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Year Delta Arkive 2018-19

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How Was 2019 For Oil and Gas: The Terrible: The Horrible: The No Good: The Very Bad Year: Is the Message Sinking Through Among the Followers of Dinosaur Economics That Their Time’s Up

 

 

|| Sunday: January 26: 2020: Kathy Hipple Writing || ά. The energy sector, which does not include renewable energy, finished dead last in the SandP 500, the second year in a row it has held that distinction. In a year of improving oil prices, the energy sector still finished firmly in last place, with a 07 percent gain compared to a 29 percent gain overall for the SandP 500. The next worst-performing sector was health care, which posted a 19 percent gain.

The industry continued to collapse in value, relative to the broader stock market. The oil and gas sector now comprises 04.3% of the SanP 500 index, compared to 28% in the 1980s. Throughout the year, oil and gas markets remained over-supplied. Oil prices began the year at $55 per barrel and ended the year 24 percent higher, at $68 per barrel.  Natural gas prices remained below $03 mmbtu all year long. The oil price increases were not enough to lift investor interest and persistent low prices for natural gas continued as rising supply outpaced rising demand.

The market response to the industry’s current predicament and largely negative outlook was punctuated each month by significant financial events.

January: Exxon Mobil CEO MR Darren Woods delivers financial results to analysts during an earnings call, the first Head of the Company to do so in 15 years. His participation followed investor and analyst criticism and disappointing earnings results throughout 2017 and 2018, Mr Woods’ first two years as CEO.

February: The Wall Street Journal reports ‘harsh reality’ for frackers, facing difficulty as ‘Wall Street backs away’, confirming IEEFA’S view that EandP companies had lost access to the cheap capital, that had long funded the sector.

March: Exxon Mobil re-books 03.2 billion barrels of Canadian oil sands reserves, which it had de-booked in 2016, a questionable financial accounting move. :Imperial Oil, Exxon Mobil’s Canadian subsidiary, posted a flat stock price, while the market rose by 29 percent:.

Norway surprises the market by announcing it would exclude EandP companies from its pension fund, the world’s second largest, as a ‘means to reduce the aggregate oil price risk in the Norwegian economy’.

April: In Vaca Muerta, Argentina’s vast oil and gas reserves in Patagonia, critically-needed foreign investment remains muted as financial risks mount. The country’s ambitious energy plan, which called for unconventional production, fracking, to double oil and gas production in five years, will likely fail, predicts IEEFA.

May: Occidental trumps $33 billion Chevron’s bid for Anadarko, with a $38 billion bid. Chevron fails to match, accepting a $01 billion in break-up fee. Occidental funds transaction with expensive funding from Warren Buffett. Occidental’s stock is in free-fall after ‘winning’ the bid, dropping from its May 06 price of $58.77, when Anadarko accepted the bid,  to close out the year at $40.70 

June: Mr Steve Schlotterbeck, the former CEO of EQT, the largest natural gas producer in the US, suggests that ‘The shale gas revolution has frankly been an unmitigated disaster for the buy:hold investor’.

Norway’s oil fund begins to divest from its exploration and production, EandP holdings. Negative cash flows reported for 29 fracking-focused companies in the US through Q2 2019 as sector bleeds red ink.

July: BP confirms that some of its oil reserves will be stranded, confirming that ‘some of those resources won’t come out the ground’.

August: Koch Industries, no longer bullish on Canadian oil sands, sells its remaining holdings, capping a list of foreign investors that have fled the sector.

Exxon Mobil’s Q2 earnings were ‘embarrassingly’ disappointing and revealed the company’s need to borrow funds to pay its dividend.

US fracking sector reports meager positive cash flows in Q2, the first positive ones after a decade of negative cash flows, as frackers reduce capital expenditures. The small gain will not suffice to pay more than $100 billion in long-term debt they owe.

September: Ms Greta Thunberg addresses UN. General Assembly, continues to spark youth climate activism around the world. Attacks on Saudi Arabia facilities fails to lift price of oil, illustrates current markets are oversupplied and likely to remain so for the foreseeable future.

IHS Markit predicts natural gas prices will remain lower for longer. University of California announces divestment from fossil fuels.

Equity research firm Redburn publishes a long-term outlook for nine integrated oil and gas major companies, ‘Lost in Transition’ and concludes: “When industries face existential risk, historical multiples provide no floor for share prices.”

October: Exxon Mobil announces Q3 earnings. It had spent more than $03 billion on US upstream capex while earning a meager $37 million.

GE announces $08.7 billion write-down in connection with its failed acquisition of Baker Hughes, reflecting dim forecast for oil field services sector.

Oil field services giant Schlumberger announces $12.7 billion write-down, due to ‘a macro environment of slowing production growth rate in North America as operators maintained capital discipline, reducing drilling and frack activity.” according to its CEO.

BP announced a $02-03 billion impairment charge on sales of many of its US holdings, that were on its books for more than the sale prices.

November: Moody’s revises Exxon Mobil’s credit outlook to negative on cash flow worries.

Appalachian frackers face uphill battle as negative cash flows mount. Shares of the publicly traded EandP companies in Appalachia have plummeted through 2019.

Staale Gjervik, Head of XTO, an Exxon Mobil subsidiary, acknowledges that the company’s plan to achieve ‘quick cash’ from the Permian Basin had failed.

December: Chevron writes off $05-06 billion, after-tax, in shale assets in Appalachia. Begins sales effort for its Appalachian holdings, initially purchased for $04.1 billion, with significant additional investments. Rystad Energy believes these assets are only worth $500 million, given the low gas prices.  

The world’s largest oil reserves in Saudi Arabia were offered to investors in an IPO. Major investors took a pass.

Exxon Mobil has taken only limited write-offs related to its $35 billion acquisition of XTO, leading analysts to wonder whether Exxon would announce significant 2019 write-off.

Journalists caution the industry with a new golden rule: “Never buy a shale-gas business.”

Shell announces $02.3 billion write-off on weaker economic outlook. Energy consultant, Rystad, ends the year with its December newsletter title, ‘2019 ends on a low note, offering a gloomy start to 2020’.

The Wall Street Journal closes its year-end reporting with analysts predicting that recent OPEC producer reductions would not improve the industry’s problem with ‘sliding” oil prices’. This article caps, at least, 14 articles written by the Journal over the year, chronicling the industry problems with fracking, oil and natural gas oversupply, persistent low oil prices, declining profits for oil majors and climate change. 

::: Kathy Hipple is an IEEFA Financial Analyst :::  

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Coal and Fossil Fuels: The Dinosaur Economics: Public Sentiment and Political Momentum Are Turning and Will Soon Be Unstoppable: It Might Be Hard to See in the Era of Laggard Politicians Like Trump Bolsanaro and Morrison But They Are the Last Hurrah of a Dying Philosophy and World View

 

 

|| Thursday: January 23: 2020: Paul Gilding Writing || ά. In its introduction in this new Discussion Paper, ‘Climate Contagion 2020-2025’, written by Mr Paul Gilding, who is a Fellow at the University of Cambridge Institute for Sustainability Leadership, published by Breakthrough: National Centre For Climate Restoration Australia, Mr Gilding writes this following piece. Mr Gilding has 45 years of history in sustainability and thought leadership on market-driven and business-led change, including, 30 years on climate change. He is, also, a senior member of Breakthrough’s Advisory Group.

::: So it begins…..You can pretty much hear it now. It’s like being in a forest and hearing the leaves rustling in the tops of trees, just before the storm hits. Then it comes with a roar, everything shakes, and we look around wondering what will fall – and will it fall on us. This is how I see the global economy and climate change. Everything is ready, everyone knows it’s coming, we’re just waiting for the storm to hit. When it does, it will be the climate emergency meets financial contagion. When the global market flips to FOMO2 – from fear of acting too early, to fear of being left behind as everyone races for the exits.

This moment was always going to come, and it was always going to be messy. Markets rarely move smoothly. But why now? Simply because all the practical economic and financial impediments are gone. The financial logic of acting is now impeccable, meaning the only thing left is for there to be a shift in sentiment

– that moment of an intangible, hard to define flip in how the decision makers in the market see the world.

That can happen overnight. It may be triggered by a single catastrophic event with clear economic consequences– like the Australian fire emergency. Or it can

just happen. And because markets hunt in packs –when they go, they’ll all go. There are four critical factors that lead me to conclude this shift in sentiment is now imminent –anytime from tomorrow morning to 2025, but not later;

01: Clean technology for zero emissions is available, scalable, superior and investable;

02: Physical climate change is obvious and accelerating;

03: Public engagement and political momentum are rapidly turning; and

04: The financial markets are primed – from central banks, to lenders to stock markets.

The scale of change that will result — and the likely timing — can only be understood by the way these factors interact in combination, as a system. This is the way to understand markets and forecast their behaviour.

Key to this, and perhaps most critically, is the way markets behave synergistically with politics and public sentiment. The markets are not abstract machines. They are run by people who feel, think and fear. They see what we see.

To explore all this, I’ll first expand on these four factors and then analyse how they will interact and drive a financial contagion across the global market, a contagion that will tip the system into a new state.

The Four Factors Shifting Market Sentiment: 01: The technology to end climate damaging emissions is ready – it’s available, scalable, superior and investable. This is a real game changer. It has long been the case that the technology was available, but it was less developed, not widely deployed and more expensive. It was therefore assumed policy would be needed before it would go to scale – policy to address the market failure of not pricing climate change risks.

Now, across energy, transport and food, countless climate solutions are not just available, but are broadly superior in performance to incumbent offerings. In most cases, they are also cheaper or at least price competitive and will keep getting more so. As a result, they are investable propositions today and capital is

flowing into them at scale. Taken together this means deployment could easily be ramped up and there would be considerable economic benefit in doing so.

02: Physical climate change is now obvious and accelerating – with two critical impacts. Firstly, it is being viscerally felt by the public and that drives public sentiment which increases the pressure for a political response. If the markets believe a policy response is more likely in the future, they will start to price future market impacts today. Secondly, physical climate impacts bring the economic implications of the physical risks into much sharper focus. This applies to physical infrastructure, real estate, agriculture and the cost and availability of insurance. When climate change ceases to be an abstract future risk and is all around you, it is more likely to impact decisions on lending risk, insurance premiums, hedging strategies and much else. When cities like Sydney are choking on smoke from unprecedented bushfires and the impacts are being measured in % of GDP lost, the humans that make market decisions start thinking.

03: Public sentiment and political momentum are turning and will soon be unstoppable. It might be hard to see in the era of laggard politicians like Trump,

Bolsanaro and Morrison but they are the last hurrah of a dying philosophy and world view. The political context is shifting, driven by two factors. Firstly, by a new generation of vigorous and uncompromising climate activism that both represents and builds a new political momentum. Secondly by the irrefutable business and economic logic of the need to act, and the huge opportunity in doing so. When business and activists both demand change, politicians resist at their peril.

04: The financial markets are primed to act at scale. They are just waiting for the tide to turn. Then FOMO will click in and contagion will erupt. While markets have so far only acted at the margins in terms of global market impact, those actions show they are paying attention, and are waiting for the moment. Signs include government bonds being sold due to climate risk, the recent fizzled IPO of Saudi Aramco, high valuations of plant-based food companies and the continued slide in value of the oil majors.

Central banks and regulators are now wide awake to the systemic risks. The market is engaged and waiting. And remember they hunt in packs.

By considering these factors together and in particular by understanding how synergies between them could drive contagion across the system, we can start to see how a market tipping point could occur – and do so any day. Let’s consider a few potential examples of the reinforcing interactions.

Climate Contagion and Energy: For capital to decide to leave the fossil fuel industry at scale — perhaps the most significant indicator of climate contagion being underway — two things need to happen.

First there needs to be a viable competitor for capital to go to. With the technology to replace the industry now superior, cheaper and ready to scale –that’s done. Secondly, there needs to be a perceived risk of loss if the capital stays where it is – the risk of being late to the exits. The key issue that will drive this loss of value is not the level of demand today, but the level of belief that demand will be there in 10–20 years’ time. This is key because the fossil fuel industry today invests hundreds of billions of dollars every year finding and proving new reserves to meet the assumption of strong demand in 10-20 years. That future demand assumption is based on a belief that climate change is a ‘future’ risk, that policy is not imminent, that the public isn’t engaged and that the new technologies aren’t ready to scale.

Those assumptions were all true 20 years ago.

Now they are all wrong. If the market starts to believe that demand won’t, or even might not be there in 10-20 years, then hundreds of billions is suddenly wasted every year. If that sentiment turns, the value is gone. The already struggling oil and gas majors will not then transform, they will just fail, as incumbents usually do.

::: “…the economics of oil for gasoline and diesel vehicles versus wind- and solar-powered EVs are now in relentless and irreversible decline, with far-reaching implications for both policymakers and the oil majors.’’ BNP Paribas: September 2019 :::

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All the Business Leaders Should Read This: Climate Change Has Become a Defining Factor in Companies’ Long-term Prospects: Awareness Is Rapidly Changing and I Believe We Are on the Edge of a Fundamental Reshaping of Finance: Black Rock Takes First Step Towards Aligning US$07 Trillion Fund With Paris Agreement: Those Business Leaders Failing to Respond and Realign Their Businesses to This New Economic Reality Will Lead Their Businesses to Death

 

 

|| Monday: January 20: 2020 || ά. The world’s largest fund manager announced overnight that it was cutting companies, that derive a quarter or more of their profits from thermal coal from its actively managed portfolios, in response to climate change. In his annual letter to CEOs, Black Rock Chairman and CEO Mr Larry Fink announced a globally significant policy, that strongly flags this US$07 trillion investor powerhouse is finally starting to align its portfolios with the Paris Agreement.

Mr Fink’s letter starts with an emphatic statement: “Climate change has become a defining factor in companies’ long-term prospects. Awareness is rapidly changing and I believe we are on the edge of a fundamental reshaping of finance.” When Black Rock announced last week it was signing up for Climate Action 100+, an investor initiative to ensure the world’s largest corporate emitters take necessary action on climate change, the global financial response suggested this was probably no more than greenwash, given Black Rock’s long history of voting against climate action in shareholder resolutions.

Mr Fink’s CEO letter, however, starts with a clear reference to Black Rock’s ‘fiduciary duty’ to its investors. Black Rock’s own analysis shows global financial markets will be materially impacted by climate change, reflected in the Bank of England’s analysis of $20 trillion at risk. Black Rock concludes this stranded asset risk is not yet priced into the market, so as a fiduciary, Black Rock really has no choice but to act.

Black Rock has announced it will divest all of its thermal coal exposure due to its exceptionally high carbon intensity, regulatory risks and the loss of economic viability. While this divestment across Black Rock’s US$01.8 trillion of active funds is couched in climate terms, the rising technology-driven economic viability risk makes this a clearly sensible financial decision, irrespective of the moral responsibility, that Mr Fink has long argued for but, done little about.

Black Rock has defined its thermal coal divestment criteria as covering both debt and equity exposures. Any coal mining firm generating more than 25% of revenue from thermal coal will be divested from active mandates by mid-2020. This means firms like China Shenhua, China National Coal Group, Coal India Ltd, Adani Enterprises, Peabody Energy, Arch Coal, Inc, Contura Energy, CONSOL Coal Resources LP, PT Bumi Resources, Whitehaven Coal, New Hope Corp, Yancoal Australia and more, are all up for immediate review and likely divestment. With no absolute cap, Glencore would survive this first cut but, not the second.

Black Rock will then closely scrutinise high risk sectors heavily reliant on thermal coal as an input. That will likely see divestment of a much wider range of firms, like KEPCO, TEPCO, Duke Energy, RWE, Southern Co, NTPC, and Adani Power and will, also, include Chinese power utility majors, such as, China Huaneng Group Co, China Datang Corp, China Huadian Corp, State Power Investment Corp and China Energy Group.

Service and infrastructure providers to thermal coal, like Aurizon, will likely go in the third round of review. The Norwegian sovereign wealth fund has been divesting an ever-wider range of emissions-intensive firms, who have failed to accept the science of climate change and who have refused to actively and fundamentally transition their business to deal with this clear financial risk. Firms like Nextera Energy of the US, ENGIE of France and ENEL of Italy have shown how this can be achieved, both rapidly and to the benefit of shareholders, in direct contrast to the increasingly evident underperformance of laggards.

While Black Rock has made important first steps in endorsing the Task Force on Climate-related Financial Disclosures:TCFD, the Sustainability Accounting Standards Board:SASB and Climate Action 100+, a major area still largely ignored with respect to the climate’s financial risks is in the majority of BlackRock’s passively managed indexed funds. IEEFA notes Black Rock is the world’s leading index manager, ahead of State Street and Vanguard, with the three effectively controlling and running a rapidly growing and all-too-powerful global financial oligopoly. All three should be regulated as Global Systemically Important Financial Institutions.

With regard to the passive index funds it manages, Black Rock has committed to stepping up efforts in offering lower emissions index-linked alternatives. Clearly, this is pedestrian and insufficient. IEEFA would strongly endorse a move by Black Rock to offer a low emissions index default offering for all investors, both new and existing. An ‘opt-in’ alternative could then be offered, allowing investors to actively choose a high emissions intensive exposure to fossil fuels and the complementary stranded asset risks, rather than Mr Fink’s current suggestion of an ‘opt-out’ option.

It is, also, crucial that Black Rock show leadership in fixed income and real asset portfolios, as well as, equity investment products. The vast majority of new high carbon risk power and energy infrastructure is predominately funded by debt. This debt, often, sits in unlisted state-owned-enterprises:SOEs outside of the US. Until the credit rating agencies address more appropriate rating methodologies, it falls to the asset managers to reprice these ballooning carbon risks for fixed income investors, especially, in emerging markets where governance risks still run too high.

Climate policy-aligned shareholder voting, public transparency and time limited engagement with companies is another crucial area of reform for Black Rock. IEEFA’s August 2019 Report: Black Rock’s fossil fuel investments wipe US$90 billion in massive investor value destruction, highlighted the importance of Black Rock leading on shareholder engagement. 

To date, 116 globally significant banks and insurers have announced their exit from coal, with new announcements accelerating to weekly during 2019. And 2020 has begun with Dutch insurance major Aegon, announcing a significant tightening of its coal divestment policy. Global managers with over US$11 trillion of assets under management have made similar fossil fuel divestment commitments.

IEEFA’s analysis, ‘Over 100 Global Financial Institutions Are Exiting Coal, With More to Come’, shows that, once, a financial institution accepts its fiduciary duty to act on the climate’s clear financial risk, the initial announcement is, almost, always, just the first step. A firm committing to align with the Paris Agreement is committing to deep decarbonisation and anything other than a superficial greenwash highlights the profound stranded asset risks.

Our recent analysis of Indian thermal power assets shows that, even, in a country with exceptionally high energy demand growth expectations and a commitment to using domestic coal for many years to come, there has still been a quick accumulation of more than US$60 billion of non-performing assets. Bank write-downs over recent months highlight the loss of 60-80% or more of their total exposure.

Without a full alignment with the Paris Agreement by global capital markets, coupled with the follow-through of divesting the laggards and businesses unable or unwilling to rapidly decarbonise away from coal and other dirty fossil fuels, the future is very uncertain and increasingly dire, as people around the world experiencing climate change first hand know all too well.

About IEEFA: The Institute for Energy Economics and Financial Analysis:IEEFA conducts research and analyses on financial and economic issues related to energy and the environment. The Institute’s mission is to accelerate the transition to a diverse, sustainable and profitable energy economy.

::: Tim Buckley is the Director of Energy Finance Studies, IEEFA: Tom Sanzillo is the Director of Finance, IEEFA: Melissa Brown the Director, Energy Finance Studies, Asia, IEEFA :::

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IMF on the Finnish Economy: Following a Long Recession the Economy Has Been Solid in Recent Years Despite Now Slowing Down Which Highlights Underlying Challenges

 

|| Thursday: January 16: 2020 || ά. On January 09, the Executive Board of the International Monetary Fund:IMF concluded the Article IV consultation with Finland. The Board finds: Finland’s economic performance in recent years has been solid, after a long recession: yearly growth has averaged around 02½ percent, employment has continued to increase and unemployment is now close to historical lows. But growth has slowed in 2019 and household debt and productivity weaknesses persist.

Growth is expected to be only around 01½ percent this year and the next, before converging to a potential growth rate of about 01¼ percent. Risks are mainly to the downside: the recent improvement in employment could yet prove to be mostly cyclical and the economy is exposed to further deterioration in external demand. The new government has committed to spending more on education, employment, infrastructure and climate policies. A cornerstone of the new medium-term economic programme is for employment to reach a rate of 75 percent by 2023, from 72.6 percent currently, an additional 60,000 jobs from current levels.

The government has indicated that it favours wage subsidies and more spending on assistance for job seekers. There are, also, spending increases on education to address labour market mismatches. The government plans to achieve carbon neutrality by 2035, by reducing emissions and strengthening carbon sinks through increased taxes, subsidies for renewables and expenditures.

The 2019 budget implies an easing of fiscal policy: based on currently-allocated spending, the headline government balance would decrease to around -01¼ percent of GDP over the next two years, before returning to around -01 percent of GDP in the medium term. This would mean missing the government’s own medium-term target of a minimum structural balance of -0.5 percent of GDP. Debt would slightly increase, approaching 60 percent of GDP by 2024 but, net financial worth would drop more substantially as a consequence of asset sales.

The banking system is well capitalised and profitable. However, some borrowers look vulnerable, especially, from the rapid increases in housing company loans and consumer credit.

The slowing economy highlights underlying challenges. The economy has performed well over the past three years, with unemployment falling and real earnings increasing. But growth has slowed more quickly than anticipated in 2019. Trend growth is constrained by adverse demographics, while productivity growth remains weak. There are some vulnerabilities in household finances. The external position remains moderately weaker than implied by fundamentals, the estimated current account gap would imply a real exchange rate overvaluation in the range of 05 to 10 percent, with similar estimates from real exchange rate models.

The new government’s programme is challenging. It has committed to spending more on education, employment, infrastructure and climate policies and balancing the budget. In the short run, fiscal stimulus will support demand but, even so, growth is only expected to reach 01½ percent this year and the next. Given the likely growth and employment over the medium term, the government would still have a fiscal deficit of about 01 percent of GDP in 2023, about ½ percentage point away from its medium-term fiscal target.

There are many options to meet the medium-term fiscal target. Assuming it proceeds with the planned expenditure increases, off-setting measures would be required. The government could eliminate tax expenditures and subsidies on environmentally-harmful policies. Otherwise, the government will have to find other savings. Cost control has to be part of the debate about health and social services reform.

Improved tax and benefit incentives could boost employment. The government could look at leave and homecare benefits, which generate incentives for women to stay at home and tax and benefit schedules, that mean that some face a financial penalty to work, rather than stay unemployed or out of the workforce. Still more could be done to increase participation and employment of older workers. Employment of older workers could be increased by further limiting early retirement. But relying on job subsidies, which are expensive and have had mixed effects in other countries, seems likely to disappoint.

The financial system is sound but, extra measures are needed to address vulnerabilities of borrowers. While Finnish banks are highly exposed to real estate, residential and commercial real estate markets are not obviously overvalued. But household debt has been increasing, especially, from housing company loans and consumer lending. The recent recommendation to limit the ratio of household debt to income is both sensible and in line with steps, taken in many other countries. But it is important to address the tax code, which creates a clear incentive for investors to favour housing company loans and to improve data collection.

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India’s Top Renewables States Can Learn From South Australia: So Can the Rest of the World: Doing Learning and Making Better Together

 

 

|| Tuesday: January 14: 2020: Kashish Shah Writing || ά. Australian state of South Australia:SA has been a remarkable world leader in transitioning its electricity sector to a low-cost, low-emission, renewable energy-driven system in a short space of time. Three years ago, the state was vulnerable to frequent power outages. Today, SA boasts one of the highest renewable energy penetrations in the world, despite being located at the ‘end’ of a national grid which severely limits its ability to leverage interstate electricity flows.

The state produced 54.6% of its total power generation from variable renewable sources during 2019. Onshore wind and solar, both utility-scale and rooftop, represented 49% of total installed electricity capacity and battery storage another 02%. SA exemplifies a learning by doing model, with on-going challenges in how best to manage renewable energy’s intermittency, while providing a template for other states and territories around the world, grappling with the necessary energy transition away from coal-gas-fired power into cleaner, low-emitting electricity systems.

In Australia, electricity is traded on the National Electricity Market:NEM, a wholesale market, where power generators sell electricity to retailers:distributors. Just like other open spot markets, wholesale electricity prices on the NEM reflect the supply and demand dynamics using 05:30 minute pricing intervals.

SA has historically been a high-cost electricity market due to its location, lack of scale and the state’s paucity in heavily subsidised coal-fired power. That changed towards the end of 2019, however, with SA achieving the lowest average wholesale price on the NEM, at AU$73.80:MWh in October dropping to AU$56.84:MWh in November.

The lower costs were driven by record high renewable energy penetration, averaging 65-66%, across the state. This resulted in extremely low average variable renewable energy tariffs of AU$43.99:MWh in October and AU$36.06:MWh in November. Indeed, average wholesale prices overall and for renewables, dropped 30-50% in price compared to the same period in 2018.

The increased contribution from renewable energy reduced overall monthly average wholesale tariffs in SA. This emerging trend of low wholesale tariffs continued until mid-December 2019, when extreme temperatures of 43-45°C spiked demand.

A decade ago, SA was heavily reliant on coal and gas, plus net imports from the neighbouring state of Victoria. A failing coal utility changed, that picture. In 2016, the unexpected early retirement of SA’s entire 760 megawatt:MW of coal-fired capacity, without adequate notice or system planning, forced the state to act.

Fast forward to 2019 and SA is now a net exporter of power, with 11.1% of its gross electricity production going to Victoria, while 54.6% of the state’s power generation is variable renewable energy. South Australia is now targeting ‘100% renewable generation’ this coming decade.

The state’s three battery storage facilities, Hornsdale Power Reserve, 100MW:129MWh, Dalrymple North Battery, 30MW:8MWh and Lake Bonney, 25MW:50MWh, have immensely improved grid reliability in the state, while, also, managing the intermittency of the high and constantly rising penetration of variable renewable energy.

SA, also, has 1,241MW in behind-the-meter, grid-interactive, distributed rooftop solar capacity, which forms 16.4% of its total generation capacity. This has enabled SA to pioneer the engineering of virtual power plants:VPPs. VPPs are basically the aggregation, through smart controls and communication, of hundreds or thousands of rooftop solar and battery storage installations that can be managed remotely online as though they were a single unit.

South Australia’s accelerated energy system transformation is a model for states and territories transitioning their power systems, such as, India’s top six renewable energy states.

Karnataka, Tamil Nadu, Gujarat, Maharashtra, Rajasthan and Andhra Pradesh have a combined total of 65.3 gigawatts:GW of variable renewable energy capacity. In the last three years, these states have built and contracted massive renewable energy generation capacity at less than Rs3.00:kWh:US$41.5:MWh with zero indexation for 25 years. These tariffs are roughly equal to the average renewable tariff achieved by SA over the last three months. IEEFA notes India’s tariffs are lower in real terms as there is zero inflation indexation for 25 years incorporated into these transformational contracts.

State-owned discoms or power distribution companies, from the top Indian renewable states must have confidence in the deflationary nature of renewables on average wholesale electricity prices, accentuated in SA’s transition. In the last 18 months, some of these discoms have enforced renegotiations and cancellations of already low-priced renewable contracts to further reduce the tariffs discovered through competitive reverse bidding auctions. This has slowed the pace of investment in new least-cost renewable capacity additions, undermining investor confidence.

On the other hand, these states have increasingly expensive coal-fired power purchase agreements:PPAs at tariffs 50-60% higher than from renewables on a cost-plus basis, as the discoms are mandated to continue to underwrite capital costs, even, if, they do not take the power. This slow death spiral for power from non-mine mouth coal-fired power plants is compounded by the zero marginal cost of intermittent renewable energy, undermining coal via the progressive decline in utilisation rates along with all the associated increases in inefficiencies, higher auxiliary power self-consumption and increased wear and tear of faster ramping rates, something coal plants are not built for.

Discoms are trying to offset the unsustainable and largely unfunded electricity cross-subsidies in India, high commercial and industry tariffs are insufficient to offset below-cost residential and agricultural tariffs, by putting pressure on already cheaper renewables. The example from SA suggests that as penetration of cheaper renewable energy increases on the grid, average wholesale prices progressively decline but, this must be accompanied by investment in grid modernisation to mitigate increased intermittency of generation.

The lesson from South Australia is that, if, variable renewable energy is to become the dominant source of low-cost domestic electricity in India, much more needs to be done to manage variable demand and to increase variable supply. Greater penetration of lower cost but variable renewable energy requires a significant step-up in investment in reliability via batteries, pumped hydro storage, solar thermal, gas and or diesel power ‘peakers’, faster-ramping coal plants, plus, increased interstate grid connectivity and demand response management.

While battery storage costs have declined dramatically all over the world and will continue to do so, they are yet unviable for the Indian market in the absence of a formal, bankable price premium for on-demand peak power supply. IEEFA sees a flexible ‘time-of-day’ pricing mechanism as a key policy support required to enable investment in the reliability of components in the electricity system. However, ever-cheaper renewable energy, particularly, in real terms, will compensate for increases in complementary and supporting system costs over the long term.

India’s states must stay on track and build renewable energy capacity without burdening already loss-making discoms. At the same time, the Indian government must ensure a policy environment, that enables concurrent investment into flexible, firming capacity. It took an extreme weather-induced blackout in SA in 2016 to highlight the need for adequate long-term planning and a pricing incentive for flexible, firming capacity plus increased interstate grid connectivity investment. The SA government has shown clear leadership in creating the policy clarity necessary to drive investment in a complex range of complementary solutions, enhancing system reliability and putting the system on a path to sustainably lower costs as a result.

Unlike SA, which is a small, remote market at the end of a long-line grid with just one neighbouring state with which to trade electricity, India’s top six renewable states already have multiple trading partners via a well-functioning and growing interstate grid system, strongly led by the central government’s Green Energy Corridor investment program. This provides an excellent opportunity for leading states to look at increased investment in renewables, not just to meet their own power demand, but also to drive electricity exports to states which do not have great renewable energy potential. This could allow loss-making discoms of ‘renewable-rich’ energy states to earn new revenues and profits, and spare loss-making discoms of ‘renewable-poor’ states from investing in increasingly expensive new thermal generation capacity, providing a partial financial solution to the current dire state of discoms across India. 

India already has a well-connected, centralised power grid. However, grid expansion in the ‘renewable-rich’ zones and better interconnectivity between states would better leverage India’s centralised grid and its abundant renewable energy potential, while helping to manage local intermittency via India’s national demand profile.

SA has innovated its way out of an unreliable, high-emission, polluting, and expensive electricity system in a remarkably short time. A favourable policy and political environment has been key to enabling this technology transition. India must build on SA’s example and continue to accelerate its own electricity sector transition. There will be enormous benefits from maximising the learnings of those states in both India and Australia, that are leading the global energy system transformation, including the exchange of knowledge and ideas with other technology leaders, such as, Germany and California.

::: Kashish Shah is an Energy Finance Analyst with IEEFA India :::

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Despite the Oil and Gas Stocks Placed at the Dead Last in 2019 Again Even Though the Price Went Up 30% Why the Institutional Investors Remain Committed to the Flailing Energy Sector: Why Is the World Letting Them Drag Everyone to Pay for This Committed Blind-Fold Suicide-Walk in the Very Not Too Distant a Future

 

 

|| Monday: January 13: 2020: Tom Sanzillo Writing || ά. Rising oil prices couldn’t keep oil and gas stocks from under-performing again in 2019. Brent Crude Oil prices rose 28% and WTI oil prices rose 30% last year. Still, the energy sector was placed dead last in the Standard and Poor’s 500 index, posting a 07.3% gain, while the index as a whole rose 29% for the year.

How much of an outlier was energy? The next-worst performing sector, health care, was up 19%. This is the third year straight that the energy sector has finished at the bottom of the SandP 500. The energy sector now commands only 04.3% of the index, down from 25% in the 1980s, when oil and gas companies represented seven of the top 10 companies. Today, there are none, since Exxon Mobil, the industry leader, dropped out of the SandP’s top ten last year for the first time in more than 100 years.

Moody’s 2020 oil and gas outlook says that the industry is ‘stable’. Stable is not necessarily a good thing when you are sitting in last place. Confusion and disarray at Exxon Mobil, in March 2017, newly minted CEO Mr Darren Woods declared that his approach to exploration and production, fracking, in the Permian Basin would be to secure quick cash in a short cycle process, that would help the company rebound from its doldrums within three years.

He made the announcement personally and, together with the company’s senior VP Mr Jack Williams, drove a stake through the heart of former CEO Mr Lee Raymond’s signature achievement: convincing the markets, that the oil industry should not be judged through the prism of short-term cash gains. In 2019, Mr Woods deployed Mr Staale Gjervik, XTO’s, Exxon’s fracking arm, President, to state the obvious, the Permian Basin could not produce cash within three years. In fact, Gjervik set no time frame for achieving long-term value creation.

Exxon Mobil’s adoption of a long-term strategy feels not so much a return to Raymond’s theory of value creation but, more like management grasping for something to say in the wake of missing another high-stakes benchmark. Others in the industry announced write-downs, even, during this year of rising oil prices. Will investors have the courage to recognise that Exxon Mobil might write down its assets?  The company’s big-bet losses: in the oil sands, Russia and XTO, are noteworthy and the tottering of its Permian venture looms large. The issue for Exxon Mobil and the oil and gas industry is that the last round of write-downs came on the heels of crashing prices. Now we see write-downs occurring during a year in which the price of oil increased substantially.

Exxon Mobil’s 2019 stock performance was flat. Integrated oil and gas companies generally rose by about 02.3% dragging down the energy sector’s overall weak 07.3% gain. GE hits the skids on failed fossil fuel investments. The company, which is backed by Black Rock, Vanguard and Fidelity, lost $193 billion in share value over three years on a series of gambles, related to natural gas and fossil fuel development. GE’s fall from grace rattled the markets in 2019, as it had to acknowledge major missteps in its power unit and in an inability to generate synergies from its purchase of oil services company Baker Hughes.

Saudi Arabia’s IPO overstated Aramco’s value. Much of the international debate, surrounding the initial public offering of state-run oil giant Saudi Aramco focused on uncertainty over specific aspects of the transaction.  Overall, Saudi Aramco was just another oil interest, seeking to convince the market that its oil and gas reserves were worth more than the market would pay. The opaqueness of the Saudi-run enterprise added to market skittishness over its $02 trillion offering.

This IPO was not a financial transaction. No investment house signed off on the Saudi valuation. No globally-recognised stock market took on the transaction. No investors outside the Persian Gulf were willing to take the risk. Initial investors were not arms-length buyers but, rather, had their arms twisted. Even, the dividend structure was fraught, too low for the risk, too high for company finances and the fiscal solvency of the Kingdom. The Company, eventually, achieved its $02 trillion goal after four days of trading but, it came with an asterisk. A royal fiat is not a market price.

The transaction has been characterised, correctly by some, as a political ploy by Saudi Crown Prince Mohammed bin Salman to build up his popularity at home, positioning himself as a potent problem-solver and as a leader both in the Middle East, open to the outside, strong enough to retain power and, globally, the head of a $02-trillion company.

Poor performance is well understood by the business press and, presumably, by equity and debt analysts as well. A week does not go by without a prominent story on the financial failures of fracking, the stumblings of oil majors and other tales of woe during this volatile downcycle. Yet, almost, all heavy institutional investors, led by Black Rock, State Street, Fidelity and Vanguard, remain wedded to these companies, in spite of each quarter bringing new evidence of weak revenues, distressed transactions and a negative outlook.

The financial justification for these investments remains elusive. The Black Rocks, J.P. Morgans and their peers can not convincingly answer the question of why they continue to be so heavily invested in fossil fuels. Most mutter about passive indexes and diversification or, feign a commitment of accountability to their clients, who, apparently, are crying out for stakes in an underperforming industry.

In the end, evidence be damned, the prevailing view in a year when the market as a whole went up 29% is, who cares, if, the sick energy sector came in last? But how long can financial leaders like Black Rock be rewarded with astronomical fees, $18 billion in revenues in 2018, for unproductive, hands-off stratagems, that yield shaky results? 

Money doesn’t invest itself yet. People do. It is time for energy investors to sit up and act accordingly.

::: Tom Sanzillo is IEEFA’s Director of Finance :::

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The Cold Chill of the Market Realities Are Catching Up with the US Coal Sector

 

|| Tuesday: January 07: 2020 || ά. Some energy pundits have spoken in recent times of an impending US coal renaissance. The Heritage Foundation trumpeted coal’s ‘Colossal Comeback’ in 2017 and a Wall Street Journal Reporter in 2018 wrote of its global ‘resilience’. Industry executives, three years ago, credited the newly-elected Trump administration with paving the way for fresh investments in new mines.

The exuberance trickled down to state governments, where coal-state governors and legislators enthused as recently as last year about coal’s nascent rebound. That noise has now largely died down. Coal-fired power plants continued to close, including, the 2,225-megawatt:MW Navajo Generating Station in Arizona and the 2,700MW Bruce Mansfield station in Pennsylvania. Even, exports, touted by many in the industry as an option for future growth, are falling, down 17 percent through the end of the third quarter and new coal export projects remain a dim hope, weighed down by local opposition and, more importantly, low prices.

While coal struggled throughout 2019, renewable power generation continued its ascent, for the first time, surpassing coal, a trend led by new wind and solar installations, while cheaper-to-operate gas-fired power plants continued to take market share from coal. At least, six U.S. coal companies declared bankruptcy in 2019, including three of the largest. Cloud Peak Energy, once the third-biggest coal producer in the country, shut its doors, selling its three Powder River Basin:PRB mines at fire-sale prices to a small operator with a spotty track record. Blackjewel imploded, unexpectedly, idling two big PRB mines less than two years after having taken them over.

Even, Murray Energy, led by an avid Trump supporter, filed for Chapter 11 protection and the company in late December announced the closure of Genesis Mine, its largest in western Kentucky. The shutdown of that mine, which produced some 02.4 million tons in 2018, signals more consolidation ahead in the region.

The companies, that remained solvent saw a spectacular collapse in their market value. At the beginning of 2019, Peabody Energy, the largest private-sector coal company in the world, had a total market value of $03.6 billion. Now, it is worth less than a billion dollars, a 73 percent drop in a year when the stock market as a whole rose by 29 percent. Alliance Resource Partners saw its market capitalisation plummet by 40 percent, Arch Coal’s fell by more than 28 percent, and CONSOL Energy’s by 59 percent.

In some ways, the main challenge to the US coal sector comes from electric utilities, which buy the vast majority of US coal. Utilities continue to shift from coal to solar, wind and gas, all of which offer significant cost advantages. In 2019 alone, utilities shuttered 14 gigawatts:GW of coal-fired generating capacity, according to the US Energy Information Agency:EIA, following the shutdown of 15GW the year before.

By all indicators, the pain will continue, with the EIA projecting that coal companies will cut production by an additional 100 million tonnes this year, to about 600 million. The new year is barely a week old and already two units at the Colstrip Generating Station in Montana have shut down. That’s just a prelude of things to come: All told, IEEFA currently estimates that 08.5GW of coal-fired power will shut down by the end of 2020, a forecast, that, may, very well, prove to be understated.

Far from staging a comeback, US coal continues its slide and industry proponents can not argue with any credibility that its troubles are policy-driven. The so-called ‘war on coal’ is being waged by the market itself and the market is winning.

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Australia’s Abundant Solar Resources and Lower Costs Warrant Investing in Electric Vehicle Market

 

 

|| Sunday: December 15: 2019 || ά. Australia has great potential to capitalise on its exceptional solar resources and save people big dollars by driving growth in electric vehicles, powered by residential rooftop solar and batteries, according to a Report, released on December 12, by the Institute for Energy Economics and Financial Analysis:IEEFA. One fifth of households have, already, installed rooftop solar to reduce overly high electricity bills

The Report, ‘Steering by the Southern Sun: Australians Are Missing a Trick on Solar-Powered Electric Vehicles’, finds enormous potential for the rapid adoption of electric vehicles in Australia, highlighting one fifth of households have already installed rooftop solar to reduce overly high electricity bills. ‘’We are seeing rapid change in Australia with people totally on board in adopting new energy technologies.” says IEEFA Analyst Mr Gerard Wynn.

“Australia is leading the world in rooftop solar market share, and people are looking around for the next carbon-free innovation. In a market, where electric vehicles and batteries are made more affordable, transport and fuel costs are, also, reduced. The beauty of electric vehicles is they can be charged by a household’s rooftop solar plus battery, with savings generated by on-site power generation and from avoiding the cost of constantly fuelling a conventional car.”

While rooftop solar in Australia is, already, achieving payback periods of five years or less, with consumers then benefiting from 20 to 25 years of free electricity, the Report found Australia is lagging behind other developed countries in building an electric vehicle market.

“At the moment, the combination of an electric vehicle with rooftop solar plus battery has a payback period of nine years, falling to four years in 2025 and less than two years in 2030.” says Mr Wynn. ‘’With the right government incentives, this payback period can fall to about five years today and be zero by 2030. In a market where electric vehicles and batteries are made more affordable, transport and fuel costs are also reduced for people across Australia.

Electric vehicles will become increasingly attractive to Australian consumers, who have, already, demonstrated their passion for early solar adoption through more effective policies and incentives.” The Report finds in 2018, Australia registered just 1,800 electric vehicle sales, a tiny 0.21% share of national sales. That number trails far behind other countries similar in economic size or region, such as, Korea, 29,630 new electric vehicle sales last year, the Netherlands, 25,070, Canada, 22,660 and New Zealand, 4,360.

The Report, also, looked at other countries, such as, Germany and Norway for examples of lessons, that could be applied to Australia. Norway achieved rapid electric vehicle growth through incentives, including, removing GST and import tariffs on electric vehicles, exemptions on road tolls, exemptions from motor vehicle taxes, free public parking and consumer capital starter-packs of up to A$6,500. 

“When the government introduces the right mix of incentives, people in Australia will benefit from cheap, solar-powered charging for their vehicles sooner. says Wynn.

“Electric vehicles are cleaner, quieter and less carbon-emitting than conventional cars. With rooftop solar being installed at faster rates per capita than anywhere in the world, Australia has a big opportunity to jump on the bandwagon and reduce everyday bills for Australians, even, further, while kicking climate goals.”

Read the Report  

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Dinosaur Economics Has No Future: Global Capital Acknowledges the Stranded Asset Risks: The Momentum Against Thermal Coal Builds: Insurers Have Divested From Coal Roughly $08.9 Trillion of Investments Over One-third, 37% of the Industry’s Global Assets

 

 

|| Thursday: December 05: 2019: Tim Buckley Writing || ά. Global capital markets are continuing to move towards the exit when it comes to financing, insuring or investing in thermal coal and coal-fired power plants used to generate electricity. The International Energy Agency:IEA has made it clear that unabated thermal coal use must cease globally by 2050, if, warming is to be held below 02°Celsius. In response, financial institutions are moving on thermal coal first.

Over 112 globally significant banks and insurers now have formal coal exit policies in place, that are, invariably, accompanied by a commitment to align with the Paris Agreement. In this note, we examine the building momentum in the financial sector to drive alignment with the Paris Agreement. To date in 2019, there have been 35 new or tighter policy announcements by significant banks and insurers, restricting coal financing, building on 31 polices announced in 2018. Half has been new financial institutions, making their first formal commitments to begin aligning with the Paris Agreement.

In November 2019 UniCredit, the largest bank in Italy, announced a new environmental, social and governance:ESG target, stating: “UniCredit has committed to fully exit thermal coal mining projects by 2023. A new coal policy prohibits new projects in thermal coal mining and coal fired power generation.” UniCredit, also, committed to the Paris Agreement Capital Transition Assessment:PACTA project for international banks to develop a methodology to assess their lending portfolios against the Paris Agreement’s goals. Additionally, UniCredit has signed up to external monitoring requirements via the Taskforce for Climate-related Disclosures:TCFD, aimed at encouraging firms to align financial disclosures with investors’ needs and taking into account climate risk.

Coal exit policies have now been announced by 17 of the world’s biggest insurers, controlling 46% of the reinsurance market and 09.5% of the primary insurance market. Insurers have, also, divested from coal, roughly, $08.9 trillion of investments, over one-third, 37% of the industry’s global assets. To date, at least, 35 companies have taken action, up from 15 companies since 2017, with $04 trillion in assets under management.

In October 2019 Axis Capital announced a new policy commitment, limiting investment and underwriting of thermal coal and oil sands in support of the transition to a low-carbon economy. This is the second US. insurer to move, following Chubb’s exit in July 2019.

And at the start of December 2019, the first South Korean insurer announced a formal coal exit policy. DB Insurance, one of the three biggest South Korean general insurance companies, has committed to stop investing in new coal projects in a move aimed to support global efforts to tackle the climate crisis. Two private South Korean asset managers, the Korean Teachers’ Credit Union and the Public Officials Benefit Association, joined DB Insurance to, also, exclude new coal investments. This builds on announcements by two Korean public pension funds, the Teachers’ Pension and Government Employees Pension System, who announced their coal exit policies in 2018.

Half of the coal exit announcements in 2019 has been a tightening of existing policies. In November 2019, BNP Paribas built on its previous coal exit policies, announcing a timeframe for a complete coal exit ‘to cease all its financing related to the thermal coal sector in 2030 in the European Union, and worldwide by 2040’.

BNP is already the largest lender to renewable energy in Europe but, the bank defined a new financing target of €18bn by 2021. This is a clear matching of commitments, progressively reducing fossil fuel lending with an offsetting expanded lending commitment to sustainable alternatives.

AXA followed suit with a similar policy upgrade in November 2019, stating, “AXA’s new climate policy increases the stringency of its existing coal policy, tackling not only coal expansion and installed coal capacity, but also committing to a long-term total coal exit.”

However, the strongest policy alignment with the Paris Agreement to date comes from the European Investment Bank:EIB, which in November 2019 announced: “The EIB will end financing for fossil fuel energy projects from the end of 2021”.

As with BNP, the EIB will accelerate lending to technology solutions to ensure a just transition. Over the last five years, the EIB has provided €65bn of financing for renewable energy, energy efficiency, and energy distribution.

Central Banks are increasingly coming under scrutiny, reflecting the Bank of England Governor Mr Mark Carney’s repeated assertions that stranded asset risks could be globally systemic, firms ignoring the climate crisis will go bankrupt and there needs to be a whole of financial system solution.

In November 2019, the new European Central Bank Chief Executive Officer, Ms Christine Lagarde declared a goal to make climate change a ‘mission-critical’ priority for the central bank as part of a comprehensive strategic review.

The Central Banks’ Network for Greening the Financial System:NGFS recently announced its’ expansion from 34 to 46 members in just 18 months, with the latest additions being the Banco Central de Costa Rica, Comisión Nacional Bancaria y de Valores, Mexico, Guernsey Financial Services Commission, and the New York State Department of Financial Services. The NGFS’s first report, ‘Climate change as a source of financial risk’ notes the inclusion of the People’s Bank of China on the Steering Committee, with the notable absence of the US.

In November 2019, Riksbank’s Deputy Governor Mr Martin Floden announced the Swedish central bank had divested bonds from Australia and Canada due to the financial risks of those country’s excessive carbon intensity, stating: “We are now doing this by rejecting issuers who have a large climate footprint.”

Global equity investors have announced a new campaign to ‘call out’ the role of the Big Four global audit firms Also, in November 2019, French Finance Minister Mr Bruno Le Maire said that France aimed to stop all coal investments in Europe by its financial institutions within 10 years. Mr Le Maire, also, stressed the need for compulsory environmental standards reporting and the enforcement of European Union rules regarding its planned ‘taxonomy’ of green financial products.

The International Monetary Fund’s:IMF Managing Director, Ms Kristalina Georgieva has been increasingly vocal about the intertwined nature of climate risk and financial stability, noting ‘climate change is an existential threat’, that must be addressed for the world to achieve sustainable growth.

The Taskforce for Climate Related Disclosures:TCFD has, likewise, seen significant growth in global support, with Mr Mark Carney reporting in October 2019 that ‘four-fifths of the top 1,100 global companies are now disclosing climate-related financial risks in line with some of the TCFD recommendations’.

And as a clear endorsement of the significant shift in thinking in the last year since Marubeni Corp announced their landmark coal exit policy, Japanese TCFD signatories have increased from nine to 199 in just over a year and now have a market cap of almost US$02 trillion.

The commitment to the Paris Agreement comes in many guises. On the positive side, the RE100 is a commitment by leading global corporates to transition to 100% renewable energy, on average by 2028. As of November 2019, over 200 global leaders have signed on with membership increasing one third in 2019 alone.

In Australia, the first anniversary of the domestic launch of the RE100 was celebrated by the announcement that National Australia Bank and Macquarie Group had both joined QBE, ANZ, CommBank, and Westpac, the six largest domestic financial institutions, in RE100. In September 2019, Macquarie Group announced a commitment to invest US$20bn in renewable energy infrastructure globally within five years, one of the five largest renewable investments commitments globally.

The growth in climate bonds on track for another record year in 2019, with issuances to date standing at US$182bn, having surpassed the 2018 full year total of US$171bn by the end of October 2019. One highlight showing the expanding capacity of the global green bond market was that Ørsted had priced subordinated green hybrid capital securities of €600m with a hundred years maturity at an initial yield of just 01.75% annually.

At a time when domestic financial institutions are constraining new credit, the renewable infrastructure sector of India significantly expanded its access to the global green bond market in the second half of 2019, with new issues by Adani Green, US$362m, Greenko, US$350m after just completing a US$950m issue and Azure Power, US$350m.

Financial sector service providers are, also, starting to see increased scrutiny. Global equity investors have announced a new campaign to ‘call out’ the role of the Big Four global audit firms, Deloitte, Ernst and Young, KPMG and PricewaterhouseCoopers, for consistently ignoring the financial risks of climate change in their annual report audit sign-offs, while the International Accounting Standards Board:IASB has similarly failed to address this issue.

To conclude, most forecasters of global energy markets point to the multi-decade life of energy infrastructure assets, suggesting the rate of change will be progressive but incremental in nature, rather than rapid. IEEFA takes an entirely different perspective.

Financial markets are sometimes slow to act but, once a technology driven disruption becomes probable, the immediacy of market pricing can be severe and abrupt. Signs suggest 2019:20 is a tipping point for thermal coal, even, if, the financial sector is yet to price in what an alignment with the Paris Agreement means for wider fossil fuel use.

It is worth considering that the largest private coal company in the world is Peabody Energy. Having dusted US$18bn of shareholder wealth in its 2016 bankruptcy, Peabody proclaimed its phoenix-type return to the equity markets in 2017. Yet, 2019 has seen its shares again collapse 70% in value. Investors appear more reticent to catch the falling knife a second time.

::: Tim Buckley is Director of Energy Finance Studies, IEEFA South Asia :::

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Global Coal Power Is Set for Record Fall in 2019: The European Union Has Surprised All With a Staggering 23% Year on Year Decline in Coal-fired Power Generation in the Calendar Year to September 2019

 

|| Tuesday: November 26: 2019 || ά. Coal-fired power, used to make electricity, is on track for record declines globally in 2019, finds a new briefing note out yesterday by the Institute for Energy Economics and Financial Analysis:IEEFA, the Centre for Research on Energy and Clean Air:CREA and Sandbag. The Note, Global Coal Power Set for Record Fall in 2019, finds thermal coal declines are likely across China, the US, the European Union and Japan.

The long-term decline of unabated thermal coal use is becoming increasingly clear. Mr Tim Buckley, Co-author of the Report and the Director of Energy Finance Studies at IEEFA, says that the growth in Southeast Asian markets is unable to absorb the coming over-supply of thermal coal.

“At just 04.6% of the world’s total coal-fired power generation in 2019, the Southeast Asian region is not big enough to compensate for the dramatic cuts in thermal coal use in the US, the European Union and South Korea and the on-going slow decline in Japan.’’ says Mr Buckley. The US. is on track for a record decline in coal-fired power generation in 2019.

Coal-fired power is tracking down 13.9% year on year and coal use in power generation is reported at down 13.0%, Mr Buckley notes. “The European Union has surprised all with a staggering 23% year on year decline in coal-fired power generation in the calendar year to September 2019.

“And Japan’s thermal coal imports are down some 03.5% year on year, reflective of flat overall electricity demand and rising nuclear power and renewables generation, from a low base.”

Co-authored with Mr Lauri Myllyvirta, the Lead Analyst at the Centre for Research on Energy and Clean Air:CREA and Mr Dave Jones, Electricity and Coal Analyst with Sandbag, the Note finds the rate of decline in global thermal coal-fired power generation is dropping 03% year on year in 2019, moderated in part by slower global economic growth.

“World electricity markets are experiencing a dramatic technology-driven disruption.” says Mr Buckley. “The economics of renewables and batteries are seeing double-digit annual deflation and new thermal coal-fired power generation increasingly can not compete.”

The IEEFA notes that global capital is increasingly fleeing coal in the face of rising stranded asset risks. To date, 110 globally significant financial institutions have announced coal financing restrictions across the banking and insurance sectors.

“The long-term decline of unabated thermal coal use is becoming increasingly clear.” says Mr Buckley. “A stalling in coal-fired power generation in China, despite the illogical continuation of building new, idle coal power plants and a totally unexpected decline in India during calendar year 2019 to-date might be the wake-up call for forecasters that technology is disrupting the global electricity market, while at the same time, driving the convergence of new energy technologies in the transport sector.

The transition away from coal is happening faster than forecasters can keep up with.”

About IEEFA: The Institute for Energy Economics and Financial Analysis conducts research and analyses on financial and economic issues related to energy and the environment. The Institute’s mission is to accelerate the transition to a diverse, sustainable and profitable energy economy. ieefa.org

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What Would It Take to Limit the Global Temperature rise to 01.5°C

 

 

|| Monday: November 18: 2019 || ά. Every year, the World Energy Outlook scenarios are updated to take into account the latest data and developments in policies, technology, costs and science. The major new scientific element for this year’s WEO was without doubt the Special Report on Global Warming of 01.5 °C, which the Intergovernmental Panel on Climate Change:IPCC published in late 2018.

The IPCC report contains a wealth of new information about the risks of global warming, underlining that many of the physical impacts of climate change escalate in a non-linear fashion in relation to increases in global temperature. In other words, the impacts of 02.0°C of warming are far worse than those of 01.5°C. The energy sector is at the front line of this issue, as it is by far the largest source of the emissions, that cause global warming.

As a result, this year’s WEO explores in detail what a pathway consistent with capping the temperature rise at 01.5°C would mean for the energy sector. The discussion goes to the heart of energy’s dual role in modern civilisation: it’s essential to all the comforts of modern life, our homes, workplaces, leisure and our infrastructure but, the way it’s largely produced and consumed at the moment damages the environment on which we all depend.

Although, the task of tackling climate change is huge, it is relatively simple to define. Global emissions need to peak as soon as possible and then fall rapidly until they hit zero or, as the Paris Agreement puts it, until there is a ‘balance between anthropogenic emissions by sources and removals by sinks’, a situation, sometimes, called, net-zero.

It’s not the only variable, that counts but, the year at which global emissions reach net-zero is a critically important indicator for the prospects of stabilising global temperatures. The Paris Agreement specifies that this needs to happen ‘in the second half of this century’. The IPCC’s 01.5°C report underlines that there is a major difference between reaching net-zero in 2100 versus 2050 and attention in many countries is increasingly focused on earlier dates.

After the UN Climate Summit in September, at least, 65 jurisdictions, including, the European Union, had set or were actively considering long-term net-zero carbon targets, including, efforts to reach net-zero in 2050 or sooner. These economies together accounted for 21% of global gross domestic product and nearly 13% of energy-related CO2 emissions in 2018.

The Sustainable Development Scenario: The Sustainable Development Scenario relies on all of these net-zero targets being achieved on schedule and in full. The technology learning and policy momentum, that they generate, means that they become the leading edge of a much broader worldwide effort, bringing global energy-related CO2 emissions down sharply to less than 10 billion tonnes by 2050, on track for global net-zero by 2070.

There are no single or simple solutions to achieve this result. Rapid energy transitions of the sort envisaged by the Sustainable Development Scenario would require action across all sectors, utilising a wide range of energy technologies and policies. Energy efficiency improvements and massive investment in renewables, led by solar PV, take the lead but, there are, also, prominent roles in this scenario for carbon capture, utilisation and storage:CCUS, hydrogen, nuclear and others.

Among the range of technology solutions proposed for global emissions, there is one category, that is used only very sparingly. These are the so-called negative emissions technologies, which, actually, remove CO2 from the atmosphere. Examples are bio-energy used in conjunction with CCUS, often, called, BECCS and direct air capture. These technologies, may, yet, play a critical role but, the level at which they are deployed in the Sustainable Development Scenario, 0.25 billion tonnes in 2050, is lower than nearly all of the 01.5 °C scenarios assessed by the IPCC.

The Sustainable Development Scenario and the pursuit of 01.5 °C: If, emissions were to stay flat, at the net-zero level, from 2070 until the end of the century, then, the Sustainable Development Scenario is ‘likely’, with 66% probability, to limit the rise in the average global temperature to 01.8 °C, which is, broadly, equivalent to a 50% probability of a stabilisation at 01.65 °C.

If, negative emissions technologies of the sort mentioned above could be deployed at scale, then, emissions could, actually, go below zero, meaning that carbon dioxide is being withdrawn from the atmosphere on a net basis. This is a very common feature of the scenarios, assessed by the IPCC in its special report: 88 out of the 90 scenarios in the IPCC’s report assume some level of net negative emissions.

A level of net negative emissions significantly smaller than that used in most scenarios assessed by the IPCC would give the Sustainable Development Scenario a 50% probability of limiting the rise in global temperatures to 01.5 °C.

It is technically conceivable that the world will reach a point where large quantities of CO2 are absorbed from the atmosphere but, there are uncertainties about what, may be, possible and about the likely impacts. As we have pointed out in previous WEOs, when designing deep decarbonisation scenarios, there are reasons to limit reliance on early-stage technologies for which future rates of deployment are highly uncertain.

That is why the WEO has always emphasised the importance of early policy action: the pathway followed by the Sustainable Development Scenario relies on an immediate and rapid acceleration in energy transitions.

With the same precautionary reasoning in mind, the WEO-2019, also, explores what it would take to achieve a 50% probability of stabilisation at 01.5 °C without net negative emissions.

A 01.5 °C scenario, that does not rely on negative emissions technologies implies achieving global net-zero emissions around 2050. This, in turn, means a reduction in emissions of around 01.3 billion tonnes CO2 every year from 2018 onwards. That amount is, roughly, equivalent to the emissions from 15% of the world’s coal fleet or from 40% of today’s global passenger car fleet.

The year by which different economies would need to hit net-zero in such a scenario would vary but, the implication for advanced economies is that they would need to reach this point in the 2040s. The difference, compared with the Sustainable Development Scenario, would be much starker for many developing economies, which would all need to be at net-zero by 2050.

A zero-carbon power system would need to become a reality at least a few years before the entire economy reaches net-zero. This implies moving to a zero-emissions electricity system in the 2030s for advanced economies and around 2040 for developing economies.

Discussing target dates in this context is useful but, the really tough part is working out how to get there. That requires credible plans to, actually, reduce emissions quickly across the entire economy, pathways, that work not just from the perspectives of technical feasibility or cost-efficiency, although, these are important but, also, take into account the need for social acceptance and buy-in.

The technical solutions in the power sector, at least, are well known, although, the scale and speed at which clean energy technologies would need to be deployed and existing facilities either repurposed, retrofitted with CCUS or retired, is breath-taking. But any economy-wide net-zero target, also, needs to find answers quickly for sectors, that are much harder to decarbonise, notably, buildings, heavy industries like cement and steel, aviation and freight transport. Achieving such an outcome, without compromising the affordability or reliability of energy, represents an extraordinary challenge.

The energy sector is rightly at the heart of the climate debate but, it can not deliver such a transformation on its own. Change on a massive scale would be necessary across a very broad front. As the IPCC 01.5 °C report says, this type of scenario would require rapid and far-reaching transitions not only in energy but, also, in land, urban infrastructure, including, transport and buildings and industrial systems.

In its 2019 edition, the World Energy Outlook once again puts the spotlight on the huge disparity between the kind of transformation, that is required and the pathway, that the world is on, according to our assessment of today’s policy plans and ambitions and the rising energy needs of a growing global population and economy.

As the IEA’s Executive Director, Dr Fatih Birol, commented at the WEO launch this week, the world urgently needs to put a laser-like focus on bringing down global emissions. “This calls for a grand coalition encompassing governments, investors, companies and everyone else who is committed to tackling climate change,” Dr Birol said. “Our Sustainable Development Scenario is tailor-made to help guide the members of such a coalition in their efforts to address the massive climate challenge that faces us all.”

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 ::: This piece is by Laura Cozzi: Chief Energy Modeler and Tim Gould, Head of Division for Energy Supply Outlooks and Investment at the International Energy Agency:IEA || :::ω::: ||

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The End of Dinosaur Economics: A Quantum Ambition With Seismic Leap Is a Must: Time It Is For Clean Green Circular and Sustainable Economics: European Investment Bank Will End Financing for Fossil Fuel Energy Project From 2021: Any Financing That Is Not Green Will Be Made Sustainable According to the Requirements of the Paris Deal

 

 

|| Friday: November 15: 2019 || ά. The board of the European Investment Bank:EIB agreed a new energy lending policy and confirmed the EIB’s increased ambition in climate action and environmental sustainability. This newly approved strategy for climate action and environmental sustainability. This includes three key elements: a: The EIB Group will aim to support EUR 01 trillion of investments in climate action and environmental sustainability in the critical decade from 2021 to 2030;

b: The EIB will gradually increase the share of its financing dedicated to climate action and environmental sustainability to reach 50% of its operations in 2025 and from then on and c: The EIB Group will align all its financing activities with the principles and goals of the Paris agreement by the end of 2020. In the near future this will be complemented by measures to ensure EIB financing contributes to a just transition for those regions or countries more affected so that no one is left behind. And, it is time, the entire world’s all investment banks and finance houses, must, follow the leadership of the European Investment Bank. And, to ensure that happens, the public movement must keep on going on the streets in cities, towns and communities across the globe. The time for dinosaur economics is no more: it is time for the economics of sustainability to create a system of economics, that is clean, green, circular and sustainable and, in this, it can not but be so unless it is fair and just to all humanity at the same time: in the new maxim: it can not harm anything and any one: that includes the earth and humans. This means that this new system of economics must deliver building-block foundational human rights to all humanity across the earth for only with these new rights capitalism is brought to a state of not harming anything and anyone.

These humanical foundational human rights are: A: Absolute Right to Live in Clean, Healthy, Safe and Natural Environment: B: Absolute Right to Breathe Natural, Fresh, Clean and Safe Air: C: Absolute Right to Necessary Nutritional Balanced Food and Drink: D: Absolute Right to Free Medical Care at the Point of Need: E: Absolute Right to an Absolute Home: F: Absolute Right to Free Degree-Level Education and Life Long Learning: G: Absolute Right to Guaranteed Social Care: H: Absolute Right to a Universal Income: I: Absolute Right to a Job: J: Absolute Right to Dignified Civic and Human Funeral Paid Through by Universal Income. For only with these newly created foundational human rights, that are eternal and infinite and legally enforceable will create the condition, that will deal with all of capitalism’s high-cruelties, high-barbarities and high-brutalities, that are enforced through the current system of economics, that is nothing but ensuring poverty devastates the entire human existence. It is not sustainable, it can not be sustained and it must be dealt with as we seek to create a new economics on clean, green, circular and sustainable foundations.

“Climate is the top issue on the political agenda of our time.” said EIB President Mr Werner Hoyer. “Scientists estimate that we are currently heading for 03-04°C of temperature increase by the end of the century. If, that happens, large portions of our planet will become uninhabitable, with disastrous consequences for people around the world.

The EU bank has been Europe’s climate bank for many years. Today it has decided to make a quantum leap in its ambition. We will stop financing fossil fuels and we will launch the most ambitious climate investment strategy of any public financial institution anywhere.” Stressing the need for co-operation, he further said, “I would like to thank the shareholders of the Bank, the EU Member States, for their co-operation over the past months.

We look forward to working closely with them and with the EU Council of Ministers, with the European Commission, the European Parliament, international and financial institutions and, crucially, with the private sector, to support a climate neutral European economy by 2050.” The new energy lending policy details five principles, that will govern future EIB engagement in the energy sector: a: prioritising energy efficiency with a view to supporting the new EU target under the EU Energy Efficiency Directive; b: enabling energy decarbonisation through increased support for low or zero carbon technology, aiming to meet a 32% renewable energy share throughout the EU by 2030; c: increasing financing for decentralised energy production, innovative energy storage and e-mobility; d: ensuring grid investment essential for new, intermittent energy sources like wind and solar, as well as, strengthening cross-border interconnections and e: increasing the impact of investment to support energy transformation outside the EU.

Mr Andrew McDowell, EIB Vice-President in charge of energy, said, “Carbon emissions from the global energy industry reached a new record high in 2018. We must act urgently to counter this trend. The EIB’s ambitious energy lending policy adopted today is a crucial milestone in the fight against global warming.

Following a long discussion, we have reached a compromise to end the financing by the EU Bank of unabated fossil fuel projects, including, gas, from the end of 2021. I am grateful for all those, who have contributed to the largest ever public consultation on EIB lending in recent months and energy expert colleagues, who have outlined how the EU bank can drive global efforts to decarbonise energy.”

This decision ends an open and inclusive review process, which involved industry, institutions, civil society and the public at large. Intensive stake-holder engagement since January produced more than 149 written submissions from concerned organisations and individuals and petitions signed by more than 30,000 people.                         

Over the last five years the European Investment Bank has provided more than EUR 65 billion of financing for renewable energy, energy efficiency and energy distribution. Following this new approval of the revised energy lending policy, the EIB will no longer consider new financing for unabated, fossil fuel energy projects, including, gas, from the end of 2021 onwards.

In addition, the Bank set a new Emissions Performance Standard of 250g of CO2 per Kilowatt:hour:KwH. This will replace the current 550gCO2:KwH standard. A previous review of energy lending in 2013 had already enabled the EIB to be the first international finance institution to effectively end financing for coal and lignite power generation through adoption of a strict Emissions Performance Standard.

Ten EU countries face specific energy investment challenges. The EIB will work closely with the European Commission to support investment by a Just Transition Fund. The EIB will be able to finance up to 75% of the eligible project cost for new energy investment in these countries. These projects will, also, benefit from both advisory and financial support from the EIB.

The EU bank has been Europe’s climate bank for a long time. Since 2012, the EIB provided EUR 150 billion of finance, supporting EUR 550 billion of investment in projects, that reduce emissions and help countries adapt to the impacts of climate change. This made the EIB one of the world’s largest multi-lateral providers of finance for projects supporting these objectives.

EIB Vice-President Ms Emma Navarro, in charge of climate action and environment, said, “To meet the Paris climate goals we urgently need to raise our level of ambition and this is precisely what we have done today. Two weeks before the United Nations climate change conference in Madrid, these decisions send an important signal to the world: The European Union and its Bank, the EIB, commit to mobilise investments on an unprecedented scale to support climate action projects around the world.

In addition, we commit to align all EIB Group activities with the principles and goals of the Paris agreement by the end of 2020. Any financing, that is not green will be made sustainable, according to the requirements of the Paris deal.”

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Africa’s Energy Future Matters for the World: Africa Must Capture the Renewables Future

 

 

 

|| Monday: November 11: 2019 || ά. Africa is set to become, increasingly, influential in shaping global energy trends over the next two decades as it undergoes the largest process of urbanisation the world has ever seen, according to a new Report from the International Energy Agency:IEA.

Africa Energy Outlook 2019, a special in-depth Study, published today, finds that current policy and investment plans in African countries are not enough to meet the energy needs of the continent’s young and rapidly growing population. Today, 600 million people in Africa do not have access to electricity and 900 million lack access to clean cooking facilities.

The number of people living in Africa’s cities is expected to expand by 600 million over the next two decades, much higher than the increase experienced by China’s cities during the country’s 20-year economic and energy boom. Africa’s overall population is set to exceed two billion before 2040, accounting for half of the global increase over that period. These profound changes will drive the continent’s economic growth, infrastructure development and, in turn, energy demand, which is projected to rise 60% to around 1,320 million tonnes of oil equivalent in 2040, based on current policies and plans.

The new Report is the IEA’s most comprehensive and detailed work to date on energy across the African continent, with a particular emphasis on sub-saharan Africa. It includes detailed energy profiles of 11 countries, that represent three-quarters of the region’s gross domestic product and energy demand, including Nigeria, South Africa, Ethiopia, Kenya and Ghana.

The Report makes clear that Africa’s energy future is not pre-determined. Current plans would leave 530 million people on the continent still without access to electricity in 2030, falling well short of universal access, a major development goal. But with the right policies, it could reach that target while, also, becoming the first continent to develop its economy, mainly, through the use of modern energy sources. Drawing on rich natural resources and advances in technology, the continent could by 2040 meet the energy demands of an economy four times larger than today’s with only 50% more energy.

“Africa has a unique opportunity to pursue a much less carbon-intensive development path than many other parts of the world.” said Dr Fatih Birol, the IEA’s Executive Director. “To achieve this, it has to take advantage of the huge potential, that solar, wind, hydropower, natural gas and energy efficiency offer. For example, Africa has the richest solar resources on the planet but has so far installed, only, 05 gigawatts of solar photovoltaics:PV, which is less than 01% of global capacity.”

If, policy makers put a strong emphasis on clean energy technologies, solar PV could become the continent’s largest electricity source in terms of installed capacity by 2040. Natural gas, meanwhile, is likely to correspond well with Africa’s industrial growth drive and need for flexible electricity supply. Today, the share of gas in sub-saharan Africa’s energy mix is the lowest of any region in the world. But that could be about to change, especially, considering the supplies Africa has at its disposal: it is home to more than 40% of global gas discoveries so far this decade, notably, in Egypt, Mozambique and Tanzania.

Africa’s natural resources aren’t limited to sunshine and other energy sources. It, also, possesses major reserves of minerals, such as, cobalt and platinum, that are needed in fast-growing clean energy industries.

“Africa holds the key for global energy transitions, as it is the continent with the most important ingredients for producing critical technologies.” Dr Birol said. “For example, the Democratic Republic of the Congo accounts for two-thirds of global production of cobalt, a vital element in batteries and South Africa produces 70% of the world’s platinum, which is used in hydrogen fuel cells. As energy transitions accelerate, so will demand for those minerals.”

African countries are on the front line when it comes to climate change, meaning the continent’s energy infrastructure planning must be climate resilient. 

“Even, though, Africa has produced, only, around 02% of the world’s energy-related CO2 emissions to date, its eco-systems, already, suffer disproportionately from the effects of a changing climate.” Dr Birol said. “They are exposed to increased risks to food, health and economic security.”

By 2040, an additional half a billion people in Africa are expected to live in areas, requiring some form of cooling as populations expand and average temperatures increase. Although, Africa is expected to experience rapid economic growth over the next two decades, its contribution to global energy-related CO2 emissions rises to just 3% by 2040, based on current policies and plans.

For this Report, the IEA developed a new scenario, that analyses how the energy sector can spur Africa’s growth ambitions while, also, delivering key sustainable development goals by 2030, including, full access to electricity and clean cooking facilities. The Africa Case is based on Agenda 2063, African leaders’ own strategic framework for the continent’s economic and industrial development. Economic growth in the Africa Case is significantly stronger over the next two decades than in the scenario based on today’s stated policies, but energy demand is lower. This is linked to an accelerated move away from the use of solid bio-mass, such as wood, as a fuel and to the wide application of energy efficiency policies.

The IEA has been monitoring Africa’s energy sector closely for a long time: IEA analysis of energy access issues on the continent began in 2002 and is set to expand significantly. This new report comes at an important time in the IEA’s deepening engagement with Africa. In May, the IEA and the African Union Commission co-hosted their first joint ministerial summit at which the two organisations signed a Memorandum of Understanding to guide future collaboration. A second ministerial forum will be held in 2020.

Africa Energy Outlook 2019 is an excerpt from the IEA’s flagship report World Energy Outlook 2019, which will be published in full on November 13.

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It’s Time to Move Away Dinosaur Economics: Data Shows US Shift Away From Coal-fired Generation Is Intensifying

 

 

 

|| Monday: November 11: 2019 || ά. New data from the Energy Information Administration:EIA indicates that the shift away from coal-fired power generation has accelerated this year in the United States. In August, utilities generated 18 percent less power from coal than in August of last year, marking the sixth month in 2019 with a decline of more than 10 percent.

The Southeast reports some of the steepest coal generation drops this year, led by a 62 percent decline in Virginia, where coal’s market share has fallen to 04 percent from nearly 11 percent in 2018. Coal-fired generation is, also, down enormously in Florida, by 31 percent; in Alabama, by 23 percent and in South Carolina and Tennessee, by 21 percent, all states where the regional trend was first detailed in an IEEFA Report, published in October, Coal-Fired Power Generation in Freefall Across Southeast US.

Last year, not a single month had a decline of 10 percent or more. Overall for the year, coal-generated power has fallen by 13.9 percent. The decline is, also, happening broadly across the US in 30 of the 45 states, that still burn coal for power, coal-fired generation is down 10 percent this year.

Full-scale retirements alone do not entirely account for this decline. Many utilities are, also, curtailing the operations of plants, that are still active, running the plants at lower capacity factors, in favour of operating lower-cost gas and renewable generation. That’s a bad sign for coal producers large and small.

Midwestern and Ohio River Valley states, many of which have been historically dependent on coal-fired generation, also, report significant declines this year. Illinois and Indiana were down 17 percent through August, Ohio and Pennsylvania by about 15 percent each. Even, Kentucky and West Virginia, two states among the most reliant on coal mining and coal-fired generation, had declines of 08 percent each. The move away from coal in this region, especially, was one of the reasons cited in last week’s bankruptcy filing by Murray Energy, among the largest U.S. coal-mining companies.

In two Midwestern states, Illinois and Indiana, a sharp increase in wind generation has been a factor. Wind-powered generation is up 22 percent this year in Illinois, to a market share of, nearly, 08 percent and 16 percent in Indiana, a 06 percent market share.

To be sure, coal plant retirements are a major part of the power-generation change, that is at work. Data compiled by IEEFA shows that 57 coal-fired units with a total capacity of 14 gigawatts will close this year, about 05.8 percent of all remaining coal-fired capacity.

Market forces, that favour cheaper forms of generation are at the root of the shift, that is undermining American coal as a whole. These market forces are the reasons as to why Peabody Energy’s stock price tanked so sharply last week on a poor earnings report and this is why Navajo Transitional Energy Company’s acquisition of Cloud Peak Energy is so ill-advised, why Peabody and Arch Coal are consolidating operations in the Western US, why 11 coal-mining companies have filed for bankruptcy in the past three years and why coal’s share of the national power-generation is expected to fall to just 22 percent in 2020 from 48 percent in 2008.

Additionally, export prices for overseas coal have deteriorated significantly in recent months, leading the EIA to forecast a 40-million-tonne decline in shipments in 2020 from 2018 levels, to 75.5 million tonnes in 2020 from 115.6 million tonnes in 2018. The one-two punch from falling domestic demand and low export prices were major factors, pushing Murray Energy into bankruptcy.

In short, these are all more signs that the once-dominant coal industry is in the midst of a steep structural decline.

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India: Thermal Coal Flat-lines in Faltering Economy: Power From Non-coal Sources Continues to Grow

 

|| Monday: November 11: 2019: Charles Worringham Writing || ά. In the space of just a few days, India’s slowing economy has attracted the attention not only of the domestic press but, of international media, including, the Financial Times and an Economist special report, which noted that ‘with alarming speed, India has gone from being the world’s fastest-growing large economy to something more like a rumbling Indian railway train’.

A host of economic indicators have received attention, ranging from the official, World Bank and Indian government growth downgrades, through indices, such as, Fitch Ratings or Live Mint’s Macro Tracker, to the flippant but, nonetheless, informative, including, the New York Times’ story on underwear sales or, Neilsen’s report of declining toothpaste purchases in rural India.

Having held up throughout the summer when other signs of a relative downturn were already apparent, the amount of thermal coal burned for power fell precipitously in September and October. So steep has been the decline that the annual increase in coal consumption by the power sector, which has averaged 06.3% or 27 million extra tonnes each year for the last 12 years, fell to zero not only for the financial year to date but, also, for the full 12 months to October  31, compared to the previous year.

When economies stumble, slackening electricity demand is a very common symptom. In India’s case, the current decline is quite specific to coal. This is most readily seen by comparing how power generation from different sources has changed across the course of this year relative to last. 

Hydro, solar and nuclear have added substantially to their generation levels of the previous year and continue upwards. Wind started well but the monsoon period was disappointing, resulting in less cumulative generation than at the end of October in FY19. Gas, a minor player, also, lagged slightly.

Collectively, power from all non-coal sources grew by about 24,000 GWh or 08.4%, to the end of October. The obvious exception is coal, which had made the largest contribution to extra energy as of late July, only, to falter in August and collapse in September and October. As of the time of writing, coal had produced about 12,500 GWh less electricity than it had by the same date in FY19, roughly, the amount, for perspective, consumed by Delhi and its 24 million residents in five months.

Three related points can be made about this abrupt fall. Firstly, it is not primarily the consequence of any shortage of coal, despite claims to the contrary. Power plant stocks are now 08.5 million tonnes, 66%, higher than at the end of October last year when generation was much higher, despite 29 plants having ‘critically low’ stocks, only, three plants are in that position today. Not only have the Rail and Coal Ministries succeeded in increasing power plant stocks overall, they have evened out the distribution to reduce the number with only a few days’ supply; even, though, these now include more high capacity plants.

More to the point, the 77 plants, that generated less energy in late October this year than they did a year ago had on average 07.8 more days of stock on hand, using October 28 as the day for comparison and, only plants, whose capacity was the same in both years.

Thus, while specific individual plants clearly do have supply problems because of strikes, weather, e.g, Talcher STPS, the Dipka mine flood, and others, such as, Tuticorin JV TPS, are receiving less coal than a year ago, this is not typical. Nationally neither unmet energy nor unmet peak demand has increased. Warnings that a supply crunch threatens to restrict India’s economy by 2024 may or may not eventuate but, they are not today’s reality. Rather, India’s economy appears to be limiting the use of available coal. 

The second point is that the duration of the thermal coal downturn can not be accurately forecast. To the extent it is driven by India’s economic conditions, it could be relatively brief, if, the economic optimists are correct, such as, Gaurav Dalmia, interviewed at the University of Pennsylvania’s Wharton Business School or longer-lasting, if, we rely on those who see more intractable and structural factors at play. The Economist’s take is that higher growth will largely depend on whether India adopts appropriate economic reforms: ‘With luck, in a few years’ time, the present slump may be regarded as a useful catalysing moment’.

The third observation is this that the coal slump offers India an unusual opportunity. While not under pressure from burgeoning electricity demand growth, India could fortify its necessary energy transition plans, reduce the country’s 01.2 million annual air pollution-related deaths and stimulate urgently needed rural job growth, all while enhancing India’s energy security through greater domestic capacity.

This could include a revival of large-scale renewable infrastructure investment in preparation for sustained higher growth, while accelerating the HVDC Green Corridors and plans for the Flexible Operation of Thermal Power Plants, as well as, new projects built on the comprehensive and collaborative Grid Integration studies India has developed.

As India presses forward with its renewable energy transition, as and when higher economic growth does resume, it will be fuelled by substantially cleaner energy than in the past.

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::: Charles Worringham is a guest contributor with IEEFA South Asia. He edits India Power Review:::ω.

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The International Energy Agency Report Warns: The Time to Act Now As Global Energy Efficiency Progress Drops to the Slowest Rate Since the Start of the Decade

 

 

|| Monday: November 04: 2019 || ά. Energy efficiency has tremendous potential to boost economic growth and avoid greenhouse gas emissions but, the global rate of progress is slowing, a trend, that has major implications for consumers, businesses and the environment, according to a new Report by the International Energy Agency:IEA.

Global primary energy intensity, an important indicator of how heavily the world’s economic activity uses energy, improved by just 01.2% in 2018, the slowest rate since the start of this decade, according to Energy Efficiency 2019, the IEA’s annual Report on energy efficiency.

The rate of improvement has now declined for three years in a row, leaving it well below the 03% minimum, that IEA analysis shows is central to achieving global climate and energy goals. If, the rate had reached 03% over that period, the world could have generated a further USD02.6 trillion of economic output, close to the size of the entire French economy for the same amount of energy.

“The historic slowdown in energy efficiency in 2018, the lowest rate of improvement since the start of the decade, calls for bold action by policy makers and investors.” said Dr Fatih Birol, the IEA’s Executive Director. “We can improve energy efficiency by 03% per year simply through the use of existing technologies and cost-effective investments. There is no excuse for inaction: ambitious policies need to be put in place to spur investment and put the necessary technologies to work on a global scale.”

The need for stronger action underpins the work of the Global Commission for Urgent Action on Energy Efficiency, which the IEA announced in July. Headed by Irish Prime Minister Mr Leo Varadkar, the Commission’s members include national leaders, government ministers and top business executives. It will produce recommendations next summer on how to achieve major breakthroughs in energy efficiency policy.

The slowdown in energy efficiency is, also, the key reason the IEA has been the driving force behind the Three Percent Club, an initiative under which 15 countries have, already, signalled their commitment to help the world get on a path of 03% annual improvements in energy intensity.

Energy Efficiency 2019 examines in detail the reasons for the recent deceleration in efficiency progress. It finds that it results from a mixture of social and economic trends, combined with some specific factors such as extreme weather. At the same time, policy measures and investment are failing to keep pace with the rising energy demand. This means that new ways of policy thinking, that move beyond traditional approaches are required, particularly, to maximise the potential efficiency gains from the rapid spread of digital technologies throughout economies and energy systems.

The new Report includes a special focus on the ways, in which digitalisation is transforming energy efficiency and increasing its value. By multiplying the interconnections among buildings, appliances, equipment and transport systems, digitalisation is providing energy efficiency gains beyond what was possible when these areas remained largely disconnected. While efficiency in these areas has always had benefits for energy systems, digitalisation enables these benefits to be measured and valued more quickly and more accurately.

“As digitalisation transforms the global energy system, the IEA is committed to helping countries ensure they are able to maximise the benefits while navigating the challenges.” Dr Birol said. The Report points out that, while digital technologies could benefit all sectors and end uses of energy, uncertainty remains over the scale of those benefits. Much will depend on how policies are designed to respond to the huge opportunities and to the emerging challenges, most notably, the risk of increased energy demand from the mushrooming use of digital devices.

The IEA’s commitment to advancing energy efficiency around the world includes sustained efforts to build greater capacity for smart policy-making in emerging economies. In the past year, the IEA has trained nearly 500 policy makers from 100 countries. A notable recent example is the first ever IEA energy efficiency training week in sub-saharan Africa, which took place from October 14-17 October in Pretoria, South Africa.

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Why Humanity Must Rise to Discard Capitalism In Order to Keep on Existing on Earth Because It Is Capitalism That Has Brought the Earth and Humanity to This Total Wipe Out

 

 

|| Tuesday: October 29: 2019: Munayem Mayenin || ά. This piece, picks up on the following list of what capitalism has brought on earth and sentenced the entire humanity to perish away in suffering a horrendous human condition, comprised of all high-cruelties, high-barbarities and high-brutalities and, with it, led everything towards creating an unsustainable way of ‘wasting away’ in endless consumption for infinite greed for profit, into extinction: extinction of all expressions of the ecology of life on earth, including, humanity.

The world’s capitalism’s establishment and the people, in whom it has found its ‘till-death-loyal-followers, seek to portray this mythology that capitalism has established a ‘heaven on earth’ while all we can see is the vast and endless sociology of squalor being expanded everyday across the earth and there is no end in sight as to where and when this nightmare of an economics system, this capitalism to come to an end. And, let the people, who believe Marxism will re-emerge and rescue humanity from capitalism, acknowledge that that is an illusion because it is not going to happen.

Humanics has brought about the vision of that future without capitalism and it is new but it will not just disappear but keep on going for humanity can not just sit still and await extinction. Humanity, particularly, the younger generations, must not go quietly and wait till extinction wipes all out of the earth. This fight for existence must gather pace and must we keep on going because otherwise capitalism will bring everything to an end with this phase of it, this pseudonomics, that now ravages the world and world humanity.

Humanity Will Have No Future Unless Capitalism Is Discarded: Why: a: Lack of Universal Education Higher Education and Life-Long Learning: b: Lack of Universal Employment: c: Lack of Universal Home: d: Lack of Universal Social Services: e: Lack of Universal Social Care: f: Lack of Universal Medical Care: g: Absence of Building-Block Foundational Human Rights: h: Poverty: i: Hunger: j: Malnutrition: k: Destitution: l: Poverty-wage: m: Polluted Natural and Built Environment: n: Polluted Oceans and Water-ways: o: Polluted Toxic Air: p: Plastic Pollution: q: Infinite Greed and Infinite Consuming: r: Highest Waste of Natural Financial and Human Resources: s: Pseudonomical Profiteering and Robbery: t: Unable to Seek to Achieve Circularity Sustainability and Green Economics in All Business Trade and Commerce:

u: Global Warming: v: Climate Change: w: Destruction of Representative Democracy and Rise of Racist Misogynistic Chauvinistic Xenophobic and Supremacist Majoritarian Mob Dictatorship: India Brazil United States of America and Many Other Countries Around the World and Particularly in the European Union: x: Sociology of Squalor: y: Sociology of Evil: z: The Distorteddia: We Have Run Out of the Alphabet:!: Alpha: Dehumanisation of Humanity: Beta: The Destruction of the Self and the Agency of the Human Mind: Gamma: The Weakening and Destruction of Individuals Families and Communities: Delta: Absence of a Philosophical Political Philosophical and Political Economical Movement in the World That Takes Into Consideration and Respond to the Existential Threats Being Put Before Humanity by Capitalism and Its Killing Mechanism Means That This Killing Mechanism Is Dragging Humanity Towards the Slaughter-House of the End Along With It the Entire Web and Ecology of Life on Earth Are Being Terminated! Humanics Has Put Forward the Vision of Humanity Without Capitalism But with and in Humanics: It Is Up to the World's Humanity Particularly the Youth to Rise to Save Humanity From This Definitive Doom Being Implemented by Capitalism.