Oct 30, 2019

Axios Generate

By Ben Geman
Ben GemanAmy Harder

Welcome back! Today's Smart Brevity count: 1,221 words, < 5 minutes.

Situational awareness: Former Exxon CEO Rex Tillerson is slated to take the stand today in the New York state court case over whether the company misled investors about climate change, the New York Times reports.

And, Nov. 1 will mark the 1975 release date of The Band's "Northern Lights — Southern Cross," which provides today's epic intro tune...

1 big thing: Big Oil's offshore wind moves

Illustration: Eniola Odetunde/Axios

Big Oil and gas producers might finally have found a renewable energy they can fully embrace — largely because it has a lot in common with oil and gas, Axios' Amy Harder reports.

Driving the news: Up to 40% of the costs of offshore wind, including construction and maintenance of massive structures, overlap with offshore oil industry costs, a new International Energy Agency report finds.

Where it stands: While the U.S. has just one (tiny) offshore wind farm, a boom is on the horizon with a slew of companies planning big projects.

  • European oil and gas majors are leading, with Equinor, Shell and BP either already operating existing offshore wind farms or actively expressing interest in it.
  • The world’s largest offshore wind developer, Denmark-based Ørsted, used to be an oil company. It changed its name from Danish Oil and Natural Gas and dumped its fossil fuel assets two years ago.

By the numbers: About 30% of the federal offshore wind leases that the Interior Department has auctioned to date are tied to the oil industry (Equinor and Shell), according to BloombergNEF data.

Why it matters: These companies have deep pocketbooks and global reach. If they make big bets on offshore wind, which accounts for just 0.3% of global electricity today, its growth could exceed current expectations.

  • The IEA predicts it’ll increase at least 15-fold in the next 20 years.
  • “The technology of offshore wind has made a real move forward, I would say, over the last four years,” BP CEO Bob Dudley told me in a recent interview. “We would be natural investors in that if the economics were acceptable.”
  • BP operates some onshore wind farms, but no offshore ones. Dudley said BP is looking at several countries, including the U.S., but declined to offer specifics.

The big picture: Oil majors are under pressure from shareholders, lawsuits and the public to more readily acknowledge their role fueling climate change and more fully embrace a global, albeit uneven, transition to cleaner energy sources.

Between the lines: A trend among these companies is to buy stakes in separate developers already focused on clean energy, such as solar and electric vehicle charging.

  • But because of the significant crossover between offshore oil and wind, the producers are more likely to make it part of their internal portfolios.

Go deeper: Troubles lurk for America’s emerging offshore wind boom

2. Using AI to track solar deployment
Expand chart
Reproduced from Cape Analytics; Chart: Axios Visuals

Five metro areas in California have the nation's highest density of homes with solar panels, while Detroit has the lowest, according to new analysis that uses AI to track solar deployment via high-resolution aerial imagery, Axios' Orion Rummler reports.

What they did: Cape Analytics analyzed visual data on tens of millions of homes in major metro areas nationwide by working with partners like the location data company Nearmap.

  • That enabled a fine-grain analysis of residential solar power at a neighborhood level.

Why it matters: The firm intends its localized data to help policymakers better understand where solar power is being adopted and why.

  • Solar power currently provides roughly 2% of U.S. electricity, and while it's growing fast, advocates hope to see even faster deployment.

What they found: Every "super solar" neighborhood in the U.S. — those with over 500 homes and solar systems — is in California, except for one in St. Petersburg, Florida, which is 13.2% solar.

Read more

3. Completing Tesla's revenue puzzle

Tesla has revealed that revenues from U.S. sales fell sharply in the third quarter to $3.13 billion, compared to $5.13 billion in the same period last year in the company's largest market.

But, but, but: The Silicon Valley electric automaker's filing with securities regulators yesterday showed rising revenues in other areas including China and the Netherlands.

Why it matters: The document provides a look at the geographic breakdown behind the company's recently revealed performance in Q3, when it beat expectations and eked out a $143 million profit.

  • However, even as Tesla delivered a record numbers of cars, revenues are under pressure as the lower-margin Model 3 becomes its increasingly dominant product.

What they're saying: “[Elon] Musk & Co. are laser-focused on Europe and China for growth, while domestically, core demand is fading relative to other regions," Wedbush analyst Dan Ives tells Reuters.

Quick take: Falling U.S. revenues are obviously not a great sign. But the growth trend in China is promising because it's the world's largest auto market and the government there is behind EVs, although subsidies have been scaled back recently.

4. PG&E's power woes could spur on-site generation

Photo: Michele Eve Sandberg/AFP/Getty Images

The risk of wildfires in California prompted what may be the largest deliberate power cut in U.S. history. The growing frequency of such precautions could incentivize residential and commercial customers to turn to on-site power generation, writes Axios Expert Voices contributor Morgan Bazilian.

Why it matters: Such a shift could mean a boon for solar energy systems, but also a comeback for gas-powered generators in areas bearing the brunt of extreme dry weather exacerbated by climate change.

What's happening: The fires and power cuts are intertwined due to a complicated mix of factors, including ineffective management by energy companies, insufficient regulatory oversight, climate change, poor urban planning and suburban sprawl.

  • As PG&E considers power cuts over the next decade, people and businesses in California are looking at alternatives, whether solar and storage systems or more “traditional” generators that run on gasoline, diesel, liquid propane or natural gas.

Between the lines: Gas-powered generators are priced at roughly $100 per kilowatt, making them a relatively affordable, and easy-to-source, fallback.

  • Many also have multiple fuel options, making them resilient to shortages or price fluctuations.
  • Solar energy systems might also get a boost from power cuts, but the upfront costs of a solar system (especially with battery storage) can be significantly higher than those of a generator.

What to watch: Because a solar energy system requires no fuel, the equipment's lifetime cost is lower than a generator's.

  • However, the upfront cost of a solar energy system could still be more than most people or businesses are able or willing to cover when facing imminent power cuts.

Bazilian is a professor of public policy and director of the Payne Institute at the Colorado School of Mines.

5. Catch up fast: VC, earnings, climate

Batteries: The storage company ESS has raised $30 million in Series C funding from backers including the Bill Gates-led Breakthrough Energy Ventures and SoftBank Group’s SB Energy.

  • Why it matters: "Flow batteries have been one of the more prominent lithium-ion alternatives, but companies working in the space have struggled to stay afloat financially and move beyond the pilot stage," Greentech Media reports.

Big Oil: Via Bloomberg, "Total SA’s third-quarter profit beat analyst estimates and cash flow held firm, as the French giant offset lower oil and gas prices by boosting production and cutting costs."

Climate change: Per the Washington Post, "Rising seas will be much worse and more expensive to deal with than previously thought, new research finds, not because of faster changes in sea levels but because of an increase in estimates of the number of people living on low ground."

6. Number of the day: $2.3 million

That's the per-mile cost on average if PG&E were to bury power lines underground in order to lower the risk of equipment starting wildfires in high-wind events, according to the San Francisco Chronicle.

Why it matters: The massive blackouts are prompting new focus on ways to cut risk. But as the Chronicle reports...

"[T]he company has no plans to bury lines on a major scale — at least not yet — though it is implementing or considering the transition in targeted locations."

Go deeper:

Ben GemanAmy Harder