It’s not about net zero – it’s all about energy industry policy and strategy.
It’s Climate Week in New York – see you there? – and much will be made of commitments to net zero and other such marketing speak. The real game has moved on from these kinds of climate conversations to energy industry policy and strategy.
Since I last wrote, America passed the Inflation Reduction Act (IRA), which is a big catch-up on climate solutions. The US of A is now throwing serious support at the supply and demand side of markets for solar, storage, EVs and other tech sets needed for its decarbonization and to compete in the future.
There’s some good stuff there, hard-won by social and environmental activists, like earmarks for “energy communities” and organized labor. Of course, there is also some dumb stuff, like oil and gas leases for every wind and solar lease on Federal lands … no, really.
Like any legislation conceived in the end by two old white men in a basement, it is far from perfect. But, as has been pointed out, along with the CHIPS Act and infrastructure legislation from last year, the Biden administration is trying to do its bit on the homefront of energy transitions.
Our Sputnik Moment
This legislation signals that we are at least subconsciously cognizant that the U.S. is way behind. Bested in an array of technologies that the U.S. either invented or pioneered to a large degree – photovoltaics, wind turbines, lithium batteries, electric vehicles – the American establishment has realized that clean energy is not one of the economic opportunity races. It’s the race. With oil and gas supplies showing themselves to be as huge of a liability for the U.S. as they are for all nations, the drive to go renewable is now inexorable. Sure, some countries and companies are making hay, Americans amongst them. But when the Chinese National Oil Company is re-selling Russian gas to Europeans, and both are making historic money off the trade, aside from the Saudis et al., the writing is on the wall for an end to the madness.
When the Chinese National Oil Company is re-selling Russian gas to Europeans, and both are making historic money off the trade, aside from the Saudis et al., the writing is on the wall for an end to the madness.
While it has been a leader in renewables and EV adoption over the last few years, the U.K. may have the hardest winter coming. Harbingers like this below from British Gas, even though the new prime minister promised to cap bills below this level, do not bode well. Much else is left undone as the Brits struggle with climate change, energy disruptions and the challenges facing their not-so-new leadership.
The EU is preparing a bit better for the impending winter, which is likely to be worse, thanks to Russia. It has mandated gas storage and sharing and has other market interventions in train. A windfall tax on profiteering fossil fuel companies will pay for these programs. It’s hard to keep up, but it is a fascinating study of why energy is wicked while important. Without a doubt, renewed enthusiasm for renewables will remake Europe’s rooftops for good. In May, European Commission President Ursula von der Leyen announced a proposed mandate for rooftop solar on all commercial and public buildings by 2027 and for all residential buildings by 2029. Talk about a clean energy economic opportunity!
China Charging Ahead
But this new dawn is coming late relative to the competition for controlling the key technologies that will make our electricity and mobility happen in the coming century. It warrants saying that despite the renewed hype, this is not going to be nukes. Nor will it be “fossils with Carbon Capture and Storage (CCS)” or something breathtakingly new. We don’t have time to perfect these technologies even if we really want to! It’s going to be wind and solar at scale with electric everything powering forward. And on this, China is likely to start playing hardball. Another great bit of research (see graph) from Bloomberg New Energy Finance (BNEF) last week says it all to me:
More than 90% of the above growth is from factories in China funded to build four times more PV than today’s market. And this will be available in just a few years! This means the global capacity to spit out solar panels will be able to replace all current generating assets in 20 years with this capacity alone.
This is when disruptive change will really start to happen
Given the aforementioned, the U.S. IRA is trying to “reshore” photovoltaic production at home; Ursula Van der Leyden has raised the need for Europe to do it, Indonesia and even Australia are considering it, and the capacity is likely to be far greater.
Low-cost electricity will be coming out of the back of these PV panels for decades to come, spilling over into the economics of everything and driving fossils down further and faster. This is when disruptive change will really start to happen. Exciting, isn’t it?
I don’t have space for the startup of the month but want to call out a recent additional share-offering on the Philippines’ stock exchange from a company featured in this column last November at the time of their IPO. Forbes subsequently covered Leandro Leviste’s business, SolarPhilippines, which is now pursuing 10 gigawatts of solar and storage for Manila. That’s right: 10 gigawatts!
Shine on, indeed.