Oct 4, 2018

Axios Generate

By Ben Geman
Ben GemanAmy Harder

Hi. Lots of car news today.

Oh, and I'm a little late here, but Monday marked the 1984 release of U2's "The Unforgettable Fire." So let's get going with this incredible live version of one of those cuts...

1 big thing: Electrifying California transit

Two big announcements in California yesterday show how the world's fifth largest economy is moving on vehicle electrification with the help of some big corporate players.

Why it matters: California is by far the country's largest auto market and already home to an array of electric vehicle initiatives, such as the California Public Utilities Commission's late May approval of $738 million in electrification projects by state's big utilities.

Driving the news, part 1: Electrify America, a VW unit, announced a $200 million plan Wednesday afternoon to expand EV charging infrastructure in California.

  • The latest phase of their California work would add fast-charging stations to several metro areas like Riverside-San Bernardino and Santa Cruz.
  • The plan filed with state regulators would also expand their existing efforts in major urban centers including Los Angeles, Fresno, San Francisco and three others.
  • They're also planning new investments along highways, and new collaboration with operators of bus and shuttle fleets.
  • The big picture: It's part of a wider, nationwide VW-funded charging initiative that stems from the automaker's settlement of its diesel emissions cheating scandal.
  • Go deeper: GreenBiz has a good story on the investments here.

Driving the news, part 2: Shortly before the Electrify America news was the official launch of a non-profit organization called Veloz, which also announced its first project, "Electric For All."

  • The coalition aimed at speeding up EV deployment in the state consists of major automakers (including GM, BMW and Nissan), state officials and power companies.
  • Electric for All is "the largest multi-stakeholder, multi-million dollar public awareness campaign in North America," the group said. Electrify America is helping to fund that effort too.
  • Read more of the full story on Veloz, which had soft-launched previously but had its big rollout yesterday.

Yes, but: While EV deployment in California is growing, carbon emissions from transportation are still rising in the state.

  • California state officials have an existing goal set under Gov. Jerry Brown of having 5 million electric vehicles on the state's roads by 2030, but that's a heavy lift, and the Veloz rollout was an explicit recognition of barriers to meeting the target.
  • The initiatives also come as the Trump administration is seeking to roll back federal auto efficiency and emissions mandates that are helpful to EV deployment.
2. Big moves in the electric autonomy race

Breaking Thursday: Toyota and SoftBank announced a joint venture around "mobility services" that has an electric component. The Wall Street Journal's piece on the partnership notes...

Toyota and SoftBank hope to deliver robot-cooked meals or provide medical checkups using Toyota electric vehicles by the latter half the 2020s, they said. The two are also studying other services, such as mobile offices, they said.

Meanwhile, Axios' Joann Muller reports that Honda is joining forces with GM and Cruise on a new autonomous vehicle (AV) to be built and sold in global markets.

What's new: Honda is committing $2.75 billion to the project over the next 12 years, including an immediate $750 million investment in Cruise, GM’s self-driving car unit.

  • The transaction, on top of a recent $2.25 billion investment from SoftBank investments, puts Cruise’s valuation (if it were a stand-alone company) at $14.6 billion.

Why it matters: GM has promised a world of “zero crashes, zero emissions, zero congestion” and sees large-scale deployment of self-driving EVs as the answer. It plans to launch a fleet of self-driving Chevrolet Bolt EVs in San Francisco in 2019.

  • The deal with Honda opens up new possibilities with a ground-up vehicle that can be adapted for multiple purposes and built in large numbers around the world.

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

My thought bubble: AVs, along with greater use of "shared mobility services" like ride-hailing, are expected to help drive the expansion of EVs, which today are a just a tiny share of the global vehicle fleet.

But there are lots of known unknowns around the environmental consequences of ride-hailing and autonomy. There's plenty of concerns that services like Uber and self-driving cars could lead to more overall driving.

3. Meet Trump's new FERC nominee

President Trump will nominate Bernard McNamee, who is currently a top DOE policy official, to fill the vacant GOP seat on the Federal Energy Regulatory Commission.

  • He has previously been with the conservative Texas Public Policy Foundation and worked as aide to Texas Sen. Ted Cruz, among other gigs.

Buzz: "If confirmed, McNamee would be the most overtly political person to serve on FERC in decades," E&E News reports.

Why it matters: The conventional wisdom around McNamee is that he'll be an ally of White House efforts to prop up economically struggling coal plants. Via Utility Dive's Gavin Bade...

  • "Last year, he helped pitch the DOE’s Notice of Proposed Rulemaking, which would have provided cost recovery to plants with 90 days of fuel onsite, pumping the plan at regulatory conferences and defending it in front of Senate lawmakers this July."
  • FERC rejected that plan early this year, but Utility Dive notes that McNamee has defended the idea of using DOE's emergency authorities to keep uneconomic coal plants operating.

What's next: The timing for Senate consideration is unclear, but in a note yesterday, ClearView Energy Partners said it could move quickly, especially in the unlikely event that Democrats win back the Senate in November.

  • That would boost the odds of a lame-duck confirmation, they note.
4. The volatile politics of rising oil prices

Here's the latest on the geopolitical blame game as crude oil prices hover at 4-year highs during election season...

Look over there: Via S&P Global Platts, "As oil prices hit new four-year highs Wednesday, the US State Department accused OPEC of withholding 1.42 million b/d of spare capacity from the world market."

  • "Citing an OPEC spare capacity estimate from the US Energy Information Administration, State said that Trump administration officials are working with OPEC to produce the spare capacity they are 'not deploying,'" they report.

Yes, but: Russian President Vladimir Putin pointed to Trump's reimposition of energy sanctions against Iran, and other U.S. moves, as a key reason for the upward trajectory.

  • "I would say, if you want to find the culprit of who's guilty that prices are growing then you should just have a look in the mirror," Putin said at a Moscow energy conference yesterday, per CNBC and other outlets.

What they're saying: Financial Times energy editor David Sheppard finds himself in reluctant agreement with Putin, writing...

While calls for self reflection from Mr Trump — even from someone the US president once thought might be a friend — are likely to go unheeded, the inescapable conclusion is the US decision to reimpose sanctions on Iran’s energy industry has upended the oil market.

The big question: Traders will be looking to see how much more oil Saudi Arabia and Russia may bring to the market in coming months to compensate for sanctions driving down Iranian exports. Reuters yesterday reported...

Russia and Saudi Arabia struck a private deal in September to raise oil output to cool rising prices and informed the United States before a meeting in Algiers with other producers, four sources familiar with the plan said.

The latest: Also per S&P Global Platts, Saudi oil minister Khalid al-Falih says that while the kingdom is ready to dip into its spare production capacity if the market needs it, he questioned whether it's necessary.

Per their story Thursday morning, al-Falih says:

"It's not going to be popular for me to say this, but the market is well supplied. Some would even say oversupplied."
5. Looking at Alaska's LNG project

Shell's decision this week to green-light a big LNG project in Canada left me wondering whether it might undercut a big export project on the drawing boards in Alaska.

The big question: The move by Shell and its partners comes amid planning for a major LNG project in Alaska — which is not as far along — that would also serve China and other Asian markets.

  • The Alaska Gasline Development Corporation yesterday was quick to put out a statement saying the parties to that project "reaffirmed" their intentions (although there has been no final investment decision).

But for a separate perspective, I asked Wood Mackenzie analysts whether Shell's move will undercut the Alaska LNG project, a joint venture between Chinese energy interests and banks, the state of Alaska and the Alaska Gasline Development Corp.

The short answer is no.

Yes, but: WoodMac analyst Cody Rice tells Axios that there's a different cloud over the project...

"The bigger threat to Alaska LNG is that it is completely dependent on financing from China and we are in the middle of a trade war. Alaska LNG project will be affected if China withdraws financing support."
"However, unless that happens, I expect steady progress towards FID for Alaska LNG, with the recent announcement of ExxonMobil's commitment to sell gas to the project representing the latest step forward."
Ben GemanAmy Harder