The Value Perspective Podcast episode – with Doomberg

Hi, everyone. We have landed another rockstar from Finance Twitter as our guest. Doomberg is an anonymous account with some 142,000 followers on Twitter since being founded in May 2021 and is also famous for its ‘Green Chicken’ brand. Doomberg is actually a small team of industry consultants coming from the commodity sector, who specialise in distilling complexity. They write predominantly about energy but have also covered other areas, such as crypto, meme stocks and bankruptcy court. Here Andrew and Juan sit down with the Green Chicken to discuss the battle of physics versus platitudes; using the financial ideas of flows and payback in the context of energy and climate change; fossil fuels and the future of cement, steel, ammonia and plastic; what actually constitutes hydrogen; nuclear in the context of emerging markets; and accessing the raw materials. Enjoy!



Juan Torres Rodriguez
Fund Manager, Equity Value
Andrew Lyddon
Fund Manager, Equity Value


Chapter headings for Doomberg on The Value Perspective Podcast

Please click on the link below to jump straight to a chapter

* Doomberg, welcome ...

* Physics v platitudes

* Energy ignorance

* A nuanced take on wind and solar

* Geothermal and a rainbow of hydrogens

* Nuclear options

* Humanity’s vital materials

* War and pieces

* Book recommendations and one big mistake


JTR: Doomberg – welcome to The Value Perspective podcast. It is a pleasure to have you here. How are you?

D: Juan, Andrew, I’m doing great and the pleasure is all mine. Looking forward to a fantastic discussion today.

JTR: Please could you introduce yourself – bearing in mind, of course, you are an anonymous account – and, in particular, explain why we are currently talking to a green chicken on your screen?

D: Sure. As I said, it’s a real pleasure to be here. I am the head writer of Doomberg – Doomberg is a small team of industry consultants who come from the commodity sector and our specialty is distilling complexity into accessible discourse, either written or spoken. Through the years, we developed several product lines at our consulting business, one of which was helping content creators run their businesses better – and several of our clients suggested we consider starting our own content-creation business. Some 17 months ago, we decided to do so and built the Doomberg brand from scratch using all the principles we used to teach our clients. It has been a fascinating journey and an incredible success beyond all of our wildest imaginations.

And the anonymity serves a couple of purposes. First of all, Doomberg is not a person. Many content creators can orient a brand around themselves but we chose not to do that. And considering we are setting out from a standing start, it is difficult to stand out as a person as well – having just another face as your Twitter icon is sort of forgettable. And one of the rules of marketing is you can’t be remembered if you don’t stand out – and the Green Chicken stands out. It is kind of funny without being silly, which is one of our brand attributes.

Then, once it all took off, of course, we could never reveal ourselves – even though many people on Wall Street know who we are. It’s not like we are doing this for our personal safety or anything like that – it’s more brand protection at this point. If we did come out as individuals, it would collapse the mystique and the intrigue around the brand and so it’s more preservation of brand value. We are very proud of the brand that we built – we chop away at it every single day, we’re very protective of it and to do anything that would risk it at this point would be foolhardy. So that is the primary driver behind the desire for anonymity.

But Substack knows who we are and our payment processor obviously knows who we are and we have to pass ‘know your customer’ and anti-money laundering like everybody else – and we happily do so. We don’t keep our identity all that secret but, having said that, for the broader brand ambition – now that we have such a big following on Twitter and so many subscribers on Substack – anything that threatens the brand is a no-go zone for us.

JTR: Doomberg really seemed to come alive during the pandemic – is that correct or were you guys working together before that?

D: Yeah, we had been a firm for several years together but the pandemic did change our course. We have said this on other podcasts but I don’t mind repeating it here – we had built up a very nice consulting business but we were catering to predominantly publicly-traded companies and maybe some wealthy family offices. And, when Covid hit, we lost a substantial portion of our revenue – and effectively all of our publicly traded company revenue – because turning off consulting is a very easy thing to do in a time of crisis.

Everybody has some memory of the recovery from the depths of the lows in March 2020 but fewer – though many business owners will – will remember the reason why we got into that hole was because the economy seized up. So we had a real decision to make as a firm – you know, what handles could we pull? – and we got an excellent piece of advice from a pretty famous hedge fund manager we happen to know in real life. He suggested we create this new line of business where we help content creators who specialise in selling their content to Wall Street. His view was that, while many of them were great at creating content, few of them knew how to run a business as effectively as he knew we could do.

And that was a real turning point for us. We decided to launch that product and then, over the next year or year and a half, we more than re-established all of the business we had lost. It was that typical American entrepreneurial flexibility, right! You have to adapt to the hand you are dealt – either go home or get up and keep trying – and we decided to get up and keep trying. And in so doing, we discovered not only could we do it, but we would enjoy doing it. We found ourselves jumping in and helping with the content more and more – not just with the marketing of the business or the branding of the business or the domain creation or the operations, which are all things we specialise in.

And, ultimately, it was the encouragement of one client in particular, who said, you know – you guys would follow all of your own advice. One of the frustrations for consultants is your clients don’t always listen to everything you say and that can be challenging – so it was a really insightful comment. The old adage runs, ‘Those who can do and those who can’t teach’ and, in a way, consulting is an expensive form of teaching – and we wanted to prove the adage wrong.

In the beginning, Doomberg was initially thought to be a showcase for our consulting business: look at this content-creation business that we could create – surely we can help you with yours. It was kind of showcase marketing but it succeeded to the point where we actually stopped accepting new clients on the consulting side and are focusing more and more of our efforts on Doomberg because it is the work of our life and the funnest thing we get to do. It is the thing I personally am most proud of in my life – that we were able to do this so effectively and so quickly. I had a very good career in corporate America and I am very proud of my education and the hard work that went into those things – but those accomplishments pale in comparison to the pride I feel every day getting out of bed and working away at the Doomberg project.

JTR: How many followers do you now have on Twitter?

D: We have something like 142,000 and change, I think, overnight at the time of this recording. It has been going relatively fast. August slowed down a bit – you know, with European vacations and the dog days of summer. But we launched in May of 2021 and we now have 140,000 followers – and all organic. We don’t buy followers – we don’t play those games – we just produce good content every day on Twitter. Twitter is a unique part of our ‘domain creation’ strategy so that has been great.

It is a great platform, if you treat it well – like anything else – but there are also some challenges with it. There is incredible toxicity, if you get sucked into it, and so we have developed strategies on how to use Twitter effectively for its intended purpose. The Doomberg Twitter account is not an outlet for my personal opinion – the strategic intent of the account is to drive demand for Doomberg Substack and so we have a general rule, for example, which is, if we would never write about it, we don’t tweet about it.

That allows us to dodge many of the controversies of the day and to avoid some of the ‘cancel culture’. If we write about something, however, we are very confident and steadfast in our views on that topic – and so then it is ‘open season’ to tweet about it. And that is a very powerful rule – one of many we have implemented so we can get the most out of Twitter, without getting sucked into some of the dirty underbelly of the platform.

JTR: Well, you have two big followers in Andrew and I and we really enjoy your content in all its forms – Twitter and Substack. We have also listened to many of the podcasts you have appeared on and now it is a real pleasure to have you on ours. Can I ask – where are you based at the moment?

D: We are based in the Midwestern part of the United States – ‘flyover country’, as we like to say – and the Eastern time zone, so we roll with the cycles of the New York Stock Exchange, predominantly. In today’s hyperconnected world, you can create a digital business from anywhere – and this is where we decided to create ours.

JTR: We tend to associate Doomberg with all of the work you have done on climate change but you also now appear to be commenting on crypto, among other things. Where are you guys coming from?

D: We don’t write about climate change per se, we write about energy predominantly. I would say roughly two-thirds of our pieces have an energy bent to them but we are also interested in the news of the day and pride ourselves on being able to learn things quickly and to distil complexity into accessible discourse. So we have written about crypto – we are pretty fascinated by it – and we have written a lot about certain meme stocks. [US cinema chain] AMC in particular is one we find interesting.

We also have pretty good experience in the corporate sector on our team – so we can draw on, say, our experience in bankruptcy court to comment on the Twitter case – and we can draw on our experience in private equity. The editor-in-chief of Doomberg comes from the private equity sector and understands that industry quite well and, you know, the complexities of a capital table and ‘your terms, my price’ – those venture capital-type things.

So we have written about certain aspects of the private market as well and, as we have said on other podcasts, we invest almost exclusively in the private market so that is one area we know pretty well what is going on and have some expertise. I would say two-thirds of our pieces are energy and then one-third of our pieces are interesting, off-the-beaten-path type topics or our take on the viral news of the day. We do that not only to keep the interest of our readership, but also to keep it interesting for ourselves. So that is the content strategy and, just roughly, the partitioning of the topics.

Physics v platitudes

JTR: That’s really interesting. Now, Doomberg has come up with some great ideas since going live but perhaps my favourite is ‘In the battle between physics and platitudes, physics is undefeated’. That sounds very powerful but what actually do you mean by that and can you offer us some examples?

D: Yeah. I am a trained scientist with a couple of decades of research and development experience in the commodity sector. I have also led large teams of scientists in my career and have a pretty good ‘molecular map’ of the economy and how it works at a chemical and physical level. And what we mean by ‘In the battle between physics and platitudes ...’ is the laws of physics dictate certain constraints. So, at the highest level –and we have written about this a variety of times from different angles – we have popularised the phrase, even if we can’t say we coined it, ‘Energy is life’.

Ultimately, the human endeavour is a constant, unrelenting struggle against the forces of entropy and your standard of living is literally defined by how much energy you get to waste in battling entropy – you know, right angles don’t spontaneously appear in nature. So in order to have a decent standard of living, you must have access to a certain amount of primary energy ... so that you can waste it. And all humans everywhere – as a general rule – would like a higher standard of living. Yet the integrated amount of standard of living we can distribute across society is bound by physics – how much primary energy are we producing? – and there is no way to circumvent that. So if you are not going to produce a sufficient amount of primary energy, then it necessarily follows that some amount of standard of living decrease must be absorbed by society.

Now, who does the absorbing and what the consequences of that absorbing are puts you into the realm of politics. But when we say ‘platitudes’ we mean, like, while you can stand up at a cocktail party and say, we must eliminate our use of fossil fuels by 2040, there is just no way to do that without decimating the standard of living of billions of people on the planet. And so, if one necessarily follows the other, then we should be discussing that – like, we might decide as a species that sacrificing half of us, for the good of the quote-unquote ‘planet’ might be something we all should be willing to do. To which I would say ‘you first’! But that is just the facts – like ‘energy is life’. Physics dictates the standard of living across society – and how much energy you get to waste defines where you are on the totem pole. Whether you are nearer the base of Maslow’s ‘hierarchy of needs’ or nearer the apex, where you can comfortably tell everyone else in the world what to do, I think has a big input into your views on the matter. So, ultimately, you cannot wish away physics – in the long run, physics has to be confronted and dealt with. Those are laws, platitudes are opinions.

JTR: Would you say platitudes have been winning the argument over the course of the last five years?

D: I would say over the last 15 to 20 years – and I would characterise the primary reason why platitudes have had the comfort of occupying much of the public square flows from the fact the past couple of decades have been a period of relative abundance in primary energy, driven predominantly by the revolution in the shale patch. So when you have excess primary energy, you can be tricked into believing primary energy is just another commodity and not a foundational one. It is only during periods of energy shortage when you realise the true price elasticity of demand for energy because, as we said, what is the price elasticity of demand for life and who can afford to pay it?

And you will find the richest in the world will pay almost any price for life or the wellbeing of their family and their children. And that will, by definition, price out and export inflation to the rest of the world that cannot afford it. And that is what we are seeing now as a consequence of what we are characterising as a period of primary energy shortage relative to demand. That shortage has arisen from lack of funding in the fossil-fuel and nuclear sectors running up against the emergence of massive populations of the aspiring middle class, especially in Asia – and who are we to say who gets to have a good standard of living and who doesn’t? So, again, because we are in a period of energy shortage and are seeing the collapse, for example, of the European energy infrastructure, we are now finding we will soon have far less tolerance for platitudes and the population will demand our political class reacquaint themselves with the fundamental laws of physics.

AL: Just to follow on from that point on trade-offs and standards of living, that sounds a little bit like some of the work William Nordhaus did a few years back that won the Nobel Prize – just the trade-offs between the amount of warming we should maybe let the climate do versus the good to mankind in terms of standards of living that might accrue from using more energy, including more fossil fuels. Do you have any thoughts on that kind of analysis specifically?

D: I can’t speak to the direct conclusions of his analysis because I am unfamiliar with them – but it sounds very sensible and it sounds very logical, which is how we would approach it. You know, laws are laws. If we forgot everything we knew about science and spent a couple of centuries relearning it, we would end up at relatively the same conclusions because those are fundamental aspects of the universe! So it is a trade-off.

Again, these are the exact kinds of adult conversations we need to be having – what is our best estimate of the anticipated damage to the planet, taking into account our ability to remediate but also understanding we should have a shared human objective of a reasonable standard of living for as many people as possible? Now, once you take that third variable into consideration, you enter into all manner of political discussions like capitalism versus socialism versus universal basic income versus ... pick your favourite. But, ultimately, if there is not sufficient primary energy, then all those other conversations become a little less relevant as people scramble for the life-nourishing energy they need to just maintain their existence, let alone to thrive.

Energy ignorance

JTR: That’s a great segue to my next question. You have suggested before that a lot of current perceptions stem from what you have termed ‘energy ignorance’ – what do you mean by that?

D: A friend of mine on Twitter has coined that phrase and, occasionally, I indulge in the attempt to popularise it. But yeah – getting energy wrong has massive consequences, which I would argue the Germans and, by extension, the Western Europeans are experiencing directly as we head into the winter right now. These are foreseeable policy errors – that we had been writing about for over a year – that are amazingly coming to fruition like a slow-moving trainwreck. But we watch it every day and it is truly incredible. So, when we say ‘energy ignorance’, what we really mean is ‘physics ignorance’ – but, yes, that is a phrase we indulge in a little bit on Twitter.

JTR: One way to combat that is to educate people and, to that end, Doomberg has been trying to place some of these complex matters in frameworks that are more digestible and easier to understand. One that caught our attention is your putting the energy market in the context of flows and paybacks – in the same way one thinks about money flows and investment paybacks when talking about finance. Please can you explain this mental framework – and, particularly, why is it so powerful to show that, as things stand, it will be very difficult to achieve the targets we have self-imposed for 2030 or even 2050?

D: When you consider a project in the financial world – say, a business leader is deciding whether to engage in a capital project or in the acquisition of a competitor – many on Wall Street are familiar with discounted cashflow models. So there will be a ‘time equals zero’ or ‘t = 0’ monetary outlay and then you will get, hopefully, a series of cashflows in the future – and, depending on the discount rate you apply to those cashflows, you can calculate whether the project is profitable enough to meet your weighted average cost of capital and so on and so on and so on.

You can do the exact same thing with energy. And we have argued that, in reality, energy is the real currency and that currencies are just constructs that overlay our energy transactions in the hopes of making them more efficient and, in some ways, more equitable. So, instead of thinking of financing a project with fiat currency, think of financing an energy project with joules – or pick your favourite measurement of energy. So the amount of energy you have to invest upfront needs to be paid and then, much like with a financial project cashflow, the energy payback matters a lot.

Let’s take nuclear, for example – the amount of energy it takes to create a nuclear power plant gets paid back in six weeks. And so the amount of energy you have to spend to increase the share of nuclear on your grid is relatively small compared to this steady stream of really reliable, long-term energy flow back to humans, who can then use this energy to spread increased standard of living around. Similarly, with drilling for natural gas – once you have drilled it, all this abundance of excess energy comes at you pretty quickly and, depending on the decline-rates of the fields, the total energy return is pretty substantial. But, of course, that comes with the penalty of CO2 emissions and, if we have decided as a society we want to minimise those, then we have to take that into account.

But just from a pure energy perspective, these things matter – and then, if you go to things like solar, there is debate about the energy payback period. You know – do you have storage with it? Are you truly accounting for all the disruptions in the grid? But let’s just imagine ... I’ll be generous and say the payback period for solar is a year – well, if you want to install 5% of your grid, you have to take 5% of your energy in any particular year to do that. And that is a huge energy pull.

So those are just concepts you can measure that allow you to consider how viable it is that we could quote-unquote ‘replace’ a substantial portion of our fossil-fuel primary energy with alternative means. And there are certainly ways to do it – we believe they would necessarily involve a massive renaissance in nuclear power – but once you have that framework, then you could get down to the question of measuring and debating what the flows are at t = 0. How much energy are you truly getting back? You know, what is the capacity factor of the installed energy plant you are putting in there and how often does it run?

That is what ‘capacity factor’ means – like, your nameplate capacity versus how much energy it actually produces can be two very different things, depending on the technology. So, for example, nuclear is in the 90s and solar is around 25%. So, once you get all of the honest numbers in, then you can have a legitimate and fair assessment of the suite of technology options available to us – if we decide we would like to have a decent standard of living for everybody with minimal CO2 emissions. And then again, as I said earlier, many of these numbers become hyperpolitical and it is disappointing, but not uncommon, for scientists to literally make stuff up to meet an agenda they have. It is not quite as straightforward as I describe it but it is a useful framework for considering our energy strategy on a go-forward basis for society.

A nuanced take on wind and solar

JTR: So, given what you have just explained, what would be the payback for something like solar?

D: Again, it depends on many assumptions. The estimates range from one to four years – and it makes sense because the production of polysilicon is incredibly energy-intense. You know, sand is a thermodynamic sink and, if you start with sand and you create pure solar-grade polysilicon, you are putting in an enormous amount of energy upfront to do that. So then, the time it takes for you to produce enough electricity to have justified that initial energy investment –  depending on the set-up and depending on where you are in the world and depending on how cloudy it is and depending on whether you have battery storage with your system and so on and so on and so on – ranges from anywhere between one to four years.

But again, the assumptions that go into those calculations are hyperpolitical – you would have some people who don’t want solar, exaggerating the payback period time; and some people who really want a lot of solar, perhaps minimising the energy payback period of time – and you have to be mindful that everybody has their biases and scientists are no more immune from such biases than anybody else in society.

JTR: OK – so what about wind? What would be wind’s payback?

D: Again, you can find all of these numbers – the National Renewable Energy Laboratory in the US puts out various estimates of various technologies – and, again, it depends where you are putting your wind turbine and how long the blade is and how efficient the motor is that is capturing the energy up in that little box there at the centre of all of those blades. How much downtime is there? You know, do you have to stop the wind turbine to clean up all the dead birds on the ground? I mean, there are a thousand different calculations that you have to consider – and those are hyperpolitical numbers. But all energy payback periods are much, much longer than the payback period of nuclear power, for example.

AL: Just to dig a bit more into the ‘physics versus platitudes’ line in the context of the consensual renewable technologies – with something like solar, say, could you talk about some of the aspects of physics and science that are being conveniently overlooked in people’s discussions of that?

D: Yeah. We have perhaps been misconstrued as overly negative on solar. We are realistic about solar – in fact, we are big fans of solar for the following reason: the Earth is not a closed system and the amount of energy the earth is bombarded with every day from the sun is enormous. And we believe we should always be investing in the development of solar technology – both research and development and tinkering around with it and installing it and seeing how it works and how we could improve it. And are there innovative ways to convert its intermittency into a source of energy that has more characteristics of a baseload power?

So we do believe there needs to be a place in the collective energy strategy for solar – much more so than wind, for example. Our main issues with solar – and we have pretty deep experience in the industry – is we have allowed the Chinese to take over the production of solar and trick people into thinking the recent decrease in price for polysilicon, for example, flows from some ‘S’ curve of innovation. When, in reality – I think it is pretty conclusive and we have lived it, so this is experience we have first-hand – the Chinese essentially leveraged ... let’s call it forced labour or cheap labour and dirty coal to flood the world with artificially cheap solar panels and took over the most valuable aspects of that supply chain.

So now you have 90%-plus of all the polysilicon in the world made in regions of the world that the US government and the EU believe exploit slave labour and we are riding on the backs of that nefarious behaviour on the part of the Chinese Communist Party to make ourselves feel good about installing solar in the West. So, I mean, this is stuff we let them do – and they stole intellectual property from Western companies – and it became uneconomic for those in the West to compete with the Chinese, who were not playing by the rules. They have done the same in many of the critical industries in the renewable sector but solar is a particularly glaring one that we lived through first-hand two decades ago.

AL: Wind was going to be the next area I came on to – and you alluded to some of your thoughts on it just there – but, again,what do you see as the physical constraints or other problems with wind most people are not considering?

D: Yeah – the challenges are pretty well-known. You use an enormous amount of steel, for example, in the production of the giant pillars that hold these turbines. Another big challenge is the lack of recyclability of the epoxy thermoset materials that go into the production of the blades. And, if the turbines are onshore, wind has enormous land-use and there are classic stories of clear-cutting of forests in Germany to install evermore wind turbines. So, again, these are all trade-offs, of course.

One of the challenges we have in the ‘ESG platitude’ game is certain technologies are just pre-emptively and forever labelled as quote-unquote ‘green’ and there shall be no argument against them – regardless of the deficiencies, economic challenges, grift and corruption that may flood those sub-sectors. And as long as we are unwilling to have an open and honest debate about the true trade-offs of our energy sources, we will end up with a massive misallocation of capital, a destabilised grid, expensive energy and unhappy populations.

And we have long argued with our friends who are passionate about ESG that the path function matters – if you get it wrong, you might not get another chance, politically, to get it right. And one of our concerns is that we will see a massive rightward tilt in the German population, for example, as they confront the winter of 2022/23, with year-ahead electricity prices at €650 per megawatt/hour – a price that was unthinkable two years ago. And so, if you get this wrong, you risk forever missing out on the chance to get it right – and that is a real thing you cannot just wish away with platitudes.

AL: You mentioned there recyclability with regard to wind. An issue that has come up in some of our discussions with other people is the recyclability of solar and the lack of a plan, basically, for what to do even with the current installed cells – have you seen anything sensible written on that?

D: Again, this is an example of where – because solar is a priori ‘good’ – we don’t even have the time to stop and think or ask such questions, whereas we spend reams and reams of paper writing about the deadly nature of nuclear waste, for example, to prevent the propagation of nuclear technology. And if you put those two ‘problems’, quote unquote, on a scale, the lack of recyclability of polysilicon is a far greater challenge to the environment than our ability to safely handle and store the de minimis amount of nuclear waste that is produced relative to the massive improvable benefits of carbon-free power produced at nuclear facilities.

As we have argued in one of our pieces, if you think nuclear waste is a problem, you are either a victim of propaganda or a knowing architect of it because it is just not the problem – compared to the trade-offs for every single other energy source, nuclear waste is a non-issue. And we only observe the fact you are not even allowed to comment on it without being labelled a ‘climate denier’ – such is the current situation in our discourse – but we don’t believe that is a situation that can persist because, again, physics won’t be denied. And if the people are starved of enough energy, they will revolt – you know, on the path from abundance to starvation is riot. The people will riot and we are about to put that hypothesis to the test here in Europe, I’m afraid, this winter

Geothermal and a rainbow of hydrogens

AL: You have also written on geothermal, which is one renewable source of energy that does not get much attention – it tends to be crowded out by solar and wind. What other sources of renewable energy – be it geothermal or anything else that tends to get overlooked – do you think the world should be seriously thinking about investing more in?

D: We wrote about geothermal because it is an example of a technology where developments in a seemingly unrelated field could have a rapid and measurable impact on society that may be difficult to predict – and we love such thought experiments. And I believe in that piece you reference – and if we didn’t we should have – we probably opened it with a history of just how fast the shale revolution and horizontal drilling and fracking moved and how much energy that developed.

You know, for a long time in the US – and this is difficult for people to conceptualise now – but the whole concept of ‘peak oil’ and Hubbert’s Peak Oil theory was dogma among our political and military leaders. We were convinced the US would never produce as much oil as it had done in the 1970s when it peaked – and that belief fed our geopolitical strategy for decades. You know – many, many wars just coincidentally happened to be near where pipelines needed to be built or where oilfields could be secured and there was all kinds of propaganda painted around the ‘true’ reason why we engage in such destructive wars.

If you are the US and you believe you have peaked in your domestic supplies of energy, then that strategy may even be sensible. But the breakthrough in horizontal drilling and fracking changed all of that and the US suddenly became an energy superpower again – the largest producer of oil and gas in the world. And we are now the largest exporter of natural gas via LNG and we are once again able to flex our geopolitical power – as evidenced by the reshaping of the geopolitical chessboard in Europe, Russia and the US.

So we are always on the lookout for – if a breakthrough happens over here, what could that mean over there? And one such area that caught our interest is geothermal, which essentially is just a drilling problem. If you can easily and economically drill holes deep enough and then pass fluid through it, you can extract heat from the earth’s core. There is effectively a limitless supply of it and, presumably, with enough smart engineering design, you could extract carbon-free energy from it. So that is an example of where, having researched it – and now, on a going forward basis – if we see a headline about a breakthrough in drilling technology, we would quickly cross from there to, hey, this could enable geothermal power and what does that mean for competing energy technologies and so on.

So that is a fun type of piece we like to write about with Doomberg and that was our interest there. And there are all kinds of other renewable technologies – you know, as we speak, we are set to publish a piece around the hydrogen economy. What aspects do we think are interesting? And what aspects do we think are hyped? And what would we do if we were in charge and we were given a magic wand and so on? Those are the types of things we like to discuss – we like to do them in the physics-first approach and explain to our readership why it is we take the positions we do.

JTR: That’s a great segue into something we have talked about with other guests – the misconceptions that exist in the energy markets. You’ve already touched on the average cost of solar technology coming down and now you mention hydrogen. Is that scalable and a solution for the future?

D: As we describe in the piece we are publishing, The Hitchhiker’s Guide to Hydrogen, the first thing most people get wrong – even some who should know better – is hydrogen is not a source of energy. It is a carrier of energy – and not a particularly good one at that. Hydrogen the molecule – H2 – is incredibly reactive with air, and it produces water and releases energy, which is why it does not persist in nature. You cannot go drilling for hydrogen and, quote unquote, ‘produce’ it in the same way you might drill for natural gas.

While natural gas can be burned – you know, methane is relatively stable and can accumulate underground and you could drill for it – hydrogen, on the other hand, must be made and handled under controlled conditions. And, as a general rule – when you add up all of the energy losses in going from water to hydrogen and back to water again – you have to put in two times as much energy as you could hope to get useful work out of on the back end. Those energy losses come both in the splitting of water and then the efficiency with which you can extract useful work from the recombination of hydrogen and oxygen to make water again.

So hydrogen is an energy carrier, not a source of energy, and so if you are going to have a world where you are taking advantage of the characteristics of hydrogen as a carrier of energy, you must begin the discussion with asking, what is the primary source of energy you are using to produce the hydrogen in the first place? This is well-known by people in the hydrogen industry but, if you are going to use natural gas in a steam reformer to make hydrogen and you are going to emit CO2 out the back end, well, that’s not a particularly good use of natural gas, because you are wasting half of the energy in it just to do that cycle.

But there are alternative ways to make hydrogen and the industry has this kind of ridiculous colour-coding scheme. ‘Green’ hydrogen is when you make hydrogen using electricity from renewables that powers an electrolyser. ‘Blue’ hydrogen is when you use natural gas to make hydrogen but you capture the carbon emissions on the back end and sequester them. ‘Grey’ hydrogen is when you use natural gas but you don’t capture the CO2. ‘Brown’ and ‘black’ hydrogen are when you use coal and then there are all kinds of other variants like ‘turquoise’ and ‘white’ and ‘pink’, which is when you use nuclear to do it. Because heaven forbid we ever label anything to do with nuclear as ‘green’ even though it is the smartest way to make hydrogen! So ‘pink’ hydrogen is the hydrogen that is derived from nuclear power.

So it is very important people understand a priori – back to our energy flows – that hydrogen is just a carrier of energy, it is not source of energy and it must be made. It doesn’t just appear – it can’t be drilled for – and the manner in which you make it and the efficiency with which you do so dictates the sensibility of using it in the economy. If energy were free, hydrogen would be a great way to utilise our free energy – but, you know, energy is not free. And so we conclude the piece by saying, in a world of excess energy, and excess cheap energy, importantly, and energy that has minimal carbon footprint, the use of hydrogen as a carrier could make sense in certain important applications. None of those three conditions exist today.

Energy is expensive, it is not in good supply and it is derived predominantly from fossil fuels. Now, that doesn’t mean we shouldn’t be researching hydrogen because, as we say in the piece, in a utopian world, where we have a renaissance of nuclear power, using nuclear to spin electrolysers to create hydrogen to burn in hydrogen combustion engines would make a lot of sense ... potentially. You can circumvent the need for lots of mining, if you had an economy that you designed in that way – for example, if you are going to use it for a fuel cell, you have to get all the palladium and the precious metals in the fuel cell itself.

And so there are some challenges there – it is a redesign of the vehicle fleet. Whereas hydrogen combustion engines, while less efficient than fuel cells, look a lot like internal combustion engines and we know how to make those at scale. Certainly burning the hydrogen gives you water out the tailpipe – just like using a fuel cell does. So we go into all of those different scenarios in the piece, we try to explain the pros and cons and we conclude with a nuanced perspective on hydrogen. It is certainly an interesting energy carrier that does give you the benefit of closed-loop, carbon-free energy – if you have enough primary energy that you can create it using carbon-free sources, such as nuclear power.

JTR: Given all that, how far away are we from being able to use hydrogen as a carrier in a useful way?

D: We could do it today but, then, how much energy would you be taking from other, life-critical ambitions we have as a society? Like, for example, there is no technical invention required to build a fleet of small modular nuclear reactors that power a distributive army of electrolysers – think of them as ‘future gas stations’ and pulling up in a car, filling up your carbon-fibre reinforced gas-storage tank, getting up to 500 or 600 or 700 bars of hydrogen pressure and then burning that to move your car around with a range of 350 or 400 miles. All those technologies exist today – they require no special inventions – but they require some money and a lot of political will, which is unfortunately in very short supply.

Nuclear options

JTR: It doesn’t matter who we talk to, it seems everything comes back to nuclear – and I know Andrew is very much looking forward to asking you about that. Before we get there, though, I want to ask you – in this war between narrative and reality and some of the fallacies feeding the narrative, what is your view on the transition to a 100% electric vehicle [EV] fleet?

D: We would argue – and have argued – that there is insufficient battery materials and copper to convert a measurable portion of our fleet to electric vehicles. And if battery materials are a constraints, then we should manage to those constraints. Now, I do believe excellent engineered plug-in hybrid platforms do exist that abate 70%, 80%, 90% of the total amount of fossil fuels used, with far less drain on battery materials.

I’ll give you an example – if you take this grotesque GM Hummer EV and you took the battery pack out of that, you could make a dozen plug-in hybrid EVs, where the owners of those plug-in hybrid EVs could abate the vast majority of their fossil fuel usage while still having an internal combustion engine as back-up, so they don’t have to worry about ‘range anxiety’. But if you drive less than 40 miles a day, you can get 40 miles a day of range on a 20 kilowatt/hour battery pack. Even better, the Toyota Prius uses a four kilowatt/hour pack, if I am not mistaken and it gets 40 to 50 miles per gallon on average, just regular driving. In fact, they do better in the city than the highway because there is more chance to capture regenerative braking losses.

So if we have a finite amount of battery materials, and we are simultaneously demanding we change our fleet to electric vehicles, while protesting the siting and permitting of new mines, we are going hit the hard wall of physics – there just is not enough nickel and cobalt and lithium and copper wire to transform our fleet in the way the electric vehicle proponents would like. They are not managing to constraints properly and we will see – inevitably – the price of these battery materials skyrocket. Nickel went crazy this year – you know, one of the biggest nickel producers was ‘short squeezed’ and the price of nickel quadrupled over a period of a couple of days. These are all things that happen when inelastic materials have more demand than they can supply.

It is impossible to convert a meaningful portion of our automotive fleet into electric vehicles, given the existing and anticipated supply of the critical materials needed to make the batteries that would go in those cars. That is just undeniable. Just look at copper – you know, with all of the social upheaval in South America ... one of the West’s problems is we have outsourced the ‘dirty’ parts of the economy to other parts of the world because of nimbyism. So good luck getting a new mine sited and permitted in the US or even Canada.

The world’s largest producers of copper, for example, are in Africa and South America and they might have less stringent environmental standards than we do, but they still have societal problems and inflation that we are exporting is disrupting those societies – so we think a second and third-order impact of inflation is that we are going to choke off supply of these critical materials. Conceptually, if you had unlimited free energy, the efficiency of sending electricity over wires and charging a battery is very high – much higher than, for example, a hydrogen combustion engine with all the losses we described earlier – but you are going to run into the constraint of battery materials, which need to be mined, and those mines don’t exist. The inelasticity of demand for those materials is high and so we expect those prices to sky-rocket and to make it uneconomic.

AL: Going back to nuclear – if we put some of the more irrational ‘fear factor’ issues to one side, I guess the pushbacks we hear from a more practical standpoint would be the large upfront cost of nuclear power plants and the time taken to build them. Certainly in the UK and other parts of Europe – even if these projects get approved – they take a very, very long time to build and they cost a lot of money. So what would you say to those arguments against nuclear as an option?

D: Two examples on that. I would say, first of all, at the highest level, many of the costs and most of the delays come down to pure politics. And when there is political will, there is a way – for example, I saw an excellent chart on Twitter today where the average time to build all of the Japanese nuclear reactors was less than four years per reactor. So 3.8 years, I think, was the average time it took to build those out.

And the other one, which we have written about recently is the almost miraculous decarbonisation of the electricity grid in Ontario, where they just decided – because of smog and other air pollution – that they were not going to use coal to make electricity anymore. And, over a period of a decade, they managed to completely eliminate the use of coal. Some 90% of electricity on the grid in Ontario comes from either nuclear, which is the balance of it, and then also hydro and then some wind – less than 10% comes from the burning of natural gas and oil. So you have a developed economy, with good standards of living, that completely decarbonised its grid – and they are doing just fine, thank you very much.

Now, they are dealing with the fall-out of trying to shut down their nuclear power plants and replace them with intermittent sources, such as wind and solar. Luckily, their foray into copycatting what Germany has done was ended at the voting booth – the Liberal Party of Ontario was completely wiped out in the 2018 election, in large part because of the scandal around a terrible implementation of an ESG policy. But Ontario stands as proof that, with sufficient political will, the grid can be decarbonised.

Now, the rest of its energy needs are a separate story – but the electricity grid of Ontario was decarbonised by a proactive refurbishment and improvement of its nuclear fleet and a political will to eliminate the burning of coal to produce electricity. We would applaud that and I think it works. Again, these are just political constraints and our view is, if you suffer enough pain, you will find the political will. We’ll see – how long will it take the UK to bring online the new reactors that Boris Johnson initially promised before he resigned? It will be an interesting case study. There is no shortage of reasons for people to point to why nuclear, quote unquote, ‘won’t work’ – we find none of them particularly compelling.

AL: Could you just talk us through some of the advantages of the newer, smaller modular reactors you mentioned earlier?

D: Sure. We wrote a piece recently about NuScale, which is a publicly-traded company in the US that had an important milestone of having one of its designs approved by the NRC [Nuclear Regulatory Commission], which is a rare thing – it is only the seventh such design to have ever been approved. And ultimately, after eight decades of development, I would say the industry has radically improved what was already an incredibly safe profile. You know, the political demands of, essentially, zero-risk – which are sort of unfair to apply to the nuclear industry – those demands have effectively been met.

In fact, we make the point in the piece that NuScale’s technology is rather pedestrian in the sense that it is undifferentiated and there are dozens of nuclear designs that could be ‘walk-away safe’ – where it would be effectively impossible to have a meltdown of consequence that would release radioactivity into the environment. And we start the piece by telling the story of the small nuclear fleet that powers the US military’s submarines and aircraft carriers – you know, these things have been operating for 75 years without incident. A perfect safety record – you know, we know how to do this. It is doable – it is just political will.

The real issue in the US is we just don’t know how to build projects of that type anymore. But if we decided we wanted to, it could happen pretty quickly. And I would point to the Chinese who are in the process of building some 150 nuclear reactors – do as the Chinese are doing, not as they’re saying. They are selling us solar panels and epoxy plates, while burning coal and building nuclear. They are going for baseload power and they are exporting intermittency to us. And if we are going to be foolish enough to do it, shame on us – but they are going to gain the competitive advantage over us, if we just sit here and do nothing,

AL: Would incorporating those into a grid involve a series of larger nuclear power stations infilled with smaller ones? How would greater adoption of that technology fit within the broader context of the grid?

D: The management of a grid is an incredibly complex technical and political challenge with a lot of economics mixed in, as you know – but, as a general rule, the more baseload power you have, the better. The management of the peaks and the valleys can be challenging – this is where it is useful having peaking plants and something to do with the excess electricity when demand drops. But all of those things get better with a higher percentage of baseload – as Ontario has proven. It is a very stable grid and relatively cheap and the only thing that made it expensive was the disastrous roll-out on solar and, in the absence of forced intermittency, grid operators have much more flexibility to do their jobs, which is to provide continuous and reliable cheap energy to the population so they can live a good standard of living and grow the economy.

JTR: Few people seem to mention how nuclear energy’s raw material is not easily accessible and mostly in the hands of developed countries. Is this only a solution for the developed economies – leaving behind emerging market ones – and how do you think about nuclear in the context of world power?

D: There are certainly some military geopolitical challenges to the proliferation of civilian nuclear power and the temptation to convert your societal knowledge of civilian nuclear power into military applications. I would counter one of the assumptions embedded in your question, though, which is people point to nuclear fuel and the difficulty of refining as a constraint when, in reality, the cost of fuel is almost irrelevant to the cost of operating a nuclear power plant – you know, the price of uranium could go up fivefold from here and operators of nuclear power plants wouldn’t bat an eyelid. It is just such a tiny part of the cost of operating a nuclear power plant that it’s almost irrelevant. Whereas for things like natural gas turbines that produce electricity, the cost of natural gas is the single most dominant input parameter that matters. So that is a big advantage for nuclear, relative to other sources of primary energy.

But in a scenario where we have a hydrogen economy, you can imagine shipping that energy in various forms to the developed world from the countries that are capable of building their own nuclear power. Every tonne of coal China doesn’t use once its nuclear fleet is up-and-running is a cheaper tonne of coal a developing economy could use. You might not like that idea but, ultimately, we live in a global economy. If the Chinese go nuclear, then they have a really cost-advantaged manufacturing sector and the exports of those goods become cheaper and more accessible to the rest of the world. You know, as long as you have primary energy abundance, lots of good things happen. And if you have primary energy shortage, then all of the challenges = we see now – inflation, famine and social upheaval – undoubtedly and always follow.

JTR: I was thinking more about access to the raw materials – not so much in terms of cost but finding uranium and then how easy it is to buy it or move it around. I’m not an expert but I believe the largest mines are in Kazakhstan and then in countries in Africa – and then, as you referenced, because of the military aspect, it’s not like you can buy uranium the same way you can buy copper or nickel.

D: A couple of corrections – there are significant uranium deposits in Australia and also in Canada – but you are correct in that Kazakhstan is also currently home of the largest producer. Still, my point earlier is not one that should be missed – to the extent that the Western world produces sufficient nuclear power to tip the global economy into a period of excess primary energy, then everyone in the globe benefits from that. So the rest of the world need not make nuclear power, at the margin, for them – at least on a second-order basis – to receive substantial benefit from a nuclear renaissance in the West.

Right now, since we have a primary energy shortage, they are the first and most violent victims of our exportation of inflation – because that arises from a shortage of primary power. If the US and Canada and Europe and Australia and Korea and Japan had an abundance of primary energy because they had relied on the most physically sensible – that is, sensible from a physics perspective – nuclear power as an anchor to their strategy, the developing world would also be enjoying the dividends of that strategy, as opposed to suffering the consequences of doing the reverse, which is clearly what is going on right now.

Humanity’s vital materials

JTR: That’s very interesting. My next question is inspired by How the World Really Works: A Scientist’s Guide to Our Past, Present and Future by Vaclav Smil. In it, Smil highlights how there are four materials on which humanity is highly dependent and which subsequently depend on fossil fuels. Number one is cement; number two is steel, which you pointed out is a key component material of wind turbines; number three is ammonia; and number four is plastics. Is there any way to transition any of that quartet away from fossil fuels? And what are the medium term consequences of doing so?

D: Of the four, the easiest one to do is ammonia – without question. Ammonia today is synthesised via the Haber process, where you basically react hydrogen with nitrogen from the air and you make NH3 or ammonia out the back end. Today, the hydrogen that goes into the ammonia process is synthesised using predominantly natural gas – but it would take very little technical challenge to synthesise that hydrogen using a small nuclear power plant and an electrolyser, like we talked about with the hydrogen economy. So there is no question in my mind that, with political will and sufficient funding, we could essentially make ammonia carbon-free – feed the world using nuclear power, effectively.

With the other ones, it is more difficult to imagine how a transition would work. I suppose you could run the grinding mills at a cement factory using electricity derived from nuclear but you still have to grind the materials and you still have to cook it in the kiln. And many people do not truly understand plastics – plastics are basically a highly economic utilisation of the waste products of oil and gas refining. So the chemical industry arose as a necessary outlet for roughly 7% to 8% of the components of a barrel of oil or, in the case of natural gas, the couple of percent of natural gas liquids that are a bit of a pest in natural gas development.

So the two primary products that feed ‘crackers’, which are these giant chemical plants that produce ethylene and propylene – two of the key fundamental components of the entire world – are naphtha from oil-refining and natural gas liquids from the production of natural gas. If the chemical sector had free energy, then you could make the chemicals we need from CO2 – but we don’t have free energy. We make the plastics we use today, in large part, because they are sort of by-product economics and the advantages of having to do something with those carbon atoms – you know, in the same way all of the roads are paved with asphalt because it is the still bottoms of oil-refining and it needs to go somewhere.

So the carbon-based nature of our economy is oriented around getting as much as you possibly can out of every oil barrel – because just the volume of oil that is used means any small by-product builds up and would become unmanageable very quickly. Engineering around the extraction of utility out of a barrel of oil is stunning and staggering and terribly underappreciated in modern society but, you know, there is hardly an atom in a barrel of oil that goes to waste.

JTR: That’s interesting. And what, in your opinion, would be the secondary consequences of damaging the flow of any of these materials?

D: Again, it is just a matter of cost. In the hands of a chemist – and with an unlimited budget – we can make anything we need. Again, plastics are a luxury of the by-product economics of the fact that the chemical industry leverages unwanted by-products of the barrel of oil or the natural gas liquids from the field. And so we have become accustomed to the relative cheapness of such materials – but, in the absence of our ability to use fossil fuels to derive them, the cost will go up.

Literally, I could start with, you know, corn ethanol or sugarcane ethanol in Brazil and I could make ethylene which I can then polymerise into polyethylene, which then I could use to make milk jugs or garbage bags or wires that wrap around copper in our transmission cables – pick your favourite. These are all things chemists could do – it is just a matter of cost. And the reason why we don’t use ethanol today to make ethylene to make polyethylene to make all those things is, one, because, those things are probably better used as foodstuffs.

And two, it just can’t compete with an ethylene cracker that makes billions of pounds a year of this stuff on a massive scale with huge economies of scale – economic advantages over an otherwise low-energy-density field full of corn in the heartland of America. So here energy density rules – and that’s why we make plastics in the way we do. In theory, there is nothing stopping us from making plastics via other means – it is just economics right now that dictates the pathways we have chosen.

War and pieces

JTR: That is very powerful. In your latest piece, Small Biggies, you wrote: “War is nothing more than the concentrated conveyance of destructive energy.” We cannot pass up this opportunity to ask you about energy markets in the context of the current conflict in Europe and its geopolitical impact in the future, given some of the choices China might be following.

D: Yeah. When you think about what war is, you know, you store a massive amount of energy in a bomb and then you would like to place that bomb with precision inside your enemy’s camp and then release all of that energy all at once in a way that destroys things. So the history of warfare – and people like Daniel Yergin have written fantastic books that ‘recast history’ through the lens of energy wars – you know, World War Two was started in part in the Pacific because the US cut off Japan from oil and Japan felt like it needed to do something about that. And the US was able to become the ‘arsenal of democracy’, so to speak, because it had, effectively limitless supplies of oil and, since no bombs ever made it to the US shores, they could produce that energy unfettered by the inconveniences of war.

With respect to what’s going on in Europe today, we have argued that, by handing over Western Europe’s energy cards to Putin, in many ways we enabled him and we emboldened him – and he never imagined in a million years the Western Europeans would try to sanction his energy because what is their alternative? And as we are finding out as we head into the winter, there are no alternatives. You are talking about, you know, people showering once a week and turning down the dials and suffering their way through the winter and you’re seeing the value-added manufacturing economy of Germany literally collapse before our eyes because of a lack of primary energy on the front end.

You cannot make chemicals in Germany anymore. We wrote a piece a couple of months ago called Moribund Verbund that noted how BASF’s site at Ludwigshafen is in jeopardy. The entire manufacturing business model of Germany was oriented around cheap natural gas from Russia – and that assumption now no longer persists. So we are strong believers that, if Europe had not handed over its energy cards to Putin, he would not have been so emboldened as to invade a sovereign country, even though it is on his border and he might think it is part of, you know, historical Russia.

We are not into the politics of it but it is just very clear that Putin has a lot of leverage over the West and he is willing to use it – and our view is we should not give such leverage to people who don’t like us. We should be smart about our own energy and independent and rely on ourselves for the things we need. That is a critical mistake in this context and we shall see how it unfolds. We have characterised the resolution of the German energy crisis ahead of the 2022/23 winter as the single greatest geopolitical event unfolding before our eyes right now. How that manifests itself in a resolution is going to be both historic and extremely consequential.

JTR: Do you see any way for Germany to escape this situation over the next four months?

D: Absent a political revolution and a dangerous rightward tilt, or peace with Putin, it is difficult to find a path out for Germany, given the facts we see today. You could imagine a scenario where a peace is negotiated and Nord Stream 2 is turned on and the full atomic flow of molecules of methane crosses the border into Germany – that would alleviate a lot of it. They could be smart and not shut down their three existing nuclear power plants – and they could be even smarter by restarting the three they just shut down at the end of 2021. But the German population has not yet suffered enough pain for such sensibilities to make their way into the political leadership – and so unfortunately for our many friends and followers and subscribers who live in Germany, we believe there is a lot of pain ahead.

JTR: This is a very ignorant question from my side – I’m sure Andrew knows the answer – but how easy is it to bring a nuclear plant back online once you have shut it down?

D: In the pantheon of challenges facing Germany today, I would argue it is deceptively simple to do compared with all the alternatives.

JTR: Doomberg, we are coming to the end of our session and, while we tend not to ask our mini-ESG series’ guests the signature questions we ask our other guests, we suspect you have some great recommendations for what our listeners might like to read. Is there anything that comes to mind?

D: I think the book you mentioned earlier, How the World Really Works by Vaclav Smil, is a really good one. But I would actually recommend a prior book of his that was really transformative to us, called Energy and Civilisation. It is a classic sort of a bible of solid physics and an understanding of how humanity and our societies have evolved in the context of the efficient harnessing and use of primary energy to do work. It is a really powerful book – one I have read at least twice and would wholeheartedly recommend to your listeners.

JTR: For anyone wanting to reach out to you or sign up to your Substack, where would they find you?

D: I appreciate the opportunity to give our commercial – we write at and we are 100% subscriber-supported. We take no advertising or sponsorships – all of our revenue is derived from our readers – and we have priced our products competitively. We also can be found on Twitter at DoombergT – somebody, unfortunately, was squatting on the ‘Doomberg’ handle, but such is life in the modern era. We are active on Twitter as well – we view Twitter as sort of our free offering, where we publish smaller tidbits of analysis and sometimes we do longer threads. And we do respond to DMs – polite DMs, of course, we don’t respond to all of them because many are trolls – and to emails as well.

But the primary way the Doomberg team subsists is through the support of our subscribers, which thankfully is all organic. We are not reliant upon big-money sponsors and other advertisers, which we believe would negatively impact our editorial freedom. So we have been able to attract a critical mass of subscribers to allow us to persist in this project and every subscriber is precious – and, if anybody listening enjoyed this conversation and wants to read more of our work, the best place to go is

JTR: Doomberg, thank you very much for your time. This was a real pleasure.

D: The pleasure was all mine – thank you gentlemen.

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Juan Torres Rodriguez
Fund Manager, Equity Value
Andrew Lyddon
Fund Manager, Equity Value


The Value Perspective
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