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G-7 TAKEAWAYS: The Group of Seven wrapped up its Hiroshima summit this weekend but not before leaders managed to find a consensus to keep the door open for natural gas investment and put off again any commitment to a hard phase-out of coal-fired power generation.
The other big highlight was its newly expressed approach to “de-risking” relations with China rather than decoupling, a position absent from last year’s communique but brought about by increasing tensions, new industrial policies (the Inflation Reduction Act), and divergent strategies among the G-7 as to how members reckon with China’s industrial might and related issues (Taiwan and Ukraine).
Gas and coal: The final communique fell pretty favorably on the side of additional gas investment to manage continued reorientation of the global energy trade following the invasion of Ukraine.
It provides a lengthy preface detailing members’ commitment to the Paris agreement, members’ national determined contributions, and to the cessation of “inefficient” fossil fuel subsidies by 2025 before it gets to the politically sensitive matter of endorsing new gas and related infrastructure.
“In this context, we stress the important role that increased deliveries of LNG can play, and acknowledge that investment in the sector can be appropriate in response to the current crisis and to address potential gas market shortfalls provoked by the crisis,” the document says.
Supply diversification and security remain big enough priorities to trump the impulse and international pressure, including from the United Nations, for a more aggressive phasing out of fossil fuels.
On coal, leaders committed to “work towards ending the construction of new unabated coal fired power generation” – a first for the annual summit’s conclusions – but didn’t move further on phasing out coal, again pledging only to “achieving a fully or predominantly decarbonized power sector by 2035.”
China consensus: China doesn’t get an explicit mention in the document, but its deteriorating relations with the U.S. and its supremacy across key commercial sectors got a nod. Leaders said they will coordinate on economic matters in a way “that is based on diversifying and deepening partnerships and de-risking, not de-coupling.”
Breaking the chain of reliance on Chinese mineral refining, battery, solar PV, and semiconductor manufacturing has been a dominant storyline of the past year and was a motivation behind major legislative acts of the past year, especially the Inflation Reduction Act and the CHIPS Act.
For some, the Chinese competition piece was more of a motivator than for others. Many lawmakers in Congress are prepared to decouple with China to the nth degree and at just about any cost, something President Joe Biden resisted in comments after the summit.
“We’re not looking to decouple from China, we’re looking to de-risk and diversify our relationship with China,” Biden said. “It means protecting a narrow set of advanced technologies critical for our national security.”
De-risk vs. decouple: This is the first time we can recall Biden speaking within this “de-risk” paradigm after European Commission President Ursula von der Leyen introduced it earlier this year as the EU rolled out its green industrial policy response to the IRA.
Remember the G-7 is a diverse lot, too. One-seventh of the Group’s signatories had just been to Beijing weeks before, where he caused a stir for straying from what many hawks in Congress thought had been the consensus among U.S. allies as to the necessity to isolate China.
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COLORADO RIVER CONSERVATION DEAL STRUCK: The Biden administration reached agreement today on a historic Colorado River Basin conservation deal California, Arizona, and Nevada.
The agreement with the three states, which together make up the river’s Lower Basin, is slated to last through the end of 2026, the Interior Department said in a statement. It will also conserve at least 3 million acre-feet of water.
Of those conservation savings, 2.3 million acre-feet will be compensated through roughly $1 billion in federal funds created by the Inflation Reduction Act, which supports efforts to increase near-term water conservation of the Colorado River System, as well as to build long-term system efficiency and prevent its reservoirs from falling to critically low levels.
It will also help pay farmers, Native American tribes, and others who voluntarily forego water supplies.
Read more from Breanne here.
CARPER CALLING IT QUITS AFTER FOUR SENATE TERMS: Sen. Tom Carper of Delaware this morning announced plans to retire when his term expires in 2025.
The Democratic Environment and Public Works chairman said in a speech that the coming years mark an “opportune time to step aside and pass the torch to the next generation.”
Carper has occupied the Delaware seat since 2001.
Rep. Lisa Blunt Rochester, the Energy and Commerce Committee member who is the at-large representative for the state, is a leading possibility to replace Carper.
EXXON WADES INTO MINING WITH DRILLING RIGHTS PURCHASE: ExxonMobil recently purchased drilling rights to land in Arkansas containing reserves of lithium, the Wall Street Journal reported, further diversifying alternative energy-related commercial activities to supplements its core oil and gas business.
Exxon paid roughly $100 million for rights to 120,000 acres in southern Arkansas, home to the Smackover Formation.
Galvanic Energy, the exploration company that sold the rights to Exxon, commissioned an independent evaluation of its prospect which found it has minerals sufficient to supply 50 million electric vehicles.
Oil and gas+: The Western energy majors are steadily diversifying with ventures in non-fossil fuel energy sources and technologies such as biofuels and electric vehicles that supplant demand for oil and gas.
Strategies vary considerably among the main competitors, with Europe-based BP and Shell devoting considerable capital to renewable wind and solar and electricity. BP is diving headfirst into EV charging, a segment where CEO Bernard Looney said the company wants to be as big a player as it is in the liquid fuels market.
Exxon and Chevron, by contrast, have taken different paths, focusing more on biofuels and carbon capture technologies.
US AND AUSTRALIA JOIN FORCES ON CRITICAL MINERALS: The White House announced a new compact with Australia detailing its intent to collaborate with the global mining giant on critical mineral production and clean energy.
The compact established a joint task force on Critical Minerals and provides that government financing bodies, including the U.S. Export-Import Bank and Export Finance Australia, be included in the governments’ minerals expansion and climate policies.
Why Australia: Australia is a key ally in the Pacific, right in China’s proximity, and shares with another mineral giant in Chile about 70% of global lithium extraction.
FORD ANNOUNCES KEY ELECTRIC VEHICLE MINERALS DEALS: Ford has announced new deals to secure lithium as it seeks to drastically ramp up its EV production and sales over the next several years.
Ford said it has plans to produce EVs at a rate of 2 million annually beginning in 2026, according to CNBC.
The critical minerals supplier Albemarle said it has entered into a strategic partnership with Ford to provide 100,000 metric tons of lithium hydroxide, or enough to supply roughly 3 million EVs.
And Compass Minerals International said it has signed a “binding, multiyear” deal with Ford to supply the automaker with up to 40% battery-grade lithium carbonate, slated to be produced from a new facility in Utah. Two other mining companies, EnergySource Minerals and Nemaska Lithium have also struck agreements with Ford, according to CNBC. Read more on the deals here.
UKRAINE RESTORES POWER AT ZAPORIZHZHIA: Ukraine has restored power to the Russian-occupied Zaporizhzhia nuclear power plant in the country’s south, it said today, following a brief outage that forced it to temporarily switch to its emergency generators.
Ukrainian operator Ukrenergo said today that repair work had been carried out, and that it was resuming normal power supply.
U.N. nuclear watchdog chief, Rafael Grossi, had warned of “extremely vulnerable” safety concerns at the plant, and reiterated his calls for international protection.
The plant, which fell to Russian control shortly after the start of the war, is the largest nuclear power facility in all of Europe. The latest attack had cut off electricity to nearly 250,000 consumers in the Zaporizhzhia region, officials said, but has since been restored. Read more from Reuters here.
ENEL SELECTS OKLAHOMA FOR SOLAR FACTORY: Italian energy company Enel announced this morning that it selected a suburb of Tusla to site its first U.S. solar manufacturing facility.
Enel and affiliate 3Sun first announced its intention last year to locate a cell and module facility in the U.S. but had yet to choose a location. The company will put forward an initial investment of more than $1 billion to build its 3-gigawatt PV cell and module facility in the town of Inola, with construction expected to begin next fall, and may expand with a second phase to scale the factory up to 6 gigawatts per year.
Solar growth: 2022 was the third-highest year for growth in utility-scale solar, according to a new annual market report out this morning from American Clean Power Association.
ACP pinned last year’s lagging growth in the renewable power sector, characterized by the first decline in total clean power installations in five years, on delays related to regulation, supply chain challenges, and interconnection difficulties.
US AND NUSCALE ADVANCE SMR DESIGN IN ROMANIA: The Biden administration and several partner countries announced intentions to provide up to $275 million to help finance the deployment of NuScale’s small modular reactor power plant in Romania.
Japan, the United States, South Korea, and the United Arab Emirates are contributing to the public-private financing partnership, which was announced during the G-7 summit. NuScale said the financing will support procurement of long lead materials, engineering and design work, provision of project management expertise, site characterization and regulatory analyses, and the development of site-specific schedule and budget estimates for project execution.
The Export-Import Bank and U.S. International Development Finance Corporation also issued letters of interest for potential support of up to $3 billion and $1 billion for project deployment.
Romania and the U.S. signed agreements to cooperate on civil nuclear back in 2019, and the first NuScale power module is expected to be built by 2027.
The Rundown
Washington Examiner Here’s how long EVs have to be driven before they save emissions versus gas cars
LA Times Gov. Newsom unveils sweeping plan to speed up California infrastructure projects
Wall Street Journal How did Hyundai get so cool?
