Sep 28, 2018

Axios Generate

By Ben Geman
Ben GemanAmy Harder

Welcome back.

Situational awareness: Per Reuters, "The Trump administration on Thursday eased safety rules on offshore oil and gas production put in place after the deadly 2010 BP Plc Deepwater Horizon disaster, as part of its effort to slash regulations and boost the energy industry."

Sunday will mark 21 years since Bob Dylan released "Time Out Of Mind," so let's close our eyes and wonder if everything is as hollow as it seems...

1 big thing: Nuclear energy has rocky path ahead

Three developments this week together tell a story of the present and future of U.S. nuclear power.

Driving the news: A federal appellate court yesterday upheld New York's zero emissions credits (ZEC) program that subsidizes nuclear plants.

  • The unanimous decision in the U.S. Court of Appeals for the Second Circuit said the program is not preempted by federal electricity law.
  • It's the second appellate decision this month upholding states' authority to subsidize nuclear plants, following the Sept. 13 Seventh Circuit ruling in favor of Illinois' ZEC program.

Why it matters: The decisions bolster efforts in several states to prop up nuclear plants facing severe market pressures.

  • They're a win for advocates who fear that a wave of plant closures will be a huge step backward for the decarbonization the country's power mix.
  • And environmentalists also welcome them as a blessing for states' powers to bolster renewables.

The big picture: The New York decision arrived a day after owners of a badly over-budget project to build two big reactors in Georgia struck an 11th-hour deal to keep construction going.

  • However, that action was at most a limited win for the troubled nuclear industry.
  • The Southern Company-led project is the only new commercial nuclear plant under construction in the U.S., and there aren't others on the horizon.

That brings me to...

What's next: A new report says the path forward for new U.S. nuclear development lies with development and commercial deployment of small "microreactors."

  • The report from The Breakthrough Institute, the R Street Institute and the ClearPath Foundation says this "can leverage America’s comparative advantage: our unrivaled innovation system and entrepreneurial business culture."
  • It calls for policy changes and support, including several contained in bipartisan legislation before Congress, to help develop and license these projects.
2. Elon Musk on the brink

Illustration: Sarah Grillo/Axios

Tesla's stock is down 12% in pre-market trading following yesterday's Securities and Commission complaint against CEO Elon Musk for allegedly making false statements related to his abandoned efforts to take Tesla Motors private.

Why it matters: Musk could be barred from serving as CEO of Tesla, or even as a director on its board.

  • The case is a major problem at a critical period for the electric vehicle company. It's struggling to sustainably boost production and deliveries of the Model 3 and improve its finances.
  • For one thing, company could have a tougher time raising money from capital markets (though, as the New York Times notes, Musk has said he doesn't have any plans to do so).

Where it stands: Here's more from my colleague Dan Primack's coverage yesterday...

  • The SEC alleges that Musk made a "false and misleading" statement when he tweeted on Aug. 7 that he had funding secured for a takeover of the company. SEC also says he continued lying "over the next three hours" via Twitter.
  • Musk allegedly never discussed the $420 per share price with any funding source prior to the public tweet. Instead, he got there by calculating a 20% premium to where the stock was trading in early August, and then adding an extra dollar because "420" is associated with marijuana and he allegedly thought "his girlfriend would find it funny."

The intrigue: The Wall Street Journal has some fascinating reporting about the high drama around Thursday's SEC action. Citing sources familiar with the matter, they report:

The SEC had crafted a settlement with Mr. Musk — approved by the agency’s commissioners — that it was preparing to file Thursday morning when Mr. Musk’s lawyers called to tell the SEC lawyers in San Francisco that they were no longer interested in proceeding with the agreement.
After the phone call, the SEC rushed to pull together the complaint that it subsequently filed, the people said.

What they're saying: Musk called the complaint an "unjustified action."

  • Tesla and its board said later Thursday that they are "fully confident in Elon, his integrity, and his leadership of the company, which has resulted in the most successful US auto company in over a century."
  • Per Bloomberg, "'If Elon Musk resigns or is not the CEO, Tesla is a fundamentally different company that is less attractive to us,' said Ross Gerber, chief executive officer of Gerber Kawasaki in Santa Monica, California, which holds Tesla stock."
3. The race for the next billion cars

Illustration: Rebecca Zisser/Axios

Axios' Steve LeVine reports ... When the world's automakers are scrambling to retool into electric and driverless mobility companies, they are thinking about this number: 1 billion.

That's how many cars that are estimated will be added to the global fleet as early as 2030, igniting a frenzy over who will capture the sale of these probably much cleaner, higher-tech vehicles.

Why it matters: 1 billion is a large number. It's double the current number of cars on the road. And, at a rate of 80 million cars sold annually around the world, it's sufficient to build and sustain numerous trillion-dollar companies, a geopolitically defining scale of wealth.

  • What very few analysts are considering: The actual prize may be much higher — at least some of the existing global fleet may be up for grabs, too, in a gigantic future, one-time-only bout of automobile obsolescence.

What's going on: By the second half of the next decade, the cost of electric and combustion drive trains will converge, and then cross over, according to Bloomberg NEF. Electric cars will become cheaper than conventional combustion systems, the analysis says.

  • At that point, electric car sales will boom, Bloomberg NEF and other analysts forecast.
  • Bloomberg NEF estimates that there will be 30 million EVs on the road around the world in 2030, up from 4 million today, and 560 million, a third of the global fleet, in 2040.
  • The International Energy Agency forecasts 125 million EVs by 2030.

Go deeper: Read Steve's full story in the Axios stream.

4. The oil industry's climate shift

Axios’ Amy Harder writes ... A trio of recent articles caught my eye that crystallize a trend we cover a lot here at Axios about oil companies and climate change.

The bottom line: A tangible shift over the last two years is sharpening among the world’s biggest oil companies, including in America, to more readily acknowledge and address climate change.

The trend, fueled by investor and lawsuit pressure, is underway regardless of, and partly in response to, President Trump’s retreat on the matter.

Driving the news:

  • Via E&E News (paywall): Chevron now says it backs a carbon tax, under certain terms. “It would have to be a ‘well-designed policy,'" spokesman Sean Comey said by email to the publication. That appears to be a shift from last year, when a Chevron spokeswoman told the same publication “that the company ‘does not support general calls for implementing a price on carbon.’”
  • Via Alaska Public Radio: “‘There’s been a real sea change in the last 18 months or so in how the oil industry approaches climate change as a financial issue,’ said Andrew Logan of Ceres, a Boston-based nonprofit that works with investors and companies to make the business case for environmentally friendly practices.”
  • Via Bloomberg: Goldman Sachs’ co-head of global natural resources, Gonzalo Garcia, said in a presentation at a conference in Norway Wednesday that “he’s probably spent more time talking with oil company executives about the energy shift and renewables in the last two years than the previous 23 put together.” Garcia says he predicts U.S. companies like Exxon and Chevron will invest in renewables like their counterparts in Europe.

Go deeper: Exxon, Chevron join global industry group on climate

5. Electric cars are key to cutting northeast CO2

National Grid's Terry Sobolewski writes for Axios ... The recent pace of emission reductions in New York and New England is insufficient to meet 2050 CO2 emissions targets, set at an 80% reduction from 1990 levels, according to the most recent data published by the Energy Information Administration.

In fact, at recent emission reduction rates, the Northeast region will struggle to make it even halfway to its goal. 

The big picture: While the power sector has made progress, transportation emissions across the Northeast remain stubbornly at or above 1990 levels, and now account for over 40% of all energy-related emissions (e.g., transportation, heating and power generation). 

Without continued decarbonization of the electric sector, electrification of the transportation sector, and accelerated progress in the heating sector, the Northeast will fall far short of its goal.

In light of the magnitude of the transportation challenge, here are some key initiatives that would help the Northeast meet its 2030 emissions targets:

  1. Deploy 10 million electric passenger cars and light trucks in the next decade, which will effectively require that EVs make up all light-duty vehicle sales by 2028. This transformation would build on both the increasing decarbonization of the power sector and the inherent energy efficiency of EVs compared to internal combustion engines.
  2. Advance new zero-carbon options for heavier transport sectors, such as medium- and heavy-duty vehicle fleets, with a focus on near-term advances such as electric buses and freight trucks.
  3. Maximize investment in EV charging infrastructure, aligning financial incentives for utilities with public policy to accelerate vehicle adoption.
6. 1 cool thing: Making music in a power plant

Screenshot of the video for "The Solution" from Masary Studios.

South Boston’s iconic pink Edison Power Plant won’t be around much longer, but it can now live on in two new mesmerizing music videos by local artist collective Masary Studios.
— Boston Magazine reports

Check out the videos made in the decommissioned plant here and here. The Boston Magazine piece describes them like this:

Captivating light displays and haunting musical scores highlight the grandeur of the centuries-old facility that’s slated to be redeveloped over the next decade.
Ben GemanAmy Harder