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Eye on the Market

11th Annual Energy Paper

Michael Cembalest

Chairman of Market and Investment Strategy
For J.P. Morgan Asset & Wealth Management

Michael Cembalest

Chairman of Market and Investment Strategy
For J.P. Morgan Asset & Wealth Management

 

Future shock.

Absent decarbonization shock treatment, humans will be wedded to petroleum and other fossil fuels for longer than they would like. Wind and solar power reach new heights every year but still represent just 5% of global primary energy consumption. In this year’s energy paper, we review why decarbonization is taking so long: transmission obstacles, industrial energy use, the gargantuan mineral and pipeline demands of sequestration and mineralization, and the slow motion EV revolution. Other topics include our oil & gas views, President Biden’s energy agenda, China and client questions on electrified shipping, sustainable aviation fuels, low energy nuclear power, hydrogen and carbon accounting.

Topics covered

Electric vehicles, Will Ferrell, Norway and the rest of the world 

TOPIC 1

Electric vehicles, Will Ferrell, Norway and the rest of the world 

Forget about Norway: how is the EV revolution going everywhere else? The latest on EV penetration, vehicle replacement cycles, ICE car break-even mileage and why hybrids don’t count (as much)

Transmission Dreams 

TOPIC 2

Transmission Dreams 

MIT and Princeton have laid out grand scale deep decarbonization ideas that acknowledge the need for massive electricity grid expansion

…and Transmission Realities 

TOPIC 3

…and Transmission Realities 

Grid expansion can be a hornet's nest of cost, complexity and NIMBYism, particularly in the US

The Song Remains the Same: geologic sequestration of carbon may face the steepest climb of all 

TOPIC 4

The Song Remains the Same: geologic sequestration of carbon may face the steepest climb of all 

The highest ratio in the history of science: CCS academic publications vs real-life CCS implementation

Decarbonization of the industrial sector: costs, challenges and limitations 

TOPIC 5

Decarbonization of the industrial sector: costs, challenges and limitations 

Even assuming greater renewable electricity, only some industrial processes can be easily electrified

Oil and gas update: our bullish call on the sector, one year later 

TOPIC 6

Oil and gas update: our bullish call on the sector, one year later 

As the sector refocuses on profitability, valuations are rising and have more to go

Biden’s energy agenda: how much oil and gas will the US need in the future? 

TOPIC 7

Biden’s energy agenda: how much oil and gas will the US need in the future? 

The energy math on grid decarbonization, Federal land production bans, EV incentives and mileage targets

China’s rare earth metal diplomacy revving up again 

TOPIC 8

China’s rare earth metal diplomacy revving up again 

China saber-rattling on rare earth metal exports is leading other countries to develop their own

China: how new laws on residential heating systems actually lead to greater GHG emissions 

TOPIC 9

China: how new laws on residential heating systems actually lead to greater GHG emissions 

Replacing coal-fired residential heating with electric heaters solves one problem, causes another

US solar power: distributed small-scale generation is growing, but customers face headwinds 

TOPIC 10

US solar power: distributed small-scale generation is growing, but customers face headwinds 

Many utilities no longer pay solar customers at a retail rate for electricity exported to the grid

[Epilogue]: Last words on the Texas power outage and why I write this paper

[Q&A]: Answers to client energy questions

Q&A on electrified shipping, sustainable aviation fuels, low energy nuclear power, Saudi Arabia's green hydrogen plant and the unintended consequences of MSCI's carbon accounting methodology

 

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