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America’s Energy Transition
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Welcome back. The House of Representatives has begun deliberation on the climate bill, and if passed, the Inflation Reduction Act is a valuable roadmap on how the U.S. plans to ease energy transition by coordinating action and reducing investment risk.
The act would provide companies and investors with an outline of the country’s future energy mix. There would be lots of low-emission electricity coming from wind, solar, storage, geothermal and advanced nuclear plants. Hard-to-electrify sectors would have help from clean hydrogen, sustainable fuels and carbon capture and storage technologies. Energy-efficiency investments—the wallflowers of the energy transition—would help cut bills and usage. Security is also prioritized with a combination of more oil-and-gas development and efforts to build up friendly or domestic supplies of electric vehicles, batteries and renewable technologies.
The $369 billion investment in clean energy may be criticized as meddlesome industrial policy, but it leans heavily on tax credits—a tried-and-true method to help de-risk investment while also leaving the market some space for trial and error. Some failure is inevitable. But, as we saw with the internet bubble, even defunct businesses help develop technologies and skills, which can go on to seed new ventures that may eventually succeed.
The path and pace of the transition are difficult to predict, but a national energy plan can speed things up by reducing investment risk and coordinating action to help avoid possible disruptions. Some may be tempted—particularly in an energy-producing nation like the U.S.—to see the transition as a threat, but it is also an opportunity both for energy companies and those that use their products.
This week: Digging In; Europe's Energy Crisis; Gender Pay Gaps
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Content from our Sponsor: DELOITTE
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7 Steps, 7 Questions to Prepare for New SEC Climate Disclosure Rules
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Understanding their obligation to disclose targets and goals, refining governance, and building reporting agility are among the ways companies can prepare for proposed climate disclosure rules. Read More ›
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The Inflation Reduction Act, as agreed by Senate Democratic leadership on July 27, will see U.S. emissions in 2030 reduced by about 40% from 2005 levels, according to analysis from Princeton University, Rhodium Group and Energy Innovation. Here is a detailed look at the main parts of the $369 billion clean-energy plan:
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Hydrogen: A $3 per kilogram tax credit for green hydrogen—produced using renewable-powered electrolyzers to split water—should kickstart the domestic industry, helping it to catch up to or even surpass European and Asian players, writes Dieter Holger. Hydrogen produced using natural gas might qualify for partial tax credits, if it comes from a low-methane source and the carbon-dioxide emissions generated when producing hydrogen are captured and stored.
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Wind and Solar: The 10-year extension of wind and solar tax credits decreases uncertainty for developers, which should boost projects. However, what developers really want is for legislators to deliver on their promise to streamline the permitting process later this year, writes Rochelle Toplensky.
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Green bank: Smaller renewable projects will also benefit from the $27 billion green bank funds, writes Amrith Ramkumar. The bank would offer first-loss debt financing on smaller projects and is expected to spur significant private investment. It includes about $8 billion earmarked for disadvantaged communities.
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Storage: A new standalone tax credit for energy storage could be a real turning point for one of clean energy’s most important missing pieces, writes Jinjoo Lee. Previously it was only available for those projects built alongside solar farms.
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Energy Efficiency: There are tax credits for homeowners to invest in energy-saving measures like more efficient windows, doors, heating and cooling systems and insulation. There is $14.5 billion earmarked for a 30% credit on green remodeling expenses. The annual maximum credit is $1,200 per year, or $2,000 for spending on a heat pump or biomass stove, writes Ashlea Ebeling.
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Electric Vehicles: Rules around the $7,500 tax rebate on a new electric vehicle have been tweaked, which could make it tougher for some customers to qualify, writes Mike Colias. However, buyers of used EVs could get a new tax credit of up to $4,000. There are also tax incentives on EV charging stations and $15 billion has been set aside for automakers to retool their factories or build new ones.
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Carbon Capture and Storage: Fossil-fuel companies stand to benefit from higher tax credits for capturing and storing carbon dioxide emissions, which could extend the life of oil-and-gas assets, writes Jinjoo Lee. They will, however, also face higher penalties for methane emissions.
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Secure supply chains: Initiatives also encourage a shift to friendly or domestic manufacturing of key components of EVs, batteries and renewable equipment. Solar developers have faced a series of challenges buying panels. The latest delay stems from customs agents starting to enforce The Uyghur Forced Labor Prevention Act, write Phred Dvorak and Katherine Blunt. Supplies from several of the biggest Chinese suppliers have been held or sent back.
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Much of France's Loire river has dried up amid a heat wave. FRANCK DUBRAY/ZUMA PRESS
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Oil and gas flows from Russia continue to dwindle, sending energy bills soaring and raising the specter of shortages this winter. British forecasters warned household annual energy bills could be £4,420 next year, equivalent to about $5,400, triple what they were at the start of the year. The FT explains why they have risen so high.
As another heatwave arrives in the region and drought threatens, people around the continent are cutting energy usage now to save for the coming winter, write David Uberti and Eliza Collins. Air conditioning limits came into effect this week in Spain, the Dutch were encouraged to take shorter showers, and nighttime lighting of many German monuments was switched off.
In France, high temperatures also are creating problems for its nuclear reactors. Five nuclear plants, which use local river water to cool their facilities, needed special exemptions to continue running despite the risk that their discharged water could be so hot it harms the aquatic ecosystem, write Giulia Petroni and Dieter Holger. Nuclear energy normally provides about 70% of French power, but output has fallen significantly—12 of its 56 nuclear power plants were halted at some point in the first half of the year for inspections and repairs of unexpected corrosion in the facilities.
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After getting a degree in petroleum engineering, Roxanne Marino pushed for a job in the oil field. She currently works in Prudhoe Bay, Alaska. PHOTO: BENNY CONTRERAS
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The gender pay gap opens up soon after graduation according to a new WSJ analysis of data from 1.7 million students who received federal student aid and graduated between 2015 and 2016. Three years after graduation, men’s median pay was higher than that of their female counterparts for nearly three quarters of 11,300 programs at 2,000 universities, with half the male graduates already earning at least 10% more.
While many reasons are posited for the gap—such as confidence, more aggressive salary negotiation, job preference, working conditions and differences in ambition—there are no solid answers. Dig into the details or check out how your alma mater fared. This week, Serena Williams also weighed in on what sounds like the ultimate employment gender gap, as she tells Vogue she wouldn’t be retiring from tennis if she were a man.
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Nikola to Buy Battery Maker Romeo Power for $144 Million
Electric-truck company Nikola said that it had agreed to acquire Romeo Power—a battery-pack supplier that specializes in lithium-ion battery modules and packs for commercial vehicles—in an all-stock transaction valued at $144 million. Nikola's move, which may carry positive implications for its business-model-innovation record, material sourcing and supply-chain management, is the latest example of a vehicle maker vertically integrating to safeguard its supply of batteries. Nikola Chief Executive Mark Russell said that the company would be able to accelerate the development of its electrification platform and serve its customers better "with control over the essential battery-pack technologies and manufacturing process." Neither Nikola nor Romeo Power, which both went public through merging with special-purpose acquisition companies in 2020, meet the disclosure requirements to be ranked
by the Dow Jones Sustainability Scores.
This is a sample of exclusive analysis of sustainability news from the Journal’s environment, social and governance (ESG) research analysts, whose work is primarily published by Dow Jones Newswires to help institutional investors and wealth managers integrate ESG factors into portfolio models, risk management programs and financial advice. The commentary by our research analysts is independent of the news coverage by reporters at the Journal. For more information about Dow Jones Newswires, click here.
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Chile’s Salar de Atacama salt flat accounts for over half of the known global lithium deposits, a key component in batteries and EVs, but expansion plans are facing challenges from locals and the government. (WSJ)
The award-winning National Geographic documentary The Territory opens next week. It presents the indigenous peoples’ battle against the deforestation of farmers and illegal settlers.
Exports of U.S. wood pellets to Europe are up, as the region seeks to replace 3 million metric tons of annual supply from Russia and Belarus. Spot prices have about doubled over last year and U.S.-listed supplier Enviva seems to be a big winner. (WSJ)
BP’s carbon capture and storage business took a step forward this week by starting to drill a new test well in Texas. The oil company announced a project in May to capture and store carbon dioxide from Linde’s hydrogen production facility on the Texas coast by 2026, which could eventually store as much as 15 million metric tons per year across multiple sites. (Reuters)
Private firefighting forces, buried power lines and using more fire-resistant home materials are just some of the ways that Napa Valley residents are trying to stop forest fires in the region. (FT)
ESG still matters, according to a new McKinsey report. While definitions can be wooly and change over time, they argue ESG is in essence a company’s social license to operate. With changing societal expectations and rising scrutiny, that license is getting more important and also more challenging to maintain. (McKinsey)
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