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Greg's avatar

I work in the renewables space, on 'deep decarbonizaton' aka trying to replace natural gas. Prior to that I worked in the chemical industry trying to monetize cheap methane. Some partially disjointed thoughts on the whole thing:

- When I worked in chemicals, we were very conflicted on whether $1.5-$2/mmbtu NG was an artifact of overinvestment in the shale space, or the new normal. My interpretation today is overinvestment / financial shenanigans that were exposed by Covid - aka that $1.5-$2 was always a sugar high. So what is the market clearing NG price - $6, $10, $15? Does it have to be 100% balance sheet financed? I have NO idea, which is terrifying.

- My god, how much of the disinflationary pressures over the past decade were simply overinvestment in shale trickling into literally everything?? My prior was globalization/labor supply shock, but seriously rethinking that now.

- Renewables under current policy offer a backstop at nominally $20-$25/mmbtu. That's approximately where Green H2 projects can compete with NG with no green premium. We could certainly reduce that via subsidies if we chose.

- We've seen NG at $12/mmbtu quite recently, and society didn't collapse.... then. We do seem more fragile now.

- How much did we overinvest in fertilizer intensive crops?

- We're gonna need a LOT more solar panels, wind turbines, easier permitting processes, SMRs (nukes not H2), transmission lines, all of it. That's a once-in-a-lifetime opportunity for middle America (geographic and economic). Ok, this is the 2nd once-in-a-lifetime opportunity in 20 yrs, after shale. How lucky is that?

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The Coal Trader's avatar

Nice post. It brought to light something I haven't really thought about. They say revolution starts in the refrigerator. I can see this spiraling out of control and then the gov't coming in to control the means of production in order to save people, making the problem worse. Reminds me of something I learned in history class - just can't put my finger on it! [sarcasm]

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