🇺🇦 When the pieces land

🇺🇦 When the pieces land


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I wanted to follow up on Sunday’s newsletter with some thoughts on where the pieces land once we get through the Russian war in Ukraine.

Institutional volte-face by the European Union has proven that in times of real crisis even the most slow-moving can move quickly. Germany’s shift, reversing decades of deeply held beliefs about the nation’s role, has been even more remarkable. Olaf Scholz addressed each of the criticisms I levelled at Germany in the Sunday newsletter in one blistering speech. I’d like to take credit for Germany ending its reliance on Russian gas, speeding up a move to renewables and increasing its defence spending to build its resilience. Given when the newsletter was sent and when he made his speech, I think it unlikely 😉.

I want to connect the dots between geopolitical confrontation and some underlying themes of the Exponential Age. Like many crises, this war will accelerate and accentuate some of those trends. Here are six quick thoughts.

1| MASSIVE PUSH FOR NEW ENERGIES


One might believe that Russian gas will find new outlets. Pakistan just ordered a whole lot of the stuff from Russia. But for any country with net-zero targets and wishing to remain aligned with the West (or at least not strongly aligned to Russia), it isn’t clear how appealing that supply will be.

As commodities journalist Javier Blas pointed out on Wednesday, Russia was unable to shift – at any price – a load of Siberian gas.

Any nation considering real energy security in the light of these events needs to figure out how to lower its dependence on gas. The Dutch renewable energy association released a plan on how to reduce Dutch dependence on gas by as much as 13% in just one year. The plan is in Dutch, so I’ve had to rely on the comments of Kees van der Leun, a renewable energy expert I have tracked for several years.

They may extend the life of existing nuclear power stations by investing in the new generation of smaller and safer nuclear plants. That isn’t a panacea, of course, because Kazakhstan represents something in the order of 40% of uranium exports today.

Redoubling efforts to move to renewable-based energy for electricity generation is a natural decision. It will also manifestly increase the demand for storage solutions. Green hydrogen should also see a boost.

Longer-term, we should expect investments in developing nuclear fusion to increase. Fusion reactors will have minimal requirements for weird and exotic fuels. More than 99% of global exports in deuterium come from Canada, the US and France. Commercial production of tritium (another candidate fuel for early reactors) is largely dominated by a research reactor in Canada. But courtesy of e=mc2, the fusion doesn’t need huge amounts of fuel.

To catch up on the state of nuclear fusion, listen to my conversation with Nick Hawker.

2| NEW INDUSTRIAL MECHANICS


The ideological belief of a flat world with extended supply chains took another body blow. For several years, nations have realised that technological sovereignty, not just standards and capabilities but manufacturing and production, was going to matter—and that global supply chains didn’t provide that. The shock of Covid taught us how fragile that web of container ships is. Consequently, Putin’s attack will be to remind leaders everywhere of the importance of not just energy security, but food security and industrial capacity.

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