The Alternative Energy Fallacy

In 2009, the world produced some 13.2 billion metric tons of hydrocarbons, or about 4,200 pounds for every man, woman and child on the planet. Burning those hydrocarbons poured roughly 31.3 billion metric tons of CO2 into our atmosphere. The basic premise of alternative energy is that widespread deployments of wind turbines, solar panels, and electric vehicles will slash hydrocarbon consumption, reduce CO2 emissions, and give us a cleaner, greener, and healthier planet. That premise, however, is fatally flawed, because our planet cannot produce enough non-ferrous industrial metals to make a meaningful difference, and the prices of those metals are even more volatile than the prices of the hydrocarbons that alternative energy hopes to supplant.

The ugly but undeniable reality is that aggregate global production of non-ferrous industrial metals, including aluminum, chromium, copper, zinc, manganese, nickel, lead, and a host of lesser metals is about 35 pounds for every man, woman, and child on the planet. All of those metals are already being used to provide the basic necessities and minor luxuries of modern life. There are no significant unused supplies of industrial metals that can be used for large-scale energy substitution. Even if there were, industrial metal prices are more volatile and climbing faster than hydrocarbon prices, which means that most alternative-energy schemes are like jumping out of the frying pan and into the fire.

For all their alleged virtues and perceived benefits, most alternative-energy technologies are prodigious consumers of industrial metals. The suggestion that humanity can find enough slop in 35 pounds of per-capita industrial metals production to make a meaningful dent in 4,200 pounds of per-capita hydrocarbon production is absurd beyond reckoning. It just can't happen at a relevant scale.

I'm a relentless critic of vehicle electrification schemes like the one from Tesla Motors (Nasdaq: TSLA  ) because they're the most egregious offenders and doomed to fail when the EV hype goes careening off the industrial-metals cliff at 120 mph. Let's get real here. Tesla carries a market capitalization of $2.8 billion and has a net worth of less than $400 million, so its stock price is 86% air -- a bubble in search of a pin. Tesla plans to become a global leader in the development of new electric-drive technologies that will use immense amounts of industrial metals to conserve irrelevant amounts of hydrocarbons. Even if Tesla achieves its lofty technological goals, it must fail as a business. Investors who chase the EV dream without considering the natural-resource realities are doomed to suffer immense losses. Tesla can't possibly succeed. Its fair market value is zero. The stock is a perfect short.

I won't even get into the sophistry of wind turbines and solar panels.

Next on my list of investment catastrophes in the making are the lithium-ion battery developers such as A123 Systems (Nasdaq: AONE  ) , Ener1 (Nasdaq: HEV  ) , Valence Technologies (Nasdaq: VLNC  ) , and Altair Nanotechnologies (Nasdaq: ALTI  ) that plan to use prodigious quantities of industrial metals as fuel-tank substitutes or, worse yet, for grid-connected systems that will smooth the power output from inherently variable wind and solar power facilities that also use prodigious quantities of industrial metals as hydrocarbon substitutes. Talk about compounding the foolishness.

I can only identify one emerging battery technology that has a significant potential to reduce hydrocarbon consumption and industrial metal consumption at the same time while offering better performance. That technology is the PbC Battery from Axion Power International (OTC BB: AXPW.OB), a third-generation lead-acid-carbon battery that uses 30% less industrial metal to deliver all of the performance and five to 10 times the cycle life. There may be other examples, but I'll have to rely on my readers to identify them.

Humanity cannot reduce its consumption of hydrocarbons by increasing its consumption of industrial metals. The only way to reduce hydrocarbon consumption is to use less and waste less. There is a world of sensible and economic fuel efficiency technologies that can help us achieve the frequently conflicting long-term goals of reduced hydrocarbon consumption and increased industrial metals sustainability. They include but are not limited to:

  • Better buiding design and insulation.
  • Smarter power management systems.
  • Telecommuting.
  • Denser cities with shorter commutes.
  • Smart transportation management to reduce congestion.
  • Buses and carpooling.
  • Bicycles and e-bikes.
  • Shifting freight to rail from trucks.
  • Smaller vehicles that use lightweight composites to replace industrial metals.
  • Deploying solar and wind with battery backup for remote power and in developing countries.
  • Shipping efficiency technologies, such as better hull coatings, slow steaming, and so on.
  • Recycling, recycling, and recycling.

My colleague Tom Konrad wrote a 28-part series on "The Best Peak Oil Investments." While I'm skeptical about the future of biofuels after suffering major losses in the biodiesel business, Tom's work provides an exhaustive overview of the energy-efficiency space and a wide variety of investment ideas that have the potential to make a real difference. Since we can't simply take a couple of giant leaps into the future, we'll just have to get out of our current mess the same way we got into it -- one step at a time.

We live in a cruel world. There is no fairy godmother who can miraculously accommodate the substitution of scarce industrial metals for hydrocarbons that are a hundred times more plentiful. We can and we must do better, but we can't solve humanity's problems until we accept the harsh realities of global resource constraints without the filters of political ideology and wishful thinking.

Disclosure:Author is a former director of Axion Power International and owns a substantial long position in its common stock.

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Read/Post Comments (22) | Recommend This Article (7)

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  • Report this Comment On June 25, 2011, at 5:47 PM, DavidLloydJones wrote:

    I hate it when people say there's a shortage. Shortages exist relative to prices, to technologies, and to perceived market opportunities.

    Industrial metals don't go away. That 35 pounds per man, woman and child is in addition to the tons per person already in existence and steadily being put to more and more valuable uses.

    The sky may be cloudy, dear chicken, but it ain't falling yet.

  • Report this Comment On June 25, 2011, at 5:49 PM, dmdude wrote:

    I don't understand this article at all. Is the author trying to say there aren't enough metals to produce new products? So have the metal-producing companies make more! Last I heard, the earth contains plenty of metals; the companies take as much as they need, and doesn't that make good business sense?

    But what about solar? Last I checked, most of the panels are silicon (with metal or composite or some other material for the frames). And what is silicon? It's SAND!!

    I think this article is coming from a person who has a beef against alternative energy, perhaps because of his stock position?

  • Report this Comment On June 25, 2011, at 6:33 PM, Tallspruce wrote:

    I agree with both the article & the comments. However, you are leaving out part of the change. For years people have run cars on water electrolyzed to form hydroxy gas. Like all technologies, the science on this is advancing to the point that any engine, gasoline, Diesel or jet turbine can run on it without the aid of any extra fossil or bio fuel. With the fracking process of shale to get oil or natural gas using 100 gallons of water to get ONE gallon of oil or equivalent gas, we can save our water tables from both pollution & wasted water. Cutting down on the transport of fuel & food will save water & end pollution. A gallon of water replaces TWO gallons of fossil fuels. When you run out of rain, use filtered, distilled recycled water, or buy it from Wal-Mart at 86 cents a gallon. I have no stocks at the moment, so I have no hidden agenda. I am a retired person who has time to research alternatives. Wind & sun are only available an average of 4 hours a day. Thus you need the grid as storage. Electrolyzation of water means your storage of energy is a nice, safe water tank. A system for your car or semi truck costs $7,500 installed. A system for your home costs $19,900 and supplies all your energy needs; electricity, heat & water. No energy bills & no pollution.

  • Report this Comment On June 25, 2011, at 7:33 PM, colleran wrote:

    The problem with electrolysis is that it uses more energy than it provides. I understand that people are working making an excess of energy, but as far as I know, there are no products that do this.

  • Report this Comment On June 25, 2011, at 8:06 PM, numisman wrote:

    Author raises some very good points, some that I agree with strongly while also promoting some dangerous falsehoods. It's incredibly disingenuous to use a vastly more flawed argument to refute a position on the grounds of being flawed.

    I most strongly agree that the best answer is to use and WASTE less energy via telecommuting, insulation, etc. (Someone explain using trucks vs trains to me...please).

    I also agree that material availability is an issue not to be overlooked epecially rare earth metals, and battery technology is the ABSOLUTE key to the electric car.

    The flaw in the author's argument, looking at production of metals without noting both;

    1. Recycling-which is currently most effective in metals, and

    2. Comparing apples&oranges production volumes of metals to energy.

    My car has about 2000 lbs of metal, gets 20+MPG, and will burn about 50,000 lbs of gasoline over 10 years. It is patently absurd to suggest that I will need 50,000 lbs of metal to offset that amount of energy use. Take about 5-6 vehicles 10 years use of fuel weight (150 tons) in metal. It would roughly produce a 1500 KW wind turbine and tower. At 25% capacity factor (6 hrs/day) you would produce about 34 million kWh over 10 years.

    At 34 kWh/100 miles, you would get 100 million miles of vehicle travel, or run 850 vehicles for 10 years with that energy. And have 20+ more years of life in the unit, before it is disassembled and RECYCLED. Something you cannot do with carbon fuels.

    It's incredibly unfortunate that the author chooses to embellish his otherwise excellent points with this kind of flim-flam.

    The only other argument that I will make is that we as humans undervalue finite resources when they are plentiful. It sets everyone up for disaster when our dependence gets out of proportion to their availability.

    The true cost is at the end of the availability curve, not the beginning. If we will see $500/bbl oil within 20-30 years, then any alternative cheaper than that will look good. We need to figure out what those alternatives are now while the oil is still affordable.

    As long as the shorts don't drive them out of business, by driving up the cost of capital, that is. The butt you save may be your own.

  • Report this Comment On June 26, 2011, at 2:55 AM, tedwarrenlives wrote:

    Peterson you have hit new lows! You will do anything to raise the price of Axion so you can sell out of it!! We get it, what a joke you are and I am not surprised that I read this on the fool.com. The fool dot com reputation has become of a paid short advertising group for the most part.

    Tom Gardner email us another self-profiting 90 minute video.

    You and John are a great match, schills with no backbone and scent of a snake.

    Yes thanks for lettting me know that there are only 35lbs of precious metals. The 3-2200lb cars everyone in my neighborhood in each driveway must be made mostly of plastic. Seriously?

    Yes Tesla is a bubble but we know that.

    Yes you are heavily invested in Axion and the pain of the near 90% retracement is too much pain for you to bear!

  • Report this Comment On June 26, 2011, at 4:17 AM, Barbereche wrote:

    I can explain these issues to you but I can't understand them for you. Attacking the messenger because you don't like the message is dishonest.

  • Report this Comment On June 26, 2011, at 7:51 AM, skypilot2005 wrote:

    Thanks All, for the article and the comments. I've learned from reading both.

    Sky Pilot

  • Report this Comment On June 26, 2011, at 8:58 AM, exeter17 wrote:

    Ted he specifically said non ferrous - there is a lot of steel and iron in a car. Also there are most likely less that one car per person globally.

  • Report this Comment On June 26, 2011, at 9:11 AM, ETFsRule wrote:

    "For all their alleged virtues and perceived benefits, most alternative-energy technologies are prodigious consumers of industrial metals. The suggestion that humanity can find enough slop in 35 pounds of per-capita industrial metals production to make a meaningful dent in 4,200 pounds of per-capita hydrocarbon production is absurd beyond reckoning. It just can't happen at a relevant scale."

    Which alternative energies use a lot of industrial metals? How much do they use?

    How can you skip over wind and solar so quickly, when they are the most obvious sources of alternative energy, and they don't use a lot of metal? How about other sources of energy, like geothermal or hydroelectric?

    How much "industrial metal" goes into one Tesla car, compared to a normal car? We need to see the actual numbers for your point to be valid. And, why couldn't a company like Tesla switch to lightweight composites and use less metal?

  • Report this Comment On June 26, 2011, at 10:22 AM, EdwinDrake wrote:

    <strong>numisman wrote:</strong> <em>"(Someone explain using trucks vs trains to me...please)."</em>

    <strong>My response</strong> follows. This response is based upon a comparison of passenger automobiles to passeger trains, not freight trucks to freight trains. But the expenditures of energy and materials are still comparable.

    <strong>Metal needed</strong> to manufacture 1 train car = 8 tons

    <strong>Metal needed</strong> to manufacture 1 highway car = 2 tons

    <strong>--the car wins</strong>

    <strong>Energy needed</strong> to manufacture 1 train car = <em>(I have yet to find out, but I'm working on it)</em>

    <strong>Energy needed</strong> to manufacture 1 highway car = <em>(I have yet to find out, but I'm working on it)</em>

    <strong>--no known winner yet</strong>

    <strong>Number of people</strong> per carriage inside 1 train car = 60

    <strong>Number of people</strong> per carriage inside 1 highway car = 4

    <strong>--the train wins</strong>

    <strong>Liquid fuel needed</strong> to propel 1 fully loaded train car <em>(aproximately 12 tons)</em> 300 miles = 10 gallons

    <strong>Liquid fuel needed</strong> to propel 1 fully loaded highway car <em>(approximately 2.5 tons)</em> 300 miles = 14 gallons

    <strong>--the train wins</strong>

    <strong>Avergage number of years</strong> that pass before a train car needs replacing (and a new round of metal and energy needs to be employed in manufacturing) = 35

    <strong>Average number of years</strong> that pass before a highway car needs replacing (and a new round of metal and energy needs to be employed in manufacturing = 11

    <strong>--the train wins</strong>

    <strong>Amount of energy</strong> used per mile in the laying/constructing of new rail tracks = <em>(I have yet to find out, but I'm working on it)</em>

    <strong>Amount of energy</strong> used per mile in the paving/constructing of new highways = <em>(I have yet to find out, but I'm working on it)</em>

    <strong>--no known winner yet</strong>

    <strong>Cost to taxpayers</strong> per mile in the maintaining of established rail tracks = <em>(I have yet to find out, but I'm working on it)</em>

    <strong>Cost to taxpayers</strong> per mile in the maintaining of established highway = <em>(I have yet to find out, but I'm working on it)</em>

    <strong>--no known winner yet</strong>

    Again and again, the train is shown to be superior to the car as far as energy, materials, and overall cost. The car is nothing but a very expensive --and even a very selfish-- form of personal convenience. The flagrant wastefulness of cars when compared to the efficiency of trains is clear.

    As for tractor trailer trucks, the unweildy cost per ton mile when compared to the ton miles of freight trains has been known for decades, yet due to political reasons (not scientific reasons) the highway still won out.

    The ongoing decimation of what is called "track density" (the number of tracks side-by-side) here in America is crippling our train infrastructure. Also, the systematic elimination of "rail yards" (massive rail hubs where dozens of tracks lie side-by-side, and where train cars get de-coupled, sorted, then re-coupled into new groupings to reroute freight deliveries) eliminations which are often carried out to make way for yet more highways, is a form of energy suicide America is committing aginst itself.

    In the military there is a crucial expression: "Two is one, and one is none." That expression refers to the need of "redundancy" for any given system or any given supply. Redundancy is when you have a back-up plan or a substitute waiting at the ready in case the primary system or the primary supply runs out. (Such as two back-up generators instead of just one back-up generator in case one generator proves to be broken.) By prioritizing the highways over and above the rails, we have undercut the crucial redundancy we once had in the US rail system. So if a day ever comes (and I suspect it will quite soon) when cross-country trucking cannot perform for us anymore, we sadly do not have the redundancy of the US rail system to fall back on. The current US rail system has been stripped back to far too frail and skimpy of a shadow of the might it once posessed 80 years ago. The tracks and the rail yards just aren't there anymore. Therefore, if we are indeed facing a bleak future of energy scarcity, we MUST restore the traditional US rail system (never mind "high speed rail" we don't NEED the high speed stuff as much as we need the traditional stuff) to what we once had back in the 1920's. We need to restore the former track density that has been stripped thin, and we need to rebuild rail yards that have been eliminated. That way our transportation redundancy will be restored, and we will be able to move people and goods around with ease, and allow a choice in the marketplace for transportation options.

  • Report this Comment On June 26, 2011, at 11:49 AM, educatedquest wrote:

    John Petersen is nothing but a mouth piece for Axiom Power

    "I can only identify one emerging battery technology that has a significant potential to reduce hydrocarbon consumption and industrial metal consumption at the same time while offering better performance. That technology is the PbC Battery from Axion Power International"

    "Disclosure:Author is a former director of Axion Power International and owns a substantial long position in its common stock"

    Motley Fool should be ashamed of themselves for letting someone use their site for this kind of self promotion. Nothing he says or any of his "facts" can be deemed worthy of even considering as true. The fool should take this article down now!!!

  • Report this Comment On June 26, 2011, at 4:37 PM, r0b50 wrote:

    Is this author seriously a fraud?

    He is a shill for his old Company's stock and nothing more.

    Going on and on about a supposed shortage of metals because we nee d a different energy sourse is apples to apples comparrison? REALLY? WTH!

    Then to see he is a former Director with stock options for the 'one emerging battery technology' that he could see doing some good...JESUS...This is something from fool.com??????

    This is a joke worthy of real fools, not investing ones...

  • Report this Comment On June 26, 2011, at 10:42 PM, Ledamien wrote:

    Although I do agree with the idea that a real way to tackle energy shortages is to consume less of it (duh), I have to give an advice:

    So there is only 35 pounds per human per year ?

    Let's take one of these big windmills in Europe: the largest one (Enercon 126) weighs 712 tons (not including the mast), and produces enough energy on average for 4500 households. Let's imagine there is two persons per household:

    4500/712 = 600 kilograms

    So there is a need of 600 kilograms of various metals to give an energy glutton couple their juice. As a conservative estimate gives windmills a 20 years expiring date, that's about 15 kilograms per year per person. Or about 35 pounds. Problem solved. Now, these metals can be recycled, then...

    My point is that in our consumer societies, announcing that we have to make cut backs results in resistance and no action. Inviting to alternatives is a much better option. Besides, from smart meters to the Volt displays of energy consumption, monitoring your consumption makes you virtuous. Conservation is good, but the market will eventually push all of us toward it. Mitigating the effects of shortages is the point of alternative energies. So if you want to criticize those who try, at least, don't rest your argument on sloppy mathematics.

  • Report this Comment On June 27, 2011, at 8:05 AM, DannelMalloy wrote:

    You are not the messenger. You are the propagandist.

    Here's why your article sucks:

    You compare oil and metals by weight. Why? There is no basis for this. Very different amounts do very different things - how much vanadium does it take to make a battery? Not 4,200 pounds. I honestly don't even know why you presented these numbers side by side.

    Oil is used for energy production. Metals are used for storage - at least in the way you paint them for lithium battery companies.

    You compare metals to oil according to market price. However, the price of a barrel of oil does not take into account the cost of the environmental and social impacts of the use of oil, which are still external to markets in most cases. This is, in fact the reason for such major policy shifts toward alternative energies.

    Potatoes are abundant and cheaper than a well-balanced diet. John Petersen, do you only eat potatoes? No? Why? Because you would pay far more in terms of health care bills, and decreased quality of life.

    Good luck with Axion - it is a fine company... if you like potatoes.

  • Report this Comment On June 27, 2011, at 9:50 AM, sabertoothtiger2 wrote:

    I'm not buying it (Petersen's argument).

  • Report this Comment On June 27, 2011, at 1:52 PM, drax7 wrote:

    This metal to energy relationship is not quite sensical. Good luck with your investment, I gather

    They found a way to burn metal instead of oil.

  • Report this Comment On June 27, 2011, at 9:57 PM, militauro wrote:

    The points he makes are all relative to advancements in today's world. It's like saying 50 years ago that a car can't run on battery unless it is the size of a bus. True for the time, but advancements in technology (which is ongoing) make this possible at a future time. Which is why I think these alternative energy sources are "the future" and not the present.

  • Report this Comment On June 30, 2011, at 7:10 PM, tylersmithis wrote:

    This author has been bad mouthing this industry for years. I have held a long position, in ALTI for years and John has held a long position in Axion Power. Apparently from his articles the two compete, but this guy writes an article about once per month explaining why Axion is better the the others. I don't have the techincal level of detail to know who's right and who's wrong, but his pattern tells me I should not trust his statements.

  • Report this Comment On July 09, 2011, at 7:58 PM, 69L46 wrote:

    You make the battery once, and recharge it thousands of times. (capital cost)

    You consume the gasoline constantly. (operating cost)

    I would avoid any company that installs a person who conflates capital costs and operating costs as a company officer. They are either incompetent or trying to swindle you.

  • Report this Comment On December 08, 2011, at 6:52 PM, Mega wrote:

    Over the past few years, AXPW has put up large losses and collapsed from $6 to $0.34 per share. John Petersen has pumped it relentlessly while attacking other battery and alternative energy companies (many in better financial condition) in an extremely unprofessional manner. Irrespective of the facts and opinions in this article, does the Motley Fool really want to associate with him?

  • Report this Comment On August 08, 2014, at 7:46 PM, Jim1865 wrote:

    "Tesla can't possibly succeed. Its fair market value is zero. The stock is a perfect short."

    Petersen gives the absolute worse financial advice of any writer in existence! I fell sorry for anyone that followed his advice in 2011 when TSLA was in the 30s. It is now in the 240s! Great advice Johnny!

    Oh yeah, Axion Power is less than a dime! This guy is a joke.

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