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INVESTMENT SHORTFALL: World energy markets will face more “turbulence” and price shocks this decade due to inadequate investments, the International Energy Agency said in its annual World Energy Outlook released today.
Oil and gas investment is down in recent years in anticipation of less demand for fossil fuels as governments and private companies invest more in clean energy to address climate change.
Without greater investment, volatile energy prices and shortages shocking the world could become the norm throughout the decade.
“What we are seeing now is a transitory preview of a much bigger and longer lasting energy shock later this decade,” Bob McNally, president of Rapidan Energy and a former top energy official in the George W. Bush administration, told Josh.
Rather than calling for oil and gas companies to step off the sideline to close the gap, the IEA says the way to address this mismatch is to boost clean energy spending considerably.
That emphasis piggybacks on the IEA’s recent declaration that the world must immediately stop investing in new oil and gas projects in order to reach net-zero emissions by 2050. To reach that target, IEA underscores in today’s report that clean energy investment would need to more than triple over the next decade to nearly $4 trillion annually by 2030.
Wind, solar and other clean technologies are taking off, and are cheaper than fossil fuels in many instances. But the level of growth and investments are far below what’s needed to replace fossil fuels, keep pace with demand, and to sufficiently address climate change.
For the first time, the IEA projects in all of its scenarios that oil demand will start to decline, predicting “peak oil” by 2025 if all current government climate pledges are met.
Still, the agency expects natural gas demand to increase over the next five years in every scenario.
Consumers would see less of a shock from volatile oil and gas prices in a world running mostly on clean energy, the IEA said. But sufficiently scaling up clean energy alternatives to the level needed to protect consumers as fossil fuels phase down will be difficult, analysts told Josh.
“It’s a much more complex issue than there is a supply and demand gap,” said Nikos Tsafos of the Center for Strategic & International Studies. “The IEA has been communicating that for a while now. We need someone to step up, we need a lot of people to step up and a lot of different parts of the system to step up.”
One challenge spotlighted by the IEA is that around 70% of additional clean energy spending needed has to emerge in developing economies, where financing is scarce, especially after the pandemic. Wealthy nations, meanwhile, have failed so far to fulfill a promise — first made in 2009 — to provide $100 billion starting in 2020 in annual financial assistance to help the developing world shift away from fossil fuels.
Another problem is that there is no central authority to marshal clean energy investment. When there are oil supply shortfalls leading to price spikes, the world can call on OPEC, the cartel of oil-producing nations. The IEA has previously found that only 2% of governments’ fiscal recovery responses to the pandemic support clean energy technologies and infrastructure.
“In this case there is no OPEC, there is no autonomous provider of clean energy the way there is for oil,” said Kevin Book, managing director of ClearView Energy Partners. “So the policy answer governments have is to create a set of incentives for industry to get there faster to create a more market friendly way to deploy investment. The question is, can it happen fast enough?”
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PELOSI SIGNALS SHRINKING RECONCILIATION PACKAGE: Under pressure from party centrists, House Speaker Nancy Pelosi said yesterday Democrats will have to “make tighter decisions” on their climate and social spending package that is stalled in Congress, the Washington Examiner’s Susan Ferrechio reports.
Pelosi acknowledged in a press conference that the $3.5 trillion package planned by Democrats will have to shrink to about $2 trillion, telling reporters, “The fact is there are fewer dollars to spend, there are choices to be made, and the members have said let’s get the results we need, but we will not diminish the transformative nature of what it is.”
“We are still talking about a couple of trillion dollars,” Pelosi said. “It’s much less.”
Pelosi, in a memo to Democrats late Monday, said she is looking for the package to include fewer policy issues, but to spend more on them, including climate change mitigation.
Yesterday, Pelosi suggested Democrats can slash the cost of the measure by shortening the time frame for the program funding. She would not tell reporters which programs, if any, would be cut.
MORE FROM CAPITO INTERVIEW ON ‘PLUGGED IN’: President Joe Biden and Democratic leaders were wrong to postpone a House vote on the bipartisan infrastructure legislation in a bid to link it to the reconciliation package, Sen. Shelley Moore Capito said on the second episode of the new “Plugged In” podcast, which we previewed in yesterday’s edition.
Capito told Josh and co-host Neil Chatterjee, former chairman of FERC, that sitting on the bipartisan bill denies Biden a “win” he needs as his poll numbers are falling.
“The president needs this,” said Capito, a Republican from West Virginia who voted for the bipartisan bill when it passed the Senate in August. “He’s had a host of big negative items he is having trouble shaking. So a big broad infrastructure package would be to his best benefit.”
The bipartisan infrastructure measure provides $550 billion in new spending, including $7.5 billion on new electric vehicle charging stations as well as billions on mass transit, rail, climate resilience, grid upgrades, and more.
Having a voice at COP26: Capito, who has been at the forefront of the GOP attempt at shifting its positioning on climate change to support clean energy technology innovation, also told us Republicans should be present at the upcoming U.N. climate conference in Glasgow.
“I do believe we as Republicans need to be part of the solution. We cannot act like or pretend we don’t see storms that are increasing or heavier rainfall or ice that is melting,” said Capito, who won’t be attending personally.
Capito is pushing for the Biden administration to provide more “transparency” around how it intends to meet its updated emissions reduction pledge, or NDC, to cut emissions in half by 2030, and how achieving the target would affect the economy.
“That is a reasonable thing to ask for if you are going to make a decision that is going to have implications economically,” Capito told us. “We need to know what you are basing your decision on.”
WHO’S COMING TO BLOCKBUSTER FOSSIL FUEL ‘DISINFORMATION’ HEARING: The CEOs of six major oil and gas companies and lobby groups will testify at a House Oversight Committee hearing this month about their role “spreading disinformation” about the role of fossil fuels in causing global warming.
Rep. Ro Khanna, Democrat of California, who chairs the Oversight and Reform Subcommittee on Environment, told the Washington Post that he’s “pleased at the compliance that we’re seeing” from the fossil fuel industry in participating in the hearing.
Khanna has threatened to subpoena the executives if they don’t show up for the Oct. 28 hearing.
Top officials from BP, Chevron, Shell, and Exxon, along with the Chamber of Commerce, confirmed to the Post they are planning to participate in the hearing.
The American Petroleum Institute previously confirmed to Josh it will make its CEO Mike Sommers available to the committee.
WHAT TO ANTICIPATE: Expect the industry officials to look to shift the conversation to the present and future to emphasize their support for policies such as carbon pricing and how they see themselves as part of the solution to address climate change.
EPA REGIONAL ADMINISTRATOR APPOINTEES NAMED: The Biden administration yesterday announced two appointees to serve as administrators of EPA’s Region 3 and Region 5.
Adam Ortiz, who recently served as director of Maryland’s Department of Environmental Protection, will oversee implementation of EPA policies for Delaware, Washington, D.C., Maryland, Pennsylvania, Virginia, West Virginia, and seven federally recognized tribes.
Debra Shore, who currently works as the commissioner of the Metropolitan Water Reclamation District of Greater Chicago, was selected to lead Region 5, which covers Illinois, Indiana, Michigan, Minnesota, Ohio, Wisconsin, and 35 tribes.
VINEYARD WIND PLACES TURBINE ORDER: Massachusetts-based wind power developer Vineyard Wind has placed an order for 62 General Electric Haliade-X turbines, moving the company a step closer to bringing online the nation’s first commercial-scale offshore wind installation.
“We’re pleased to supply the first utility-scale offshore installation in the US, increasing the potential of the turbine to generate more power for our customer,” John Lavelle, the president and CEO of Offshore Wind with GE Renewable Energy, said in a statement. “Our Haliade-X technology combined with our innovative digital capabilities means GE is well positioned to support the growth of offshore wind in the US and globally.”
The company will set up its project 15 miles off the coast of Martha’s Vineyard and expects it to begin producing energy in 2023.
Once operating, the installation is slated to provide carbon-free power to 400,000 residences and businesses in the state of Massachusetts, according to GE.
FEMA LOOKING TO REVISE FLOOD INSURANCE PROGRAM STANDARDS: FEMA is weighing a revision to decades-old minimum floodplain management standards, compliance with which allow for states’ participation in the National Flood Insurance Program.
The agency issued a request for information from the public yesterday as part of a review of the standards, which are meant to encourage states and localities to adopt adequate floodplain management measures for land development projects.
The White House, in announcing the move, pointed to the worsening toll of flood events in recent years as demonstrating the necessity of updating NFIP standards.
FEMA said in a public notice it wants updated standards to “better align the NFIP with the current understanding of flood risk and flood risk reduction approaches.”
The Rundown
Wall Street Journal Oil prices have topped $80. But don’t expect a spending bonanza from shale drillers
Chicago Tribune Pritzker’s energy policy promises 40% renewable power by 2030. But Illinois has fallen short of earlier targets.
Washington Post White House launches climate initiatives to arm communities against floods, extreme weather
Reuters Rocking down to Electric Avenue? Good luck charging your car
Calendar
TUESDAY | OCT. 19
10 a.m. 366 Dirksen. The Senate Energy and Natural Resources Committee will hold a hearing to consider the nominations of Willie Phillips to be a member of the Federal Energy Regulatory Commission, Brad Crabtree to be an Assistant Secretary of Energy for fossil energy and carbon management, and Charles Sams III to be director of the National Park Service.
