Welcome to Grid Brief! Here’s what we’re looking at today: ESG accidentally funnels billions into Aramco, Illinois considers repealing its nuclear moratorium, and more.

ESG Drives Billions Into Fossil Giant

ESG is supposed to shunt finance into funding the renewable energy revolution. Instead, it has shoveled billions of dollars into the Saudi oil and gas giant Aramco through a loophole.

Here’s Bloomberg’s gloss of how it happened:

• “JPMorgan Chase & Co. constructs its ESG indexes using a model that grades and ranks issuers’ sustainability profiles. It uses scores from external data providers Sustainalytics and RepRisk to divide issuers into quintiles.

• The SPVs used to finance the Aramco oil and gas pipelines sit in the second-highest quintile, according to proprietary index data reviewed by Bloomberg. Aramco itself, meanwhile, falls into the lowest quintile and is therefore blacklisted from the index.

• The ESG scores are based on data that doesn’t span the entire financing chain, and therefore don’t reflect Aramco’s involvement.”

This is embarrassing and ironic for both ESG advocates and for Aramco. For ESG proponents, the issue is obvious: they’ve done the opposite of what they’ve set out to do. Aramco, meanwhile, looks hypocritical. The company has railed against ESG as an investment strategy opposed to conventional energy projects of all kinds, especially fossil-based ones. Neither group can say that now.

This is also the perfect brand of goofy, counterintuitive outcome that chums the water for aggressive regulators. Expect ESG to fall under greater scrutiny.

Illinois May Repeal Nuclear Moratorium

Illinois is considering repealing its moratorium on nuclear reactors.

Put in place by a Republican governor in the 1980s in response to Chernobyl, the moratorium has found opponents among pro-nuclear activists concerned about climate change, utilities, and labor groups who see nuclear as a solid job creator.

“Illinois is already leading the country in carbon-free nuclear power production. Now, it should position itself to lead in new nuclear development. This legislation puts the possibility back on the table,” Madison Hilly, President of the Campaign for a Green Nuclear Deal, said via message. “By removing this barrier to nuclear power, we can provide the coal communities of Illinois a chance to opt for a future that has not been offered before: producing clean electricity without sacrificing jobs, revenue, or purpose.”

Pat Devaney, secretary-treasurer of the Illinois AFL-CIO, told the Chicago Tribune that the repeal would “provide not only the construction jobs to be able to develop these facilities but also in the ongoing operations and maintenance would provide opportunities that don’t currently exist, for example, in the renewable industry.”

On the anti-repeal side, fearmongering about nuclear safety abounds. They cite unfounded concerns about nuclear waste and nuclear reactor safety as their major issues. The split between labor and environmentalists over nuclear is at least half a century old.

While the moratorium would legalize new nuclear in Illinois, it’s not clear that utilities want to spring for new plants despite their support for the repeal. Illinois, which is split between the MISO and PJM power markets, isn’t friendly territory for new baseload plants. The markets tend to shortchange them in favor of natural gas and heavily subsidized renewables. Secondly, many utilities are eyeing the debacle at the Vogtle plant owned by Georgia Southern. Plagued by overruns and other mishaps, the plant is a blemish on the nuclear industry that may give other utilities well-founded concerns about new nuclear.

Utilities may pivot to advanced nuclear plants, which are supposed to be smaller and easier to build. But those are still first-of-a-kind complex engineering projects that, until construction competency is achieved, look prone to unforeseen delays and overruns of their own.

Correction 7/12/23: An earlier version of this segment read that the repeal had not yet made it to the Governor’s desk, but it has. Governor Pritzker has yet to sign it and appears to be sitting on it. If he does nothing, it will automatically become law in Mid-August.

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• French nuclear output is up. “Nuclear power generation at EDF's French reactors in June rose 12.4% year on year to 22.7 terawatt hours (TWh),” reports Reuters. “EDF's website said that total nuclear generation in France since the start of the year was 158.1 TWh, up 2.6% from the same period last year due to the strategic postponement of unit outages. The French utility's June nuclear power output in Britain was down 19% year on year at 3.3 TWh. Total generation in Britain since the start of the year was at 18.2 TWh, down 21.5% from the same period last year.”

• Brazil hunts for more gas supplies. “Brazilian state-run oil company Petrobras is negotiating seven new natural gas supply contracts for the coming years, three sources close to the matter said on Monday, as the firm aims to boost supplies while lowering domestic energy prices. The contracts cover three gas projects, the sources said, and mark the latest push to reduce prices, currently at around $12 per million BTU,” reports Reuters. “Petrobras is under government pressure to increase local gas production and better control energy costs for consumers, added the sources, who were not authorized to speak to the media about the plans. The projects require investments of 5.2 billion reais ($1.06 billion) and are seen starting operations between next year and 2028.”

• Wood Mackenzie believes a sea pipeline could ease Europe’s LNG dependence. “A proposed US $5 billion export route linking gas fields in the Barents Sea in Northern Norway to European markets could help alleviate the continent’s dependence on liquified natural gas (LNG) imports,” reads the firm’s press release. “The report ‘Can the Norwegian Barents Sea help solve Europe’s gas crisis?’ concludes that after spending years in the doldrums, Russia’s invasion of Ukraine brought a potential Barents Sea gas export route back onto the agenda in Norway. However, the report added there are several hurdles the 800 kilometre, 15 million square metres per day (msm/d) would have to overcome before it was green lit by Oslo.”

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