Welcome back to Energy Source.
Oil markets remain relatively calm just over a week after Opec+ sprang its spring surprise. David Sheppard and I wrote about the cuts, and their significance, in a Big Read over the weekend. Do please have a look and write with any comments.
Also worth your time is this dispatch from Aberdeen, once the flourishing capital of the UK’s oil and gas industry but now a city contending with its place in an energy transition.
I’m in the market for a different car — one that can schlep a dog and teenage kids to the Catskills occasionally and New Jersey sports grounds frequently. I’d like to go electric, for the obvious reasons. But EVs remain expensive and after the recent ruling from the US government, even fewer of them qualify for the new tax breaks on offer in the Inflation Reduction Act. As Myles notes today in the newsletter, the polling suggests a large majority of Americans remain reluctant to go electric for the same reason.
I’m curious — how many of you will go electric for your next vehicle? Tell us what you think.
Our second note is also on the energy transition, which after the energy crisis caused by Russia’s full-scale invasion of Ukraine last year is unfolding in a far more chaotic manner than optimists hoped.
Data Drill takes in more polling data on US attitudes to carbon taxes and grid expansion. My guess is Energy Source readers would support both. But in an era of soaring inflation, less than 40 per cent of the US population would spend another $1 a month to fight climate change. No, that’s not a typo: one dollar. And not many people seem to like the idea of more power lines in their neighbourhood either.
Thanks for reading. — Derek
Are EVs about to take off in America?
When it comes to electrification, the gas-guzzling US still lags much of the developed world.
One of the aims of President Joe Biden’s landmark Inflation Reduction Act, with its $369bn worth of cleantech tax breaks and subsidies, was to push American motorists into buying electric vehicles. Tax credits of up to $7,500 included in the legislation are supposed to make EV purchases cheap enough for the mass market.
So is it a game-changer for EV uptake? Not really, according to a climate attitudes survey released today by the University of Chicago’s Energy Policy Institute and the AP-NORC Center for Public Affairs Research.
Even with the IRA subsidies, just two in every 10 Americans are “very likely” to buy an EV as their next car. Among Republicans the number is just one in 10.
The reason? Cost and charger availability.
More than eight in every 10 people surveyed said the price remained a reason not to buy an EV. Almost as many cited worries over the number of charging stations.
On the other side of the equation, saving money on gasoline was the leading reason people said they would consider buying an EV — with three-quarters pointing to this as a motivating factor.
The IRA tax break was a much less significant driver. Six in 10 cited it — with only a third of those saying it would be a “major reason” to buy an EV.
In a nutshell, economics still trumps ideology. For Democrats and Republican alike, cost is the biggest barrier to — and driver of — EV uptake.
The findings come as Washington doubles down on its EV push. The Environmental Protection Agency is set to announce tough new vehicle emissions standards as soon as this week that it hopes will turbocharge the shift away from combustion engines.
But if the Biden administration really wants half of all new car sales to be electric by the time the decade is out, it still needs to be cheaper to go green. (Myles McCormick)
The energy transition gets messy
The energy crises of the 1970s left a lasting legacy. Western countries formed the International Energy Agency; the US promoted coal and created a stockpile of emergency crude stocks; renewable energy technology advanced; France went for nuclear energy; Alaska and the North Sea became big oil producers.
The reaction to the energy crisis of 2021-2022 should be just as significant. The US’s Inflation Reduction Act, as well as the REPowerEU package in Europe, bring hopes that rapid decarbonisation could go alongside the shift to a more secure energy system for consumers.
But as I argued in a recent column, this isn’t happening — at least in the short term. Investment in clean energy is racing ahead, but remains a fraction of what is needed. The world is burning record amounts of fossil fuels. Emissions continue to rise.
A humdinger of a paper from Columbia’s Jason Bordoff and Harvard’s Meghan O’Sullivan explains why the energy transition is getting messy.
Conventional wisdom held that “the shift to new sources of energy would not only aid the fight against climate change but also put an end to the troublesome geopolitics of the old energy order”, they write. “Such hopes, however, were based on an illusion. The transition to clean energy was bound to be chaotic in practice, producing new conflicts and risks in the short term.”
Bordoff and O’Sullivan point out several problems that are surfacing:
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Petrostate power is still rising. The fossil fuel producers that have induced the energy security anxieties and market tightness, such as Russia, are now capitalising from the situation. Get used to it: their “power and influence will increase before it wanes”.
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With fossil fuel prices soaring, “old patterns” have reappeared, such as the US pleading — “mostly in vain” — for Saudi Arabia to pump more oil. “Ironically, by the time the UAE hosts the next major UN climate conference, at the end of 2023, the world may well also be turning to Abu Dhabi not just for climate leadership but for more oil.”
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The efforts of governments such as the US to reshore supply chains is bringing the risk of “climate-provoked trade wars”. Meanwhile, Europe’s rush to burn more fossil fuels last year raised energy prices — and accusations of hypocrisy — in poorer countries, widening rifts.
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Rapid electrification will leave consumers exposed to a fragile grid vulnerable to extreme weather caused by climate change. The supply and processing of critical minerals needed for the energy transition, meanwhile, is concentrated in just a handful of countries.
To make this transition less messy, Bordoff and O’Sullivan say the US and others must focus on resilience: additional renewable capacity on the grid should be matched with adequate storage, and utilities paid to maintain backup facilities. Fossil fuel plants should remain available until clean alternatives have replaced them.
The world will also need more trade, not less, they argue, pointing to IEA forecasts for a trebling of critical mineral trade to meet 2050 climate targets. Washington should “eliminate tariffs” on clean energy goods and technology and join the IEA to make the trade more transparent.
Everything is at stake if the energy transition does not include energy security, they argue:
“In the not-so-distant past, officials and experts thought that fears about energy security might hinder the fight for the climate. Today, the opposite is true: as the transition to a net zero world proceeds, the bigger danger to the climate will be insufficient attention to energy security.”
(Derek Brower)
Data Drill
Back to the EPIC/AP-NORC climate attitudes survey, where there are two other things we found interesting:
1. RIP carbon tax
Economists have long argued that slapping a price on carbon is the most efficient way to drive down emissions. But political antipathy towards it in the US has stopped the country following Europe or Canada down this road.
Those hoping that might soon change are set to be disappointed.
Willingness to pay a fee to combat climate change is at its lowest level since the poll began in 2016. Just 38 per cent of Americans said they would be willing to pay an extra $1 a month to combat climate change, down 14 percentage points from 2021.
2. NIMBY-ism is a big problem for transmission
The massive transmission line buildout needed to properly achieve the aims of the IRA — allowing electrons to be ferried from huge solar and wind farms to urban areas — does not seem to be winning hearts and minds.
A little more than half of Americans support significant public investment to build new high-voltage power lines. That falls to less than half if those power lines are being built in their backyards.
(Myles McCormick)
Power Points
Energy Source is written and edited by Derek Brower, Myles McCormick, Justin Jacobs, Amanda Chu and Emily Goldberg. Reach us at [email protected] and follow us on Twitter at @FTEnergy. Catch up on past editions of the newsletter here.
