The U.S. Cleantech Industry Is Struggling
U.S. renewable energy and cleantech companies have been struggling in recent months, with the highest number of such firms filing for bankruptcy since 2014. Many of the cleantech startups received support from investors and climate funds backed by Bill Gates or Amazon a few years ago. But the high interest rates now, some delays in federal incentives for green energy technology, and growing competition to raise more funds to finance often costly new energy solutions have created a perfect storm for many cleantech startups, the Financial Times reports. SunPower, the California-based solar developer and operator, was probably the biggest and most famous victim of the recent culling in the cleantech industry. Last month, SunPower filed for bankruptcy protection after slashing jobs and saying it would restate its financial results for the last two years on cost misclassification. French energy giant TotalEnergies, which owns about 65% of SunPower, now faces the repercussions of these developments. A weakening of the rooftop solar market in California was one big reason behind SunPower’s troubles, as inventories built up amid slackening demand. Regulatory reforms in the state contributed to the weaker demand as they removed a large part of the incentives that drove people to put solar on their rooftops. SunPower was not the only victim of the troubles clean energy firms face. Battery start-up Moxion Power, which had raised $110 million, shut down in July and laid off all remaining 250 workers. Amazon invested in Moxion Power’s technology through its Climate Pledge Fund in 2022. Moxion Power and SunPower add to battery startup Ambri and wood pellets provider Enviva as the four companies that have filed for bankruptcy so far in 2024, the highest number since 2014, per Bloomberg data cited by FT. Ambri, a provider of battery storage systems, emerged from bankruptcy in July after successfully completing a court-supervised sale process of assets seen by the management as the best course to facilitate a comprehensive recapitalization for the company and to secure its position for long-term growth and profitability. Commenting on the recent troubles in the U.S. cleantech industry, Arash Nazhad, co-head of the cleantech group at Moelis, told FT, “An increasing number of companies are at risk, particularly those spending more than they generate without a clear path to becoming cash flow positive”.
European Oil Majors Are Set to Struggle as a Supply Glut Looms
Oil stocks went back in vogue two years ago with a vengeance as investors sought to get a piece of the record profits the industry reaped from the gas squeeze in Europe and the oil squeeze fears prompted by sanctions on Russia. Two years on, and that appeal is dissipating, at least according to some banks, as oversupply in oil looms over the market, and demand growth remains below optimistic expectations. In fact, one bank believes European Big Oil is maxed out. Last month, Morgan Stanley cut its price target for crude oil, citing rising supply and dwindling demand growth. The bank also cut its share price targets for the European Big Oil majors without exception. TotalEnergies, Shell, BP, Equinor, and Repsol were all revised down, with Eni alone being spared by the bank’s forecasters. Those forecasters had a sound basis for their revisions: none of the factors that usually drive energy company stocks higher were present at the moment. Among these factors, as reported by the Financial Times, were expectations of higher inflation, higher interest rates, rising oil prices, and a subdued overall stock market. “Going through the checklist, we find that none of these are in place at the moment. In fact, most of these factors are pointing in the opposite direction,” Morgan Stanley analysts wrote in a note predicting the immediate future of European supermajors. Interestingly, Morgan Stanley lists higher interest rates as conducive to higher energy stock prices, when those are in opposition to another factor for higher stock prices, namely rising oil prices. When interest rates are high, oil prices tend to get pressured, and vice versa. But another factor that Morgan Stanley cited as a reason for pessimism about the energy sector was the discrepancy between oil demand and oil supply. The bank said in an earlier report that the oil market would swing into oversupply in 2025 amid higher production from both OPEC+ and other producers, namely the United States and Brazil. Morgan Stanley, by the way, is not the only bank predicting a surplus. Goldman Sachs also recently forecasted a surplus situation, citing high global inventories, weak Chinese demand, and growing U.S. production. If all these developments are indeed in progress, it’s bad news for the European supermajors. They just recently revised their strategies, reprioritizing their core business over experiments with so-called ESG investing over the past few years as they sought to get a piece of the transition action and suffered losses from it. Yet here is the thing: the factors Morgan Stanley lists as precursors to a stock rout in oil and gas are not a fact. They are suggestions and possibilities. And they might never materialize. Let’s take Morgan’s expectation for a surplus oil market in 2025. The specific numbers are demand growth of 1.2 million barrels daily and supply growth of 2.6 million barrels daily, both from OPEC and non-OPEC producers. Like others, Morgan Stanley assumes that U.S. output would keep growing at previous rates and that OPEC will begin rolling back its cuts at whatever price point Brent crude is trading. These are some substantial assumptions, especially in light of OPEC’s insistence it would only begin rolling back the cuts when market conditions are right. Brent below $80 does not seem to fit OPEC’s perception of the right market conditions. Leaving the OPEC cuts aside, however, what about production? U.S. drillers have been serving surprise after surprise, reporting higher than expected output on drilling efficiencies, posting an unexpected output growth rate of about 1 million bpd for last year despite a lower rig count. Yet the assumption that this would continue regardless of where oil prices are going would be a bold one. Because in addition to drilling efficiencies, U.S. oil producers have been focusing on ensuring a certain level of shareholder returns at the expense of drilling just for the fun of it. Then there is demand. All price forecasts, whether Brent crude or Shell’s stock, rely heavily on Chinese demand data and forecasts. The data suggests that the oil demand in the world’s largest importer of the commodity is losing steam after two decades of strong growth. This naturally weighs on prices—and on supply. Reuters’ John Kemp reported last month that OECD oil inventories were 120 million barrels or 4% below the ten-year average at the end of June this year. This was up from a deficit of 74 million barrels at the end of March. In other words, the world, or at least the OECD part of it, was dipping into inventories to satisfy its oil demand. Those are very far from the surplus Morgan Stanley predicted for next year. Incidentally, OPEC+ is in no rush to roll back production cuts. European supermajors have seen their stocks underperform their U.S. peers. However, the consensus on the reasons for that has had nothing to do with oil demand and supply. It has had to do with the much tighter regulation in Europe and the obligation to invest in non-core activities in the alternative energy segment of the industry. Those investments have not turned out well—despite upbeat analyst forecasts that this was the way forward and the supermajors were doing the right thing. Big Oil’s bets on its core business, on the other hand, have generally paid off, regardless of bank predictions.
Gadkari calls for reducing GST on flex-fuel vehicles to 12 %
Minister for Road Transport and Highways Nitin Gadkari made a pitch for reducing Goods and Services Tax (GST) on flex-fuel vehicles (FFVs) from the current 28 percent to 12 percent. Speaking at the inauguration ceremony of India Bio-Energy & Tech Expo on Monday, Gadkari stressed on the need to make FFVs and ethanol100, or E100 fuel, economically viable for increasing their adoption. “To make the Ethanol100 fuel and flex engine vehicles a success story, the country requires economic viability,” said the minister. The minister said that the proposal to reduce the GST on flex-fuel vehicles to 12 percent needs to be placed before the GST Council. “We need support from finance ministers of different states. The Union Finance Minister (Nirmala Sitharaman) has assured me that we will try to convince state finance ministers,” he said. “Yesterday, I discussed with the Finance Minister of Maharashtra. And I told him, please go to the meeting and put up this proposal of reducing GST up to 12 percent on flex-engine cars, scooters. That is to be a great thing for all of us,” said Gadkari. Flex fuel vehicles can utilise more than one type of fuel and also a mixture of fuels. In India, such vehicles can run on petrol or the recently-launched, E100 fuel. E100 fuel includes 93-93.5 percent ethanol blended with 5 percent petrol and 1.5 percent co-solvent, which is a binder. Indian Oil has started retailing E100 fuel across 400 outlets in the country since March this year.
India’s Russian oil imports soften in August as refinery maintenance season weighs on demand
India’s crude oil imports from Russia—New Delhi’s largest source market for oil—cooled off sequentially in August from July’s near-record levels as oil demand evidently softened in the run-up to the refinery maintenance season, according to ship tracking data and industry watchers. Relatively lower availability of Russian oil for the export market was also a likely factor. Oil market experts expect India’s oil imports—including from Russia—to be slightly subdued in September as well due to maintenance shutdowns at a few refineries, before recovering again in October as the affected refining capacity comes back on stream in the festival season, which is usually marked by high fuel demand. India’s Russian oil imports declined 14.5 per cent—or by 0.31 million barrels per day (bpd)—sequentially in August to 1.80 million bpd, but still accounted for a whopping 39.9 per cent of the New Delhi’s total crude oil imports for the month, per provisional vessel tracking data from commodity market analytics firm Kpler. Notably, India’s overall oil imports for the month also declined by a similar volume—0.32 million bpd—to 4.52 million bpd. Interestingly, Russia’s oil exports have also gone down by 350,000 bpd…So there is less Russian availability, lower Indian crude intake, and generally less movement (of oil),” said Viktor Katona, head of crude analysis at Kpler.