Guess what? Texas Republican politicians are becoming far more cautious about being overly reliant on renewables. On the margin that might be worse for the climate but big picture, long term, it might be far better for everyone, including planet earth.

Perhaps the positive is other American regions will skate-by like California in the El Nina summers of 2021 and 2022. We may get lucky, once again. That would be great though it might be also unseemly. California went for the only option they had: begging residents to limit their use of power in the early evenings when there is no solar and air conditioning usage is high and also importing very expensive power from elsewhere.

Now most of the country finds itself potentially in California's position. Our unfortunate reliance on:

Massive renewable energy subsidies and not much else.

Continues and has gone national. Once again, this was intentional.

The Inflation Reduction Act is super charging investments in renewables which is GREAT but that is also driving other forms of power generation out of business. That is explicitly the intent of the IRA and our current government's policy but as California has already neatly demonstrated, that can come with serious drawbacks.

What if the whole country is facing a Californian future?

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