After a brief summer hiatus Energy Source is back just in time to begin the two-month countdown on the US election.

The November vote will be more significant for energy and climate than any in living memory. The outcome appears increasingly binary. President Trump says his rival, Joe Biden, would destroy America’s world-beating energy sector. Wood Mackenzie, an energy consultancy, says a Biden defeat would “end hopes of US decarbonisation before 2050”.

In Energy Source today, we ask what a Biden win would mean for US wind power. Our second item looks at hydrogen, a fuel whose time — after many false starts — may at last be arriving.

Thanks for reading. Let us know your thoughts and ideas at energy.source@ft.com. If this has been forwarded to you, please sign up for the newsletter here. — Derek

The Biden effect on US wind

Hope is blowing through the American wind industry. Driving it is a septuagenarian from coal country who has the potential to send the market soaring.

Should Joe Biden win the US presidential election in November, wind power will be a primary beneficiary, key players say. Capacity installations could triple and hundreds of thousands of jobs could be added. 

“We’re excited,” Tom Kiernan, chief executive of the American Wind Energy Association (AWEA), told ES. “If Joe Biden is elected in November it is very, very positive for renewables — and for the American economy.” 

That a Biden administration would be a boon to renewables will come as no surprise to anyone who has been tracking ES’s series on how he would shape US energy policy. (We’ve taken a look at what it would mean for oil, electricity and Iranian sanctions. For a deep dive, check out Derek’s Big Read.)

But quantifying Mr Biden’s specific impact on the US wind sector is tricky. The industry is doing all right for itself already — without the former vice-president’s support.

After a patchy start earlier this century, US onshore wind developments have taken off in the past seven years — driven initially by incentives (in the form of the production tax credit, known as PTC) and then by rapidly declining costs. Now, onshore installed wind capacity amounts to more than 100GW. Its offshore counterpart, after numerous delays, is on the precipice of a boom. 

Line chart of Capacity (GW) showing Blowing strong: US wind power

Indeed, the past four years have been some of the industry’s best — despite a president who has claimed turbines destroy property value, kill birds and cause cancer.

So executives say they do not necessarily need a Biden administration to spark more development. 

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“It’s not that one is diametrically opposed and one is really supportive,” said David Hardy, president and chief operating officer of Orsted’s US offshore wind business, referring to the two presidential candidates. “I think it’s a little more neutral-to-very-supportive . . . We are going to progress in any election outcome.”

“We will take more support and a Biden win probably would lead to that but I don’t think that we’re dependent on a Biden win for our growth,” Mr Hardy said.

Show us the money, Joe

AWEA, however, reckons industry growth under Mr Biden could be substantial. As things stand, the industry body estimates the sector will deploy around 15GW this year — plus a further 10-15GW next year should Mr Trump retain the presidency. Under a Biden administration annual capacity additions stand to be “doubled or tripled” in the coming years, Mr Kiernan said. 

The number of jobs in the sector — currently around 120,000 — would likely remain flat under four more years of Mr Trump but could increase by “several hundred thousand” under Mr Biden, according to Mr Kiernan.

Still, specifics are lacking. Mr Biden has said his $2tn clean energy and infrastructure plan will lead to the construction of “tens of thousands” of new turbines. But that is not a tangible target. Investors want hard numbers.

The key driver will be his promise to strip carbon emissions out of American electricity by 2035. This will involve two main features:

  1. Ramping up new renewable capacity

  2. Capturing the carbon emitted in fossil fuel-fired generation

Wind developers would prefer money pumped into the former, supported perhaps by an extension of the PTC. Oil and gas producers would prefer support for carbon capture utilisation (CCUS) and storage technology.

As one investor put it to ES: “It’s still not clear — probably even to the campaign team — what they are going to put their weight behind . . . The devil is in the detail.” (Myles McCormick)

Hydrogen: back to the future?

“It’s the fuel of the future — and always will be.” So goes the common quip about hydrogen fuel cells.

Every few decades markets get excited about the take-off of hydrogen as an alternate fuel that can be used to store and move energy — revolutionising everything from cars to boilers — before it ultimately returns to the shelf.

The last chapter of hydrogen hype occurred in the late 1990s when a host of major automakers pumped money into fuel-cell technology, only for plans to fizzle when consumer demand failed to materialise.

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Is it really different this time? Increasingly, analysts, policymakers and industry players believe it is.

The potent combination of lower costs and the urgent need to cut emissions has primed the industry, according to Bernstein Research, whose new paper predicts fuel cell sales will increase from $300m in 2019 to $12.5bn by 2030 and $150bn in 2050.

“The growth rates are obviously exponential assuming hydrogen does become the solution we expect it to,” said Neil Beveridge, lead author of the paper. “We’ve gone through several waves of development of hydrogen but it’s never quite made it. What’s different this time is climate change and the need to decarbonise energy.”

Line chart of Compound annual growth of 23 per cent showing Hydrogen hockey stick

Fuelling share prices

The bulk of hydrogen produced today comes from fossil fuels and is known as “grey” hydrogen. But strides have been made to shift the focus to “blue” hydrogen, in which carbon is captured, and ultimately “green” hydrogen, produced via electrolysis from renewable energy.

It is the green variety that is driving market excitement. Japan wants to become the world’s first “hydrogen-based economy” in the coming decades, while the EU has put hydrogen at the heart of its “Green Deal”.

“Climate change has risen to the top of the political agenda,” said Felix Chow-Kambitsch, an analyst at consultancy Aurora Energy. “Governments across the world are exploring green stimulus packages in the wake of Covid-19. As a strong candidate for decarbonising the energy system, I expect hydrogen would be on the list of solutions governments are considering to fight climate change.”

The buzz has sent share prices soaring. Companies such as Canada’s Ballard, Plug Power in the US and Swedish group Powercell have all seen their share prices shoot up over the past year as investors dive in.

Line chart of % change in share price showing Hydrogen stocks have surged in value

Picking the right horse

But with rival technologies and models vying for pole position, some investors remain cautious. Alfredo Marti, a partner at Riverstone Holdings who oversees a private equity portfolio of over $4bn in the renewables sector, told ES the dynamic in the hydrogen space draws comparisons to solar technology a decade ago.

“It was evident then that there would be good investment opportunities at scale in the sector,” said Mr Marti. “But it wasn’t clear which technologies and business models specifically would prevail.”

Back then, investors rushed in to bet on emerging technologies such as concentrated towers and parabolic mirrors before photovoltaic cells came to dominate the market. That left many nursing hefty losses.

“Something similar is happening now, both in hydrogen and in new forms of battery storage. Investors and companies are assessing a number of competing technologies, use cases and business models. There is no real consensus yet in which ones will prevail and some investors are likely to back the wrong horses,” said Marti.

Nonetheless, there is “no doubt”, according to Mr Marti, that hydrogen and battery storage will have a key role to play in energy markets globally in five years’ time.

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This time round, it might be that tired industry gag — not the tech — that gets shelved. (Myles McCormick)

Data drill

After Hurricane Laura slammed into Texas last week, US oil imports fell to their lowest level in more than two decades. But even before the storm hit, petrol demand was about 14 per cent lower than a year earlier. Saudi shipments to the US have dropped from about 1.6m b/d a day in May to less than 200,000 b/d.

Line chart of Barrels of oil per day (m) showing US crude imports hit a 28-year low

Power points

  • Gregory Meyer reports on New York state’s plan to decarbonise its power sector — and the opposition it is creating.

  • Electric vehicles will remain more expensive to produce than conventional car engines for at least a decade, writes Joe Miller.

  • Rising demand for nickel — used in battery-powered cars — is prompting concerns about the disposal of waste created when it is mined, reports Henry Sanderson.

  • BP’s and Shell’s writedowns this summer followed pressure from investors who insisted they account for the impact of climate change on their businesses, writes Attracta Mooney.

Endnote

Has Joe Biden finally answered the fracking question? In a speech this week in Pennsylvania’s shale gas heartland, the Democratic presidential candidate was adamant: “I am not banning fracking, no matter how many times Donald Trump lies about me.”

The Pittsburgh Post-Gazette’s editorial board said the message was “clear, but he’ll need to keep repeating it”.

“The fracking industry is essential in Pennsylvania, especially in the south-west and north-east sections of the state. Both areas went for Mr. Trump big time in 2016, and whoever wins Pennsylvania this year will need their support.”

Energy Source is a twice-weekly energy newsletter from the Financial Times. Its editors are Derek Brower and Myles McCormick, with contributions from David Sheppard, Anjli Raval, Leslie Hook and Nathalie Thomas in London, and Gregory Meyer in New York.

Via Financial Times