Coronavirus accelerates downward trends for fossil fuels. China’s goes backwards on pollution. And a major utility takes a surprise turn.
IS THE FOSSIL FUEL MARKET COLLAPSING? The fossil fuel era won’t end anytime soon, but when it does end, this summer might look like a turning point. The pandemic is accelerating the trends of the past decade — trouble for oil, doom for coal, excitement about green technologies, fear about the climate. And new evidence keeps emerging that these trends are becoming long-term realities, that the world of the future will be fueled and powered by cleaner energy.
The coronavirus has wreaked the most havoc in the oil patch, bankrupting behemoths like Occidental Petroleum along with a slew of smaller drillers. And while oil busts aren’t new, the industry no longer seems to expect demand for its products to return to normal. Last month, BP and Shell wrote off $40 billion in assets, astonishing votes of no confidence in their core businesses. Earlier this month, two massive utilities canceled the $8 billion Atlantic Coast Pipeline, complaining it’s gotten too hard to build fossil infrastructure.
As if to prove their point, a judge then shut down the $4 billion Dakota Access Pipeline, and the Supreme Court denied the Trump administration’s push to jump-start the $13 billion Keystone XL Pipeline. In the immortal words of James Bond: Once is happenstance, twice is coincidence, three times is enemy action.
Oil and gas boosters like Energy Secretary Dan Brouillette blamed pipeline blockages on “the well-funded, obstructionist environmental lobby,” and it’s true that climate activists are waging war on dirty energy.
REALITY CHECK: But the greens haven’t gotten better-funded or more obstructionist; they just have reality on their side. The economics of coal-fired electricity have collapsed over the past decade, forcing hundreds of plants into retirement, and the virus is crushing what’s left of the industry. Meanwhile, wind and solar are getting so cheap that instead of replacing pollution belching coal plants with somewhat cleaner natural gas, utilities in states like Arizona, Colorado and Florida are skipping directly to zero-emissions renewables.
Markets are trending green. Tesla stock has tripled since April, global investment in offshore wind has quadrupled in 2020, and the electric truck startup Rivian just raised another $2.5 billion before producing a single vehicle. Wall Street giants like BlackRock are starting to talk big about climate, and cash is pouring into sustainability-focused investment funds.
The Trump administration is trying to hold back the tide, pushing financial rules that would prohibit funds from focusing on anything but returns, gutting environmental reviews that delay pipelines. But the political climate may be changing, too. New York’s pension fund just divested from coal. Fifteen states just called for all trucks to be zero-emissions by 2050. Joe Biden just unveiled a $2 trillion climate action plan that would eliminate all emissions from the electric grid by 2035.
Of course, the climate doesn’t care about politics, and 2020 is on track to be the hottest year ever. The scary reality of a warmer world, along with the sunny reality of cheaper renewables and electric vehicles, is the context for the long-term bets on a greener economy. It’s increasingly foolish for bettors to assume that tomorrow will look like yesterday.
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A NET-ZERO FUTURE WITHOUT A NEW NATURAL GAS PIPELINE — Dominion Energy told The Long Game last month that building the Atlantic Coast Pipeline was key to its plan to hit net-zero greenhouse gas emissions in the coming decades, because expanding natural gas could help replace dirtier coal-fired power plants and make service more reliable for customers. But now that the project is canceled, the utility says it can still reach climate targets by 2050.
So how does it plan to do that? In part by writing off its natural gas assets.
Dominion spokeswoman Ann Nallo said the pending $9.7 billion sale of substantially all of its natural gas transmission and storage business to Berkshire Hathaway Energy will result in an immediate 50 percent reduction in carbon emissions (the sale still needs federal approval).
The majority of that investment will be for zero-carbon energy like offshore and solar and battery storage, while $6 billion will go toward replacing older pipelines so they leak less methane and $2 billion will be spent on renewable natural gas, the spokeswoman said.
Renewable natural gas, or biomethane, comes from turning livestock manure into energy. Dominion’s goal is to replace 4 percent of its gas utility customers’ energy needs with RNG — now bought from food and waste facilities. All of the energy goals are based on what’s achievable using today’s technology, Nallo said, adding that the company expects to set more ambitious targets down the road.
Dominion continues to defend the expansion of natural gas. The Atlantic Coast project was “the best, most comprehensive solution” to the region’s electric and gas reliability challenges and a path to cleaner energy, Nallo said. Without the ACP, there is a critical need unmet in the region.
Opponents disagree, and argue that Dominion’s new plan to achieve net-zero emissions is evidence that investing in fossil fuels is foolish both economically and for the planet.
“Natural gas is not part of the solution to getting to a zero-carbon grid,” said Greg Buppert, senior attorney at the Southern Environmental Law Center that challenged the ACP’s construction. “Methane leaks throughout the system wipe out any benefits over coal. “The reality is the cost of battery storage has come down so dramatically that that’s the future. There is a huge opportunity here to go after a clean energy future.”
There still is a growing web of oil and gas infrastructure, as POLITICO’s Ben Lefebvre and Eric Wolff recently reported. Despite the recent high-profile courtroom losses, the fossil fuel industry has put tens of thousands of miles of new steel in the ground in recent years.
“While the many have been focused on debating the Atlantic Coast Pipeline, we’ve actually built and have newly operating over the last five years the mileage equivalent of over 18 Atlantic Coast Pipelines,” said John Stoody, vice president of government and public relations at trade group Association of Oil Pipe Lines.
NEW COAL DEVELOPMENT IN CHINA CASTS DOUBT ON CLIMATE TARGETS — While this summer could mark a turning point for fossil fuel infrastructure in the U.S., the opposite is appearing true in China, the world’s top polluter and energy consumer.
Before the pandemic, China had positioned itself as a climate leader. But instead of treating its economic recovery as a once-in-a-lifetime opportunity to speed up decarbonization and lock in climate goals, there are signs the country is falling back on its old playbook of pumping cheap credit into fossil-fuel heavy energy projects, reports Harry Pearl of The South China Morning Post.
Following a dramatic plunge in emissions early in the year, daily consumption of coal, oil and gas in June was on par with the previous year. Meanwhile, China has nearly 250 gigawatts of new coal-fired capacity either already under construction or in planning, which is larger than the coal fleets of the United States or India, according to Global Energy Monitor and the Centre for Research on Energy and Clean Air. In this year alone, plants accounting for some 17 gigawatts were approved to start construction — more than the previous two years combined.
The acceleration of coal plant construction this year highlights the tension at the heart of China’s climate commitments, which often pit the strategic interests of Beijing against the more immediate goals of cash-strapped provincial governments. China in recent years has limited the pace of new coal power plant development and is the world’s largest investor in renewable energy, although more than half of its power still comes from coal.
“What is behind this is to some extent Covid-related because large-scale infrastructure projects are very appealing when local governments face economic difficulty,” said Li Shuo, senior climate and energy policy officer for Greenpeace East Asia.
China remains on track to meet its Paris climate agreement targets, including generating 20 percent of its energy from non-fossil fuel sources by 2030 through a mix of new wind, solar and nuclear, and an expansion of electric car infrastructure. However, a lot of energy planning “is still up in the air because of the sheer level of uncertainties that Covid-19 introduced,” Li added.
INVESTORS CLAMOR FOR INDIA’S COAL — India is hoping that coal can propel its economic recovery from the pandemic after Prime Minister Narendra Modi last month ended a four-decade state monopoly on the fossil fuel.
More than 1,100 bidders, including dozens from outside India, have joined the virtual auction to sell 41 state-owned mines, according to coal minister Pralhad Joshi. The interest is significantly higher than what some analysts had predicted: The Institute for Energy Economics and Financial Analysis expected no foreign entities to bid. Aug. 18 is the deadline for submissions.
The sales fly in the face of India’s stated goal of slashing coal production in half by 2030. Three-fourths of the country’s electricity is generated by coal, making it the globe’s biggest consumer behind China. Auctioning coal rights to investors is estimated to generate nearly $7 billion, according to Modi’s office, and could boost the country’s domestic supply while decreasing reliance on imports.
“Let’s make no mistake, India’s power sector will be heavily reliant on coal for the next couple of decades,” IEEFA research analyst Kashish Shah said.
— Morgan Stanley on Monday became the first major U.S. bank to publicly disclose how much its loans and investments contribute to climate change, POLITICO’s Zack Colman reports. Since 2016, 35 banks have poured $2.7 trillion into fossil fuel projects, and Morgan Stanley accounted for nearly $92 billion of that.