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INSIDE NEW POLICY ON FINANCING NUCLEAR ABROAD: The U.S. International Development Finance Corporation mostly had small nuclear reactors in mind when it proposed this month lifting its ban on funding nuclear projects overseas. But a senior official from the DFC – a greatly expanded successor to the Overseas Private Investment Corporation – says the agency also envisions select situations for funding traditional large reactors, despite recent projects being delayed or canceled by cost overruns.
“One can foresee a situation in Europe, for example, where they have grid infrastructure to support old-school nuclear, one can imagine us playing a role there,” a senior DFC official told Josh in a recent interview. “But clearly, what drove us is the potential for looking at opening this up to advanced nuclear in the developing world. That is the appeal for us.”
The official cited a move by Congress a year after lawmakers passed the BUILD Act in 2018, which authorized the DFC, that called on the U.S. government to support energy diversification projects in Europe as a counter to Russia’s “energy dominance.”
(It’s worth noting that some European Union member states, like Germany, are strongly anti-nuclear. Nuclear plant construction is currently underway in only three EU member states — Finland, France and Slovakia — according to the World Nuclear Association).
Opening the door for SMRs: Small modular nuclear reactors, meanwhile, are still under development and a decade or so from becoming widely operational. This has critics of the DFC’s move questioning the timing of it. The DFC official countered the new policy puts the U.S. in the game with China and Russia, which are already aggressively promoting their advanced nuclear technologies in developing countries.
“If we have a way of advancing U.S. technology, giving a punch to Putin, and helping developing economies move forward, that’s a home run in my book,” the official said.
But the policy shift commits DFC to nothing if small reactors end up being a flop. The DFC met with small reactor developers such as NuScale, an Oregon-based company seeking to be the first to have its license approved by the Nuclear Regulatory Commission, that were pushing for the agency to change its policy.
“It’s a bit of a chicken and egg thing,” the official said. “Some say the technology is not there. If this policy change were made, it would mean we are open to looking at this technology. It doesn’t mean we have to. It doesn’t mean we open a certain amount of capital to it. It just opens the door and allows industry to know there is a full packaging of funding available. The game is on now. We are in a battle for influence across the world.”
He indicated the agency would only partner with developing countries if they are a party to “all appropriate U.S. export controls and safeguards” related to nuclear power.
Help wanted: The official added the DFC would be working closely with the Export-Import Bank and the Energy Department in deciding whether to partner on projects. The DFC offers direct equity financing, loans, and political risk insurance, while Ex-Im can only offer credit or lending. The DFC has a total investment limit of $60 billion, amounting to about a $1 billion maximum per project, the official said.
He acknowledged the DFC does not have in-house expertise on nuclear power at the moment, but he said it’s not uncommon for the young agency to work with independent engineers and experts from other agencies to assess financing opportunities.
“I am not aware we have anyone on staff who has built a nuclear power plant,” the official said. “What we do have is very strong policies and procedures and frameworks to look at big complicated projects.”
Welcome to Daily on Energy, written by Washington Examiner Energy and Environment Writers Josh Siegel (@SiegelScribe) and Abby Smith (@AbbySmithDC). Email [email protected] or [email protected] for tips, suggestions, calendar items, and anything else. If a friend sent this to you and you’d like to sign up, click here. If signing up doesn’t work, shoot us an email, and we’ll add you to our list.
HOUSE DEMOCRATS THROW A BONE TO RENEWABLES: Their sweeping $1.5 trillion infrastructure package also includes five-year extensions to the wind and solar tax credits.
The text of the bill, released today, incorporates a discussion draft released late last year by Democrats on the House Ways and Means Committee that would extend a variety of clean energy tax credits, also including carbon capture and offshore wind. Abby has more here.
SHALE INDUSTRY’S ‘GRIM’ NEW REALITY: Low oil prices could force the shale industry to write down the value of their assets by as much as $300 billion, with much of that happening this year, according to a new analysis by Deloitte.
BP last week became the first U.S. oil major since the pandemic to acknowledge its oil and gas assets are worth less than expected, announcing it is writing down up to $17.5 billion in assets while projecting a lower oil price outlook.
Current oil prices aren’t cutting it: About 30% of shale producers are already “technically insolvent” when U.S. oil prices are $35 per barrel, and another 20% are financially “stressed” at that level. The West Texas Intermediate price is currently trading around $39 per barrel, a modest recovery since the depths of the price crash in April and May.
The result: “The grim financial position of many companies and weak economic outlook could trigger deep consolidation in the US shale industry,” the Deloitte analysis says.
About 27% of small-to-medium sized shale producers are good candidates to be acquired by larger rivals, while another 50% are “avoidable” and would be too risky for buyers.
RIG COUNT KEEPS ON FALLIN’: Even as some producers begin bringing back production, the number of oil and gas rigs operating in the U.S. fell to a record low last week for the seventh week in a row, according to data Friday from energy services firm Baker Hughes.
There were 266 active rigs as of Friday, dropping 13 from the prior week, and a whopping 701 rigs below this time last year.
SHELL AND BP TAKE DIFFERENT TACKS ON DIGITALIZATION: Shell is creating digital tools to boost its downstream sales, via complementary services for existing customers, while BP is selling products to other oil and gas companies and other businesses, Bloomberg NEF says in a new report.
The different approaches have a common goal, though. Oil and gas majors are starting to look toward digitalization as a way to diversify their revenues, BNEF says. Shell, for example, is partnering with IBM on a digital services marketplace for mining companies. BP has spun off its seismic analytics technology and is selling smart cities software.
Digitalization can also save oil majors money: BNEF estimates digital technologies could cut operating costs for refineries in the U.S. by 11.5%. Such technologies could also save the oil and gas industry nearly $1 billion per year in power costs, the report says.
ANOTHER WATER RULE LEGAL PATCHWORK: The Trump administration’s replacement of Obama-era clean water requirements takes effect in every state today except for Colorado.
That’s despite an effort by a California-led coalition of more than a dozen states to convince a federal judge to freeze the rule nationwide while it is subject to litigation. On Friday, a federal district court judge in California denied states’ bid to pause the rule, saying they didn’t make a strong enough showing that the Trump rule violated the law.
A different story in Colorado: Also on Friday, a federal district court judge in Colorado sided with the state in its separate bid to pause the water rule in the state while litigation is pending. The Trump administration’s rule, which sets a narrower definition of which waters are covered by federal protections, faces a number of legal challenges in different states across the country.
What EPA has to say: Administrator Andrew Wheeler, in a tweet this morning, touted Friday’s ruling in California as a “favorable Court decision” and said the new rule “protects our nation’s water systems & provides much needed regulatory certainty for farmers, landowners, and businesses across the country.”
NEW YORK OFFICIALS SUGGEST EXPANDED CLEAN ENERGY STANDARD: The proposed changes are aimed to ensure the state meets its 70% renewables by 2030 target, according to utility regulators and energy officials in the state.
A recent white paper, from the New York State Energy Research and Development Authority and the state’s Public Service Commission, finds current and planned renewable energy capacity would bring New York to roughly 42% renewable generation.
To make up the difference, the officials are proposing ramping up the state’s renewable energy procurement targets in line with the 70% target. They also suggest the utility commission formally adopt a statewide goal of at least 9 gigawatts of offshore wind power by 2035.
The New York City problem: The white paper also proposes creating a new category under the state’s clean energy standard that would increase financial support for renewable energy projects delivering power to the city. In 2019, the white paper notes, New York City consumed about a third of the state’s total power, and nearly all of it from fossil fuels.
“Without displacing a substantial portion of the fossil fuel-fired generation currently operating” within the city, “the statewide 70 by 30 Target will be difficult to achieve,” says the white paper, which is open for public input for 60 days.
DEPARTMENT OF TRANSPORTATION FINALIZES RULE TO ALLOW LNG TRANSPORT BY RAIL: The Pipeline and Hazardous Materials Safety Administration, an agency of the Department of Transportation, issued a final rule Friday authorizing the bulk transportation by rail of liquified natural gas.
“The Department’s new rule carefully lays out key operational safeguards to provide for the safe transportation of LNG by rail to more parts of the country where this energy source is needed,” said Transportation Secretary Elaine Chao.
Under current law, LNG can only be transported by ships, trucks, and, with special approval by the Federal Railroad Administration, in United Nations-approved portable tanks that can be mounted on top of railcars. The National Transportation Safety Board, an independent government agency, argued when the rule was proposed that it “would be detrimental to public safety.”
EFFICIENCY ADVOCATES CALL FOR MANDATORY BUILDING STANDARDS: At current rates, it would take around 67 years to retrofit the current U.S. stock of commercial buildings and more than 500 years to retrofit existing U.S. homes, the American Council for an Energy-Efficient Economy says in a new report out today.
The group is calling for states and cities to require retrofits of existing buildings to make them more energy efficient, a policy 10 jurisdictions have adopted in recent months. The step would pack a huge climate punch, the report says, noting if two-thirds of existing buildings were retrofitted, it would slash carbon emissions by 2050 by an amount greater than all of the current emissions from New York’s buildings, power plants, and cars.
The Rundown
Reuters After BP takes a hit, investors widen climate change campaign
Axios Supreme Court unleashes power over pipelines, natural gas
Bloomberg Law Environmentalists relieved as critics slam ‘muddled’ SCOTUS term
Calendar
WEDNESDAY | JUNE 24
9:30 a.m. 366 Dirksen. The Senate Energy and Natural Resources Committee holds a hearing to examine the impact of COVID-19 on mineral supply chains, the role of those supply chains in economic and national security, and challenges and opportunities to rebuild America’s supply chains.
10 a.m. G50 Dirksen. The Senate Agriculture Committee holds a legislative hearing to review S. 3894, The Growing Climate Solutions Act of 2020.
10 a.m to 11:30 a.m. The Nuclear Energy Institute hosts its annual “State of the Nuclear Energy Industry” event virtually. Sen. Joe Manchin, D-W.V., is interviewed on federal policy efforts around nuclear energy.
