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In the latest edition, written from CERAWeek in Houston, we look at the bull market for electricity,͏‌  ͏‌  ͏‌  ͏‌  ͏‌  ͏‌ 
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March 22, 2024

Net Zero

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  1. Electricity is a bull market
  2. Brighter days ahead?
  3. LNG lawsuit
  4. Nuclear ‘optimism bias’
  5. Big Oil’s climate tech buy

A battery labor shortage, and a call for fossil-fuel chiefs to ‘just shut up.’


The electricity bull market is here

Tim McDonnell
Tim McDonnell
REUTERS/Bruna Casas

Artificial intelligence and cleantech manufacturing are driving a huge boom in electricity demand in the U.S., threatening to derail the power sector’s journey to net zero as renewable energy companies struggle to keep pace.

“The month that ChatGPT was released was a pivotal month for the energy industry,” said Arshad Mansoor, CEO of the Electric Power Research Institute, a research nonprofit. “That resulted in a frantic effort by all the people who are involved in the AI business, that whoever gets the infrastructure built first is going to win the race.”

This CERAWeek energy conference underway in Houston this week is normally focused on volatility in the oil and gas market. Last year, the hot topic was how to balance the world’s climate targets against the urgent need to replace Russian fossil fuels. This year, however, the power market — which has been stable and sleepy for the last several decades — was front-and-center, with executives warning that the AI computing revolution is expanding much more quickly than what the power sector can keep pace with.

The electricity market isn’t boring anymore. In the last year, as generative AI has proliferated and the Inflation Reduction Act has fueled a manufacturing boom, U.S. grid planners have doubled their forecast for how much more power will be needed in the next five years, according to an analysis by the consulting firm Grid Strategies — about the equivalent of adding 38 new nuclear power plants.

The gap between what data centers need and what can be built means that the AI boom will inevitably lead to an increase in fossil fuel consumption and emissions. →


Sunny side up

Investors shouldn’t lose confidence in the rooftop solar industry, the CEO of embattled solar installer Sunnova told Semafor.

The company’s share price plunged last month after it reported that its net losses more than doubled in 2023 from the previous year, and that it would initiate a $100 million stock offering that some investors read as a sign that the company may be getting desperate for cash. Residential solar installers across the U.S. have been hammered by rising interest rates that make it more difficult for both households and installers to finance panels. Sunnova’s sales were up last year, but its expenses grew by a third, reflecting the challenge of a business model in which a growing customer base also means more leased systems for the company to maintain.

“It’s been a bruising year,” CEO John Berger said, admitting that “I need to do a better job of cutting operating expenditure.” But the flight of investors away from the company reflects a misunderstanding of long-term energy market trends, he said: Utility rates are rising, which makes rooftop solar a more attractive proposition for households, ensuring that companies like Sunnova have a widening pool of potential customers. He also said that California’s decision last year to pare back rooftop solar incentives was a “costly mistake” that will ultimately backfire for the utilities that supported it. “The more they try to hold back consumers and technology, the faster they’re gonna get trampled.”


LNG lawsuit

REUTERS/Annegret Hilse/File Photo

Sixteen Republican-led U.S. states sued the Biden administration this week over its decision to temporarily halt issuing new permits for liquefied natural gas export terminals, arguing the federal government lacked the power to deny those licenses. The lawsuit echoes critics of the January decision in arguing that the temporary halt would harm the U.S. economy, and ultimately benefit the country’s adversaries by disrupting future supplies to American allies in Europe seeking to wean themselves off Russian gas. Both the lawsuit and the White House’s original decision point to the difficulty in planning for future fossil-fuel export capacity. As we wrote at the time: “Underinvestment in the name of climate action could lead to supply shortages and price spikes that feed a public backlash against clean energy. But overinvestment means locking in large sources of carbon emissions … and leaving investors out to dry.”


Nuclear’s ‘optimism bias’

REUTERS/Fabian Bimmer/File Photo

A growing number of industry executives and analysts believe that while Western countries are increasingly looking to ramp up their nuclear power capacity to address growing electricity demand and slash carbon emissions, they are underestimating the challenges involved and may already be too late in their nuclear conversion.

Nuclear power is seen as critical to meeting net zero goals, and 22 countries pledged at last year’s COP28 climate summit to triple nuclear power generation by 2050. Small modular reactors are increasingly seen as a viable technology — Bill Gates’ TerraPower expects to start building its first one in June in Wyoming — and about a dozen countries met near Brussels this week to push the European Union to pick up the pace. But the huge upfront costs required, as well as repeated delays and permitting difficulties, mean nuclear power is likely to struggle to even hold on to its current market share. BloombergNEF analysts project that nuclear power will account for just 1% of the European electricity market in 2050. The head of one major reactor manufacturer, meanwhile, told the Financial Times that governments and companies “have this optimism bias towards being able to deliver faster,” but that outlook ultimately led to mishandled projects.


Big Oil’s cash pile

REUTERS/Callaghan O'Hare

A top climate tech investor is betting that oil and gas companies will be willing to pay billions of dollars to acquire low-carbon startups. Peter Sopher, investment partner for Boston-based Clean Energy Ventures, was at CERAWeek to get a sense of what types of startups may be attractive to oil companies — essentially scouting, he said in an interview, for the next Carbon Engineering, a carbon capture startup that was bought for $1.1 billion last year by Occidental Petroleum. For climate tech startups, exits of that size remain vanishingly rare — a more typical acquisition is in the $200-300 million range, Sopher said. But as pressure mounts for the economy to reach net zero, startups with technologies to enable gigaton-scale carbon reductions will see their values shoot up. “Like it or not, the companies with the deepest pockets for acquiring energy startups are the big oil and gas ones,” he said.

Startups on display at CERAWeek included the thermal battery company Antora Energy, whose technology could be used in petrochemical refining, the sustainable aviation fuel producer Twelve, and a company called ClearFlame that retrofits semi-truck engines to run on ethanol. Any company working in alternative fuels, carbon capture, geothermal, methane reduction, or emissions tracking software could be a possible candidate for a Big Oil acquisition, Sopher said, and venture investors who place the right bets early on will hit a gold mine when that happens: “That’s a leap of faith a lot of us are making.”

Power Plays

New Energy

  • The Biden administration will try a second time to sell offshore wind leases in the Gulf of Mexico. The first auction round last year attracted almost no bids, but wind companies say they’ve recalibrated their rates to account for inflation and make new projects more viable.
  • Siemens Energy is poised to resume sales of wind turbines after pausing that business last year. The company had discovered engineering flaws in earlier iterations of its turbine technology that cost it billions of euros in writedowns.

Fossil Fuels

  • Glencore, one of the world’s biggest mining companies, reported a steep jump in its annual emissions after reopening an oil refinery and increasing coal production. The company said it is still on track for its modest carbon reduction target of 15% below 2019 levels by 2026.


Politics & Policy

  • U.S. officials are urging Ukraine to stop targeting Russian energy infrastructure. Drones strikes on refineries could drive up global oil prices, they warned, and could provoke more retaliatory strikes like those that Russia launched last night against Ukraine’s largest hydropower dam and other energy infrastructure.

Batteries & Minerals


  • Republican lawmakers are raising complaints about International Energy Agency chief Fatih Birol. A letter this week led by Cathy McMorris Rodgers (R-Wash.), chair of the House Committee on Energy and Commerce, accused Birol of being an “energy transition cheerleader” and called for a review of U.S. funding for the agency.
One Good Text

Mark Hutchinson, CEO of green hydrogen producer Fortescue Energy.

Live Journalism

Sen. Michael Bennet; Sen. Ron Wyden; Kevin Scott, CTO, Microsoft; John Waldron, President & COO, Goldman Sachs; Tom Lue, General Counsel, Google DeepMind; Nicolas Kazadi, Finance Minister, DR Congo and Jeetu Patel, EVP and General Manager, Security & Collaboration, Cisco have joined the world class line-up of global economic leaders for the 2024 World Economy Summit, taking place in Washington, D.C. on April 17-18. See all speakers and sessions, and RSVP here.

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