Hello and welcome back to Energy Source.
On Tuesday, we asked y’all if your next car would be electric. The results are in after more than 1,100 votes (thanks!) and . . . we are split down the middle. Forty-seven per cent answered yes, 45 per cent said no and the rest were unsure. There is a significantly higher share of “yes” responses in the Energy Source community compared to the polling we reported on earlier this week, but clearly not everyone thinks electric vehicles are right for them, at least not yet.
US President Joe Biden is still moving to accelerate the shift to electric vehicles, despite consumers’ reluctance to do so. His administration proposed auto emission rules that could require two-thirds of new vehicles to be electric by 2032. It would be a huge transformation of American car culture in less than a decade.
One big caveat: these emissions rules have been a focus of partisan political battles for years. They were tightened by former Democrat president Barack Obama, only to be loosened by Republican Donald Trump, and are being pushed again by Biden. If a Republican retakes the White House in 2024, they will very likely roll back the rules again.
Meanwhile, Biden’s energy secretary Jennifer Granholm yesterday signalled that the administration wants to start refilling the nation’s strategic petroleum reserve later this year — if the price is right.
On to today’s newsletter, Myles spoke to ConocoPhillips’ chief executive, who says Biden is still no ally of the oil industry, even after approving the company’s big Alaskan oil project. Myles also breaks down data showing rising costs for renewables — and just about everything else. Amanda has more on Biden’s new vehicle emissions rules.
Thanks for reading – Justin
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Biden has not come around on oil, says ConocoPhillips boss
After entering the White House on a promise to wean the US economy off oil, Joe Biden and his administration seemed to have changed their tune on fossil fuels over the past year.
Many climate activists have cried betrayal as the administration has urged drillers to pump more oil, touted US LNG to Brussels, churned out more drilling permits than the Trump administration in its first two years and, last month, greenlighted ConocoPhillips’ big Alaskan drilling venture.
Outside Conoco’s investor conference at the New York Stock Exchange yesterday, a protester held up a sign that read: “Biden sold our future to Conoco.”
Has the Biden administration truly become a fossil fuel friend? Absolutely not, says Conoco boss Ryan Lance: the White House’s approach remains the same as it ever was.
“They’re trying to transition faster away from fossil fuels and everything they’re trying to do is trying to drive that — certainly policy wise, procedurally,” he told me on the sidelines of Conoco’s investor conference at the New York Stock Exchange yesterday.
Approving Willow — an $8bn oil development on Alaska’s North Slope — was not a signal that the administration had come around on oil and gas, he said. Rather, Biden’s team had little choice. Not approving it would have triggered mega lawsuits.
“They’re clearly trying to pivot and put a slightly different agenda in place,” said Lance.
“The problem is the math doesn’t work. You cannot run this country on renewables only. You can’t run the world on renewables . . . What’s your baseload? What’s it going to be? I asked him at the end of the day to tell me how the math works. The math doesn’t work.”
The blowback against Willow has been intense. A #stopwillow campaign gained a mass following on TikTok. Outside the NYSE yesterday, protesters gathered to condemn the project, chanting, “Hey, hey, ho ho, Conoco has got to go.” (One Conoco fan dived into the fray with a pro-oil retort: “Hey, hey, ho, ho, lazy hippies have to go”).
Lance said the public and political blowback and “brutally” drawn-out permitting process meant other developers would “think twice” before embarking on a multibillion-dollar US oil project.
“All of us are looking at it now and saying you’ve got to be very darn sure you can get it across the finish line,” he said.
“It’s going to give pause for everybody. If you’re in the deepwater Gulf of Mexico, or on federal lands, and you have a big discovery, people are going to think twice about how quickly can we get it done? And can we get it done? Can we get it permitted?”
If you’re an oil company, that may be a problem. If you are an anti-fossil fuel activist, though, it suggests your campaigning might just be working. (Myles McCormick)
Industry bible warns of increasing costs across the energy sector
After a decade and a half of cost declines, it’s getting pricier to build wind and solar projects as supply chain woes and rampant inflation bite.
But it is not just renewables: the average unsubsidised cost of energy developments from combined-cycle gas to nuclear is rising, according to Lazard’s latest Levelised Cost of Energy Analysis, released yesterday.
The study — the industry bible for comparing the lifetime cost of building and operating different types of energy projects — underlined how cost increases are impacting everything from equipment parts to financing, which have bitten into margins and pushed up break-evens across the board.
“Input costs and financing costs have gone up,” Sam Scroggins, a director in Lazard’s global power, energy and infrastructure group, told me. “For the first time in the last 15 years the average LCOE has risen.”
Still, at the lower end of the range, the cost of utility-scale wind and solar continues to slide, as bigger developers flex their muscles to bring down overheads.
“Companies of scale that can take advantage of supply chain and economies of scale are going to continue to lead the build out,” said Scroggins.
But even for developers with less firepower, the sweeping US Inflation Reduction Act and its $369bn of tax credits and subsidies will offer major relief.
The exact bottom-line impact of the legislation is still being hashed out as authorities nail down eligibility criteria for generous investment and production credits. Extra handouts will be given for sourcing content domestically or building in former fossil fuel communities.
“I think it is fair to say that while costs are increasing, the IRA has an impact in offsetting those costs,” Scroggins said. “Even on an unsubsidised basis renewables continue to fall on the low end. The average is up but that is offset by the IRA.” (Myles McCormick)
Data Drill
The Biden administration is coming in with sticks after dangling its carrots for electric vehicles. Yesterday the Environmental Protection Agency proposed its strongest standards for vehicle pollution, which would avert nearly 10bn tonnes of Co2 emissions from entering the atmosphere over its five-year period, more than twice US emissions in 2022.
The EPA estimates EVs will make up 67 per cent of all vehicle sales in 2032 as a result of the proposal. EVs made up roughly 7 per cent of current sales last year.
The proposed standards would take effect in 2027 and run until 2032. At least $56bn in electric vehicle and battery manufacturing investments have been announced since the IRA’s passage, according to an FT analysis.
While climate groups cheered yesterday’s announcements, many obstacles still face EV uptake, including affordability and supply chain snarls. As Myles highlighted in Tuesday’s Energy Source, nearly half of Americans said they were not likely to buy EVs in a recent survey, citing cost and charger availability as the top reasons.
The Alliance for Automotive Innovation, the trade group that represents the largest auto and battery makers, said the EPA’s standards were “aggressive by any measure”.
“The question isn’t ‘can this be done,’ it’s ‘how fast can it be done,’ and how fast will depend almost exclusively on having the right policies and market conditions in place to achieve the shared goal of a net zero carbon automotive future,” said John Bozzella, head of the trade group. (Amanda Chu)
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.
