Feb 14, 2020

Axios Generate

Happy Friday! Today's Smart Brevity count: 1,276 words, 5 minutes.

Quick housekeeping note: Generate will be off next week. But keep an eye on the Axios website for energy and climate coverage. The newsletter returns Feb. 24.

Situational awareness: "Oil prices rose on Friday and held on track for their first weekly gain since early January as investors bet the economic impact of the coronavirus would be short-lived and hoped for further Chinese central bank stimulus to tackle any slowdown." (Reuters)

🎵Tomorrow will mark 40 years since Elvis Costello & The Attractions released "Get Happy!" which provides today's intro tune...

1 big thing: Big Tech's AI for oil controversy

Illustration: AĂŻda Amer/Axios

Big Tech is making splash with its aggressive carbon reduction goals.

But Axios' Orion Rummler reports that some of its employees and climate activists are criticizing Google, Microsoft and Amazon for partnering with fossil fuel companies to use artificial intelligence to find hidden hydrocarbons and bring them to market.

Why it matters: Major oil companies are some of the richest, most resourceful enterprises in the world. They collect multiple terabytes of data daily but don't have the capacity to analyze and efficiently utilize that volume of facts without AI.

The big picture: Critics say the fossil fuel partnerships undercut tech companies' increasingly aggressive climate and clean energy efforts.

  • Big Tech has improved the reach of wind power and made data centers more efficient by training AI to predict how much energy should be used in a given day.
  • Tech companies were again the corporate top buyers of renewable energy in 2019, with Google contracting the most new capacity, per BloombergNEF.

What to watch: Global spending on AI in oil, gas and renewable energy industries is expected to reach $7.79 billion by 2024, per BIS Research.

  • U.S. tech companies are dominating AI in the energy sector. They took in the most net revenue globally in 2018 — roughly $657 million — by selling AI to oil, gas and power industries including renewable energy, BIS told Axios.
  • Tech companies in China netted roughly $180 million for the same thing.

Some ways AI is used for oil and gas:

  • Microsoft cloud computing software helps Chevron analyze drilling data from approximately 40 complex wells.
  • Amazon provides its AI-enabled CloudWatch to GE Oil & Gas and heavily advertises its AWS machine learning as a tool to make oil drilling and production faster, reduce costs and analyze data.
  • Google Cloud has helped Total quickly explore oil and gas fields through AI data analysis since April 2018, a Total spokesperson confirmed to Axios.

Some ways AI is used for renewable energy:

  • Microsoft Azure machine learning has helped energy providers in the U.K. avoid energy-balancing fees imposed by national energy authorities and analyze data for solar energy providers.
  • AWS' SageMaker helps a German-based energy company track customers' online behavior. It also supplies deep learning and predictive tech to: New Zealand's largest electricity and gas distributor, a Nordic branch of World Fuel Services, a California energy and battery company, and the U.K.'s EDF Energy.
  • Google is still optimizing a DeepMind AI algorithm launched in 2016 to autonomously run its data centers' cooling systems.
Bonus 1: What Big Tech says about its oil ties

Big Tech companies say that working with the oil industry isn’t at odds with their climate commitments, Orion reports. In some cases, they're working with Big Oil on clean energy plans — like BP giving AWS renewable power.

  • Microsoft is "committed to continuing to work with all our customers, including those in the oil and gas business ... while innovating together to achieve the business needs of a net-zero carbon future," per their "carbon negative" release.
  • Amazon said in a statement to Axios it will "continue to provide cloud services" to oil, gas and renewable energy companies as they work to "make their legacy businesses less carbon intensive and accelerate development of renewable energy businesses."
2. Delta Airlines says it's going big on climate

Axios' Amy Harder reports: Delta Airlines is spending $1 billion over the next decade to essentially cancel out all of its future greenhouse gas emissions beginning March 1, the company announced Friday.

The big picture: Delta is the world’s biggest airline by revenue, and this news is the latest in a rapidly growing trend of corporations announcing climate change goals in response to public and investor pressure.

Driving the news: Delta is able to immediately become carbon-neutral by purchasing what are called carbon offsets, financial transactions that ostensibly help cancel out carbon emissions by preventing emissions elsewhere in the world, like planting trees or supporting renewable energy.

  • The company isn’t disclosing how many offsets it’s purchasing — or how much it’s spending on that. But it’s likely to be a huge number given the scale of its announcement.

Yes, but: Delta also says it’s going to minimize its reliance on carbon offsets, though it also concedes technologies enabling it to directly reduce its emissions aren’t readily available or in some cases even invented yet.

  • It plans to research those technologies and others with its new allocation of $1 billion.

The intrigue: Carbon offsets are, at best, "very opaque and definitely hard for the average person to understand," said Sola Zheng, an expert on aviation at the nonprofit International Council on Clean Transportation.

  • The quality of offsets also faces scrutiny. Doubt persists about whether offsets purchased actually reduce emissions and don’t just throw money at projects, such as planting trees or building a wind farm, that would have happened regardless.

Read more

3. Making sense of Tesla's $2B stock offering

Tesla stock rose by about 5% on Thursday after the company announced it was issuing about $2.3 billion in new stock.

Axios' Felix Salmon breaks it down: While a 5% move is not unusual for Tesla, the fact that the shares rose is a clear vote of confidence in the company. Most companies, when they issue new shares and dilute existing shareholders, see their stock price fall.

Background: This time last year, Tesla was struggling with cashflow issues and suffering waves of layoffs. And, investors weren't particularly happy with Tesla's reluctance to spend money.

  • Tesla bulls (who, after all, represent the overwhelming majority of the company's only shareholders) saw a fast-growing technology company investing heavily in new automobiles, factories and batteries. In other words, they saw a company with significant opportunities to turn fresh cash into future profits, and they wanted CEO Elon Musk to grasp those opportunities.
  • The bull case for Tesla is explicitly predicated on the company raising billions of dollars in fresh equity capital.

The bottom line: The recent surge in Tesla's share price can be viewed as the stock market positively begging Musk to raise fresh cash while it's incredibly cheap. While he claims not to need the money, investors are sure that he'll find something worthwhile to do with it.

4. Dispatch from a busy Beltway climate week

Here's a scorching hot take: Making climate policy is going to be really hard, even if there's now more bipartisan agreement that, well, there should be something called climate policy.

Driving the news: Consider the political and policy news of the last few days...

  • Wall Street giants Goldman Sachs and JPMorgan Chase just endorsed a carbon tax that would return revenue to the public, joining oil majors in the Climate Leadership Council pushing the idea. Amy has more.
  • But House Republicans, who this week promoted bills to boost carbon capture tech, took pains to emphasize they're not into the tax thing. They "stand united against carbon taxes and burdensome regulations," said Rep. Garret Graves, the top Republican on a special House climate panel, in a statement to reporters.
  • Oh, and even the rather modest House GOP proposals — a break from longstanding dismissal of climate — are getting pushback from conservative groups like the American Energy Alliance, the Club For Growth, and the Competitive Enterprise Institute.
  • Meanwhile, Sen. Bernie Sanders, who isn't so into big banks and wants to prosecute oil majors, has emerged as the Democratic primary front-runner. And carbon pricing isn't featured in his Green New Deal, which would impose sweeping changes in the energy system via huge investments and new regulations.
Bonus 2: Charting the climate divide
Expand chart
Reproduced from Pew Research Center U.S. Politics and Policy; Chart: Axios Visuals

Newly released Pew Research Center data highlights the persistent partisan divides on climate change.

The big picture: The chart above shows the split between Republicans and Democrats over whether climate should be a top priority for the White House and Congress.

  • It's part of a wider survey last month of U.S. adults' policy views.
  • Read it here.
5. Catch up fast: BP, cars, natural gas

Climate: "BP Plc is expanding its team working on carbon capture and storage projects as part of its ambition to zero out net greenhouse-gas emissions by 2050," Bloomberg writes.

Regulations: The NYT reports that Trump administration efforts to weaken vehicle mileage and emissions rules are running into a host of problems and "may not be ready until this summer — if ever."

Natural gas: A helpful new Center for Strategic and International Studies post explores the role natural gas is — and isn't — playing in coal's steep decline in Europe.

  • "Gas is playing a role in reducing coal consumption in Europe, but that role is neither simple nor straightforward," Nikos Tsafos writes.