We have to wait a few weeks to see just how green President Joe Biden’s stimulus plan turns out to be. But we’re already in the middle of an unplanned green investment boom. It will end both badly and usefully.
Energy of all varieties is a capital-intensive business, so the cost of that capital often makes or breaks a new project. This is especially so for renewable-energy projects where all the investment is up front and, unlike an oilfield for example, there is no option embedded in terms of volatile commodity prices. Similarly, the more cutting-edge technologies, such as vehicle electrification, are often at start-up stage or otherwise unprofitable, so access to capital is an existential issue.
Hence, when people talk about the “energy transition,” on some level what they’re describing is a transition of capital, or money being deployed into one type of energy infrastructure over another. Which makes this chart very important: