S&P Global Commodity Insights Weekly ET News Highlights – April 17, 2023

The US Department of Energy's process to establish hydrogen hubs reached a critical milestone April 7 when regional groups submitted final applications federal funding. The DOE has declined to reveal the identities of applicants, or the total number of applications received. However, several hub candidates announced submissions last week shining a light on the competitive field of hub hopefuls. Meanwhile, US hydrogen producers and stakeholders are waiting with bated breath as the Treasury Department writes the rules that will govern hydrogen tax credits promised under the Inflation Reduction Act, and which will dictate how hydrogen's carbon intensity levels are measured, when published this season.

Rising costs are set to reverse the multi-year trend for falling bids in the UK's latest auction for green power contracts. "The current ceiling price of GBP44/MWh proposed in [the fifth CFD round] is going to be tight for developers — given that regulatory barriers, global inflation and the very real prospect of supply chain bottlenecks, continue to drive project costs upward," Will Sheard, director of analysis and due diligence at consultancy K2 Management, told S&P Global Commodity Insights. Meanwhile bids in a first European renewable hydrogen pay-as-bid auction later this year will be capped at Eur4/kg ($4.36/kg), according to draft criteria published by the European Commission. The cap looks to have been set with one eye on US incentives under the Inflation Reduction Act, where green hydrogen can receive a $3/kg tax credit.

In Asia Pacific, attendees at the G7 Ministers' Meeting on Climate, Energy and Environment in Sapporo, northern Japan, agreed on pursuing net zero goals through "various pathways" and ensuring energy security through steps such as accelerated energy transition. Some of the major takeaways were conciliatory language acknowledging that some natural gas investment is "appropriate" to address shortages amid the ongoing Russia-Ukraine war; and countering the impact of geopolitical risk on supply chains for critical minerals for energy transition amid growing US-China tensions. The venerable IEA also changed its tone from calling for "no new investments in oil, gas and coal" to "new investments remain necessary". Meanwhile, the Australian government's State of Hydrogen report highlighted concerns about losing the green hydrogen race to rivals and achieving the goals of the national hydrogen strategy. -- Eric Yep

North America

SPGlobal.com

'Strongest-ever' emissions rules could boost EVs to two-thirds of new US car sales

Apple expands investment in fund focusing on carbon removal projects

Platts Dimensions Pro

US hydrogen hub applicant field begins to emerge after DOE deadline

Treasury's hydrogen tax credit guidance needs to 'strike the right balance': think tank

Global offshore wind power projects could be delayed amid cost increases: CEOs

EMEA

SPGlobal.com

Biomethane set for big growth in Europe but likely to face use case, regulatory challenges

BP acquires 40% stake in Harbour Energy's North Sea Viking CCS project

European companies accelerating climate action: EIB

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Cost inflation creates new bidding dynamic in UK renewables auction

European Commission sets draft hydrogen auction ceiling bid price at Eur4/kg

Asia Pacific

SPGlobal.com

Australia falling behind in global clean hydrogen race: report

G7 ministers agree on 'various pathways' for net zero, energy security

China to raise share of non-fossil fuels in total energy mix to 18.3% in 2023

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South Korea revises 2030 target for greenhouse gas emissions

UK, South Korea in energy transition accord focused on civil nuclear, offshore wind

Quotes of the week:

"EPA's choice to fixate on tailpipe emissions rather than full fuel and vehicle lifecycle is a huge error that will stymie investment and artificially cap the potential of carbon abatement for liquid fuels and vehicles on the road today." --American Fuel & Petrochemical Manufacturers President and CEO Chet Thompson said in a statement.

"Biogas is the province of farmers or sewage treatment companies generally. Managing manure is going to be right out of the comfort zone of utilities and energy majors" -- Deborah Mann, senior director of gas, power and climate solutions at S&P Global Commodity Insights

"The crisis has reminded policy makers and energy consumers of the immediate importance of stable and affordable natural gas supplies. The traditional arguments in favor of gas -- its role as a reliable partner to the clean energy transition and its ability to step in to fill the gap left by declining coal and oil -- are also being tested." – International Energy Agency's report on gas markets and investment.

Price of the week:

$4.60/kg

South Australia alkaline hydrogen prices spiked April 13 on the back of lower renewables output

Charts of the week:

Note: Commentators doubt UK offshore wind bids can continue to fall in today's commodity markets

Clean hydrogen prices

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S&P Global Commodity Insights Weekly ET News Highlights – Mar 25, 2024

Energy transition highlights: Our editors and analysts bring you the biggest stories from the industry this week, from renewables to storage to carbon prices. Thyssenkrupp has signed a realization agreement with gas transmission system operators Nowega, OGE and Thyssengas to connect its Duisburg steel plant in Germany to the GET H2 hydrogen pipeline network in 2028 as it seeks to decarbonize its operations. The GET H2 pipeline project plans to connect green hydrogen production hubs with industrial consumers in the Lower Saxony and North Rhine-Westphalia regions. “With this contract, the hydrogen economy in North Rhine-Westphalia and Germany continues to take shape," the companies said in a statement March 21. The 135-km pipeline network between Lingen and Gelsenkirchen will be extended to the Duisburg steelworks via a 40-km link from Dorsten. GET H2 in turn will link to the planned national hydrogen pipeline network. Hydrogen prices in the spotlight as pipeline tenders begin Price of the week: Eur4.46/kg ($4.85/kg) Platts hydrogen alkaline electrolysis assessment in Europe March 20 (Netherlands, including capex). Thyssenkrupp is tendering to buy large volumes of pipeline delivery hydrogen for its Duisburg steel plant from 2028. Thyssenkrupp Steel to connect to GET H2 German hydrogen pipeline in 2028 Editor’s picks SPGlobal.com INTERVIEW: 85% of ship engines ordered in 2030 likely to be dual-fueled: MAN Singapore MAN Energy Solutions expects the order book for dual-fuel ship engines to ratchet up, with around 85% of all engines ordered in 2030 to be dual-powered, as the global shipping industry speeds up maritime decarbonization efforts. Its Singapore Managing Director Nicolas Brabeck said ammonia will soon be add to the list of fuels that engines can run on, along with other alternatives such as methane, ethane, LPG and methanol. CERAWEEK: Hydrogen could play role in decarbonizing power despite logistical challenges Hydrogen presents a complicated challenge when used as a power source, but these challenges could be addressed with incremental gas blending and artificial intelligence tools, industry participants said March 20. However, the use of hydrogen in power is generally controversial, speakers at CERAWeek by S&P Global said, saying it's "not the first application that comes to mind." Blue, green ammonia prices diverge as electrolysis power prices rise, natural gas falls Blue and green ammonia price indications diverged in February as capital costs for electrolysis and rising power prices pushed up renewables-derived production cost calculations, while falling natural gas prices continued to weigh on prices for blue production pathways. Blue ammonia prices slipped by $50-$60/mt, with Far East Asia prices falling to $369.63/mt, their lowest level since May 2023. Platts Connect China starts consultation for enrolling aluminum smelters into compliance carbon market China, which operates the world's largest emission trading scheme with 5.1 billion mt/year of CO2 emissions covered, opened a consultation for emissions accounting, reporting and verification guidance for aluminum smelters, paving the way to enroll another industry into the national compliance ETS after the power sector. CERAWEEK: Renewable power undergoing ‘deep industry reset’: NYSERDA official Renewable power is “going through a deep industry reset” in which “nobody’s making any money,” a New York State Energy Research and Development Authority official said during the CERAWeek by S&P Global conference in Houston March 21. Asked how inflation in material and operations and maintenance costs have affected renewable project returns, Georges Sassine, NYSERDA vice president for large scale renewables, said, “Terribly.”

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CERAWEEK: Energy industry has trapped itself with binary technology talk

Industry must be open to new technologies Wind, solar attack natural gas’ market share The energy industry has trapped itself with binary dialogue about being for one type of technology or another, when all resources need to work together to achieve energy transition goals, Tinker Energy Associates CEO Scott Tinker said March 22. The energy transition is not just about one technology, but rather a suite of technologies, panelists said at the CERAWeek by S&P Global energy conference in Houston. “What is nice about renewables and new technology is they're much more democratically distributed around the world,” said Andres Gluski, AES Corporation president and CEO. “The reality is a little bit more complicated. But I also think it's not rocket science.” However, the industry has to be careful about status quo because things are changing rapidly, Gluski added. “In the power industry, we're seeing once in a 100-year events, like floods and heatwaves, etc., occur every year.,” Gluski said. “The weather has changed. That’s the reality.” Industry leaders need to look at how to deliver the electricity with the lowest carbon and in most sustainable way possible, he added. Renewables versus fossil fuels Solar and wind costs have dropped remarkably over the years, Tinker said. “To make it reliable requires something sitting here waiting to back it up … and that something is expensive,” Tinker said about battery storage. “I think we have to be more open and candid about the actual cost of electricity to be integrated.” The domestic production of wind turbines is strong, with battery storage production to come, while domestic of solar panels will take longer, Gluski said. And while renewables do not generate 24 hours a day, coal is not going to come back regardless of political slogans, he added. “For a lot of these new technologies we need the regulators to be on top of it as a lot more is coming," Gluski said. The energy transition has to happen at a pace that’s politically sustainable, said David Victor, a professor of Innovation and Public Policy with the School of Global Policy and Strategy at University of California, San Diego. “I'm really concerned that we are overweighting the familiar,” Victor said. “We are overinvesting in things we know how to do and probably underinvesting in things that we don't yet know how to do.” Glue that holds it together “We got to figure out the glue that holds all this together,” said Hunter Hunt, chairman and CEO of Hunt Energy. There will be less natural gas needed than the industry thinks, but more than environmentalists think, he added. “Wind and solar are absolutely attacking natural gas’ share and they've decimated coal in the industrialized world,” Hunt said. “If natural gas is going to be a transition fuel, the industry needs to do its part to make sure that we're doing it in the right way. The future of energy can be seen in Texas today, Hunt said about the battery storage growth happening. There such a diversity in approaches with new technology and “we need all of it,” said Evelyn Wang, director of the Advanced Research Projects Agency-Energy with the United States Department of Energy. Houston, we have an opportunity “One of the things that is different today versus this time last year, is just explosion of activity in energy transition-related projects in Houston and Gulf Coast,” said Bobby Tudor, CEO Artemis Energy Partners and chairman of the Houston Energy Transition Initiative. “We have enormous competitive advantages here in this region to be a leader, and it's up to us to intentionally do that. … We intend to continue to exploit that advantage.” Texas has the largest concentration of technical talent in the world related to energy systems, Tudor said, adding the state is well positioned for the task due to its ports and access to wind and solar resources. A lot of the development in Texas has to do with permitting and the ability to get projects permitted and done, Tudor said, adding that process is much more difficult in rest of the country. The catch phrase should be “Houston, we have an opportunity” instead of “Houston, we have a problem,” said Atul Arya, S&P Global Commodity Insights senior vice president and chief energy strategist.

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CERAWEEK: No limit to global copper demand, Trafigura chief economist says

China's plans to offer stimulus measures to boost energy transition efforts are expected to favor sectors such as electric vehicles and photovoltaic panels in 2024, a trend that would support consumption of nonferrous metals such as aluminum, copper and lithium, industry sources said March 6. China's Premier Li Qiang, in his work report released during the country's key annual political gathering on March 5, emphasized the important role EVs will play in the country's economy. Li proposed several supportive measures, including development of new energy systems and storage, and boosting large-scale wind power photovoltaic bases. Battery metals EVs and energy storage sectors, which are the major consumers of battery metals, are expected to grow steadily this year driven by the expected stimulus measures from the government, sources said. China's three state-backed vehicle producers First Auto Work, Dongfeng and Changan were called on to increase their EV outreach. As a result, EV production from these vehicle producers is expected to see an increase this year, some sources said. However, the proposed measures aimed at EVs and energy storage sectors did not really alleviate concerns around battery and lithium chemicals oversupply in China, according to sources. Due to weak downstream demand, most medium-to-small sized battery makers are running below 40% of their capacity currently, which could explain why the demand for cathode material and battery metals remained sluggish, said a Chinese battery maker source. The weak outlook for lithium markets is also reflected in the falling EV sales in China. China's EV sales declined in January, falling below 30% of total vehicles sales reported in China during the month, according to latest data from the China Association of Automobile Manufacturers. Lithium markets are expected to remain oversupplied in 2024, keeping spot prices subdued, sources said. Platts assessed battery-grade lithium carbonate at Yuan 109,000/mt ($15,141/mt) on a DDP China basis March 5, down Yuan 1,000/mt on the day, , S&P Global Commodity Insights data showed. This came after a short-lived rebound driven by talks of environment-related checks on lithium salt producers and output cuts of Australian miners. Aluminum and copper China's proposed measures and expected higher consumption from energy transition-related sectors could offset the weak growth seen from the country's construction sector, which traditionally has been a strong consumer of aluminum and copper, according to sources. Rising demand from the EV, photovoltaic and lithium battery sectors would be the three mainstays of aluminum and copper demand in China in 2024, state-run research agency Antaike said. China's aluminum consumption from these three sectors is expected to reach 7.34 million mt in 2024, up 26% from the previous year, according to Antaike. The government work report released March 5 also mentioned that China will continue to push forward with timely deliveries of presold homes in 2024. However, China's construction sector is still expected to see tepid demand in 2024, pressured by the decline in housing starts over the past two-three years, Antaike said. The sector's aluminum demand is set to fall 2.5% on the year to 15.2 million mt in 2024, it added. The growth of floor space completed usually lags two-to-three years behind the growth in housing starts. Copper demand from construction and home appliance sectors typically makes up more than 20% of the country's total demand, market sources said.

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WPC: Energy transition faces discord amid geopolitical pressures

Geopolitical pressures — including rising resource nationalism and a year in which over 50% of countries will be having elections — as well as inflationary pressures have sent energy transition progress into “discord.” A specialty chemicals panel session held March 19 at the World Petrochemical Conference by S&P Global in Houston, Texas, tracked the challenges and opportunities of the energy transition for the industry. Speaking at the session, Roman Kramarchuk, head of climate markets and policy analytics at S&P Global Commodity Insights, said that if the short-term scenario continues, global temperatures could rise 2.4 degrees Celsius by 2100, far above the Paris Agreement’s goal of a 1.4-degree increase. “Over the past few years, we’ve certainly been trending more towards our ‘discord’ scenario,” Kramarchuk said. “We’re trending toward a longer runway for fossil fuels and less [greenhouse gas (GHG)] emission reductions. This is a case of less GDP growth, less trade and less technology transfer.” Since 1990, world GHG emissions have grown 45%, with mainland China, India and the Middle East representing the biggest increases in emissions, at 304%, 241% and 181%, respectively. Over the last 25 years, the Commonwealth of Independent States and the EU have cut their emissions the most, with decreases of 39% and 31%, respectively. The US has cut emissions 1% since 1990. Of S&P Global Commodity Insights’ three energy and climate scenarios, only one, “green rules,” has global temperatures near the Paris Agreement’s 1.5-degree goa, with an expected increase of 1.7-degrees Celsius by 2100l. The “green rules” scenario, however, assumes more technology transfer, cooperation and policy-driven outcomes than is currently happening. “2030 is not that far away,” Kramarchuk said, “and when you think about what the energy transition will take, solar panels can be constructed fast, but anything beyond that — like an onshore or offshore wind plant or a nuclear unit — we’re getting into lead times of 5, 10, or 20 years.” While the US Inflation Reduction Act has helped speed these transformational energy products along, there are still a lot of slowdowns in permitting, especially in Europe. “We joke that there needs to be a ‘Complexity Reduction Act’ in Europe to move things forward,” Kramarchuk said. Harald Schwager, deputy chairman of Evonik Industries AG’s executive board, added that companies are stuck in a hard place. Evonik has signed power purchase agreements (PPAs) to be powered fully by renewable energy by 2030. “The question will be, will production capacity be hampered by the regulatory process and will we have sufficient infrastructure in place to transport enough renewable power for site demand by then,” Schwager said. Distant peaks Commodity Insights’ energy and climate base case pegs the peak years for coal, oil and gas demand to be 2022, around 2030 and 2040, respectively. “When there is a surprise need for energy,” Kramarchuk said, pointing toward the COVID-19 pandemic and a drought in China, which caused a boost in coal usage, “fossil fuels fill that need.” However, “there’s more investment in renewable capacity than we’re seeing in upstream oil and gas,” Kramarchuk said. Under all scenarios, renewable electricity will be the lion’s share of newly generated energy sourcing. Rebecca Liebert, president and CEO of Lubrizol Corp., said that it is the duty of specialty chemical producers to be agile and proactive in bringing innovative and more sustainable products to market. “Political and technical factors are all things we must account for in our bring-to-market timelines. And we get it right a lot of times, but we get it wrong some of the time. Sometimes you get to market before the market is ready for your product. And I think that’s great, to have a solution on the shelf as the market comes along.” Schwager agreed: “In the specialty chemical industry, we have more good ideas than we have money. And there’s no regret on moves for improved efficiency.” While there has been little movement on target setting and market-based mechanisms for growing renewable energy, COP28’s first global stocktake committee called for “countries to contribute to triple global renewable energy capacity and double global energy efficiency by 2030.” “Even though we are heading for the discord path right now, with all the technology solutions and innovation pushes, we’ll be shooting up ahead towards the ‘green rules’ scenario in the long-term,” Kramarchuk concluded. This article was first published in chemweek.com .