Tuesday Night Links

• Even free storage isn't helpful if the cost of energy from the solar arrays is more than natural gas. Lazard's yearly report is the industry benchmark for solar's cost per megawatt-hour. The 2025 edition pegs the best-case US cost at $38/megawatt-hour, equivalent to more than $11/MCF of natural gas. The trading hub price for natural gas has been $3-$4/MCF in 2025 (and many years before that), exposing a significant problem for our thesis. A closer look reveals the issue. The operating cost of a solar farm is very low at $4/megawatt-hour, but the capital cost comes in at $1150/kilowatt in the US, contributing $34/megawatt-hour. Commodity solar panels cost $80/kilowatt globally and $200-$250/kilowatt in the US, meaning there is a lot of waste (and opportunity) in today's solar farm capital cost. The first slash at these costs comes from co-locating the solar array with the storage system. More than $300/kilowatt of cost comes from preparing electricity for export or connecting to the grid. These items include inverters, medium-voltage transformers, switchgear, substations, high-voltage transformers, power lines to the grid, and all the project management overhead to build these systems. [Austin Vernon] 
• The world has arguably been energy-constrained for fifty years, with most economic growth coming in regions with significant coal reserves. Oil has been expensive and a brake on growth. The oil and gas industry has only grown its reserves with high prices. It cannot maintain price stability like in the pre-1973 era. Advancements like shale gas have so far been regional phenomena rather than global forces due to high transportation costs for LNG. The tyranny of oil supply could ease as the manufacturing capacity for solar PV approaches 1 TW/year, with no real constraints to further supply. Deployments at that scale will quickly saturate electric grids and stall solar growth without the development of complementary technologies. The age of solar PV is still young, and it could power humanity’s next leap in living standards. [Austin Vernon] 
• Scale is helpful for most businesses, but refining might be one of the most extreme examples. A typical rule of thumb in chemical engineering is that capital costs increase sublinearly with capacity, usually by (capacity ratio)^0.6. A plant with double the output is only 50% more expensive to build, and operating costs tend to follow similar trends. The reason behind this is that chemical plants and refineries are agglomerations of steel vessels and pipes. Vessel and pipe volume increases faster than surface area as size increases, decreasing steel and fabrication costs per unit of volume. Many items, like controls or operators, cost the same for a large component as they do for a small one. Rapidly expanding refining capacity means crashing costs. [Austin Vernon]
• Conservative intellectuals on Twitter and Substack are constantly sketching out their ideal society: a high-trust community rooted in family (fertility rates are high), self-sufficiency, and continuity with the past. They dream of a life lived closer to the land, with a strong sense of personal responsibility. By almost any of their metrics, the Faroe Islands is the most successful conservative nation on earth. And yet, it is also a profoundly liberal place. It’s cosmopolitan and highly educated. There is a massive social safety net and great equality, a deep belief in the collective over the individual, and a culture where economic aspiration doesn’t dominate life. It is, in many ways, the idyllic left-wing society. The Faroe Islands seems to have achieved the goals of both political tribes simultaneously, without any of the ideological warfare. [Daniel Frank] 
• The Hunt brothers, Herbert and Bunker, had a solid thesis for investing in silver.  Broad trends unfolding over 1960s and 1970s pointed to a high probability of an extreme supply and demand imbalance in silver, which would result in higher prices. Most of the world’s silver is not produced at dedicated silver mines but as a byproduct of mining copper, lead, or zinc mining.  Lower cost surface mines were depleted and had to be replaced with underground deposits that were more expensive to mine.  The sale of US government silver holdings that had been accumulated since 1934 was a temporary source of supply that would eventually be exhausted.  Silver supply could theoretically come from reclamation – melting down coins, silverware, or jewelry – but this would require a high enough price to garner attention of the numerous and disparate holders (one source of illegible silver supply was distributed across India and had to be smuggled out of the country to Dubai before it could enter global markets). [The Magic Bakery]