Daily Energy Standup Episode #327 – Solar Suppliers, Financial Shifts, AI Demands, and Regulatory Challenges

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Michael Tanner: [00:00:14] What’s going on, everybody? Welcome into the Tuesday, March 12th, 2024 edition of the Daily Energy News Beat stand up. Here are today’s top headlines. First up, solar panel suppliers linked to alleged abuses in China imperil US climate goal. You absolutely hate to see it. Next up, Bank of America is set to expand its energy transition business. Next up the obscene energy demands of AI. Ooh, slip a little AI in there. Gotta love it. Finally, in the news segment, SEC climate disclosure rules face legal gantlet. This is a really important story about what’s what’s. Whoa, whoa, what the SEC just announced with a lot of these climate targets. Stool. Then toss it over to me. I will quickly cover what’s going on in the oil and gas finance markets. We did see, overall markets drop a little bit today. But the big news out of the oil patches, the equity and Aqua trans merger, remember, this was a former equity company that were subsidiary that was spun out and now rolled back in. You know, we’ll cover a little bit on what’s, what what kind of some of the reaction is on that. I didn’t want to let you guys get on out of here. Back to work and start your day. As always, I’m Michael Tanner, joined by Stuart Turley. Go ahead. Kick us off, my friend. [00:01:33][79.2]

Stuart Turley: [00:01:34] Hey, let’s get rolling around our buddies over there in China. Solar panels, supplier links to alleged abuses in China imperil U.S. climate goal. Michael, if you’re going to be an energy hypocrisy giant, you might as well start rolling out some serious solar panels. Let’s go ahead and let’s take a look at, Miss Producer, if you can slide in the graphic that’s titled U.S. Solar Panel Imports during Q two of 21. Michael, let’s take a look at this. The top five market, or 79% of our, panels come from China. Yeah. Look at that’s just not. [00:02:19][45.5]

Michael Tanner: [00:02:20] It’s pretty big. And the rest of the world only gets 21%. [00:02:24][3.2]

Stuart Turley: [00:02:25] Yes. So when you sit back and take a look. Holy smokes. Now let’s go down to the next chart. Largest owners of planned U.S solar projects from 2020, 2021 to 2025. Next era. Look at that. Bad. We’re talking 10,000, almost 11,000 kilowatt hours of solar going in. And you take a look at all of those. All of those companies are supporting, humanity abuse, as far as I’m concerned, without having some kind of, program in place. Here’s a quote out of it. The lack of transparency in China, in the deserved skepticism that some have towards documentation provided by Chinese companies, adds on an element of uncertainty that’s difficult to remove or solve. These humanity abuses on these folks are just horrific. [00:03:26][61.7]

Michael Tanner: [00:03:28] Yeah. It’s it’s it’s becoming hard to say. Solar is ESG. You can’t really say that. You you can’t, especially when you see data like this. So I think the the shine is coming off. I think that’s, you know, probably why you see people shifting in the wind because they’re we’re still waiting for the wind. We’ll find out about where these wind for. I’m sure the wind manufacturers are getting abused too. I’m sure, I’m sure in there. [00:03:56][28.4]

Stuart Turley: [00:03:56] Yeah. And but the the sad part about the offshore wind is it’s killing the whales. Let’s see. Kill the people, kill the whales. [00:04:04][7.2]

Michael Tanner: [00:04:05] You know my stance on whales kill. What’s next? [00:04:07][2.5]

Stuart Turley: [00:04:08] Yeah. You kill me, Michael. Okay. Bank of America set to expand its energy transition business. First off, I don’t bank at Bank of America. And we’ll just go right on into the story here. And, the U.S banking giant is already expanding its exposure to power and natural gas markets and in trading environment. Here’s your quote down in here. I thought that you would find this interesting. It says natural gas. Gas is seen as a transition fuel by the Bank of America. And the bank is betting on gas trading, too, according to Brett Orlando, managing director and global head of commodities transition at Bank of America. Michael, they finally have said, oh, it’s a transition fuel. I got some news for them. It’s going to be around a little while. That transition, I believe, Secretary Yellen said, inflation’s transitory. [00:05:10][62.2]

Michael Tanner: [00:05:12] Well, we’re going to. I mean it’s I do I trust do I think Bank of America is going to have an insane carbon business? No, I don’t think so. Now, could they make money trading power, natural gas? Oh, they probably will. I mean, it can be a lucrative market specifically if you have the resources like Bank of America, does. But, you know, I wouldn’t, I wouldn’t bet on this desk being terribly profitable over the next couple of years. Carbon desk, I bet. Is it to. [00:05:38][25.9]

Stuart Turley: [00:05:39] Profit? No. And here it goes. The bank will also imposed restrictions for new energy clients engaged in an expansion of oil and gas, as well as restrictions on non diversified energy clients. This becomes a investing in energy hypocrisy mix is. It’s okay to dabble in energy because you can say natural gas is a, transitory, fuel. But Michael when you drill for natural gas you normally get a lot of oil or gas first. It depends on the well, but they kind of go hand in hand, don’t they? [00:06:18][39.7]

Michael Tanner: [00:06:19] Yeah, I know they it does. They do go hand in hand. So I don’t know what to tell you. What’s next. [00:06:23][4.2]

Stuart Turley: [00:06:25] I don’t know the obscene energy demands of I you know, you gotta love a good story like this. When we sit back and take a look, there’s a fundamental mismatch between this technology. Environmental sustainability. Said device, devices, the virus. I’m hoping, the world’s most prominent AI cheerleader, Sam Altman, the CEO of open and AI, says, quote, I think we still don’t appreciate the energy needs of this technology. Really? Why are all these gigantic server farms being built? And he says, we don’t really understand. I think you’re going to need every single bit of storage that you’re going to need in server. [00:07:18][53.7]

Michael Tanner: [00:07:20] We need AI is going to become the thing of the future. It takes an incredible amount of power to train these models to deploy these models. Data center is going to have to expand as long as individual stock chart is pointed like this. [00:07:33][13.6]

Stuart Turley: [00:07:34] Yep. [00:07:34][0.0]

Michael Tanner: [00:07:35] You’re going to see power go through the roof. So it’s always a catch 22 with these people. Oh we’re going to we’re going to transition. Oh well now we’re going to need this again. [00:07:46][10.3]

Stuart Turley: [00:07:46] Woops oop. And and now the IEA the International Energy Agency announced that energy related global CO2 emissions rose yet again. Of course data centers for now, or at least a small part. But they are increasing in percentages. Yeah. [00:08:10][24.2]

Michael Tanner: [00:08:11] So now I think if you you know, I think a lot of the Bitcoin community would tell you it’s, you know, growing these type of solutions. You know deploying Bitcoin and deploying crypto mining is a way to solve this. If I put it all on the taking you know. So there’s another side to this. But it is it is this is how everything needs to go. I well we’re going to need more power. [00:08:35][24.5]

Stuart Turley: [00:08:36] There is a difference between a data center and cryptocurrency data mining. There is a significant difference because I am a Bitcoin fan for this. One big, huge reason. Bitcoin mining when used with MP operators, allows them to use stranded natural gas, stranded energy that would have been wasted and then provide revenue to deliver lower cost energy to the consumers. I love me Bitcoin mining. When used properly. [00:09:12][35.8]

Michael Tanner: [00:09:12] Well, it’s a better revenue source for operators who abs, you know, especially when you have the arbitrage opportunity. The right now with natural gas at $1.70 and and bitcoin it at whatever it is 70,000 or whatever. So but no, in terms of of the power needs for AI, it’s only going to go up. So, you know, everyone was talking about oil and gas demand is going away. Sam Altman says no, no, no no no. [00:09:39][26.9]

Stuart Turley: [00:09:40] No, no. There was one comment buried in that article and says, well, maybe I could figure out how to use less energy. I’m like, what? Okay. [00:09:50][10.5]

Michael Tanner: [00:09:51] Yes, I hope the AI drives that person off a cliff. [00:09:53][2.7]

Stuart Turley: [00:09:54] That was not a he was he was already removed from all investor relations, a job opportunities. He now no investor job for you, man okay. SEC. Climate disclosure rule faces legal gantlet this. It drives me nuts. Quote. The SEC tried hard to mollify corporate America on how expensive this would be, but there are enough companies in enough states who hate the idea of capital markets regulatory taking an action, taking on climate action roles, said David Zhang, professor at the University of Pennsylvania’s Wharton School of Business. You cannot understand when, the there the landmark Securities Commission rule approved last week by 3 to 2 drew immediate legal challenges. [00:10:52][57.5]

Michael Tanner: [00:10:54] Yeah. I mean, shout out to Texas for for you know, this is led by Texas Ken Paxton down here. He’s the one leading the charge on all this. It really is interesting. What’s what. I mean, these rules are fairly crippling. I mean, you know, they’ve been fairly, I guess is the wrong type of word. [00:11:16][22.4]

Stuart Turley: [00:11:17] I’m going to say they’re going to make a peg leg out of Popeye. And this is horrible. [00:11:20][3.2]

Michael Tanner: [00:11:21] It is, it is. But and much like what what was the bill? It was the health care bill. What was the bill that Elizabeth Warren came out and said, you got to pass it before we read it. Oh, no, that was Pelosi. What was it, the health. [00:11:34][12.8]

Stuart Turley: [00:11:35] Yeah. No, it was the one of the Inflation Reduction Act. [00:11:37][2.7]

Michael Tanner: [00:11:38] It was it was a while ago. Okay. It seems like you got to pass the bill before they’ll let us read it. [00:11:43][5.2]

Stuart Turley: [00:11:44] Nah, this is so both. But, you see, this is regulatory action at its worst. Legislation through regulatory action at its finest. The court the Supreme Court has already said it needs to, make sure that they do what they’re supposed to do. What does the SEC get to do with climate change? They’re overstepping their bound. So they. [00:12:11][26.5]

Michael Tanner: [00:12:11] Really are. They really are. [00:12:12][1.2]

Stuart Turley: [00:12:13] I mean, go, go forth and monitor something that you’re and supposed to be doing. This is ridiculous. [00:12:19][5.6]

Michael Tanner: [00:12:19] Yeah. Monitor cryptocurrency. [00:12:20][0.7]

Stuart Turley: [00:12:23] You know? Yeah. I don’t get it. [00:12:24][1.7]

Michael Tanner: [00:12:25] Anyway, I’m with you. [00:12:26][1.0]

Stuart Turley: [00:12:27] Hey, hey. So much for logic. Now back to you. [00:12:30][2.8]

Michael Tanner: [00:12:31] Not so much for logic, but. All right, we’ll go ahead and switch over to finance. Before we do that, though, we’ll go ahead and pay the bills here. As always, guys. This podcast is brought to you by the world’s greatest website, energy, news beat the best place for all your energy and oil and gas news. Go ahead and hit the description below. You can go ahead and, have access to all of the different articles, links, timestamps, everything that you’re going to need, is in that description below we’ve got a survey that we’re running. Go ahead and click that. You can go ahead and contribute a little bit. We’re going to be rolling out a nice premium subscription or premium offering. And we want you, the viewers valuable feedback on what exactly you guys want to see in that. So check that out. You can see that survey dot energy newsbeat.com. You can also hit us up on our our web application dashboard,energynewsbeat.com. Get it while you still can. Could be buying a subscription at some point. So check that out. We love the feedback. We appreciate it. [00:13:31][60.5]

Michael Tanner: [00:13:32] But I mean pretty simple today Stu. We only really saw one major thing which was the equity merger. So I’ll get into that in a bit. But first we had the S&P 500 drop. About a 10th of a percentage point. Nasdaq takes a little bit more. A 3/10 of a percentage point. Bitcoin up five percentage points as we’ve been talking about over $72,000. We saw oil prices stumble, you know, mainly off the back. Well, first, you know, opened at somewhere around $78. We closed somewhere at 79. At 77. 15. Remember, markets roll over and we start trading again. You know, the close that you see happens at 1230 eastern or 1130 Central Time. So since then, we’ve actually risen. We’re staying or trading here at about 5 p.m. central time at about 7807 natural gas. Take a you know, is continue to trend downward. It’s trading at the lowest levels it has in 24 hours, $1, and $0.75. Main reason. [00:14:28][56.5]

Stuart Turley: [00:14:29] For for. [00:14:29][0.4]

Michael Tanner: [00:14:31] That rollovers. We saw that 80 mark. You know, something that we don’t talk about much, but I need to start covering more frequently is the commitment of traders. The commitment of traders is a report that comes out every single week, which shows the positions of large hedge funds that actually are involved with trading oil. You know, would you trade crude oil futures and natural gas futures in any commodity if the commitment of traders, that are held for commodities. And what it showed last week was that there was a huge shorting of the oil market. PE companies picked up record shorts on crude on, bearish short positions for U.S. crude. And few options. What does that mean when you’re covering shorts? What’s going to now? Drop the price because you’re you’re finalizing the repurchase of what was previously a bearish shorts. So it looks like we’re not it looks like that $80 mark is going to act as a little bit of a top this week as people continue to sell off those repurchases or as they finally finish the repurchases. So remember I had that backwards. Excuse me. I mean, I mentioned it backwards. When you’re selling a short, you’re selling it. You’re having to repurchase it because you’ve leveraged it in the first place. You’ve had to borrow that share. So in order to give that share back to the person you borrowed it from, you have to go buy it on the open market. So as you do, that price goes up. Well, as we got to $80, we saw the commitment of traders this week. Wow. We’re actually out. All those bears have shorted out. There’s none left. And so that’s where you seeing price roll off right there. So we’ll start covering more closely what’s going on with commitment to traders. But that was a really interesting note that we saw on Friday. And, and kind of the main reason we saw a little bit of a softening of a price, Friday afternoon rolling into today, hasn’t really look the, you know, no real news out of Israel or Ukraine, which sort of changes that geopolitical standing right there. We will see, this afternoon, as you guys listen to this, on Tuesday, the API will announce their crude oil inventory storage numbers. So we’ll check to see where that goes. You know, the only other thing that I saw today was, was the big announcement out of equity. They go ahead and reacquire equity midstream. This will create a fairly vertically integrated gas company, quote unquote, that will compete on the global stage. We we do love the team over there at equity. Interesting move though, you know, to kind of win the clock back before we go and get into some of the numbers here. Equity was equities midstream business. You know, for years it was the original EQT midstream business. they were a subsidiary of them. You know, equities team. You know, prior to the merger with rice act with or with Rice Energy Group in which the rice family kind of cook them over. They went ahead and, and had, you know, built up this midstream position, after the, the merger with Rice Energy, these were, you know, hey, you know, you know, in equities in an activist investor came in and basically said, hey, we need you to spin out the midstream business. And so the midstream business was spun out about four years ago, and now it’s been re bolted on again in what really works out to be a, you know, I’m trying to find the actual price on it. It’s a little bit difficult to find. I think it was $12.5 billion. was the overall actual acquisition price, or, excuse me, 5.6 billion for the acquisition? But it’s an all stock transition. All stock. Excuse me? Merger or not? Merger, but it’s an all stock transaction. There’s about 6 billion of debt sitting on top of that, though. So that’s where that 11.5 billion number comes from. You know, I think what’s interesting is the street didn’t I mean just you know, the easiest thing to say is what did the street think today. Their stock up pounded by seven percentage points. It was down of both $3. so that’s seven but almost ten percentage points wiped off. Why? Well, I mean, I for me, I’m in favor of a vertically integrated, you know, natural gas company, equities claiming that the cash flow from 2025 to 2029 is going to pay for the merger, inclusive. A dad, I have a hard time believing that, from the standpoint of, you know, you must be using the forward curve for natural gas. And I was on a phone call today with a buddy of mine, and we were just laughing about how, you know, people are using the forward curve and the fact that two years out, okay, or gas is projected to be for 50, I mean, you don’t know that forward curve is rarely right. You know, you know, if you I there’s this I forget the guy on Twitter. I mean, I gotta find him and shout him out. So I’ll have to do that for the next show. But there’s a, there’s a guy I follow on Twitter who does that, who shows actual price, and then the forward curve at the time of those prices. And it’s absolutely unbelievable in terms of how wrong the forward price is. So you’ve got a deal that yes, using the forward curve for natural gas, you may be able to say the cash flow will cover it, but in reality will it. And did you just overpay for an asset already owned? I saw a great comment on Twitter. Where was this? It was from and this is from our buddy David Ransom. [00:19:45][314.7]

Stuart Turley: [00:19:46] Would they share that without a. [00:19:48][1.9]

Michael Tanner: [00:19:48] You know, d RW they shouldn’t have spun it out originally? This feels like punishment to the fact that the only people who made money on the net transaction was management and bankers. Fine fun. So interesting again I think the market sniffed that out because they got pounded today for something that probably should be fairly as you would claim, transformation. But I think, you know, the signal through the noise is, you know, there this is just a oh, four year transaction in which management and bankers got some nice fees on it. I mean, makes sense. I guess I’d take a fee. [00:20:23][34.7]

Stuart Turley: [00:20:24] And maybe they’ll sponsor the show. [00:20:25][1.1]

Michael Tanner: [00:20:26] Maybe. Maybe we’ll take a nice fee for that. Trust me, we’ll be. It’ll be a transformational sponsorship. Transformational? Trust me. You got anything else? [00:20:35][9.8]

Stuart Turley: [00:20:36] Oh, no. Hey, I get to interview. Let’s see here. Paul Tice in the morning. He is the author of Race to Zero How ESG investing Will Crater the Global Financial System. I’m finishing up the book tonight. It’s kind of cracked. Kind of crazy. [00:20:53][17.0]

Michael Tanner: [00:20:54] Yeah, absolutely. So all right, well, I’ll go ahead and let everybody get out of here. We appreciate you guys for checking us out. World’s greatest podcast energy news beat. Check us out online WWW.energyNewsBeat.com. We’ll see you tomorrow, folks. [00:20:54][0.0][1201.8]

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