Jul 28, 2020

Axios Generate

By Ben Geman
Ben GemanAmy Harder

Good morning. Today's Smart Brevity count: 1,274 words, < 5 minutes.

🎵 And yesterday marked the 1981 release date of Stevie Nicks' "Bella Donna," which provides today's beautiful, under-appreciated intro tune...

1 big thing: The money case for offshore wind

Illustration: Sarah Grillo/Axios

A new peer-reviewed study reveals rapidly falling offshore wind power prices in key European markets — findings that could also bode well for the emerging U.S. sector.

Driving the news: Researchers analyzed years of developers' winning bids in offshore wind power auctions in five countries that represent three-fourths of global capacity.

  • The paper in Nature Energy finds that the bid price for power from proposed wind farms in northern Europe fell by roughly 12% annually from 2015–2019.

Why it matters: The authors say this is a turning point in the economics of offshore wind, a potentially massive source of carbon-free power. The report finds....

  • "[O]ffshore wind power generation can be considered commercially competitive in mature markets."
  • "Offshore wind energy development has been driven by government support schemes; however, recent cost reductions raise the prospect of offshore wind power becoming cheaper than conventional power generation."

How it works:  The auction designs mean subsidies that helped establish the sector are due to pay for themselves or even provide a financial benefit to governments and consumers when it comes to the latest projects coming online in the next few years.

  • "The level of subsidy implied by the auction results depends on future power prices; however, projects in Germany and the Netherlands are already subsidy-free, and it appears likely that in 2019 the United Kingdom will have auctioned the world’s first negative-subsidy offshore wind farm," per the report.

Yes, but: The wider question of cost vs. return to governments depends in part on whether grid connection costs are borne by developers or socialized via national infrastructure investments. Most nations choose the latter, they point out.

  • However, upcoming projects in the U.K. are effectively zero-subsidy even if developers paid these costs, as co-author Iain Staffell of Imperial College London describes in this Twitter thread.

The big picture: The paper comes amid a growing pipeline of planned projects in the U.S., where there's currently just a tiny amount of offshore wind.

  • BloombergNEF projects that the U.S. will have 20 gigawatts of installed capacity by 2030, and the Nature Energy paper underscores how Europe's experience is aiding the sector here.
  • "Regions of Asia and North America also benefit from shallow waters, and could expect some of the learning of Europe (for example, turbine size increase, construction techniques and financing) to play a key role in achieving similar results," it states.

The intrigue: Growing price competitiveness is only one factor in achieving very large commercial-scale development in the U.S., which is decades behind Europe.

The Washington Examiner's coverage of a virtual Atlantic Council event Monday looked at some of them, including...

"Major upgrades to the electric transmission system will be needed to accommodate all of the offshore wind Northeast and Mid-Atlantic states are planning to bring online, and there’s not a planning process in place yet to support those upgrades, said Hannes Pfeifenberger, a principal at the Brattle Group."
2. New scrutiny for Trump's auto regs

The EPA's internal watchdog is opening a probe into how the agency wrote controversial rules that weakened Obama-era carbon emissions standards for cars and light trucks.

Driving the news: The inspector general said the office will explore whether the rules met transparency and record-keeping requirements and "followed the EPA’s process for developing final regulatory actions."

Why it matters: The Obama-era emissions and mileage standards that extended into the mid-2020s were a pillar of the former president's climate change agenda.

  • The Trump administration's rewrite has been among the most sprawling and bitter regulatory fights in recent years, and has led to splits within the auto industry too.
  • The new probe opens another front in the ongoing legal and political tussles over the standards.

The big picture: The prior rules would have required roughly 5% annual efficiency improvements, while the rewritten standards finalized this year mandate 1.5% year-over-year gains.

  • Trump officials called the Obama standards unwieldy and said the rewritten rules will cut traffic deaths — a conclusion that critics contest.

The intrigue: The ultimate shape of U.S. auto rules will be in flux for a while. The new standards are being litigated, and if Joe Biden wins, he'd look to revive more stringent requirements and extend them.

Go deeper: EPA inspector general to investigate Trump’s biggest climate rollback (NYT)

3. Hydrogen news keeps coming as Microsoft joins group
Source: Giphy

Microsoft and 10 other companies have joined the Hydrogen Council, the initiative announced Monday, indicating the wide reach the suddenly prominent energy technology is garnering, Axios' Amy Harder reports.

Why it matters: Corporate support is considered essential (but not sufficient on its own) to get new technology off the ground, and support for this tech is uniquely broad around the world, as pointed out in the Harder Line column yesterday. 

Where it stands: The Hydrogen Council, a consortium launched at the 2017 World Economic Forum, started with 13 and now has 92 members.

  • Membership leans heavily toward industrial, auto and fossil-fuel giants, including Saudi Aramco and General Motors.
  • The addition of Microsoft, which will be represented on the council by chief environmental officer Lucas Joppa, indicates an even broader level of interest.

The intrigue: Microsoft also announced that hydrogen fuel cells have powered a row of data-center servers for 48 consecutive hours.

Yes, but: Divisions lurk around where the hydrogen comes from, whether from renewable-energy electricity or natural gas. 

  • A lot of the biggest industrial and energy companies that are members of the council support natural gas-made hydrogen in addition to the renewable energy kind. 
  • Environmentalists and progressive politicians are keen on ensuring it’s only from renewable energy, given the fact natural gas is a fossil fuel and has a big environmental footprint when it’s extracted.

Go deeper: NextEra Energy to build its first green hydrogen plant in Florida (Greentech Media)

4. Catch up fast: FERC, Ohio scandal, activism

Agencies: "President Trump made two nominations to the Federal Energy Regulatory Commission (FERC) Monday, bowing to pressure from Democratic lawmakers who have pushed to maintain the bipartisan split in the commission." (The Hill)

States: "A FirstEnergy customer on Monday filed what could become a class-action lawsuit in an effort to make the electricity company refund customers for rate hikes that resulted from a billion-dollar nuclear bailout now at the center of a corruption scandal." (Cleveland.com)

Climate policy: "Russia’s economic development minister warned last week that the EU’s plans to deploy a carbon tax at the bloc’s borders will not be in line with World Trade Organisation (WTO) rules, just as Brussels doubled down on the idea of green tariffs." (Euractive)

Advocacy: "Oil and gas companies, fossil fuel-burning utilities and the banks that fund drilling donate heavily to police departments’ charity foundations, according to a new report published Monday by the anti-corruption watchdog Public Accountability Initiative and the nonprofit research database LittleSis. That money in many cases directly supports the purchase of weapons and gear." (HuffPost)

5. Chart of the day: California's climate policy
Data: IEA; Chart: Axios Visuals

The International Energy Agency is out with a new primer on the role that emissions trading systems play in a wider mix of climate policies.

The big picture: Trading systems are expanding worldwide, especially as China moves toward its national system, though carbon pricing is no longer at the forefront of policy discussions among U.S. Democrats.

Why it matters: What caught my eye was the distillation of how California's expanding mix of mandates is supposed to intersect with its cap-and-trade system.

  • It's important because California's CO2 emissions are the second-largest behind Texas, and the state has the nation's most aggressive mix of climate policies and targets.

How it works: "[T]hese other mitigation policies could underperform relative to expectations. If this happens, the cap-and-trade system is designed as a backstop to ensure that the overall goal to reduce 621 MtCO2-eq by 2030 is achieved, by filling the gap in the emissions reductions over and above what is achieved by the prescriptive measures," IEA notes.

6. Quote of the day
"Paris is like a vessel, such as a glass — you can pour water or wine into it."

Who said it: Former State Department climate official Sue Biniaz, speaking to the Guardian about the Paris Agreement's structure allowing countries to set their own emissions plans.

The big picture: The story explores the future of the agreement in light of Trump's decision to abandon the deal and scale back U.S. climate efforts, while Biden has vowed to rejoin and impose new emissions curbs.

Ben GemanAmy Harder