Feb 6, 2019

Axios Generate

By Ben Geman
Ben GemanAmy Harder

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And happy birthday to the late Bob Marley, who brings us today's intro tune...

1 big thing: Colliding visions at SOTU
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Ok, the State of the Union is always heavy on symbolism and spawns a thousand takes, so I'm just going to lean into it.

Details: Last night's address encapsulated the huge political gulf between the parties on climate change. In general, President Trump ignored global warming and his brief nod to energy celebrated the U.S. oil-and-gas boom. (It also had some factual problems, which we'll get to later).

  • "We have unleashed a revolution in American energy — the United States is now the number one producer of oil and natural gas anywhere in the world. And now, for the first time in 65 years, we are a net exporter of energy," Trump said.
  • He also generically touted regulatory rollbacks. On energy, those have included plans to weaken or nix several Obama-era climate rules.

Where it stands: The speech arrived as progressive Democrats are preparing to unveil a resolution that will put at least a little more meat on the bones of their calls for a sweeping Green New Deal.

  • The GND's prominence among Democrats was on display last night: Sen. Ed Markey, author of the Senate version of the resolution, brought along Sunrise Movement co-founder Varshini Prakash as his guest.
  • The youth-led group has been at the forefront of the movement, which is being led in the House by Rep. Alexandria Ocasio-Cortez (AOC).

Between the lines: There's not much, if any, middle ground here, which is another way of saying that last night showed why the 2020 elections will be so consequential.

  • If Trump wins re-election, basically none of the GND's animating ideas — policies to speed a rapid transition away from fossil fuels and massive federal investments in emissions-cutting — are in the offing.
  • Democrats would also need to regain the Senate to move anything really big, and even then a slim majority would present big hurdles absent changes in the GOP's posture.
2. Fact-checking Trump on energy

Trump's claim that the U.S. is now a net energy exporter gets a "close, but no cigar" award.

Where it stands: The country was a net exporter of crude oil and petroleum products combined for a very brief period late last year, federal data shows.

  • But according to the Energy Information Administration, the U.S. won't become a net exporter on an ongoing basis until some time in 2020.

Go deeper:

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Trump also appeared to take credit for the emergence of the U.S. as an oil-and-gas behemoth when he noted that the country is the world's biggest producer of oil and natural gas.

  • Both of those things are true. The U.S. moved past Russia and Saudi Arabia to become the world's biggest crude producer last year, per EIA, and output has only grown since.

But, but, but: The U.S. became the world's largest gas producer in 2009 (h/t to Bloomberg's Jennifer Dlouhy for pointing that out).

  • More broadly, the U.S. oil-and-gas boom was set in motion over a decade ago as energy companies, using advances in fracking and horizontal drilling, began boosting production from shale formations.
  • It has little to do with Trump, although the industry has generally supported his moves to pare back regulations. (It also didn't have much to do with Obama either.)
3. A bit more on the Green New Deal

Yesterday Bloomberg reported on a draft copy of the resolution that AOC and Markey are preparing.

The intrigue: One wrinkle is that it doesn't call for a transition to 100% renewable electricity specifically (a goal in a prior template AOC had floated), but instead cites “clean, renewable and zero emission energy sources."

Why it matters: "The omission of a specific ban on fossil fuels is a nod to moderates who feared it was unfeasible and seen as too extreme and was a nod to labor unions who had concerns with the language," Bloomberg writes.

What they're saying: AOC's chief of staff, Saikat Chakrabarti, yesterday responded via Twitter to the reports. He didn't deny them but sought to add some framing, such as...

"The resolution describes the 10-year plan to transform every sector of our economy to remove [greenhouse gases] and pollution. It says it does this through huge investment in renewables at WW2 scale (which was 40-60% GDP investments)."

Quick take: The 10-year ambition of the whole thing is a political and technological moonshot anyway, to say the least, so these differences aren't hugely important right now.

  • But that said, the development of the wording is a window into the authors' delicate efforts to balance a constellation of interests and viewpoints on the left, and among climate advocates overall.
  • It also touches on a wider debate over the desirability of focusing on renewable power specifically, or embracing a bigger suite of technologies.

Go deeper: Renewables vs. zero-carbon

4. Business notes: Exxon, Nike, Tesla

LNG: Via Reuters, "Qatar Petroleum and Exxon Mobil Corp said on Tuesday they are investing in a $10 billion project to expand a liquefied natural gas (LNG) export plant in Texas, as companies race to meet global demand for the fuel."

Renewables: Per the Financial Times, "Nike has signed its first European clean energy deal with Iberdrola, the Spanish utility, marking the latest in a series of corporate power purchase agreements that have provided a boost to the renewables industry."

Electric vehicles: CNBC reports that Tesla has cut $1,100 from the price of the Model 3. "The second price cut to the Model 3 this year now brings the cost of its least expensive variant to $42,900, according to the company's website," they report.

5. U.S. and China can learn EV charging together
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Adapted from Hove, et. al., "Electric Vehicle Charging in China and the United States", 2019; Chart: Andrew Witherspoon/Axios

Officials in China and the U.S., the world's 2 largest EV markets, could learn from each other about better guiding deployment of charging infrastructure, a new report argues.

Why it matters: The study released via Columbia University's Center on Global Energy Policy arrives as EV sales are rising fast in both countries, albeit from a small base compared to the overall auto market.

  • A suite of actors are involved in financing and siting the charging stations that will be needed to accommodate (and hasten) continued EV adoption.

What they found: Deployment decisions unfold differently in the 2 countries, and the charging industries are growing largely independently of one another.

  • Not surprisingly, China's central government has a much stronger hand than in the U.S. (though China's provincial and local governments are also involved).
  • Power companies play a bigger role in China, while automakers are more involved in the U.S.
  • Chinese government mandates on charger construction are inefficient, they state, with "EV chargers built in inconvenient or inaccessible locations."

The intrigue: The report lays out ways in which the countries could learn from one another. A couple examples are...

  • Chinese policymakers could learn from the U.S. approach, letting the market play more of a role in deciding the locations for public EV charging sites.
  • U.S. power companies, meanwhile, "could learn from China’s investment in real-time data collection on EV charging."
6. WSJ: OPEC wants formal pact with Russia

OPEC is seeking to formalize its market management partnership with Russia and other producers, a proposal slated for discussion later this month in Vienna, the Wall Street Journal reports.

Why it matters: Plans to transform their existing, roughly 2-year-old oil supply management effort into something more durable signals how the U.S. production surge has upended oil markets and geopolitics.

  • Most recently, OPEC, Russia and allied producers agreed in December to jointly curb output by a combined 1.2 million barrels per day for the first 6 months of 2019.

Details: The WSJ, citing an unnamed OPEC official, reports that "under the current draft document, the alliance could last up to three years and wouldn’t be legally binding."

  • OPEC did not respond to a request for comment from Axios.

The intrigue: Proposals to turn the loose partnership often called OPEC+ into a more institutional arrangement have been a moving target for a while. In December, Russian energy chief Alexander Novak said it’s unlikely Russia and OPEC will create a formal, institutional structure.

The big picture: The return of the U.S. to the ranks of global oil behemoths in recent years has prompted OPEC and Russia to cooperate in an effort to bolster prices.

  • As the WSJ notes, the Saudis in particular need prices above $80-per-barrel to balance their budget (right now Brent crude is trading around $62).
  • The U.S. is now the world's largest producer, with output closing in on 12 million barrels per day.

What's next: Per the WSJ, OPEC members and will meet with Russia and other non-OPEC producers to debate the idea in Vienna in 2 weeks, and hope to agree to a final deal in April.

7. Moniz and Yergin on energy innovation

Axios' Amy Harder reports that former Energy Secretary Ernest Moniz and IHS Markit vice chairman Dan Yergin teamed up on new joint report on energy innovation out today.

Why it matters: Innovation is an overused buzzword, but when the groups behind these 2 experts put their collective minds together, it’s worth reading.

  • Moniz was energy secretary under Obama and now leads his own think tank, Energy Futures Initiative. Yergin is a Pulitzer-Prize winning author and leads the energy practice at global firm IHS.

The big picture: The groups issued the report commissioned by Breakthrough Energy Coalition, a diverse group of companies and philanthropists ranging from oil companies to Bill Gates.

  • The report lists 10 types of technologies the private sector and government should prioritize, including storage and battery technologies, advanced nuclear reactors and management of carbon dioxide emissions, including sequestration.
  • The report recommends short and longer term changes to help do that, including more targeted public investment and a more electricity-focused agenda at the Energy Department.
  • “The purpose of the report is to provide a framework and a guide to people who want to invest in clean energy innovation. ... To give them a framework for where to put resources and what needs to work together to get to results, as opposed to just doing science projects,” Yergin tells Axios.

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Ben GemanAmy Harder