Which Are The “Stranded Assets” Now? – Watts Up With That?

From the MANHATTAN CONTRARIAN

Francis Menton

How quickly things change. It was only two years ago, in 2023, that I was writing posts compiling long lists of quotes from climate activists warning that all assets used for production of coal, oil and gas were about to become obsolete and “stranded.” After all, wind and solar were (supposedly) cheaper and cleaner for generating electricity, which could then power anything and everything. Therefore anyone stupid enough to make further investments in producing fossil fuels would lose everything. Here is one such post from June 2023, and another from February 2023.

If you look today, you can still find predictions in 2025 that fossil fuel assets will shortly become “stranded.” (Here is one from Bloomberg from March 6: “Investors Risk $2.3 Trillion of Stranded Fossil Fuel Assets.”). But such predictions are becoming fewer and fewer. Instead, what looks far more likely is that large portions, if not the entire business, of “renewable” electricity generation from wind and sun is likely to get “stranded.”

Consider the latest from the UK. The current Labour government of Keir Starmer, elected just a year ago, is languishing with record-low approval ratings. A YouGov poll in May found Labour with just a 23% “favorability” among the populace, compared to 32% favorability for the Reform Party of Nigel Farage (and 16% favorability for the Conservatives). In other words, if and when the next election is held, Reform could well prevail. Meanwhile, the Reform Party has broken with the former all-party consensus in favor of “net zero,” otherwise known as endless subsidies for wind and solar power.

Two days ago, on July 16, the Deputy Leader of the Reform Party, Richard Tice, wrote to heads of UK renewable energy companies to advise them that a Reform government headed by Nigel Farage would terminate the subsidies for wind and solar energy. Here is a copy of one such letter sent by Tice to Greg Jackson, CEO of Octopus Energy; and here is a July 17 press release from Net Zero Watch publicizing Tice’s initiative. Tice’s letter specifically warns wind developers that if they are granted subsidies in an upcoming round of handouts from the Labour government dubbed “AR7,” a future Reform government will not continue those subsidies:

Let me be clear: if you enter bids in AR7, you do so at your own risk. The political consensus that has sheltered your industry for nearly two decades is fracturing. Reform UK will not be bound by the assumptions or commitments of this failing Labour government.

And from Net Zero Watch’s press release:

Richard Tice is absolutely right to put developers on notice that any new investments will become stranded assets under a Reform government. . . . [T]he real problem with renewables is not political risk but nature itself: the fundamentals of physics and economics, which make wind and solar inherently uneconomic. The industry has been constructed on subsidy, not on market fundamentals. After decades of windfarm handouts, consumers can no longer afford to foot the bill. Politicians can’t override physics or economics – no matter how much they subsidise failure.

The prediction that wind and solar assets will become “stranded” is fundamentally different, and fundamentally sounder, than the comparable prediction for fossil fuel assets. That is because wind and solar generators are entirely a creation of taxpayer subsidies. Without the subsidies they are uneconomic, and they will be worthless the minute the subsidies are withdrawn. In contrast, the fossil fuel assets are economic without government support. The prediction that fossil fuel assets will become “stranded” is based instead on a belief that governments will intentionally destroy these assets in their zeal to stop CO2 emissions. But that means that governments will continue a war on fossil fuels even as it becomes obvious that the alternatives are hugely more expensive, and as consumers are forced to bear the costs of soaring energy prices. My own prognostication is that even the craziest governments will relent in their efforts to destroy the fossil fuel businesses as the costs of doing some become ever more evident.

Back here in the U.S., the Trump administration and Congress have now, via the One Big Beautiful Bill Act, put apparent end dates on subsidies to new wind and solar projects not yet initiated; but they have not threatened to pull subsidies from wind and solar projects that have gotten built based on a commitment of subsidies (particularly tax credits) during the useful lives of the facilities. As such, there would appear to be reason for owners of existing wind and solar facilities to hope that their investments will not become stranded. But it is not a sure thing. There are several ways for the wind and solar investments to fail even if the existing subsidies continue at currently committed levels. For example, wind and solar facilities could turn out to need more maintenance than anticipated to keep going; and if governments will not agree to increase the subsidies at that point, the assets will become stranded. Also, if the end of subsidies for wind and solar developments puts an end to construction of those, then the investments in facilities like factories to make wind turbine blades will become stranded.

Another thing that can and should happen is that the grid operators around the country should restructure the markets by which they acquire electricity from power facility operators to make it such that the grid only buys power that is dispatchable. Such a reform — which is highly desirable — would leave all wind and solar generators stranded.

Back in the oil and gas business, things are booming. Oil and gas production are hitting annual records. The demand for reliable energy only goes up. Anyone who thinks those assets are going to get “stranded” is delusional.

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