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January 23, 2018

Good morning and welcome back!

A quick reminder that the Axios World stream, our hub for international news and expert voices, is up and running and packed with Smart Brevity. And you can find them on Twitter here.

Ok let's dive in . . .

Parsing the solar trade news

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The conventional wisdom quickly hardening around the White House decision to impose four years of tariffs on imported solar panel equipment is that it will likely slow solar power deployment to some degree, but is not nearly as aggressive as developers and their allies feared.

ICYMI: Yesterday the White House announced 30% tariffs on imported solar cells and modules that will decline by 5% annually to 15% in the final year, with 2.5 gigawatts worth of cell imports exempted.

What they're saying: Suniva and SolarWorld Americas, the financially distressed panel makers that petitioned for the tariffs, applauded the move overall even though they're less aggressive than the companies sought.

What we're hearing:

  • Goldman Sachs analysts predicts a "relatively benign" impact. They see a "potential 3%–7% cost increase for utility-scale and residential solar costs, respectively," with a declining effect as the penalties lessen.
  • ClearView Energy Partners estimates the 30% tariffs could increase residential rooftop system costs by around 4% and utility-scale systems by around 10%.
  • Reuters reports that MJ Shiao, head of renewables research for the consultancy Wood Mackenzie, says the tariffs will likely cut new U.S. solar installations by 10%–15% over the next 5 years.
  • Varun Sivaram, a solar expert with the Council on Foreign Relations who opposes tariffs, sizes up the decision in our Expert Voices.

Quick take: The relatively modest penalties are another reminder that President Trump's aggressive rhetoric isn't always fully consistent with the policy decisions that emerge from the administration.

  • But that said, the Solar Energy Industries Association claims the decision will cause the loss of 23,000 U.S. jobs and will slow down new development.

Go deeper: Read our full story here.

A bold prediction on peak oil demand

BofA chart comparing peak oil demand and EV deployment
Chart from research note by Bank of America Merrill Lynch

Gauntlet thrown: A new research note from Bank of America (BofA) Merrill Lynch analysts predicts that global crude oil demand will peak by 2030 thanks to very fast electric vehicle adoption beginning in the early 2020s.

  • They see EVs reaching 40% of new car sales by 2030 and 95% of new sales by mid-century.

Why it matters: The timing of the global demand apex — and the rate of decline thereafter — has major ramifications for the finances of oil-producing economies and, more broadly, the earth's climate.

What's new: The BofA report breaks with several major forecasting bodies and analysts, who predict a much later peak.

On the other side: In contrast, the main forecasts from the International Energy Agency, the U.S. Energy Information Administration, and OPEC do not even see a peak by 2040.

  • Nonetheless, some forecasters say the peak could be coming into focus sooner. The prominent consultancy Wood Mackenzie said in mid-October that demand could peak as soon as 2035, and Royal Dutch Shell's CEO Ben van Beurden has predicted a peak could occur by the late 2020s, though his comments have been soaked with caveats.

To be sure: BofA acknowledges uncertainties in their forecast, especially the known unknowns about EV penetration. But that said, their report is noteworthy because it argues that EVs will curtail the global thirst for oil so much that the decline will outpace other areas of heavy demand — namely petrochemicals and trucking — in the not-too-distant future.

Musk's pay package as Tesla CEO could be worth $55 billion

Elon Musk speaking on stage

Elon Musk. Photo: Justin Sullivan / Getty Images

Speaking of EVs, my colleague Shannon Vavra writes Elon Musk has agreed to be CEO of Tesla for the next decade, where he could earn as much as $55 billion in stock awards.

Yes, but: He “will be paid only if he reaches a series of jaw-dropping milestones based on the company’s market value and operations. Otherwise, he will be paid nothing,” NYT’s Andrew Ross Sorkin writes.

  • Per NYT, Tesla has set a dozen targets, each $50 billion more than the next. Tesla is worth about $59 billion today. Reaching its market value goal of $650 billion would make Tesla one of the five largest companies in the U.S.

Read Shannon's full story here.

Breaking in tech: Volkswagen's EV charging software decision

Driving the news: Electrify America, Volkswagen's EV charging initiative, has tapped the firm Greenlots to provide the operating platform for all of the expansive U.S. network of charging stations that VW is developing as part of the settlement of its diesel emissions scandal.

  • Terms of the software contract were not disclosed.

Why it matters: The selection of the California-based company marks another step in efforts to expand the infrastructure that will eventually be needed to support much wider consumer EV adoption.

  • “We chose Greenlots because their SKY TM Network Operating Platform is a scalable, flexible foundation to develop our own networking system that integrates dozens of new EV models, thousands of new EV chargers and other distributed energy resources with the grid," said Electrify America CEO Mark McNabb in a statement Tuesday.

Background: In addition to the newly announced operating platform deal, Greenlots is already one of the firms working with the VW subsidiary on charging network installation at workplaces and residential dwellings in cities including Boston, New York and L.A.

Big picture: Electrify America plans to invest $2 billion over the next decade on electrification initiatives, with the initial stage focusing on deployment of over 2,000 charging stations in California and 38 other states.

On my screen: BlackRock skepticism, EV skepticism, lobby reports

BlackRock's activism revisited: An interesting and somewhat skeptical piece in the Harvard Business Review looks at the high-profile open letter to CEOs from Larry Fink, head of investment powerhouse BlackRock. Fink recently warned that societal contribution (on issues including climate change) will be key to getting his company's support.

Corporate sustainability advocate Andrew Winston says Fink is serious, but cautions that there's a "structural problem" in his message. He writes:

  • "Most of BlackRock’s trillions are 'passive”' investments, sitting peacefully in index funds (and even BlackRock points out that passive funds have limited impact on equity prices). So, BlackRock can’t move capital around based on its assessment of how well companies do at managing long-term value, even though it owns a chunk of every large company and hold assets 'on par with Japan’s GDP.'"

Hard truth about EVs: A new blog post at the UC-Davis Institute for Transportation Studies cautions that for all the automaker and policy emphasis on EVs, their research shows that widespread consumer interest remains a missing piece of the puzzle. (Hat tip to the NYT's Brad Plumer for flagging.)

  • "The excitement among policymakers, automakers, and advocates as more [plug-in vehicle] models enter the market place, more charging is installed, and more PEVs are sold each successive year is utterly lost on the vast majority of the car-buying public — even in California, touted as being among the global PEV market leaders. The problem is the number of car owning households that are paying attention to PEVs is not growing," say researchers Ken Kurani and Scott Hardman.

Lobbying: The American Wind Energy Association reported slightly over $1 million in quarterly lobbying, a five-fold increase over the $190,000 spent in Q3 and similar tallies over the last couple years. It's their biggest quarterly tally since 2009. Late 2017 saw frenzied advocacy by the renewables industry over provisions in the tax package.

Research reports: manufacturing and Texas shale

Partial credit: A new paper by analysts at think tank Resources For the Future says the drop in natural gas prices thanks to the fracking boom has helped the U.S. boost manufacturing employment, but not as much as prior analyses suggest.

  • "We estimate that the 2007–12 natural gas price decline raised overall manufacturing employment by about 0.6 percent. For the industries in the top quartile of the energy intensity distribution, we estimate employment gains of 1.8 percent," they write.

Shale boom: A Dallas Fed paper looks at where the booming oil-and-gas sector fits into the larger Texas economy, noting its relative "connectedness" has declined over time.

Put another way, it's still a really big deal, but the ripple effects from the sector's fortunes across the Lone Star State's broader economy aren't what they were in the 80s heyday. That helps explain why the Texas economy slowed but didn't lapse into a recession when prices collapsed in 2014, the authors note.

  • "The diversification of the Texas economy since the 1980s toward service-providing industries, together with the greater linkages of financial and business services, likely helped insulate the Texas economy from the latest oil price drop," it states.
  • Why it matters: The paper provides a data point for how the state will fare once the energy boom in the Permian Basin and other regions eventually winds down.