Mar 15, 2019

Axios Generate

By Ben Geman
Ben GemanAmy Harder

Situational awareness: The Securities and Exchange Commission alleges Volkswagen committed "massive fraud" from at least 2007–2015 in its diesel emissions cheating scandal.

And, this is our final edition from a mammoth energy conference in Houston. And that means we one more intro tune from "Dazed and Confused," a terrific movie set in Texas. Here we go...

1 big thing: Why offshore wind is taking off

Illustration: Lazaro Gamio/Axios

HOUSTON — Power from offshore wind is finally poised for liftoff in the United States.

Why it matters: The U.S. has long been a laggard, but that's poised to change thanks to a convergence of forces that analysts see bringing enough coastal wind online over the next decade to power millions of homes.

What's happening: A huge energy conference here in the nation's oil-and-gas capital offers a window into what's prompting giant energy companies to plan multibillion dollar investments. It's a story of...

  • Atlantic Coast states moving ahead with zero-emissions power procurement policies.
  • Oil-and-gas majors expanding their low-carbon power portfolios.
  • Technology evolution and falling costs.
  • The Trump administration supporting the development even as it abandons Obama-era climate programs.

What they're saying: “The missing piece for some time was actually an interest from the states up along the coast to acquire this power from this industry,” says Christer af Geijerstam, who heads U.S. wind efforts for the oil-and-gas giant Equinor.

  • “That’s where we have seen the significant shift the last 2-3 years being led by New York and Massachusetts,” he tells Axios while at the big CERAWeek by IHS Markit conference.

ICYMI: In December, Equinor was among the winning bidders in a federal auction of development sites that are off the Massachusetts coast.

The big picture: IHS Markit's current forecast sees 7 gigawatts of offshore wind coming online in the U.S. by 2030, up from almost nothing today. But that estimate could rise.

  • “We will be looking carefully at what the outcome of solicitations in Massachusetts and New Jersey and New York is going to be,” IHS associate director Max Cohen says.
  • Bloomberg NEF already projects 11.4 gigawatts of capacity by 2030. They've upped their estimate thanks to a combination of specific solicitations and long-term targets by state governments in Virginia, New Jersey and elsewhere.

Where it stands: Equinor is among several deep-pocketed companies in the space planning projects. Here are some other players...

  • Danish wind giant Orsted bought the U.S. firm Deepwater Wind last year.
  • A joint venture between Shell and EDP also had a winning bid in the recent Massachusetts sale. “The U.S. has a magnificent wind resource right next to a large population and highly densely populated areas,” Enrique Alvarez Uria of EDP Renewables said at a panel here yesterday.
  • Vineyard Wind, co-owned by Copenhagen Infrastructure Partners and Iberdrola's Avangrid Renewables, snapped up a lease that adds to their plans for a separate project in the region.

What we're hearing: One real but hard to quantify factor is the role shareholder pressure plays on these decisions.

  • “The changing ESG [environmental, social and governance] landscape is really going to move capital,” Jonathon Kaufman, the co-head of the power and renewables group at Credit Suisse, said at a separate panel discussion yesterday.

The intrigue: Offshore wind has long been a big thing in Europe. But one irony of U.S. delay into this sector is the upside of being a late mover — lower costs.

Go deeper: Read the full story.

2. Tesla unveils the Model Y
Tesla's Model Y is newest addition to the lineup. Photo: Tesla

Tesla CEO Elon Musk unveiled the company's latest electric car, a small SUV dubbed Model Y, at a jam-packed event Thursday night, Axios' Joann Muller writes.

Why it matters: The Model Y is a logical next step for Tesla, but by the time it goes on sale in fall 2020, it'll face more competition. Ford trolled Tesla just ahead of the event with a tweet saying "hold your horses" — a clear reference to its Mustang-inspired electric performance SUV coming in 2020.

Details: The Model Y, which will seat up to 7, includes a panoramic glass roof and 66 cubic feet of space.

  • With the battery under the floor and a low center of gravity, "it will look like an SUV but drive like a sports car," Musk said, with a 0-to-60 mph time of 3.5 seconds.
  • The long-range 300-mile version goes on sale in fall 2020, for about $47,000.
  • The standard version, with a smaller battery, will follow in 2021 and cost $39,000.

But, but, but: Tesla said nothing about where it will built the Model Y or how it will afford the capital investment the new model will require. Just last week, Musk said the company would close many of its stores and cut its workforce for the third time this year.

Our thought bubble, per Joann: Will this deflect attention from some of the company's current troubles?

3. Hickenlooper clear on "urgency" but not policy

HOUSTON — Democratic White House hopeful John Hickenlooper, the former Colorado governor, told energy executives here that "urgency" is needed to tackle climate change but steered clear of offering policy specifics.

The big picture: Hickenlooper casts himself as a problem-solving "doer" as he seeks the moderate lane in the progressive field. He often touts the methane regulation deal he forged as governor of an oil-and-gas state.

Hickenlooper praised the Green New Deal while keeping some distance from it. "I support the urgency of the Green New Deal," he said onstage at CERAWeek, one of many times he used the "u" word.

  • "It's a very ambitious and maybe excessively ambitious goal," he said Thursday evening.
  • "I think the point of it is the sense of urgency that we have got to go hard and fast, and it is going to take all the tools in the toolkit to get to a cleaner economy."

He said the "urgency" stems partly from feedback loops in which warming frees methane frozen in the tundra in Canada, Alaska and elsewhere.

Where it stands: I asked him for policy plans and he demurred, saying his platform isn't ready. But Hickenlooper offered reporters some wide-angle thoughts on the sidelines of the event.

  • He noted some U.S. emissions reductions have come because manufacturing has gone abroad. “That’s not how we want to win,” Hickenlooper said.
  • “I think most people would say, well if we are going to build stuff, we would rather have the energy consumption here where we control it and make sure it’s greener than having that production move to Asia or the Middle East or wherever,” he added.
4. GOP lawmaker likens GND to "genocide"

A senior House Republican equated the GND with genocide on Thursday morning, Axios' Amy Harder reports.

Driving the news: Rep. Rob Bishop (R-Utah) said the ideas behind the progressive policy are "tantamount to genocide."

  • "That may be an overstatement but not by a whole lot," Bishop, the top Republican on the Natural Resources Committee, said at a press conference Thursday on Capitol Hill.

Reality check: The GND is not at all related to genocide, which is defined as "the deliberate killing of a large group of people, especially those of a particular ethnic group or nation."

Read the full story.

What's new: Bishop walked back comments in a statement to the Salt Lake Tribune, saying they were "obviously not meant literally," while reiterating his criticisms of GND.

Meanwhile, newly minted White House hopeful Beto O'Rourke offered a pretty full-throated endorsement at a campaign stop in Iowa. Via CNBC...

“So, some will criticize the Green New Deal for being too bold, or being unmanageable,” O’Rourke said. “But, I’ll tell you what. I haven’t seen anything better that addresses this singular crisis that we face, a crisis that could, at its worst, lead to extinction.”

What's next: Roll Call reports that Senate Majority Leader Mitch McConnell has set the procedural gears turning to bring up the GND resolution for a test vote the week of March 25.

5. Big Oil moves on climate

Breaking Friday: Via the Financial Times, "Italian energy major ENI will plant a forest four times the size of Wales as part of plans to cut greenhouse gas emissions in its exploration and production business to “net zero” by 2030 — the latest in a string of new climate targets set by oil and gas companies this week.

Shell: Per Reuters, "Royal Dutch Shell said on Thursday it planned to reduce carbon emissions from its oil and gas operations and product sales by 2 percent to 3 percent during the 2016-2021 period, the first time the company has issued carbon footprint targets."

The big picture: The announcements are part of Big Oil's wider moves on climate, even as hydrocarbons remain their dominant investments.

So that brings me to Amy's interview with Equinor CEO Eldar Sætre, who chatted with Amy about the evolution of their portfolio, trade group memberships and more. Here's a snippet...

  • Amy: How much time do you spend on climate change?
  • Sætre: “A lot. Externally, it’s more than 50%. Go back, five, 10 years ago, it’s a big increase. It’s also a big part of the dialogue with investors, almost just in the last year.”

Go deeper: Read Amy's full interview with Sætre.

6. On my screen: Oil markets, FERC, coal

FERC: Utility Dive's Gavin Bade noticed an evolution in the posture of Federal Energy Regulatory Commission chairman Neil Chatterjee, who's now emphasizing transmission investment as FERC weighs new steps to enhance grid resilience.

  • "The emphasis on transmission is new for Chatterjee, who has focused on the ability of plants to store fuel onsite for grid resilience," Utility Dive writes.

Oil: Via CNBC, "A nationwide power failure in crisis-stricken Venezuela could trigger 'serious disruption' to the oil market, the International Energy Agency (IEA) warned on Friday, but OPEC kingpin Saudi Arabia should have the means to offset any further production woes in Caracas.

Coal: "The latest sign that coal’s losing its sway in the U.S. power market: Vistra Energy Corp. — one of Texas’s largest power generators and coal plant owners -- says the fossil fuel’s days are numbered," Bloomberg reports from CERAWeek.

Ben GemanAmy Harder

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