Welcome back to Energy Source.

Oil markets remain relatively calm just over a week after Opec+ sprang its
spring surprise. David Sheppard and I wrote about the cuts, and their
significance, in a Big Read over the weekend. Do please have a look and write
with any comments.

Also worth your time is this dispatch from Aberdeen, once the flourishing
capital of the UK’s oil and gas industry but now a city contending with its place
in an energy transition.
I’m in the market for a different car — one that can schlep a dog and teenage
kids to the Catskills occasionally and New Jersey sports grounds frequently.
I’d like to go electric, for the obvious reasons. But EVs remain expensive and
after the recent ruling from the US government, even fewer of them qualify for
the new tax breaks on offer in the Inflation Reduction Act. As Myles notes
today in the newsletter, the polling suggests a large majority of Americans
remain reluctant to go electric for the same reason.

I’m curious — how many of you will go electric for your next vehicle? Tell us
what you think.

Our second note is also on the energy transition, which after the energy crisis
caused by Russia’s full-scale invasion of Ukraine last year is unfolding in a far
more chaotic manner than optimists hoped.
Data Drill takes in more polling data on US attitudes to carbon taxes and grid
expansion. My guess is Energy Source readers would support both. But in an
era of soaring inflation, less than 40 per cent of the US population would
spend another $1 a month to fight climate change. No, that’s not a typo: one
dollar. And not many people seem to like the idea of more power lines in their
neighbourhood either.

Thanks for reading. — Derek

Are EVs about to take off in America?

When it comes to electrification, the gas-guzzling US still lags much of the
developed world.

One of the aims of President Joe Biden’s landmark Inflation Reduction Act,
with its $369bn worth of cleantech tax breaks and subsidies, was to push
American motorists into buying electric vehicles. Tax credits of up to $7,500
included in the legislation are supposed to make EV purchases cheap enough
for the mass market.

So is it a game-changer for EV uptake? Not really, according to a climate

attitudes survey released today by the University of Chicago’s Energy Policy
Institute and the AP-NORC Center for Public Affairs Research.

Even with the IRA subsidies, just two in every 10 Americans are “very likely”
to buy an EV as their next car. Among Republicans the number is just one in
10.
The reason? Cost and charger availability.

More than eight in every 10 people surveyed said the price remained a reason
not to buy an EV. Almost as many cited worries over the number of charging
stations.
On the other side of the equation, saving money on gasoline was the leading
reason people said they would consider buying an EV — with three-quarters
pointing to this as a motivating factor.
The IRA tax break was a much less significant driver. Six in 10 cited it — with
only a third of those saying it would be a “major reason” to buy an EV.
In a nutshell, economics still trumps ideology. For Democrats and Republican
alike, cost is the biggest barrier to — and driver of — EV uptake.

The findings come as Washington doubles down on its EV push. The

Environmental Protection Agency is set to announce tough new vehicle
emissions standards as soon as this week that it hopes will turbocharge the
shift away from combustion engines.

But if the Biden administration really wants half of all new car sales to be
electric by the time the decade is out, it still needs to be cheaper to go
green. (Myles McCormick)

The energy transition gets messy

The energy crises of the 1970s left a lasting legacy. Western countries formed
the International Energy Agency; the US promoted coal and created a
stockpile of emergency crude stocks; renewable energy technology advanced;
France went for nuclear energy; Alaska and the North Sea became big oil
producers.

The reaction to the energy crisis of 2021-2022 should be just as significant.

The US’s Inflation Reduction Act, as well as the REPowerEU package in
Europe, bring hopes that rapid decarbonisation could go alongside the shift to
a more secure energy system for consumers.

But as I argued in a recent column, this isn’t happening — at least in the short
term. Investment in clean energy is racing ahead, but remains a fraction of
what is needed. The world is burning record amounts of fossil fuels. Emissions
continue to rise.

A humdinger of a paper from Columbia’s Jason Bordoff and Harvard’s

Meghan O’Sullivan explains why the energy transition is getting messy.

Conventional wisdom held that “the shift to new sources of energy would not
only aid the fight against climate change but also put an end to the
troublesome geopolitics of the old energy order”, they write. “Such hopes,
however, were based on an illusion. The transition to clean energy was bound
to be chaotic in practice, producing new conflicts and risks in the short term.”

Bordoff and O’Sullivan point out several problems that are surfacing:

1. Petrostate power is still rising. The fossil fuel producers that have
induced the energy security anxieties and market tightness, such as
Russia, are now capitalising from the situation. Get used to it: their
“power and influence will increase before it wanes”.
2. With fossil fuel prices soaring, “old patterns” have
reappeared, such as the US pleading — “mostly in vain” — for
 Saudi Arabia to pump more oil. “Ironically, by the time the UAE
hosts the next major UN climate conference, at the end of 2023, the
world may well also be turning to Abu Dhabi not just for climate
leadership but for more oil.”
3. The efforts of governments such as the US to reshore supply
chains is bringing the risk of “climate-provoked trade
wars”. Meanwhile, Europe’s rush to burn more fossil fuels last year
raised energy prices — and accusations of hypocrisy — in poorer
countries, widening rifts.
4. Rapid electrification will leave consumers exposed to a fragile
grid vulnerable to extreme weather caused by climate
change. The supply and processing of critical minerals needed for the
energy transition, meanwhile, is concentrated in just a handful of
countries.
To make this transition less messy, Bordoff and O’Sullivan say the US and
others must focus on resilience: additional renewable capacity on the grid
should be matched with adequate storage, and utilities paid to maintain
backup facilities. Fossil fuel plants should remain available until clean
alternatives have replaced them.

The world will also need more trade, not less, they argue, pointing to IEA
forecasts for a trebling of critical mineral trade to meet 2050 climate targets.
Washington should “eliminate tariffs” on clean energy goods and technology
and join the IEA to make the trade more transparent.

Everything is at stake if the energy transition does not include energy security,
they argue:

“In the not-so-distant past, officials and experts thought that fears about
energy security might hinder the fight for the climate. Today, the opposite is
true: as the transition to a net zero world proceeds, the bigger danger to the
climate will be insufficient attention to energy security.”
(Derek Brower)

Data Drill
Back to the EPIC/AP-NORC climate attitudes survey, where there are two
other things we found interesting:

1. RIP carbon tax

Economists have long argued that slapping a price on carbon is the most
efficient way to drive down emissions. But political antipathy towards it in the
US has stopped the country following Europe or Canada down this road.

Those hoping that might soon change are set to be disappointed.

Willingness to pay a fee to combat climate change is at its lowest level since
the poll began in 2016. Just 38 per cent of Americans said they would be
willing to pay an extra $1 a month to combat climate change, down 14
percentage points from 2021.
2. NIMBY-ism is a big problem for transmission
The massive transmission line buildout needed to properly achieve the aims of
the IRA — allowing electrons to be ferried from huge solar and wind farms to
urban areas — does not seem to be winning hearts and minds.

A little more than half of Americans support significant public investment to

build new high-voltage power lines. That falls to less than half if those power
lines are being built in their backyards.
(Myles McCormick)

Power Points
 Teck Resources declares Glencore bid a “non-starter”

 Nuns urge Citigroup to rethink financing of fossil fuel projects

 Tesla boosts China investment with plans for Shanghai battery factory

 India’s renewables industry under pressure to fulfil government’s target