Jennifer Granholm on the challenges of transition to cleaner energy sources
The US energy secretary tells the FT's US energy editor Derek Brower that fossil fuel communities must not be left behind as the industry adjusts. She explains the action under way to shift power source dependency at a time when there are worries about the risks of Europe spiralling into an energy war
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Welcome back, everyone. Good afternoon, good evening, wherever you are. I'm Derek Brower, the FT's US energy editor. I'm in New York, so anybody joining me on this side of the Atlantic, welcome.
One person who is, and I am delighted is joining us, is the United States Secretary of Energy Jennifer Granholm for the conference's last session. Truly leaving the best last, I think.
I don't know about that.
Before we begin, a note of housekeeping. Please, any questions that you have for Madam Secretary, please send them in using the box, chat box, on the right of your screen. And second, if you want to tweet about this, please use the hashtag #FTEnergyTran.
Madam Secretary, welcome. Let's begin. If I could I'd like to start with Europe because a lot of our audience is there. There's an energy crisis under way, as you know, in Europe. Gas and electricity prices are at historic highs. Do you blame Russia for this?
Well, we're certainly watching it. I'll say this. I just got back from Poland and met with a number of the eastern and central European countries, and there was a deep concern that there was withholding of supplies and manipulation of the market in order to demonstrate, if you will, the indispensability of Russian gas as Germany considers its Nord Stream 2 approvals.
However, I don't have information to say that that is the case. We are watching it very carefully. Obviously, the US wants to make sure... and there is a ripple effect in the United States, as well. We are seeing natural gas prices shoot up also. So we are undergoing a process internally to the federal government just to let you know to look at this issue and to make sure that we're doing all we can, both here and in Europe, to ensure that people have the supplies they need.
Does that include the possibility of investigating market manipulation by Gazprom as the Polish government has called for?
Well, I know the Polish government was very concerned about that as well. Suffice it to say we're aware of the request. We're aware of the fact that there does seem to be what... well, I say a choke point and not as much supply. But there are also, I understand - and it's true in the United States, too - this ramp-up after Covid takes a little bit more time than people would like given how quickly winter is emerging. And it is projected to be a bit of a colder winter. So there are those issues. Let me just say that we are looking at it.
It sounds... I mean, those are fairly moderate comments. It sounds like you're trying to cool some of the rhetoric. Because some of your colleagues in Europe are talking about this as an energy war almost. We're in the grip of another energy war. Do you fear that it could spiral into that?
I worry about that, certainly. I mean, you don't want to see energy made into a weapon. And the weaponisation of energy is a serious problem. I'm not saying that is happening right now. I am saying that we understand the concerns, and that, given the enormous jack-up in prices, there deserves to be special eyes on it, and we are looking at it. But at the moment, we don't have a conclusion on that.
Is there anything you think the US can do on the supply side, for example, to help? And I ask because the previous administration, as you know, talked of freedom gas and so on helping to break Europe's dependence on Russian gas. Should the US, or can the US, send more gas right now? Most of the cargoes that are sold in the spot market seem to be bought by Asia right now, and the market is sucking them in one direction and not arriving in Europe. Is there something more that the US can do to help relieve Europe?
You know, again, we have an inter-agency process looking at this. I mean, as you know and as Europe knows, I mean, we are in a position where we preside over a free market. And so we don't own the means of supply and we don't own the ability to direct. And so the question is, what are the tools at our disposal to make sure that there is supply that's adequate both for Europe, as well as for the United States.
I will say that our LNG supply at this moment is almost to the cap of the existing capacity. So you'd have to build out... even though new terminals are authorised, they have not been built out yet. It would take, obviously, some time for that to happen to jack up additional supply. So it's not as obvious of a solution as one might otherwise think. The capacity limits are almost reached.
Let me stay with the international mark and ask about oil prices because WTI, West Texas Intermediate, the US benchmark is near $80. Brent is above $80. Levels that some economists say will start to slow the recovery, the economic recovery, from the pandemic. The administration has expressed its alarm about gasoline prices, and President Biden has talked about them.
Do you think Opec is doing enough? Last week, they met, or earlier this week, they met. And after the US asked for more supply they stuck to their existing plan. Is the Opec group of producers, Opec-Plus, are they doing enough to cool what could be a damaging oil price rally?
Well, I think that everybody was hoping that there would be additional supply made available so that prices would not be jacked up. And the president, President Biden, has made it clear that he wants Americans to have access to affordable and reliable energy, obviously, at the pump, but natural gas too. The administration really is committed to doing everything we can to make sure that everybody is paying - that Americans are paying - fair and affordable gas prices.
This is a similar problem, right? We don't own our own gas supply or oil supply. And so the market is what the market is. Presidents don't control the cost of gasoline. And we also are aware that we want to move into a clean energy environment, and that, while this transition occurs, we want for people to not bear the cost of that in terms of at the pump.
And the president, even in deciding on how to pay for his big agenda in Congress, he made it clear that raising gas taxes, for example, is not on the table. He drew a red line for that. So he does not want to raise costs on everyday people for anything. And so, while we go through this transition, he wants to incentivise the development of clean technologies and clean fuel supplies without having everyday citizens pay for the cost of that.
And the White House has said that all tools - I think Jen Psaki said this earlier this week - all tools are on the table in terms of trying to deal with this price surge. Does that include releasing oil from the Strategic Petroleum Reserve, for example?
Yep, it's a tool, for sure.
And is that a possibility in the next coming weeks?
Well, it's a tool that's under consideration. There are regularly scheduled sales already set. A regularly scheduled sale set. So that might provide some. But again, it's very much marginal assistance overall given the scope of the problems. But nonetheless, that is a tool, and certainly the president will consider that.
And possibly restricting exports. Is that also on the table?
That's a tool that we have not used, but it is a tool as well. And as I say, we have an intergovernmental process that is going on. And as Jen Psaki said, all tools are on the table. But some are more readily available than others.
Let me turn to the US now and ask about... we'll stick with the oil for a sec. Oil and gas. US producers, the shale producers, as you know, say these price rises are the outcome of policies from the Biden administration. In particular, they cite the moratorium on leasing of federal lands for fracking. Do you think producers in the US should be doing more to increase production right now themselves?
Let's be clear that the moratorium was on new leases, and there were a whole lot of existing leases that were not even being used, that were available, that are available, to be able to be taken advantage of. We want to see supply and demand be at a place where we don't see huge increases in prices. So I'll just leave it at that, and the president is very concerned about that.
OK. Let me turn to Congress. The president has been adamant that his sweeping clean energy agenda will go ahead. These are huge plans, as we all know and as we've discussed a lot in this conference. And his agenda rests on Congress's approval of these plans later this month, potentially, or when the vote comes in the coming weeks.
You've been following the machinations and the debate in Congress closely, of course, and are very familiar with what's happening. What do you think is likely... not what you want to come out of this process, but what do you think is likely now to emerge from Congress in terms of how much of the $3.5tn reconciliation package, how much of the $1.2tn bipartisan infrastructure bill, how much of these packages will survive by the time Congress is done with them?
I mean, as you're aware, the bipartisan infrastructure deal will largely stay intact, I predict. And I think that's pretty clear. It's just a question of the size of the Build Back Better, the second piece, the Build Back Better agenda. You're aware, of course, that the president spoke with members of his party over the past couple of days and told them that they would have to pare down the ambition.
And so whether the real question is whether they pare everything back, or whether they put certain categories off to the side and fund others fully. I know that even just as I was coming on to this call, I saw Senator Manchin describing what he thought were his priorities. And he has a pretty big say in how this is shaped.
So I do think that, combined, this is still going to be a huge investment in our nation. And from my column of the world in the Department of Energy, it is going to be a huge investment in technologies, and in projects, and in a grid deployment authority that really takes us to the next level and knocks down a lot of the barriers that we have seen in the past.
So the issue really comes down to, quite honestly, whether there will be this clean electricity performance programme or some version of it that incentivises utilities to do the buildout and has both incentives and penalties and goals. And so is it the CEPP, as we call it? Or is it something that's got those elements? That is part of what the last bit of negotiation is to occur.
I think there will be consensus around the investment in tax credits to incentivise the buildout of clean energy. We have been eager to incentivise all kinds of clean energy. - clean broadly defined. That includes, obviously, wind and solar and renewables, but it also includes decarbonisation of fossil fuels. It would include nuclear.
So we are... I continue to say, this is about silver buckshot, not a silver bullet. To incentivise all of those in the way that this bill does, I think, will be enormous for America and enormous for the movement forward of these technologies. And most importantly, from the president's perspective, is jobs in this overall sector. It's not just one industry. It is a sector that includes a whole slew of industries that provides jobs for people.
I'll come to jobs in a sec. Let me just, if I may, ask a couple of follow-ups. So does the silver buckshot, does that include natural gas in the CEPP? Because it seems that that may be a sticking point for Senator Manchin. If the CEPP can include natural gas - broadly defined, if natural gas can be included in a clean energy package - he may approve it. Would you be happy for natural gas to be in the CEPP?
Natural gas with carbon capture technology, yes. I will say that Senator Manchin has been a huge advocate, as have a number of decarbonisation technologies, like carbon capture and sequestration.
And so presumably, then, if natural gas with carbon capture could be in it, coal with carbon capture could also be in it?
Yeah. I mean, part of the... decarbonisation is decarbonisation. And so the question for coal has been, does it pencil out? But the CEPP provides the means to build out that technology. And that's what it funds. It doesn't fund shareholder profits. It funds the buildout of these technologies.
And we want to take these technologies to scale. It's not just the US that is looking at these decarbonisation strategies. We want to prove it out. Part of the infrastructure bill that was passed includes carbon capture and clean hydrogen hubs, demonstration hubs. So we want to take it to scale so that we can reduce the cost of it, so that it can be one of the pieces of buckshot that's in our goal of clean, dispatchable baseload power.
Right. And just to be clear, so a new natural gas-fired power station with CCS could be part of the utilities...
...programme. Could be. OK. Let me ask about jobs because I know, as you said, this is very dear to the administration and President Biden's agenda for clean energy.
Nonetheless, the pushback from some people in the traditional fossil fuel jobs is that clean energy jobs are less reliable, less long term, lower pay. Frankly, they come with higher risks, and some of the skills aren't necessarily transferable in the way that some people claim. How important do you think it is, first of all, for these communities in fossil fuel areas of Wyoming and non-Democrat voting areas of the country, frankly, to be brought alongside, or be brought in, along while you push this energy transition? Or do you just think that some of these will essentially be casualties of a necessary shift?
Yeah, this is a great question, and hear me loud and clear. The president doesn't want to leave anyone behind. And he feels very strongly that these communities in particular - he has a whole Justice 40 initiative. And that Justice 40 initiative and the focus on coal and power plant communities, and the focus on communities that have been left behind because they have perhaps been located in the shadows of smokestacks and have disproportionate amounts of asthma, et cetera. Both types of communities, Just Transition communities and Justice 40 communities, are going to be part of our place-based strategy for targeted focus on investments.
We have not really had that before. I mean, other countries have. Europe has. But we have not really focused as much as we should have on these transitioning communities.
I tell you, the reason why I think the president asked me to be Secretary of Energy is because I was governor of Michigan. And we were in that situation. Our main product is a product that uses fossil fuels with an internal combustion engine.
And so we saw our industry on its knees through the Great Recession. And a lot of that was the Great Recession compounded by the fact that we saw a lot of imports that were much more fuel efficient, honestly. Japanese imports, et cetera. And people were expressing a preference.
And so we had to make a decision. And this is why the president is so key on this because during the Recovery Act, they funnelled money to Michigan to help us diversify into areas that we knew we could be competitive in. Including car 2.0, which is the electric vehicle. And the guts to that vehicle, which is the electric vehicle battery.
So that experience... and now, of course, Michigan is on the rebound. Electric vehicles. You saw all of... I know you want to have a separate conversation about vehicles. But I just have to say this is near and dear to me. And the point is that the president sees that example, and sees what's happening in these coal and power plant communities, and says, we can offer them an ability to diversify.
I say this to Senator Manchin all the time. West Virginia powered this country for hundreds years on coal. They can power our country for the next 100 years, but using clean energy. And we can figure out what are the technologies that are consonant with the experience and the skill set of the workers there.
So do they have expertise in subsurface? Yeah, let's look at the hot spots in West Virginia for geothermal. Let's give people the ability to attach carbon capture and sequestration technologies to existing power plants. Let's make sure we have clean hydrogen hubs. And that, by the way, might require the ability to lay pipe underground to move carbon, et cetera.
So there are tonnes of skills in this clean energy world that are good skills, including... I mean, Senator Manchin would love to put nuclear on top of coal plants, like they just did in Wyoming. TerraPower, founded by Bill Gates, just put, or is slated to put, a small nuclear reactor adjacent to a coal plant. That is a huge opportunity. Good paying jobs. Union jobs.
We do not want to leave any community behind. We are not going to leave any community behind. And we're going to direct investments into those communities.
OK, let me ask about cars. Ford and SK Innovation recently announced this huge $11bn investment plan to build assembly and battery plants in Tennessee and Kentucky. And there's this big EV rollout that they're planning there. Do you see that region of the country... is Tennessee about to become the Detroit of EVs?
Don't say that to me. I mean, good for Tennessee, but I still... I mean, I have my home team, you know? But honestly, I mean, there's enough love to go around. I mean, we want to see these investments in batteries in the United States, and the supply chain for those batteries.
The anode, the cathode, the separator material, the electrolyte. Those are all separate companies, different kinds of investments. We want them all in the US. And that includes, by the way, responsible extraction of lithium and cobalt and the materials that go into those batteries. And we don't do that as much in the United States. Very few places. We end up importing.
And that's true with processing those materials. We don't have a single processing facility in the United States. It's one of the reasons why the president is focused on the battery supply chain. To be able to get the whole value chain associated with electric vehicles in the United States.
And I'm sure Tennessee wants it. Michigan wants it. Georgia wants it. They all want it. And you know, good. Let's compete.
Let me ask you a question about infrastructure, and energy infrastructure in particular. There is obviously a huge focus from the administration on infrastructure, full stop, period. But the energy infrastructure seems to be a particularly thorny matter for this energy transition because, as you know, transmission lines need to cross states, and some of the permitting for this is difficult.
I spoke to an offshore wind developer who talked about starting the permitting process in 2007 and only getting approval for it last year. But the problem is not just on clean energy either. Pipeline developers say that they can't get approvals. And we saw the vulnerabilities when the Colonial Pipeline went down earlier this year of the US energy you know consumer to the vulnerabilities in the energy infrastructure system in the US.
How can you, how does the federal government, fix this problem, speed up this process, that this isn't hindering the transition, or even hindering energy security?
Yeah, this is a great question. I mean, the permitting for some of these projects, especially on the transmission side, it is just... any type of infrastructure that runs across multiple states is going to be onerous. But there are steps that we're taking to help clear the obstacles to approval. I hear more about it on the transmission side.
For one thing, here's an example. The Department of Energy already has authority over public highways and other rights of way. Public lands where we can site and permit new transmission lines quickly. And so if we can use those existing rights of way and create and just put them up in easements, that's fantastic.
Earlier in the year, I know the Department of Transportation issued new guidelines on how to leverage these rights of way, public rights of way, for high-priority transmission projects. And, by the way, to serve as a model for private partners, like railroads, to do the same. And part of that infrastructure, as well, is building out the infrastructure for electric vehicles. And so you can imagine a combination of perhaps transmission, EV buildouts, along public rights of way, which lessens the resistance, of course, since it is on public land.
Congress clearly wants us to address these bottlenecks, too. And so that bipartisan infrastructure deal includes a new grid deployment authority, which would let us at DOE designate corridors of national interests along those existing rights away, allowing for quicker construction. And would allow DOE to take a position on a proposed transmission line because, as you know, transmission lines are not built on spec usually. We have to have offtake. And if we see it as an important one that we would take a position, potentially, to do that offtake so that they can then afford the buildout and surety that they will be able to have that offtake.
DOE and the FERC, the Federal Energy Regulatory Commission, we both have roles in getting projects permitted. And we meet every other week to make sure that we are in sync and aligned to be able to move faster. And then on the oil and gas side, obviously, we need to invest in infrastructure that's going to help us build our clean energy economy.
And while we still... we obviously will also have pipelines into the future. We want to make sure those pipelines are leak free, particularly natural gas pipelines as we're concerned about methane emissions. And there will be more on that as you're probably aware. But that's over in the EPA side of things.
We also, though, want to continue to build out the infrastructure for the clean side and emphasise that as well. And I see that I'm bumping up against time. I'm so sorry about that. I may have to jump off at this moment.
But I really appreciate the chance to have a conversation. Thanks for the smart questions.
Madam Secretary, thank you very much.
That is it from the FT Live Energy Transition Summit. It's been a provocative two days, I think. The consensus from my panels and the ones I listened to was that transition, energy transition, to a cleaner energy future is well under way and is probably irreversible. The market is moving in that direction, and policy now needs to follow more quickly, too, to support it.
But there will, I think, this came up repeatedly. There will be dislocations caused by this transition and involved in this transition. And these need to be addressed. In particular, there are gaps in the technology that needs to be filled. That was clear from a number of panel discussions. And there are fossil fuel communities that cannot be left behind. And we just heard the Secretary of Energy in the United States talk about that.
These are hard questions and probably need more than what Greta Thunberg describes as "blah blah blah" from politicians in their bromides. That's certainly not what we just heard from the Secretary of Energy. I was delighted with that conversation.
I have been intrigued to hear in a lot of the panel discussions, and I think some of my other moderators at the FT have felt the same way, the view that the fossil fuel supply crisis that is under way now, soaring prices for fossil fuels will not slow this energy transition but will actually accelerate it.
Those are my concluding thoughts. Thank you to everyone who participated. Thank you to the excellent green room and backroom staff who made all this happen, the planners and so on.
Thank you to our lead sponsors, Baker Hughes, Chevron, EY, Mitsubishi Heavy Industries Group, Oliver Wyman, to our associate sponsors, and Ansys, Axpo, Blackstone, FuelCell Energy, Lundin Energy, National Grid, and Worley. Thanks also to our supporting organisations, Bioenergy Europe, International Solar Alliance, Eurelectric, GasNaturally, and Commodities Trading Association.
Everyone who's still here, do you remember you can watch these videos from the conference on demand for the next 90 days at energy.live.ft.com. And finally, I look forward to seeing everyone - I hope in person, for a change - at the FT Energy Source Live US Edition in Houston in early April with a date, an exact date, to be confirmed soon. See you there, and thank you for being here.