A weekly five-point roundup of critical events in the energy transition and the implications of climate change for business and finance.
Saudi Arabia Wants to Rebuild the Electric Vehicle Ecosystem In the Desert
What happened: Saudi Arabia has been on a decade-long, very public quest to diversify its oil-based economy, sometimes landing on projects that don’t seem aligned with its expertise (a new golf league) and sometimes aligning with those that do. Since it owns a large portion of struggling EV maker Lucid, trying to become the next hub for electric batteries would seem like more of the latter.
Why it matters: Because everyone wants a battery supply chain to exist outside of China, and Saudi Arabia is doing more to make that a reality than just about anyone. “As part of an effort to attract foreign talent and investment, Saudi Arabia this year restricted state entities from doing business with international companies that don’t have their regional headquarters in the country by January 2024. It’s set a year-end target for having 160 global companies run their Middle East operations from Saudi Arabia.”
What’s next: If this ends up anything like Lucid’s trajectory, a lot of grand ambitions won’t amount to much in the next year or two. (By Mirette Magdy, Bloomberg)
Republicans Want Foreign Polluters to Pay
What happened: Two Republican congressman just introduced a bill that weaves climate policy with economic protectionism, introducing a new “foreign polluter fee” that would raise the cost of products made in countries that release a lot of greenhouse emissions.
Why it matters: Lots of politicians spend a lot of time thinking of ways to punish or protect against the growing economic power of China. Few so explicitly target them as this proposed law does, however. But it could represent a bridge with Democrats who want to tackle carbon emissions.
What’s next: Bills that won’t pass anytime soon, as this one likely won’t, are often a trial balloon for future legislation that just might. (By Robinson Meyer, Heatmap)
This Is Why We Can’t Have Nice Things: The Electric Truck That Won’t Come Here
What happened: Toyota, which has been reticent to release any electric vehicles in the United States, is coming out with a modified, electric version of its popular Hilux truck. Currently only available in Thailand.
Why it matters: There is a false narrative currently being pushed that EV demand is slowing. It’s not. What’s slowing down are the number of consumers willing and able to pay a premium just to buy an electric version of something they could own much cheaper if it used gas. This truck is representative of an entire class of vehicles (three-row SUVs and minivans included) that would probably do very well here if they were a) affordable and b) even available.
What’s next: Consumers who want a cleaner, easiest-to-maintain vehicle have to hope the battery cost curve keeps plunging. Otherwise, models like the Hilux will never come here. (By Andrew Moseman, Heatmap)
A New Reason Why Offshore Wind Won’t Work: Faulty, Expensive Cables
What happened: “Offshore wind insiders are raising an alarm about yet another increasingly costly bottleneck for the beleaguered industry: The subsea cables that deliver the turbines’ electricity to the onshore grid. It’s one more difficult item on the industry’s long list of problems — inflation, bureaucracy, high interest rates — that have led to a recent string of cancellations, bidderless lease auctions, and multi-billion-dollar writedowns, including the cancellation of two planned New Jersey offshore wind farms.”
Why it matters: “Offshore wind developers are running into two problems with subsea cables: There’s a looming shortage of them, and they’re increasingly expensive to insure. The problems are connected, and are likely to get worse — further delaying offshore wind deployment and likely leading to higher final power costs for consumers — as cost pressures on developers mount and wind farms get larger and further offshore.”
What’s next: The riskier projects get to finance, build, and insure, the less likely they’re proposed in the first place. (By Tim McDonnell, Semafor)
How to Figure Out If an Oil and Gas Company Is Well Positioned for the Future
What happened: A new study tries to break down which oil and gas companies are going to be caught off guard by peak oil.
Why it matters: Trying to figure out what amount of investment in production today will pay off tomorrow is the trillion dollar question in the oil and gas world. With renewables taking ever-larger chunks of production, and demand for oil and gas faltering as a result, it’s trickier than ever to know when to stop building and drilling and what projects will actually pay for themselves.
What’s next: Look far enough on the horizon and what you’ll see are a series of consolidating moves (already happening) and, possibly, a few bankruptcies. (By CarbonTracker)