Blain's Morning Porridge - July 14th 2017. Cars - what future? Buy power and batteries!

Blain’s Morning Porridge – July 14th 2017

“All Gaul s divided into three parts, one of which the Belgae inhabit, the Aquitani another, and Gauls the third.”

This day many many years ago the French were revolting. I shall leave you to ponder that thought….

That was an interesting week that: The Fed telling us Lower for Longer – selling down the balance sheet from September and hike again in December. Slow and Steady. The BoE backing down from immediate action. The Ebb and Flood of the Brexit tide as Theresa tries to stick multiple fingers in a very leaky dyke. And what’s the ECB going to do next – something to wonder about next week. Who knows? Who can tell? This is heaven, this is hell… anyone for the last few choc-ice?

Back in my happy place… I’ve been thinking about cars and my conclusion is to buy electricity related stocks and renewables. I read a stack of stuff yesterday, and reckon my next car is likely to be my last internal combustion engine job. And, although there is nothing wrong with current one, it’s not going to be a diesel – because that would be indescribably cruel to small invertebrates, rodents and children according to the Greens...

I won’t be wasting any time on test drives. I don’t have a wish list – it will be a Range Rover. Why? Because life without a Range Rover is not life and cannot even be contemplated. At times I’ve had posh sports-cars, but a Rangey is a Rangey. We will keep the roller-skate (our delightful soft-top Fiat 500) and if enough readers give me more business perhaps something sporty, but the last Blain proper motor will be essentially the same thing I first bought 30-years ago when I picked up my first Mark 1.

Why my last car?

The media reckon the last internal combustion engine car will come of an assembly line somewhere in India in 2030 as Electrics totally replace proper engines. Sad, but by then Electrics will have ranges measured in four digits, take moments to charge, be faster and safer and probably cheaper. Batteries will be solved. Elon Musk will have built a Space Palace on an Asteroid half-way to Mars on the proceeds. France says it will ban petrol and diesel by 2040. Volvo is going to build all electric by 2019.

But then I read the lightbulb moment story about how much Electric there is and where it comes from…

Cars are the result of the Fossil Fuel Revolution that’s been underway since we worked out Black Rocks can burn. Some bright German Spark figured how to convert liquid dead trees into power via an engine. If we get rid of the dirty, polluting dead tree input and replace it with beautiful clean electric.. whoopee for the planet. Except for the minor issue about where that power comes from.

Apparently the UK will need 6 more Nuclear Power Stations by 2050 just to make all the electric to put in car batteries. Er. That’s a problem. The present UK Nuclear embarrassment, Hinkley Point, has been in planning, inquiry or under pre-construction since about 2005 and isn’t likely to produce a single gallon of electric till about 2027 – at a cost that’s bound to greatly exceed the current £20 bln estimate. So if we want 6 of them, we probably should have started a while ago.

And if 30 million gas guzzling cars are to be replaced with 30 million Electric sucking autos, that’s an awful lot of electric. Hah, great news if you own power stations of the grid.. Is it? If you take a look at the UK Grid and the capacity reserves – which might just have been required on Saturday/Sunday if a Brit had made it to the Wimbledon Final – just aren’t there anymore.

Year by year we’ve been getting rid of extra capacity. We’ve reached a stage where for whole days the UK doesn’t need to burn any carbon fossil fuel in the old coal-fired stations at times of peak demand. That capacity is gone. At some point in the near future, a sudden increase in demand for electricity in the UK will trigger power outages. Apparently we’ve dodged winter shut-downs through blind luck these last few years.

Of course, there is always Gas! Its cheap and cheerful..

Forget Qatar (where most of our power currently comes from). The USA is about to become the number one exporter of Gas. But isn’t there something intrinsically wrong about burning fossil derived gas to convert it into electricity to power electric cars so they don’t burn petrol?

There is that famous equation about needing 19 kilos of corn to produce one kilo of cow. I don’t know what the inefficiencies in transporting Gas from the states to convert into electric to drive cars is.. but I’m sure its significant.

If anyone thinks building electric cars will be any less polluting than petrol.. prepare for disappointment. For electric cars to succeed we need to see the next stage of the Fuel Revolution – take fossil fuels out the equation completely. Otherwise building Electric achieves essentially zero environmental improvement – you will still have massive carbon emissions during the construction phase (from building factories, infrastructure, raw materials, and building the cars) and from the power generation phase.

Which leads us to renewable power. If we could find a way to distribute raw electric from the sun drenched deserts, from the wind-lashed oceans, from tidal estuaries, by treating our wastes more efficiently or from volcanic hot spots to consumers – that would be a result. Solving the capacitance problem is critical – and will be done… making the prospects for renewables better and better.

I’ve heard a number of very interesting “future” investment themes in recent years. Two I particularly like are:

Water – everyone needs it, and its becoming scarce

Ageing – it effects everyone, and its treatable to make our lives healthier..

Add Power/Capacitance to that list..

On that happy note, have a great weekend!

Bill Blain