Welcome back to Energy Source coming to you from Houston today.
Results season is in full swing with Shell and TotalEnergies both reporting a sharp drop in quarterly earnings in a sign that 18 months of bumper profits for Big Oil, following Russia’s invasion of Ukraine, may be drawing to a close.
Chevron got the ball rolling this past weekend also reporting a near 50 per cent fall in earnings compared to the second quarter of 2022. ExxonMobil reports tomorrow and BP next Tuesday.
In today’s newsletter I take a look at US President Joe Biden’s renewed push to rein in methane emissions, as the White House looks to up its game ahead of the COP28 summit in November.
Amanda reports on the latest clean energy project to abandon Europe for the US, lured across the Atlantic by Biden’s generous subsidies.
As scorching summer temperatures that baked the US South in recent weeks move north, Data Drill looks at this summer’s “oppressive heat”.
Thanks for reading. — Myles
Much ado about methane
The Biden administration’s campaign to purge methane leaks from the oil and gas industry was back in the spotlight yesterday with the launch of a White House methane “task force” to reduce emissions.
There was much fanfare surrounding the creation of the cabinet-level unit — unveiled during the White House’s first methane summit — which will be tasked with coordinating efforts to detect and eliminate leaks at the federal and state level.
Ali Zaidi, the president’s national climate adviser, said the administration was “turbocharging” the fight against methane, which is a much more potent greenhouse gas than carbon dioxide in the short term.
In reality, though, yesterday’s announcement seemed more flash than substance. For all the talk of “turbocharging”, there was no clear indication that either the task force or the summit will move the dial seriously on methane reduction.
Still, it makes clear the emphasis the White House is putting on tackling methane leaks from the hydrocarbon sector as the president gears up for next year’s electoral showdown — and the COP28 summit in Abu Dhabi at the end of November.
“The Biden administration appears to be upping its methane game,” said analysts at ClearView Energy Partners.
“Whether or not this new bureaucratic superstructure improves multiple federal agencies’ methane-related rollouts — and it could, [in] our view — according the task force cabinet-level status would seem to leave little doubt about methane’s primacy among White House climate priorities.”
Environmental Protection Agency administrator Michael Regan, the country’s top environmental enforcer, struck a defiant tone when I met him in March, vowing to “fight hard” against efforts to weaken the clampdown. “There are no facilities that are getting out of jail free,” he told me.
The war on methane is being waged primarily through the EPA, which is working on finalising a rule to force oil and gas companies to find and plug leaks in infrastructure. A separate methane fee introduced via the Inflation Reduction Act will also help — but it was largely defanged by Senator Joe Manchin before the bill was passed.
The agency also kick-started a plan this week to dole out $1.55bn to help states and companies slash emissions.
Environmental groups welcomed the renewed methane push. But they want more. Lauren Pagel, policy director at Earthworks, said the importance of Biden “making it a major priority of his administration to cut oil and gas methane pollution cannot be understated”.
“But in order to live up to President Biden’s climate and justice goals, he must declare a climate emergency and stop the buildout of fossil fuel infrastructure,” she added.
The oil industry, meanwhile, is demanding a seat at the table. It bristled at a decision not to invite industry representatives to attend yesterday’s summit.
“We are disappointed that the industries driving the most reductions in methane emissions, including the natural gas and oil industry, were not included,” the American Petroleum Institute, Big Oil’s Washington lobby group, said in a statement.
The White House was clear yesterday that the push is designed to allow it to “leverag[e] domestic action to raise global ambition” on tackling the methane problem.
“With a strong US enforcement program, we will have the credibility to argue for stronger international spotlighting and enforcement of methane leaks, which should be our next step,” said Sheldon Whitehouse, the Democratic senator for Rhode Island.
But for the US to go to Abu Dhabi and badger other countries for dragging their feet, it needs to be able to show tangible progress at home.
European solar manufacturer picks new US facility over German expansion
President Joe Biden has lured another high-profile manufacturing investment away from Europe with subsidies from his sweeping climate law, the Inflation Reduction Act.
Swiss solar company, Meyer Burger, announced earlier this week that it was putting expansion plans in Germany on hold in order to launch a solar cell factory in Colorado Springs. The announcement follows months of criticism from European leaders that the IRA’s tax credits create “unfair competition” and undermine the bloc’s industry.
“I would be very happy if Europe arrived faster to this new reality on climate and brought more support for companies here,” said Gunter Erfurt, chief executive of Meyer Burger. “The longer it takes, the more investment will go to the US, not only from Meyer Burger but also from others.”
The IRA, which passed last August, included lucrative sweeteners for clean energy developers to manufacture and purchase solar panels domestically. The law is a signature element of the Biden administration’s plan to decarbonise the country’s economy while creating thousands of good-paying jobs.
Meyer Burger’s decision to manufacture cells in Colorado was “propelled”, Erfurt said, by the US Treasury’s May guidance stating that developers would receive an extra 10 per cent bonus tax credit if they sourced both their solar modules and cells domestically. The company also makes solar panels in Arizona and expects to receive $1.4bn in subsidies throughout the lifetime of the IRA.
The US has virtually no solar cell production and only manufactured enough modules to meet half of demand last year, according to data from energy consultancy Wood Mackenzie. Meyer Burger expects production at its Colorado facility, a former semiconductor plant, to begin in late 2024.
The investment from Meyer Burger is another example of the outsized role that foreign investors will play in the US energy transition. A recent Financial Times analysis found that foreign investors made up more than 60 per cent of all cleantech manufacturing projects announced in the US since the IRA’s passage.
To counter the IRA, the European Union has proposed a green industrial plan that would allow member countries to match subsidies for projects at risk of leaving the bloc.
Whether western countries can create a clean energy industry competitive with cheap imports from south-east Asia and China is unclear, however.
A report released from BloombergNEF this week found that US cell factories were at risk of becoming “functionally obsolete” in the next five years due to new developments in Asia. Other parts of the supply chain also faced “technical and physical barriers” like high costs, shortages of equipment, and long timelines for ramp-up.
“There will be only a fraction of winners out of the frenzy of US solar module manufacturing announcements,” said Pol Lezcano, a senior associate at BloombergNEF. “Only a few of the factories that plan to make cells will succeed, but it will be a tough road ahead for them too.”
Still, Meyer Burger remains bullish on the US clean energy market and its competitiveness.
“By 2032, I’m absolutely convinced that [the IRA] will have created an industrial ecosystem in the US,” said Erfurt — adding that the company is scouting for another US location. (Amanda Chu)
More than 150mn Americans are under heat alerts this morning as the extreme temperatures in the south-west spreads east. New York is under its first heat advisory of the year, with heat indices reaching 105 degrees Fahrenheit (41C) into the weekend.
The “oppressive heat” arriving in New York has gripped parts of the south-west for weeks. Phoenix, Arizona has experienced a record 26 consecutive days above 110F so far this month, beating its previous 18-day streak set in 1974, according to the National Weather Service.
The US has recorded eight all-time high temperature records and more than 2,000 daily high temperature records so far in July, according to the National Oceanic and Atmospheric Association. The Energy Information Administration expects record natural gas consumption for electricity this summer as Americans try to keep cool.
This week’s heatwave comes after the warmest June on record in the world. Another record is expected for July with the UN declaring the first week of the month the hottest on record. A study released by World Weather Attribution on Tuesday found that the extreme heat blanketing large parts of the US, Mexico, Europe and China this month would be “virtually impossible” without climate change. (Amanda Chu)