A Conspicuous Silence at GM, A Wind Power Whiff and More (Energy Transitions | Week in Review)

A weekly five-point roundup of critical events in the energy transition and the implications of climate change for business and finance. 

The Greenwashing Crackdown Is Almost Upon Us

What happened: The terms “carbon neutral” and “net zero” sound great, both to consumers and the businesses that use them. But regulators across the globe seem to have figured out that those words are useless without their intended meaning, and are preparing for a crackdown.

Why it matters: “Multiple surveys indicate both that consumers lack a deep understanding of the terminology companies use in their advertising, and that businesses make green claims they cannot back up: A European Commission study in 2020 found that more than half of all examined environmental claims were vague, misleading, or unfounded. Across the rich world, watchdogs are taking notice, and beginning to police the precise language companies use to describe their emissions-cutting and environmental efforts.”

What’s next: This is the classic European-American divide. One continent thinks consumers have to be protected, the other believes consumers will punish companies that don’t play by the rules, making rules unnecessary. Either way, it should have a chilling effect on any large cap even tempted to make questionable claims. (By Prashant Rao, Semafor)

General Motors Is Suddenly A Lot Less Eager to Talk EVs

What happened: During a Q3 earnings call, GM CEO Mary Barra acknowledged that the company was no longer giving guidance on electric vehicle production for 2024, whereas previously it had promised to build a record 400,000 EVs.

Why it matters: Because GM, like every other legacy automaker, has always had good reason to delay its investment in EVs, and now it has even more. The strike with the UAW is costing it $200 million a week and it may not have the funds to invest in all the new manufacturing and battery plants that this slow shift to EV production requires. Kicking the can down the road has rarely been as easy to witness in real time.

What’s next: GM, like other automakers, will cite consumer reluctance to switch to EVs as one reason for its delays in investment, even as it guarantees more reluctance by being unable to produce EVs consumers actually want to buy. (By Mike Colias, The Wall Street Journal)

The World’s Biggest Carbon Capture Project Was Secretly a Failure

What happened: An investigation has revealed that the largest carbon capture project currently in existence never achieved more than a third of its planned capacity, the economics didn’t hold up, and was quietly sold last year for less than it cost to build.

Why it matters: Direct air capture is the newest form of carbon capture. Yet it’s more expensive and more complex than simply attaching a system of carbon burial into an already existing plant. The fact that this less complex, presumably cheaper form of carbon capture utterly failed in its largest test suggests the future is a lot less clear for the suddenly-popular form of climate tech.

What’s next: Everyone watches and waits as the biggest proponents, like Occidental, the makers of the failed project, tout the newest version of their old tech. (By Natasha White, Bloomberg)

Biden Whiffs On Wind Power Goal

What happened: President Joe Biden’s 2021 plan to oversee the installment of 30 gigawatts of offshore wind capacity has gone from ambitious but attainable to just about impossible, thanks to a series of upward cost revisions and the resulting, near 50% revision in price per megawatt hour.

Why it matters: Offshore wind was seen as a key player in the United States’s ability to meet its climate goals. The tech was almost perfect aligned with the country’s population, where 40% of people live in a big city near coastline. But if projects aren’t sustainable even at the outset because of rising interest rates and the rising cost to create power, none of those lofty goals matter.

What’s next: A recurring nightmare for the Biden administration: even more companies paying even more onerous fines to simply walk away from deals they’d already signed. (By Will Wade, Bloomberg)

Everything Everywhere Eventually Comes Back to the Fed, Even Climate Tech

What happened: “When the Federal Reserve raises interest rates and keeps them high, money becomes more expensive to borrow (just ask anyone who’s trying to buy a house right now). This matters a lot for a bevy of clean energy companies, because they often need to spend now — to, say, build a utility-scale solar array — in order to secure flows of payments in the future. When interest rates are high, funding is not only costlier, but future payments are less attractive compared to, say, buying low risk government bonds, which can offer a sizable return with less risk.”

Why it matters: This de-risking of investing even hurts the clean tech companies that are arguably the furthest beyond the pain curve. Elon Musk in Tesla’s 3Q earnings call sounded visibly depressed, and constantly referred back to higher rates as the reason why he and his company were, for perhaps the first time ever, cutting back on production capacity for the coming year.

What’s next: To see whether or not IRA subsidies can overcome the cost of capital. (By Matthew Zeitlin, Heatmap)