MARCH 20, 2024

Good morning, Amena and Cat are at CERAWeek. Give them a shout if you are too! (amena.saiyid@ciphernews.com and cat@ciphernews.com).

Today's edition:

• Cat looks at the double-edged sword of AI.
• Amena takes stock of this year’s Houston confab.
• In our Data Dive, Cat weighs hydrogen's cleanliness.

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Send your energy photos, story tips and more to news@ciphernews.com.

Crusoe Energy moves computational power loads to otherwise under-utilized or wasted energy resources, like the data centers seen here in Utah that run on natural gas that would otherwise have been flared. Photo credit: Crusoe Energy.

AI teeters between climate boon and energy burden

BY: CAT CLIFFORD

Artificial intelligence can help tackle the thorniest climate problems. But there’s a catch: It uses a ton of energy.

While AI tools have been around for some time, this climate conundrum is coming to a head now because the sophistication of these tools, like the well-known ChatGPT, and their corresponding energy use has exploded in recent years as tech companies like Microsoft, Google and Amazon ramp up a cutthroat race to dominate the sector.

AI is among the buzziest topics on the agenda at the annual energy gathering CERAWeek by S&P Global, underway this week in Houston.

And it’s urgent because demand for electricity more broadly is on the rise in the U.S. after remaining relatively flat for decades. “We are competing with a renaissance in manufacturing,” Kleber Costa, chief commercial officer for the global renewable developer, AES Corporation, said on Monday night at CERAWeek.

Read the full article about AI’s climate conundrum here.

Highlights below:

AI is becoming a linchpin tool to help industries like aviation, agriculture and energy suppliers find climate solutions.

But the very nature of AI — taking vast data sets and crunching them to identify patterns and make projections — makes it “fundamentally incompatible with environmental sustainability,” Alex de Vries, a Dutch data scientist who launched Digiconomist to track the carbon intensity of bitcoin and who has since published work on the energy demands of AI.

“If you're making AI models, a bigger model will always be more robust, and a more robust model will always perform better. At the same time, it's also true that bigger models will simply require more computational power and energy sources to operate,” de Vries tells Cipher.

The best estimates we have suggest AI’s energy thirst will continue to grow. Globally, data centers used 460 terawatt hours, or 2% of electricity worldwide, in 2022, according to the International Energy Agency. By 2026, the agency estimates that figure could more than double. AI alone could use roughly the same amount of energy as the Netherlands by 2027, de Vries found in an analysis published last year.

For companies like Amazon that have aggressive climate and AI goals, part of the solution is buying up record quantities of renewable energy.

“We recognize that you can’t do AI using energy that generates carbon,” Bill Vass, Amazon Web Services’ vice president of engineering, tells Cipher.

AES, which counts large tech companies including Microsoft, Google and Amazon at the helm of developing AI products as its clients — often advises its big tech clients to put their data centers near clean energy sources, says chief operating officer Ricardo Manuel Falú.

“One of our big realizations is that moving power is actually harder than moving data,” says Chase Lochmiller, CEO of Crusoe Energy, which seeks to utilize otherwise excess and cheap clean energy to power data centers.

Check out the full article on Cipher's website.

Lunchtime Reads and Hot Takes

Joe Manchin: Our energy policy is a success. President Biden should be proud. — The Washington Post

Cat’s take: Manchin says the U.S.'s "all of the above" energy policy is needed to both maintain energy security and innovate for the future. That sentiment is palpable here in Houston at CERAWeek.

Exxon CEO Says Hydrogen Project at Risk Without IRA Tax Credits — Bloomberg

Amy’s take: The comments, made at CERAWeek, underscore the stakes of the debate over these subsidies. Final tax rules are expected later this year.

Japan companies partner to take lead in floating wind power — Nikkei Asia

Bill’s take: With strong heavy industry manufacturers and unique offshore wind resources to be tapped, this move is a natural one for Japan.

EU electricity carbon tax will hit net zero targets and consumers, industry warns — Financial Times (subscription)

Anca’s take: Fears about the impact of this tax are growing. This study found it will significantly drive up the price of electricity traded between the United Kingdom and the European Union.

He’s a Renewable-Power Billionaire, Not an Environmentalist — The Wall Street Journal

Amy’s take: Interesting profile. This stat wowed me: Invenergy is developing a solar project in Northeast Texas that spans 18,000 acres — bigger than Manhattan!

Hydrogen adoption will cost Europe, US more than $1 trillion — Reuters

Amena’s take: The world will have to pay a steep price to produce, store and transport hydrogen to power plants and other industries.

The Zombies of the U.S. Tax Code: Why Fossil Fuels Subsidies Seem Impossible to Kill — The New York Times

Cat’s take: Key quote: “Getting rid of them seems to be one of the hardest things to achieve on the climate agenda,” said Michael L. Ross, a political science professor at UCLA.

Hot rock batteries are coming to Europe — soon — Financial Times (subscription)

Bill’s take: One of many innovative ways different technologies are being adapted to sync with the variability of renewable energy.

Cold Weather Businesses Suffer in the Winter That Wasn’t — The Wall Street Journal

Amy’s take: I find it almost unbelievable that not one, but TWO corporate executives say they hope this mild winter is a “fluke.” No, this is climate change (yes, made even warmer by El Niño.)

Five climate megaprojects that might just save the world — New Scientist

Anca’s take: These include direct air capture and energy island projects, but also putting a solar power station in space and re-greening the Sinai Peninsula. Good way to take stock of big efforts worldwide.

Former U.S. Military and Political Leaders Call on Senate to Ratify Law of the Sea — The Wall Street Journal

Cat’s take: Lawmakers recently introduced a bill to support deep sea mining. The U.S. is trying to gain a foothold in supply chains for critical minerals, which China currently dominates.

More of what we're reading:

• Biden's Climate Law Has Created a Growing Market for Green Tax Credits — The New York Times
• The first big US offshore wind farm is open — here’s what’s next — Canary Media
• Bezos Seeks to Revamp Meat Alternatives in Climate Push — Bloomberg

Climate, AI and energy security drive CERAWeek confab

Illustration by Nadya Nickels.

BY: AMENA H. SAIYID

HOUSTON — One of the world’s largest energy conferences, underway this week in Texas, is embracing clean technologies and new tools like artificial intelligence to help speed up the pace of the global energy transition.

CERAWeek is so large and widely attended by the energy industry that it’s considered a reflection of the sector itself.

Traditionally known to represent oil and natural gas companies, the event has been evolving like the industry and this year’s theme is the “multidimensional energy transition.”

Founded in 1983, CERAWeek (Pronounced seer-a, it stands for Cambridge Energy Research Associates) has taken place every year since (except 2020). This year, organizers estimated 9,000 attendees — more than double the numbers from 2018 — from 80 countries.

The agenda reflects the energy industry’s uneven embrace of cleaner and innovative energy sources.

Here’s a snapshot: More than 100 sessions on liquefied natural gas, more than 70 on hydrogen, roughly a dozen explicitly on artificial intelligence (but you can expect it to pop up everywhere, as our main article notes) and a half-dozen on fusion.

Click here to read our full CERAWeek story.

CO2 emissions from producing hydrogen vary wildly

Source: Wood Mackenzie Lens Hydrogen • UAE = United Arab Emirates. Emissions from electrolysis, carbon capture and storage and reforming come from electricity. Upstream gas infrastructure includes the extraction, processing, flaring, venting and leaking of natural gas.

BY: CAT CLIFFORD

When it comes to the climate impact of making hydrogen, to say the devil is in the details is an understatement.

Two primary ways to produce hydrogen exist today: heating fossil fuels (natural gas or coal) and separating out the resulting hydrogen or using electricity to power a device called an electrolyzer, which splits water into hydrogen and oxygen.

Producing hydrogen with an electrolyzer has the potential to produce close to zero or relatively few carbon emissions. But, as a recent report from energy consultancy Wood Mackenzie shows, it can also release just as many — if not more — carbon emissions as using natural gas. Electrolyzers require a lot of electricity, so the carbon intensity of that power directly influences the cleanliness of the resulting hydrogen.

The two graphs above show the carbon intensity of hydrogen produced with an electrolyzer and with natural gas equipped with carbon capture in four countries: Australia, Norway, the United Arab Emirates and the United States.

Wood Mackenzie made the following assumptions in its analysis, and acknowledged actual numbers will vary:

• Electrolyzers would be powered by renewable energy generated on site and 20% electricity from the grid, using the average carbon intensity of each country’s grid.
• For hydrogen produced with natural gas, the use of a carbon capture device is assumed to capture 60% of the emissions. The analysis used the average upstream emissions from producing the gas in each country, including methane leaks.

The charts show relying on even a relatively small share of grid electricity to make hydrogen with an electrolyzer can have significant carbon costs if the grid itself is dirty. Norway’s electricity comes almost entirely from renewable energy, so its emissions from electrolysis are near zero. Meanwhile, fossil fuels still make up roughly 40% of electricity in the U.S., 68% in Australia and nearly 90% in the United Arab Emirates.

This dichotomy explains why the debate around drafting U.S. rules to determine which hydrogen projects should qualify for a tax credit included in the 2022 Inflation Reduction Act has been so contentious. As the Internal Revenue Service writes the rules for implementing the credit, much of the consternation has been about how to account for the electricity that powers an electrolyzer.

A public hearing on the proposed rules is set for March 25. It’s not yet clear when the final rules will be released.

AND FINALLY...
Inside and out at CERAWeek

The above two photos, taken by Amena and Cat, give you a flavor of the mood at CERAWeek in Houston. Protestors gathered on Tuesday in a “funeral march” for people whose deaths were linked to fossil-fuel pollution. Meanwhile, inside a sprawling convention center, some 9,000 attendees gathered at myriad events, including this one in the Agora space, which focuses on tech and innovation.

Editor’s note: In addition to supporting Cipher, Breakthrough Energy also supports and partners with a range of entities working to tackle climate change, including nonprofits, corporations, startups and research firms. For more information on Cipher’s editorial policy, click here.