Nov 15, 2018

Axios Generate

By Ben Geman
Ben GemanAmy Harder

This is cool: We interview Tim Cook, Elon Musk and Bill Gates in the tech-heavy final two episodes of “Axios on HBO,” airing the next two Sundays at 6:30pm.

Breaking Thursday in oil: Via S&P Global Platts, "Russia is committed to continuing its cooperation with OPEC, and is satisfied with current oil prices of around $70/b, President Vladimir Putin said Thursday."

Onto music. At this moment 25 years ago, Pearl Jam was atop the Billboard album charts with "Vs." so they've got today's intro tune...

1 big thing: Oil majors' power moves

Oil-and-gas giant Royal Dutch Shell and two partners rolled out a new business unit Thursday that provides a suite of energy services to buildings, such as heating and cooling, efficient lighting, controls, and electric vehicle charging.

  • The new unit called Shell Energy Inside provides services on a "subscription" basis, wherein customers pay fixed monthly expenses (we've got more on that later).

Why it matters: It's the latest wrinkle in the growing movement of some of the largest multinational oil companies — especially European-headquartered players — into the electricity space, although it remains a small part of their overall portfolios.

  • For instance, today the Norwegian oil-and-gas giant Equinor announced its latest move in renewable energy: an $82 million deal to obtain an almost 10% share in the multinational solar power company Scatec Solar ASA.
  • Reuters has more on the Equinor transaction here.

Where it stands: Shell is working with two companies in the U.S. market to offer the power services to commercial, industrial and municipal buildings...

  • Sparkfund, which specializes in providing various building energy technologies on a subscription basis.
  • GridPoint, which provides "smart building" controls, software and analytics.

Background: Shell states on its website that, in deregulated markets, the Shell Energy Inside services will be bundled with retail power from Shell Energy North America and its Texas-based subsidiary MP2 Energy.

  • Shell recently soft-launched Shell Energy Inside when VP of energy solutions Brian Davis mentioned it in an interview Greentech Media.
  • Thursday marks the formal rollout and identification of partners.

What they're saying: I chatted with Sparkfund CEO Pier LaFarge. He argued that the subscription offering is part of a broader way of imaging how energy services are provided, much the same way that, say, Netflix has shaken up entertainment.

“We have iPhone-d the delivery of energy outcomes inside the building and we keep all of the crazy behind the curtain," he said.

LaFarge said the work with Shell and GridPoint represents "business model innovation, not just technology innovation."

The big picture: Shell Energy Inside is part of Shell's wider "new energies" division, which is aimed at low-carbon fuels and power. Shell said last year that it's investing $1 billion–$2 billion per year in the new energies division until 2020.

2. PG&E stock plunges as California fires rage on
Expand chart
Data: FactSet; Chart: Naema Ahmed/Axios 

Shares of PG&E Corporation, the parent company of utility Pacific Gas and Electric Company (PG&E) which services Northern California, have lost roughly half their value amid concerns that the company could be held liable for the state's deadliest wildfire on record, Axios' Courtenay Brown reports.

What's going on: PG&E, whose power lines have been linked to 16 of last year's devastating fires, said in a regulatory filing on Tuesday that its insurance would not fully cover the cost of damages, and there would be a "material impact" on the company's financial health if it were found responsible for the Camp Fire.

  • That blaze destroyed the town of Paradise in Butte County, about 90 miles north of Sacramento.
  • It has killed at least 56 people, with more than 200 still missing.

The details: The cause of the fire has not been determined yet, but PG&E disclosed that it reported an outage on a transmission line in Butte County at 6:15am PT on Nov. 8, 18 minutes before Cal Fire said the blaze began.

  • The cost of the Camp Fire damage is projected to reach $15 billion or more, per Citi analyst Praful Mehta.
  • The company is already on the hook for $17.3 billion in potential liabilities for last year's wildfires, according to J.P. Morgan.

Read more of the full story.

Further information on the deadly wildfires in California...

California Governor Jerry Brown said on Wednesday that climate change was a major source of the wildfires that have ravaged California over the last week.

Interior Secretary Ryan Zinke, who is visiting the state, said it's not the time to "point fingers," admitting that rising temperatures was one of several contributing factors, the Associated Press reports.

Why it matters: President Trump has repeatedly pointed to "poor" forest management from the state of California as a cause of the fires, and has threatened to pull federal funding, despite scientific experts citing climate change as a major factor of the fires.

  • Meanwhile, Zinke has previously expressed doubts about humans' role in climate change and has questioned whether emissions of greenhouse gases account for the bulk of global warming.

Go deeper: Why it's so hard to issue a fire warning

3. On my screen: EVs, LNG, FERC

China: Bloomberg has a nice explainer on China's looming rules designed to spur wider EV production and sales.

  • "From 2019, major manufacturers will be punished unless they meet quotas for zero- and low-emission cars or they buy credits from other companies that exceed the quotas," they write.

Volkswagen: Via Reuters, "Volkswagen ... will convert three German factories to build electric cars, as Europe’s largest automaker by sales starts mass producing zero-emission vehicles in a major strategy shift following its emissions cheating scandal."

FERC: Later this morning, the Senate Energy and Natural Resources Committee will hear from Bernard McNamee, the White House nominee for an open GOP seat on the Federal Energy Regulatory Commission.

  • Just in time, Duke University's Nicholas Institute for Environmental Policy Solutions has a good primer on the big topics confronting FERC, including its review of gas pipeline approvals and the White House push to prop up economically struggling coal-fired and nuclear plants.

LNG: Via the Houston Chronicle, "Houston-based Cheniere Energy is expected to export its first shipment of liquefied natural gas from its  complex near Corpus Christi Thursday afternoon."

4. What a California-EPA deal might look like

The Golden Gate Bridge in Sausalito, Calif. Photo: Justin Sullivan via Getty Images

Axios Expert Voices contributor John M. DeCicco looks at the possible endgame in the fight between California and EPA over federal efforts to roll back auto emissions and mileage rules....

What's new: Formal public reaction to this plan was due on Oct. 26, and the comments show that none of the major stakeholders support the administration's proposal. While the prospect of a compromise had long looked slim, it now appears that the makings of a deal might be on the table.

The key parties:

  • California, allied states and major green groups have prepared to defend existing targets, with the Environmental Defense Fund calling the administration's proposal "arbitrary, capricious and illegal."
  • Automakers started this fight and praise the administration for reversing the Obama-era decisions. But even they say the proposal is too weak, and want to keep the peace by compromising on a single, national program that still offers regulatory relief.

Automakers have been vague about their preferred targets, stipulating only that they be in line with market realities. California has said it's open to greater flexibility, but insists on strong progress toward long-term greenhouse gas reduction goals, including rapid electrification of the state's vehicle fleet.

Between the lines: The key to a compromise may lie in regulatory credits. These would enable automakers to meet standards that look increasingly stringent on paper despite being weaker in practice. Such credits would give companies extra "brownie points" for adding popular technologies to their cars, whether or not they actually cut emissions.

  • The Auto Alliance calls for a "significant expansion" of credits for plug-in hybrid electric and battery electric vehicles as well as additional credits for gasoline-only hybrids across the entire fleet.
  • Automakers also want a raft of new credits for assorted safety technologies they claim will save fuel, such as driver assistance and automation features.

DeCicco is a research professor at the University of Michigan Energy Institute.

5. How energy subscription services work

JW Marriott Marco Island Beach Resort on Marco Island, Florida. Photo: Creative Touch Imaging Ltd./NurPhoto via Getty Images

Let's return to the topic of energy services on a subscription basis. Axios Expert Voices contributor Brandon Hurlbut, who is on Sparkfund's board, writes....

Commercial and residential buildings account for 39% of carbon emissions in the U.S., making them a critical site for reducing the country’s energy consumption and tackling climate change.

One way to reduce their carbon footprint is the subscription model, also known as “as-a-service,” whereby a central entity owns and upgrades equipment for customers.

How it works: Subscription companies purchase, install and maintain energy-efficient technologies such as HVAC and LED lighting in a customer’s building.

  • The customer saves money on the expense of purchasing and maintaining the equipment over the long term and, because the equipment is energy efficient, on their utility bill.

Where it stands: The subscription energy industry is still nascent. But according to an August 2018 Bloomberg New Energy Finance report, as-a-service agreements are “emerging as the most suitable framework for delivering” energy infrastructure, with several companies seeing early success.

  • The subscription model is gaining traction because it addresses the key barriers to adoption of more efficient energy technology — namely, spending time and capital upfront on equipment that doesn’t fuel a company's core business.

Go deeper: Read the full piece in the Axios stream.

Hurlbut is the co-founder of Boundary Stone Partners and former DOE chief of staff. 

6. Quote of the day
"I think that focusing too much on temperature targets feeds a counterproductive fatalism."

Who said it: Rutgers University climate scientist Robert Kopp in this interview posted by the school's news service.

Why it matters: Kopp's remarks follow a major UN scientific report last month that laid out the dire effects of allowing warming greater than 1.5°C above pre-industrial levels — and the damage already felt at lower levels.

Here's a little more of what he said...

"[C]limate change is not a binary thing. It’s not the case that 1.4 degrees Celsius of warming is fine but 1.6 degrees is catastrophic."
"Every incremental increase in emissions leads to an incremental increase in temperature and in the risks that society and ecosystems face. Every bit we do to reduce warming reduces that risk."
Ben GemanAmy Harder