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One big geopolitical thing to start:
US president Joe Biden is heading to Saudi Arabia next month, where oil will be high on the agenda alongside regional security and the kingdom’s human rights record.
Back on the home front, Biden yesterday sent letters to big American refiners, including BP, Shell and ExxonMobil, telling them their large profit margins were “not acceptable” and urging them to start supplying more fuel.
It was Biden’s latest effort to tame surging fuel prices, which are driving the US’s highest inflation rate in 40 years — or to at least appear to be taking action on a problem that threatens to sink his presidency.
The response? Refiners and analysts say that there’s little that can be done to lift fuel production anytime soon.
BP and Shell told Energy Source that their refineries are already running at or near their maximum capacity. The American Petroleum Institute, the industry’s biggest lobbying group, welcomed the “increased dialogue” but shifted the blame for high pump prices back on to the White House. ExxonMobil suggested the administration could waive shipping and fuel specification regulations to lift domestic supply.
Robert Campbell, an analyst at the consultancy Energy Aspects, said there wasn’t capacity “sitting on the sidelines idle that would not require a lot of time and money to restart”.
One issue not mentioned in the back and forth: record-high US exports of petrol, diesel and other fuels. American refiners are cashing in on tight global fuel supplies. It’s an issue that is likely to garner more attention as fuel prices continue to surge in the US.
On to today’s newsletter, I talked with the chief executive of NextEra Energy, America’s largest renewables developer, about his company’s new plan to go emissions free by 2045 in one of the most significant clean energy expansions in the US. And in Data Drill, Amanda reports on the heatwave scorching much of the US — including us here in Texas.
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NextEra’s big green plan
Time to add a new phrase into the decarbonisation lexicon: Real Zero.
NextEra Energy, America’s largest renewable developer and a major utility in Florida, trademarked the term “Real Zero” to describe its ambitious new plan to scrub greenhouse gas emissions from its business by 2045. Unlike other companies’ “net zero” plans, NextEra insists it will not lean on carbon offsets and tree-planting schemes to green its business.
“Some folks have used offsets and planting trees, for example, but we think the number of trees that would have to be planted to actually meet the offset requirement would be substantial enough to cover several states,” John Ketchum, NextEra’s chief executive, told ES. “More importantly, buying renewables directly is a much cheaper way to solve and to achieve the goal.”
NextEra will get off to a fast start on its new clean energy push, which is among the nation’s most ambitious green energy expansion plans. The company says it will spend up to $95bn over the next four years on power projects in the US. That’s roughly what American oil group ExxonMobil plans to spend globally on its energy developments over the same time period.
“In the last 10 years, only Amazon, Google, AT&T and Verizon have invested more capital in the United States than NextEra,” says Ketchum, who took over as the boss at NextEra earlier this year from longtime chief executive Jim Robo.
NextEra says it will expand its solar installations in Florida from 4 gigawatts today to more than 90GW by 2045, requiring hundreds of millions of new solar panels to be put up. They would be backed up by a fleet of batteries capable of storing 50GW, up from 0.5GW today. The company says it plans to keep its nuclear capacity running and wants to convert its natural gas power plants to run on green hydrogen by the 2040s. It didn’t put a price tag on the clean energy buildout, but it will certainly run into the many tens of billions of dollars.
The move is a big bet on the future of green energy from a company that had long resisted calls to lay out a net zero emissions target, even as other utilities and clean energy developers released their own plans.
The major green energy expansion plan from one of the nation’s largest power providers is a boon to president Joe Biden’s decarbonisation goals, which have been floundering amid surging fossil fuel prices and Congress’s inability to pass key climate-related legislation.
It also comes at a time of deep uncertainty in the US renewable power sector, which has been stung by a series of trade disputes, rising interest rates, and surging commodity prices that have pushed up costs for new clean energy projects. NextEra’s share price is down 20 per cent this year, after its market value briefly surpassed ExxonMobil’s during the pandemic.
Ketchum said the Biden administration’s decision last week to give a two-year break on any potential tariffs on imports from south-east Asia was “really important to accelerating” its emissions-slashing plans and “being able to get solar projects back on track”.
While Ketchum said he supported the Biden administration’s efforts to bring solar panel manufacturing back into the US, a key pillar of the administration’s effort to create a Made in America energy transition, he said it would “require the right government policy support” to get factories up and running that could compete with Asian suppliers.
There are caveats to the plan — namely that the company is promising its big green shift will not result in higher costs for its consumers.
Despite the industry’s recent struggles, Ketchum said he expects costs for renewables to continue to fall and that relying on solar would reduce the sort of price volatility being seen now with natural gas.
“We think renewables are just going to continue to get cheaper and cheaper. That certainly has been our experience with renewables over time,” he said.
Power companies are also facing intense competition with the electric vehicle sector to secure the batteries needed for a utility-sized energy storage buildout. Car companies, such as Tesla and Ford, have actively worked to ensure a steady supply of the batteries they need, but utilities typically have not.
Still, Ketchum said his company had plenty of weight to throw around to secure the supplies it needed.
“We have a lot of buying power,” he said. “With battery manufacturers they know we are the leader, the world’s leader in renewable energy, we’re number one in wind, we’re number one in solar. We’re number one in battery storage, and [suppliers] want to be doing business with the number one player.” (Justin Jacobs)
It’s hot enough to bake a pie in your car in Arizona. More than 100mn Americans were warned of high temperatures this week as a heatwave stretched across many parts of the US.
From last Friday through Wednesday afternoon this week, local weather stations across the US recorded 75 new temperature highs, and another 48 temperatures that were recorded tied those of previous highs. Temperatures in Death Valley, California, one of the hottest places on the planet, reached 123 degrees on Friday, the highest temperature recorded for that date, according to AccuWeather.
“These temperatures are definitely unprecedented,” said Joseph Bauer, a meteorologist at AccuWeather. “This many cities breaking records is definitely not common.”
The heatwave started in the south-west last Friday before moving to the upper Midwest and south-east. Texas’s grid manager, the Electric Reliability Council of Texas, recorded its highest electricity demand on Sunday, breaking its August 2019 record.
The heatwave occurs as some states grapple with storms, wildfires and record drought. The Midwest is bearing the brunt of the heatwave, just as a storm knocked out power for thousands of residents in Michigan, Indiana, Ohio and West Virginia.
The Midcontinent Independent System Operator said it was experiencing high demand and warned of a capacity shortage yesterday. The Tennessee Valley Authority reported record power demand for June on Monday.
Heatwaves are among the most deadly weather hazards. More than 65,000 Americans are hospitalised each year due to heat, according to the Centers for Disease Control and Prevention. Elderly and low-income households are at disproportionate risk for heat stress.
Meteorologists expect above normal temperatures for the rest of the summer. The National Weather Service expects the heatwave to move back to the western US by the end of the week, with triple-digit temperatures returning to southern California and Arizona.
“It’s going to keep going, especially for Texas. There does not look to be much relief in sight,” said Bauer. (Amanda Chu)
Energy Source is a twice-weekly energy newsletter from the Financial Times. It is written and edited by Derek Brower, Myles McCormick, Justin Jacobs, Amanda Chu and Emily Goldberg.
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