Energy

U.S. producer prices for final demand goods and services rose more than expected last month, largely owing to higher energy costs, Reuters (subscription) reports.

What’s going on: “The producer price index for final demand rose 0.5% last month, the Labor Department said on Wednesday. Data for August was unrevised to show the PPI accelerating 0.7%.”

• Reuters-polled economists had expected the PPI to increase 0.3%.
• “In the 12 months through September, the PPI increased 2.2% after advancing 2.0% in August.”

Core PPI: Core producer prices—prices excluding food, energy and trade services components—rose 0.2%, the same increase seen in August.

• “In the 12 months through September, the … core PPI increased 2.8% after climbing 2.9% in August.”

Coming up: The Federal Reserve is expected to leave current interest rates unchanged when it meets Oct. 31 and Nov. 1, according to Reuters. 

An energy startup that just hit the $1 billion investment mark thinks it holds the key to finally producing large quantities of “green” hydrogen, according to The Wall Street Journal (subscription).

What’s going on: “Electric Hydrogen believes the secret to success is finding a better way to split a [water] molecule. … Splitting it to create green hydrogen requires devices called electrolyzers. They are expensive and consume vast amounts of renewable electricity to make a small amount of hydrogen, making most projects uneconomical. Electric Hydrogen says its electrolyzer can produce much more hydrogen.”

• The company says its method of hydrogen production combined with “the generous tax subsidies on offer” from last year’s Inflation Reduction Act could finally make green hydrogen a market-competitive energy source.

​​​​​​​Investors go all in: The company “recently raised $380 million from backers including BP, United Airlines, Microsoft and iron-ore producer Fortescue Metals,” helping it pass $1 billion in total investments.

Why it’s important: Green hydrogen “is one of the few options to eliminate emissions from trucks, planes, steel mills and chemical plants where renewable power and batteries alone can’t get the job done.”

• “Hydrogen is one of the few ways to move green power long distances. Potential demand is so great that the winner of the race for green hydrogen could dominate a market worth as much as $1 trillion in the coming decades.”

​​​​​​​ Cracking the code: While electrolyzers have been typically small devices used in the aerospace and chemical industries, Electric Hydrogen thinks it can make the devices both larger and more affordable “by starting from scratch and using new plate engineering focused on the performance of bigger electrolyzers.”

The NAM’s take: “Clean hydrogen is critical to decarbonizing hard-to-abate industries, and manufacturers are leading the way in developing and scaling it for widespread use,” said NAM Vice President of Domestic Policy Brandon Farris.

• “The NAM is working to ensure that the incentives available for clean hydrogen help create the right market incentives for producers—as well as manufacturers and other end users—to meaningfully contribute to decarbonization while boosting domestic job growth and global competitiveness.”

In a milestone for the logistics sector, Danish shipping firm Maersk recently unveiled “its first container vessel moved with green methanol,” CNBC reports.

What’s going on: “The new container ship, ordered in 2021, has two engines: one moved by traditional fuels and another run with green methanol—an alternative component, which uses biomass or captured carbon and hydrogen [for] renewable power. Practically speaking, the new vessel emits 100 tons of carbon dioxide fewer per day compared to diesel-based ships.”

• The ship is the first of a larger order of 25 due for delivery next year.
• Other shipping firms have placed orders for similar vessels.

Why it’s important: Because it’s a global industry—with approximately 90% of the world’s traded products traveling by sea—ocean shipping has typically been less receptive to transitioning to new energy sources, Danish Minister of Industry Morten Bodskov said, according to the article.

• For example, “[i]n June, a group of 20 nations supported a plan for a levy on shipping industry emissions. But China, Argentina and Brazil were among the nations pushing back against such an idea.”

Climate goals: Maersk aims to be “climate neutral” by 2040, making the green-methanol vessels a key part of its approximately 700-ship fleet.

However … “[A]nalysts are worried that Maersk and its competitors might struggle to find enough supply of green methanol. The fuel is scarce and costly to transport.”

The last word: “Manufacturers are leading the way on developing and scaling up new clean energy sources,” said NAM Vice President of Domestic Policy Brandon Farris. “The NAM continues to advocate for policies and programs that foster and encourage that innovation.”

A measurement of wholesale inflation rose more than expected in August, according to data from the Bureau of Labor Statistics. 

What’s going on: The Producer Price Index for final demand goods and services rose a seasonally adjusted 0.7% last month, and 1.6% on a year-over-year basis.

• The increase was the strongest monthly gain since June 2022.
• Core producer prices rose 3.0% year-over-year, an increase from July’s 2.9%.

Final demand goods: Producer prices for final demand goods jumped 2.0% in August, buoyed largely by a 10.5% rise in energy costs.

• Excluding food and energy, producer prices for final demand goods inched up 0.1% last month.

Final demand services: Producer prices for final demand services, meanwhile, increased 0.2%, with transportation and warehousing prices rising 1.4%.

Our take: “Despite the uptick in wholesale inflation in August, the overall trend remained encouraging,” said NAM Chief Economist Chad Moutray. “The data continue to reflect moderation in pricing pressures year to date, particularly as core producer prices continued to moderate. The deceleration in producer prices will likely take some pressure off the Federal Reserve, even as it remains concerned about lingering inflationary pressures overall.”
 

Chevron Corp. has bought a majority stake in a federal government–supported “green” hydrogen project in Utah that, once completed, will “produce massive volumes” of the renewable energy source, according to E&E News’ ENERGYWIRE (subscription).

What’s going on: Chevron said on Tuesday that it had completed a deal with fuel-storage developer Magnum Development LLC to take over full ownership of the Utah salt caverns where green hydrogen production and storage is set to take place.

• This purchase gives the energy giant “a majority interest in the joint venture that is developing the [Advanced Clean Energy Storage] project.”
• ACES—in which Mitsubishi Power Americas Inc. and private-equity firm Haddington Ventures LLC are also partners—won a $504 million loan guarantee from the Department of Energy in 2022.
• The project is part of a larger effort by Chevron to develop emerging energy technologies through 2028.

Why it’s important: “We seek to leverage the unique strengths of each partner to develop a large-scale, hydrogen platform that provides affordable, reliable, ever-cleaner energy and helps our customers achieve their lower carbon goals,” Chevron New Energies Vice President Austin Knight said in a statement.

• The plan is to make the hydrogen in the salt caverns in Delta, Utah, “for use at a nearby power plant” looking to diversify its energy mix—and aiming to run entirely on hydrogen by 2045.

Another effort: In partnership with ExxonMobil Corp. and Shell PLC, Chevron is also part of a Texas industry group asking for $1.25 billion in 2021 Bipartisan Infrastructure Law funds to construct hydrogen “hubs,” large-scale demonstrations of hydrogen production, transportation, usage and storage.

A model project: “Currently under construction, the ACES project could become one of the western U.S.’s most important demonstrations of what a low-carbon hydrogen industry might look like,” ENERGYWIRE reports.

The NAM’s take: “Manufacturers view clean energy solutions, such as hydrogen, as an important part of our country’s energy present and future—and the industry is used to leading the charge in developing and scaling hydrogen projects for widespread use,” said NAM Vice President of Domestic Economic Policy Brandon Farris.

• “The NAM is committed to ensuring that the hydrogen tax credit and other incentives help build the appropriate market conditions for hydrogen projects to succeed.”

Real estate companies are turning to artificial intelligence to help cut emissions from commercial buildings, according to The Wall Street Journal (subscription).

What’s going on: While developers and builders have begun using more energy-efficient design and building methods in recent decades, and governments are introducing stricter energy-use codes for commercial spaces, “more than 80% of buildings don’t have smart systems to efficiently manage their energy use.”

• Commercial real estate manager JLL “has been making a string of investments to bring AI systems to companies looking to cut their emissions. … JLL says it expects 56% of organizations to pay a premium for sustainable spaces by 2025.”
• One of its investments is in a firm that installs electric motors and small computers into building systems to better control heating and cooling.

Why it’s important: “AI building systems learn from historical patterns and the daily habits of occupants to predict and power things on and off.”

• “For instance, software and hardware that automatically manages lights, heating and cooling can help buildings cut 20% or more of their yearly energy use.”

A caveat: Just 10–15% of buildings have systems in place to collect the data needed to make these predictions.

• As one source told the Journal, “Bad data means you can’t do any kind of schedules, rules or more sophisticated use cases around artificial intelligence. You have to have the data.”

Check it out: Speaking of data collection, the Manufacturing Leadership Council (the NAM’s digital transformation division) is hosting an event in December that will help manufacturers envision what a data-driven industry might look like by 2030. Learn more and register here.

The federal permitting process for major transmission lines should soon get a lot easier to navigate, according to POLITICO’s ENERGYWIRE (subscription).

What’s going on: Last Thursday, the Department of Energy proposed “completing environmental reviews and other federal approvals for electric power lines within two years.”

• In addition, “DOE would be the lead agency conducting environmental impact statements and other federal reviews for transmission projects so that developers wouldn’t need to go through multiple federal agencies.”
• Once finalized, the framework will be called the Coordinated Interagency Transmission Authorization and Permits Program.

Why it’s important: The draft revision—a response to the recent debt-ceiling deal—could slash the time it takes to get long-distance power lines built and operational.

• This “could help integrate more solar and wind into the U.S. energy resource mix,” according to ENERGYWIRE.
• Though Congress authorized the DOE as lead federal agency in reviewing electric power lines, this proposal marks the first time the authority has been “formally proposed,” a source told the news outlet.

Developers’ role: The proposal details what developers would have to do under the new process.

• “For example, DOE would require developers to complete resource reports about potential environmental impacts from construction or operation of their projects. Applicants would also need to submit plans for engaging with communities affected by a new transmission line.”

However … CITAP wouldn’t cancel the need for local and state permits.

• “Rather, the goal is to ensure that developers have a clearer and smoother process for obtaining necessary federal permits.”

The NAM’s take: “This is a step in the right direction,” said NAM Vice President of Domestic Economic Policy Brandon Farris. “As part of our push for permitting reform, the NAM has long advocated for a lead federal agency to run point and streamline the permitting process.”

• “The NAM will continue to work with Congress and the administration to make the permitting process more predictable and consolidate the many complex layers of review so the U.S. can continue to build on our shared goals of boosting domestic manufacturing.”

The Biden administration will soon announce the first grant winners of a multi-billion-dollar competition to speed up development of technology to “remove carbon dioxide from the sky,” according to E&E News’ CLIMATEWIRE (subscription).

What’s going on: The “awards for so-called direct air capture hubs could define the future of the nascent DAC industry in the United States as well as the broader CO2 removal sector, experts say.”

• The Department of Energy received more than a dozen proposals in response to the $3.5 billion DAC hub competition, which was created in 2021 as part of the historic bipartisan infrastructure legislation and seeks to increase the use of DAC technology.
• The projects expected to be announced this month could get “between $3 million and $500 million in matching funds” for efforts such as DAC undertakings capable of capturing and storing one million tons of carbon dioxide every year.

What it is: DAC plants use filters, power, piping and fans to remove carbon dioxide from the air and sequester it underground.

• Just 27 such facilities have been commissioned globally, and the largest of these can remove 4,000 tons of carbon dioxide from the atmosphere annually.

The economic challenge: “At the moment, it costs around $700 per ton for a DAC facility to remove carbon from the air, according to the industry data clearinghouse CDR. The Inflation Reduction Act, meanwhile, increased the tax incentives for DAC operators to $180 per ton for the CO2 they permanently store.”

• To bridge that cost gap, last year Congress ordered the Biden administration to start a pilot program to pay DAC firms and developers of carbon-removal technology to remove emissions from the air.

The final say: “Manufacturers view clean energy solutions—such as carbon capture and sequestration/storage technologies and hydrogen—as important parts of our country’s energy present and future,” said NAM Director of Domestic Economic Policy Brandon Farris.

• “Manufacturers are leading the charge in developing them and scaling them up for widespread use.”

U.S. scientists have achieved a net energy gain in a nuclear fusion reaction for a second time—this time, with a higher energy yield, according to Axios.

What’s going on: The federal Lawrence Livermore National Laboratory in California announced Sunday that in an experiment on July 30, a fusion reaction produced more energy than it consumed, and more than a similar experiment produced last December.

• The December reaction used 192 lasers to produce a net gain of 1.1 megajoules of fusion energy, enough to power an average-size home for about half an hour, according to Extreme Tech.
• The July reaction is said to have netted even more, though specific figures for it are not yet available.

Why it’s important: “Scientists have worked for decades to develop nuclear fusion as a source of effectively limitless clean energy,” Axios reports.

• However … “Scaling up the technology to support the electrical grid will require increasingly powerful lasers—and more of them,” according to Extreme Tech.

The last word: “The net gain of fusion energy—for a second time, and in a larger amount—is a tremendous milestone,” said NAM Director of Domestic Economic Policy Brandon Farris. “It is further evidence of the enormous potential of nuclear power to help us meet our energy needs and energy-security goals.”

U.S. power companies are finding it increasingly difficult to get the large transformers they need to move electricity long distances—and the Department of Energy should step up to help them, the Government Accountability Office said this week, according to E&E News’ ENERGYWIRE (subscription).

What’s going on: A “GAO report called on DOE to create a plan, with deadlines, to overcome growing delays and difficulties U.S. utilities are facing in getting new large power transformers that are required to move electricity across more than 160,000 miles of U.S. high-voltage lines.”

• Most of the transformers are imported from overseas, and there is still a shortage due to pandemic-related supply chain disruptions.
• In some cases, delivery times have more than doubled, and the largest of the transformers can cost up to $10 million.

Why it’s important: “Transformers are critical for the future energy mix, as they are needed to create a larger grid for increased wind and solar generation, according to analysts.”

• In 2027 the demand by North American power companies for large transformers will likely be about twice what it was in 2020, according to the DOE.

What can be done: The DOE should create a plan to get more power companies to take part in voluntary programs to loan out spare large transformers during emergencies, the GAO recommends.

• The largest of these sharing agreements, the Edison Electric Institute’s Spare Transformer Equipment Program, had 57 participating utilities as of March.
• Thirty-one utilities in 28 states have signed onto a grid program to furnish spare transformers during cyberattacks or natural disasters.

The challenges: “[S]hortages of skilled manufacturing craftsmen able to build the transformers’ complex windings are a significant challenge … [DOE] said it is working on expanding apprenticeship programs to address the issue.”

Our take: “Transformers and transmission lines are critical to meet our growing energy security needs,” said NAM Director of Domestic Economic Policy Brandon Farris.​​​​​​

• “The NAM will continue working with the DOE and others to ensure that current and future needs are met, including developing the next generation of the manufacturing workforce and breaking down permitting barriers to expedite the buildout of our grid.”