Why Renewables Alone Can’t Replace Fossil Fuels – Part 2

In a previous article, we emphasized that fossil fuels will most likely complement the transition to renewable energy rather than be replaced by them. Exploring this dynamic further, we delved into the intricate factors—intermittency, storage limitations, and geographic challenges—that may hinder a complete phasing out of fossil fuels in energy generation. Additionally, resource constraints and the strain on electrical grid capacity add layers to the complexity of this transition.

Resource Constraints

Renewable energy technologies are resource-intensive, meaning they use more minerals and materials than their fossil fuel equivalents to produce the same amount of energy.

For example, a typical electric vehicle (EV) uses six times the materials of an equivalent internal combustion engine vehicle. Meanwhile, an onshore wind farm requires nine times more material resources than a gas-fired plant.[1]

To meet the International Energy Agency’s green energy targets, the production of minerals used in clean technologies would have to double.  To meet Paris Agreement targets, it would have to quadruple, and to meet net-zero by 2050 targets, mineral production would have to increase six-fold.1

As renewable energy systems ramp up, clean energy’s share of total mineral demand is expected to increase substantially. For example, it may make up approximately 40% of the demand for copper and rare earths, 60%-70% of the demand for nickel and cobalt, and 90% of the demand for lithium by 2040.[2] 

The Electrical Grid Will Need to be Rebuilt

The electrical grid is currently built for a power system that relies on fossil fuel. However, wind and solar energy are produced in different locations than energy based on fossil fuels. Thus, new lines and connections to the grid are needed for the transition to clean energy.

Bloomberg New Energy Finance estimates that a 152-million-kilometer supersized grid is needed to power a greener future. That is more than double the length of the grid today.

BNEF estimates that if all the stalled wind and solar projects were connected to the grid, that would add up to more than the present electricity generation capacity of the US. They additionally estimate that more than $21 trillion will be spent by 2050 to build the grid needed for the clean energy transition and to reach net-zero emissions.[3]

How May Investors Gain Exposure to Fossil Fuels?

Range ETFs aim to capitalize on the enduring importance of nuclear and fossil fuels in the energy sector. These ETFs look to offer investors an opportunity to navigate the evolving energy landscape.

Explore our Range ETFs today as you consider your position in the energy sector.

• Range Global Coal Index ETF (COAL): seeks to provide exposure to companies involved in the metallurgical and thermal coal industry
• Range Global LNG Ecosystem Index ETF (LNGZ): seeks to provide investors with exposure to companies involved in the Liquified Natural Gas (“LNG”) ecosystem
• Range Global Offshore Oil Services Index ETF (OFOS): looks to provide exposure to companies in the offshore oil services ecosystem
• Range Nuclear Renaissance Index ETF (NUKZ) looks to provide exposure to companies in the nuclear energy sector including utilities, construction, services, fuel, and advanced reactors

[1] The Role of Critical Minerals in Clean Energy Transitions, International Energy Agency (IEA), May 2021
[2] Is a Solar Future Inevitable?, University of Exeter Global Systems Institute, Working Paper Series 2022/02, 8/23/22
[3] A Power Grid Long Enough to Reach the Sun Is Key to the Climate Fight, Bloomberg New Energy Finance, 3/8/23

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Investing involves risk, including possible loss of principal. There is no guarantee the Funds will achieve their stated investment objectives.

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