Jul 30, 2020

Axios Generate

Good morning, I'm filling in while Ben Geman takes a well-deserved mental health day, a nice perk Axios is giving each of its employees during the pandemic.

Today's Smart Brevity count: 1,274 words, 5 minutes.

1 big thing: The long energy-innovation road
Adapted from IEA; Note: We simplified three names and some of these technologies are commercial. More info below. Chart: Andrew Witherspoon/Axios

Scaling up technologies key to combating climate change will take anywhere between 18 years to more than 100, the International Energy Agency found in a recent report.

Why it matters: Scientists say the world must find ways to drastically cut heat-trapping emissions over the next 30 years, but the path of innovating and scaling is stubbornly long, even in the best of scenarios.

How it works: The IEA is predicting how long a handful of nascent technologies, like long-haul electric trucks and different kinds of tech capturing carbon dioxide emissions, will take to go from an initial prototype project to capturing 1% market share of whatever country moves first.

  • IEA, a Paris-based intergovernmental research group, analyzed past energy-technology development pathways to determine the possible timeline for these ones (see accompanying chart).
  • These timelines are according to a specific scenario IEA modeled that assumes the world immediately begins on a pathway of reaching net-zero greenhouse gas emissions by 2070. (Some countries and companies are setting net-zero goals by 2050, which would compel an even faster timeline.)
  • The world is not currently on either pathway. Under the status quo, tech innovation will take even longer.
  • “Factors that have in the past led to discontinuous learning, including a lack of financial resources, fossil fuel price risk and political instability, are assumed not to affect innovation in the future,” the report states.

The intrigue: The technologies included on this chart are among the trickiest to make clean, such as industrial activities and long-haul transportation. The IEA has a similar chart on more developed tech, like wind, solar and nuclear power, on page 76 of its report.

Flashback: Even successful technology deployments, like solar photovoltaic and batteries in electric vehicles, took about three decades from their first prototype to time of commercialization, the IEA finds.

Yes, but: The future is notoriously hard to predict. For its part, the IEA is increasingly facing scrutiny from climate advocates and some climate journalism organizations for not being critical enough in its analyses of the role played by fossil fuels.

What’s next: IEA is releasing more data on this topic in a report in September.

Of note: For the chart, Axios simplified three names: hydrogen-based chemicals = electrolytic hydrogen-based methanol; carbon capture in steelmaking = enhanced smelt reduction steel with CCUS; and electric heavy-duty trucks = battery-electric heavy-duty trucks.

  • Within the technologies displayed, battery-electric heavy-duty trucks, hydrogen fuel cell-based cars, and carbon capture in natural gas-based steelmaking are already commercial.

Go deeper: Pandemic worsening lack of clean-energy innovation

2. Oil giants report profits despite price collapse

Shell and Total SA announced mammoth earnings declines Thursday that reflect the pandemic's toll on energy prices and demand, but the companies nonetheless beat expectations and eked out profits, Ben reports.

Driving the news: Shell announced second-quarter adjusted net earnings of $638 million, an 82% decline from the same period last year.

  • The big drop stems from lower prices and sales, and lower refining margins, but it was partly offset by gains in their trading divisions and cost cuts, Shell said.
  • Total said its profit fell to $126 million, down 96% from the same quarter in 2019 — and like Shell, trading performance cushioned steep losses elsewhere.

The intrigue: "Although better known for their oil fields, refineries and filling stations, Shell, Total and also BP Plc run huge in-house oil trading businesses that can handle more than 25 million barrels a day of crude and products," Bloomberg reports.

Why it matters: The quarterly numbers are one marker of how COVID-19 — as well as climate policies, activist pressure and other forces — is shaking up the sector's outlook in the near- and long-term.

Yes, but: Shell's profits don't include a $16.8 billion write-down on the value of its assets, though Shell had previously warned it could have been up to $22 billion, due to downward revisions of future price forecasts.

  • And Total yesterday announced a $8.1 billion write-down (more on that below).

What's next: ExxonMobil and Chevron report Q2 earnings Friday before markets open.

Go deeper:

3. Parsing Trump's Texas speech

Illustration: Eniola Odetunde/Axios

Let's examine a few key parts of President Trump's speech Wednesday in Texas oil country.

What he said: He helped stave off an even worse crisis for the oil industry early in the pandemic.

  • Reality check: This is largely true, though as Ben wrote at that time, a lot of other factors had to come together too.

What he said: Joe Biden would ban fracking, a common refrain you can expect to hear more and more as the election nears.

  • Reality check: Although Biden said during a debate early this year fossil fuels would be "eliminated" under his leadership, his official campaign position does not include ban on fracking.

What he said: The oil and gas industry in Texas, New Mexico and other energy-producing states would cease to exist if Biden wins.

  • Reality check: Biden's plan would ban leases of new fossil fuel production on federal lands, which would affect some states a lot (like New Mexico), but most oil and gas development is on private lands.

What he said: Biden is going to lose Texas in the presidential race.

What he said: He wanted his energy secretary to buy oil for the nation's strategic reserves when the price briefly went below zero.

  • My thought bubble: That comment probably didn't sit well with the oil-industry crowd, who would much rather not sell their oil by paying people for it.

Go deeper: Texas oil industry not "out of the woods" despite Trump boasts (Washington Examiner)

4. Catch up fast: Disclose, consume, write down

Bank of America and Citi separately announced Wednesday they're joining the Partnership for Carbon Accounting, a global consortium of financial companies that agrees to count the heat-trapping emissions stemming from their investments.

  • Go deeper: Politico had a good deep dive on Morgan Stanley's move from a couple weeks ago.

The pandemic has pushed energy consumption to a 30-year low (AP)

  • By the numbers: "Overall U.S. energy consumption dropped 14% during April compared to a year earlier, the energy administration said," AP writes, citing Energy Information Administration data. "That’s the lowest monthly level since 1989 and the largest decrease ever recorded in data that’s been collected since 1973."

French oil giant Total announced Tuesday that it's writing down $8.1 billion of its assets, chiefly its Canadian oil sands. (WSJ)

  • The intrigue: This is the crude musical chairs playing out as I wrote about last September. Canada's oil sands, more carbon-intensive and expensive than other types of oil, is the first to go in a world addressing climate change.
5. Bucking trend, offshore wind builds with unions

Illustration: Annelise Capossela/Axios

Unions are going offshore to find a receptive renewable energy.

Driving the news: America’s nascent offshore wind industry, which requires uniquely complex infrastructure, is being built out with strong labor agreements that were largely absent from their onshore counterparts.

  • “Things are changing with offshore wind, which is going to be a big job creator on the East Coast,” says Phil Jordan, vice president at BW Research.
  • “Most of those projects are going to be or already have been under project labor agreements, so a much higher percentage of those workers will be union members.”

The intrigue: In my recent column on how Biden’s climate plan is trying to bring unions into clean-energy industries, the numerous union officials, state officials and other experts I spoke with said the main exception to the trend that renewable energy lags on union representation was offshore wind.

How it works: They said the reason is threefold: Local government policy supports it (especially in New York), union-friendly European firms are leading development, and the inherent complex nature of the tech calls for it.

  • “There is no doubt an offshore wind project is a large infrastructure to the greatest degree,” Doreen Harris, acting director of New York State Energy Research and Development Authority, told me recently.
  • “The complexity and need for safety is in even sharper focus for the offshore wind industry than the land-based [wind] might be.”

Go deeper: Biden’s climate plan tries to bring unions into clean energy