Dec 6, 2019

Axios Generate

Happy Friday! Today's Smart Brevity count: 1,239 words, ~4.7 minutes.

The first-ever “Axios on HBO” special airs Sunday at 6:30 pm ET, featuring a blunt, newsy Joe Biden interview.

Sneak peek: He hits media, rivals for wrongly thinking that AOC and Medicare for All define Dems (watch here). Catch the full interview Sunday for Biden on stuttering, his family, Elizabeth Warren and more.

And Monday will bring the birthday of Joan Armatrading, whose lovely songwriting and voice bring us into the weekend...

1 big thing: A day that distilled climate politics in 2019

Illustration: Sarah Grillo/Axios

These two things happened Thursday...

1. Former senator and Secretary of State John Kerry, who has spent decades working on climate change, endorsed Joe Biden in a statement that included a shout-out to Biden's ability to tackle the topic.

2. The upstart, very lefty Sunrise Movement released its scorecard of candidates' climate plans and commitment to action. It puts Biden's far behind Elizabeth Warren and especially Bernie Sanders, who scored the highest with his aggressive (and, some climate experts say, questionably constructed) $16 trillion proposal.

Quick take: OK maybe this is a hot take, too, but here goes: It nicely captures the split on climate between the party's upstart left and more traditional liberal pols, like Kerry, who hold out hope for bringing Republicans into the fold.

  • For instance, Biden, unlike Warren, is against ending the filibuster — a demerit in the Sunrise tally. (Sanders backs "reforms" and talks up budget reconciliation, a procedure that gives some proposals immunity from filibusters.)
  • The aggressive, youth-led group arrived on the scene in 2017 and has grown into a force in climate advocacy and is not shy about going after Democrats they see as too cautious at a time when steep emissions cuts need to begin.
  • Kerry, meanwhile, just days ago launched a new bipartisan climate advocacy group called "World War Zero," which includes moderate Republicans like former Ohio Gov. John Kasich.

The bottom line: Kerry, a Massachusetts liberal who has worked with environmentalists for decades, has long advocated for tough steps on climate.

But his approach represents a political style that's no longer en vogue among more aggressive advocates in the Sunrise camp, who are aligned with the Alexandria Ocasio-Cortez wing of the party.

Go deeper: Bernie Sanders gets top score from Sunrise Movement for his Green New Deal (Washington Post)

2. Aramco's IPO is huge and limited at the same time

Illustration: Eniola Odetunde/Axios

There's a split-screen effect with the Saudi Aramco IPO: it's simultaneously the largest ever and an event that's less consequential than initially envisioned.

Driving the news: The company yesterday said shares would be priced at 32 riyals, or $8.53, per share on the country's domestic exchange, representing a $1.7 trillion valuation.

They're initially selling 3 billion shares, a 1.5% slice, which means a $25.6 billion offering that edges out the 2014 IPO of the Chinese conglomerate Alibaba for the record.

Why it matters: That's a lot of money that Crown Prince Mohammed bin Salman hopes to steer toward the kingdom's efforts at economic diversification.

Trading begins this month, the culmination of the long-planned, often delayed effort.

But, but, but: It's all a far cry from bin Salman's earlier vision of a 5% float of the world's largest oil-producing company, with a higher $2 trillion valuation.

Plans for a listing on an international exchange seem to be on hold at best.

The big picture: Bloomberg notes that for bin Salman, getting the sale across the finish line "could help get his ambitious plan to overhaul the economy back on track."

"It’s been derailed by problems at home, including the backlash against his purge of the elite, and abroad by the outrage over the murder of Washington Post columnist Jamal Khashoggi and the war in Yemen," they report.

Go deeper: Aramco Valued at $1.7 Trillion in World’s Biggest IPO (Wall Street Journal)

3. OPEC and Russia creep toward a production deal

The news since yesterday's newsletter is that OPEC+ is coalescing around a deal to deepen the production-limiting agreement by 500,000 barrels per day, according to news reports and analysts.

Why it matters: The emerging agreement signals how petro-states are grappling with how to prop up prices amid rising supplies from the U.S. and elsewhere, and sluggish global demand that's hampered by trade battles.

But, but, but: Oil prices have trended somewhat higher since signals of additional cuts emerged this week, but traders' limited response signals how the cartel still faces headwinds in its bid to tighten the market.

Between the lines: Reports that the cut will be based off October baseline production levels also mean it's actually a smaller curb than the top-line figure would suggest.

"Deepening the cut will not require much of a reduction from recent output levels," Argus Media notes.

Where it stands: There are all kinds of wildcards in the negotiations around how to deepen the production-limiting plan that currently runs through the first quarter of next year.

  • How consequential the deal is depends on how well countries actually comply with it.
  • "It remains unclear what would occur in 2Q20, potentially reflecting Saudi’s new stance that they could walk away from this deal if other countries did not comply fully," Goldman Sachs analysts said in a note this morning.

Go deeper: OPEC and Russia seek to ratify deeper oil production cuts (CNBC)

4. Go deeper: GM's big battery move

General Motors' battery joint venture with LG Chem was surfacing as we sent yesterday's newsletter, so here's some more important info beyond our short item Thursday.

Driving the news: Via Axios' Joann Muller, a $2.3 billion joint venture on Thursday to mass-produce battery cells for electric vehicles in Ohio, creating 1,100 new jobs.

Why it matters: The new battery plant could likely employ many of the 1,200 autoworkers who lost their jobs when GM shut its Lordstown car assembly plant in March.

And it's a further sign of GM's commitment to an electric car future.

How it works: GM and LG Chem, one of the world's largest battery manufacturers, will each invest more than $1 billion in the new joint venture to be located in northeast Ohio, near the old Lordstown factory.

  • The cell manufacturing plant will have an annual capacity of more than 30 gigawatt-hours, with flexibility for expansion, making it one of the world's largest battery factories.
  • Tesla's gigafactory in Nevada reached an annualized production rate of roughly 20 GWh in mid-2018, according to Tesla's website.
  • Construction will begin in 2020 and be completed in 2023.
  • GM plans to introduce 20 new electric models by 2023.

Between the lines: In addition to cell manufacturing, the two companies will jointly work on advanced technologies to further reduce the cost of batteries and make electric vehicles more affordable.

Bonus: The growing battery market
Expand chart
Data: BloombergNEF; Chart: Axios Visuals

An analysis this week from the research firm BloombergNEF takes a wide-angle look at the growing global battery market (check out the chart above).

The big picture: That projected rise is enabled by the growing cost competitiveness that will help bring EVs, still a niche market, into the mainstream.

Where it stands: Battery prices were $1,100 per kilowatt-hour (kWh) in 2010 but have plunged to $156 per kWh this year, and projected to achieve the $100 per kWh range by 2023.

Why it matters: Getting below $100 is key. "This price is seen as the point around which EVs will start to reach price parity with internal combustion engine vehicles," the analysis states (though cautions there are other variables).

5. Catch up fast: Tesla, wind, solar

Offshore wind: Per Greentech Media, "Connecticut on Thursday selected Vineyard Wind’s 804-megawatt Park City project as the winner in a major offshore wind solicitation, setting up the seaport city of Bridgeport to become a significant hub for the emerging U.S. market."

Electric cars: Via Reuters, Tesla Inc. said on Friday its Chinese-built Model 3 cars would receive state subsidies, a move that will help the U.S. electric vehicle maker’s push into the world’s biggest auto market.

Solar: Also from Reuters, "BP is increasing its stake in solar energy developer Lightsource BP to 50% from 43% and is aiming for rapid growth over the next few years, the two companies said on Thursday."

* * *

And finally, this line from a Morgan Stanley note yesterday on its clean-tech event in New York this week is wild:

"Globally, the total power being consumed by data centers worldwide is equivalent to the 4th largest country in the world (in terms of power consumption)."

Have a good weekend all and we'll see you Monday.