Net Zero

1. Billions for hydrogen
2. Need a refill?
3. Solar ‘dumpster fire’
4. Discount oil
5. Sneaky supply chains
6. Moms vs. climate
7. Changing rainfall patterns
8. Where’s the steel deal?

Billions for hydrogen

ExxonMobil, Chevron, Amazon, EQT Corp., and Constellation were among the big winners of a $7 billion pool of U.S. federal grants for low-carbon hydrogen production announced today. Seven “hydrogen hubs” were selected across the country, in which groups of companies will collaborate on new methods for industrial-scale production and utilization of low-carbon hydrogen, a gas that barely exists today but that many politicians and private investors are banking on to replace fossil fuels in steel, fertilizer, commercial transport, and other industrial sectors. The selected hubs cover a range of hydrogen production technologies — including renewables, nuclear, and natural gas with carbon capture, suggesting the Department of Energy is willing to take an “all-of-the-above” approach to hydrogen and not stay limited to the narrower definition of “green” hydrogen preferred by climate advocates.

Need a refill?

The U.S. Strategic Petroleum Reserve is at a 40-year low after being tapped repeatedly by the Biden administration in the last year or so to blunt the pain of global energy market volatility for U.S. consumers. The question is how much that matters. Following the escalation of conflict between Israel and Hamas in the last week, conservative commentators warned that a depleted SPR left the U.S. vulnerable to disruptions in Middle East oil trade. An analyst note last week by the Federal Reserve Bank of Dallas reached the opposite conclusion, arguing that with U.S. oil production at an all-time high, there’s little justification for the billions of dollars it would cost to refill the reserve all the way.

Arizona may pull the plug on solar

THE NEWS

Arizona regulators voted on Wednesday to consider lowering the rates that electric utilities must pay homeowners with rooftop solar for their excess power. Clean energy advocates say the move will undermine the state’s booming solar industry and unfairly pad utilities’ profits.

The decision follows a deep cut to solar benefits in neighboring California, an indication of how states with high rates of rooftop solar — regardless of their political leanings — are struggling to integrate solar power with the legacy electric grid.

“It was a straight-up dumpster fire,” Jason Gallagher, chief operating officer for Chandler-based solar installer Fusion Power, told Semafor of the Arizona meeting.

TIM’S VIEW

The decision in Arizona illustrates how solar power, in spite of its plummeting global price and unprecedented federal backing, is still subject to local political whims and the rehashing of decade-old arguments.

In Arizona, as in most states, when a home’s rooftop solar panels generate more electricity than the house needs, the excess can be sold into the grid, a practice called net metering. The rate utilities offer for that power differs between jurisdictions; usually it’s the same rate the house would pay to buy power from the grid, or a bit less. In 2016, after an expensive lobbying campaign by the state’s biggest utility, regulators adopted a plan that would gradually step down the rate over time (pre-2016 customers were able to keep a grandfathered higher rate). The justification was that the retail rate, being higher than the wholesale rate utilities would typically pay to acquire electricity, raised utilities’ costs in a way that was eventually passed on to non-solar customers.

Over the last few years, Arizona’s net metering rate has now fallen below the wholesale rate, such that excess rooftop solar power is actually a bargain buy for utilities. Yet the perception that net metering constitutes an unfair cost-shift or subsidy has persisted in some corners. At Wednesday’s hearing of the Arizona Corporation Commission, which regulates the state’s utilities, chairman Jim O’Connor, a Republican, argued that anyone wanting a solar roof “shouldn’t do that at the expense of their neighbors and communities.” O’Connor, along with two other Republicans on the five-member commission, voted to reopen the 2016 policy and potentially allow for much steeper annual cuts in the net metering rate.

The decision makes solar a hard sell for homeowners in one of the country’s sunniest states, Gallagher said, because it makes it impossible to calculate a realistic payback period, and most likely extends any such period. That view was echoed in a filing by Tesla, which sells solar and battery systems in the state and said the decision will “harm investor and customer confidence in Arizona.” Even the utility companies that originally pushed to lower the rate were against reopening the existing policy.

“They’re setting a precedent that whatever they decide in one meeting doesn’t really matter,” Gallagher said, because it’s liable to be re-litigated every two years when the commissioners are up for reelection. “There is no major renewable energy company in the nation that, if they looked at what happened [on Wednesday], would feel comfortable investing in Arizona.”

Discount oil

Amount China saved on oil imports this year by switching to low-cost suppliers that are under U.S. and European sanctions. That list includes Russia, Venezuela, and Iran, which together supplied about 25% of China’s oil so far this year, according to Reuters, a record — at steep discounts to the global average price.

Sneaky supply chains

Morocco and South Korea are cashing in from U.S. policies that aim to exclude China from its clean energy market. Chinese battery mineral firms have signed at least $4.5 billion in deals with Korean manufacturers this year, according to a Wall Street Journal analysis, and at least four are plotting mineral processing and battery production plants in Morocco. The idea is to retain access to U.S. buyers even as electric-vehicle tax credits disappear for cars with too many parts from China. Chinese clean energy firms have a history of moving operations to dodge U.S. trade barriers; several Chinese solar companies opened shops in Vietnam and elsewhere in southeast Asia to maintain lower-tariff access to the United States. (In August, U.S. officials ruled that some such firms will be liable for back payments.)

One Good Text

Erica Smithwick, professor of geography at Pennsylvania State University and member of the Science Moms advocacy group (she’s “a mom of three children, ages 18, 16, and 9, two dogs, two cats, and numerous goldfish”). The group hosts a clean energy tax credit calculator for households.

The impact of changing rainfall patterns

A drought in Brazil’s Amazon and hydropower struggles are among the growing and varied impacts of consequences of climate-related changes to rainfall patterns. The shortage of water in Brazil has already been linked to mass fish and river dolphin deaths, and threatens to restrict the country’s ability to export corn as key river thoroughfares are drying up. Elsewhere, hydropower dams are having to adapt to shifting weather patterns which have led to either a lack of power due to reduced precipitation, or an oversupply thanks to severe, unexpected rainfall. Overall, hydropower dams are supplying on average 2% less electricity than 30 years ago, according to WIRED. The World Meteorological Organization has called for improved monitoring of what it described as the “increasingly erratic water cycle.”

Where’s the steel deal?

A trade deal between Europe and the U.S. on low-carbon steel and aluminum is proving hard to nail down. European leaders plan to meet with U.S. President Joe Biden next week to discuss trade issues, among other things. They were scheduled to announce the conclusion of two years of negotiations over steel and aluminum tariffs, with analysts expecting a deal that would lower trade barriers between the EU and U.S. but impose them on other places — most notably China — on the basis of the amount of CO2 emitted in their production. On Monday, the self-imposed deadline for a deal was bumped to January, Politico reported.

A green-steel trade deal “is perhaps the climate opportunity window that is the most important but also the most challenging,” Nathan Iyer, an analyst at the Rocky Mountain Institute, wrote on X, formerly Twitter, this week. One problem is the opposite ways that the U.S. and EU are supporting steel decarbonization: Subsidies via the Inflation Reduction Act in the U.S., and carbon border tariffs in the EU. That makes it tough to fairly equate production costs between the regions. U.S. producers more often rely on recycled scrap, which makes their product lower-carbon in a way that European producers can’t easily replicate. As the American Prospect reported this week, high-tech lower-carbon steel manufacturing also is generally less labor intensive, which puts the Biden administration’s trade goals at odds with domestic labor. Finally, there is little agreement about what “green steel” actually is, and even less data to directly compare emissions from Steel Mill X to Steel Mill Y. Economists are stuck with broad country-level data that lets the dirtiest producers off the hook.

With all that said, greener steel and aluminum are clearly essential for the global economy. It’s just a matter of settling on the tradeoffs that both sides can accept — and hoping that the deal doesn’t set off another trade war with China or an investigation from the World Trade Organization.

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