Shareholders Quiz ExxonMobil on Climate Risks
Last fall I devoted a lengthy post to the notion that future policies to address climate change expose investors in companies producing fossil fuels to a bubble in asset valuations. So I was particularly interested to see that ExxonMobil (XOM) issued a report this week responding to specific shareholder concerns along these lines. Although the term “carbon asset bubble” did not appear in XOM’s report, the latter’s references to carbon budgets and the risk of stranded assets in a low-carbon scenario were aimed directly at this emerging meme.
Unsurprisingly, ExxonMobil’s management reassured investors that, “none of our hydrocarbon reserves are now or will become ‘stranded’.” Wisely avoiding past tendencies to question interpretations of climate science, the company’s analysis appears to be grounded in mainstream views of climate change. It focuses on the costs and achievability of an extreme low-carbon scenario, and on the resilience of the company’s portfolio under various climate policies.
You Can’t Get There from Here without Breaking the Economy Again
XOM’s analysis is based on the company’s latest Outlook for Energy, an annual global forecast broadly similar to the main “New Policies” scenario of the International Energy Agency (IEA). It has fewer similarities to the IEA’s “450″ scenario that underpins carbon bubble claims. The company expects energy demand to grow at an average of about 1% annually over the next three decades–faster than population but much slower than the global economy–with increasing efficiency and a gradual shift toward lower-emission energy sources: Gas increases faster than oil and by more BTUs in total, while coal grows for a while longer but then shrinks back to current levels. Renewables grow fastest of all, producing about as much energy in 2040 as nuclear power does today. As a result of these shifts global greenhouse gas (GHG) emissions peak around 2030 and then decline gradually.
LNG As the Next Battle after Keystone
A collection of environmental groups, including the Sierra Club, Friends of the Earth and 350.org apparently just sent a letter to President Obama, urging him to require a Keystone-XL-style environmental review — presumably entailing similar delays — for the proposed Cove Point, Maryland liquefied natural gas (LNG) export terminal. Given the President’s “all of the above“ approach to energy and his recent remarks in support of wider natural gas use, the hyperbole-laden letter seems likelier to rev up the groups’ activist bases than to influence the administration’s policies.
Either way, its timing could hardly be coincidental, coming just as opinion leaders across the political spectrum have seized on LNG exports as a concrete strategy for countering Russian energy leverage over Europe in the aftermath of President Putin’s seizure of Crimea. If, as Robert Rapier and the Washington Post have suggested, the Keystone XL pipeline is the wrong battle for environmentalists, taking on LNG exports now is an even more misguided fight — at least on its merits.
Wrong on Science, Wrong on Scale
Referring to unspecified ”emerging and credible analysis”, the letter evokes the thoroughly discredited argument that shale gas, pejoratively referred to here as “fracked gas”, is as bad or worse for the environment as coal. In fact, in a similar letter sent to Mr. Obama one year ago, some of the same groups cited a 2007 paper in Environmental Science & Technology that clearly showed that, even when converted into LNG, the greenhouse gas (GHG) emissions of natural gas in electricity generation are still significantly lower than those of coal, despite the extra emissions of the liquefaction and regasification processes. The current letter also implies that emissions from shale gas are higher than those for conventional gas, a notion convincingly dispelled by last year’s University of Texas study, sponsored by the Environmental Defense Fund, that measured actual — not estimated or modeled — emissions from hundreds of gas wells at dozens of sites in the US.
Carmakers’ Persistence with Fuel Cell Cars Could Still Pay Off
Being effectively snowed in last week gave me some time to catch up on my reading backlog, including an article in the Washington Post’s “Capitol Business” edition on “Are We Ready for Hydrogen Cars?” Published in conjunction with this year’s DC Auto Show, which I missed, it mentioned a new fuel cell model from Hyundai for the California market, while providing some background on a technology that looked much more like the next big thing a decade ago than it does to many, now.
We can’t talk sensibly about the prospects for fuel cell cars to become practical without discussing the cost of fuel cell components, the infrastructure to deliver H2 to vehicles, and the suitability of various options for storing it safely onboard. However, I was surprised the article failed to mention a new factor that might do more than anything else to improve the odds for this technology: shale gas. CONTINUE»
Solar Is Growing, But Hydro Remains Much Bigger
A tweet this morning sent me on a fact-checking expedition into state-level electricity statistics. The subject was a San Jose Mercury article with the unwieldy title, “Drought threatens California’s hydroelectricity supply, but solar makes up the gap.” The article’s quote from the head of the California Energy Commission implied that solar power additions were sufficient to make up for any shortfall in hydro, historically one of the state’s biggest energy sources.
My gut reaction was to be skeptical: Solar has been growing rapidly, especially in California, but even with nearly 3,000 MW of photovoltaic (PV) and solar thermal generation in place, it’s still well short of the scale of California’s 10,000 MW of hydropower dams, especially when you consider that the latter aren’t constrained to operate only in daylight hours. However, I also know better than to respond to a claim like this without checking the data on how much energy these installations actually deliver.
The Comparison Has Shifted In the Last Year
My first look at the Energy Information Administration’s annual generation data seemed to confirm my suspicions. In 2012 California’s hydropower facilities produced 26.8 million megawatt-hours (MWh), while grid-connected solar generated just 1.4 million MWh. However, when I looked at more recent monthly data, the mismatch was much smaller, due to solar’s strong growth in the Golden State. For example, in October 2013 California solar power generated 435 MWh, or nearly 24% of hydro’s 1.8 million MWh.
Energy’s Brief Appearance in the State of the Union Address
Energy issues received scant mention in Tuesday’s State of the Union speech, consisting mainly of a victory lap for the President’s “all of the above” formulation and a somewhat contradictory promise to place even more federal lands off-limits to drilling. While browsing through reactions from various energy leaders and environmental groups I was intrigued by one critique of Mr. Obama’s approach from an environmental NGO, arguing that he should instead be placing the country’s bets on “best of the above” energy. They weren’t the only ones to object to the current approach.
It’s clear from their statement that Earthjustice has definite ideas about what’s best and what isn’t, but their comment merits further discussion. After all, who could argue against supporting the best energy sources? And isn’t all of the above just a sop to the status quo, in which a diverse array of energy sources dominated by fossil fuels provides the energy for the rest of the economy?
Obama and “All of the Above”
As President Obama noted Tuesday, his reference to an “‘all of the above’ energy strategy”–a debatable characterization in itself–referred to a key phrase in his 2012 address to Congress. It’s worth recalling the context, in an election year in which the Republican nominee was certain to focus on conventional energy when it was delivering US production growth in both oil and natural gas that couldn’t have been imagined just a few years earlier.
Ford’s Solar Car Isn’t Just A Toy
It’s car show season again. I’m not sure I’ll have time to take in the DC Auto Show later this month, but if I do, the entry I’ll be keenest to see won’t be the new Corvette “supercar” or the Acura TLX prototype, as much as those speak to my love of cars. Instead it’s the Ford “C-MAX Solar Energi” concept, an unlikely marriage of electric vehicle (EV) and solar photovoltaic panels (PV). The car previously debuted at this year’s Consumer Electronics Show in Las Vegas.
This isn’t the first time a carmaker has put solar panels on the roof of a car, even if we exclude competitions like the Solar Car Challenge and many other efforts to test how far or fast one-off solar vehicles designed by engineering students or enthusiasts could travel. However, I believe this is the first time an “OEM” has added solar panels to a production car for the purpose of providing a significant fraction of its motive power.
China’s Production of Synthetic Natural Gas Has Global Implications
In its latest Medium-Term Coal Market Report the International Energy Agency (IEA) forecasts a slowing of coal demand growth but no retreat in its global use. That won’t surprise energy realists, but the item I wasn’t expecting was the reference in the IEA press release to growing efforts in China to convert coal into liquid fuels and especially synthetic natural gas (SNG).
It’s not hard to imagine China’s planners viewing SNG as a promising avenue for addressing the severe local air pollution in that country’s major cities, but the resulting increase in CO2 emissions could be substantial. It could also affect the economics of natural gas projects around the Pacific Rim.
A Solution for China’s Smog?
Air quality in China’s cities has fallen to levels not seen in developed countries for many decades. There’s even a smartphone app to help residents and visitors avoid the worst exposures. Much of this pollution, in the form of oxides of sulfur and nitrogen and particulate matter, is the result of coal combustion in power plants. Although China is adding wind and solar power capacity at a rapid clip, after years of exporting most of their solar panel output, the scale of the country’s coal use doesn’t lend itself to easy or quick substitution by these renewables.
If It’s December It Must Be PTC Time, Again
With the end of the year fast approaching, the US wind power industry faces yet another scheduled expiration of federal tax credits for new wind turbines. The wind Production Tax Credit, or PTC, was due to expire at the end of 2012 but was extended for an additional year as part of last December’s “fiscal cliff” deal. There are no signs yet of a similar reprieve this year.
With the PTC and other energy-related “tax expenditures” subject to Congressional negotiations on tax reform, this might truly be its last hurrah in its current form. It is high time for this overly generous subsidy to be “sunsetted”, and if it’s replaced with a smarter policy emphasizing innovation, the outcome could be beneficial for taxpayers, the environment, and even the US wind energy industry.
Too Big To Last
In its 20-year history, minus a few year-long expirations in the past, the PTC has promoted tremendous growth in the US wind industry, from under 2,000 MW of installed wind capacity in 1992 to over 60,000 MW as of today. For most of its tenure, the PTC did exactly what it was intended to do: reward developers for generating increasing amounts of renewable electricity for the grid at a rate tied to inflation.
Concerns Prompted by Tesla Fires
Several vehicle fires involving Tesla’s new high-end Model S sedan have attracted a great deal of media scrutiny. Two of the three reported incidents are now under investigation by the National Highway Traffic Safety Administration (NHTSA). Yet while the company’s founder, Elon Musk, is certainly correct in indicating that gasoline vehicles are involved in the overwhelming majority of vehicle fires, including most of those resulting in fatalities, the statistical comparison he has provided in interviews got me curious enough to track down the data for myself.
How Often Do Gasoline-Powered Cars Catch Fire?
The statistic that caught my attention was that Tesla suffers an average of one fire per 6,333 cars, versus a rate of one fire per 1,350 gasoline-powered cars. I’ve been driving for four decades and have probably observed several million cars on the road in that time, yet I’ve only seen a handful that were burned-out following accidents to the extent of the recent Tesla fires. I sensed something wrong, or at least counter-intuitive about the figures cited by Tesla.
Can CO2 Emissions Become A Useful Feedstock?
A fascinating article in Chemical & Engineering News describes current German research and development work focused on developing new industrial processes for making organic chemicals from CO2. These public/private partnerships capitalize on the country’s long expertise in industrial chemistry and its highly successful chemical sector. They are also extremely timely, not just because of growing concern about steadily increasing levels of CO2 in the atmosphere, but because Germany’s “Energiewende”, which includes the rapid phase-out of nuclear power, is actually raising the country’s emissions as it relies increasingly on coal for baseload electricity generation.
In my last post I explained why it is unlikely that fossil fuels could be phased out rapidly enough to threaten the current valuations of oil and gas firms. But if carbon-based fuels will be with us for some time, that leaves open the large question of what to do about the CO2 emitted when they are burned, particularly from stationary installations like factories and power plants. The long-mooted approach of carbon capture and sequestration (CCS) still faces significant obstacles in terms of cost and social acceptance. That makes CO2 utilization efforts such as those underway in Germany especially intriguing.