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I'm looking at Tesla.
That stock has been in the news every day every day this year. The stock is really underperforming, down thirty seven percent, so it seems like an odd time for Tesla.
We'll ask shareholders to.
Vote again on the same fifty six billion dollar compensation package for chief executive officer Elon Musk that was avoided by a Delaware court early this year. Craig Trudell joins us. He covers all that Auto stuff for Bloomberg. It's just amazing here, Craig, it seems like an odd time to be asking for this monster's payday here.
What's going on at Tesla? The board and Elon?
Yeah, it's it's not a huge shock in that we we sort of heard the complaining about this ruling, uh as as soon as it hit, you know, we saw it play out on on X as you would expect. But it is I guess I was surprised to see that. You know, their their move here was to take the same plan and just put it back to the shareholders.
It's a it's a fairly simple one, but it does seem like a pretty bold one, just given the very thorough uh you know case that was laid out by the Delaware Chance record, uh you know against the company in particular, particularly the board. I mean, the language that Judge Kathleen McCormick used was was pretty uh, pretty notable. She described the directors as and I quote, supine servants of an overwinning master. I mean, she just had a
lot of mil zingers about this, about this board. And for them to you know, respond to that by you know, doing it over again is really something.
Just to be clear, we're talking fifty six billion, like with a bee with.
A bee, yeah, I mean, how do we get to that if you want to, if you want to defend the board here, of course they did. We constantly referred to this pay package as a moonshot award, right, and and it absolutely was. It was setting targets that nobody thought was was at all possible that the company wouldn't be able to pull off. It was it was based on performance of the company and its earnings and market value.
And I think there was a combination of Musk absolutely pulling you know, miracles in terms of the earnings performance of this company that no one saw company comping coming. But it was also the case that you know, this company was the sort of poster boy for the zerp Era and you know, a mean stock, right, and we don't get there without you know, the enthusiasm that Musk manage to pull off. In addition to turning this company into a car company to really you know, take seriously.
All right, So they're also looking to reincorporate I guess in a friendlier jurisdiction, maybe get out of Delaware and get to the great state of Texas.
Is that all tied together with this?
They interestingly do lay out in the proxy that they wanted to sort of put this to shareholders together. They didn't want to be perceived as basically running from Delaware in response to the ruling and going to Texas where they would be treated differently. They wanted to have shareholders, you know, get another opportunity to say yay or nay to this and give them an opportunity to weigh in
on whether they should change the incorporation. I think it still remains to be seeing you know, just exactly how this can can work out, uh legally speaking, this idea that a court would make this ruling and and the company would, you know, basically just have shareholders perform a do over after the judge you know, said that they, you know, did not look out for the best interests of shareholders.
Uh.
You know, I guess if if you're Tesla, the argument you make here is that, well, you know, you just exposed this idea that that we apparently did enough and broke it down and uh, you know, pretty damning detail. The investors know. Now the shareholders can vote again, and if they vote in favor, then uh, you know, what's your what's your problem is essentially.
Yeah, hither too. I want to transition to Continental, which is an autoparts company really that stuck us down over five percent over in Germany. And I say that because their results were worse than feared, and there's all points to the current auto market isn't doing too great. And then they also ev market isn't doing too great and for Continental, that squeezes on both sides.
Yeah, I think they've been a company that really has struggled with this transition, you know, really like very very much been in a position of being caught flat footed in terms of being ready for electrification, and has made a lot of a lot of moves to try and
address that that haven't gone particularly smoothly. And so, in addition to this idea that you know, the auto market is showing some signs of strain under the pressure of higher interest rates making it more difficult for consumers to be able to afford big, big purchases like a new car, it's also very much a case specific to this company where they're really trying to remake themselves and struggling to do so.
Craig, We're where are we now?
Just in kind of the markets perception of overall and demand for evs. I mean, is this just a bump in the road that an industry that's undergoing a long term transition should we should expect to see, or there's something more fundamental going on out there.
Yeah, it's a good question, because I think even folks who covered this just religiously are our colleagues at Bloomberg New Energy Financed. I think they were initially reluctant to sort of come around to this idea of an ev slowdown and sort of you know, had a view that you know, people were more more pessimistic than was really warranted.
And this was as you know, a lot of headlines were coming out late last year early this year, I think when when Tesla reported their first quarter deliveries and it came in so far short of of everyone's expectations. You know, the consensus was coming down and down going into that report, and yet even then the company came up, you know, tens of thousands of vehicles short of where
people were seeing them, you know, report. I think even BNF now is very much concerned about, you know, the magnitude of deceleration that we've seen and the challenges that we're seeing, particularly in a market like the US, where you would think that at this point, you know, this many years into this transition, and with all the investments that companies are making, that surely we would start to see you know, more momentum or at least a healthier
continuation of momentum. Instead, we've seen a real slow down, and I think you know, even even Biden's Inflation Reduction Act does a lot of the right things to try and you know, uh, move this this part of the industry forward, and yet executions has been a challenge.
Hey, Craig, thanks a lot, Craig Trudell Bloomberg a Global Autos editor. Super appreciated and we are at a Bloomberg Ye ANYF conference right now. But I think, but that does point to the fact that we don't actually know how this will play out, and things are really lumpy, and you can be in a structural shift in different industries and still be a cyclical industry like auto auto industry is cyclical, right, so but you can still be in a structural shift. So all of these things can
be true. It's just a matter of then how you price it. If you're an investor, that gets complicated.
It does get complicated.
And I just wonder to what extent if any, this ev transition, at least in the United States, has become politicized blue red totally, you know, And if that's in fact the case, then that really I think is a significant roadblock for the mass adoption, the mass volume that the economics demand to get the unit profitability there, because it's not you barely make a profit. It seventy or eighty thousand a car, and its Kevin Tyne and a Bloomberg Intelligence points out.
How you're going to make a profit at thirty or forty thousand dollars.
Yea, exactly, exactly.
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We are at Bloomberg an ef A Summit, Day two. So, Paul, one of my bigger takeaways from yesterday when we were here is that you have a lot of money being spent on stuff, and that's the good part. The other part is there's still a lot of uncertainty in terms of are we spending on the right stuff? Is the demand really there? Permitting is an issue, connection to lays trade issues. There's lots of stuff that we're trying to unpack here. One way to look at it is the
importance of big energy in this space. So you need exon Chevron Shell total BP. You need these guys to put money in the right spot to really help turn things around. So one of those individuals we're going to talk to you right now is Jeff Gustavin. Nope, Gustafson, I can't do it. I asked him to say, gust Ofsen. It's V and the s Jeff, this is my problem. He's president of Chevron New Energies. He's been at Chevron for what was it twenty five years?
You said twenty five years.
We've belt lots of different positions. What brought you to the new energy part of Chevron? What's that like for you?
Yeah, well, first of all, great to be here, thanks for having me. We launched these new businesses about three years ago. This is actually our third full year and it's a suite of businesses that support our lower carbon strategy as a company. There's two pieces to that. One is lowering the carbon intensity of our traditional oil.
And gas business.
The other part is growing new low carbon businesses and solutions to scale, and that's what Chevron New Energies is. We're focused on renewable fuels, carbon capture, utilization and storage, hydrogen carbon offsets, emerging technologies, and everything in between. This is something that's always been a passion of mine, the energy transition and low carbon energy. I love oil and gas.
I grew up in.
Oil and gas, but now shifting seeing a company like Chevron, with the capabilities we bring to this space, growing these new businesses. I couldn't be more excited about this role.
And I always looked to the educational background of our guest because I think that's kind of fun.
University of Colorado.
He's a buffalo, that's big, and he's also got his NBA from the Red Macombs School of Business at the University of Texas. Red Macombs is a co founder of Clear Channel, little radio company. I took public back in the day, so I know read pretty well. And Larry Mays like this, likes to say, Hey, I got my name on the NBA program in Texas a and in for ten million, Red you spent fifteen million.
I got a better deal.
You got a better deal.
Yeah, Jeff, what is I don't know.
If you fast forward five years from now, ten years from now, how do you guys think about sustainable energy as a part of the overall portfolio of Chevron. What percentage do you think that might look like?
Yeah?
Good question.
And when we launched, we announced that we were allocating or guiding to spending ten billion dollars over an eight year period, right, this would be twenty twenty one to twenty eight And that's just the starting point. So these are already a significant part of our capital allocation strategy. We have a very large oil and gas business, which requires a lot of capital to maintain and grow that
business to meet global demand. But these these businesses are We're spending anywhere from one and a half to two billion a year to support these new businesses. And my job and our job as a new segment is to find the right opportunities that are investable so we can grow this business even further.
So Paul asked this question and break and I actually think it's a good one, so I'm gonna ask it. You're based in Houston, and his question was, are guys like you the new energy people?
Are?
Are you guys welcome in Houston?
Like the oil bar, like the oilman's bar, taking.
Like the cowboy guys who stick like a pipe in the ground and get oil. He's thinking those people, are you welcome in those bars?
Yes?
And I love being referred to as a new energy person, but no, I mean this is I think this. Look, there's three things that we're that we really need to see in order to accelerate the growth of these businesses. And that's a greater collaboration between private companies, between private
companies and policymakers, between governments around the world. It's lowering the cost of these new technologies and solutions so customers, large customers, large businesses or individual customers will buy them. And it is bringing capabilities to bear the right capabilities. And that goes to your Houston question. The energy industry possesses a lot of the capabilities, technical, operating, commercial capabilities that are required to grow these businesses profitably, to scale.
So absolutely, you know a lot of this, a lot of activity in Houston, a lot of companies engaged in this. So Houston it's an oil and gas capital that's out thought of. It's also new energy capital.
So where are we in terms of I've been reading a lot on this, Alex, she knows that she's the expert. I've been reading up a lot on this over the last several days. It seems like the US government's putting a lot of money into this. That's the good news, as Alex mentioned earlier, but I've also heard here of the last couple of days, it's still not easy doing business with the government. I'm thinking permitting for certain projects
and things like that. What's been your experience there is to is the government doing the best it can to kind of facilitate some of these investments in transition.
Yeah, So collaboration between the private sector and the public sectors fundamental here. It helps lower the cost. Those are you know, advocacy understanding politics, not just in this country but around the world. Is a strength of our company of energy companies, you know, more broadly, so it fits one of our existing capabilities. But that is one of the starting points here. You know, you need the right policy support, the right incentives to get the private sector
investing even more heavily in this space. That will drive the technology forward, That will drive innovation, that will drive to building large scale projects which will lower the cost, make it more consumable for the world, and that is a cycle that will then you know, continue. So it starts with policy, but it really is sustained by the investment by the private sector in technology. Government's a very important partner. We've seen We're having really constructive conversations with
the government, But you mentioned permitting. There's still a long way to go to make all of this come together. We've shown some progress, but there are many steps in front.
Of us, you know, Paulo. To your point, it seems like the good part of this is that energy companies in the new energy world are in the room talking to people, typically the government and oil and gas of a contentious relationship at past in certain administrations, and it feels like in this area maybe that is dissolving a bit, which would be helpful. Something that I've noticed too, is that I think it was like three hundred and three billion dollars has been spent I think it was last
year on all these new energy stuff. What I'm also hearing is that demand is a forgotten problem. Like all the money is being spent, all the money, but the money being spent on supplying the stuff and getting that cost down, but not enough it is being spent on demand to incentivize a company signing up with you for esaff for something along those lines. Is that true?
There is a lot of money being spent in these in these new businesses. It's actually one point seven trillion dollars globally compared to about one trillion dollars spent in the traditional energy business last year, and we need even more to grow these businesses to scale. And you hit on a very important point. It is, and I'll use hydrogen as an example. It's not hard to produce hydrogen.
It's harder to produce low carbon hydrogen at a low cost, something that we're working on using natural gas as a feedstock or using electricity and renewable power as feedstocks to produce low carbon hydrogen. But transporting hydrogen to the market,
you need policy support in order to do that. You need technological innovation to do that to lower the cost, and then importantly, encouraging consumers to buy a hydrogen making it easier for them to transition from a traditional product that they're using today to a lower carbon product that comes at a higher cost. That's where demand incentives and policy support will also be required.
What's the biggest headwind you guys have been facing over the last three years as you begin this transition. Has it been on the regulatory governmental front? Has it been capital getting capital from your CFO?
Where's it been now?
There's always a lot of challenges when you're starting up new businesses, but it's very, very exciting, and we're making tremendous progress. We've identified probably a dozen large foundational projects and all of these sectors around not just the US, but around the world. We're the second largest bio based a diesel producer in the United States. We've got a large you know, CCUS hub on the US Gulf Coast. We've got a large hydrogen project in Utah that we're growing.
So we're making a lot of a lot of progress. There's always challenges along the way. How do you prioritize the best opportunities, how do you advocate for the right policies, how do you create the right culture to support these businesses. We have a fantastic culture in our company. We're using all of that and more. But you have to think about these businesses in a different way. So there are challenges, but it has been very rewarding.
At the same time, He's not going to answer that question, Paul, Well, I stock, I thought I did answer it.
We're looking for like, hey, what what's really hard? What stresses you ask?
Well, it's I mean.
To go, it's all hard, yeah, and so all of that, you know, how can we collaborate you know more uh more aggressively. How can we lower the costs faster? How can we bring all of the capabilities we have to bear here. How do we make sure that everyone remains committed to this, not just us, but everyone in this ecosystem to drive these businesses forward. So those are all big challenges. I'm not discounting that, but I'm very excited about what we're doing.
Gotta leave it there, Jeff really appreciated Jeff Gustavenson. I'm going to get it. President of Chevron New Energies. I'm going to work towards that for sure. Thanks so much.
Thank you.
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We're at Bloomberg n e App Summit, Day two. We're in the middle of the pubbabaloo. We're in our Intercontinental Hotel on forty U Street down in Midtown Manhattan, and it's all about getting world leaders and CEOs and thought leaders and analysts together to sort of tackle this energy transition where we are now, and then where do we go to and how do we do that?
Well?
Doing us now? As our next guest, Andy Vessi, he's president and CEO of Fordescue North America, and he joined us. Now, Andy, good to see you.
Well, that's a pleasure to be here and thank you for having me.
So I do follow this industry quite closely, and I was like, what Fordescu is a metal company, what's going on? It's based in Australia. What are you doing here talking about hydrogen?
Well, Fortia something. Forlidescu was a metal company. In fact it still is.
It's the fourth largest producer bron or in the world and the lowest cost operator. What our founder, Andrew Forres, came to the realization that carbon emissions was having a significant impact on the planet and it was happening quickly, and that his business contributed to that, and so he made a commitment that he was going to decarbonize his metals business, scope on and scope to emissions by twenty thirty.
And in thinking about doing that, he had to think about all the technologies he needed to make that happen, and many of them were n't available commercially. So he decided that he would is going to create that ecosystem. One component of that was green hydrogen because he needed green hydrogen to do a number of things to replace diesel fuel in his mining operations. But then he realized there were a lot of other things he needed and
a lot of more things he needed. So what Fordeskew is today, while it still has a metals group, it now has an energy's group, but we describe ourselves as an integrated green technology, energy and metals group and they're all coming together and it's one Fortescue now. So that's why we're here. And I happen to have the privilege of trying to be on the side of the business that produces green hydrogen specifically.
In North America.
Is green hydrogen?
Okay, well it's hydrogen, but it's made from green energy, which would include solar, wind and hydro So just to alex.
Plain Youse, so you have some been called an electrolizer where you get water in and you separate the hydrogen from the water, and how you power that determines the color of that hydrogen. So if you power with say cole, it's going to be gray. If you power with natural gas, it's going to be a blue. If you power with solar and wind, it's going to be green.
And there's right, I learned something to get it.
But now I'm guessing there's a tax issue here. I'm reading all throughout your notes forty five v. Dumb it down for somebody like me, a media guy.
Yeah, So look, the bottom line is that seventy percent of a green molecule made what would be called electrolytic because it uses electricity. Seventy percent of the cost of that molecule is the cost of that green electron. And so if you're going to be in this business, you would say, well, I'm going to go every place where the renewable energy is really really cheap. Right, You're going to go to North Africa, You're going to be in Australia,
you might be in parts of Latin America. But where you would not be would be in the US, right, because we know it's expensive. But there's another thing about the US. It's probably one of the largest consumers of gray hydrogen or hydrogen that's produced from methane gas. So there's a huge market here. But the challenge is getting to a price point where people will buy it well.
The US government also understood this and understood that to decarbonize, hard to abate sectors, meaning sectors that can't use a green electron to meet emission reduction goals need a green molecule. And so the Bidy administration decided, well, what we need to do is assist in getting the price down, get the industry started, and then eventually, through scale and involvement in the market, the price will come down naturally on
the learning curve. Right, So they came up with the idea of providing a tax incentive a PTC that you can get direct cash for it, so it would help lower the end product price to customers. And the maximum you can get would be three dollars a kilogram, and that's based on the carbon intensity of that molecule. So all non gray molecules, right, all those molecules not produced or that don't have carbon emissions at some level, would get a rising incentive.
Okay, brilliant.
Right Now, companies like Fordesky, who is investing all over the world that sys, we're going to put capital in the United States, right, We're going to develop technology in the United States because this could be a big market. Right, But there was an expectation of how that would come out, and when the rules were written. It's now called forty five V because it's a section in the IRS code came out in such a way that it didn't actually
help us to some degree. It hurt early movers because of how strict the rules were.
Meaning that from where I understand it is it Normally you could say, look, I'm going to buy this much wind and solar over the course of a year, give me the credit. But they want hour for hour matching. So if you use energy for an hour, that needs to be solar, and that needs to be counted, and that's very difficult because that's not predictable with wind and solar, and you also.
Don't have it right. See you underst in as perfectly.
That's when that's one of the pillars, right, but probably the most problematic. And I'll give you a reason why. So you said it earlier. We use an electoralizer, right. We take electricity and we split the water into oxygen and hydrogen.
That's what we do.
In terms of when you're going to be using the energy. That's called temporal matching, and it exists because there are no one hundred percent green grids in the US, so there's always the concern by adding additional load, you potentially are going to use fossil based energy to meet it. Right, So the view is, how are you going to do the temporal matching?
Right?
So, if I have a one megawatt electoralizer, I need to have three times that much capacity in the market if I'm matching on an annual basis, because they get to average it over the year, and over a year perfect.
Right.
If you go to monthly matching, you need five times much energy, but an hourly you need seven times.
Right.
So if I'm building a gigot of electrolyizers in Texas, I may only need a giggot of energy at any time, but I have to buy seven times that to ensure that I have all the probabilities working so I know I can match in that hour, which means that the bulk of what I buy I don't need. So I'm gonna have to be buying and selling energy and that's equivalent to almost, you know, between five and ten percent of the annual I mean the daily load in the
AIRCOT system. I mean it's massive. So what are the implications, Well, there are two the way forty five via structure today A. It will absolutely increase the price of the product. Now, remember the whole idea of this was to decrease the price of the product. It will increase the price of the project anywhere between one hundred and fifty to one hundred.
And seventy five percent to the consumer. Okay.
The second thing is because of the massive amount of energy we have to buy, all right, we have to make the project smaller so you can actually transact that third point. Because of again annually this hourly matching, there are only certain places you can do it, so there are fewer opportunities to get it done right. And if we have to do one other thing, which is part of the forty five E we have to add new green electrons, well that can take years and years. So
we are doing everything against the original intent. Right, And why are we doing this Because we're thinking about the perfect solution at the beginning, right, we want the perfect projects.
The idea should be.
No, we're building an industry which ultimately will work. Let's not handicap it at the beginning. Because like any other industry, the more market interactions you have, the more things you build, the more things that fail. The more supply chains that get created, the more people who get trained. That's what building an industry is. And unfortunately we're thinking about projects. Yeah, right, one off projects, and that's just wrong.
Andy, we really appreciate it. It's complex to break it down. There's a lot of chemistry. It's actually weirdly good at chemistry, but it's all forgotten of Cotant. Andy Vz, President and CEO of Fortescue Industries here in North America, really appreciate it. Thank you so much. I guess the takeaway and we have to even dealt with the demand side. Then you have to make the demand be there. People are going to have to buy that product, and that gets really and that's also very difficult.
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Thirty Alex Thee alongside Paul Sweeney. This is Bloomberg Intelligence Radio and we are live from Bloomberg n EF Summit to Day two in the Intercontinental Hotel right here in New York City. The summit really provides a chance for CEOs, thought leaders, world leaders, politicians to kind of get together in a room and talk about the issues facing the energy transition. How you get from zero to one hundred?
How do you get from here to there in a meaningful way that is also price efficient and makes profits and does stuff and is cheap enough. We spent about the US, I should say, spent about three hundred and three billion dollars last year's position. Wow, worldwide over a trillion. And there's still a lot of problems, things like but permitting demand trade issues we just saw earlier today, maybe President Biden will look at an increased terror from stale
aluminus in China. So how do you deal with that if you're running a company?
Well.
Anna Moscolow is chief executive vice president of Low Carbon Solutions over at Shell. She's been with Shell for about twenty years and has had many different jobs within the company and has landed here in the past two years, right years, two or three years? Okay, Yes, how's it going well?
So it's going well. We are progressing. Energy transition probably is progressing well overall. And we've seen big strides in electrification, but at the same time in my lifetive oil demand is doubled, and we still see sectors like aviation, shipping and commercial road transport buses and trucks where we see demand increasing in the coming years, and.
These sectors need the hardware.
Sectors need solutions to support that, so biofuels or biogasses.
So I think what we've learned maybe over the last several years with the invasion of Ukraine is just an important you know, traditional energy, carbon energy is for the global trade. So as we make this transition to a more sustainable energy grid, we still have to invest there.
How does your company think about that? How does a huge company like Shell think about that?
It's all about balance probably and making sure that we have probably two things that we pace ourselves with our customers in making sure that we transition with the right pace in different places and that changes by country and by geography, but also that we focus on the solutions where we have a real competitive advantage. If I think about, for example, the LNG market, we've seen LNG actually playing a big role in being providing flexible and secure supplies in the last two or.
Three years, and LNG is under your purview right. LG is part yes of these, which is interesting because not every company is going to look at LNG in the new carbon low solutions business.
Yeah, so the traditional LNG business does not sit with me.
But what my team does is actually using the LNG, for example, the marine sector. So we match LNG and our traditional position globally in LERG trading with customers. So the marine sector sits with me, and we are transferring and selling LNG for the marine sectors instead of fuel oil, and that provides for lower carbon intensity products.
Are there certain industries in your customers You mentioned the marine industry and I didn't even think about that when this discussion started ten years ago about how they burned so much fuel. But when I see them off or at on my beach, when I'm sitting on my pitch here, I see the smoke at the back of the thing. So what industries are doing a good job and making the transition and what maybe industries still need some work from your perspective.
So, as I said, we've made great progress on the decarbonizing true electrification.
The areas that are a bit more stubborn are.
The planes, the trucks, the ships, and also the heavy industry, so industry that need high intensity heat.
Cement like cement, steel.
Fertilizers, chemical industries, and in those cases you need what we call drop in fuels like biofuels or synthetic fuels, whether liquid or gas, so high energy intensity and different sector is moving at different paces in different regions. And of course we shouldn't forget that regulatory environments certainty around how things should develop is very important.
Where it is carot or stick.
Yeah, we talk a lot carrot and stick on the panel earlier today. You also mentioned when I was talking to you about how you guys look at returns for the different investments. So if you look at oil and gas returns straight up to say fifteen percent plus correct, then how do you judge the returns for different projects in low carbon solutions.
Yeah, it's important to recognize that different products and different solutions are available at different scales. So for our traditional businesses we are looking upstream and marketing. We are looking at fifteen plus for biofuels electrical vehicles where we have positions today we are one of the biggest suppliers or biofuels and traders.
Today for.
Ev we have already fifty four thousand charging points globally, so for those one we are looking at at twelve percent. And for solutions that are not quite there and they need scale, and we've been a bit more selective in our investments like hydrogen and CCS it's ten plus, So we are being targeted around our approach on returns and they are also will change over time as the industry changes.
And also when we look at our overall investment profile last year with twenty three percent of our capital was spent in low carbon energy solutions so IV, biofuels, biogases.
And renewable generations that was five point six billion.
By the way, you know, boy, I'm looking at your revenue contribution where comes I mean, you're truly a global company obviously show with roughly a third out of Europe, a third out of Asian and Africa, and the third out of I guess the America is so truly a global company. Are there certain parts of the world where you have had more success and maybe you know, in terms of making these investments and seeing change versus some other parts of the world, we.
See that it's easier when we have clarity from the regulatory perspective. So Europe, US, Canada we've seen whether it is charac or stick, We've seen clarity around mandates, tax incentives and so on. But all this being said, by the way, we are also seeing Asia picking up the way China is going around evs for example, and electrical charging points. We are seeing in Southeast Stasia development of
carbon capture and storage. India also, we've made an investment recently in India Spring Energy, where we are investing in renewable generation. So actually Asia and everybody knows that the moment it comes and it picks up, the volumes will be there.
What's it like being a company in Europe versus if you were a company in the US. In that Europe deals with a lot of sticks. US typically has the carrots, but the governments are supportive in different ways. It's much more bifurcated in the US. How do you yeah, what's the hardest part of all of that?
Probably the hardest part is making sure that there are clear trade offs between sectors. So let me give you an example. If I want to use hydrogen greener hydrogen, do I use it for commercial road transport?
Or do I use it for passenger cars?
Well, actually probably passenger cars that can use it for ev so making sure that the regulatory environment matches with the sectors you need to address. So hydrogen for commercial road transport in the future or heavy industries, that would be a solution. So trying to incentivize use of these cars agyrogen we will have available, and we have available into the industry that needs it most. And then the other thing is probably the stability. So these are longer
term investments. You need to make investments that are multi billion over ten, fifteen years, twenty years time. You need to have certainty of the regulatory environment and direction of trouble, and the industry needs to move in tandem supply and demand. We cannot build projects if our customers also don't invest.
Carbon capture and storage is quite a good one where our customers need to invest in the capture of the CO two, invest in the transport and the storage to bring the CO two under the ground.
What's the next big road a mile post that someone like me who doesn't follow this day to day, what should I look for? Is there a piece of news, Is there a piece of legislation or something that's going to be a big milepost that. Boy, this industry is continuing to make progress.
We would want to see that carbon pricing is reflected in in in and starting to see that there is an opportunity and incentives for people to switch and move on. That that's one one trend that you would be looking at. Then stability of the regulative environment is another one. And then the other thing I would say is there is not a single solution that fits all. So for sect, every sector, we have a roadmap and we work with our customers to look at what is what is available.
And again we start from our position of strengths l n G, e V, bio fuels and then building on that with hydrogen ccs and probably in the future with director capture, if and when that will happen.
That's Skate and.
Thanks so much, super appreciate Ana Moscolo. She is a Shell executive vice president for Low carbon Solutions. Really interesting. You more coming up?
I am more coming up?
More You into it?
I am.
I'm getting into it now.
You see, you need to get traditional entry companies and new energy companies that got to be together, which they are at this conference at least.
So we'll see.
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Thirty Alex de alongside Paul Sweeney. We are live at the Bloomberg AF Summit right here in Midtown Manhattan, where we're covering all the top regulators, official CEOs, analyst strategy officers within the energy transition space. How do you get from oil and gas to something different and what does that actually wind up looking like. So here's a question for you, Yep, what is the third best performing stock in the SMP this year.
I'm going to guess it's an energy stock.
Calls the best. It is Constellation Energy, which is the largest nuclear power facility in the country. It also is the largest provider of power to like C and I customers. And that's really interesting because you have super Marico is the best performing stock, then in Vidia, and then you have Constellation Energy GE and Energy Energy And what all of this has in common is a lot of demand for data centers. A boost and power demand and a need for that power, and nuclear is really front and
center for that. So joining us now to discuss is Kathleen Baron. She's executive vice president and chief strategy officer. She joins us now here at the summit. Kathleen, it's a pleasure, Thanks for joining.
Thanks, Alex happy to be here.
So funnily enough, I talked to her CEO yesterday on TV. So if you guys want to hear more about nuclear, you can check out that segment from Bloomberg Television The Clothes. Let's talk about what other stuff you guys are doing nuclear obviously bread and butter in the energy transition space of which nuclear is a big part. What else are you guys doing looking at paying money.
For well, one of the opportunities we see ahead of our country is to find ways to decarbonize austrial sector.
It's a huge source of emissions. It's really hard to find a way to run steel, manufacturing, agriculture, aviation, long haul shipping on electricity, right, So we have to find another way to decarbonize that sector and find a liquid or gases or a solid fuel that we're going to have at the ready at any moment to power those industries, and hydrogen has emerged as an opportunity for the US
now that the Inflation Reduction Act has passed. There's a production tax credit for hydrogen in that act, and we see nuclear and hydrogen as an ideal pairing because, as you pointed out, nuclear is clean, but it's also firm, it's reliable, it runs twenty four to seven, and so it can be a steady source of power to run into an electrolyzer, split water into oxygen high and then create that clean molecule that can power industrial applications.
What color fuel, Well, we're trying to.
Discourage the rainbow of colors and just talk about clean versus emitting.
But it is called pink for what it's for just to work clear, yep.
So I was fascinated to not just I didn't know much about your company.
Your company has the largest or the biggest nuclear fleet in the country with twenty one reactors. What is the future of nuclear energy in this country as we again think about more green types of energy sources.
You know, it has changed a lot, even just in the last few years in terms of public acceptance for the technology it makes. I mean not just our fleet, but the nuclear fleet generally generates twenty percent of the electricity that runs through this building we're in in our economy every day. People don't really realize that, but it is the backbone of the power sector, and it is carbon free, and as we just talked about, very reliable.
It operates around the clock, no matter the weather, their sun, wind, brainstorm, it's still operating. And we own twenty one reactors. We operate T one reactors. We own twenty three and so that's about a quarter of the US fleet. And the beauty of these machines is that they can run for a very long period of time. Most of our assets are sort of in the thirty forty to fifty year old time frame, but they can run up to eighty years according to the Federal Safety Regulators in Washington, and
so they are constantly being rebuilt. We put in about a billion and a half a new capital every year, and we're replacing the components. It's kind of like an old car that's having its plate its parts replaced regularly. So these machines can run for a very long time. They abate about five hundred million metric tons of carbon every year, so it's in the nation's interest to keep them running. In with this growing public acceptance, we're seeing
interest in corporate procurements, We're seeing interest from governments. We're seeing people valuing this thing that we don't have enough of, which is a clean firm megaal pour.
So when we talk about the hydrogen stuff, so pink. So basically you would get the power to split the hydrogen from the oxygen and the electrolyizer using nuclear stream. Does that mean that if I'm building a hydrogen facility, I have to go where your power plant is, or are you going to be building a power plant, a small modular power plant near me, or are we running like a big tube of something in between me and you.
So what we're talking about is using the existing reactors to power an electrilyizer, and as you said, split the oxygen and the hydrogen. You could do that right up next to the power plant, so you put the electricity right into the electrolyzer, or you could put your electrolyizer next to your manufacturing plant or whatever process you're trying
to use the hydrogen for. 's say you're making sustainable aviation fuel, and we can shift the electricity over the transmission line to your electrolyizer and the dedicated power purchase agreement that sort of hydrogen by wire configuration. So either co located with the plant or through the transmission line. Either way you're going to have that steady source of zero carbon electricity going. It's the electrolyizer every hour.
Can I go out and build a nuclear power plant in this country today?
There is no reason why you can't. But thank you, Alex.
You know, there are.
A bunch of reactor technology developers who have new designs you mentioned small modular reactors that are in the process of getting licensed, and there are some utilities who have created relationships with those technology developers for sort of you know co development or you know, an advanced commitment, but none of them are under construction just yet. Some of
them are going to be starting soon. For example, in Canada that the Ontario Power Generator has partnered with the GE three hundred megawatt reactor design too, and they think they have been through regular Tory approvals and they will start construction sooner. But in the US we're just we've lagged. I mean, this is happening in Canada's happening overseas and
we don't have that market poll here. We don't have commitments as much as we should to get those new reactor designs through licensing and into construction and past that first of a kind cost cycle. That's really the thing that we need to overcome.
It kind of jumped over nuclear for a while, right Like when I first started covering commodity seventeen years ago, it was all uranium because of the nuclear stuff. And then it was like, we don't talk about that right now. And even Germany was like anti nuclear for a while. They retired all their fleets and they're like, oops, oops, yep, oopsie, what happens when Russian and Beidess Ukraine? Kathleen, so great
to get your perspective. That was really great. Love to see how that relationship pans out between hydrogen A nuclear. Kathleen Baron, she's executive vice president and chief strategy officer over a Constellation Energy.
I'm learning a lot this past couple of days.
I thought you could be so bored.
Sibl. Yeah, a little bit more chemistry than I thought. You know, I didn't think there would be math here, but I'll figure it out.
It's helpful with the ag Oh, it's like right, okay, yes to hydrogen one oxygen.
We got this.
We can do this.
Yep, we can do math.
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