This is not a good time to be an environmentalist. The world is dealing with a serious shortage of electric energy, which, together with the war in Ukraine, is forcing an increase in the use of fossil fuels, particularly coal. Moreover, there does not appear to be any viable short-term solutions in sight, and potential long-term solutions are contentious, to say the least.
For example, France relies on nuclear power to generate 70% of its electricity, but the average age of its fleet of reactors is 37 years. France needs to bring a new generation online in coming years.
A recent announcement by France that it intends to embark on a major buildup of its nuclear power program has unleashed the usual conflicts between the environmental community and proponents of energy realism. Regardless of how this dilemma is resolved, it takes at least 15 years to build a nuclear reactor. So, while nuclear is often cited as a green alternative to fossil fuels, it is not going to be a viable alternative over the near term.
In the meantime, supply chain issues, inflation and the war in Ukraine are becoming serious issues in the development and deployment of renewables such as wind and solar.
Investors should recognize that unless there is a fairly quick resolution of the catastrophe that Russia has unleashed in Ukraine, the near term outlook for energy, green or fossil, is bleak.
All comments and suggestions are welcome.
Walter J. Kirchberger, CFA