Hello and welcome back to Energy Source.
Before we dive into today’s newsletter, a new — and provocative — film has entered the energy-related movie universe: How to Blow Up a Pipeline.
The film’s sympathetic view of a group of radicalised environmentalists plotting to sabotage an oil pipeline has stirred a fiery debate — and apparently caused concern at the FBI.
The film’s director Daniel Goldhaber told the Financial Times he did not mean for the movie to be a call to action — unlike the book the film is based on. But he said the “climate crisis is the largest existential threat” humanity has faced and “if we want to have a chance at stopping it, we have to at the very least explore these tactics”.
Have you seen the film? Let me know what you think of it and the surrounding debate — [email protected].
Today, in a case of “the enemy of my enemy is my friend”, Big Oil and Big Renewables are teaming up in Washington to try to make it easier to build big new energy projects in the US. Aime Williams picks apart President Joe Biden’s solar storm. And Amanda has fresh data on the coming clean energy boom.
Thanks for reading — Justin
Big Oil and Big Green: the new alliance?
The oil and gas industry has long argued that the protracted process for permitting major new energy projects in the US needs to be overhauled.
Now they have a new (and perhaps surprising) ally in their war on red tape: Big Green.
Lobby groups representing Big Oil, renewables developers and utilities are co-ordinating a joint approach to persuade Congress to streamline the system, as Aime and I reported this weekend.
If Congress fails to speed up the lengthy permitting process, they argue, the impact of the Inflation Reduction Act — whose $369bn of tax cuts and subsidies is meant to supercharge the buildout of clean energy — will be limited.
The average time for a new project to be permitted is 4.5 years, according to the American Clean Power Association, the leading renewables industry group. And for transmission lines needed to carry power from remote wind and solar farms to urban consumption areas it is even longer, at 6.5 years.
“The clean energy revolution is moving faster than ever before — but not fast enough,” Jason Grumet, head of the ACP, told ES.
“I think you are now seeing the entire energy industry come together and say we all share the same basic [aims].”
“There are daily discussions happening between our policy staff,” he said. “I think you’re going to see multi-tech coalitions showing up together on the Hill.”
The hope among lobbyists across the energy spectrum is that they can get some kind of reform bill over the line as part of a bipartisan deal on raising the debt ceiling. Their solution to the deadlock is a grand legislative deal on energy that satisfies fossil fuel and clean energy interests alike.
As Mike Sommers, head of the American Petroleum Institute, put it to me:
“Permitting reform has support from both sides of the aisle and could be the next big compromise deal between Democrats and Republicans — similar to the 2015 bipartisan agreement that led to lift the ban on crude exports and implementing subsidies for wind and solar development.”
But the politics are tricky . . .
Hardliners in both parties are less enamoured with the idea of a bipartisan push on permitting reform. Some Republicans will not back anything that supports the roll out of the IRA. Some Democrats will not support any measure that gives an inch to fossil fuel interests.
The irony is that it leaves the clean energy industry on the opposite side of the fence as many activist groups.
“For us, anything that will support the build out of fossil fuel infrastructure is a no go,” Dana Johnson of WeAct, an environmental justice group, told me last week. “We will continue our efforts to fight against it.”
To win hearts and minds from a constituency that once would have been its natural ally, Big Green has a fight on its hands.
“If you want energy transition to happen quickly and use the IRA, you should be supporting transmission,” said Mark Goodwin, chief executive of wind and solar developer Apex Clean Energy, at a recent climate event hosted by Lazard.
“Industry should be . . . talking to folks on the environmental side and saying this far overrides . . . what fossil fuels get out of it.”
Clouds roll in on the solar tariff debate
Joe Biden threatened to make the second veto of his presidency yesterday as US lawmakers made a fresh push to slap tariffs back on to imported solar panels parts.
Back in June, Biden offered a reprieve to solar project developers by pausing tariffs on solar panel components imported from Cambodia, Malaysia, Thailand and Vietnam. Modules and cells from the four south-east Asian countries are set to be allowed for two years.
The US Congress, which has become increasingly grumpy about being overlooked by the executive branch on matters of trade policy (see: Katherine Tai being grilled on the Hill about the critical minerals deal with Japan), is now threatening to reverse that decision.
The bill has been put to the full House for a vote, where it is expected to be widely backed by Republicans keen to portray Biden as soft on China, and by some Democrats keen to provide American jobs for American workers and boost US domestic manufacturing.
But it also pits Washington’s efforts to tackle climate change directly against the Democrats’ protectionist instincts on trade.
Critics argue that imposing tariffs would increase the cost of solar development and slow progress towards Biden’s goal of making the US power grid carbon free by 2035. Proponents argue that imposing tariffs is simply a matter of countering China’s unfair trade practices and encouraging domestic manufacturing.
Several Democrats have argued that the two can be reconciled: supply chains won’t relocate from Asia to America overnight, and a temporary suspension of tariffs would help meet US demand in the short term.
Analysts at ClearView Energy Partners, a Washington-based consultancy, have found that US demand for solar components far outweighs domestic manufacturing capacity: imports are necessary if installations are to proceed, and tariffs in this case would simply raise costs.
“Our question was — could solar project developers find alternative supply chains in the US, and our answer is currently ‘no’,” said Tim Fox of ClearView.
Panels from Cambodia, Malaysia, Thailand and Vietnam accounted for 75 per cent of all solar power capacity imported to the US in 2022, according to Rystad Energy.
Assuming Biden’s temporary stay on duties can be protected by the presidential veto power (which it will be, unless the Senate can command an unlikely-looking two-thirds majority vote to back the tariffs) duties are still likely to be imposed in June 2024, at the recommendation of the commerce department.
In a preliminary ruling last December, commerce named four specific companies that it said were circumventing existing tariffs on Chinese solar imports by exporting their products to the US from south-east Asia rather than China. The full investigation is scheduled to conclude next month. (Aime Williams)
While the debate heats up about solar tariffs, the US is still poised for a clean energy boom triggered by the Inflation Reduction Act, with about 600 gigawatts of solar, wind and energy storage capacity coming on line by 2030, according to BloombergNEF.
But in the short term, a slew of challenges threaten to slow the industry’s rollout. Annual onshore wind installations will fall 21 per cent this year to their lowest levels since 2015, estimates BNEF, citing permitting and grid challenges, supply constraints, and uncertainty over tax credits. The IRA’s impact will only be felt from 2025, BNEF reckons.
The roadblocks facing the onshore wind industry are shared by the renewable sector at large. Approximately 1,700GW of clean energy projects are awaiting grid connection, which requires at least a three-year wait period on average, according to Lawrence Berkeley National Lab.
Costs for solar modules and batteries are expected to remain elevated until 2025 as a result of high commodity prices and tariffs on key inputs. While the costs of raw materials including polysilicon and lithium have fallen from their record highs last year, many large–scale developers are locked into long-term supply agreements.
A shortage of workers is also inflating project costs. BNEF found most construction firms were fully booked into 2024. While wages for solar technicians and engineers were in line with inflation, wages for wind technicians were up 29 per cent between 2020 and 2022, according to Bureau of Labor Statistics data. (Amanda Chu)