Ferg's Finds

This is a short weekly email that covers a few things I’ve found interesting during the week.

Article(s)

Really enjoyed this piece by Janis Kluge: How sanctions are strangling Russian coal

Also, this overview of the PGM market: Johnson Matthey’s PGM 2024 market research

Podcast/Video

GM70: The State of the Commodity Super Cycle ft. Adam Rozencwajg

Quote

Behavioral advantages are the most interesting because they are the most durable. The best part is that such results are likely to be systematically exploitable and not able to be arbitraged away as they  become more widely known.

- Bill Miller 

Tweet

The record levels keep coming…

Charts

This chart is from HFI Researchs piece: Fighting Between Going Really Long Or Really Really Long (This was also worth a read)

Something I'm Pondering

I'm pondering how far society's understanding of energy has departed from reality due to transition narratives and academic models, i.e. IEA's "stated policies".

A quick example is asking ChatGPT to rank energy sources by EROI (energy return on investment).

The ChatGPT ranking is a far cry from the reality below (and it is comical that it assigns higher EROI to wind and solar than nuclear).

If you push ChatGPT to explain the wide range in EROI for the likes of wind and solar the answers are inadequate.

I’d dug into this back when I wrote The EROI Reduction Act and wanted to understand how the likes of Vestas were claiming their wind turbines produced a EROI of 40 when my understanding was they were mid-teens EROI.

Here is what I concluded:

Every month, I feel I learn of a new "modelling assumption" that will have no place in reality.

Take this recent example with mixing hydrogen into natural gas in order to use existing distribution sounded viable to me until I read this interesting piece:

Pipeline deterioration and cracking: “Recent, extensive testing of typical pipeline materials in Europe demonstrates both acceleration of fatigue cracking and reduction in fracture toughness when hydrogen is used, but the impacts vary widely depending on the material.36 Welds and their heat-affected zones, as well as manufacturing or fabrication defects in the pipe increase vulnerability by serving as crack initiation sites.37”

“Blending” hydrogen into natural gas is not a solution: “Even with small percentage admixtures of molecular hydrogen in high pressure natural gas pipes made of high-yield strength carbon steels it is expected that considerable acceleration of fatigue cracking, by as much as 30-fold, will occur with fracture resistance of the piping material reduced by as much as 50%.34”

Lower volumetric energy density of hydrogen means that pipelines and storage facilities would need to be tripled in size to transport the same energy content: “Switching the gas system to pure H2, with an energy density per unit volume roughly one-third that of a typical pipeline gas; therefore, would result in a reduction in “line pack” storage to one-third of the present value if storage pressure and volume are kept constant (Figure 5).49 If pipeline design pressures must be de-rated to accommodate the added risks associated with hydrogen to the pipeline materials of construction (as discussed in Section 3.2), a further reduction in the line pack would be expected.”

As much as I moan about the stupidity of it all, it does give us an edge as retail investors to take the other side of many of these net-zero assumptions.

I hope you’re all having a great week.

Cheers,

Ferg 

P.S. I now have a directory for all my articles (free and paid) and a full overview of my portfolio position by position here.

Or if you’re interested in my story and why I started this Substack, you can read the story here.