JP Morgan warns of the need for a 'reality check' on renewable energy ambitions

Christyan Malek, JPMorgan’s head of global energy strategy warns of the need for a ‘reality check’ on ambitions for a rapid transition from fossil fuels to renewables, saying ‘it may take “generations” to hit net-zero targets.’

“While the target to net zero is still some time away, we have to face up to the reality that the variables have changed,” Christyan Malek, JPMorgan’s head of global energy strategy and lead author of the report, told the Financial Times. “Interest rates are much higher. Government debt is significantly greater and the geopolitical landscape is structurally different. The $3tn to $4tn it will cost each year come in a different macro environment.”

In tandem, Wood Mackenzie also warned of higher interest rates making the net zero transition “even harder and more costly”.

‘Peter Martin, Wood Mackenzie’s chief economist, said “the increased cost of capital has profound implications for the energy and natural resource industries”, and that higher rates disproportionately affect renewables and nuclear power because of their high capital intensity and low returns.’


Rather than thinking of it as primarily borrowing money to switch from fossil fuels to renewable…maybe the thinking should be to stop investing new money into fossil projects and just put all that into cleaner tech. Although new tech should still be pursued, we have plenty of renewable tech that can be deployed now, we just need it at a bigger scale.
Here are a couple of examples.
Every quarter there are about 40 new oil tankers being built

What could all those shipyard workers be making instead?

Even though coal has been decreasing, we are still opening new (or reactivated) mines in the US



HI Mike - thanks for your response
One of the deterrents to further renewables investment is its ‘subpar returns’ in a tougher cost of capital outlook, according to JPM, ‘a leading financier of fossil fuel projects and low-carbon energy projects.’

JPM is a biased financier of fossil fuel project. We should not listen to JPM because they want to make money - but not help the environment. We should not let fossil fuels continue to degrade/destroy our world.

If true, that says a lot, doesn’t it (as in demand for said fossil product).

Earlier this month in Australia, the head of Alinta Energy gave a speech. (By the way, five years ago Alinta developed the first big battery storage project in Australia.) In his speech he says we need to be honest about the higher costs.
I shocked people when I spoke at a conference two years ago and said that it would cost $8 billion to hypothetically replace our brown coal-fired power station, which was acquired for $1.1 billion. Replacing it with pumped hydro and offshore wind today would now cost in excess of $10 billion, up $2 billion in a mere two years…

When I sat down to write this speech, the future Victorian energy price for the 2026 calendar year was $58 a megawatt hour…But, at $58, I can’t build anything to meaningfully prepare for coal to come out of the system.

I can’t build more solar, because we already have a solar glut in the middle of the day, which is sending spot prices deeply negative.

If I was just looking at that forward price, I would also be very wary about building new wind, because the margins would be slim to non-existent, and any curtailment – which is a growing problem – could be disastrous.



Another example of how renewables can lead to higher prices.

Fortescue says the proposed design of the Biden administration’s green incentives scheme could triple the cost of low-carbon hydrogen projects and stifle growth in the sector, warning that developers will reduce the size of their plans in response…

The iron ore group has an ambitious strategy to become a major force in hydrogen and renewable energy…But Fortescue’s enthusiasm has waned since the US Treasury issued draft regulations known as “45V” which provide the detail on eligibility for the tax credits. Fortescue’s biggest problem is the requirement that companies must match each hour of production to an hour of renewable power generation and consumption to be eligible…

The “hourly matching” rule will force hydrogen producers to either cease production when renewables are not available – an option that would undermine productivity and viability – or sign up for excess renewable power from diverse sources to improve the chances of having clean energy available from at least one source at all times…

Andy Vesey, Fortescue’s North American chief, last week said the “hourly matching” rule would force a hydrogen developer to sign up for seven times more renewable power than they could consume at any one time.



Hi jaagu - JPM definitely is biased towards making money - be it in ‘fossil fuels’ or in ‘low-carbon energy projects’
That’s the kind of bias we should all be paying attention to, regardless of our carbon choices :slight_smile:

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Another way of saying we can have green energy anytime we are willing to pay for it. But expecting it to be cheap is not likely.

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Well, not anytime. Even with boatloads of money the transition is a slow process.

To which I would add that more reality checks – and more honesty about costs and difficulties – would be very useful.


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Putting lipstick on a pig? Why isn’t JPM in the renewable “no-carbon energy projects”? We have too many carbon energy projects already.

Green energy transition from fossil fuel energy does cost money in the rebuilding of the electricity infrastructure. We know that renewable energy can generate electricity cheaper than fossil fuels and nuclear power. That is shown by the wholesale price of electricity where renewables have lowest wholesale prices. The retail price of electricity is always higher than wholesale price of electricity for residential, commercial and industrial customers because of taxes, administration, grid connections and other add costs.

Most projects can be completed in two or three years.

At 2% per year typical, it will take 50 years.

The main variable is the number of projects funded.

Here’s another take on the increasingly higher cost of renewable vs fossil energy:
'The higher cost of borrowing affects the energy and natural resources sectors unevenly. Highly capital intensive and often reliant on subsidies, low-carbon energy and nascent green technologies are most exposed. Debt accounts for a higher share of the capital structure for low-carbon energy sectors, too. The impact of higher interest rates grows as the capital expenditure (capex) share of total expenditure increases.

In contrast, the oil and gas industry, while also highly capital intensive, has far less exposure to the cost of debt, so is less affected by higher rates.’

woodmac report contains the following:

“Nascent technologies – low-carbon hydrogen, carbon capture, utilisation and storage (CCUS) and direct air capture (DAC) – will play an important role in the energy transition. However, they require major development and incentives to transform them into commercially viable, large-scale options for energy supply or decarbonising the economy.”

I say none of these nascent technologies can lead us to net zero by 2050. Therefore, saying that they play an important role in the energy transition is absurd. These pseudo technologies are a waste of money and should not be pursued.

It would appear then that net zero is not feasible.

Britain must invest £30bn in a network of massive air cleansing systems designed to strip CO2 from the atmosphere if it is to reach net zero, a government-funded report has warned.

Without such a scheme the UK will never reach its target of net zero emissions by 2050, according to the report by Energy Systems Catapult, a government-funded body that promotes innovation.

“Beyond 2040 we see few options to abate remaining emissions so use of direct air carbon capture and storage (DACCS) will be required,” it said. Direct air capture would collect 38-48 million tonnes of CO2 a year by 2050. This technology appears to be essential to meeting net zero in all our scenarios and yet remains unproven at scale.”



Nascent technologies will not help get us to net zero. Renewables will get us to net zero.

No this air cleansing technology does not exist and it will never exist to help reach net zero by 2050. UK is investing in nuclear and renewables. They will also need to find additional low carbon energy from geothermal, biomass, waste incineration, hydrogen and biofuels. They will also need to increase their energy conservation, energy storage and district heating systems.

Maybe true, maybe not. The future is hard to predict. And while you’re doing without nascent technologies, how do you eliminate, for example, carbon dioxide emissions from flying?

I see you still haven’t realized that you can’t get there from here without “negative carbon” technology.


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I guess you have not heard of the following negative carbon technologies which can actually work:

  • Afforestation and reforestation
    A strategy that involves planting trees to capture CO2 from the atmosphere and store it in the soil, living biomass, and dead organic matter

  • Biochar
    A carbon-negative process that converts unstable plant material into a more stable form and stores it within the biochar itself

  • Enhanced weathering
    A technology that captures CO2 from the atmosphere by mixing silicate rocks with agricultural soils to form carbonates

  • Soil carbon
    A technology that sequesters carbon, but agricultural practices like irrigation and fertilization can compromise this potential

  • Coastal blue carbon
    A technology that involves coastal vegetation like mangroves, salt marshes, and sea grasses, which store carbon in the soil at a higher rate than land plants

  • Enhanced ocean productivity
    A technology that involves artificially increasing the rate at which microscopic marine plants photosynthesize to remove CO2 from the atmospher