Look to space to fix the energy crisis

An untethered astronaut in space rear view

(Image credit: Getty Images/NASA)

published 17 December 2023

Wind isn’t working. Or so it seems. New developments are on hold both in the UK and in the US (where one of the world’s biggest companies, Ørsted, has just abandoned two big projects); the UK’s offshore auction earlier this year attracted not a single bid. The problem here, says Barry Norris of Argonaut, is that wind is just “too expensive to be commercially viable, even with inflation-adjusted price guarantees which protect suppliers against intermittency and supply chain problems”.

This is partly about the rapidly rising cost of initial production: “cheap” wind was to some extent a function of low interest rates, low labour costs and low commodity prices. But it is also a question of ongoing costs – offshore turbines may last more like ten years than 25 – and about the cost of intermittency (the backup energy required when the wind isn’t blowing). The UK has poured a lot of energy and effort into making wind the answer to the energy transition. But, says Norris, that renewable energy is both more expensive and less useful than most people think. As a result, fossil fuels, like it or not, aren’t going anywhere.

Shares in the various renewable-energy companies out there seem to be with Norris on this. Most wind-only indices are down by over 20% so far this year and the S&P Global Clean Energy index (which includes solar, hydro and biomass) is down by 25% year-to-date (and up by a mere 2% over a ten-year period). Ørsted’s stock has slid by 60% this year alone. The same goes for the UK’s big energy companies, which are fast pulling back from their low-carbon promises and going instead for keeping oil output high and gas output growing. Shell’s new CEO Wael Sawan, for example, announced this week that he is to cut 200 jobs in the firm’s “low-carbon solutions” division and put another 130 under review.

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He is also looking to sell French floating-wind power specialist EOLFI, and earlier this month pulled out of a contract with a US windfarm, preferring to “pay a penalty rather than face rising costs for building the project”, according to Reuters. The UK government is clearly not convinced that renewables will be powering much more of our economy soon either. It plans to allow companies to bid annually for new licences to drill for North Sea oil and gas.

It was a tiny amount, says Marshall, but it provided firm proof of concept: there is a chance that we are “only a few years away from having fields of such panels in space directing energy 24 hours a day” into national or local grids. And if that doesn’t come off, space combined with artificial intelligence (AI) might have another amazing solution for us: nuclear fusion, for which we need lots of helium-3. There isn’t much helium-3 on Earth (plenty of helium-4, the one we use for balloons, but not much helium-3). However there “may be a million tonnes of the stuff on the Moon”.

You might think that of little interest right now, given that despite decades of work we have not yet cracked fusion. But that is where AI might come in. What if AI solves fusion and the Moon provides the helium to make it work? Wind would definitely be a goner. Both these things would require a huge grid upgrade of course, but would certainly be kinder to the grid than the intermittent renewables we are currently having to manage.

Before that, if we want to move away from fossil fuels, and assuming we don’t agree that gas will do the transition job, we do need a way to produce reliable electricity. Enter nuclear, which is safe, cheap, emissions-free (after hydro it is the cleanest greenest energy there is) and now recognised by pretty much everyone, including energy extremist Greta Thunberg, as the only good answer to the energy dilemma.

The International Energy Agency (IEA) estimates that for us to have any hope of reaching net zero, nuclear capacity needs to at least double by mid-century (we are assuming no movement on energy from space). That nuclear power is generally a good thing in a carbon-concerned world is hardly a new insight. However, the more doubt is cast over the other net zero solutions (and wind in particular) the more attention it will garner.

Norris, whose VT Argonaut Absolute Return fund has gained 80% over five years and has shown first-quartile performance over one, three, five and ten years, has been shorting wind and solar shares. Now he is buying uranium producers Cameco and Kazatomprom (LSE: KAP). Should you follow? Maybe. As Norris told Bloomberg: one day governments will wake up to the “uselessness” of intermittent weather-dependent power. Then, they will all go nuclear.

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Merryn Somerset Webb started her career in Tokyo at public broadcaster NHK before becoming a Japanese equity broker at what was then Warburgs. She went on to work at SBC and UBS without moving from her desk in Kamiyacho (it was the age of mergers).

After five years in Japan she returned to work in the UK at Paribas. This soon became BNP Paribas. Again, no desk move was required. On leaving the City, Merryn helped The Week magazine with its City pages before becoming the launch editor of MoneyWeek in 2000 and taking on columns first in the Sunday Times and then in 2009 in the Financial Times

Twenty years on, MoneyWeek is the best-selling financial magazine in the UK. Merryn was its Editor in Chief until 2022. She is now a senior columnist at Bloomberg and host of the Merryn Talks Money podcast - but still writes for Moneyweek monthly.

Merryn is also is a non executive director of two investment trusts – BlackRock Throgmorton, and the Murray Income Investment Trust.