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New England had to burn oil when hydropower was briefly cut off up north.
The Quebec forest fires that have recently contributed to some of the worst smoke days in American history are also wreaking minor havoc on the electric grid.
Observers of electricity markets were puzzled Wednesday evening when grid operator ISO-New England announced that “due to an unanticipated transmission outage and higher-than-forecast consumer demand,” the New England grid would be calling on reserves “to balance the regional power system.” Demand that day did not seem particularly or unexpectedly high, nor were there any obvious supply issues in New England, so why was ISO-NE having trouble? More illumination came Thursday, when it specified there was a transmission issue with its imported power.
A spokesperson for Hydro-Québec, the French Canadian utility, told me that its Phase-2 power line, which connects the vast amounts of hydropower generated in northeastern Canada to a substation over 900 miles away in Boston, went down briefly yesterday due to forest fires in the James Bay region. “Heat and smoke can trigger automated system protection mechanisms, which will essentially shut down the powerline in order to protect it,” the spokesperson said. These are many of the same fires that have recently blanketed the eastern and midwestern United States in smoke.
Imported hydropower from Quebec plays a crucial role in New England’s grid, responsible for over 11% of the region’s total electric use in 2022. New York is also looking to expand its use of imported hydropower, with a new transmission line that will run from the Canadian border to New York City and is currently under construction.
Quebec itself essentially powers its entire grid with its massive hydropower resources, making it one of the least carbon intensive grids in the industrialized world.
Some of that excess hydropower has been exported to New England for decades, and it has become more and more attractive south of the border as New England and New York seek to decarbonize.
The actual scale of the disruption in power delivery turned out to be well within ISO-NE’s capabilities to manage. The grid operator didn’t ask consumers to use less power, as Texas did in the past few weeks when its grid was beset by high temperatures and record consumer demand, or as New York and California have done on hot days. But in addition to pulling in more imports from New York state, ISO-NE also had to burn oil for electricity, which New England sometimes does when its natural gas supply runs short, especially in the winter when gas is used for heat.
While the system in both Quebec and New England survived the transmission hiccup — a Hydro-Québec spokesperson made sure to note that “our bulk transmission infrastructure has not suffered any damage as a result of the forest fires” — it does underscore the threat that even non-carbon-emitting electricity generation faces from the effects of climate change. In addition to briefly shutting off this transmission line, forest fires have also reduced solar generation due to blocking out the sun.
On the other hand, as Joe LaRusso of the Acadia Center, a New England clean energy group, pointed out to me, transmission is also what saved the day when Quebec’s imports were shut off, as imports from New York picked up the slack. “It serves as a demonstration not that transmission is a weak link, but that it’s the principle means of enabling balancing authorities like ISO-NE and NYISO to rely on one another to make up for variations in capacity.” That’s as true of “unplanned generator and transmission outages” as was the case in Quebec, as it is for more predictable fluctuations in solar and wind power.
“While forest fires are not a new phenomenon, the intensity and increased frequency of these events in North America are the result of climate change,” the Hydro-Québec spokesperson said. “The amplitude of this event should serve as a clear reminder that we need to accelerate every effort towards transitioning away from the burning of fossil fuels for electricity generation.”
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The company has a new CEO and a new strategy — to refocus on its “core business.”
After a proxy fight, a successful shareholder revolt, and the ousting of a CEO, Air Products, the largest hydrogen company in the world, is floundering. In early May, it posted a $1.7 billion net loss for the second quarter of the fiscal year. While Air Products produces an array of industrial gases, the newly appointed CEO, Eduardo Menezes, told investors on the company’s recent Q2 earnings call that he blamed its investments in clean hydrogen projects for its recent struggles.
“Over the past few years Air Products moved away from its core business in search of growth,” Menezes said. (That core business would be traditional industrial gases such as oxygen, nitrogen, and hydrogen, produced sans newfangled clean technologies.) “We deployed capital to complex, higher risk projects with first-of-a-kind technologies — and, more importantly, without committed offtake agreements in place.” The company took on significant debt and increased its headcount to try and carry out its ambitious agenda, he explained. “This had a negative impact on both cost and execution quality, leading to significant project delays.”
This is, of course, in line with the overall downward trend in fortunes for clean hydrogen. Demand has long lagged behind production capacity, and projects have fallen apart left and right as uncertain economics, the Trump administration’s fossil fuel-friendly agenda, and the future of the clean hydrogen tax credit threaten to reverse what early-stage progress producers have made to date. But while these hurdles could be expected to flatten the hopes of some emergent startups or oil and gas industry tourists, it’s a more telling signal when the world’s biggest hydrogen supplier can’t make an expedient transition to clean energy work.
“I think that they’re just at the forefront of the industry pulling back,” Krzysztof Smalec, an equity analyst at Morningstar, told me. Air Products has committed $15 billion to the energy transition overall, making a more aggressive push into the low-carbon hydrogen space than its competitors such as Linde and Air Liquide. “They’re the most exposed, so it’s the most high profile, but it’s not unique to Air Products,” Smalec said.
The company has been facing investor pushback over its ostensibly risky investments in this space for some time now. In January, shareholders voted to replace three of the company’s board members, including former 81-year old CEO Seifi Ghasemi, who drove the company’s enthusiastic expansion into the clean hydrogen market. This was a major win for activist hedge fund Mantle Ridge, which holds a nearly 2% stake in Air Products. The investor spent much of last year ginning up support for the idea that Air Products needed new voices in the boardroom to scale back its clean energy projects, many of which had not yet secured buyers. (Air Products did not immediately respond to a request for comment.)
The Mantle Ridge campaign — called Refreshing Air Products — backed Menezes for CEO. On last week’s call, he was frank with investors as he echoed his supporters’ — and much of the industry’s — perspective when he emphasized “the importance of refocusing” on tried and true outputs. This refocusing means major layoffs. The company employs about 23,000 people, and Menezes told investors that 1,300 layoffs are already “in process.” Between next year and 2028, the company intends to eliminate another 2,500 to 3,000 positions.
Air Products is also scaling back its plans for a controversial blue hydrogen project in Louisiana. This means the hydrogen is made from natural gas, with the resulting CO2 emissions captured and stored underground. Initially, Air Products had planned to turn about 80% of the hydrogen from this project into ammonia; now it’s looking to sell off the ammonia portion of the business, as well as the plant’s carbon capture and sequestration operations. The goal is to reduce the project’s costs from around $8 billion to $5 billion or $6 billion. All funding will be paused while the company pursues this “derisking strategy,” and will restart only once firm offtake agreements are secured. As of now, none have been announced.
This comes on the heels of three project cancellations Air Products announced in February, two of which were hydrogen-related. One was a sustainable aviation fuels project in California that proposed using hydrogen to convert diesel into jet fuel. The company nixed it due to “challenging commercial aspects.” The other was a planned green hydrogen facility in New York that would use clean electricity to produce hydrogen. That decision followed the January release of final hydrogen tax credit rules, which mandate that projects buy energy from new renewable sources (Air Products had planned to use existing hydropower facilities), as well as slower than anticipated development of the market for hydrogen-powered vehicles.
“I think Air Products just went out on a limb and just took a bet that they’ll be able to finish these projects, be the first mover, and be able to charge a premium,” Smalec told me. “And that was a lot of additional risk.”
The difficulty of deploying new technologies is certainly not confined to the hydrogen industry. “A lot of energy transition industries are struggling at the moment,” Murray Douglas, the head of hydrogen research at Wood Mackenzie, told me. No kidding. “That’s a result of many different factors, not least higher borrowing costs, high rates of inflation across much of the world.”
There is one hydrogen project that the new leadership appears to be relatively happy with, though perhaps predictably, it’s not domestic. That’s a green hydrogen complex in Saudi Arabia, expected to come online in 2027. On its website, Air Products boasts that the facility is “based on proven technologies,” running counter to the new leadership’s narrative that this novel tech might be too risky a bet. While Menezes told investors that from the outside he was “very concerned with this project” he’s been pleasantly surprised that it appears poised to produce low-cost green ammonia from hydrogen. As for the upfront costs, he told investors that Air Products has “successfully limited our spend on this project through partnership and project financing.”
The fact that a green hydrogen project — said to be the world’s largest — is taking root in a fossil fuel-rich nation like Saudi Arabia could be seen as a ray of hope. But on the whole, Douglas isn’t surprised that Air Products is pulling back. So many companies — be they industrial gas behemoths or oil majors — are winnowing down their once robust clean energy project pipeline now that political and economic realities have shifted. BP, for example. stopped work on 18 early-stage hydrogen projects last year and shut down its hydrogen-focused low carbon transportation team. Similarly Shell is scaling back its hydrogen ambitions, scrapping its hydrogen vehicles division.
“They’ve had to probably accelerate the narrowing of that portfolio a bit quicker than what we were expecting because the market just isn’t maturing quickly enough,” Douglas told me. “Maybe the rules are a bit more difficult, cost escalation, inflation has really got in the way.”
But while the tide is certainly out for clean hydrogen, Smalec reads Air Products’ pullback as more of a push towards prudency than a companywide disavowal of the category. Under the right conditions, including manageable costs and secure offtake agreements, “my sense is that they would definitely be willing to invest,” Smalec said. That’s how the company’s competitors are approaching things, he added.
For the near future, though, expect the drama around Air Products to simmer down. “For the next three years or so, I would not expect any major announcements,” Smalec told me. “I think that they have a pretty straightforward path to really improve their performance.”
Unfortunately for the clean hydrogen industry, the path to profitability has changed significantly in recent months, and green and blue hydrogen might be more of a side quest these days.
Add it to the evidence that China’s greenhouse gas emissions may be peaking, if they haven’t already.
Exactly where China is in its energy transition remains somewhat fuzzy. Has the world’s largest emitter of greenhouse gases already hit peak emissions? Will it in 2025? That remains to be seen. But its import data for this year suggests an economy that’s in a rapid transition.
According to government trade data, in the first fourth months of this year, China imported $12.1 billion of coal, $100.4 billion of crude oil, and $18 billion of natural gas. In terms of value, that’s a 27% year over year decline in coal, a 8.5% decline in oil, and a 15.7% decline in natural gas. In terms of volume, it was a 5.3% decline, a slight 0.5% increase, and a 9.2% decline, respectively.
“Fossil fuel demand still trends down,” Lauri Myllyvirta, the co-founder of the Centre for Research on Energy and Clean Air, wrote on X in response to the news.
Morgan Stanley analysts predicted Friday in a note to clients that this “weak downstream demand” for coal in China would “continue to hinder coal import volume.”
Another piece of China’s emissions and coal usage puzzle came from Indonesia, which is a major coal exporter. Citing data from trade data service Kpler, Reuters reported Friday that Indonesia’s thermal coal exports “have dropped to their lowest in three years” thanks to “weak demand in China and India,” the world’s two biggest coal importers. Indonesia’s thermal coal exports dropped 12% annually to 150 million tons in the first third of the year, Reuters reported.
China’s official goal is to hit peak emissions by 2030 and reach “carbon neutrality” by 2060. The country’s electricity grid is largely fueled by coal (with hydropower coming in at number two), as is its prolific production of steel and cement, which is energy and, specifically, coal-intensive. For a few years in the 2010s, more cement was poured in China than in the whole 20th century in the United States. China also accounts for about half of the world’s steel production.
At the same time, China’s electricity demand growth is being largely met by renewables, implying that China can expand its economy without its economy-wide, annual emissions going up. This is in part due to a massive deployment of renewables. In 2023, China installed enough non-carbon-emitting electricity generation to meet the total electricity demand of all of France.
China’s productive capacity has shifted in a way that’s less carbon intensive, experts on the Chinese energy system and economy have told Heatmap. The economy isshifting more toward manufacturing and away from the steel-and-cement intensive breakneck urbanization of the past few decades, thanks to a dramatically slowing homebuilding sector.
Chinese urban residential construction was using almost 300 million tons of steel per year at its peak in 2019, according to research by the Reserve Bank of Australia, about a third of the country’s total steel usage. (Steel consumption for residential construction would fall by about half by 2023.) By contrast, the whole United States economy consumes less than 100 million tons of steel per year.
To the extent the overall Chinese economy slows down due to the trade war with the United States, coal usage — and thus greenhouse gas emissions — would slow as well. Although that hasn’t happened yet — China also released export data on Friday that showed sustained growth, in spite of the tariff barriers thrown up by the Trump administration.
All of the awesome earth-moving and none of the planet- or lung-harming emissions.
Construction is a dirty business, literally and figuratively. Mud and gunk and tar come with the territory for those who erect buildings and pave roads for a living. And the industrial machines that provide the muscle for the task run on hulking diesel engines that spew carbon and soot as they work.
Heavy equipment feels like an unlikely place to use all-electric power in order to ditch fossil fuels. The sheer size and intense workload of a loader or excavator means it has enormous energy needs. Yet the era of electric construction equipment has begun, with companies such as Volvo, Komatsu, and Bobcat all now marketing electric dirt movers and diggers. One big reason why: Full-size machines create the opportunity to make construction projects quieter and cleaner — a potentially huge benefit for those that happen in dense areas around lots of people.
Volvo, for example, appeared at last week’s Advanced Clean Transportation Expo in Anaheim, California, primarily to tout its efforts to reduce emissions in the trucking industry via hydrogen-powered semis, electric trucks, and technological refinements to reduce pollution such as nitrous oxide from traditional diesel. But the Swedish brand also trotted out its clean power dirt movers.
The L120 electric loader that is now taking reservations has a lifting capacity of 6 metric tons on pure electric power, making it useful for job sites such as recycling centers and ports. To see such a beast in person — and displayed on pristine convention-center carpet as if it were this year’s Ford Mustang, no less — is an odd and humbling experience that elicits a little-boy level of glee at beholding a big machine. Its bucket, large enough to carry a basketball team, seems to exist on a scale that is too big for battery power, yet Volvo claims the L120 can match the performance of its diesel brethren.
Volvo also brought an electric excavator, the machine used for shoveling out huge bucketfuls of earth. The EC230 Electric is based on the diesel-powered machine of the same name, but with a stack of batteries adding up to 450 kilowatt-hours of capacity and 650 volts of power give the excavator seven to eight hours of runtime on clean electric power.
“Going to the 600-volt battery packs with similar power density that we’re using in [semi] trucks allowed us to take that into the larger construction equipment,” Keith Brandis, VP of policy and regulatory affairs for Volvo North America, told me. “A big breakthrough for us was making sure that the duty cycle — the vibration, the harshness, the temperature extremes — was proven. We have coolant that runs throughout that battery pack, so we precondition the temperatures for very cold starts as well as during very hot temperatures.”
Indeed, the two big boys on display in Anaheim expand Volvo’s lineup of electric construction machines up to seven. The new full-size offerings also take battery power up to a scale needed for serious projects, where it could cut the noise and pollution that emanate from a site. Volvo says its e-machines are already at work on the restoration project in New York City’s Battery Park, at the southern end of Manhattan, where the local government made quiet and clean construction equipment a priority.
Volvo is not alone in this space. Komatsu builds a slate of electric excavators in a variety of sizes leading up to the 20-ton PC210LCE, which the Japanese brand introduced in 2023.
At the smaller end, Bobcat now builds battery-powered mini-loaders and compact excavators. Caterpillar made an EV dump truck a couple of years ago, and more heavy-duty electric machines for industries like mining are on the way.
Although electric loaders and excavators have begun to match the capability of their combustion-powered cousins and have reached a battery runtime that spans a full workday, Volvo and other heavy equipment manufacturers face a few hurdles in convincing more construction companies to go electric. Just like with passenger cars, there is the matter of price. Battery-powered equipment costs more up front, so companies must be convinced that the savings they’ll reap via reduced fuel and maintenance costs will make the electric equipment less expensive in the long run.
And just like with passenger cars, incentives play an outsized role in affordability. Brandis noted that municipalities often have fixed budgets for equipment replacement, which is inconvenient when clean, electric equipment costs substantially more. “We typically rely on purchase incentives or infrastructure incentives, grants, or vouchers that are available,” he said, such as California’s HVIP voucher for zero-emission heavy equipment.
Then there is the construction version of range anxiety, simply ensuring there is enough electricity at any job site to recharge a division of electric loaders. At locations where sufficient electrical infrastructure is already in place, Volvo is helping electric buyers install switchgears, meters, and EV chargers built to talk to the big machines. “It eliminates one other problem point for the customer because we’ve already proven that the operability is there with the equipment,” Brandis told me.
The problem with construction, however, is that sometimes it takes place in remote locations far from easy connections. At ACT, Ray Gallant of Volvo construction equipment said this is the point at which the power has to come to the customer. Volvo recently acquired the battery production business of Proterra, which, among other things, would help the corporation develop battery electric storage solutions that it could deploy remotely — at a far-flung job site, say.
“When we’re in remote sites, we have to take the electrons to the electric machines,” he said.