Sep 13, 2018

Axios Generate

By Ben Geman
Ben GemanAmy Harder

Good morning and welcome back.

Situational awareness: We're pretty worried about Hurricane Florence arriving at the doorstep of the Carolinas. Check out the Axios stream for updates on the storm and info on why it's so dangerous. The Weather Channel has a guide to providing aid to those affected here.

Finally, at this moment in 1985, the Dire Straits was midway through a deservedly long run atop the Billboard album charts with "Brothers in Arms," providing today's intro tune...

1 big thing: A "crucial period" for oil markets
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The International Energy Agency said Thursday that the global crude market is entering a "very crucial period" as U.S. sanctions against Iran loom and the country's exports have already dropped. Oh, and Venezuela is still collapsing.

The big picture: There's certainly enough crude from elsewhere sloshing around right now.

  • OPEC supplies actually hit a 9-month high of 32.6 million barrels per day last month, and the ramp-up "outweighed a substantial reduction in Iran and a further fall in Venezuela," IEA said in its monthly oil market report.
  • In fact, global supplies hit a record 100 million barrels per day in August.

Yes, but: The Paris-based agency still sees the market "tightening up." And there are uncertainties about where additional barrels will come from if Venezuela and Iranian supplies keep falling as expected.

  • OPEC countries have a combined 2.7 million barrels per day in spare capacity, but it's unclear how much is readily available.
  • Brazilian production has not grown as much as expected.
  • U.S. production is growing (more on that below), but infrastructure constraints could limit how much companies can boost output beyond existing plans.
  • Libyan production has been up lately, but it's a fragile place.

The bottom line: Things could get rocky and oil prices, which for Brent have been in the $70–$80 range since April, could be "tested." IEA states:

The situation in Venezuela could deteriorate even faster, strife could return to Libya and the 53 days to 4 November will reveal more decisions taken by countries and companies with respect to Iranian oil purchases. It remains to be seen if other producers decide to increase their production.

State of the market: Traders seem to be responding to the currently robust supply picture. Per MarketWatch:

Oil futures fell in early Thursday trade as a report showed production among OPEC members surged in August, pushing global inventories to a record.

Go deeper: Reuters breaks down the IEA report in detail here.

2. What Hurricane Florence means for energy
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Data: National Hurricane Center; Chart: Chris Canipe and Lazaro Gamio/Axios

Situational awareness: "Duke Energy said Wednesday it expects between 1 million and 3 million of its customers in the Carolinas will lose power because of Hurricane Florence and its aftermath," the Charlotte Observer reports.

And via the Washington Post: "Federal officials warned that the millions of people in Florence’s sights could be without electricity for weeks, if high winds down power lines and massive rainfall floods equipment."

Axios' Amy Harder reports ... Several nuclear power plants in North Carolina and nearby states are bracing for the storm, including a plant right in its path with the same design as the Japanese reactors that melted down in 2011 when a tsunami knocked out backup power.

Why it matters: While the probability is very low, the risk of a storm-fueled accident at a nuclear plant could be devastating and threaten the health of tens of thousands of people living nearby.

Between the lines: All kinds of energy production and generation get attention only when things could go wrong or have gone wrong — but particularly nuclear given its controversial reputation.

It’s worth pointing out that nuclear plants have "consistently proven hardy against hurricanes," according to an in-depth News & Observer piece published Wednesday.

Go deeper: Read Amy's full piece in the Axios stream.

3. Chart of the day: U.S. is tops in oil output

Screenshot of EIA report on crude oil production estimates

It happened! Preliminary data show that the U.S. likely overtook Russia and Saudi Arabia as the world's largest crude oil producer this year, the Energy Information Administration said in a short report.

Why it matters: While analysts have been expecting this moment, it's nonetheless a threshold that starkly signals the remarkable shale-driven U.S. production boom over the last decade.

  • The chart above tells the story of the surge. U.S. production is at record levels and averaged 10.9 million barrels per day last month, according to EIA.

Yes, but: Remember the Saudis have significant spare production capacity (the International Energy Agency pegs it at roughly 1.5 million bpd), so production levels should not be confused with what a country could pump.

  • The Saudis and Russians both limited their output during the production-cutting agreement.
  • And for all the White House talk of "energy dominance," U.S. energy costs remains tethered to global markets and the U.S. remains a major crude importer.

The details: In June and last month, U.S. production exceeded Russian output for the first time since 1999, according to EIA, while the U.S. overtook the Saudis early this year for the first time in over two decades.

4. The yin-yang of European renewables

Two items from the continent offer contrasting views on two different types of renewables...

Wind: The trade group WindEurope said Thursday in a new report that 87 gigawatts of new wind power capacity is slated to be installed there over the next five years, with the continent reaching 258 gigawatts of installed capacity by 2022.

  • The big picture: Europe will be home to a quarter of all the world's capacity additions over the next five years, the group said in a summary of its forecast.
  • Yes, but: Giles Dickson, the group's CEO, said the growth stems from "yesterday's decisions" and the outlook for new investment is murkier.
  • "Most governments still haven’t clarified their plans for new wind farms up to 2030. And partly because of this it’s getting harder to secure permits for new wind farms," he said.
  • Go deeper: Bloomberg has more on the new data here.

Biomass: A new paper argues that the European Union's 2030 renewables targets aimed at increasing deployment could actually be a setback for climate policy, thanks to way that biomass is credited.

  • Why it matters: "The result could consume quantities of wood equal to all Europe’s wood harvests, greatly increase carbon in the air for decades, and set a dangerous global example," states a summary of the research in the journal Nature Communications.
  • Go deeper: The Independent explores the research here.
5. A glass half-full for U.S. solar
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U.S. solar growth slowed down last quarter as the effects of import tariffs ripple through the market, but there are signs of a "turnaround" as well, according to a new industry report.

Why it matters: It provides a snapshot of how the solar market is responding to tariffs on panel imports that the White House imposed earlier this year.

By the numbers: The 2.3 gigawatts of new capacity installed in the June–August stretch was a 9% year-over-year decrease, according to data jointly released by Wood Mackenzie Power & Renewables and the Solar Energy Industries Association.

What's next: "Looking ahead though, the report forecasts an acceleration of solar deployment in the second half of 2018 driven by utility-scale projects. According to the report, 8.5 gigawatts of utility PV projects were procured in the first six months of the year, the most ever procured in that timeframe," a summary of the data states.

6. On my screen: lobbying, climate, EVs

Saudi Arabia: Via Bloomberg, the Saudis have tapped former Solicitor General Ted Olson to lobby against longshot legislation that would go after OPEC with U.S. anti-trust laws.

  • Threat level: It's a bill that has been rattling around Congress for almost two decades and is commonly called "NOPEC," but the politics are a little different under President Trump. Bloomberg notes in the article that the Saudis are "taking no chances."
  • "Although Congress has debated various forms of legislation targeting OPEC since 2000, Presidents George W. Bush and Barack Obama threatened to use their veto power to prevent it becoming law. President Donald Trump has repeatedly attacked the cartel both before after being elected," they report.

Climate change: Per the Wall Street Journal, "New York City will invest $4 billion of its pension funds into climate-change solutions like renewable energy and clean water over the next three years, more than doubling its current investment, according to city officials."

Electric vehicles: The Guardian looks at one of the announcements at the big Global Climate Action Summit in San Francisco.

  • "A group of 26 city, business and regional or state leaders, representing [about 122 million] people around the world, have used the Global Climate Action Summit to call for car makers to quicken the pace of electric vehicle rollout," they report.
7. One cool thing
Screenshot from Michael Webber's new Twitter feed

Energy expert Michael Webber of UT-Austin has launched the "Today in Energy History" Twitter feed. It's designed to be a wide-ranging look at the topic, and already...

  • The first tweet, on Monday, marked Chevron's 1879 founding date.
  • The second marked Sept. 11 at the Energy Department.
  • The third marked the 2007 anniversary of DOE's office of Science launching a website about the Large Hadron Collider.

What they're saying: "There is a thriving #EnergyTwitter community online, we wanted to find a way to contribute on a regular basis," Webber said in an email.

"There are various influential dates in history that are important to the energy world. We wanted to provide a platform that consolidated these facts in a fun, convenient, way that served as a medium to learn about energy history."
Ben GemanAmy Harder