A weekly five-point roundup of critical events in the energy transition and the implications of climate change for business and finance.
No One Wants Offshore Wind in the Gulf
What happened: The government just held auctions for three leases in Texas and Louisiana for offshore wind farms. Two of those leases received no bids, and the one that did was “won” for pennies compared to leases just auctioned off in the Northeast.
Why it matters: In some places, renewables just don’t make much sense unless there’s massive government intervention. The Northeast utilities have mandates to buy renewable energy. The gulf doesn’t. Electricity is also really cheap there, wind is usually not strong enough (and sometimes way too strong), and there are other factors, like silty earth that makes it hard to install a turbine. In short, regional differences in energy generation are likely to increase in the age of IRA incentives.
What’s next: While it may not use wind energy, the Gulf may still play a role in its implementation, as a new offshore-wind installation vessel is about to come online after being built there. (By Tim McDonnell, Semafor)
Japan’s Renewables Push: Too Little, Too Late?
What happened: Every country wants its version of the IRA, a big infrastructure and manufacturing bill to help meet Net Zero goals. But not every country gets the right kind of IRA, which is the criticism of Japan’s Green Transformation Basic Policy.
Why it matters: Japan is a heavily populated country heavily constrained by its size and lack of domestic resources. For it to produce such an unambitious piece of legislation — only aiming to halve fossil fuel use in its energy sector by 2035 rather than fully decarbonize as other G-7 nations plan to — suggests not everyone is comfortable moving quickly. That’s especially important given that Japan is the world’s fifth-largest emitter of greenhouse gasses.
What’s next: A country that takes its cues from its industrial leaders may have to change its tune when those industrial leaders, Toyota among them, start falling behind globally. (By Nithin Coca, Semafor)
Peak Gasoline In China Is Here Already
What happened: Chinese oil giant Sinopec quietly announced that its estimates for peak gasoline usage were too conservative. Demand will top out this year, rather than two years from now as it originally assumed.
Why it matters: Most predictions like this come from analysts with no skin in the game. Sinopec is China’s largest fuel distributor. It knows of what it speaks. EV adoption is the main “culprit” and given that anything involving cars happens in China about two or three years before it happens anywhere else, it could mean this is a sneak peak at the destiny of the rest of the developed world.
What’s next: You know that chatter about electricity demand being way higher than supply you’ve been hearing lately? Expect it to grow louder. (By Colin McKerracher, Bloomberg)
Everyone Is an Energy Producer If the Terms Are Right
What happened: IRA credits for utility-scale solar are so inviting that untraditional energy providers, like timber companies, are suddenly signing leases to add capacity to the grid.
Why it matters: The country’s biggest property owners and self-storage companies with acres of empty roofspace are the sort of solar customers that might not have existed if it weren’t for incentives. Now that they are economically viable, their increased output is helping keep the cost of traditional energy low.
What’s next: The possibility of a virtuous loop: power generated on-site lowering costs and energy demands. (By Ryan Dezember, The Wall Street Journal)
How the Next Hurricane Could Topple Florida’s Teetering Insurance Market
What happened: Private insurers have been fleeing Florida for years. That’s left state-run insurance company Citizens to pick up the slack, resulting in a nearly four-fold increase in customers over the last five years. One big, well-targeted storm could wipe out Citizens reserves and force taxpayers to start footing the bill.
Why it matters: Of all the future unknowns in a warming world, perhaps the biggest is what happens when no one in an entire state can insure their home or car. A permanent solution might be on the horizon, but in the meantime premiums might become so prohibitive as to actually cause net migration in a state known for growing every year.
What’s next: An even bigger obsession with the path of this season’s hurricanes, as one degree west or east could cause a hit to the pocketbook of many Floridians. (By Matthew Zeitline, Heatmap)
