Today’s Key Takeaways: Grid can’t handle all the clean energy projects on the horizon. American Petroleum Institute proposes carbon tax that could raise gas prices. AIDEA approves funding for study on Ambler Access Project. Insurance companies invested $536 billion in fossil fuels in 2019.
NEWS OF THE DAY:
The US has more clean energy projects planned than the grid can handle
Jeff St. John, Canary Media, April 20, 2022
Without major policy reforms and grid upgrades, much of the 1.4-terawatt queue of solar, wind and battery projects may never get built, two new reports find.
The proposed wind, solar and battery projects seeking interconnection to U.S. transmission grids today are enough to bring the country to 80 percent carbon-free electricity by 2030. But based on historical trends, less than a quarter of those planned projects are likely to be built.
And even the best-positioned projects that already have the land rights, construction financing and power-purchase contracts necessary to move forward are likely to face years of delay and potentially millions of dollars of grid upgrade costs before being able to connect to the grid. These barriers could prevent many planned projects from reaching completion — and block the country from decarbonizing fast enough to prevent the most devastating effects of global warming.
This mixed forecast comes from Lawrence Berkeley National Laboratory’s latest report on U.S. interconnection queues. The annual survey of the country’s seven transmission grid operators and 35 major utilities covers 85 percent of U.S. electricity load, making it one of the most comprehensive overviews of utility-scale clean energy development out there.
And while the data showcases a “revolution taking place in the type of electricity we’re seeking to install in the U.S.,” it also reveals “massive institutional and structural barriers that are slowing down and prohibiting a lot of that capacity from coming online,” said Joe Rand, LBNL senior scientific engineering associate and lead author of the study.
A separate Department of Energy report released alongside the LBNL study last week surveys research indicating that waning transmission construction and rising interconnection costs and wait times are holding back clean energy growth in the U.S. “To alleviate the growing gridlock, transmission planning and interconnection processes need reform,” the report states.
This week, the Federal Energy Regulatory Commission is set to unveil the next steps in its major revamp of U.S. transmission grid policy. That proceeding is the country’s “best and most immediate chance to resolve this fairly quickly,” Rand said in an interview — a view echoed by clean-energy industry groups and policymakers pushing clean-energy agendas at the state and federal levels.
“If you love solar and wind power, you have to at least like transmission,” Rand said.
The good news: A tidal wave of clean energy on the horizon
Rand highlighted the good news in LBNL’s report first: 1,300 gigawatts of wind, solar and energy storage capacity had been proposed for interconnection as of the end of 2021, representing just over $2 trillion in potential investments. That figure has risen from 750 gigawatts of wind, solar and energy storage capacity in queues at the end of 2020.
While a handful of gas power plants are still being planned, wind power, solar power and energy storage projects make up 93 percent of the projects LBNL is tracking. That includes 676 GW of solar, 247 GW of wind and 427 GW of energy storage.
This adds up to roughly the amount needed to provide 80 percent of U.S. electricity from zero-carbon resources by 2030. It also represents about 84 percent of the estimated 1,100 GW of solar and wind capacity needed to reach the Biden administration’s target of 100 percent clean electricity by 2035. Just under three-quarters of the projects in interconnection queues at the end of 2021 have requests in to come online before 2025.
But it’s highly unlikely that most of these projects will be built. Only 13 percent of the projects in LBNL’s tally have already signed interconnection agreements, the vital step that cements a project’s right to connect to the transmission grid. And over the past decade, only about 23 percent of all projects in interconnection queues have successfully connected to the grid and begun operating. Those completion rates are even lower for wind power, at 20 percent, and solar power, at 16 percent.
“Entering a transmission interconnection queue is only one of many steps in the development process,” the report states. “Projects must also have agreements with landowners and communities, power purchasers, equipment suppliers, and financiers, and may face transmission upgrade requirements.”
And the trends on these fronts are getting worse, not better. Since 2015, the time it takes for projects to secure interconnection agreements has risen from about a year and a half to more than three and a half years in 2021, the report finds
The bad news: Too many projects can’t cross the finish line
LBNL’s data doesn’t reveal why any one individual project may or may not succeed in coming online. But DOE’s report notes that the increase in projects seeking to connect to the grid has coincided with a slowdown in new transmission buildout projects. Transmission deployments have fallen from an annual average of 2,000 miles between 2012 and 2016 to an annual average of just 700 miles between 2017 and 2021.
This lack of new transmission capacity combined with booming project queues has led to longer interconnection wait times, rising costs and uncertainties for projects seeking interconnection, as well as a greater proportion of projects withdrawing before they can secure interconnection agreements, according to LBNL data.
“We’re seeing so much evidence of this backlog, both in the high withdrawal rates and low completion rates, and the amount of time these projects are taking,” Rand said.
Multiple studies indicate the U.S. will need hundreds of billions of dollars’ worth of new transmission to integrate the amount of clean energy needed to decarbonize the grid. A similarly large body of research suggests that existing transmission development and interconnection policies are making it increasingly difficult for new clean energy projects to come online.
Caroline Golin, Google’s global head of energy market development and policy, summarized the views of many clean-energy developers and buyers in a press conference last week unveiling Google’s new clean-energy policy roadmap.
“The queue is backed up, at a minimum, at least two years in every market,” she said. “You can be a private investor and want to deploy billions of dollars in capital, and you can just sit and wait and see if your projects get online.”
“If we don’t reform how these technologies get to market,” Golin warned, the development of clean energy is “going to stall perpetually.”
FERC’s Advance Notice of Proposed Rulemaking, the bureaucratic moniker for the major transmission reform it launched last year, has provided a venue for energy developers and corporate buyers such as Google to lay out what they see as the key causes of this stalled-out interconnection situation and how they’d like to fix them.
The cause: Broken transmission policy, from interconnection to expansion
One fundamental problem is that there are simply far more projects trying to interconnect to the grid than ever before. That makes it much harder for utilities and grid operators to study their potential impacts, particularly when projects are being added and are dropping out on a regular basis.
Mid-Atlantic grid operator PJM, for example, has 225 gigawatts’ worth of projects in its new services queue, 95 percent of them wind, solar, storage or a hybrid of renewables with storage. This chart from an October report by consultancy Grid Strategies shows how PJM’s volume of studies has skyrocketed from 2015 to 2020.
In February, PJM set forth a major proposal to reform its interconnection processes, designed to drive “a better, faster, more efficient way to integrate projects into the system and enable states to meet their renewable portfolio goals,” said Ken Seiler, PJM’s vice president of planning.
Oil Trade Group Drafts Carbon-Tax Proposal That Could Raise Prices at the Pump
Timothy Puko, Ted Mann, The Wall Street Journal, April 21, 2022
The nation’s biggest oil industry trade group has drafted a proposal urging Congress to adopt a carbon tax, which would put a surcharge on gasoline and other fossil fuels to discourage greenhouse-gas emissions.
The draft proposal was approved by the American Petroleum Institute’s climate committee last month, according to a document reviewed by The Wall Street Journal. The measure must still be approved by the group’s executive committee.
A carbon tax would raise gasoline prices and other energy costs for consumers. Some API members want to delay action on the proposal amid near-record prices at the pump, contending it could alienate not only voters but Republican lawmakers friendly to the oil industry ahead of midterm elections, according to people involved in the discussions or who were briefed on them.
“The worst case is not get the policy, and lose the friends,” one of the people said. “Today, that’s probably the most likely possibility.”
The API proposal calls for assessing gasoline wholesalers, power plants and others a tax starting at $35 to $50 a ton for carbon dioxide generated by the fossil fuel they sell or use, with annual adjustments for inflation and other factors, according to the document reviewed by the Journal,
Some Democrats who once supported a carbon tax now oppose it, on grounds that the costs are passed on to consumers, including many who can’t afford it. The API proposal suggests rebating some of the revenue collected by the carbon tax to households and to invest the rest of the money in new technology.
The draft proposal says a carbon tax is “the most impactful and transparent way to achieve meaningful progress on the dual goals of reducing greenhouse gas (“GHG”) emissions while simultaneously ensuring continued economic growth.”
The measure is a follow-up to last year’s decision by API to push Congress for legislation to price carbon emissions across the economy, in what was a policy turnabout a decade after the organization helped to kill a similar plan.
API spokeswoman Megan Bloomgren said the proposal is under a routine review by the organization, which she said was “focused on the most transparent and impactful ways to reduce emissions at the lowest cost for American families.”
Several climate committee members pushed to send the measure to the API’s executive committee for final approval, the people said. Instead, the measure was referred to API’s lobbying committee, which has pushed to delay the completion and rollout of the policy until later this year, they said.
Some API members, including representatives of European-based producers Shell PLC and Equinor ASA, want API to take action quickly on the carbon-tax proposal to show that climate change is a top priority, according to the people.
“Shell remains committed to taking actions and convening important conversations, including at API, that could ultimately lead to putting a price on carbon,” a Shell spokesman said.
An Equinor spokesperson declined to comment on the API proposal but said the company “is a long-standing advocate of carbon pricing, which we see as being a key enabler of the energy transition.”
Companies including Hess Corp., Marathon Petroleum Corp. and Phillips 66, along with API’s lobbying team, argued a delay was necessary to help the industry avoid political blowback because a carbon tax has become unpopular among both conservatives and liberals, the people said.
A Hess spokeswoman said the company has supported pricing carbon emissions generally in its securities filings. A Phillips 66 spokesman said the company supported the API carbon pricing framework but didn’t address the carbon tax proposal approved last month.
“An economywide carbon price appears to be one of the more efficient and effective ways to reduce carbon emissions,” a Marathon spokesman said. “However, as with any policy initiative, details will be very important.”
Some within API are concerned that coming out in favor of the tax now could anger Congressional Republicans, who have long been staunch allies of the oil industry. Some of these lawmakers were displeased last year when API publicly pivoted on climate change, calling on Congress to address it with policies such as a price on carbon.
Sen. John Barrasso (R., Wyo.), the Republican leader on the Senate Energy Committee, said at the time that a tax “might be good for international energy companies, but it’s a cost the American people can’t afford.”
Earlier this week, the Business Roundtable, an association of top U.S. executives, announced energy policy recommendations that included “a price on carbon where it is environmentally and economically effective.” The group didn’t specifically call for a carbon tax, however.
Those pushing for delaying action on the carbon tax want to wait until after the midterm elections, when Republicans could retake control of the House and Senate, the people said. Their view is that Republicans would still likely oppose the carbon tax after the election but would be less likely to get angry at the oil industry if it doesn’t push the issue during an election year, the people said.
Others within API are skeptical, seeing a delay as a potentially deadly blow to the effort. This year may be the only chance to pass such policy with Democrats now crafting a climate and energy bill, which Republicans said they would oppose.
The rift over the carbon-tax proposal is the latest in a series of disputes within API over the industry’s approach to climate change.
TotalEnergies SE of France canceled its API membership last year citing disagreements on climate policy, while Shell and BP PLC—both based in London—have their membership under review.
That puts them at odds with U.S. independents and refiners whose businesses are more closely tied to selling crude and gasoline. They have been slower to support climate policy that may make their products more expensive.
In recent years, much of the industry has come out in favor of carbon pricing as a way to show they are willing to address climate change. That shift took a credibility hit last year when an Exxon Mobil Corp. lobbyist, tricked into being recorded by Greenpeace, said his company’s support for a carbon tax was merely an “easy talking point” because it is a policy unlikely to ever be implemented. Exxon later disavowed those comments.
The carbon tax would ultimately be paid by consumers. The proposal recommends placing stickers on gasoline pumps to show motorists the carbon tax added to the price of a gallon of gasoline and says transparency on the cost of the policy would help consumers understand how to limit their own emissions.
In a nod to likely objections to a tax increase that would be felt by consumers, the proposal states “the categorical implementation of a federal carbon tax regime should not be at the expense of economic expansion.”
Other key recommendations in the proposal include rebates for exporters and tariffs on imports that come from countries without a carbon tax, with the proposal calling it necessary for U.S. competitiveness. And it says the U.S. government should put a moratorium for several years on any new regulations to limit carbon emissions while it collects data on whether the tax is effective on its own at reducing emission
Gasoline Prices And Presidential Approval Ratings Perfectly Linked
Charles Kennedy, OilPrice.Com, April 21, 2022
Prices at the pump directly correlate with presidential approval ratings, the chief executive of FedEx told Fox News this week, citing a conversation he had with President Obama.
Obama “one [time] told me in a small group that everybody thought his poll numbers went up on this, that, and the other thing,” Fred Smith said. “He said they were almost perfectly correlated with the price of gasoline.”
A recent poll by Quinnipiac University suggested that most Americans blame high gas prices on President Biden’s energy policies more than on any other topical issue.
“What is more responsible when topping off the tank hurts? A raging war launched from Moscow, or an economic policy constructed in D.C. More Americans say blame falls on the latter,” polling analyst Tim Malloy said, as quoted by local media.
Meanwhile, a Gallup poll showed that the president’s approval ratings were declining the fastest among younger voters, The Hill reported recently. Since the start of his presidency, the poll found, approval among millennials and Gen Z for President Biden had shed 20 percent.
Meanwhile, summer gasoline prices in the U.S. are expected to be the highest since 2014, the Energy Information Administration said earlier this month. The national average for the summer driving season is seen at $3.84 per gallon, up from $3.06 per gallon last year, the EIA said.
While the war in Ukraine will continue to exert upward pressure on prices, the ongoing effects of the pandemic will have a smaller effect on gasoline and diesel consumption in the United States this summer season compared with the past two summers. Overall, U.S. gasoline and diesel demand continue to remain below the respective 2019 averages, the authority also noted.
The latest daily average price data from the AAA shows a national average of $4.114 per gallon, which is down from $4.255 per gallon a month ago but up from $2.872 per gallon a year ago.
AIDEA Board Approves Funding to Study Trans-Alaska Supply Chain Corridor for Ambler Access Project
(Anchorage) – Wednesday, April 13, 2022, the Board for the Alaska Industrial Development and Export Authority (AIDEA) approved AIDEA undertaking an independent technical feasibility study of the comprehensive Ambler Mining District supply chain –from mine to road to rail to port– across Alaska. While the Ambler Mining District has been extensively explored since the 1950s, development of these proven mineral resources has been limited due to a lack of transportation infrastructure. “The access road to the Ambler Mining District is one part of the logistics chain,” said AIDEA Board Chair Dana Pruhs. “We need to look at this holistically to identify and mitigate transportation bottlenecks.” The technical feasibility study will evaluate ore concentrate routes from the intersection of the Ambler Road and the Dalton Highway via rail to export terminals at Port MacKenzie in the Mat-Su Borough, the Port of Alaska in Anchorage, Seward, and Whittier. “The known resources of the mining district include abundant deposits of copper and critical minerals essential to growing our nation’s tech-focused economy and military preparedness. Establishing access through the Ambler Access Project has the potential to lead to up to five concurrent mine operations over time, which will have broad impacts to Alaska’s existing transportation infrastructure,” said AIDEA Executive Director Alan Weitzner. AIDEA is currently in development of the Ambler Access Project, a proposed 211-mile controlled industrial access road that would provide road access from the Dalton Highway to the Ambler Mining District. The Ambler Mining District is an extensive prospective copper-zinc mineral belt in northwestern Alaska with large deposits of cobalt, gallium, germanium, arsenic, palladium, lead, gold, silver, and platinum. These elements are essential for our nation’s tech-focused economy, clean energy transition, and military effectiveness. The development of the Ambler Mining District aligns with current federal policy to reduce America’s dependence on critical mineral imports and Presidential executive orders to identify new sources of responsibly developed domestic critical minerals, increase activity at all levels of the domestic supply chain (exploration, mining, concentration, and separation) and streamline the leasing and permitting processes to expedite the exploration and production of secure, reliable resources here in the US. The Board approved spending up to $250,000 from the Arctic Infrastructure Development Fund to competitively procure the technical feasibility analysis. The solicitation will be posted to www.aideaaeaprocurement.org in early May. The Alaska Industrial Development and Export Authority is a public corporation of the state. AIDEA’s purpose is to promote, develop and advance the general prosperity and economic welfare of the people of Alaska. Since 1967, AIDEA has been responsible for directing more than $3.5 billion in economic development in Alaska and has declared $446 million in dividends to Alaska since 1997
Insurers invested $536B in fossil fuel interests — analysis
Anne C. Mulkern, Climatewire, April 20, 2022
California officials released a first-of-its-kind study in a bid to encourage insurance companies to make more “climate-focused” investments.
Insurance companies invested more than $536 billion in fossil fuel interests in 2019, even as they paid damages for climate-accelerated catastrophes, according to a report released yesterday by the California Department of Insurance.
The report examined about 1,200 insurance companies, all of which operate in California, often in addition to other parts of the United States.
Large insurers use gains from investments to help pay losses. But California Insurance Commissioner Ricardo Lara argued that dollars invested in fossil fuel companies are a growing risk, given climate change.
“We need more climate-focused investments to solve our climate crisis, including from insurance companies that must do more to protect consumers and the environment,” Lara said in a statement. “This report is part of my continued comprehensive strategy to address insurance companies’ fossil fuel exposures and hold them accountable while letting consumers judge these companies’ progress on climate action for themselves.”
The report is the most exhaustive study of fossil fuel investments by insurance companies ever done by any U.S. state, Lara said. It used S&P Global’s Trucost Environmental data, which includes climate and financial data sets, along with additional publicly available data, according to an aide for Lara.
The report looked at information from 2018 and 2019, the most recent years with data available, and found that insurance companies increased their fossil fuel investments from $477 billion in 2018 to $536 billion in 2019.
The American Property Casualty Insurance Association, a trade group for the insurance industry, said that the report “provides useful data but should not be used exclusively in evaluating the climate-related investment or commitments of any particular company. Also, this report should not be taken as a company’s current investment strategy given the lag in reporting time cycles.”
The report comes as Californians deal with the severe impacts of climate change, including catastrophic wildfires, extreme storms, and drought. Nationwide, the number of natural disasters causing $1 billion or more in damages has risen steadily for two decades, the report said.
The report notes that the 2018 deadly Camp Fire in California triggered insured losses of $12 billion, which broke records at the time as the costliest event ever globally. Last year’s severe winter storm in Texas, however, is expected to cost $19 billion.
“With losses mounting, insurers are under pressure to no longer avoid addressing the impact of a changing climate on their underwriting, pricing, investment decisions and bottom lines,” the report said. “Increased disclosure can help regulators assess the effectiveness of insurer actions to mitigate insurance risk due to climate change.”
The report details investments in fossil fuel extraction, which it says shows exposure to potential stranded assets if governments implement policies to transition away from fossil fuels. Companies in 2019 had $96.8 billion invested in fossil fuel extraction activities, compared to $78.5 billion a year earlier. Those numbers are included in the larger fossil fuel investment totals.
“Each insurer incorporates its own strategy in managing their investment portfolio,” said Denni Ritter, vice president for state government relations with American Property Casualty Insurance Association, in a statement. “This diversity of investment strategies is reflected in insurers’ governance practices, investments and underwriting decision-making process, resulting in insurers taking very different approaches to their investments and business practices. This diversity brings strength and stability to the industry overall by avoiding concentration of investment risks.”
The report is also the first to identify insurance company holdings in green bonds that support clean energy investments and other environmental projects.
The companies had more than $11.4 billion invested in green bonds in 2019, more than double the $5 billion invested a year earlier, according to the report.
“Insurers have a unique role in fostering development of more green technologies and tools by making capital and protection available to industries as they transition to a lower carbon future,” Ritter said.