Oct 30, 2018

Axios Generate

By Ben Geman
Ben GemanAmy Harder

Welcome back.

Podcast fans: The latest episode of Axios' Pro Rata podcast looks in the rearview mirror at Saudi Arabia's Future Investment Initiative conference. Listen here to learn why Axios' Felix Salmon believes it was a "complete disaster."

Onto music. Halloween will mark the birthday of the Beastie Boys' Adam Horovitz, so let's honor that a day early by giving that brilliant act today's intro tune...

1 big thing: BP just made a lot of money

Photo: Ali Balikci/Anadolu Agency/Getty Images

This morning BP reported $3.8 billion in third-quarter profits, more than twice what they made in Q3 of 2017. It's their biggest haul in 5 years and the company's stock is up around 4% in pre-market trading in the U.S.

Why it matters: The tally beat analysts' expectations and more broadly signals how oil majors are raking in cash amid higher oil prices.

  • Equinor reported a big jump in profits last week, while giants ExxonMobil, Chevron and Shell will announce their results later this week.

Power move: BP said it's planning to pay cash for all of its $10.5 billion acquisition of BHP's U.S. shale assets, a deal announced in July that will greatly expand the BP's onshore U.S. production.

  • That decision reflects "confidence in cash generation and continued capital discipline," the company said, though the plan assumes oil prices remain "firm."

Go deeper: CNBC dives into the results here.

2. U.S. power output back to pre-recession level
Expand chart
Adapted from EIA via Danish Embassy; Note: Figures reflect previous 12 months; Chart: Axios Visuals

America’s electricity generation reached the highest level since before the economic recession, reports Axios' Amy Harder.

Why it matters: Electricity generation in the U.S. has been largely stagnant for a decade, fueled by a slow-growing economy after the 2008 financial crash and the resulting lackluster electricity demand. That’s starting to change, recent data from the U.S. Energy Information Administration shows.

“We learned to do less with less during the Great Recession, then we learned to do more with less in the low-energy recovery that followed. Now it looks like America is doing more with more.”
— Kevin Book, managing director, ClearView Energy Partners

Yes, but: Chris Cassar, an electricity expert at the EIA, notes that weather may be at play too. He said this summer was a lot warmer than last year’s, which would have increased the need for electricity generation.

“It is very hard to completely separate weather from the economic factors affecting the change in electricity generation.”
— Chris Cassar

One level deeper: Growing electricity generation is good news for all producers and generators of electricity, which have been battling it out — in what Amy calls the "Hunger Games of electricity" — over the last year for a piece of the mostly stagnant market as President Trump seeks to boost financially struggling coal and nuclear power plants.

3. No, Bitcoin won't destroy climate by 2033

Illustration: Sarah Grillo/Axios

A new study predicts that a sharp increase in Bitcoin use will cause a surge in greenhouse gas emissions, potentially dooming the world to global warming levels that would exceed the targets set under the Paris Climate Agreement, Axios' Andrew Freedman writes.

Why it matters: Bitcoin has an energy problem, requiring high amounts of electricity to process transactions. Determining the implications of such energy use is of concern for climate scientists, particularly if this new currency takes off in popularity.

What they did: The study estimates that Bitcoin usage emitted 69 million metric tons of carbon dioxide in 2017, while accounting for just 0.033% of cashless transactions in the same year. They then project future emissions based on a variety of scenarios of growing Bitcoin usage in coming years.

The researchers, from the University of Hawaii at Manoa, found that Bitcoin could be responsible for emissions emissions sufficient to propel climate change past 2°C, or 3.6°F, above preindustrial levels within just the next 11 to 22 years.

  • As noted by the study, published in Nature Climate Change yesterday, a lot of Bitcoin mining takes place in China and other parts of Asia, which currently depend on coal for a lot of their electricity.
  • Therefore, if Bitcoin is increasingly utilized as a cryptocurrency, emissions could skyrocket, per the authors.

But, but, but: The study makes a number of questionable assumptions, experts said. For example, the projections assume that the fuel types used to generate electricity will remain the same as they are today.

  • This ignores the rapid rise of renewables worldwide and phaseout of carbon-intensive coal plants from many countries.
  • They also didn't take into account the likelihood that Bitcoin mining will migrate between countries, potentially shifting from nations with a more carbon-intensive electricity base, like China, to cleaner ones, such as Iceland or the U.S.
  • Also, accurately predicting future use of a novel technology is difficult, and many observers expect Bitcoin to serve more as an investment vehicle than a currency.

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

4. GE's new CEO splits up power business

Photo: Smith Collection/Gado via Getty Images

General Electric will split up its struggling power business and further slash its quarterly payouts to investors, CEO Larry Culp said today, while announcing earnings that came in below analyst expectations, Axios' Courtenay Brown reports.

Why it matters: Culp stepped in as CEO less than a month ago, and he's making the first of what’s sure to be many changes to turn around the 100-year-old conglomerate.

5. Auto news and notes

What GM wants: What is General Motors aiming for besides the national electric vehicles mandate we wrote about last week? Weaker mileage and carbon emissions rules, Reuters reports...

  • "General Motors Co. ... backs an annual increase in fuel-efficiency standards based on 'historic rates' rather than tough Obama era rules or a Trump administration proposal that would freeze requirements, according to a federal filing made public on Monday."

The big picture: Bloomberg dove into several automakers' comments on Trump administration plans to weaken Obama-era mandates:

  • "Detroit automakers expressed divergent views on how to reform U.S. fuel economy and tailpipe emissions rules, even as they urged President Donald Trump to continue coordinating the federal government’s policies with those enacted by California," they report.

Autonomous vehicles: As we noted yesterday, AVs are an energy story. More proof, via the Detroit News' coverage of GM CEO Mary Barra's remarks yesterday...

  • "GM's Cruise autonomous vehicle is built on the company's electric vehicle platform, and Barra said Monday the company believes all autonomous vehicles should be electric vehicles," they report.
  • "That means there has to be a robust charging infrastructure in place in the cities in which these vehicles operate, Barra said."
6. Few nations back Paris goals with policy yet

Just a small number of countries have laws and policies that are consistent with hitting the emissions targets they established under the Paris climate deal, a new analysis by a London School of Economics research institute finds.

Why it matters: The report drives home the challenge of reaching existing carbon reduction goals, let alone achieving the types of cuts that scientists say are needed to prevent some of the most dangerous levels of warming.

What they did: The Grantham Research Institute on Climate Change and the Environment compared nations' domestic policies to their self-established pledges under the agreement, aka nationally determined contributions (NDCs).

What they found: "Our analysis reveals that countries are being slow to reproduce their NDC commitments as targets in national laws and policies," the report states.

The bottom line: There's a major mismatch.

  • "[W]hile 157 of 197 Parties to the Agreement have set economy-wide emissions reduction targets in their NDCs, only 58 have done so within domestic laws or policies; only 16 of those are consistent with those set in the NDCs," it states.
  • "For the rest, there is insufficient data for comparison," the report adds
  • The 157 figure includes 156 nations and the European Union.

One problem, they note, is that where countries do have economy-wide and sector-specific emissions policies and targets, they're generally set to 2020, while the NDCs are based on 2030 goals.

7. Big in business: Enabling crude exports

Private equity giant the Carlyle Group and the Port of Corpus Christie are teaming up in to build a crude oil export terminal that can accommodate massive supertankers. It's a $1 billion project, according to multiple reports.

  • Those ships, called very large crude carriers (VLCCs), can be filled with over 2 million barrels of crude oil.

Why it matters: The deal, announced yesterday, is a sign of confidence in the continued growth in U.S. crude exports at a time when production is rising from prolific shale formations in Texas and elsewhere.

  • Expanding access to global markets is important for shale producers, in part because many Gulf Coast refineries are configured to handle heavier grades of crude.

The big picture: It would mark a major expansion of U.S. capacity to handle those huge ships.

  • "The parties said they expect the terminal would open in late 2020 as the first onshore terminal able to load VLCCs for export. The Louisiana Offshore Oil Port has been outfitted to load VLCCs for export, but volumes have been spotty as it remains principally an import conduit," the Financial Times notes.

Go deeper: S&P Global Platts has more here.

Ben GemanAmy Harder