The Exchanges

Q All right, Maria, what is your rising star?

A I think a rising star in clean energy this year would be geothermal energy, especially sort of the next generation technologies that try to access heat from unconventional places, kind of deeper into the ground, or maybe where there aren't hot springs or geysers available. And one standout's Uh, startup in particular would be Fervo Energy. They use horizontal drilling techniques, fiber optic sensing tools, um, mainly developed by the oil and gas industry for fracking, and now they're using it to extract heat from the earth. And late last month, uh, Fervo and Google successfully started operating a first-of-its-kind power plant in Nevada using these advanced, uh, geothermal techniques. And it's now delivering electricity to the grid in Nevada, which is where Google operates some of its massive data centers.

AI assessment note: “I think a rising star in clean energy this year would be geothermal energy”

Q And so in the chemical space, for ethylene in particular, we're not necessarily talking about a change in chemistry. We're mostly talking about electrification. Is that right?

A Right. So in my story, I focused on sort of the most emissions intensive part of ethylene production, kind of within the, the walls of the plant itself, and that is, uh, generating high heat to crack ethane gas into ethylene molecules, which are then processed into other chemicals. And so this sort of, this process of generating heat to crack ethane accounts for 90% of the carbon dioxide emissions associated with an ethylene steam cracking facility. So I focused on initiatives to electrify that portion, but you're completely right that, um, a huge part of sort of the life cycle emissions of ethylene and all chemicals come from the fact that they are oil and gas feedstocks, and they, even electrification can't fully address some of these other issues that come with ethylene and plastics more generally, and that is they generate a lot of toxic air pollution, they generate a lot of plastic waste that ends up In waterways, in our bloodstreams, etc.

AI assessment note: “Right. So in my story, I focused on sort of the most emissions intensive”

Q Yeah, so Maria, over to you. Why don't we talk about steel, since we've covered the others?

A Sure. So I would say in general, the steel industry, uh, is characterized by sort of these large legacy players. Um, in the United States, U.S. Steel and Cleveland Cliffs are actually the only two companies that still operate blast furnace and basic oxygen furnaces, but there are a handful of other companies that operate these electric arc furnaces using scrap metal, Nucor being one of them, and Nucor is actually America's biggest steel supplier. Uh, and then you have kind of a whole range of equipment manufacturers. Midrex is a company that makes these direct reduced iron plants. And in terms of sort of the startup space, obviously Boston Metal, Electra are ones that, that stand out. But I, my sense is that right now that a lot of the innovation is happening right now among sort of these established companies with support from Government programs. If you're talking about Europe, especially a lot of those projects are funded through European Union funding, or kind of state-sponsored initiatives.

AI assessment note: “in general, the steel industry, uh, is characterized by sort of these large legacy players”

Q All right, that's a good place to take a quick break, and when we come back, we'll talk about the most unpredictable stories and share our forecasts. All right. So Maria, let's go back over to you. What is your choice for the most unpredictable story of a 2023?

A Sure. So I don't know if it's unpredictable per se, but it was certainly something I was surprised to learn about is this phenomenon called natural hydrogen, naturally occurring hydrogen resources in the ground. Um, I've just been reading a couple of stories about it. Um, most recently some hydrogen was discovered in an old coal basin in France. About a decade ago, hydrogen was found in an old water well in Mali, and actually that site is being used, they've developed or extracted the hydrogen and are using it locally to generate electricity, and it sort of sparked this phenomenon of, of wildcatters looking for these natural hydrogen resources all over the world. Um, my sense, or just from what I've read, is that it's a very, very nascent industry. Who knows if it will have any bearing on sort of the Global hydrogen economy that's, that's being developed. Um, but it's, it's, it's pretty interesting. I mean, wouldn't it be nice if you could just extract the hydrogen, I guess, instead of having to produce it from electricity and electric, electrolyzers, and maybe other less clean ways of making hydrogen?

AI assessment note: “something I was surprised to learn about is this phenomenon called natural hydrogen”

Q Yeah, so why did you focus on ethylene?

A Yeah, ethylene is a key building block of a lot of the other chemicals that are made in everyday materials, like diapers, detergent, most of the plastic materials that we have, PVC pipes, even airplane wings have some ethylene, so that seems like a great place to start because ethylene is in a lot of stuff. Ethylene is in a lot of the materials that we use. It's also the Um, most consumed primary petrochemical, uh, kind of among these groups of what are called high value chemicals, it's the most consumed, so that seemed like a good place to start, and also because in my reporting I noticed there were some interesting initiatives to try and electrify parts of ethylene production, and so that seemed like a, a cool opportunity to focus on an area where there actually are solutions, or I should say there are steps toward solutions within the chemical space.

AI assessment note: “ethylene is a key building block of a lot of the other chemicals”

Q task for renewables, uh, there's also a question about the use of hydrogen in these blast furnaces, and in order for that hydrogen to be clean, you'd have to produce it through electrolysis, which requires a lot of renewable electricity, and so you are just talking about gargantuan amounts of renewables to supply this process. Maria, what is the state of the market right now? Is there even a market?

A Yeah, it's startups producing at teeny tiny levels, but the big, ah, the big steel makers are increasingly expressing interests, investing in pilot projects, ah, in this effort, especially European steel makers are kind of leading the charge when it comes to hydrogen-based steel making. So you start to see some of these initiatives like the Sustainable Steel Buyers Platform that was launched last week during Climate Week, ah, First Movers Coalition. They're trying to kind of bring together these Companies that use a lot of steel, uh, automakers, construction firms, solar module manufacturers to say, hey, we want this green steel. Could you please make more of it? So trying to kind of close this big gap that exists between potential demand and potential supply. And in the United States, again, we make 70% of our steel using kind of this scrap electric arc furnace process, but the other 30% There's not a lot of movement on sort of the green side of things that steel makers are making investments that they say clean up their processes, and then they can characterize that as green steel. But in terms of hydrogen based steel making, um, other efforts, it's all very, very early days.

AI assessment note: “it's startups producing at teeny tiny levels, but the big, ah, the big steel makers”

Q And Maria, how's this playing out a little bit differently in the wind business? These incentives are largely promoting new factories and batteries and solar. For the wind business, it's a little bit different. There's a lot of wind manufacturing already in the country, some of which has been closed. How are the incentives for changing the nature of wind manufacturing in this country?

A Sure. So, right, for solar batteries, other types of clean energy technologies, these incentives are kind of ushering the first wave of domestic manufacturing. The U.S. wind manufacturing sector has largely existed, uh, you know, for decades, but it's kind of had this on-again, off-again nature, and in, in most recent years, a lot of domestic capacity for making blades and turbine towers in particular has declined because companies are Finding it kind of more economically attractive to make these things overseas. So the Inflation Reduction Act is kind of bringing about what experts have called a second renaissance for the U.S. wind manufacturing space. Factories in Iowa and Kansas, other parts of the country that were idling or shuttered are now reopening and expanding even to not just resume production, but begin making larger turbines, which is sort of becoming the norm for projects. So It's kind of, it's breathing new life into this, this sector that has been very cyclical in nature. Um, analysts are hoping that that, this will kind of break the spell in a way that the, there can be some policy certainty, some financial certainty for the companies that make and develop, ah, win, win parts.

AI assessment note: “Factories in Iowa and Kansas, other parts of the country that were idling or shuttered”

Q So once this beef tallow, cooking oil, pork fat gets collected, it gets turned into a fuel known as HEFA, which stands for hydro-processed esters and fatty acids. So what happens to the oil once it gets Sucked up from these restaurants. How does it actually get recycled and turned into jet fuel? Sure.

A So the, the oil and the grease that Dale collects goes to a central processing facility first, where it's sort of the impurities are removed, it's cleaned up, and then it's moved to a refinery where the HEFA process, it's energy intensive, involves the use of hydrogen, turns this feedstock into an oil that's essentially very similar chemically to diesel, and is able to be dropped in directly to existing engines, be it a jet engine or a truck engine. And that's a big difference over biodiesel, which needs to be blended with petroleum products because of its different chemical characteristics. So you can go from the, a vat in the kitchen of a Burger King, take it to a refinery, and out comes a, a chemical, an ingredient that looks very similar to diesel.

AI assessment note: “goes to a central processing facility first, where it's sort of the impurities are removed”

Q So what actually determines whether this grease gets turned into a biodiesel or a sustainable aviation fuel? Like, is it, is it purely economics and that the airlines are willing to pay more?

A It's kind of purely an economic or, um, a market-based decision. Right now, there is increasing demand for renewable diesel for trucks for, for this reason that you can kind of drop it in directly rather than having to blend it. So there's kind of environmental benefits to doing that. Also, you can sell more renewable diesel in and of itself if you're not having to blend it. But with more tax credits, more incentives coming out for sustainable aviation fuel, there is an increased incentive to Both make more of the fuel and also perhaps shift some production from renewable diesel to sustainable aviation fuel. Basically, wherever fuel producers can get more money for their product is where they'll follow.

AI assessment note: “It's kind of purely an economic or, um, a market-based decision.”

Q insurrection, this bottom-up movement to get more solar and battery storage on homes and community centers, uh, and other pieces of critical infrastructure, and how there was this tension between the utilities grid plans and what citizens wanted. We're entering hurricane season. It's going to put this distributed energy to the test, and here we have Hurricane Fiona. What was that test, and how did solar and battery storage fare?

A So, fortunately for the, the people who do have, ah, rooftop solar and battery systems at their homes or businesses, they did seem to hold up from, from the folks I talked to and from, from what I was reading. Um, there's a, a fire station that I visited in Guanica, which is on the southern coast, and kind of briefly over text message, you know, they're responding to the disaster, but they said, yes, we never lost power at all during the hurricane. And in previous emergencies, During Maria, during this massive earthquake, uh, in 2020, they did lose power. That meant they couldn't communicate with people who needed help. And in this instance, because they had a pretty substantial solar and battery system, they were able to stay connected and continue receiving calls. And even from homeowners, kind of in their, their personal situations, I heard that their, their systems were working. They're, it's not that they're using All of their appliances. It's not the full sort of normal electricity demand, but certainly they have enough to keep the refrigerator running, to power their vital medical equipment, to use their electric hospital beds. So there are all these necessities that suddenly become, can become tragedies when you don't have power.

AI assessment note: “they did seem to hold up from, from the folks I talked to”

Q There's something else that's happening as well, and there's great concern that Luma has every incentive to invest in natural gas plants rather than distributed renewable energy. What is that incentive, and what is the fear that it's going to lock in more fossil fuel development on Puerto Rico?

A Right, so Luma itself says they support the Puerto Rican government's goals to transition to a hundred percent renewable grid by twenty-fifty. Um, but in practice, the, the island, the government, and the utility, they continue investing in fossil fuel infrastructure and in this existing system. In twenty-nineteen, PREPA signed a 1.5 billion dollar contract with an American company called New Fortress Energy. To replace, ah, two of its oil-fired power plants with fossil gas, and kind of more controversially, to build an import terminal for liquefied fossil gas, or you hear it called as liquefied natural gas. With the idea being that more fossil gas would be imported to the island. And, you know, this infrastructure is not something that investors and companies are building with the idea that it will be demolished in five years. The expectation is that it will continue operating for decades and continue generating profits for decades. And so the incentive that companies have, companies like Luma and New Fortress Energy have, if You know, for, for them there is not a financial incentive to shift away to a distributed renewable energy system because a lot of their money is in the existing infrastructure.

AI assessment note: “there is not a financial incentive to shift away... because a lot of their money”

Q The utility PREPA was in financial trouble before the hurricane swept through the island. There, one of the solutions to reform the energy system was to privatize the utility, and that has had mixed impacts. What was the outcome of privatizing Puerto Rico's utility?

A Right, so in 2020, um, PREPA, which is the state-run utility, transferred operation of the transmission and distribution system to Luma Energy, which is a consortium of Canadian and mainland U.S. companies. So PREPA still owns the power plants, Luma operates the grid and handles its reconstruction, and you're right, it's absolutely been mixed. There have been protests in the street. For a lot of people, because the grid problems continue, electricity costs are rising, Things haven't necessarily gotten better for many people. Luma itself says it inherited a neglected, faulty system, and they're doing the best they can to fix it, and every quarter produced progress reports sort of detailing what they've replaced, what they're doing, and I spoke with folks who don't necessarily have a problem with Luma that say maybe their experience might even be a little bit better, but I also spoke with more people who are very distressful, very Upset with, with Luma, and they see Luma as sort of representing the larger challenges with the electricity system that the island has faced as a whole.

AI assessment note: “Luma operates the grid and handles its reconstruction, and you're right, it's absolutely been mixed.”

Q of renewables and, and says that he wants a market driven solution toward clean energy resources. And you've got a couple more examples like this in the low level candidates. So I think that's kind of, Interesting. It's not going to influence the Republican Party platform at all, but does say something about how some of these local officials are couching this stuff around the country. Maria, what's your take?

A Yeah, I think it was, it's interesting, um, you know, I looked at the, the New York Times roundup that you mentioned, and these lower level candidates, a lot of them seem to kind of acknowledge the, the science, right? That climate change is happening, humans are causing it, but their focus is on adaptation. You know, there's some cognitive dissonance there, right? If you're focusing on adaptation, wouldn't you want to make that your job easier then by kind of limiting global warming to the extent that you can? Um, so it seems like they're trying to walk this line. Younger Republican voters in particular are interested and concerned about the climate, so how these candidates are trying to walk this line of acknowledging the crisis is happening, but kind of eschewing the need to actually do anything about it. And sort of, kind of circling back to Governor DeSantis' speech, it was, it was kind of, I guess every election cycle you sort of hear the same sort of lines Trotted out, and he's talking about energy dominance and lowering the price of gasoline, which the price of gasoline is not something that any single president can control, and the energy dominance aspect is really interesting because, of course, the United States is now the world's largest oil and gas producer. We have booming exports of liquefied natural gas, and that's happened under, largely under democratic Presid…

AI assessment note: “these lower level candidates, a lot of them seem to kind of acknowledge the, the science”

Q your characterization, Maria, that anticipation is a really apt descriptor for, for, uh, this moment. And so if we're thinking about that, if we're anticipating what's next, how are you going to judge whether it's been successful? Whether we, when we actually get past the anticipation phase and get deeper into the execution phase, what, how will you Determine success, or how will the people you're talking to determine success?

A Yeah, there's, I think there's so many ways to define success. I mean, obviously, most important for the climate is in terms of emissions reductions, in terms of amount of clean energy deployed, and, you know, replacing fossil fuel infrastructure, but I think, um, another metric of success that I'm hearing groups talk about more often is how these projects are developed. Are they developed with public buy-in, community engagement? Do people want these facilities there? And that would be Potentially, you know, a big change from how projects have been developed in the past, especially in terms of sort of these polluting industrial infrastructure. You know, are, are we developing clean energy in a way that, um, supports workers, supports people who are living near these facilities, but hopefully undoes some of the harm to the extent that we can, you know, that, uh, his industry, other industries have done historically. So, um, That's what I'm hearing a lot of from, from folks is sort of, um, can we build new things in a new way, you know, as, as we transition the, the, the economy.

AI assessment note: “obviously, most important for the climate is in terms of emissions reductions”

Q Even before, Fiona, there were protests erupting in Puerto Rico about management of the grid by Luma. Uh, there's this grassroots movement criticizing the privatization of the utility for these shortcomings. What has been the experience of The grid under the control of Luma in recent years, and how is Luma responding to this very significant outage once again?

A So Luma's response has always sort of been, look, we inherited this troubled, failing grid and sort of larger grid ecosystem from PREPA, from Puerto Rico state-run utility, and we're doing the best we can given these difficult circumstances. But I think for most Puerto Ricans, there's this extreme sense of anger and frustration because they haven't seen the grid get better, And their experience is getting worse, and on top of that, they're paying even more for their electricity. Um, many customers have seen their electricity bills double, so they're paying more for a crappier service, essentially. And there's so much money, so much federal recovery dollars flowing into the island, very little of that has actually been, uh, distributed and is actually making a difference. So billions of Federal recovery dollars have been made available and are flowing to the island specifically to fix the grid and to potentially invest in renewable energy, and very little of that money is actually, you know, being distributed on the ground, and so Puerto Ricans aren't really seeing much of a difference at all.

AI assessment note: “Luma's response has always sort of been, look, we inherited this troubled, failing grid”

Q After Maria, we had all these great ideas about how to make a system more distributed, and because of the factors that you laid out, we didn't see the kind of investment that we could have to make a system more distributed and more resilient. Does Fiona change that conversation in any way?

A I do think Fiona offers this proof of concept, this, okay, after Maria, we said, let's build distributed solar energy, and look, here, it's actually working. So whether or not it shifts the conversation, um, Maybe, maybe too soon to tell. I think what's hard is that this is a conversation that's been happening for years. There have been multiple reports from universities, both in Puerto Rico and the United States, national laboratories, um, many experts, many large technology companies are thinking about this, mapping out how this could work, what this would look like, but the problem is implementation. I guess it remains to be seen whether in the aftermath of Fiona, the sort of corruption and mismanagement and feet dragging, uh, will change.

AI assessment note: “I do think Fiona offers this proof of concept”