Feb 12, 2019

Axios Generate

By Ben Geman
Ben GemanAmy Harder

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D.C. readers: You're invited to Innovating the American Metropolis on Wednesday at 8am ET. Axios' Kim Hart will explore the forces transforming cities nationwide with: Sen. John Thune, Rep. Yvette Clarke, CTA CEO Gary Shapiro, and Chattanooga Mayor Andy Berke. RSVP here

Onto music and happy birthday to the late Ray Manzarek of The Doors. Last weekend also marked 49 years since the release of "Morrison Hotel," so one of those tracks gets us into the news...

1 big thing: Dems' new policy order

Illustration: Sarah Grillo/Axios

Democrats' shift to the left with big ideas like the Green New Deal and Medicare for all, along with the rise of progressives like Rep. Alexandria Ocasio-Cortez (AOC), is changing the balance of power in the party’s unofficial policy establishment, Axios' Sam Baker and I report.

Why it matters: Think tanks, policy analysts and advocacy groups are vitally important — they help shape the party’s policy platforms and channel the base’s enthusiasm.

  • And a new set of players are gaining power in that world just as Democrats seize the reins in the House and wade into a policy-heavy primary for 2020.

What they're saying: “There has been a huge shift in what kinds of policies are considered big enough to meet the scale of our problems,” said Waleed Shahid of the 2-year-old group Justice Democrats.

  • "New, startup think tanks” are “filling the void," he said.

How it works: The universe of new or newly prominent progressive groups includes Data for Progress and New Consensus, who both worked with the Sunrise Movement, a group that's providing a lot of the advocacy muscle behind the GND.

  • The GND is now well on its way into the Democratic mainstream (though it remains vague), thanks largely to the mutually reinforcing combination of outside legwork and AOC’s nearly unrivaled ability to drive the political conversation.
  • Data for Progress cofounder Sean McElwee also helped popularize the hashtag #AbolishICE. This gained steam on the left, then became part of AOC's platform, and then won its first endorsement from a senator — Kirsten Gillibrand — 2 days after AOC won her primary.

Individual experts are also playing a big role as Democrats’ 2020 candidates look beyond the familiar left-of-center policy framework.

  • Multiple Democrats have sought the counsel of economist Stephanie Kelton, a former aide to Sen. Bernie Sanders who has helped popularize Modern Monetary Theory.
  • Kelton is now a prominent voice behind making large investments in climate-friendly energy and infrastructure as part of the GND.
  • A pair of left-leaning economists from UC Berkeley reportedly helped Sen. Elizabeth Warren craft her proposed wealth tax.
  • Economists Sandy Darity and Darrick Hamilton consulted on Sen. Cory Booker's "baby bonds" proposal and Sen. Kamala Harris' middle-class tax cut.

The old guard — which includes Obama-era stalwarts like the Center for American Progress — is by no means dead or irrelevant. But those experts are sometimes reacting to big policy ideas, rather than writing them, as their party shifts to the left.

Medicare for All, for example, was not born out of a traditional marriage between think-tank white papers and political trial balloons.

Go deeper

2. High-speed rail and the Green New Deal
Expand chart
Reproduced from IEA, "The Future of Rail"; Chart: Axios Visuals

One piece of the big climate-friendly spending envisioned in the wide-ranging GND resolution is a buildout of high-speed rail.

Between the lines: Coincidentally, an International Energy Agency report on rail transport released days earlier lays out how far the U.S. has to go.

  • The chart above shows how North America has yet to be part of the global expansion in high-speed rail, which IEA defines as trains with top speeds above roughly 155 mph.

Why it matters: The technology can cut carbon emissions by displacing some aviation and other vehicle trips (though the scope of the benefits depends on several variables).

  • "If optimal conditions are met, a new high-speed rail line can produce almost immediate net CO2 benefits by reducing air and car journeys," the report notes.

What's next: There are some projects planned in the U.S., including a major California high-speed line, with the first phase from San Jose to Bakersfield targeted for opening in the mid-2020s.

  • But in the IEA's "base" scenario, North America will have just 3% of the world's high-speed rail tracks in 2050.

Go deeper:

  • America’s trains are a drag. The Green New Deal wants to fix that. (Vox)
  • Is high-speed rail in the US ever going to happen? (CNET)
3. Google-linked geothermal player raises $16M

Residential geothermal company Dandelion Energy has raised $16 million in series A funding from backers including Google's VC arm and big homebuilding player Lennar Corp., bringing total funding to $23 million.

Why it matters: The New York-based company, which spun out of Alphabet's R&D arm in 2017, said the cash will allow new R&D, the opening of new warehouses, and personnel additions.

Details: Comcast Ventures led the round with GV (once called Google Ventures).

  • Other backers in the new round include NEA, Collaborative Fund, Ground Up, and Zhenfund.
  • Dandelion declined to disclose the size of its current customer base, but a spokesman said they're the largest residential geothermal installer in the state.

The big picture: The company is marketing geothermal heating and cooling to displace electric and fossil fuel-based systems, including propane and fuel oil common in the northeast.

The intrigue: Lennar's role appears to provide Dandelion a chance to expand more quickly.

  • Lennar's Eric Feder said in a statement that they've wanted to include geothermal heating and cooling systems in new homes for years but "the math never made sense."
  • Dandelion is "finally making geothermal affordable" so they're exploring the idea of including it in the homes they build, Feder writes.

Go deeper:

4. What's next for Venezuela

Things could get a lot worse before they get better for Venezuela's oil sector, according to a new analysis from the consultancy Rystad Energy. But needless to say, the political outcome there matters a lot.

What they found: In their "base" case, production falls from 1.34 million barrels per day at the end of 2018 to 1 million this year, then drops further to 890,000 bpd next year.

  • But, but, but: If the standoff there continues and the Maduro regime can't counter the effect of U.S. sanctions and get more money, output could slide by 20% more this year and keep falling next year.
  • In their "high case," where there's regime change that ends sanctions and brings new financing to the country's battered oil sector, the decline is less pronounced, with production falling to 1.11 million bpd this year and slightly further in 2020.

What's next: Even if Maduro is ousted, production will come back only gradually as sanctions are lifted and new financing comes in, Rystad projects.

  • They see output from the country's massive reserves climbing to around 1.54 million bpd in 2025, still well below the 2.44 million bpd at the start of this decade.

The big picture: So far, oil markets haven't been especially rattled by the crisis there, in part because production has been declining for years.

But, but, but: This new commentary from the Center for Strategic and International Studies warns that there could be bumpy times ahead, both for Gulf Coast refiners that rely on Venezuelan heavy crude and the market more broadly.

  • "Gulf Coast refiners are likely to be increasingly short of the heavier grade crudes and scrambling for alternative supplies, especially later this spring as maintenance season ends," author Frank Verrastro writes.
  • He says the Trump administration seems to be counting on a swift resolution to the standoff, and "the protracted loss of substantial heavy oil volumes could also complicate the next round of sanctions and waivers on Iranian oil."

The bottom line: "Add to that Venezuela’s assumption of OPEC’s presidency, planned changes in maritime fuel standards and resurgent calls for climate action, and 2019 has all the earmarks of another year of high volatility," Verrastro adds.

5. What the CO2 capture tax credit does for power

One of the biggest concerns about the use of technology to capture carbon dioxide emissions is that it would displace renewable energy and deepen dependence on fossil fuels, but a new report out today suggests that’s largely unlikely to happen, Axios' Amy Harder reports.

Driving the news: The report by environmental group Clean Air Task Force finds that a federal tax credit that Congress expanded last year for carbon-capture technologies doesn’t displace any electricity from renewable energy while maintaining an impactful reduction of emissions.

The big picture: The technology that captures CO2 from power plant smokestacks and industrial facilities is prohibitively expensive in most cases but considered essential to reducing heat-trapping emissions to the level scientists say is necessary.

  • The Trump administration and Congress have supported its development, despite Washington’s deep divisions over larger climate-change policies.

By the numbers:

  • Nearly 50 million metric tons of carbon dioxide emissions could be captured and stored underground annually by 2030 on U.S. power plants fueled by coal and natural gas, the report found.
  • That’s equivalent to taking 7 million cars off the road.
  • The tax credit encourages 3% of America’s fossil-fuel electricity to use carbon-capture technology — most of that on existing coal plants.
  • It has virtually zero impact on developing electricity from renewable energy.

What’s next: Lead author Deepika Nagabhushan said the credits could help the U.S. power sector get more than two-thirds of the way toward achieving IEA goals for carbon capture and storage deployment. But guidance is needed from the IRS to really encourage more investment, she said.

Go deeper:

6. On my screen: Tesla, solar jobs, nuclear

Electric vehicles: Via CNBC, "Tesla's domination of the electric vehicle market is 'unsustainable' and will soon be disrupted by start-up Rivian, Morgan Stanley analyst Adam Jonas said Monday."

Solar power: Per Reuters, "The number of jobs in the U.S. solar industry dropped by 3.2 percent in 2018, a second year of losses, as the Trump administration’s tariffs on foreign panels and state-level policy changes hit demand for installations, according to an industry report released on Tuesday."

Nuclear policy: S&P Global Platts reports, "Trade groups American Petroleum Institute and Natural Gas Supply Association want the US Supreme Court to grant review of, and overturn lower court rulings that upheld nuclear subsidy programs in New York and Illinois."

7. Quote of the day
“Going forward the world is going to be Saudi Aramco’s playground.”

Who said it: Saudi energy minister Khalid al-Falih in this new Financial Times interview making the rounds on Tuesday morning.

Why it matters: Per the FT, it signals an ambitious plan to have the state oil giant increasingly compete for resources outside the kingdom, where it sits on gigantic reserves.

Here's a little more from their piece (but the whole thing is worth reading)...

  • "While Saudi Aramco is the world’s largest oil producing company, it has never meaningfully ventured overseas to extract resources, relying on its vast domestic reserves. "
  • "When asked if Saudi Arabia plans to become an international energy player like Royal Dutch Shell or Exxon Mobil, pumping oil as well as gas overseas, Mr Falih said: 'Correct.'"
Ben GemanAmy Harder