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HOW THE ELECTRIC VEHICLE CREDITS WILL SHAKE OUT: The dust is settling around the Treasury’s guidance for the new consumer clean vehicle tax credit, whose new sourcing requirements take effect later this month.
The long and short: Some big-name manufacturers put out lists in the last week illustrating what was expected — fewer models will comply with the new requirements. There will be a clearer picture on April 18, when the requirements take effect and Treasury publishes a comprehensive list of vehicles.
Fewer credits threaten to eat into sales at a time of extreme competition between automakers. But automakers are also projecting optimism that their future models, including some not yet on the market, will eventually comply and receive the full credit as battery makers move to North America and car manufacturers otherwise make changes to comply with the credit’s requirements.
Ford said this week that its F-150 Lightning will be its only fully battery electric model immediately eligible for the full credit. Its Mustang Mach-E and E-Transit, which are assembled in North America and had been eligible for the full credit last year, will only get half the credit when the requirements take effect (It didn’t say which half.)
Three others of its plug-in hybrid models will be eligible for all or some of the credit, Ford said.
General Motors has also released a list of models it expects to qualify for all or some of the credit: Its luxury Cadillac Lyriq, the Chevrolet Equinox EV SUV and Blazer EV SUV being launched this year, and its Bolt. GM’s Hummer models will lose eligibility, though.
“In the very near term, meaning April 18, 2023, clearly it’s going to take a small bite out a number of eligible vehicles,” Albert Gore, executive director of the Zero Emission Transportation Association, told Jeremy.
Gore said automakers are adjusting, though, and noted that consumer demand for EVs is strong.
“It’s not such a big bite that it’s going to, I think, when you look back 10 years from now, that it’s going to have meaningfully disrupted the availability of consumers to EVs in the United States,” he said.
Other manufacturers have a much longer way to go than Ford and GM on the consumer credit. Toyota, Kia, and Hyundai as of December had no electric models that met even the threshold North American assembly requirement, which went into effect immediately after the Inflation Reduction Act became law.
Making the move: Manufacturers have made a number of announcements signifying that the consumer and manufacturing incentives in the IRA are too good to pass up.
Volkswagen of America CEO Pablo Di Si said his company plans to sell 25 electric models in the U.S. 2030 and that the intent is for all of them to be eligible for the full $7,500 credit.
Korean battery manufacturer LG Energy Solution intends to invest $5.5 billion to build a battery manufacturing complex in Arizona, where it’s targeting 2025 for production to startup. The company, whose customers include Tesla, GM, and Ford, said the project is about addressing the need for IRA-compliant batteries.
Welcome to Daily on Energy, written by Washington Examiner Energy and Environment Writers Jeremy Beaman (@jeremywbeaman) and Breanne Deppisch (@breanne_dep). Email [email protected] or [email protected] for tips, suggestions, calendar items, and anything else. If a friend sent this to you and you’d like to sign up, click here. If signing up doesn’t work, shoot us an email, and we’ll add you to our list.
GRID QUEUE BACKLOG GREW BY 40% LAST YEAR: Requests for grid interconnection grew by 40% last year, according to new research from DOE’s Berkeley Lab, enlarging the significant backlog of projects seeking to be plugged into the larger transmission network.
More than 2,000 gigawatts of generation and storage capacity now seek interconnection, 95% of which is made up of solar, batteries, or wind.
The combined solar and wind capacity now actively seeking interconnection, roughly 1,250 GW, approximates the installed capacity of the entire U.S. installed power plant fleet.
The bad and the good: The lab notes that many projects applying for interconnection will not ultimately be built and that the long wait-times are a major reason.
“Projects are taking longer and longer to complete the interconnection study process and come online, and most of these interconnection requests are ultimately canceled and withdrawn,” the report said.
But such growth in the interconnection requests also illustrates the immense and growing commercial interest in developing additional electric generating capacity from renewables.
SWEDISH PROSECUTOR ADDS TO MYSTERY ABOUT NORD STREAM BLASTS: The Swedish prosecutor leading the country’s investigation into the Nord Stream 1 and 2 explosions said yesterday that a state actor was most likely involved in the blasts, appearing to cast doubt on recent reports that had suggested an independent group was responsible for the attack.
Swedish public prosecutor Mats Ljungqvist told Reuters yesterday that investigators had been able to determine what type of explosives had been used, which ruled out a “a very large number of actors.” Though the possibility of an independent attack was still possible, he said, it was highly unlikely given the type and amount of explosives used.
“There are certain companies that have certain special missions that mean they could, in theory, carry this out,” he said. “We don’t rule out anything, but that it is a state actor who is directly or at least indirectly behind this is of course our absolute main scenario, given all the circumstances.”
Earlier this year, the New York Times reported that the attacks could have been carried out by an independent, pro-Ukrainian group, citing U.S. officials who had reviewed Western intelligence. That group was believed to have rented a yacht in Poland which they allegedly used to ferry them to the sites and plant the explosives, according to the Times and several German outlets.
But Ljungqvist appeared to pour cold water on this theory, noting: “With that amount of explosives, it is hard to conceive how they could have used only a yacht – which is not to say the yacht didn’t play some sort of supporting role.”
And though he said there is no doubt that the blasts were an act of gross sabotage, he warned against speculating too heavily, noting, “The incident has obviously become an open arena for different influence attempts.”
“Our hope is to be able to confirm who has committed this crime, but it should be noted that it likely will be difficult given the circumstances,” he said in a statement.
… MEANWHILE, EUROPE FALLS SHORT ON LONG-TERM LNG CONTRACTS: Europe has failed to secure enough long-term LNG contracts to offset Russia’s piped natural gas imports, according to a new analysis––which could cause serious price pain for the continent this winter.
Europe imported 121 million tons of LNG last year ahead of the 2022-2023 winter season to replace Russian gas––a 60% jump in LNG purchases from the previous year, and one that, along with mild weather conditions, allowed the EU to get through winter with higher-than-expected gas storage levels.
But Europe bought much of its LNG last year on the spot market, where prices are often much higher than LNG bought under long-term contracts. Additional demand from China could push prices even higher, analysts warned, according to Reuters.
Europe purchased more than a third of total spot market LNG supplies in 2022, up from around 13% in 2021, and overtook Korean and Japanese markets as the top destination for U.S. LNG. Analysts said this exposure could rise to more than 50% during the 2023-2024 winter season.
Part of the problem is that the EU sees gas as a transition fuel, unlike Asia, which has snatched up new long-term contracts starting in 2025 and beyond.
“Their preference for security of supply has allowed them to continue to support new projects, whereas European buyers are concerned about committing to supply well into the start of their net-zero targets,” Felix Booth, head of LNG at Vortexa, told Reuters.
RUSSIA THREATENS TO SCRAP UKRAINE GRAIN DEAL OVER EXPORT RESTRICTIONS: Russia threatened to abandon the Black Sea grain deal with Ukraine unless the West agreed to lift export restrictions, saying today that the punitive measures were hurting its ability to ship agricultural supplies under the terms of the agreement.
“If there is no further progress in removing barriers to the export of Russian fertilizers and grain, we will think about whether this deal is necessary,” Russian Foreign Minister Sergey Lavrov during a press conference in Turkey, referring to the key deal that allows the safe passage of grains and other commodities to be sent via Ukrainian ports through a safe corridor in the Black Sea.
“And we will work, if necessary, outside the framework of this initiative. We have the opportunity to do this with Turkey, with Qatar – the presidents discussed relevant plans,” Lavrov added.
His remarks come after Russia said in March it would extend the deal for another 60 days in a so-called “gesture of goodwill,” stopping short of the 120-day extension sought by the U.N., Ukraine, and Turkey.
Turkey, which helped broker the deal, also said it was committed to extending the deal beyond mid-May, though it is unclear whether Russia will comply.
ICYMI – DIMON FLOATS MORE EMINENT DOMAIN FOR ENERGY PROJECTS: Something from earlier this week that caught our eye was JPMorgan Chase CEO Jamie Dimon’s suggestion that governments evoke eminent domain more readily in order to speed the construction of energy projects.
Dimon, in a letter to shareholders, said subsidies for new wind and solar projects and permitting reforms are needed, but that they may not be sufficient to avert the consequences of climate change in time.
“We may even need to evoke eminent domain – we simply are not getting the adequate investments fast enough for grid, solar, wind and pipeline initiatives,” Dimon’s letter said.
Notable inclusion: Pipelines. Dimon’s position on the energy transition has favored the production of more U.S. oil and gas to displace coal and more emissions-intensive sources of oil and gas around the world.
Dimon wondered aloud last year why the collective We can’t “get it through our thick skulls” that more production in the U.S. is not contrary to climate change mitigation. His and other major U.S. banks have been markedly less aggressive than European counterparts, some of which have elected to cease new financing of oil and gas projects in addition to coal.
The Rundown
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