California Solidifies Its Gas Car Ban // Texans On the Hook for $10 Billion // Norway Cuts Ammonia Production

California Solidifies Its Gas Car Ban

California will phase out almost all gas-powered car sales by 2035 according to new legislation.

"Governor Gavin Newsom first announced the 2035 goal in an executive order two years ago," reports Bloomberg. "But the new rules would set a firm timetable for reaching it, requiring automakers to steadily increase their sales of zero-emission cars in the nation’s largest auto market."

Seventeen other states tend to follow California's lead when it comes to automotive regulation. This ban could ripple throughout the country.

The regulations set annual goals for increasing the percentage of EVs on the road. Right now, they make up 15% of the Golden State's car fleet. California aims to increase that percentage to 35% by 2026 and 68% by 2030. "Plug-in hybrids, which switch between electricity and gas, and hydrogen fuel-cell cars would also count toward those goals," reports Bloomberg. "California already has its own clean-vehicle incentive program, offering rebates of as much as $7,000 toward the purchase of zero-emission vehicles, although cars costing more than $45,000 don't qualify."

But onboarding EVs at such a scale will pose a serious problem for California's grid, which is already in rough shape due to an under-investment in firm baseload energy plants and an over-investment in unreliable wind and solar. That's not to mention the affordability concerns for everyday Californians--EVs still cost way more than regular cars. The near and medium-term outlooks for the heavy metals needed for making EVs are grim; like almost everything else they're taking a supply-chain and energy crisis beating price-wise.

But the automotive industry is already committing itself to this trajectory. Ford recently laid off a few thousand workers, mostly from their internal combustion engine sector, as they re-orient production to compete with Tesla's EVs.

Texans On the Hook for $10 Billion

Texas resident are now on the hook for $10 billion in debt incurred during the ice storm blackouts from last year according to a recent analysis by Robert Bryce.

The debt comes from various bonds used to bail out electric utilities, gas utilities, and co-ops that took on huge losses during the blackouts. Texans will pay off these billions, which Bryce says is likely an underestimate of the total cost, over the next decade. They're already paying right now--just when the price of electricity spikes all over the state. "In June 2021, according to data published on the Public Utility Commission of Texas website, retail rates for customers in North Texas who consume 1,000 kilowatt-hours per month, were paying about 11.5 cents per kilowatt-hour," writes Bryce.

"In June 2022, those same consumers were being charged 26.2 cents per kilowatt-hour, or 2.3 times the rate in effect 12 months earlier," he continues. "Similar rate increases are happening all across the state. To put the 26.2 cents per kilowatt-hour price into perspective, the average price of residential electricity in the U.S. in 2021 was 13.7 cents."

According to a report from Intelometry, 80% of the debt falls on customers who belong to Texas's monopoly utilities.

The punchline is that market reregulation has failed to end the reign of the utilities just as it has failed to provide reliable, affordable electricity. To learn about how we got into this mess, you can read my history of it here.

Norway Cuts Ammonia Production

Norway's Yara, one of the largest fertilizer plants in the world, is cutting its ammonia production due to high natural gas prices.

Ammonia is vital for the production of fertilizer, which is used to replace the nutrients removed from the soil after harvesting. Crop yields will suffer without it.

"Gas prices have surged almost 40% in August and nearly 300% this year," reports Reuters. Yara has restricted its ammonia production to 35% of its capacity according to a statement from the company.

"We've basically never seen prices high enough to defend production at these cost levels," Kepler Cheuvreux analyst Magnus Melvær Rasmussen told Reuters. "It's not looking good and that's a problem for farmers, for food production, and for food security."

Farmers can still import fertilizer and Europe can import ammonia, but natural gas prices are high the world over.

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Conversation Starters

1. Texas is going the way of West Virginia and clamping down on ESG investors. "Texas has declared that BlackRock and nine listed European financial groups “boycott” the fossil fuel industry, a designation that could lead state pension funds with billions of dollars under management to divest shares held in the groups," reports The Financial Times.

2. India is slashing its crude imports from America by 50% as it snatches up cheap oil from Russia. "Last year, Russian oil in India’s crude basket amounted to a paltry 2.2%, while the U.S. was 9.2%; right now, Russia accounts for nearly 12.9% of India’s crude imports, while the U.S. share has tumbled to just 5.4%," reports Oilprice.com

3. Coal has been quitting the American grid because just-in-time natural gas and subsidized renewables have clobbered it in the electricity spot markets. In response, some coal plant owners have reworked their plants to fire natural gas as well. The EIA took a look at 13 of these plants. "The share of natural gas use versus coal use at these plants increased from 10% natural gas in 2018 to 30% natural gas late in 2019, before reaching 38% natural gas in 2020, according to data from our Power Plant Operations Report. The rise in the natural gas share peaked when natural gas prices sank to very low levels in 2020," the administration reports.

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