Jul 27, 2020

Axios Generate

By Ben Geman
Ben GemanAmy Harder

Good morning. My latest Harder Line column, which you can read in full at this link, dives into how support is growing all over the world for hydrogen-fueled energy.

  • I'll share a glimpse of that, and then Ben Geman will get you up to speed on the rest of today's news. 
  • Today's Smart Brevity count: 1,358 words, 5 minutes.
1 big thing: Global support builds for hydrogen

Illustration: Aïda Amer/Axios

As the world seeks to rebuild from the coronavirus pandemic, support is pouring in for hydrogen energy to cut carbon emissions and create jobs.

Why it matters: The obscure energy source could help tackle climate change in the thorniest parts of the global energy system, like shipping and power storage. But it’s prohibitively expensive and would need lots of government support to get off the ground.

Where it stands: Of the $54 billion in economic stimulus funding approved in countries around the world (mostly in Europe) that’s going toward clean energy, 19% of that is for hydrogen. That’s second only to electrified transportation, according to BloombergNEF.

“I have rarely seen, if ever, any technology that enjoys so much political backing around the world. Countries who have completely different views on energy and climate all [jointly] saying that hydrogen is a key clean energy technology.”
— Fatih Birol, executive director, International Energy Agency

The intrigue: Everyone from Joe Biden, the Democrats’ presumptive presidential nominee, to Saudi Aramco, the world’s largest oil company, is ostensibly on board with hydrogen.

  • Biden’s recently expanded climate and energy plan supports using renewable energy to make “carbon-free hydrogen” at the same cost it does from making it with natural gas.
  • The Hydrogen Council, a consortium launched at the 2017 World Economic Forum in Davos, Switzerland, started with 13 members and now has more than 80 members. They include Saudi Aramco and a hodgepodge of auto, oil and gas, and other industrial companies.

But, but, but: Environmental scrutiny awaits, and the jobs benefit is not coming anytime soon.

What they're saying: Although the Sierra Club doesn't have an official position on hydrogen yet, its director of global climate policy, John Coequyt, says the group would likely only support hydrogen made purely with renewable energy, not natural gas with captured CO2, which is where a lot of support from industry lies.

  • Experts in this area use different colors to describe how clean hydrogen is. (Green is cleanest to denote that it’s coming from renewable energy, gray is dirtiest, etc.)
  • “People don’t understand hydrogen, let alone the … colors we are using to describe it,” Coequyt said. “It would be very possible to see a situation where people think they’re getting one thing, but for a very long time they get a different thing even if eventually it gets transitioned.”

Plus, jobs won’t immediately be created with hydrogen, according to Esben Hegnsholt, global energy transition team leader at the Boston Consulting Group.

  • It’s a longer term economic strategy, which is generally good, but not particularly helpful today with jobs lost in the pandemic, he points out.

Read more

2. Rough earnings reports loom for Big Oil
Data: Company earnings reports; Chart: Andrew Witherspoon/Axios

This week brings the heart of Big Oil's earnings season and it's not going to be a pretty picture for the industry.

What's next: European giants Shell and Total report Thursday, while U.S.-based majors ExxonMobil and Chevron report Friday (you can see their last two years of results above).

Why it matters: The second-quarter results will bear the heavy imprint of the collapse in demand and prices in recent months — and could reveal more about steps that companies are taking in response.

What they're saying: "Our team has [forecast] earnings for 72 quarters and 2Q20 seems the most difficult of them," Jefferies analyst Jason Gammel said in a recent note, per S&P Global Platts.

The big picture: "The problem is that there is almost nowhere to hide," Nick Cunningham writes at Oilprice.com.

  • Typically low crude prices are offset by majors' refining assets aided by cheaper inputs and heavier demand when fuel costs are low, he points out.
  • But lockdowns crushed demand, and "as a result, refining margins collapsed," Cunningham writes. Petrochemical and gas markets were battered too.

Catch up fast: Results from big oilfield services companies last week already show the pandemic's toll.

  • On Friday Schlumberger posted a $3.4 billion loss and said it's cutting 21,000 jobs. The Houston Chronicle has more.
3. Breaking: BMW's big electric push

The BMW Group said Monday that it will make sustainability "central to the company’s strategic direction" as it rolled out new climate goals and revealed fresh details about its electric lineup.

Driving the news: The German automaker said it's setting emissions targets for 2030 that apply to vehicles' "entire lifecycle," including supply chains, production and use.

  • "The aim is to significantly reduce CO2 emissions per vehicle by at least one third across the entire spectrum," the company said.
  • BMW also announced that it will offer electric versions of its high-volume X1 SUV and 5-series sedan (though, as Bloomberg notes, it didn't provide a timeline for those models).

The big picture: These join several other EVs previously announced by BMW, which aims to have five available by the end of 2021.

  • Overall, the company plans to be selling 25 models with some level of electrification by 2023, with half of them fully battery-powered, and hopes to have 7 million electrified cars on the road in 10 years.

The intrigue: Reuters points out that EU emissions regulations are pushing the continent's automakers toward EVs.

******

Speaking of EVs, here are two pieces of startup news...

1. Rivian revealed launch dates for its long-awaited SUV and pickup, which were supposed to begin deliveries this year but were interrupted by the pandemic.

  • The truck, R1T, will launch in June, while the SUV, R1S, will arrive in August.
  • Why it matters: The well-funded Rivian has deep-pocketed backers including Ford and Amazon, and is among the best positioned startups to make the leap into commercial production (but stay tuned of course).
  • The intrigue: Jalopnik reports that the R1T is "a pretty important vehicle not only for Rivian but also for Ford, which is using Rivian’s skateboard platform as the basis for the upcoming electric F-150."

2. Lordstown Motors formally registered to lobby, according to a recent Lobbying Disclosure Act filing.

  • The company is planning to build an electric pickup at a former GM plant in Ohio.
  • Its advocacy addresses "electric vehicles, electric charging infrastructure, [and] transportation," the filing states.
4. The politics of Tesla's gift to Texas

Illustration: Sarah Grillo/Axios

Tesla's decision to build a $1 billion factory in Texas is a good bit of economic news for a state that's suffering in the throes of the pandemic, Axios' Joann Muller reports in her Navigate newsletter.

Why it matters: The creation of 5,000 new manufacturing jobs near Austin comes as the state's ongoing coronavirus outbreak threatens to overwhelm hospital systems and tears at the economy.

  • It's also an election-year gift that could feed competing political agendas.

Context: In Texas, a red state where the presidential race is viewed as a tossup, per a recent Quinnipiac University poll, people care more about the economy than the pandemic or racial inequality.

  • On this issue, President Trump has the advantage, leading Biden by a 16-point margin (56% to 40%), according to Quinnipiac.

What to watch: Both candidates could try to use Tesla's move to bolster their economic narratives.

  • Trump often takes credit for companies' decisions to add jobs or expand U.S. production, while attacking CEOs who do the opposite.
  • Last week he sought to capitalize on Tesla's decision.

The other side: Democrat Joe Biden, meanwhile, can point to Tesla's factory as a symbol of the types of clean energy jobs he'll promote if elected.

Read more

5. Catch up fast: markets, Trump, mining, Deutsche Bank

Oil and gas: "Reliance Industries Ltd. toppled Exxon Mobil Corp. to become the world’s largest energy company after Saudi Aramco, as investors piled into the conglomerate lured by the Indian firm’s digital and retail forays." (Bloomberg)

White House: "During the stop Wednesday [July 29] at Double Eagle Energy in the west Texas city of Midland, Trump will discuss how the U.S. is achieving energy dominance by cutting regulations, simplifying permitting and encouraging private investment in energy infrastructure, the White House said." (AP)

Policy: "Trump officials concluded Friday that a proposed gold and copper mine in Alaska — which would be the largest in North America — would not pose serious environmental risks, a sharp reversal from a finding by the Obama administration that it would permanently harm the region’s prized sockeye salmon." (Washington Post)

Finance: "Deutsche Bank, in a revamp of its policies for fossil fuels, said on Monday that it would end business activities worldwide related to coal mining by 2025 at the latest." (Reuters)

Ben GemanAmy Harder