How a fast transition to renewables could save (not cost) $15 trillion 

New analysis from researchers at Oxford University inverts the traditional logic of the renewables debate: Rather than purely calculating the costs of the transition, the researchers at Oxford modeled out the expected savings of wind, solar, and battery deployments through a probabilistic framework. “The best we can do is make good bets,” the authors wrote this week in the science publication Joule. “Which technologies should we bet on—and how likely are they to pay off?”

To cut to the chase, the authors conclude the payoff of a clean energy transition is profound—on the order of $5 to $15 trillion in net savings, according to the report. “Moreover,” the authors conclude, “it is also a safe bet, with around an 80% probability that it will be cheaper than continuing with a fossil fuel-based system (and 82% when compared with a slower transition).”

I emailed this week with Kingsmill Bond, a senior principal at the Rocky Mountain Institute, who writes of the report: “If you can get past the somewhat uninspiring title, it has important work in it… Most analysis on the future of energy thinks in linear terms… This paper however goes to the issue at the heart of the energy transition – the rapid fall in the costs of new energy technologies on learning curves.”

“We want to emphasize that our results indicate that a rapid green energy transition is likely to be beneficial, even if climate change were not a problem. When climate change is taken into account, the benefits of the Fast Transition become overwhelming… The belief that the green energy transition will be expensive has been a major driver of the ineffective response to climate change for the past 40 years. This pessimism is at odds with past technological cost improvement trends and risks locking humanity into an expensive and dangerous energy future.”

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Giving thanks for Wall Street’s short-term mindset

This week, we distributed a recent Q&A with our firm’s founder and CIO, Arne Alsin. For those who may have missed it, I wanted to share the link again. Arne talks about a range of subjects—his views on Tesla, Buffett’s idea of waiting for the fat pitch, portfolio management theory—but perhaps my favorite part of the conversation was his discussion of the short-termism that plagues much of Wall Street. On the surface, long-term investors often gripe about this subject, but Arne flips it. “As much as I hate the shallow analysis,” he says, “I love that it gives us opportunities.”

“Outsiders might perceive this level of concentration as unusual, but it’s like Buffett said, you wait for the fat pitch. We got a fat pitch, so we’re taking our swing. The portfolio is designed 100% for the benefit of our partners. That’s it. I know I could design a more technically attractive portfolio for outsiders, but it’s just not what we do. Our goal is to grow our partner’s capital. That’s all.”

A few more links I enjoyed: 

Market Share: Understanding Competitive Advantage Through Market Power –  via Counterpoint Global Insights / Michael J. Mauboussin, Dan Callahan)
“Investors commonly seek to buy the shares of businesses that can create value over time. These companies are often said to be surrounded by an economic moat that preserves profitability and keeps competitors at bay. Of course, investors need to be sensitive about the price they pay. But businesses with a sustainable competitive advantage can be attractive because their value grows over time.”
The AI Unbundling – via Ben Thompson
“Newspapers liked to think that they made money because people relied on them for news, furnished by their fearless reporters and hard-working editors; not only did people pay newspapers directly, but advertisers were also delighted to pay for the privilege of having their products placed next to the journalists’ peerless prose. The Internet revealed the fatal flaw in this worldview: what newspapers provided was distribution thanks to infrastructure like printing presses and yours truly.”

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