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“Clear” BC Pension Fund Buys Soiled Fuel Stranded Asset In UK for US$11.6B

Over on LinkedIn, Michael Liebreich amongst others was scratching his head concerning the latest purchase of 60% of the UK National Grid’s Gas Transmission & Metering service (NGG) by Macquarie Asset Administration and British Columbia Funding Administration Company (BCI) for £9.6 billion, about US$11.6 billion.

It’s the second half of that that caught my eye, dwelling as I do in British Columbia, which touts itself as being clear and inexperienced, and lives as much as that supreme a lot of the time. There are two halves to this story, one being purely the worth of the asset and the second being what the heck BCI is doing shopping for into fossil gasoline infrastructure that’s clearly going to be a stranded asset.

BCI touts itself as “The Funding Supervisor of Alternative for British Columbia’s Public Sector,” claiming $211.1 billion of managed belongings, and stating that makes it one of many largest funds in Canada. I’m pondering that BC’s roughly 540,000 public sector workers aren’t consulted usually about what the fund invests in, primarily based on what’s in it.

So lets poke on the worth of the asset they simply purchased. What does NGG do? Properly, the primary half is the high-pressure pure fuel transmission community in Britain. It has about 7,660 kilometers of high-pressure pipe and 23 compressor stations. That’s not distribution to buildings, that’s transferring excessive volumes of pure fuel, aka high-global warming potential methane and some p.c of otherwise nasty stuff, between locations the place it’s extracted and locations with excessive demand for it. It’s like electrical transmission strains, however with archaic and damaging molecules as an alternative of electrons.

The opposite a part of the enterprise is an impartial metering enterprise with 8.four million home and industrial fuel and electrical meters as of March 2021. There are about 19.Three million households within the UK, so suffice it to say that that is the 800 lb gorilla within the nation so far as monitoring consumption of threats to the local weather coming into buildings, no less than ones that aren’t Conservative politicians or members of the UK centered, denialism spewing Global Warming Policy Foundation that ex-Australian PM Tony Abbot just became a Board member of.

The Macquarie/BCI consortium has an choice to purchase the final 40% of NGG too, and I’m assuming sunk price fallacy will result in them pulling the fiscal set off connected to the financial gun pointing at their ft.

So let’s take into consideration this. That is delivering huge quantities of greenhouse gases across the UK and metering it going into buildings. Is that this a progress market? No, fairly the alternative. The UK is doing what each different nation on the planet is doing, which is putting in warmth pumps for constructing heating — and more and more cooling. It’s lagging behind, with solely 280,000 in the country, about 63 per 100,000 individuals, in contrast to, for instance, Estonia which is already at 1,583, however the UK being behind the remainder of the world doesn’t imply it’s going to double down on fuel within the age of local weather disaster. That will be as bone-headed as leaving the EU. Oh, wait.

The UK is a hotbed of idiotic makes an attempt by companies like Cadent and SGN  to mix hydrogen in pure fuel distribution strains and to make it a house heating fuel. That’s regardless of the actually apparent issues that it’s four times riskier than natural gas as a result of loving to leak, igniting over a vastly wider vary of mixtures and having a a lot decrease ignition temperature, and on the very minimal six times as expensive for each unit of heat delivered via warmth pumps, and extra like ten occasions as costly. There at the moment are 33 different studies that time out that hydrogen is a horrible constructing heating fuel, so it’s not like experiments are required or actuality received’t set in in some unspecified time in the future. I imply, pumping hydrogen into buildings for heating can be as foresighted as leaving the EU. Oh, wait.

So the fuel metering enterprise goes to be shrinking quick, whereas the electrical metering enterprise is simply sitting there. What concerning the pipelines? Properly, what the heck are they delivering the pure fuel for? Producing electrical energy, industrial warmth, and residential heating.

The primary one isn’t a progress market within the UK both. They’re constructing a 3rd HVDC interconnect to the UK to share renewable electrical energy, and they’re greenlighting pumped hydro amenities in Scotland and large offshore wind farms within the North Sea. Heck, they may even get Hinkley up and linked to the grid, and whereas the electrical energy shall be very costly at about $150 per MWh wholesale assured for 35 years with inflation matching value will increase, it will likely be low carbon and displace pure fuel. Electrical era goes to be decreasing consumption of pure fuel, particularly after the energy crisis diverted Europe radically away from the stuff and accelerated decarbonization.

We’ve coated residence heating, so what about industrial warmth? Certain, that’s going to take longer, however it isn’t like there aren’t solutions there that are being worked on hard. There are solely a small variety of locations in industrial heating that may’t electrify, akin to ceramics and cement, however even there plasma electrical heating programs create very comparable situations and are probably match for function, per world industrial heating skilled Dilip Chandrasekaran, SVP of Kanthal, who I had the pleasure of spending 90 minutes with the opposite day. (Watch this house, because it was for the CleanTech Talks podcast.) Sure, industrial warmth faces a bunch of interesting headwinds that it faces which might be difficult. However clearly rising the penetration of pure fuel in industrial heating, or much more foolishly utilizing vastly dearer hydrogen or artificial fuels somewhat than merely electrifying shouldn’t be going to the bulk choice. Sure, that is one other detrimental progress market.

Perhaps it’s as a result of the UK financial system and inhabitants are rising extremely quickly? I imply, it’s not like the federal government left the labor and commerce free market with over 700 million individuals and 27 superior economies just lately, misplaced a variety of its work pressure consequently, and its small companies can’t afford to cope with the smart EU border controls. Oh, wait.

To be clear, the UK shall be manufacturing and distributing some hydrogen, however nearly fully as an industrial feedstock, principally for fertilizer. That’s not going to fill 7,660 kilometers of pipelines. Given how onerous hydrogen is to distribute, most demand shall be met by elecrolyzers on the websites, so there isn’t going to be a lot pumping of the stuff. Liebreich’s remark was “there must be some residual position for the excessive stress fuel spine, ferrying biogas and hydrogen between industrial hubs,” and the important thing phrase is residual.

In fact, regardless of the British in British Columbia doesn’t imply a lot anymore, so why is the BC pension fund pondering that purchasing what’s going to clearly be a quickly diminishing pair of belongings which might be local weather change issues on the opposite facet of the Atlantic is a remotely good concept?

Properly, it’s received recreation. I dug into their 2021 investment inventory report to have a look at their portfolio. It’s outstanding that I haven’t seen something within the native press about this, however then, I don’t learn the native press. Maybe a number of the native press learn me, and it will get some protection, however it’s unlikely. Why? Properly, I’m not a fan of hydrogen for vitality. Fairly the alternative. I’ve carried out the chemistry, physics, and economics on the topic round a number of areas together with energy storage, African green hydrogen for Europe, shipping hydrogen, piping hydrogen, powering trains with hydrogen, powering planes with hydrogen, and powering ships with hydrogen. None of them are remotely affordable choices sooner or later.

Hydrogen demand projection through 2100

Hydrogen demand projection via 2100, chart by creator

Why is that this an issue domestically right here in BC? Properly, it’s the house of Ballard, the gasoline cell firm that was the darling of the Hydrogen Economic system blip round 2000 the place it peaked at $189 per share in comparison with its present worth of $8.13. A whole considerably lifeless financial system of hydrogen for vitality hope has constructed up within the province round that fading flagship. And the province continues to be constructing an LNG cargo plant whose two cities price of electrical energy demand shall be powered by, shock shock, burning natural gas to make electricity. Yeah, and we additionally welcomed Carbon Engineering with open arms and far fanfare, and I shredded them as effectively. I’m not precisely aligned with a giant chunk of BC’s ‘inexperienced’ tech group.

Is BCI an awesome outlier in BC when it comes to pondering that hydrogen for vitality has a future? Is its portfolio gentle on hydrogen by any likelihood? Nope. They’re over $Eight million into Ballard. $3.5 million into Plug Energy. $23 million into Air Merchandise. $3m into Adani Inexperienced Vitality. $2.5m into Air Liquide. $72m into Linde. $21m into Shell. $94m into Reliance.

$247 million in complete in huge hydrogen play companies, though in fact Shell is clearly not simply H2. Oh, and Adani Inexperienced Vitality is trying extra like pond scum inexperienced than observe with the latest studies on its corporate stock shell games.

And naturally a bunch of the standard suspects like BHP ($39m), Cenovus ($7m) and Suncor ($233m) are there. In fact they’ve $25 million in Fortis BC, the native perpetual greenwashing pure fuel generator and distributor. There are eight oil and fuel companies of their portfolio that aren’t even bothering to greenwash with identify adjustments as Oxy and BP did, however nonetheless have ‘petroleum’ of their company branding. Heck, they even have a few million in corporations that also have coal within the identify. Maybe it’s unfair, however in 2021 they’d $20 million in Gazprom, the Russian pure fuel downside baby. One assumes they’ve divested that.

With coal having peaked in 2013, most main analysts projecting peak oil demand arriving later this decade, the fact that Alberta’s crude will be first off the market, and the probability the height pure fuel shall be coming by 2035 at newest, it is a outstanding portfolio of fossil fuels.

All of that’s, in fact, dwarfed by the billions within the UK acquisition, though the cut up between MacQuarie and BCI isn’t public. That’s a whole head-scratcher, for the explanations I outlined.

However hey, maybe it’s closely invested in renewables? Um, no. I didn’t do a complete examine, however I did search for a number of the biggies globally and in Canada, and didn’t discover a lot. $1m in Orsted. $1.3m in Vestas. $2.5m in Transalta. $4m in Boralex.

So hydrogen and fossil fuels dwarf renewables in BC’s pension fund. Its declare to be “The Funding Supervisor of Alternative for British Columbia’s Public Sector” doesn’t maintain as much as scrutiny. Extra like “The Funding Supervisor of Alternative for Fossil Fuels and Stranded Belongings.” I’d advocate that they get some impartial strategic steerage. I’m native and that’s a giant a part of what I do, so BCI? Name me.


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