Robert Bryce 0:04
Hi, everyone, welcome to the power hungry Podcast. I’m Robert Bryce. On this podcast we talk about energy, power, innovation and politics. And I’m pleased to welcome a new guest and a new acquaintance of mine, Alexander Stehle. He is the CIO of Berg, Robin holding he is in Zook Switzerland. Now, if I pronounced your name correctly there, Alex,

Alexander Stahel 0:23
you’re in the perfect state. having me today.

Robert Bryce 0:27
So I’ve become acquainted with your work via Twitter. And I didn’t warn you, but all guests on this podcast introduce themselves. So I’ve given a brief bio about who you are. But if you please imagine you have about a minute and you’re been asked to introduce yourself, please, by all means to introduce yourself.

Alexander Stahel 0:44
Yeah, so my name is Alex, I’m a startup based out of Zook Switzerland, we do commodities. So we have a hedge fund that goes long and short. Whatever is around commodities or commodity related services. That’s what we do for a living and we love it. And we we can we cover most of the commodities acceptance of commodities, we will call ourselves although my father used to be a cotton trader, I don’t know much about cotton these days. But we feel comfy.

Robert Bryce 1:14
And so you said you but when before we started, you mainly are focused on the equities in our market, not necessarily the commodities market specifically?

Alexander Stahel 1:22
Yeah, look, if you invest in, in the commodity side only, so the pure play call it the Futures Curve of commodities, it’s a slightly different game than expressing yourself in the on the equity market side, and we feel the find more value on the in the equity market, because the dislocations there can be bigger. And that’s what we look for.

Robert Bryce 1:43
Gotcha. Well, so I first, I followed you for a while but you earlier in September, in fact, it was on September 8, you had a very long Twitter thread that got a lot of traction on what’s happening in the European electric grid. And since then, you’ve published a big chunk of that in a new report called The crisis of the European energy system that was published by the Global Warming Policy Foundation. But you your point here is that, throughout, if I can summarize what I read from your mean, you know, several dozen tweets that you or threads that you put together there. It’s that the European Electricity Grid with or without what’s happened in Russia was headed for disaster. Is that a fair? Is that a fair assessment? I mean, it can you summarize what your take, because what you the other thing you’ve said, in other words, here, most European countries have not taken responsibility for their own energy security. They’ve been relying too much on imports from other countries. And now this is all coming to a head and it’s been accelerated by the the Russian invasion of Ukraine. Is that a fair summary of your of your work here, Alex?

Alexander Stahel 2:45
That’s perfect. That’s exactly it. What happened is, you know, let me maybe zoom out even a little bit more people love to talk about gas and oil, and you know, that we have enough and other Russian sanctions going to buy it. And they said, no fourth, you know, what, we have an electricity problem, we’re not gonna have a cool problem, we may have a diesel shortage, come February, because of the sanctions they’re gonna eat on the product side, and Europe is, you know, 1 million shorties lend a million long gasoline for its refinery system as it evolved historically. And so we’ll see how we deal with that. And I think we’re going to have the shaping capacities to then take care of that. But the core of our problem in Europe is really electricity. It’s not gas, while while we are showcase, we can, you know, we can actually we can deal with it. But the electricity side is, is I think, the big thing for the next five years.

Robert Bryce 3:42
Well, and you and you the way you explained it, I thought was really just remarkably good. And I don’t say that to flatter you. But I think that you summarized so much of this, that and you look at the forward price curve of even a year out for European Electricity prices, and they are incredibly high, you know, $500 to 500 euros to 1000 euros per megawatt hour, that this looks like a very long term problem. And the markets are already Recognizing this, but it doesn’t seem that the policymakers are Is that am I reading that right? Because I don’t see the kind of alarm among the European leadership that saying, hey, we need to do something about this and right darn quick,

Alexander Stahel 4:19
you could even go a step further and say they still feel as if they have optionality. So the Germans at the moment are still discussing to zoom out the last nuclear plants they have. And they decided to put them what they call on the grid reserve. Right. And that’s, to me is just puzzling. I cannot understand what kind of stress tests they did in Germany, to conclude that they have the optionality to turn them off.

Robert Bryce 4:49
When we saw it now, today is September 27. It was just on September 23, that on GE or electric bill, the subsidiary of Anji close the dwell three reactor in Belgium. I mean, it just seems like there’s just, this is felony, stupid. I mean, I’m seeing, I’m an American here, but I’m looking at this thinking, this is just flat dumb, and there’s no polite way to put it. But the Germans lead the way, the French have under invested and under maintained their nuclear fleet. And all of these things are coming to a head. And you make a very good point where you point out that here’s, I wanted to just read and read this part. But this is from your report, you said there’s every chance that European emissions will increase rather than decrease. You’re talking about co2 emissions. Nuclear fleets across the continent are aging. And if they’re not replaced, the grid will lose another 20 gigawatts of supply by 2030. We’re just eight years away from that. But it takes 2015 years to replace aging nuclear power stations were too late already. Worse, by 2040, another 70 gigawatts will have been retired, replacing all this capacity with wind power is impossible. And you go on we know, you know, I’ve written about the impossibilities of renewables. But you what you’re calling for is it was more attention on this. But it doesn’t seem like that’s happening. You’ve rang the bell of our alarm? But Is anyone listening?

Alexander Stahel 6:09
I don’t know at the moment from what I see it. So Mark, lots also every country is a little different. So France obviously has the largest fleet. Except for America, so the second largest fleet in the world for new plants. And you will think they are the champions of nuclear technology, and they want to push for it. But what is interesting there is that they seem to have a crisis, what I call a crisis of confidence. Because how can you explain that the champions of nuclear power actually long their nukes at less than 70% capacity factor. In fact, for next year, the guidance of EDF, which is the French operator, learning those nuclear plants, is actually guiding for 300 to 330 terawatt hours for the year 2023. Now, if you take the capacity, if you will now calculate the capacity factor on that form the install base, that gives you less than 60%. So that’s number that’s almost like, you know, getting to the to the to the numbers of overcoat plant, which it can be on at 45 46%. So they you know, the Germans on their nukes, while they still have them at 94% efficiency factor. The average for the world is about 86. And most Europeans around their plants are between 88 and 92%, with the French, that also EDF that also owns plants in the UK and in Belgium, they are somewhere between 70 and 75%. And this this year collapsed on a what they call corrosion problem. Now we can go into deeper what that commercial problem is, but I think it’s it’s not very important. It’s just I call it that problem cannot be so severe, that the utilization has to collapse Farrago, except when everyone involved in this process is somehow lacking leadership, lacking decision making, you know, lacking the engineers, the people the talent, you know. And so the way I read it from Ford, obviously, you know, we read French papers too, and we know a thing or two what’s going on there. But what we hear is that actually, it’s the renewable guys that get promoted within EDF these days, call them the call engineers on the nuclear side. So the nuclear engineers seem to be put on a backseat, there is a talent, drain and solar. And this is going on for what I say 1520 years now, Miko talked about what he calls a renaissance in nuclear, we need to now he understands how dangerous the situation is. He understands that France just turned into a net importer for the first time in 20 years,

Robert Bryce 9:03
if I can. If I should, if I may, you’re talking about the French president, Emmanuel Macron. is now he’s talked a lot about in fact, he’s talked about small modular reactors, but I just wanted to insert that but please go ahead.

Alexander Stahel 9:15
Yes, so my talks about the Renaissance, but it’s just not what we’re seeing is that between the rhetoric and what we are actually seeing on the ground is a big difference. And and and that’s why I call about the crisis of confidence.

Robert Bryce 9:31
Well, because your past

Alexander Stahel 9:33
benify me yet that Europe has been on a on a path to anti nuclear now for what I would call 20 years in some country loudly and clearly. So and in some countries through the backdoor. Right. And this is a very dangerous in my view, development that has come now to the accumulation point where we have Have those low capacity factors in on the nuclear fleets? It especially in France, but also the UK and in Belgium. And that’s just a big risk for how we’ll get it in and of itself.

Robert Bryce 10:13
Well, and that was one of the things that I my question that I had was why, why are the French so bad at operating nuclear, but you brought up the point about 300 terawatt hours of output potentially for next year in 2023. And you wrote in your report that this year, it may be as low as 315 terawatt hours, I just looked it up. In 2021, they produced 379 Tao terawatt hours, but at roughly 315, this is the lowest since 1990. I’m gonna be talking about two decades old production figures. And then also looking at what you have here on your, on your Twitter thread about France. And as you point out, it has been one of the key providers or the key, I guess I’d call it swing producers are the one of the reliable producers along with Germany. But you’re projecting that by the end of that, yes, by this year, that they’re going to be a net importer of electricity, which just seems just flat stunning to me.

Alexander Stahel 11:09
They all know, and I think they tell net importer in July,

Robert Bryce 11:13
turn net importer in July, which is what Yes, France. But you know what’s interesting, Alex, when you talk about this, as I’ve talked about, you know, I’ve written a book about it, I have a movie about it, but the electric grid is the heart of the society if you let that decay you are I’m not don’t fucked, I think this is the European this morning spread Switzerland. You’re just screwed. And yet, there’s no, there’s no real understanding of how perilous the situation is, as far as I can tell.

Alexander Stahel 11:44
But I think we need to add something for your audience, which is important here. Let’s think about not the Maslow’s pyramid. What is important, what is less important than what is nice to Earth? And let’s do that quickly together for commodities. Which commodities are really important and which on ice, which ones are nice to have? And then those, you know, it’s fine to have, but sure, we don’t. And so well, I would say, everyone knows oil. And everyone knows, Gareth and I would say gas is probably a little bit more important. You know, it’s about heat. And it’s about feedstock for fertilizer. So it’s about food. So I would say gas is very low in the Maslow’s pyramid. So it’s very important. And then just above that, I will put oil, which is about transport and all sorts of products that we need in our daily lives, then I will go slightly above that, and we’ll talk about metals, probably I would put, you know, iron ore, which we have plenty above that. And there may be copper in aluminium, which we, which we need, you know, copper is the conductor for everything we need everywhere. And it defined our mortal life, right? And then we can go on open up. What I didn’t mention is electricity, where should the electricity be. And in my view, electricity is like air. It’s the basis of the base. It’s not even about warmth, or food or anything, it’s just about the basic naked survival of a society. Now, if you don’t have electricity, and you are in an emerging country, and you never had it, that’s one thing. But if you had it the way we had in abundance, like you in the US, we all have electricity, and we can switch on and off whatever we want. We were used to that, since World War Two, then you get hooked on electricity, and it’s about life and death. They say in a blackout that lasts longer than 14 days. So where you don’t have electricity, right? So society has violence, you know, it’s becomes unsafe after two weeks only. And after four weeks, they say a society is back in the stone age. You cannot argue for that way for gas or oil. That’s awkward if we don’t have enough about it, but so be it. So we try flights, or we you know, when it comes to food, it’s important, but there are alternatives when it comes to our calories. But when it comes to electricity, it really goes to the fundament and that’s why it’s so astonishing. That we are in slow motion and now in fast motion actually drive towards an electricity crisis in Europe.

Robert Bryce 14:25
It is bracing and sobering. And in fact, your your analysis and by the way, you can follow Alex on Twitter and this Twitter feed that or there’s Twitter thread that he put out on September 8 is really quite remarkable. And it’s a it’s like a miniature lecture on Twitter. And I say that with no no. That is the best way I think I can describe it. He’s at Berg Robin HBURGGR A Benh Berg, Robin H and Brugg. Robin is his holding. His company is the CIO at Berg Robin Holding AG which is based in Zurich, Switzerland and As you said, you’re about commodities. And I wanted to just get this question up front, because one of the things that I see in my own work in politics and watching what’s happening in energy markets is a mistake by policymakers to call electricity a commodity. You said and on your Twitter handle you, you said commodity commodities, are my equal in my life. Is electricity a commodity?

Alexander Stahel 15:22
It is, definitely it is a commodity, but it’s the most important commodity of the moon, without a doubt.

Robert Bryce 15:29
So it will because I asked that because I’ve thought of it as a service, right? That it’s something a network that can’t be allowed to fail, right? So we price it as in watt hours, right? We sell it in watt hours, but in actuality, what we’re what we want is watts, right? We think about, we pay for it in watt hours. But what we demand is power, not energy. And there’s a big difference there is that rhyme with you

Alexander Stahel 15:51
is a good way to put it. I mean, at the end of the day, the reason I say it’s a commodities, obviously, because we look at it from a commercial perspective, whether it’s nuclear power that we generate, or it’s a gas fired power plant, or a coal fired plant, or it’s for sale, whatever it is, you know, wind or solar, at the end of the day, what comes out at the other end is an atom. That atom then has a lot to do, how we price these things, and so on and so forth. So, but But you are right, I mean, it’s it’s a goes to the absolute fundamental for society. And if we don’t have it, we’re going to have on the list, that is very clear.

Robert Bryce 16:25
Well, and you so just to revisit the pyramid, you’re saying that you put natural gas at a very low, I’m reversing it now at a high level, but you’re saying electricity, most important, then natural gas, then oil, and then the rest of other commodities base base metals. And let’s

Alexander Stahel 16:43
not forget natural gas is the feedstock for fertilizer. And without fertilizer, we don’t have enough food. So can you guys come second, but electricity is first. Let’s put it this. So if we take everything away for four weeks, in with electricity, we’re back in storage. I guarantee you that. I mean, literally everything falls apart. If we take away fertilizer for four weeks, we’re not going to be in the stone age, but it’s going to be awkward, very awkward. I didn’t then so you can go through it. Well, it’s

Robert Bryce 17:11
interesting. You mentioned fertilizer, because in fact, just today we released a podcast with Chris Lawson from Cru group and he’s the head of their fertilizers division, and we talked about the shutdown of more than half now of Europe’s fertilizer capacity. I want to divert a little bit on that and talk about your overall take on Europe because you’re in Switzerland, the heart of Europe. Yeah, what we’re seeing is the deindustrialization of Europe. And it’s happening with astonishing speed. I mean, the closure of the smelters closure, the non ferrous metals, producers, the fertilizer plants, glass plants, I mean, how do you look into your crystal ball here, Alex? And tell me what you see this prognosis for Europe? I mean, and is Switzerland Eisah insulated from some of this damage? How do you see this all playing out in the next few months?

Alexander Stahel 17:57
Yeah, I mean, so it’s the ladies in a locked position, because we have an extremely diversified and extremely service orientated industry, but we’re not going to be you know, contained for that we’re going to have for sure problems. But if we look at the Europe, the European Union as a whole, I think there is the potential if they don’t find out how to contain the problems on the electricity side. And then to some extent, on the guest side, there is a problem for 10% GDP collection in q1. And now people say, Wow, that’s a big number. But it’s actually not that big if you think about what’s going on here. Because it really, you know, if you are a chemical maker, like the ISF, the large German chemical later, one of the largest in the world, right, they literally use 2% of overall German gas, and they use about one and a half percent of German electricity as a whole in one location. And that’s how weak they are. And, you know, they cannot produce at these levels, it’s just not possible. So you got you, you’re gonna see in the coming, if, Paul, if you know, the industry knows exactly what’s going on here, and how difficult it is to fix some of the problems that we have to fix. And we can also talk about natural gas, which is fixable, but the electricity needs addressing and it’s obviously purely homemade. As we started to discuss, we can go deeper about that. But the point is the industry in the next 12 months, we look at this and say are politicians correcting yes or no. And to an extent that the price has come back to level whether you will cost stay competitive, and if they will see no stop sign, you will see a lot of relocations and those go silent first, right because vrsf Obviously produces in the States as well. So they’re gonna expand in the US, right, the capex goes to us, whatever they add in terms of capacities, goes to places where they can, can be competitive on the unit cost site, and they slowly but surely reduce whatever they have in Germany or elsewhere in Europe. And you’ll see that for Yahveh, right, whatever they closed has been in Europe, you’re the fertilizer maker at the Norwegian one. And whatever they have in the US, they expanded our economy. And so and those patterns will continue. And you mentioned some of the, you know, call it energy intensive or electricity intensive industries, like glass, you know, you’re gonna see more of that, not less. Now, some of that is transport sensitive, you can cannot transport glass over the pond, right, you can bring it from the US easily to Europe, and, and a be competitive or not take it. So that’s a little bit more complicated. But what can be moved, I expect of decisions to be made, except when European policymakers really make the U turn. I don’t see any sign at the moment of that filter. And I think it’s an important topic to dwelve into why that is.

Robert Bryce 21:04
Well, then we’ll touch on that. So then why is it I want to talk about why you think the gas problem is fixable, because I’ve been thinking about what’s going on in the UK. And Liz truss, of course, repealed the fracking ban. And so that opens the door to more drilling. But still, we’re talking a couple of years before they have any sizable domestic production. But you talk about the U turn, what is it going to take for the European Union and it because a lot of the discussion is still oh, we need to double down on renewables, which you point out is impossible, they cannot possibly scale up the amount of renewables needed to fill the hole that they’ve dug. So what we talked about the U turn, and what and what the possibilities are for that, and what it would look like,

Alexander Stahel 21:46
yeah, okay, just quickly for maybe those that that are strong believers in renewables, and I have nothing against them, I think they are part of the mix that they cannot be the only hold for right? The problem about renewables is multiple first of all, in in Europe, or in the globe, we don’t have the chemical storage we need. So electricity is about as much as the acid Whether it produces co2 or not. In the process, it is about the timing. Right, so the minute by minute keeping a frequency stable 50 hertz, you know, matching consumption and an N and N generation at any minute, minute by minute. And then it’s also about location, because we cannot transport electricity easily from A to B and it has to be at the right places in order to do exactly what we just said. So it’s tracing the acid, the timing and the location of it. Now a new mobile strategy needs to work on all three at the moment the best we work on number one, gaming we put we build new wind farms. And then we have them in the North Sea up in the north of Germany, and we don’t know how to bring that the electricity from the north of Germany to Bavaria in the south right for that we don’t have the transmission lines in place. Now, who wants to build the new now they want to build transmission lines they do that for 20 years within 20 is the year of the inner given this we call it in German transmission line nearby nobody right because transmission lines immediately devalue whatever property you have nearby and so on so so people resisted now they made special laws to accelerate it and yet they haven’t managed they need to double the gate they haven’t managed to get the third down in 20 years. So that’s how hard it is right? And so that strategy of just having wind and solar more or less and replace everything else could only work if you have the location problem solved and on top then you need the storage right in order for the frequency to convert what is an intermittent source of electricity into what we call a dispatchable reliable source minute by minute matching of load and production. And that is not possible for the moment why storage is in what I call stage five type technology readiness where we have COVID large prototypes that we install you know the latest one that made a lot of noise by whenever it does something Elon Musk, I the battery installed in Victoria battery in in Australia you know that all the way to building it already burned down once right and they had to write the report why this no one really knew why. Right? As prototype as he comes. Look what I said to my friends is I say look when it comes to the electricity cabling, I have two messages that are important when it comes to the electricity grid. I will people to treat it like building an airplane. And we all got to sit in that airplane in that Boeing airplane or Airbus wants that thing can fly millions of times without coming down. And if we have the slightest indication that we cannot do that, that somehow that plane in certain circumstances can fake your die not gonna sit in that plane. And we shouldn’t have to sit in that plane. But this is exactly what we do. And we treating the European great like the stock, let’s see how it works. Let’s see whether we can make it work. Let’s have that wind and solar, and maybe it’s not at the right time at the right place. And we cannot match maybe we have a blackout. Okay, no one wants to talk about the blanket. But maybe we have it, you know, we tried hard, we need to decarbonize, so it’s treated like a stock. And that doesn’t work. The second thing, the important message there is you also in terms of price. In order to keep an industry or an economy competitive, you need to make sure that the prices are banking at cooling the window 30 to 50 euros per megawatt hours at the moment, we are at 500. All right, so you’re gonna destroy an economy, we got to use our 10% of 22 trillion European GDP as an economic bloc, to pay electricity bills,

when not really close, and that’s exactly where we’re in at the moment. So in order to make sure you avoid these kinds of price spikes is you want to have layer of layer of the layer of generation capacity so that you always have too much, not at some point too little. Why? Because commodities are all priced at the margin. And it’s this last molecule that we don’t have this last add to that we don’t have is the price is everything. And then if you have really too little of it, thanks, fine. That’s why when you Americans had this shale really cool going on for for 10 years starting more or less 2010, it took really off, you’ll remember that your influence, the entire global price of oil was literally kept in a window of $55 to $65. And it couldn’t go above or below it right, it was just like there was plenty of oil. Now, it wasn’t maybe so good for the shareholders there. But that’s a different story, we had plenty of oil. Here. with electricity, it’s exactly the same it the moment the gate fails, there is not enough generation capacity, because you can take this out this out and call we shouldn’t have and now we take the nukes out and we and we reduce our nukes don’t really work in for in France. And so prices panic, and rightly so. And that’s why we have what we have at the moment that it’s and nothing about it is not fixable. But now comes the policy question for that we need to have an honest conversation about our what we call the European climate laws. And they came into power robot in June 2021. Since then, your Paris Climate laws and those climate laws request you they are called by the way fit for 5555 means reduce 55% of your emissions by 2030. By 2040, those emissions have to be reduced further and by 2050. We’re gonna be at zero, right? Not just for the gate for all sorts of things. Sure. But for the gate, it’s where it really gets awkward. And that’s an important message for your audience. Because it means at the moment that many of the industrial players the utilities struggle to decide what they should do, right, they know that the fix is get the get the coal back out of storage, right? Get that what they call great reserves, get it out. So, but then your initial balance sheet looks looks bad. And so so then they say, okay, but we need we need to have in order to balance the intermittency of renewables, we need to have the gas power stations. Well, for one we have at the moment the wall and therefore struggled to get the gas, but we’re gonna have enough in order to power the gate. But but then the prices are high there and therefore price is off the entire grid are high. And so there is the next problem. And so what we did in Europe is we reduced our options, more and more to the point where we now have high prices and not enough about it.

Robert Bryce 29:40
Well, looking at just all the days, so I’ll interrupt because I just pulled up the day ahead electricity prices, this is for tomorrow now September 28. Italy $459 per megawatt hour, Germany $386, France $393. I mean the These are just staggering numbers and it’s all

Alexander Stahel 30:03
right now gold and peak gold.

Robert Bryce 30:05
Alright, I’m sorry, say again,

Alexander Stahel 30:07
those are baseload prices right now go peak peak load that those prices are double

Robert Bryce 30:13
the peak load prices are double that number. Well, okay,

Alexander Stahel 30:16
gentlemen, peak load. So pay close they I heard Germany, if we even get a quote, right, because at the moment they are going in the commission through, you know, some call it opposes of how they can fix that it’s actually the peak load is at 370. So it’s not that bad at the moment ago, it was a six hour, they had pies, right. Now we can do the winter months and say two months.

Robert Bryce 30:46
And they’re yet higher on the two month ahead.

Alexander Stahel 30:49
Stay into the winter, they go higher, right, so let’s do one months out. And don’t forget the moment no one is bidding on these prices anymore. So there is almost no liquidity, which in itself is a problem. So those are 455 and one month outcomes, right? 360 today, or tomorrow and then 455. And then that was a moment ago, that was 752. When I say a moment ago on the second of September.

Robert Bryce 31:20
So this is $752 per megawatt hour for Germany. I’m sorry for euros, I’m sorry, your switches almost $1. Yes. Would you now they’ve converged. But so you’re saying $750 in the futures price of electricity in Germany for that would be November then?

Alexander Stahel 31:37
Yeah, correct. That should be 50. I mean, maybe 45 at the price is 15 times too high. That any of these prices, we will take out the economic competitive competitiveness of the French industry of the German industry of the Italian industry of the Scandinavian industry, although they have a slightly different situation at the end of the Benelux industry. So all these prices, we cannot compete.

Robert Bryce 32:07
Well, let’s talk about Italy, since you just mentioned them. And in your report, which you did for the Global Warming Policy Foundation, which was based as we discussed earlier on your Twitter thread, that that report is called the crisis of the European energy system. And it’s on the Global Warming Policy Foundation, website. But she said Italy is by far the worst offender having closed its nuclear power stations in the 1990s, building only a few onshore wind farms and none offshore at all. They’re none offshore at all. And therefore now having an almost complete reliance on natural gas for which it has failed to secure reliable supply. You know, as I’ve thought about this, there seems like this The inability of the political class to understand the importance of energy and in it’s not necessarily you know, I joke about it Well, why are they their political, their politicians, their lawyers, why are they lawyers? Because they couldn’t do the math to get into engineering school, right? But but they, they just simply don’t understand the basis here of what is the fundamental and most important elements of the economy, and they’ve let them they’ve ignored them, and now they’re having to pay the price. But is there going to have to be some other shock that’s going to force them to accept the need for I’m gonna say it right now to build more nuclear reactors and get on it right damn quick because as I look at it, that’s the only way forward that makes any sense. How do you see it

Alexander Stahel 33:28
going. So if I’d be the electricity is our if we take this lightly here, I have no ambition to become the European Electricity so but if I’d be the electricity is out that the thing we will do is we will immediately bring back the nukes that Angelonia closed in 2011 when they had 20 gigawatts installed, which was a capacity of about 30% of the entire German jet. Then she started to watch what she called the falls out of those nukes. And then she went from 20 to 18 to 16, to 14 to 10. To two now as low as four, we have four left, and those four need to be closed by the end of the year. And then they now talk about putting it in reserve but at the end of day, Germany took out 30% of the best nukes probably in the world in terms of performance, an average of 22 years when a nuclear power plant can easily on 60 I mean, they have a call it that a base expectancy of 40 years almost all of them on 50 And then many of them go 60 and beyond when are well maintained. So we the Germans have an average when they closed all of them have 22 years so that in terms of waste of resource, and if we will bring that back and most of them are still happy and the life right they are just not in service. If we will bring them back, I would argue we will immediately take prices down by 75%. More or less on the decision. Now it may take six months to have to refuel them to have everything ready, and so on and so forth. But it may sound neat, you know, to find the personnel, the labor, and I don’t want to, you know, diminish or belittle the complexity of surgery start often after the decision was taken to shut them down. But it could be done in a coordinate war kind effort between six and 12 months, and that will take crisis time immediately. So that’s something we will have to do.

Robert Bryce 35:31
Well, it makes perfect sense. I mean, this is the part why the closure that allows us closure of the DOL three reactor in Belgium, just to me makes no no sense whatsoever. I mean, are you not looking at what’s happening here? I mean, who’s in charge? Why would you allow this critical asset that provides 10% of Belgium’s electricity to go away? I just don’t, it boggles my mind sitting here in Texas, of course, but I just think, Who is in charge here? And why aren’t they understanding the the critical nature and the critical problem at hand here? What is what is there? Why aren’t they understanding the danger that lurks

Alexander Stahel 36:06
it? I don’t understand. I don’t think we have to think like a rational people. I think they have agendas, politicians, and they had, you know, long term plans and their and the European Commission is like a supertanker moving in slow motion, once they set certain policies in, in, you know, ahead, then they it’s very hard for them to come back then with change. Its high, you know, in Germany, the decision to force our new clothes taken in 2011. So So imagine all the prep, prep, preparation steps that were taken along the way to force them out, and now you come last minute to the industry in spite away, please keep them home. Alright, then they say, first of all, we don’t have the roads, right? We didn’t know that any new fuel, we don’t have that we don’t have this. And now you want me to be on grade reserve. I don’t even know whether that works. You know, when you need me in January, when I have two weeks notice to start it up. And we’ve never tested and done that. And so the industry pushes back. So everyone says, You know what, I don’t want to take the risk here. Yeah, I start up something that is actually cold. And that has to work in two weeks time that I’ve never bound before. As a serious operator. I don’t want to take any risks there either. So it becomes this, you know, policy makers have taken decisions and the industry now pushing back because they get treated in the wrong way. I think what the industry would need is a clear pivot where they say, Okay, we made a mistake, nuclear is in the mix, for sure. And not just in certain countries in all of them. And Germany is part of it. Because by the way, Germany is the largest game in Europe, it 600 terabytes of 3000 terawatts hours per year. So you know, Germany absolutely needs that the nukes in the mix and, and industry, please make sure that we get everything back on in them in the most proper, safe, secure way that we can and then I think we will solve a lot of problems. But we are about as far away from that as we could be. I mean, they say is you see the Germans at the moment have a stress test where they say literally, we probably not gonna have enough power come February. Right. And yet, they close down the nukes. Yeah. Which means just that political pressure, the power and also the industry pushing back not one to one and then hold the back. And you know.

Robert Bryce 38:41
And I can see why the

Alexander Stahel 38:42
risks that plays out in such call it emergency maneuver where we need new clothes.

Robert Bryce 38:48
Yeah. Well, then I can take your point, right? Where the industry guys are looking at the government. They’re saying, Well, are you going to change your mind again tomorrow? Because you’ve told us this for 10 years, and now you suddenly

Alexander Stahel 38:58
have a nuclear plant? It’s just it’s just not the series option. Yeah, I mean, no one has ever had nukes as a gate reserve. And then on a two week notice you have to power them up and make sure everything

Robert Bryce 39:09
works. Yep. And that’s the part that I think is so

Alexander Stahel 39:13
that engineers Oh, I think then you’ll give them a call and say by the way, everybody

Robert Bryce 39:17
Yeah. Well then that’s the part that Navy

Alexander Stahel 39:20
SEALs right this is I mean, this is a nuclear plant. Yeah.

Robert Bryce 39:23
And that’s the part that to me is remarkable and so disappointing that the French would not be maintaining their plants in a way that would allow them to operate them at a higher capacity factors. I mean, they are the ones they’ve been the world leaders in deployment of nuclear and ones that I’ve admired but they running their plants badly which just seems it frankly, just inexcusable you got these are the most important bits of infrastructure in society and you’re letting them call it letting corrosion problems shut them down. Shame on you, this is not the should not be happening.

Alexander Stahel 39:56
So I would argue in France and given we are free thinkers. We have our hedge fund, you know, we are not, we don’t have to report to any politicians, I will say that the French have a, you know, behind the scenes a cultural problem about the nuclear industry, where, you know, when when, when I was young, I was born in 1970, we would go and visit nuclear plants in Switzerland, we are full, we will go and see them. We were proud about this technology that I remember, well, in the 70s, in the 80s, early 80s, the movies there, it was a lot about this, you know, this spirit about we can do it, you know, the French used to say, we don’t have resources, but we have ideas. And so they champion this new idea, and to make something so to speak out of nothing, right? It produced a lot of electricity. And then we had this nuclear renaissance where we created nukes on average in six years in Europe. 90 Somehow, though, changed, where sovereignly. They call it the confidence level about, you know, the risk was was over portrayed about these nukes. And fair enough, I mean, even a nuclear plant is 40 years old. One could say, by the way, why don’t we use a new car instead of an old car, argue and I don’t drive a car from the 70s. Right. But the problem is, there came the NIMBY problem not in my backyard, everyone wants that kind of, you know what we like this technology, but can we have it? Elsewhere? Right? No, exactly here. And that came down OB Yeah. And that had a big impact on Europe and the European psychology, because for the first time, we understood that was, by the way, a generation one plant very, very poor housing, it was really, I mean, it was about as bad as it gets. Right. And that was by domain of manmade accident. And then it was hidden and and so it spiraled out of control. And why we don’t know how many people died in in cleaning it all up. We know it was a huge thing. Right. And, and, and we could measure it in Switzerland on on our vegetables. Right? Right. We weren’t allowed, I didn’t have been invited. We weren’t allowed to eat vegetable that year in Switzerland. Now,

Robert Bryce 42:21
let me back up for because I just want to put the European grid into perspective because I compare it in part two. You know, I live in Texas, and I’m not from Texas. I’m from Oklahoma. So I don’t brag on Texas. But nevertheless, you make a good point here that the European grid you This is from again from your Twitter thread from September 8. The European Electricity Grid is a modern miracle. It is the largest synchronous electrical grid by connected power in the world. It interconnects 520 million end customers in 32 countries, including non European members, such as Morocco, and Turkey. And then you point out that it’s 11 150 gigawatts of installed capacity, and 3100 terawatt hours of power generation. So just for comparison, that installed capacity is roughly equal to the US capacity, we’re at about 1.1 terawatts, and the US generates slightly oil about a third more about 4400 terawatt hours per year. So the US grid it overall is roughly the same size in terms of capacity, but we’re producing more more energy than the European grid. But, and the other key is, of course, we operate at 60 hertz you you operate in Europe at 50 Hertz. But I wanted to talk about what you go on and talk about frequency stability, and that the key here, of course, is to keep the grid at that that within a very narrow band of frequency. So if you’re 50 hertz here in the US 60 And you talk about storage. This is what I wanted to talk about. You said at current levels. This is from your report at the current levels of electricity demand, and once Germany has abandoned its coal plants, as required by law, it will need at least 1500 Or sorry 15 terawatt hours of storage demanded what is known as dunkel flouting. My German is not so good, prolonged periods Excellent. prolonged periods have little to no wind or solar typically occurring in the winter months. So my first question is, where did you get that 1515 terawatt hours, that’s 15,000 gigawatt hours, that’s the output of a giga factory for at least 300 years. I mean, these are massive quantities of batteries. Where from where did that 15 terawatt hour figure come?

Alexander Stahel 44:23
We can measure these, alright, we can we can measure local flow. And we know that, you know, the period between January and March is when we and by the way, I say peekaboo. That was terrible that was but the point there is we can measure those periods. And so we know that, in general, let’s call it at the northern part of Europe has a period of where you have to assume at least for two weeks where we have very little wind, almost not like 1% and where you have For almost zero so long, even though a two o’clock during the day, right. And so if you combine the two, you get to a storage result that you need in order to get keep the gate stable assuming you don’t have the fossil fuel backup. So assuming you don’t have the new backup, so the nuclear backup we already know is going to disappear by the year end for Germany. And then we have the coal and, and the gas fire plants aspect got left, that those cannot help for peak loads in the winter, when obviously, in Europe, in the winter, you have more child requirements called the consumption requirements for your audience, then you have in in the summer, almost a third higher, and then on the peak of the day, usually between six o’clock and nine o’clock at night, when everyone comes home turns on the light turns on the oval turns on the TV Turns On older the mobile phones there. So then the peak, by the way, can be almost double of what is used, say at three o’clock at night. Sure. And so if you combine those two, we can more or less make a storage assumption that we need and and those numbers we need. So that’s important for your audience to know that is storage and storage. Right. So the storage we need is to match the great minute by minute, instead of storage that can can be accomplished, so to speak on a daily or weekly basis. Because otherwise, the great frequency breaks down. And what we have in Europe quite a bit actually, especially in the especially in Switzerland, or Sweden or Norway, we have a lot of what we call mechanical storage. So what people so called referred to as pumped storage right now those fantastic, you know, miracles of engineering, they can release energy in days, not an hour or so minutes, right. So if we want to make sure that the gates the ability is secured, we need chemical storage. And so we get back to Mr. Musk, and these Gigafactory. And if we would have the whole output of a giga factory for Germany. The Gigafactory at the moment is not at full capacity, but assume is the most because as finalized it and assume is the most school delivered at one entire production of of batteries to Germany alone only goes to Germany only for great purposes. And we will make sure that it’s good scale connected in the way it needs to be obnoxious in a single car. So then that would help for a couple of minutes, about four minutes. perspective to your audience what we’re talking about here, when people say we’re going to solve that, don’t worry, we’re going to have to stop it. When are we going to have to stop it maybe in 20 years? I don’t know when? Right? Well, it comes down to the lithium mines. It certainly doesn’t come down to any of the politicians in Brussels.

Robert Bryce 47:52
Well, let’s talk about that. Because I wanted to just I’ve asked a lot of guests on the podcast and you said in your bio, you say commodities equal my life. So you’re an investor. And I asked this of a lot of people, not just guests on the podcast, because I’m curious what they say the world today is as unstable as I can recall in my in my in the last 20 years, right. I mean, there’s just a lot of upheaval, there’s headlines or that potentially the Russians have now sabotage the Nord Stream pipeline, and that that pipeline then could be offline for a very long time. So here’s the question, what asset classes make sense to you? I mean, are you long the dollar, the dollar is incredibly strong, the euro and the pound are both very weak. They’re their asset classes that you prefer, given where you are and how you look at the world. How do you see it?

Alexander Stahel 48:38
Yes, look, you’re correct. So first of all, when we aim for these pellets, what we call periods of potentially disorderly markets, you want to be long, the dollar, you don’t want to be anything else, except maybe the Swiss franc, or other currencies don’t have what we call this. You know, flight for securities, the dollar is then what everyone wants. And that’s why the dollar also by the way, gets stronger. And that’s where it all becomes circular. Because the stronger the dollar gets the more other countries especially emerging soft, I think. For for the commodities they need. So if your net exports of everything in Sri Lanka, everything now becomes more important because the dollar becomes stronger, it’s normal. So but that’s the way the world works. And so why everyone wants to the dollar and everyone needs the dollar. And that’s why the dollar tends to get stronger in the period ahead, that we are seeing, and I would say that’s probably as another 12 months to

Robert Bryce 49:35
another 20 months, you said wait 12 months too much.

Alexander Stahel 49:39
So by the way, this could easily because we are in what we call a stagflation environment. This could easily be one of the longer correction so one that doesn’t go we’re not the year but that takes three years to play out before we really get the economy spec to look forward and to think about growth.

Robert Bryce 49:58
Well, let me so I’m no commodities or currency expert but um just you mentioned the Swiss Franc and the the flight that’s been a very strong currency for a very long time. But there’s just that there’s not enough francs for investors to get their hands on. It’s just because the dollar is such a bigger the float of the dollar is so much larger.

Alexander Stahel 50:15
I mean, the Swiss franc is also flight, flight to safety currency. And you’ll see it, it’s almost, I mean, it gave a little link to the dollar for the last 12 months, but not that much. But I think about 6%. But in general, it’s one of the strongest currencies out there. And that’s because we have a direct democracy be a diversified industry and mainly services. But on that basis, it’s just too small, yet gigantic, it’s the reserve currency of the world. And ours is like a hobby currency. Although we are walled off call it the sixth or seventh eighth largest currencies in the world, we are still Mickey Mouse compared to eight we are an 8 million population. You guys have 330. So you’re doing quite well, actually. Yes,

Robert Bryce 50:59
no. Yes. But But how much of that string

Alexander Stahel 51:02
as you guys say we’re pounding above our weight.

Robert Bryce 51:05
Are you punching, punching, above, punching, punching, your punching? Well, how much of that strength I know this, we talked about the flight quality. But how much of that is related back to the energy the ability to produce and beat not not sit in energy independent, but mostly self sufficient? You look at the Russian ruble and the American dollar have been very strong as that as energy story as well.

Alexander Stahel 51:29
I love that question all but I really, I really do look. So there are lots of guys out there, by the way on Twitter on some very smart phones and not gonna mention things that have these, of course, energy view. And then look, we that’s what we do for a living. And we love some of the things they say. But if you pay close attention, it’s actually more complicated than what they say. So often the argument is, so if you’re an energy export, your currency is going to do well in bodies ahead when we have shortages of energy, all sorts of whether it’s gas or, and you know that the US is almost self sufficient on everything except oil, where you still need inputs. But everything else you have in abundance. And gas is a big, big, big factor of that, right. So that’s the good news. But if you now look at Norway, Norway is an energy powerhouse in proportions compared to the US actually bigger. Now, they don’t produce as much in absolute numbers, they produce 1.7 billion barrels of oil, they produce 150 PCM billion cubic meters for your audience, multiply that by 35, to get to your cubic feet of gas per year, they have these hydro power poles that you know, they don’t need anything except the hydro that they have to power the gate. And then they have a ton of exports that they give to you, we get back to that. So Norway is probably in the best of all spots, and yet, the Norwegian clone it devalues it. If you asked me that six months ago, I’d say open the lock, as we call him right to Norwegian cone, it needs to be a Go pack. But it wasn’t a good band. So why is that? And I don’t know exactly if I know the explanation. But they have this huge social welfare in Norway, gigantic thing. And that holds everything about the world, right about 1% of everything that you’ll need the planet globally, right? They are so big, right? After 40 years of producing oil and gas. And it seems that because they hold the rest of the world that makes the currency could still come down, right? Because everything else at the moment becomes worthless. So you would think Jesus, the knock is the window of the windows. It’s the one currency I could kind of isolate and say that must be the winner and the reason

Robert Bryce 53:54
because because they invested

Alexander Stahel 53:56
paid attention saying who’s an exporter of energy? Who’s No, no, that’s that’s the Canadian should take off, right? The Canadian doesn’t take off then they have the pope put the bottle in everywhere in Toronto and in in Vancouver, and so on. So property is a large part of our GDP of a country and if the property hurts, usually the GDP of a country so I just noticed that in every crisis for the last 20 years the Canadian doesn’t appreciate and yet they are energy they have energy abundance. Sure. So the equation is a little bit more complicated. I think the reason the US dollar has such a strong position is also because it’s the reserve currency of the world and as they say, you know, our dollar your problem everyone needs it, when the problems come and and therefore the you know, the demand supply side of the dollar is just very positive in a crisis.

Robert Bryce 54:48
Sure. Well, so but to be more specific than so we talked broadly about currencies than an asset classes then if you’re going to buy you said equities in the US what would what would you buy then if you’re going to dump nominate your savings in dollars and you’d like being in the US what would you buy?

Alexander Stahel 55:05
Maybe you don’t buy, right? Maybe you just hold cash. Okay. So we are largely in cash at the moment. And now if you say, Look, I’m looking at this economy, and I think we have a one to two year problem to solve here. And then you could argue, then you can show a couple of things that call it the weakest links out there that you you know, the chemical players you want to show up in college in Europe, right, don’t have access to guys that don’t have access to electricity, you know, they have problems, right. So they have an earnings collapse, maybe they even have a mess, you know, maybe they even have to shut down. So you can show those weakest links, and you Americans know a thing or two about shorting, on average. So you can do these kinds of things. I think Germany, France, Italy will have a tough time that the US will also have a tough time because you have a lot of debt moreso than most European players. And that also hurts, you know, when when interest rates go up and up and up, and what is the Fed currently doing? So I think you guys not going to be isolated from the crisis. But I think there are times when when you don’t need to invest in find the special situation to benefit. You can also say this is just the hot patch. Let me preserve capital, let me make sure I mean, the dollar and let me wait for the trade to come my way. So one could argue the trade is to wait for the trade to come back to you.

Robert Bryce 56:30
Fair enough. Well, so that anticipate one of the questions I was going to ask which I’ve been following Peter Zions work. I don’t know if you’re familiar with Yeah. Yeah. And his new book is the end of the world is just the beginning. And he talks about in particular, if I were gonna boil down, what is his focus on that book, its demographics. So we’ve talked about the political issues in Europe. But we haven’t talked about the demographic problems in Europe. And this is something that that in Zion pays a lot of attention to, particularly when it comes to Italy. And you’ve identified Italy as maybe the country will clearly then the day ahead prices, their electricity prices are the highest of any one that anyone on the map that I saw. They’ve staked their electricity grid on. They’ve shut down their nuclear plants, they haven’t done much on renewables. They’ve staked their new their their electric grid on natural gas. handicapping for me if you’re going to look at the demographics and longer term prospects for European countries, is Italy in the worst situation, or is it the UK? Or can you can you handicap it? Or do you want to handicap it that way?

Alexander Stahel 57:27
I don’t want to handicap it too much. I like. And I like a lot of parts of Europe for many reasons. But let me just say maybe why don’t we quickly open and go back to the great, it’s true what you said, right? The Italians are that the logic that the importance of electricity in Europe, they relied for 20 years on autos to provide electricity, they didn’t build up after they close down the nooks. And so what did they rely on on Germany and France, Germany, France, already, as we discussed that important, so they cannot help Italy, right. And the Germans are about to do the same when they close off the nukes. And they’re going to tell maybe a bit of exports, but not for any moment in time, any minute, any extreme situation, what we call peak loads in the winter, so they will not be able to help Italy. So Italy has issues to solve. And I think they need to go about them and totally have a nuclear renaissance, or at least make sure that they build whatever they need to build in terms of at the moment, they rely mainly on gas, maybe they need to go back to coal, and so on, so much for the climate goals, right. Because at the end of the day, when you need quick fixes, you’re gonna see a lot of, of going back to coal. That’s what we know how to build trust, you build a coal plant in two years, you permit it, you build it in maybe one and a half if you need to. And to get the coal, there is plenty of coal around the world, we can call the planet for another 500 years. So coal reserves is not the issue. Maybe the production is and maybe we need to do a couple of things there. But But that’s all solvable. But that means the climate goals not going to be named. And you know, what, my my, my view there is, you know, I don’t worry too much about what happens in 30 years, I worry about social unrest and hyperinflation, you know? Electricity side is probably a sign of hyperinflation in your right now because that’s going to test the fabric of our society. So we need to make sure to fix that. And now to your question, who has biggest challenge to solve? Let me just say something because I know many, many people look at Italy and think this is a difficult one also because of its sheer debt to GDP of around 50% and so on. But look, I used to be an operator for 10 years on and we I used to have, I used to produce an industrial product roofs form of roofs. Let me not go too deep into it, but just keep it for years, where we produced the same product in Germany. In Czech Republic and Poland, in, in, in Italy, in Bergamo. And, and we could compare unit cost. And no one explains the Italians how to produce and how to be efficient. In the north, they are as competitive and as productive as anything in Switzerland, anything in Germany, anything in East anything in the West,

Robert Bryce 1:00:27
and what were you producing?

Alexander Stahel 1:00:29
We produced roofs. So one day, we’ll call bituminous roofs, call it one of the cheapest form of zones, where it was about being costly. And the Italian industry is incredibly competitive that thing is, it’s all in the north. And then we have the south call it off to Oh. And there, it’s just one big mafia state, which needs subsidy left, right and center. And that’s why the connection of the two call today Italy but used to be many kingdoms, as you know, not so long ago, somehow doesn’t work that construct and it doesn’t work also in the context of the Hugo, where they don’t have the wealth of the currency to devalue, and then make the sum of whatever they’re less productive than the Germans make them productive in terms of output final output for the product because of the currency, but they had to leave. But in general, I’m, I’m I have a lot of respect for the Italians. When it comes to their entrepreneurial skills, and their flexibility and the way to solve problems. I find them incredibly innovative, and they produce some of the most wonderful products that we know in the world. But it’s true that as a whole, they have a debt problem. And they have a political class problem. They have a political crisis, every six months, they somehow don’t know how to run this country in a way that everyone benefits. Right? And I have no idea why that is. I can you know, I’m a quote to Italian, I cannot tell you why. I mean, my model, my models model, my grandmother was born in Italy, she was incredibly capable, incredibly tough, incredibly hard working. But I cannot tell you why these Italians don’t don’t make this a powerhouse that they could be, I just

Robert Bryce 1:02:19
don’t know. But I will. That’s it. I appreciate your comparison there. And I hadn’t thought about it gets into us, we’d call him roofing shingles, I guess whatever we make them out of

Alexander Stahel 1:02:29
something like the shingles, it’s gonna be torn, his office is made out of paper. And then of course, bitumen and two makes, you know, a $4 roof per square meter. And, you know, that has a lot of use in particular applications.

Robert Bryce 1:02:47
Yeah. I want to go back to your point about the admissions and just a few more questions after that, because we’ve been talking about for more than an hour. You said In summary, this is a going again, going back to the report that you did for the Global Warming Policy Foundation called the crisis of the European energy system. And again, my guest is Alexander stale. You can find him on Twitter at Berg, Robin HBRGGRABENH. He said In summary, Europe will not deliver on its climate targets, the true energy transition is an order of magnitude more complex than can be delivered. This must simply be expected or accepted. Those who put a crash program of decarbonisation into our laws based on false claims about what could be achieved using wind and solar and by wind have brought us to a dangerous juncture. You what you wrote, There is exactly what I see, when I look at Europe, I think you spent too heavily on renewables, you under invested in hydrocarbons, you you close your coal and nuclear plants, and you relied too heavily on imports. I mean, this was I testified before the Senate last year on the saying these very things, and yet, there just seems to be no kind of understanding of this and the emissions are gonna go up because now they’re using coal because they gotta keep do whatever they can to keep the lights on it. Let me ask this. So that’s my observation. How much is oil going to fill the holes now with diesel fired gensets small generators, filling the holes for grid level generation now, do you think over this winter,

Alexander Stahel 1:04:14
not. So it’s 1.3% that we have in terms of electricity capacity up to date, so the installed capacity of crude oil or oil shale have taught in Europe or the total? is, you know, it’s 1.3%.

Robert Bryce 1:04:34
For oil fired oil fired generation, you’re talking about fire generation. So

Alexander Stahel 1:04:37
if we pulled on all of those, and we already do that we solved exactly nothing.

Robert Bryce 1:04:43
So you’re so you don’t think that these standby generators would be one other option? I mean, it’s we see that in California right now, I mean, in California followed Europe more than any other state in the US. There’s a lot of these small generators.

Alexander Stahel 1:04:54
Let’s underestimate what each and every entrepreneur at its level can do. In its factory where he can switch with switch, because at the moment gas is simply more expensive where he can switch from gas to oil, he will try to do so. Is that going to be half a million more demand in oil? I’m not even sure. We’ll have to see. And the numbers are incredibly hard to accumulate, because there are no such numbers, right. For most of the opportunity set, we just don’t have numbers. We don’t know. I mean, it’s not that the average household in Europe that he eats, has switching opportunity, right? I mean, it’s the industry and in some cases, and I can, I cannot quantify it, I simply cannot. I know that a lot of people get bullish on the switching on, especially on Twitter, and some educated people, but I think if they cannot go, we don’t know, we don’t have an apples to apples on our public.

Robert Bryce 1:05:55
So I, as I said, I mentioned that I’ve started following you on Twitter, you have 53,000 followers, which is a lot. How do you see your presence on Twitter? Because you clearly have embraced it quite a lot. What is it? What is it that that platform gives to you that? And are you on other platforms?

Alexander Stahel 1:06:11
No, no, look at it, I populated it, because I used it as a research tool, because I it was my way to connect to x. So what we do is really we do deep research, when we invest in something, we usually go in big. And so we want to know everything about it. And because we do commodities, we want to let’s say know everything about an oil deposit, reservoir, or we want to know everything about the minerals, deposits, and so on and so forth. And so we connect to a lot of experts on Twitter to help us to work in PayPal will do working in Latin America somewhere or in Africa or in places like Canada. And so And for that it, we started it and we were able to give and take in a very prosperous way. And it really extended or I would say it became a core research tool other than Bloomberg and all that and all the other data that we collect from professional data providers. But and then where it actually I felt I look over time, I felt like so many people have so little understanding about energy and everything around it. That effect, it’s a bit my duty to inform. And so I do these long threads from time to time to really explain, because I read so so so many strong opinions with so little data that I think it may be time for me to help a little bit what’s going on, right? And, again, our agenda is do we mind renewables? No, that’s fantastic. But I look at it from an electricity perspective of qualified, I’m an electrical engineer, I’m not an electrical engineer, but we look at it as if we are electrical engineers and say, Look, this is how the gig works. And this is what needs what the grid needs in order to stay stable and to provide the electricity minute by minute that we need. And so we share it because we have good look, we are what I would call a big data company, we really go about the things in detail. And we don’t talk about things that we don’t have fully covered in data. And so from time to time we share and then by the way, sharing also means that we get criticism, and then we can learn sometimes we get it wrong. And then if someone has an educated feedback, that makes us better, too. So I like that competition out there, too. And sometimes it’s obviously a bit annoying, because then people just, you know, I’m finally on Tinder and you try to zoom that up.

Robert Bryce 1:08:41
Yeah. Well, your thread from September 8 And of people listening, haven’t looked it up and do so because it’s quite remarkable. And the data that you have here, I’m looking on your slides on net exports and imports of the continental European synchronous grid and gigawatt hours here, which is, I know, you, you noted that these numbers are not easy to get. And you have a lot of tables here that are also quite remarkable. Just a few more questions, Alex. So is this a warning for the US who is what’s happening in Europe is this should be a neon lit sign saying to the United States policymakers don’t do what we did.

Alexander Stahel 1:09:17
You have the major advantage of having that much gas so you’re not gonna deal with the same gas problem that we have where suddenly they got the other guy in the East says By the way, you cannot have it and then the gas prices explode and then you know, you’re not gonna have that level. And you’re obviously Okay, it looks quite similar to ours, when it comes comes to install capacity. So it’s a good third, it’s nuclear, then coal matters in the end coal, gas fired metals, and then you have a bit of biomass and waste and then you have some of the hydro renewable Bay it looks fairly similar as a whole to Europe. Again, the problem you’re not going to have is our problem when it comes to gas which made prices higher The summer and then we added some problems that I think when it comes to nuclear via you are very similar problems. And probably not that dissimilar in timing item. I think we have the disadvantage that EDF is a bad operator. And for some reason the American operators don’t, they operate them well. And so you don’t have capacity issues there without condition so to speak. But maybe down the road, when you want to replace them all you’re gonna see resistance to I think sometimes the Americans are more practical, and they don’t, when it comes to energy, they, they are, you know, the Europeans have more of a game. So completely the home run, though, but they have, right, they want to save the planet. And as I said, in one of my tweets, you know, the road to hell is paved with good intentions. And that’s a lot in Europe. I mean, if you go to the Netherlands, right, those as a nation that traded everything, for 600 years old, and bronze was the dominant currency in the world, and so on. And so I put these guys really want to want to be doing right, and they turn off all these fantastic, you know, they have what we almost took of all of Europe, when it comes to gas is called to the Groningen field of Golding and in the Netherlands, and they will turn off literally tomorrow 25 BCM, 25 annualized PCM. I followed that. Literally sucker the switch, like about like, it’s a swing producer field guide in oil and gas, your audience may know that, you know, that’s very rare to have such large, powerful Fields was one of the 10 largest gas fields ever to be found. Groaning in front of our door internal See, talking about we don’t have resources, we have plenty of resources, and we go about them. Right. So people just like to hide it that we as if we don’t have we have them. So to go all in and feel this there and could live produced, you know, at the peak, I would love to look it up. I think it was over 85 PCs per year, it now still can do 25 It runs on a quota and cannot even do six PCs.

Robert Bryce 1:12:09
See in this is just I mean, will you say that

Alexander Stahel 1:12:12
because of a couple of earthquake risks. Then if you go about that, there are obviously all these reports about what is going on in the earthquakes. I’m thinking this could be very right. This could be like really, you know, people die when that field produces and then you go and check. And I don’t want to be late, late, right? I don’t want to get like these hate threats on Twitter later on after this interview. But I tell you, I mean, it’s the worst kind of earthquake that was that was a result scale. Three. So yes, the way the breaks can come down, right, but no one ever died. No one was ever injured. Yes, there is damage, and then the government should go about it and and refund these people and make sure that everyone actually gets a new house and is happy for that field to produce nearby. Why do I say it? Because the Netherlands, like the UK, like the Italians, they completely rely on gas when it comes to power budget. So now they rely on LNG, right. I mean, it’s a joke.

Robert Bryce 1:13:17
Yeah. Well, it’s just It’s remarkable. And as you say that how this the this ideas around, decarbonisation and so on have just swamped every other consideration. Right that this is the only thing that we have to pay attention to and dam civilization dam society. We’re not worried about that because we have to be focused on Paris on decarbonisation. Everything else is a side issue, which to me, it’s a recipe for cultural suicide, it seems to me,

Alexander Stahel 1:13:45
and I think the Americans there will be different I think, yes, you have the same forces Biden government, but I think you will handle it differently more pragmatically than we Europeans do.

Robert Bryce 1:13:59
We went I hope you are right, I hope

Alexander Stahel 1:14:02
the last we went all in. But let me say something that I wrote the other day to a Turkish newspaper, which I think sums it up. So what really happened is because of these climate laws, we made the average consumer belief that we can do without hydrocarbons. Here is the dilemma. The average person does know that they use exactly the same amount of hydrocarbons whether it’s integrate the way they get the electricity, coal, gas, fire plant or even oil, less extend in Europe. Or whether it’s the products they use daily right when they touch this thing or when they have the phone right and all the plastic that our job right? They don’t know that they use less and then when it comes to their daily behavior even in transportation they use as much maybe they the industry allowed them to save because the the the SUV they used them all with the goal was using 12 fleet spirometer kilometers now is only using seven liters. But that wasn’t them saving it was the industry making them safe. So that’s what I tried to explain is the people think they don’t need hydrocarbons because we have such a strong lobby talking that hydrocarbons down or being the baddies when actually their consumer behavior hasn’t changed whatsoever. So now we’ll go to the second change of behavior, the bottles were the Exxon Mobil team. And they are quite good in it, I have to say they really, you know, our force against the call it the hysteria, but many, you know, of the large players that the majors in Europe shale, BP, they have clearly changed their behavior when it comes to capital, investments, right hydrocarbons, and that matters more and more and more. And now some is, is rectified by the state players in a form to be complex. But the problem is the OPEC countries need the engineering, the know how the technology that the majors, the Seven Sisters provided now for decades, right? And they cannot just do without our know how and a lot of that comes out of you’re not just the United States, I would say that’s fairly even if not even a bit skewed towards Europe. And at the same time, to the youngsters that come from the Atelier, you know, what is the MIT of Zurich, right? To they want to go into oil and gas to they want to become engineers in the Netherlands to join shale? No way, Jose, no way. They want to go to Google, they want to go to fate, they want to do data, right? And that’s why I say my papa, we don’t need and you really tailor. We don’t, you know, we don’t need more bits and bytes. What we need is molecules and atoms. That changing behavior when it comes to investing when it comes to bolt ons, when it comes to the students behavior, or when it comes to the engineers has a massive effect and is a big problem that is to come. And it also is going to come to the States.

Robert Bryce 1:17:15
No, I think it’s already here. There’s no doubt about it. And by the way, I’ve not heard a Swiss say No way Jose until just now. So this is

Alexander Stahel 1:17:23
this is in the US, though I don’t sound like

Robert Bryce 1:17:29
but I think you’re right. I think that there is a you know, the the and I have children, you know, they’re growing, they’re grown. And they’re adults. And I’m proud of all of them. But they’re their age, their generation, the number of people who go into petroleum engineering. I mean, we’ve seen this and then data here, right? very drastic reductions in the numbers of people who are going into the hydrocarbon sector. And

Alexander Stahel 1:17:49
you’ll have hoped the lack of oil, right? So I mean, that’s that’s a big signal. I mean, go to both, what do you think happens there? The you know, if you have a junior that that says, By the way, I want to join Exxon Mobil? Probably the parents, you know, I don’t know what they do they freak out. They say, Are you crazy, you want to go to IBM, or I don’t know what the right name is. But the point is, they don’t want to go there anymore. And that’s a problem down the

Robert Bryce 1:18:12
road, despite the fact that

Alexander Stahel 1:18:14
that for the for the Saudis as much as it is for us, because they know create the MIT’s

Robert Bryce 1:18:21
right. And that this is a longer term issue than for hydrocarbon production, if you don’t have the expertise, and that’s going to be a limiting could potentially a limiting factor. But let me just legally place

Alexander Stahel 1:18:31
one note, see, so that’s three and a half million barrels each each year from decline rates that we have in the industry. So the industry at the moment has about 52. So how will you battle the use of that if you deduct and just get into code is about 85 million barrels per day that we need. If you reduce that we have about 55 million barrels per day that is in permanent decline already. When it comes to field production, right, those fields of aging that are in decline, they look like a cost curve, right? So they go up in production, and then it comes down to 50. So 75% of all the code we know in the world is in permanent decline. That decline rate on average is 6%. So now you make the number that’s one no see each year. So Norway, UK, Denmark, everything little on the side needs to be found. And both online develop each year, one entire north the only to keep production still. Now what is why are we going to consume more when people think we’re not going to consume more I have to say, well do the numbers before you you know, assume, right? First of all Asia is going to consume more. 8 million are going from lower to middle class. That in itself means more energy consumption, and then to populations. Also, we are forecast to go from about 8 billion people to whether it’s 11 or 12 billion, I don’t know. But that comes mostly out of Asia and some of Africa right Nigeria being forecast to go from 220 million to 600 billion people in the next 20 years. So what do they need? They need energy. Right? And you think they’re gonna do a wind farm? No, they need this cheapest, simplest form of energy they can get their hands on, which is cool. And oh, hydrocarbons, you know, gas avoid.

Robert Bryce 1:20:21
Right. So that made a very

Alexander Stahel 1:20:25
massive crisis on that basis.

Robert Bryce 1:20:28
Was there? Oh, it seems to me, you’ve made a pretty good case for being long oil and gas stocks.

Alexander Stahel 1:20:32
You want to be that but just not into this recession? Correct? Yep. I mean, we, we walked about metals in May, and said, Look, here is China’s problem. And that’s lasting and be out of the metals. Because we love metals, right? We don’t have enough copper. We don’t have enough nickel. It’s the same problem everywhere. You know, cobalt, you name it lithium. I mean a joke, right? Oh, we couldn’t, we cannot even help Elon Musk on lithium, let alone all the other key cofactors that are currently out there to be built. Right? Okay, so we’re gonna have a supercycle there. But that is not to say that first we have to digest the down cycle and the down cycle is not just the metal, it’s going to be priced up there and not gonna loop through that and look through that cycle, first on a compound, and then you invest in the metal side. And then so we want about that in May instead, look here, now is the time to be out of the metals and let that cycle play up. And then for whatever we want the jewel on Twitter publicly so and criticizes always when we do these calls. But but but I think we are acting at the moment the price action certainly gave us right right with the oil was about 110. It’s now up at and and I think we just have to digest that cycle for us with an offer that we’d see where we are going, okay, there is some past dependence, right because of the sanctions that we put on our shop. And we have to see how that plays out and so on. And so there is always news that can come out where we change our mind. But for the moment, I think you want to be defensive in commodities have now reached a point where what I like to say, you know, the demand becomes elastic, while supply is inelastic. And usually everyone likes to explain that demand is actually very inelastic. mdda is in the biggest sense of the world, right? But quantities are priced at the March. And so when we have the shocks of the demand side, it’s not that inelastic anymore, right? You can absolutely from here lose three 4% of oil demand. Right. And at the same time, the OPEC guys don’t want to throttle their production. Now. Maybe the Saudis this time will say no, no, we’ll take care of that. We’ll have to see. Yeah, they when they decide we change our mind.

Robert Bryce 1:22:52
Sure. So just last two things. And my guest again, is Alexander still he’s in Zook Switzerland. He’s the CIO of Berg, Robin holding, which specializes in commodities. You can follow Him, follow him on Twitter at Berg, Robin HBURGGR. A B. And so last two things, Alex, I asked all my guests, I have them introduce themselves. And at the end, I asked them, What are they reading? What books are you new do you have on your bookshelf or on the top of your pile there that you’re reading? We talked about Peter Zion before what else?

Alexander Stahel 1:23:20
I had, that’s a good one. I wasn’t reading that much. Because the news flow was so hard and we worked so hard on our studies, but probably what book could I recommend? Well, Thinking Fast and Slow was the last book I wrote page by page right from, from Daniel Kahneman. It’s obviously an important one because half of our job is psychology and knowing yourself and knowing your brain and what causes your brain to play games with you. And so Thinking Fast and Slow by Daniel Kahneman is really what we what we can only recommend for me well,

Robert Bryce 1:23:54
okay, and then finally, we’ve talked about a lot of things that are pretty sobering. Around especially with the the prospects for Europe and, and so on, and also in this ongoing conflict with Russia and Ukraine. What gives you hope?

Alexander Stahel 1:24:14
I’m afraid Putin only knows escalation. i We feel we know we know Russia. Well. We really do from from history, and for many reasons without going into much depth. I think this is going to embarrass him. So he escalates from here. I think it’s gonna have huge ramifications for Russia and the people I want to get out of the concrete. And I think he, you know, today, we have the news that knows three one and 200 leakages, and obviously there will sabotage and you know, if that sabotage continues into the pipelines of the Norwegian pipeline system that goes into the continent, then we have massive issues obviously, then then I’m getting like seriously where we do it and I hope it’s not gonna happen. I hope that now after and, and you know, the military complex that we have, we have some very capable people in your tool when it comes to these kinds of things. I mean, take the scan these and so on serious when it comes to their waters. And I update on protected, but I’m not sure. And if we cannot, and if this continues to escalate, you know, whatever put in those at the moment, I think is really just accelerating his endgame for himself, right? Because bringing in all these people doing mass mobilization of the people means that now people really have to move at home, that so far was on TV. And you know, the boys need to come and take care of anyone, right? They say it’s only partly it’s only 3000. But in reality, they just care of anyone, they can make no mistake there. I mean, it’s one big lie, if you think that’s gonna stay at 300 pages, and literally in 48 hours later, you’re at the front, and you don’t even know how to use the comb. I mean, it’s that kind of thing. And I mean, the Americans, you know that with all the professionalism when it comes to them, you cannot understand what’s going on in this country, and how dysfunctional our shows, it’s like on believable, dysfunctional. And on that basis, Putin loses that war, because by now the Ukrainians know what they are doing. They just gonna kill those boys on the other end. And that means Putin is going to lose that conventional war. And now the question of what is what is he going to do next as a wolf, and I don’t want to discuss that here. But you know, where I’m going, this is just the tough one. And I hope that you know, the American President, the French in the UK, you call it the big armies, right? That the ones that have everything, that they really have a series where it was the god.

Robert Bryce 1:26:47
So the way I what I’ve heard you say is you’re not very hopeful.

Alexander Stahel 1:26:53
Now, I think this has to go worse before we get spread, too, sadly.

Robert Bryce 1:26:58
Well, then we’ll leave it there. And it is a sobering time. And there’s no doubt about that. So we’ll stop there. My guest Alexander Scahill, very many thanks for your time today. We’ve talked now in for more than an hour, almost an hour and a half. But it’s been great and I really can’t recommend enough his thread that’s on Twitter, which he posted on September 8, a lot of that is in his report for the Global Warming Policy Foundation. That report is called the crisis of the European energy system. And you can find him on Twitter at Berg, Robin. H. So Alex, thanks again for being on the power hungry podcast.

Alexander Stahel 1:27:32
Thank you so much for having me. This was awesome. Thanks.

Robert Bryce 1:27:34
And thanks for all you in podcast land. Tune in for the next episode of the power hungry podcast. Until then, see you.

Unknown Speaker 1:27:39
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