Axios Generate

A green lightbulb.

February 15, 2019

Happy Friday! Was this email forwarded to you? Sign up here

A quick housekeeping note: We'll be off Monday for Presidents Day, but Generate will return Tuesday. Enjoy the holiday!

Onto music. Today marks the 1975 release date of Rush's "Fly by Night," so that brilliant (yup) trio will play us into the weekend...

1 big thing: Australia's coal export boom

Animated GIF of koala bears with coal eyes

Illustration: Sarah Grillo/Axios

NEWCASTLE, Australia — Coal exports out of this resource-rich nation brought in record-high revenue last year, according to government data released this month, Axios' Amy Harder reports.

The big picture: As concerns about climate change grow, coal is considered on its way out. But for many growing economies in Southeast Asia who are Australia’s biggest coal customers, it’s often seen as the preferred, cheapest electricity option.

Driving the news: Coal exports brought in a record A$66 billion in export value last year, according to data from the government’s Bureau of Statistics released earlier this month.

  • The data also shows that coal surpassed iron ore to become the biggest export in Australia, one of the world’s largest exporters of fossil fuels and other resources.

The intrigue: Earlier this week, I visited coal export terminals in Newcastle, a couple hours’ drive north of Sydney. The collective volume of approximately 160 million tons a year makes the area the single biggest port for coal exports in the world, according to executives at the Port Waratah Coal Services, which runs the largest operation on site here.

  • The expansive terminal sits along the banks of the Pacific Ocean along Australia’s Southeast coast and loads 10,000 tons of coal an hour onto ships.
  • The company receives 35 to 40 trains of coal a day from the nearby Hunter Valley, which is known for its coal mines and wineries.
  • About 1,300 ships a year come through Port Waratah’s operations, sending the coal mostly to Southeast Asian countries, including Japan and South Korea.

Between the lines: The type of coal exported from Newcastle is considered a cleaner type compared to the world’s other big coal exporter, nearby Indonesia. This is why Australia’s coal producers think they can thrive in a world addressing climate change.

Go deeper

2. The crude oil surge is outpacing the experts

Data: EIA monthly survey of producers and short-term energy outlooks; Chart: Harry Stevens/Axios
Data: EIA monthly survey of producers and short-term energy outlooks; Chart: Harry Stevens/Axios

A new report this week underscores a wider trend: The Energy Department's data arm and private forecasters alike have consistently underestimated the U.S. crude oil production surge in recent years, Axios' Harry Stevens and I report.

What's new: The EIA's latest monthly forecast sees U.S. crude production, already at record levels, averaging 12.4 million barrels per day this year and 13.2 mbd in 2020. That's a substantial uptick from projections just a month earlier, and if history is any guide, the latest increase won't be the last upward revision.

By the numbers: Harry compared EIA's forecasts in their monthly short-term energy outlook with actual production data. He found...

  • U.S. crude oil production has outpaced EIA forecasts every month since January 2017. The one-year forecasts have been too low by an average of more than one million barrels.
  • During the same time period, the 6-month forecasts were always revised upwards but still proved too low — by an average of about 465,000 barrels per day.

The intrigue: EIA is hardly alone in low-balling the surge, which saw U.S. output climb 2 million barrels per day last year alone.

Why it matters: There are geopolitical, economic and environmental repercussions from the faster-than-expected growth, which is driven largely by surging output in the Permian Basin region of Texan and New Mexico.

  • It complicates the joint OPEC-Russia efforts to continue propping up prices through their supply-cutting pact.
  • It brings economic gains to Texas and elsewhere, but the speed has also left local officials playing lots of catch-up on housing, infrastructure and other civic matters.
  • It could boost global greenhouse gas emissions in the long-term if it keeps going higher and higher, based on findings from a recent study released via Resources for the Future.

What we're hearing: Analysts offered a suite of reasons why growth has exceeded forecasts, such as the decline in technology costs.

  • One overarching thing is that it's hard to model the characteristics of the shale resource, given the complicated geology and the limited history of the U.S. boom.
  • Another big challenge is that the U.S. industry is very fragmented, with players of all shapes and sizes undertaking scattered developments, making it more difficult to analyze.

Read more

3. Shell buys German battery storage player

Royal Dutch Shell announced Friday that's its acquiring sonnen, a Germany-based home battery storage company.

Why it matters: The move underscores how Shell and some other majors are increasingly moving into the power and low-carbon energy space, even though it remains a very small part of their portfolios.

Where it stands: Shell had already invested in the company last year through its venture arm.

  • "Full ownership of sonnen will allow us to offer more choice to customers seeking reliable, affordable and cleaner energy," Mark Gainsborough, a top exec with Shell's New Energies division, said in a statement.
  • The cost of the acquisition was not disclosed.
  • (Yes, sonnen is a lower-cased name)

One level deeper: Via Greentech Media, "Sonnen distinguished itself in the early home storage market, with thousands of units deployed across Germany, and a notable presence elsewhere in Europe, the U.S. and Australia."

  • "Besides storing solar power for homeowners, sonnen aggregates its installations into controllable networks of grid resources," they report.

* * *

Speaking of global oil-and-gas giants, the Wall Street Journal explores BP's big annual long-term energy outlook report released yesterday:

  • "The vast majority of global energy supply growth is expected to come from renewables and natural gas over the next two decades, but steep investment in oil exploration and production will be needed to meet crude demand in 2040, BP PLC said Thursday."

4. Dems hope to parry McConnell on GND

Senate Democrats hope to put Republicans on the record on whether they support the scientific consensus on human-caused climate change.

Where it stands: Senate Majority Leader Mitch McConnell is bringing up the Green New Deal resolution for a vote soon — a move that shows GOP confidence that it puts Democrats in a political bind.

What's next: Minority Leader Chuck Schumer said yesterday that Democrats will push an amendment on acknowledgement of human-driven global warming.

  • "If Leader McConnell blocks amendments, we’ll know where he and his party stand: against science, against fact, ostriches with their heads buried in the sand as the tide comes in," Schumer said.

But, but, but: Yesterday brought more evidence that Democrats are not all on the same page when it comes to the GND resolution, which was authored by 2 Democrats, Sen. Ed Markey and Rep. Alexandria Ocasio-Cortez.

  • It's the sweeping but non-binding template that calls for massive federal investments in emissions-cutting alongside goals like job guarantees.
  • Even the bravado of Schumer's speech had a tacit admission (emphasis added): "Bring it on. You think it might embarrass Democrats to vote on a non-binding resolution that maybe some of us support but not others? Trust me, we’ll be fine."

What they're saying: Sen. Debbie Stabenow, a Michigan Democrat, declined to say how she would vote on the resolution when speaking at an Axios News Shapers event yesterday.

  • "I support the goals as it relates to climate change," she said, but added that "some of the wording is of concern ... because it leaves things wide open and allows folks that are opposing it to … mischaracterize it."

Go deeper:

5. Why Trump just lost a power market fight

The Tennessee Valley Authority's board voted yesterday to close 2 coal plants in a lopsided decision that thwarted President Trump's pressure to support coal.

Why it matters: The TVA votes underscore the tough economics facing coal-fired power, which is steadily losing market share to gas and renewables despite White House efforts to revive the sector.

  • "Both are older coal generating units that were not designed to efficiently respond to today’s continually fluctuating power needs of customers," the independent government corporation said in announcing the retirement of the two plants in Kentucky and Tennessee.

The intrigue: The Washington Post's Steven Mufson writes up a good account of yesterday's decisions...

Three of the four people appointed by Trump to the TVA board joined the 6-1 majority voting to close down the Paradise coal unit, and all four joined the unanimous vote to retire Bull Run.
Trump, who vowed during his campaign to help the coal industry, set up a clash with the TVA with his call to keep open the Paradise 3 unit, which buys much of its coal from a mining company chaired by Robert E. Murray, one of the president’s major donors and supporters.

Go deeper: With natural gas on the rise, U.S. market is moving against coal