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Leap of faith: Exxon bets the house on CCS and hydrogen (+ more)
ALSO: EU wrangling over gas exposes uneven starting points in bloc’s ‘net zero’ journey | CCS captures more US taxpayer dollars |💥Energy Flux💥| Wednesday, 28th April 2021
Welcome back to a slightly rejigged version of Energy Flux. As explained yesterday, the newsletter will now publish three times per week and link back to each story separately, rather than cramming all that text into one email.
So, here’s a quick overview of today’s issue:
💥Exxon bets the house on explosive growth in CCS and hydrogen. Rattled by activist investor, US supermajor grasps for a ‘green’ growth narrative
💥EU taxonomy wrangling highlights uneven starting points in Europe's ‘net zero’ journey. Sustainable investment guide has become a flashpoint in row over the role of natural gas in EU’s energy transition
💥CCS captures more US taxpayer dollars as part of Biden’s green jobs drive. But lavish state support means greater scrutiny of labour standards
⚡Transmission lines – Energy transition stories you might’ve missed
🧠Energised minds – Critical thinking on crucial energy issues
ExxonMobil’s latest strategy to shore up its finances while investing in lower carbon technologies is asking investors to take several giant leaps of faith in the potential future market for carbon capture, hydrogen and biofuels. It does not acknowledge the risk that these technologies might fail to commercialise, nor does it say whether the company learned anything from its many poor investment decisions over the past decade – all of which leave it exposed to repeating past mistakes.
The EU Commission has pulled off a spectacular fudge by updating its draft taxonomy on sustainable investment but delaying a decision on whether natural gas and nuclear will be deemed ‘sustainable’ investments. The friction underscores how far apart different member states are in their journey towards ‘net zero’.
The marriage of convenience between the Biden administration and the carbon capture industry is blossoming into a genuine love affair. The White House is going out of its way to put CCS at the front of its plan to revitalise communities hurt by the energy transition – but the industry should expect state support to come with strings attached.
Energy transition stories you might’ve missed
If ever there was a sign that every part of the energy industry is being roiled by decarbonisation, it is the steady flow of news about oil traders diversifying their activities. First we saw Gunvor set Scope 1 and 2 emissions reduction targets, create a renewables-dedicated arm and join the Global CCS Institute. Now its rivals are following suit: Vitol has acquired a stake in green hydrogen company Gen2 Energy, while Trafigura and Braskem have collaborated to offset the carbon emissions of a naphtha cargo, which is claimed to be a world first. Notably, Trafigura agreed to transport the cargo at a lower speed to improve fuel efficiency and reduce the amount of CO2 that needed offsetting. Might we see more slow-steaming (and longer delivery times) in the name of decarbonisation? And on offsets, is there even such a thing as ‘carbon neutral’ oil?
Spain’s new capacity market is a “potential game changer” for utility-scale batteries in the country, according to Timera Energy. “A base tranche of revenue from a capacity contract is key to underpinning an investable margin stack,” which could be supplemented by increased instances of negative pricing. Notably, batteries won’t face competition from gas-fired capacity as support is limited to zero carbon newbuilds. And of course battery costs are still coming down, as Bloomberg explains niftily here. On a related note, recycling of used car batteries is going to become an increasingly urgent business, reports the BBC.
California’s energy transition is proving rather painful. The Golden State is struggling to decarbonise, keep a lid on electric rates, avoid more devastating wildfires and keep the lights on. In a bid to avoid a repeat of the 2020 blackouts, power system operator CAISO is adopting summer reliability measures.
Oil and gas operators in the UK will have to disclose “vital” climate-related information in their financial reports. The Oil & Gas Authority is trying to bridge the gap between investor expectations on climate risk disclosures and what was actually being reported. Mandatory reporting comes into force in 2023.
For the record:
BP to buy back shares early after tripling first quarter earnings
Offshore wind final investment decisions ‘will grow 57% in the next 18 months’
Sinopec aims to become ‘the No.1 hydrogen enterprise in China’
Electrification and hydrogen can deliver net-zero by 2050, says global private-sector coalition
Small energy companies betting against quick energy transition
Australia’s energy transition being driven more by private sector than public policy
New Zealand's ambitious net-zero goal leaves out methane
India’s biggest coal producer secures first solar PPA
Welsh council bids to host nuclear fusion plant at former Aberthaw power station
Schlumberger ‘names new executives to energy transition business’ – report
Ørsted and Enefit to deliver large-scale offshore wind in the Baltics
Australia: Victoria to aggregate rooftop solar PV and battery installations into virtual power plants
Canada, Norway, Qatar, Saudi Arabia and the US form Net-Zero Producers Forum
Oil production in Alaska reaches lowest level in more than 40 years
Reaching net-zero will ‘triple clean energy investment over next decade’ – IEA
Companies are crucial to solving the climate crisis but ‘75% are falling short’
Caterpillar taps CNG supplier Certarus to explore hydrogen and renewable natural gas to lower carbon emissions
China Three Gorges Renewables Group set for mega-IPO
Critical thinking on crucial energy issues
‘Who will pay for the energy transition?’ - The shift to cleaner energy could worsen inequality and poverty, writes Reuters columnist John Kemp. “No matter how the transition is paid for the associated costs raise important distributional issues. These issues are so sensitive they explain why policymakers in most advanced economies shy away from providing details about how to move towards a zero-emission energy system even while they strongly endorse the end goal.”
‘The UK government is discouraging the installation of heat pumps’ – The Energy Performance Certificate (EPC) system that advises homebuyers how to reduce their heating bills fails to mention heat pumps, writes David Toke, director of 100percentrenewableUK. “Part of the problem is that the Government’s estimates of the carbon-reducing value of heat pumps is almost a decade out of date. The lack of urgency in doing something about this exposes the gap between the Government’s public relations and reality.”
Can the sullied reputation of ESG investing be saved from a fate worse than greenwashing? Judging from BlackRock’s most recent fund launch, it’s hard to see how...
That’s all for today. Tune in on Friday for a very special Energy Flux deep-dive all about the role of behavioural change in the energy transition, and what societal inaction means for energy incumbents.