Nov 27, 2018

Axios Generate

By Ben Geman
Ben GemanAmy Harder

Good morning and welcome back!

And happy birthday (one day late) to the indomitable Tina Turner, who has today's intro tune...

1 big thing: The electric stakes of GM's move

Illustration: Sarah Grillo/Axios

General Motor's plan to shutter several plants and cut thousands of workers is a glimpse into big changes that may loom as major automakers make the slow transition to electric vehicles.

Driving the news: As my Axios colleagues reported, GM said Monday that it will cut 15% of its salaried workforce, estimated to be more than 14,000 people in North America. It will idle factories in Michigan, Ohio, Maryland and Canada.

The intrigue: The auto giant called it part of a restructuring that will help devote more resources to fully battery-powered offerings — even as it also focuses on larger gasoline-powered products in the move away from some sedans.

  • The company is focusing on crossovers, trucks and SUVs, while "resources allocated to electric and autonomous vehicle programs will double in the next two years," the company said.
  • By next year, it will no longer make the Buick LaCrosse, the Chevrolet Impala, or the Cadillac CT6 sedan.
  • The plan also includes killing off the Chevy Volt, a plug-in gasoline-electric hybrid with limited range first launched in 2010.

The big picture: Autotrader analyst Michelle Krebs called the GM move the result of several forces, including a downturn in the North American and Chinese markets, a consumer shift toward SUVs, and tariffs and trade policy.

  • But one impetus is to position itself for electric and autonomous offerings that won't be money makers any time soon, she tells Axios. "It has got to be very profitable right now to finance all that.”
  • The automaker plans to launch at least 20 all-electric models by 2023.
“GM is really betting big on autonomous and electric vehicles, and so it has got to shore up its profits right now prepare for that future.”
— Michelle Krebs

But, but, but: Via Greentech Media, the Union of Concerned Scientists' David Reichmuth offers a critical view of GM's near-term positioning for its long-term, more electrified future.

  • “I like what they said about electrification; the problem is what they’re investing in," he tells Greentech, noting the company's focus on SUVs and pickups.
  • "I think GM and a lot of the companies know that electrification is the future, but they’re prioritizing the short-term profits from some of these less efficient gasoline vehicles," he says.

What's next: Mark Muro, a Brookings Institution expert in industrial transitions, also tells me the GM move is about slowing sales in the U.S. and China and the shift away from sedans.

  • But he adds, "The changes are equally all about accelerating the company’s move toward into the future of mobility. In that sense the restructuring reflects the company’s aggressive transition from gas to electric and analog to digital."
  • That will shift the employee base, with more emphasis on software engineers and electrical engineers, Muro says. He called the changes part of maintaining a competitive industry.
  • "There will be excruciating pain in some places left behind," Muro says.

Go deeper:

2. The energy costs of a changing climate
Expand chart
Data: Hsiang et al. 2017; Map: Harry Stevens/Axios

The big new federal report on the effects of climate change (the one released on Black Friday) explores how global warming could eventually increase U.S. power costs by tens of billions of dollars annually.

Why it matters: The energy chapter of the 1,656-page report lays out a suite of ways that higher temperatures and extreme weather affect power and fuel infrastructure and availability — and the financial toll.

Threat level: On power bills specifically, even though buildings and appliances are getting more efficient, higher temperatures will generally come with higher electricity costs (check out the map above). Why?

  • There will be higher power demand (in part for more cooling in a hotter world), combined with higher temperatures reducing the efficiency of power generation and delivery.
  • And there's the need to build new generation capacity to meet higher demand, with billions in costs ultimately passed along to homes and businesses.

By the numbers: By 2040, nationwide residential and commercial power expenditures are projected to rise by as much as 18% if carbon dioxide keeps piling up in the atmosphere unchecked (with lower projections if emissions are cut significantly).

  • "By the end of the century, an increase in average annual energy expenditures from increased energy demand under the higher scenario is estimated at $32–$87 billion," the report states.

The big picture: Higher energy costs are one of many potential outcomes in a warming world. More broadly, the report warns of "hundreds of billions of dollars" in annual losses to some economic sectors without scaled up actions to adapt to current changes and slash emissions to avoid future warming.

Go deeper:

3. Latest in policy: FERC, Trump, carbon taxes

FERC: Via Utility Dive, "Democrats on the Senate Energy and Natural Resources Committee say they will seek to postpone a Tuesday vote on Bernard McNamee's nomination to the Federal Energy Regulatory Commission after the release of a video that shows the nominee criticizing renewable energy and environmental groups."

  • But a spokeswoman for Sen. Lisa Murkowski, the committee chairman, told Axios Monday evening that the committee vote was still scheduled for today.

White House: Via Politico, "President Donald Trump on Monday dismissed a grim report on climate change produced by his own government, saying he didn’t believe the report’s prognosis of dire economic fallout."

  • Trump, asked about the report's economic projections, told reporters: "I don’t believe it."

Carbon taxes: A bipartisan group of House members will announce a bill today that would "price carbon emissions and return 100% of the net revenue as a rebate to American families," an advisory states.

  • The announced backers are Democrats Ted Deutch, John Delaney, and Charlie Crist, and Republicans Francis Rooney and Brian Fitzpatrick.
  • Reality check: The bill stands zero chance of passage anytime soon and taxing carbon has very little political traction in Congress. But it's part of a long-term effort to change the political calculus.
  • Bloomberg Environment, which broke the news of the bill, notes: "the bill could be a starting point for climate legislation after Democrats assume House control in January."
  • Details: Via Bloomberg's Dean Scott: "[T]he measure would apply a $15-per-metric-ton carbon fee to the U.S. oil, gas, and coal industries, but rebate all of the revenue as a dividend to households to shield them from increased fossil fuel costs related to the carbon fee."
4. A global renewables inflection point

Additions of renewable power generating capacity in developing nations have raced ahead of new coal-fired development, according to newly released data from the consultancy Bloomberg NEF as part of its annual Climatescope.

Why it matters: The finding is the fruit of falling costs that are making renewables more competitive in developing nations where energy demand is rising.

By the numbers: Last year, developing nations added 114 gigawatts of zero-carbon energy capacity (which includes nuclear and hydro), including 94 GW from wind and solar.

  • Newly built coal-fired generation capacity in developing nations, meanwhile, fell 38% to 48 GW, the lowest level since 2006, Bloomberg NEF said.

The big picture: "Just a few years ago, some argued that less developed nations could not, or even should not, expand power generation with zero-carbon sources because these were too expensive,” Dario Traum, a senior BNEF analyst, writes in a statement.

  • “Today, these countries are leading the charge when it comes to deployment, investment, policy innovation and cost reductions," Traum adds.

But, but, but: The report also shows coal's persistence at a time when scientists say deep carbon emissions cuts are needed to avoid temperature rises that blow past 2°C above preindustrial levels. This Bloomberg news writeup of the data points out...

"Actual generation from coal-fired plants gained 4 percent in developing countries to 6.4 terawatt-hours."
"193 gigawatts of coal are under construction in developing economies, with 86 percent of this capacity planned in China, India, Indonesia and South Africa, the report said, citing Coalswarm data."
5. Saying no to "dystopian" AV energy future

The International Energy Agency has wide-angle look at why autonomous vehicles (AVs) could eventually drive a big increase in energy demand — and how to prevent that from happening.

Why it matters: There's a lot of uncertainty about what the rise of AVs will mean for energy consumption.

  • Computer-enhanced efficiency and ride-sharing could mean, if things break right, vehicle energy needs will be significantly slashed.

But, but, but: There's a pathway for a "dystopian" reading too, the IEA analysts write, marked by AVs leading to significantly more private car travel for various reasons. They include...

  • "Living further outside city centres becomes more attractive and property values adjust accordingly, exacerbating sprawl."
  • "Costs for taxi services fall dramatically, encouraging a shift from public transit to low-occupancy AVs."
  • "Road freight also becomes much cheaper, encouraging more goods shipment."
  • AVs enabling more productive use of travel time instead of driving.

The bottom line: Policy will matter here, the commentary states. A lot.

"Policy and planning principles that focus on how sharing, electrification, and automation contribute to a multi-modal mobility ecosystem can help get us where we want to go," they write.
6. Number of the day: 153.7

153.7%: That's the year-over-year increase in U.S. EV sales in October 2018 compared to October 2017, according to updated sales data compiled by Argonne National Laboratory.

  • Of those cars, 24,514 were fully battery electric vehicles (BEVs) and 9,575 were plug-in hybrids.

Reality check: A standing reminder that while sales are growing, they're starting from a very small base relative to the size of the auto market. Cars with a plug were 2.5% of light-duty vehicle sales last month, per Argonne.

Details: The October 2018 data shows how Tesla's Model 3 is far outpacing its rivals.

  • "BEV sales included 17,750 Tesla Model 3, 2,075 Chevrolet Bolt EV, 1,350 Tesla Model S, 1,234Nissan Leaf, 1,225 Tesla Model X, 424 BMW i3, 116 Honda Clarity BEV, 100 Fiat 500e, 95 Smart ED, 62 Volkswagen e-Golf, 61 Kia Soul EV, 21 Hyundai Ioniq EV, 5 Jaguar I-Pace, 1 Mercedes B-Class Electric, 0 Ford Focus EV, and 0 Chevrolet Spark."
Ben GemanAmy Harder