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Episode 36

The Angry Clean Energy Guy on the incredible resilience of renewable energy in the midst of a pandemic, and why that means its rise will accelerate further post COVID-19; and on the incredible non-resilience of the airline industry, its irresponsible and reckless mis-management and why the earthquake in its midst means it has already seen its carbon emissions peak

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The Angry Clean Energy Guy on the incredible resilience of renewable energy in the midst of a pandemic, and why that means its rise will accelerate further post COVID-19; and on the incredible non-resilience of the airline industry, its irresponsible and reckless mis-management and why the earthquake in its midst means it has already seen its carbon emissions peak

Photo by Assaad W. Razzouk

One of the most amazing set of facts I saw recently was in the following sentence:

“Nearly two-thirds of the world’s 26,000 passenger aircraft are grounded, and some 25 million jobs are at risk. IATA has warned that carriers face a $314 billion shortfall in ticket sales this year, and half of them face bankruptcy in 2 to 3 months without government help.”

So, let’s decorticate that quickly.

Two-thirds of the world’s 26,000 passenger aircraft are grounded. So that’s over 17,000 aircraft sitting on a tarmac or in a desert somewhere right now.

On top, you have 25 million jobs at risk in that industry, and that’s because airlines have a $314 billion (that’s billion, with a B) shortfall in ticket sales this year – tickets they thought they were going to sell but they did not.

And half of these airlines face bankruptcy in 2 to 3 months, so in other words, right now, without government help.

Now I wonder, what does that tell you? Obviously, they’re not flying, so they’re not selling tickets and therefore, the pandemic has taken a heavy toll on them, right? That I understand.

But how could an entire global industry be so not resilient? That’s the topic for the second half of this podcast.

But the first half is about the resiliency of renewable energy through the Coronavirus pandemic and what this means as an inflection point going forward. In other words, renewable energy was growing quite fast Before Coronavirus. However, it had very strong headwinds from a global lobbying machine, funded with billions of dollars, and headwinds from an entrenched fossil fuel industry, that’s oil, gas and coal, that were fighting it tooth and nail.

However, I think it’s reasonable to assume, based on the facts that I’ve seen, that the resiliency of renewable energy through this pandemic means that the growth of renewable energy going forward is actually going to accelerate, even compared to what we had previously assumed.

Welcome to Episode 36 of The Angry Clean Energy Guy with me, Assaad Razzouk


So why should we expect that renewable energy will emerge with renewed vigor After Coronavirus? In other words, we have – “we” meaning the entire world – assumed a certain path of growth for renewable energy. Why is that path of growth accelerating After Coronavirus?

Exhibit one is the chief executive of British Petroleum. He hailed recently the resilience of renewable energy just as the oil price turned negative, and contrasted the performance of his own solar division at the same time as oil prices were going negative. He said, and I’m quoting him: “The renewable energy sector continues to attract investment because of its risk profile and its resilience.” In another very interesting quote, he said: “The pandemic has reminded us of the frailty of the ecosystem and how life can change almost overnight. People are looking up at clear skies and so on”, he said.

I’ll tell you what “so on” means. “So on” means people are looking up at clear skies and don’t want to be asphyxiated anymore by oil, gas and coal. People have become far more sensitive to respiratory diseases. They understand them better. They know that oil, gas and coal fumes and pollution make us more vulnerable to respiratory diseases and they’re just not going to put up with the same bullshit that they were putting up with before from oil, gas and coal companies.

Exhibit two is that electricity generated by renewables has exceeded coal fired power in the United States for a record 40 straight days just now, including every single day in April. That has not happened – ever – since we’ve started producing coal.

Exhibit three is a story dated May 6th 2020 in the Financial Times that begins “at a time when much of the global energy industry is in crisis, wind and solar projects are having their moment in the sun”. Why does the writer go with that? The reason is that the pandemic has not actually affected how much the sun shines or how much the wind blows, and as a result, renewable energy projects are continuing to produce reliable electricity around the world. At the same time, supply chain problems are preventing gas fired power and coal fired power from doing the same thing.

Exhibit four is from India, where renewables are not only proving resilient in the Covid-19 crisis. They are also speeding up the country’s shift from coal to solar power. India’s energy demand collapsed by some 30% during the lockdown that the country’s been through. However, coal generators bared the brunt of that collapse. Why? Because the government there gave renewable energy projects a “must run” status, which meant that utilities had to take that power first ahead of coal. And the reason they had to do that is because that electricity was cheaper and cleaner. In other words, if you have a drop in energy demand, why would you want to take any coal? That means firing up dirty coal plants that depend on big supply chains of this stuff and all that to generate power, which is more expensive than the alternative available right next door, which is solar and wind.

Exhibit five is a very interesting story on Bloomberg that basically says that when the oil price goes down, oil companies returns go down, and these have been suffering for a decade in any case, so they’re just getting worse. On the other hand, the price of solar power and wind power is also going down. However, the returns of investors in that sector are not suffering relatively in the same way as those of investors in the oil sector. So, in other words, onshore wind and solar are today the lowest cost new sources of power generation for most of the globe, at least 2/3 of the global population, at least 70% of global GDP, and their competitive position is due to the fact that costs have been declining for renewables and battery energy storage for a decade. So, falling costs for oil are obliterating oil companies returns. But the renewable energy industry has built falling costs into its competitive positions, and its returns are much safer. They’re also much healthier, and today their returns are higher than those of oil and gas.

Exhibit six is from South Korea, where the government is looking like it’s going to double its target renewable share from 20% in 2030 to 40% because it also saw the writing on the wall. And it now understands that it makes no sense for it to increase its coal power in its forecasts and its budgets, given that coal is both more expensive and much, much dirtier. The Korean people now understand what that means for their health, and so the government is taking its cue from that increased understanding.

Notice how none of these exhibits mentioned the words climate change and the reason for that is that we are acting on the clean energy transition faster because of the increased understanding of the health impacts of pollution, that everybody pretty much now has, in a world where a falling oil price means that oil companies are no longer such reliable investments.

So, if you put all that picture together, what you get is, I’m guessing, a faster growth curve for renewable energy going forward After Coronavirus, coupled with a faster elimination of coal from electricity grids around the world, as well as less use of coal and gas by consumers.

Now that doesn’t solve the problem, obviously, because most of our fossil fuel pollution is from industrial activities. However, it’s a big step in the right direction, driven by a pandemic, which is quite an interesting set of circumstances to think about.

And all these exhibits came together beautifully in renewable energy’s unstoppable and accelerating march when Abu Dhabi set a new global record low solar price in a huge 2 Gigawatt tender, which is now both the world’s largest and the world’s cheapest, at an incredible 1.35 U. S. cents per kilowatt hour. To put this into perspective, that’s down 15.6% from the previous record, which was set in Qatar just five months ago. No power has ever been produced this cheaply, ever.


Now contrast the resilience of renewable energy with that of the airline industry.

Yes, I know, maybe the comparison is unfair because, after all, airlines are not allowed to fly because people don’t want to fly and because countries shut down their borders. Fair enough.

However, surely the airlines could have done much, much better. Today, as I said earlier in the podcast, about two-thirds of their 26,000 airplanes, so that’s over 17,000 airplanes, are grounded. Their non-resilience has put 25 million jobs at risk, and they’re selling $314 billion less in ticket sales than they thought they were going to be. Finally, half of them or more face bankruptcy right now. I’m sorry, but my conclusion from this is that they have been badly owned and badly managed, and I’m going to give you some data points so that you can think about that.

So before the pandemic, airlines were a rising source of greenhouse gas emissions because they did not do much in terms of pushing aircraft manufacturers and engine manufacturers to do much, much better in terms of electric flight. Now that also, I understand. Big Oil has had a multibillion dollar spend on lobbying going on for many years, on top of a campaign to obfuscate the truth about its product for decades. And I suppose one could think that the airlines were tricked as well.

I mean, personally, I don’t think so, because at the end of the day, the airlines have always been the principal force that pushes aircraft manufacturers and engine manufacturers to do better.

Now they’ve always done that from the perspective of getting better planes from an efficiency perspective and planes that fit best with the routes that they wanted to fly. And what they have not done is push aircraft manufacturers and engine manufacturers to manufacture electric planes.

Now, in addition, the industry has been reckless and irresponsible.

Did you know, for example, that they spent 150% of their free cash flow – so that’s more than the free cash that they’ve been generating – on share buybacks since 2014 and of course, they’ve paid dividends on top of these share buybacks.

So, in other words, what they’ve done is whenever they made any money, they did not save any of it. And they spent it to enhance the returns of their shareholders. And they did that deliberately forgetting about the 25 million people who work in the industry, their employees deliberately endangering their resilience.

I mean, who doesn’t have two or three months worth of cash? We’re not talking a restaurant here. How can a global airline not have a month or two worth of cash to pay its bills when times are tough? I don’t understand that. So, they went ahead with the maximum aggressivity level possible on share buybacks and on dividends, fully cognizant of, the fact, my guess, that government would come and bail them out. And that’s the movie playing right now at a theater near you.

Governments are coming along, and they are bailing out their airlines, and only the most courageous governments are either not bailing out the airlines at all or putting some serious strings to any bailout package in order to ensure that the airlines not only run more sustainably going forward, but also take into account their rising carbon footprint and do something about it.

The statistics are scary when you actually look at them.

So just the top five U. S. airlines, that’s American Airlines, Delta, United, Southwest and Alaska Air, spent 96% off their free cash flows on share buybacks over the past decade. I mean, that’s incredibly irresponsible behavior by their management teams and share buybacks, in any case, are a very bad idea. They’re completely focused on enriching a tiny minority, and they completely ignore everybody else – and by everybody else, I mean those who don’t own stock or those who own less than the BlackRock of the world own, as well as employees, service providers, customers and other stakeholders.

At its heart, the airlines story is a very simple story: Many people will not be able to fly as much as they were able to before Coronavirus because their favorite airline would have gone bankrupt. Others in countries that bailout their airlines will still be able to fly. But I’m guessing that they’ll pay higher ticket prices for a long while. Meanwhile, the management teams at airlines are going to be just fine, thank you very much. Employees, much less so. Many will lose their jobs. Not sure how many will be rehired. Airlines will take government money, and then they will go back to doing exactly what they were doing before. Why? Because share buybacks artificially contribute to a rising stock. And if you’re getting paid on a 12 months bonus cycle, all you care about is what that share price does in those 12 months.

The solution is actually very simple. All that we need to do today is two things.

Number one: Ensure that government bailouts of airlines come with strings attached, for example, lessening competition on routes where one can take a train or drive. And there are many of those in most countries. The French government, to their credit, are trying to get that done with Air France.

And then the other really simple thing that should be done is that share buybacks should not be allowed for any recipient of a government bailout for at least five or maybe 10 years. And that’s 5 to 10 years after the money that the airlines took from that bailout is repaid. Because businesses like airlines should have many months of cash available to them in order to build a minimum of resilience in industries that are critical to supporting global trade and global tourism and globalization in general.

That’s it for my rant on resilience: In the case of renewable energy, good and conducive to faster growth earlier in time than we expected; In the case of airlines bad and with clear drivers, the most important one of which is greed, or the imperative that management teams at airlines felt to distribute money to shareholders instead of using it to build their resilience.

And the takeaway is this. A pandemic allows you to see things really, really clearly.

It’s really clear that the days of coal are over and that citizens want to consume less oil and gas.

It’s really clear that governments and citizens want more renewable energy.

In the case of airlines, it’s really clear that the industry let down its customers and let down its employees, and as a result, a lot of it is going bankrupt and won’t be here AC, or After Coronavirus. And what we need is we need to rebuild that industry, yes, regrettably, using government bailouts, but while making sure that these government bailouts are repaid and come with strings attached. The carbon footprint of the airline industry should no longer be allowed to rise and probably should never reach the level that it was at in early 2020. But at the same time, customers and employees of airlines should be treated just as well as the shareholders have been.

Even though I’m a capitalist through and through, I’m a responsible and green capitalist. And from that vantage point, share buybacks should no longer be allowed except under very strict conditions and probably limited to a tiny portion of free cash flows. Otherwise, what’s going to happen is greed is going to run rampant once again, and we should all of us do our utmost to spot it, to police it and to do something about it.

There is a huge fight out there, which is still ongoing. It’s not just Coronavirus, it’s also climate change, and we must win that fight. Both a rapidly growing renewable energy industry, as well as a more resilient airline industry, which is electrified, have key roles to play.

Thank you so much for listening to this Episode 36 of The Angry Clean Energy Guy with me, Assaad Razzouk and have a great couple of weeks.

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About Me

There is so much to be angry about, if you are a clean energy guy.

Every day, so many things that happen around the world make me angry when I look at them with lenses colored by the climate change chaos unfolding everywhere around us. And I am especially angry because I know we can solve the climate change crisis if we were only trying.

Each week, I will share with you a few topics that struck me and that I was very angry about – and this will generally have to do with climate change, solar or wind power, plastic pollution, environmental degradation, wildlife, the oceans and other related topics.

Assaad Razzouk

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