“Green is the new black” … why many green products are far worse for the environment than you might realize … a truly-green energy technology that will reshape the sector
Eric Fry’s most recent issue of Investment Report brought to mind the irreverent animated television comedy, South Park.
In the episode titled “Smug Alert,” Gerald Broflovski has finally purchased a hybrid car and is more-than-pleased with himself about it.
As he brags to another character “I just couldn’t sit back and be a part of destroying the earth anymore.”
His self-congratulatory preening continues as he idles in his new hybrid at a traffic stop; he turns to the driver of an adjacent, idling SUV and scolds, “You know, the emissions from a vehicle like yours causes irreparable damage to the ozone. I drive a hybrid; it’s much better for the environment. Thanks.”
When Gerald’s embarrassed son asks if they can just go home, Gerald isn’t ready – they need to go to the hardware store to hand out “awareness citations” to the SUV cars in the parking lot (one of those citations is later revealed to contain the crime of “Failure to care about the environment”).
With this in mind, here’s how Eric began his most recent issue:
Green is the new black.
The symbolic environmental color has become a de rigueur fashion statement, both on Main Street and on Wall Street.
Some folks display their “greenness” by toting reusable shopping bags to Whole Foods and loading them up with organic vegetables and vegan snacks.
Other “green” folks scorn gas-guzzling Cadillac Escalades and instead bop around town in a sexy Tesla Model X… not forgetting to snag the cushy e-parking spots wherever they go.
Still, others turn up their noses at buying an eco-pariah stock like Yanzhou Coal Mining Co. Ltd. (YZCAY) in order to buy a stock like, well, Tesla Inc. (TSLA).
In other words, we’ve come to that socioeconomic moment when both consumers and investors are jockeying to “out-green” one another.
Now, to avoid a misunderstanding, we believe going green, in theory, is fantastic and much-needed for the health of our planet.
However, you’ll note I just added the qualifier “in theory.” That’s because, before reading Eric’s issue, I failed to realize the vast extent to which many “green” products aren’t half as green as advertised.
There’s actually a name for this – “greenwashing.”
Investopedia defines it as “the process of conveying a false impression or providing misleading information about how a company’s products are more environmentally sound.”
Back to Eric:
This inconvenient truth hasn’t attracted widespread attention yet – but it will.
And this truth will matter in ways that produce significant commercial impacts in the renewable energy marketplace… and significant opportunities for investors.
In today’s Digest, let’s look at how green isn’t always so green. But then we’ll pivot to the truly-green energy on Eric’s radar that’s positioned to transform the sector in coming years.
Let’s jump in.
***Dirty clean energy
For newer Digest readers, Eric is our global macro specialist and the editor behind Fry’s Investment Report. As a macro investor, he evaluates markets and asset classes from a big-picture perspective to identify attractive opportunities. Once something is in his crosshairs, he digs down to find the right, specific investment to play the opportunity.
In his most recent issue of Investment Report, he turned his attention to one of the biggest macro trends in our world today – “green energy.” What he found would make Gerald Broflovski less-than-thrilled.
From Eric:
Most of us focus on the “greenness” of a finished product… without paying much attention to the nongreen processes that delivered that product to our door… or to the nongreen aspects of using that product day-to-day… or to the nongreen aspects of that product’s end-of-use disposal.
But any honest evaluation of environmental impacts must include every facet of a product’s life cycle – from the preproduction phase to the disposal phase…
Producing an electric vehicle (EV), for example, requires about twice as much energy as producing an internal combustion engine vehicle. This differential results mostly from battery production, which uses a lot of energy to extract and refine metals like copper and nickel.
Even after an EV rolls off the showroom floor, it is only as green as the fuel that sends electricity to its charging station. A coal-fired power grid is obviously less green than a solar-powered one.
According to one particular myth-busting study from the Mobility, Logistics, and Automotive Technology Research Centre at the Free University of Brussels (VUB), a battery-powered electric vehicle that uses electricity generated by fossil fuels will produce slightly more carbon emissions over its lifetime than a diesel-powered car.
Eric points out how EVs that use renewably-generated electricity sources over their lifetimes will produce just one-sixth the carbon emissions of a traditional vehicle.
Evaluating what this means in terms of “break even” greenness is fascinating. Eric points toward a study from the World Economic Forum (WEF) in Germany, where about 40% of the energy mix is produced by coal.
Here’s Eric for the takeaway:
…the WEF concluded that the average EV would require about nine years to become greener than a diesel car.
A variety of other studies produce more favorable calculations than this one. But they all reach a common conclusion: EVs are not “zero emission” vehicles in a real-world sense.
***Wind and solar energy have their own challenges
Compared to coal-fired power, wind and solar energy would be rated as better for our environment. However, neither has an unblemished environmental profile.
Back to Eric:
…solar power can cause serious environmental negatives. Disposing of old panels is probably the biggest one.
In theory, 96% of solar PV materials could be recycled and reused in new solar panels. But in reality, 0% of solar PV materials can be recycled profitably…
This poses serious environmental risks because of the toxic chemicals the panels contain. After a solar panel spends just a few months in a landfill, the toxic lead and cadmium it contains can leach into the soil and groundwater…
Wind turbines produce a similar environmental blight. Most of them end up in a landfill.
Eric highlights research from the John Locke Foundation, noting that wind turbines are “forever waste,” they can’t be recycled, they’re made of resin and fiberglass that can’t be repurposed, and in the next 20 years, the U.S. will have over 720,000 tons of waste blade material.
Now, as mentioned earlier in this Digest, we applaud green-energy efforts in theory. But as you just saw, their application in practicality can carry numerous environmental challenges.
But there is one competing energy storage technology that does offer a better solution…
***The truly green battery
Let’s go straight to Eric for the reveal:
That technology is called a vanadium redox flow battery (VRFB).
As Mike Woolery, a vanadium technologist from US Vanadium LLC, states:
“Of the many advantages that VRFBs deliver, one is particularly important: the ability to recycle the liquid electrolyte that enables the battery… When VRFB systems are decommissioned, the liquid electrolyte can be recycled for use in new VRFB systems.”
In his issue, Eric dives into the technical aspects of VRFBs which we’ll skip over for spatial reasons. But here’s Eric’s takeaway:
Because of their size and weight, VRFBs are not suitable for EVs. But for energy storage applications, they offer a compelling alternative to lithium-ion batteries… especially when one considers their environmental superiority…
Although VRFBs remain relatively unknown, they are attracting a growing worldwide demand.
And for good reason. They offer many benefits…
They last about three times longer than lithium-ion batteries… they can perform for more than 20 years with close-to-zero degradation, whereas lithium-ion batteries tap out after five to seven years… they can be charged and discharged repeatedly without any significant drop in performance (unlike lithium-ion batteries) … and, at the end of their useful lives, they are relatively easy to recycle, whereas lithium-ion batteries are not.
***Eric’s latest recommendation to his Investment Report subscribers is in great position to capitalize on this emerging trend
It’s a company that’s right in middle of the renewable energy storage megatrend.
Late last year, it launched a new venture devoted to producing VRFBs. As part of this, it acquired a leading VRFB company with a portfolio of patents. Eric notes that the long-term revenue and profit potential of this new ventures is “explosive.”
Out of respect for Eric’s paying subscribers, I can’t reveal the name of this company in today’s Digest. But if you’d like to learn more as an Investment Report subscriber, click here.
Wrapping up, for anyone under the assumption that an EV, or even a leading green-energy technology, is always truly green, make sure you’re not being greenwashed.
As increasing numbers of green-energy enthusiasts catch-on to this discrepancy between alleged green energy and in-reality green energy, it’s likely to produce a huge tailwind for VRFBs. This should drive returns for VFRB investors who get in today on the ground floor.
We’ll keep you updated here in the Digest as this trend gathers steam.
Have a good evening,
Jeff Remsburg
