Energy Sector Continues to be Roiled by Coronavirus and Price War

Photo: Yi-Chin Lee, The Houston Chronicle

The news about the energy sector is mixed.   The good news is that Exxon is slashing spending by 30% ($10 b) as the President waffles on tariffs on foreign imports, while The New York Times reports solar and wind projects in operation are increasing sales — as a result of utilities cutting costs — because renewables are cheaper than coal.

  • But, but, but, small solar companies doing residential installations are down, offshore wind power projects are stuck in approval processes, and energy efficiency projects are experiencing problems because the Department of Energy and local utilities, according to E&E News, have encouraged grantees and contractors to suspend or “severely limit” low-income and rebate weatherization and fuel efficiency activities.

Why This Matters:  This is the moment to pivot to clean energy. As soon as we can get back to doing energy efficiency retrofits and installing residential solar, we ought to be doing more of that.  The irony of the President’s theory of U.S. energy dominance is that we are dependent on oil and gas whether it is because we must sell it or buy it to fuel our economy.  The best way to sustain our economy and climate is for our energy to be efficient and renewable.

The Upside

We do not mean to minimize job losses, but it is significant that Exxon Mobil reduced its 2020 capital budget to $23 billion, down 30 percent from $33 billion, and cut operating expenses by 15 percent, according to The Houston Chronicle.  The cuts are planned in West Texas’ Permian Basin, slowing drilling and well completions plus delays in large projects in Mozambique and Guyana.  As for solar and wind, those projects that are up and running in places like Texas and California California and Texas, are doing well because they produce electricity more cheaply than natural gas and coal, which have not seen a drop in price despite the virus and the oil price war.

The Downside

Exxon is going forward, however, with its projected $20 billion investment in manufacturing facilities along the Gulf Coast.  And E&E News reported that the “nation’s largest source of energy jobs — the energy efficiency sector — is experiencing mass layoffs from the coronavirus as utility and state programs shut down across the country, according to contractors and industry representatives.  Utilities and state energy agencies have halted programs that help homeowners and business owners pay for new installations and building retrofits.”  Energy efficiency advocates have urged Congress to expand the energy efficiency tax credits, increase funding for the Energy Department’s weatherization and research and development programs, and bring back a $3.2 billion efficiency and conservation block grant program from the 2009 stimulus. But so far Congress has seen these as unrelated to recovery from the virus — which seems inexplicable given that tens of thousands of workers in this sector are being laid off now because they can’t get into people’s homes to do the work.

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