Today’s Key Takeaways: Tennessee Valley Authority moves toward nuclear. JP Morgan sees $120 oil if Russia’s exports derailed by Ukraine. Georgia a welcoming home to bitcoin miners. Senator Gray-Jackson enters the U.S. Senate race. WH provides details on how states can access money for EV charging stations.
NEWS OF THE DAY:
TVA OKs $200M for reactor development
Alan Neuhauser, Axios, February 10, 2022
The Tennessee Valley Authority board of directors voted 5-0 on Thursday to spend up to $200 million to prepare for the potential construction of a nuclear-powered small modular reactor (SMR) designed by GE Hitachi.
Why it matters: The approval is the latest sign of rapidly accelerating momentum for advanced nuclear energy companies and projects.
Current activities include:
- The SMR developer NuScale planning to go public via SPAC this year;
- The province of Ontario announcing in December it had selected GE Hitachi to build a BWRX 300 megawatt SMR in Canada, the same model that the TVA on Thursday said it intended to pursue for “potential deployment.”
- And advanced fission designs from Kairos, X-Energy, and TerraPower (the latter backed by Bill Gates) continue proceeding.
The big picture: For decades, nuclear energy was the single-largest source of zero-emissions electricity in the U.S., accounting for about a fifth of the nation’s electricity generation overall. But that ended in 2020. The causes of nuclear’s loss of leadership include:
- Building new nuclear plants faced soaring costs, years long licensing, permitting and construction delays, and persistent concerns about safety and security.
- Costs of natural gas and renewable energies plummeted.
Yes, but: In the mid-2000s, private companies such as NuScale and others quietly began exploring advanced nuclear technologies – including small modular reactors, even tinier microreactors, and waste-free fusion power.
What’s happening: The funds, which cover about 10% of the expected cost of building an SMR, would go toward the pre-application process for the Nuclear Regulatory Commission. The reactor, if built, could begin operation as soon as 2032.
“This is a significant step in our decarbonization strategy at TVA,” TVA president and CEO Jeff Lyash said after the vote. “It’s also important to note that it’s not a commitment to build – we don’t have the information to make that commitment yet.”
What they’re saying: The announcement drew mixed reviews from energy watchers.
- “We’re at the most exciting moment ever for advanced nuclear reactors. We have a wave of announcements of major policy support, of big utility investments in this space, of the capital markets finally coming around to advance nuclear,” says Rich Powell, CEO of ClearPath.
- Sasha Mackler, head of the Energy Project at the Bipartisan Policy Center, says, “We have a big energy system — there are important, significant gaps that need to be filled — and nuclear looks to be very well-positioned to fill those gaps in a climate-friendly and safe way.”
- Edwin Lyman, director of nuclear power safety at the Union of Concerned Scientists says, “There’s probably less than meets the eye. The story is that the industry has been trying to get traction now for a few decades using climate change and any other argument that they can muster.”
What we’re watching: The U.S. still has yet to develop a long-term answer for disposing of nuclear waste.
- The NRC, at the direction of Congress, is several years into developing new regulations that are technology-neutral, in order to speed the approval of SMRs and other advanced reactors. However, those new rules may not be finalized before further SMR applications reach the agency for review.
- “Being technology neutral is hard when you’re going from very small to very big, and you’re using different fuels and different technologies,” says Amy Roma, senior non-resident fellow, Atlantic Council.
OIL:
Oil could ‘easily’ hit $120 if Russia-Ukraine crisis escalates, JPMorgan warns
Matt Egan, CNN Business, February 9, 2022
Oil prices could soar to $120 a barrel if Russia’s crude exports are derailed by tensions with Ukraine, according to projections from JPMorgan.
The forecast underscores how a potential invasion of Ukraine would cause wide-ranging ripple effects that would be felt by inflation-weary consumers around the world.
“Any disruptions to oil flows from Russia in a context of low spare capacity in other regions could easily send oil prices to $120,” Natasha Kaneva, JPMorgan’s head of global commodities strategy, wrote in the report published late Tuesday.
Such a spike from about $91 today would drive up prices at the pump, which hit a fresh seven-year high on Wednesday.
JPMorgan warned that if Russian oil exports are cut in half, Brent oil prices would likely race to $150 a barrel. The all-time high for oil prices was set in July 2008, when Brent spiked to a record at $147.50 a barrel.
How oil supplies could be threatened
Russia-Ukraine tensions have helped inflate oil prices in recent weeks. Brent crude hit a fresh seven-year high of $94 a barrel on Monday, although it has since retreated to around $91.
Russia is the world’s No. 2 producer of both oil and natural gas, second only to the United States for each category. The country plays a key role at OPEC+, the producer group that has only gradually added back production that was sidelined during the onset of Covid.
The Russia-Ukraine crisis poses several risks to the oil market.
First, such a conflict could potentially damage energy infrastructure in the region. Secondly, Western powers could seek to punish Russia by imposing sanctions that cripple the country’s energy exports, although US officials have signaled a preference for penalizing other sectors of its economy first.
And then there is the risk that Russian President Vladimir Putin retaliates by weaponizing exports of oil and natural gas. Higher natural gas prices in Europe would drive up oil demand as factories and power plants switch to oil instead.
Prices at the pump are at seven-year highs
Oil prices have cooled off a bit in recent days on hopes of easing Russia-Ukraine tensions, as well as signs of progress on reaching a new Iranian nuclear deal.
Gas prices, which move with a lag to oil, are still catching up to the recent oil surge. The national average for gas hit $3.47 a gallon on Wednesday, up seven cents in the past week alone, according to AAA.
Despite the Russia-Ukraine standoff, the Energy Department’s forecasting arm is projecting energy prices will cool off later this year as supply finally meets demand.
The US Energy Information Administration projects gasoline prices will average $3.24 a gallon this year. That’s below current levels, although it is above the EIA’s December forecast for $2.88 a gallon in 2022.
The EIA expects prices at the pump will slide below $3 a gallon in the final quarter of this year and Brent crude to tumble to an average of $68 a barrel for all of 2023.
Russia is also leading producer of natural gas — and its biggest customer is Europe, which is already grappling with very high home heating costs.
“A disruption in exports on any of the major pipelines could place Europe’s natural gas balance in a precarious situation, particularly given that 2022 started with record-low European gas inventories,” JPMorgan warned.
GAS:
Japanese buyers downplay LNG diversions to Europe
Joey Chua, Argus Media, February 10, 2022
Japanese utilities have shrugged off the prospect of their LNG supplies being diverted to Europe, arguing that their domestic requirements will take precedence with forecast cold weather in Japan expected to weigh further on already reduced inventories.
Japan’s trade and industry (Meti) minister Hagiuda Koichi on 9 February told the US ambassador-designate Rahm Emanuel and the EU’s ambassador to Japan Patricia Flor that “as long as the stable supply to Japan is ensured, [it] will co-operate [in diverting LNG to Europe] as much as possible”. The US and the EU have requested that Japan send LNG supplies to Europe, in response to a potential shortfall in Europe’s gas imports from Russia in the event of an escalation of tensions between Russia and Ukraine. Europe receives around 40pc of its gas supplies from Russia.
Japan will send some cargoes with destination flexibility to Europe in March, Meti told Argus on 10 February. It did not disclose the volume of cargoes that will be diverted but said that more cargoes from Japanese firms will arrive in Europe in March than in February, as a result of the additional allocation of cargoes to Europe.
No cargo has yet been sent to Europe as a result of the requests, with current Europe-bound shipments being part of existing contracts or trading arrangements, Meti told Argus. European gas hub prices at a premium to Asian spot LNG prices in past weeks had incentivised some Asian sellers with Atlantic supply to keep cargoes within the basin.
Industry participants suggest that any cargo that gets diverted to Europe is likely to be from Japanese trading houses or companies with upstream resources, limiting any impact on Japanese utilities and the supply-demand balance in Japan.
The government has reached out to Japanese upstream group Inpex, asking the firm if it would be possible to divert LNG to Europe in the event of any disruption in Russian gas supplies, Inpex told Argus on 10 February. The firm operates the 8.9mn t/yr Ichthys LNG and has stakes in the 3.7mn t/yr ConocoPhillips-operated Darwin LNG and the 3.6mn t/yr Shell-operated Prelude floating LNG, which is off line. All three projects are in Australia.
“I think the government is now talking with Japanese traders,” a trader at a Japanese trading house said. “They have some trading volume not for Japanese utilities. So, if the government asks them to allocate, they will use such volumes. Allocated volumes will probably not be from Japanese utilities.”
Gas storage levels in Europe remain below average despite brisk LNG arrivals to the region and high sendout in recent weeks, industry participants said. Gas storage sites in Europe were 35pc full at 393TWh on 8 February, down from 54pc and 602TWh on 1 January, and 47pc and 528TWh on 8 February 2021.
Trading flexibility
Several Japanese trading houses have long-term contracts with US suppliers.
US volumes are sold on a fob basis and do not have destination restrictions, granting buyers greater flexibility to trade and optimise cargoes. Mitsubishi and Mitsui each have a term supply agreement to receive 4mn t/yr of LNG from the US’ 15mn t/yr Cameron terminal in Louisiana.
State-controlled Jera and utility Osaka Gas hold 2.3mn t/yr each in offtake from the 15mn t/yr Freeport LNG facility, while Tokyo Gas has 1.4mn t/yr in fob supply from the 5.75mn t/yr Cove Point terminal.
“We don’t know how much volume [will be sent from Japanese firms], but it should be small,” the trader added.
The Japanese government has not approached utilities in the country to divert supplies to Europe, industry participants said. But most utilities will be reluctant if asked, several market participants said.
“Meti will sooner or later ask if we have enough stock to divert to Europe, and all will answer ‘no’,” a trader at a power utility based in western Japan said, adding that there is currently not yet enough urgency from Europe to secure supplies as it is “not in an energy crisis yet”.
“Most Japanese buyers will face low inventory from March to April, both because of the DQT [downward quantity tolerance] from Malaysia and lower temperatures,” a trader at a Japanese gas utility said.
Malaysia’s state-owned Petronas has since last year exercised the DQT clause in its contracts to cancel term deliveries from its 30mn t/yr Bintulu LNG from last November to potentially the fourth quarter of this year over production issues at its Pegaga field. This has pushed many term offtakers, most of which are Japanese importers, to buy replacement cargoes from the spot market.
Domestic priority
Forecasts of even lower temperatures in Japan in the next few days could draw down LNG stocks further, with the past few weeks of cold weather having already weighed on inventories and spurred spot requirements for March-April deliveries.
Weather in the Tokyo metropolitan area, the largest power consumption area, is expected to get even colder in the coming days, with sub-zero temperatures having already been seen more than 10 times this year. The Japan Meteorological Agency on 9 February warned of heavy snowfall in Tokyo across 10-11 February, predicting that the city will get 5-10cm of snow.
Japan’s main utilities held 1.63mn t of LNG stocks as of 6 February, down by 2.4pc from 1.67mn t a week earlier and lower than the 2.3mn t at the end of February last year, according to a weekly survey by Meti. The latest stocks were also 17.7pc lower than the four-year average of 1.98mn t. Inventories started dropping after hitting 2.42mn t on 23 December.
Nine Japanese buyers have purchased at least 10 cargoes for March since the start of the year. A power utility is seeking an April cargo, while another utility has a spot requirement for a delivery between the end of March and early April.
“Japanese buyers feel that keeping ourselves warm during winter is most important… it is difficult to ask us to give our blanket to other countries when we don’t have enough cloth,” another trader at a Japanese gas firm said.
MINING:
Bitcoin Miners Have Found a New Paradise — And It’s In The U.S.
Veronika Bondarenkof, The Street Investing, February 8, 2022
While the practice of crypto mining is spreading fast across the US, people usually don’t think of Georgia as a prime place for it: When it comes to business, the state still often brings up associations of Coca-Cola (KO) – Get Coca-Cola Company Report, Atlanta reality television and miles of fruit and vegetable farms.
But as Bloomberg recently reported, that is quickly starting to change.
Companies like bitcoin miner and energy producer CleanSpark Inc. recently received approval to get green power for 15,000 mining machines on a plot of land it bought in the College Park suburb of Atlanta.
What Is Crypto Mining?
Using computer code to confirm cryptocurrency value and record transactions, crypto mining does not actually mine resources from dirt or rock, like traditional mining operations.
But is still a highly energy-heavy process requiring heavy hardware and constant energy use to keep the blockchain going.
The state of Georgia had, according to Bloomberg, previously tried to prevent CleanSpark’s attempt to switch from an older energy provider. But it now allows part of the machines to use a less expensive and more energy-efficient power.
“At the end of the day, Georgia wants this business here,” Matt Schultz, CleanSpark’s executive chairman, said in an interview. “They’ve done everything in their power to grow bitcoin in the state.”
As early as last year, China was the world’s biggest crypto mining destination — at one point, 76% of mining practices were taking place in the country. But due to the practice’s heavy toll on the environment, Beijing started phasing out the practice before banning it outright by the end of the year.
Where Miners Are (And Aren’t) Going
A lot of mining operations then shifted to the U.S. and have found a welcoming home in Georgia.
Cryptocurrency company Foundry reported that 34% of its mining was coming out of the state by Jan. 31. Foundry is far from the only mining company in the country, but it is the biggest.
The state’s cheap energy prices are the main reason many mining operations are choosing to set up shop.
The business those companies are bringing in is also pushing regulators to ignore the momentum created by the state’s recent shift toward more left leaning environmental policies, which has stopped bitcoin mining in other states.
Kentucky, which is the next biggest destination for Foundry at 12%, recently approved tax breaks to companies that invest over $1 million in equipment. New York, meanwhile, is currently seeing growing opposition from lawmakers who are pushing to suspend mining amid more stringent environmental reviews.
“Listen, we’re not moving into vicinities that don’t want us, hard stop,” Core Scientific founder Darin Feinstein told Bloomberg. “We’re not going to New York, we’re not going to areas that don’t want this industry within their borders.”
POLITICS:
Anchorage state Sen. Elvi Gray-Jackson is first Democrat to enter race for U.S. Senate
James Brooks, Anchorage Daily News, February 9, 2022
Democratic Alaska state Sen. Elvi Gray-Jackson of Anchorage registered Thursday morning as a candidate for U.S. Senate in this year’s elections.
Gray-Jackson is the first Black U.S. Senate candidate in Alaska history and is the first Democrat to confirm a run for the seat currently held by Republican Sen. Lisa Murkowski.
“Alaskans deserve better. They really do. And me running for United States Senate, now they’re going to have a choice,” she said Wednesday.
She said that if elected, she would support a law guaranteeing abortion rights. She said she opposes Pebble mine and will support oil and gas drilling on federal lands in Alaska “if it’s done environmentally correct.”
Talking to reporters on Thursday, she said she supports increasing the national minimum wage and wants to see more reliable health care access.
Gray-Jackson’s entry into the race is not a surprise. She said she had been considering a campaign for six months and had talked openly about it. The website of the Alaska Democratic Party featured a message telling Alaskans to ask her to run for U.S. Senate. At least one public opinion poll used her name as the default Democratic candidate when examining the Senate race.
That poll found her finishing as voters’ third choice.
Before being elected to the state Senate in 2018, she worked as a budget analyst for the Anchorage Assembly and was on the Assembly from 2008 through 2017. She said her experience in local government gives her an advantage that neither Murkowski nor Republican candidate Kelly Tshibaka have.
“Throughout the time that I’ve been in public service, I’ve been out there in the community, helping Alaskans navigate through government, helping them deal with potholes, helping them deal with drainage issues. And I have tons of experience on different projects that I can talk about, and I understand what they need, because I haven’t just been working for Alaskans. I’ve been working with them for many, many years,” she said.
Asked about her status as Alaska’s first Black U.S. Senate candidate, she said she’s thought about the “historical nature of her candidacy.” If elected, she would be just the third black woman to serve in the U.S. Senate.
“Every time we see Congress gather, I’m reminded of how far our country has come and how far it still needs to go,” she said.”
She will not resign from the Alaska Legislature before the end of this year’s session, she said.
Sitting legislators are prohibited from fundraising for a state election or for someone else’s federal election while the Legislature is in session. There is no prohibition if a legislator is raising money for their own federal campaign, said Jerry Anderson, administrator of the Legislature’s Ethics Committee.
It is prohibited to use state resources for a campaign, and Gray-Jackson said she will not fundraise from the Capitol. She agreed to an interview only if it took place outside the Capitol.
Murkowski and 10 others have already registered as official Senate candidates with the Alaska Division of Elections. That figure does not include Gray-Jackson or Tshibaka, a former Alaska Department of Administration commissioner who has been endorsed by former President Donald Trump.
In a prepared statement, Tshibaka said Gray-Jackson’s entry “makes two Democrats for voters to consider” because Murkowski’s positions are indistinguishable from those of a Democratic candidate.
“Between Jackson and Murkowski, there is no difference in how they would support abortion, oppose border security, approve liberal judges, or vote to confirm Joe Biden’s radical nominees who support defunding the police and hate our energy industries,” she said.
Members of Murkowski’s campaign team did not immediately respond to requests for comment Thursday morning.
Under Alaska’s new election system, Alaskans will be asked to vote for one U.S. Senate candidate in the August primary election. The top four vote-getters will advance to the general election, where voters will be asked to rank them in order of preference.
A winner will be calculated using ranked-choice voting, and the result will be announced 15 days after the Nov. 8 general election.
CLIMATE CHANGE :
From the Washington Examiner, Daily on Energy:
WHITE HOUSE, DOT OFFER NEW DETAILS ON EV FUNDS: The White House and the Department of Transportation issued a new statement today offering new details on how states can access nearly $5 billion in infrastructure funding to help meet the administration’s goal of building out a national network of electric vehicle charging stations over the next five years.
In its statement, DOT said it is making available $615 million in charging station funds to states this fiscal year. Any states hoping to receive those funds, it said, must first distribute an EV Infrastructure Deployment Plan describing how it plans to use its share of funds to the newly created Joint Office of Energy and Transportation.
Those plans must be consistent with criteria from the National Electric Vehicle Infrastructure (NEVI) Formula Program — a new effort established by the infrastructure bill — as well as the Federal Highway Administration, which is tasked with administering the funds.
“A century ago, America ushered in the modern automotive era; now America must lead the electric vehicle revolution,” said U.S. Transportation Secretary Pete Buttigieg. “The President’s Bipartisan Infrastructure Law will help us win the EV race by working with states, labor, and the private sector to deploy a historic nationwide charging network that will make EV charging accessible for more Americans.” Read the full statement here.