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Economy

How Wall Street Is Making Sense of Energy’s Weird In-Between Period

Four takeaways from a week of earnings.

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Renewables, a Tesla, and an oil refinery.
Heatmap Illustration/Getty Images

Every few months, corporate earnings announcements give us the chance to (pretty literally) take stock of how the energy transition is going. After a rocky end-of-year for many renewables companies, this earnings season was, perhaps, more warily anticipated than most.

A bunch of energy companies reported this week, ranging from fossil fuel stalwarts to the bleeding edge of decarbonization and in between. The results indicate an industry that's a bit unsure of itself — showing promising signs overall, but with lots still to figure out, especially in how to make offshore wind a real business. Everyone expects growth, but turning that growth in consistent profits can be tricky.

Here are four takeaways from a mixed bag:

1. TL;DR: Look at GE.

GE’s renewable energy business is a kind of snapshot for utility scale investment: it's doing a lot, but at least for now struggling to make money and taking a bath on offshore wind. The business reported both a fourth quarter loss and a full-year loss for 2023, but its onshore wind turbine business was profitable, as was its business servicing the electric grid. Offshore wind, meanwhile, remained something of a money suck.

So while one large offshore wind order was cancelled (likely a New Jersey project), GE’s renewables head Scott Strazik said the massive SunZia wind project in the Southwest was still full steam ahead with an order for 2.4 gigawatts worth of wind capacity.

2. Transmission is hot right now.

The rush to build out new power lines to deliver new electricity also buoyed GE’s business, with “a number of large [high voltage direct current] orders” — infrastructure for sending power over long distances — and a 40% jump in orders for power transformers, equipment necessary to help move electricity. “There’s a lot of healthy demand across renewables that we expect to continue into 2024,” Strazik said.

That demand is coming from companies like NextEra, which combines a regulated utility in Florida with a wind, solar, and storage development business. The company told investors in a presentation on Thursday that it “continues to see strong demand for new renewables and storage,” and had added 9,000 megawatts of combined renewables and storage in 2023. The company said it would spend almost $2 billion to build out transmission through 2027, creating a virtuous cycle with manufacturers like GE.

3. Storage is taking off.

If NextEra is on one end of the storage business, then Tesla is on the other. The former builds out utility-scale battery operations, often on the same sites as solar projects, and could “operate up to 53 gigawatts of generation with the potential to co-locate battery storage,” its chief executive John Ketchum told investors.

In Tesla’s earnings call on Wednesday, meanwhile, CEO Elon Musk spotlighted the company’s Tesla Energy business, which sells the Powerwall battery and solar system, as an area of high growth while its core auto business goes through a period of transition. A new model code-named “Redwood” coming, Musk said, in 2025.

Musk said the company’s energy storage business “delivered nearly 15 GW-hours of batteries in 2023, compared to 6.5 GW-hours the year before,” growth he described as “tremendous.” And while investors were miffed that Tesla didn’t provide a forecast for growth in car sales — which implied it wouldn’t hit its traditional 50% target — Musk was happy to say that he thought the company’s storage business “would grow much faster than the car business.”

4. Don’t count out fossil fuels.

While the oil majors have yet to release their fourth quarter earnings, the market got a hint at how things were going from the results released by Halliburton, the oil services firm that’s also a major player in fracking.

The company hiked up its dividend and reported both revenue and profit growth in 2023. Overall, the business was the most profitable it had been “in over a decade,” the company’s chief financial officer, Eric Carre, told analysts.

It did, however, note that the footprint of its North American business was shrinking as the number of active oil rigs had declined, and that it expected “flattish revenue and margin environment,” the company’s chief executive, Jeff Miller, added. Meanwhile, overseas, Miller said he expected industry spending to “grow at a low double-digit pace,” with “multiple years of sustained activity growth.”

He did not, however, expect an end to oil any time soon. “[The] long-term expansion of the global economy will continue to create enormous demands on all forms of energy,” Miller said. “I expect oil and gas remains a critical component of the global energy mix with demand growth well into the future.”

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AM Briefing

Neutral, at Worst

On Chinese hydrogen, Fermi upheaval, and British offshore wind

Smokestacks.
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Current conditions: The Pineapple Express, an atmospheric river originating in the Pacific near Hawaii, is arriving in the Southwest laden with heavy rain that’s set to flood the region • Indonesia has the worst air quality in the world as forest fires rage along Sumatra’s southern coast • A cross-country storm will soak much of the United States on Tuesday’s Election Day.


THE TOP FIVE

1. Permitting bill’s worst-case climate scenario is still carbon neutral

The Senate’s grand compromise to simplify federal permitting on energy projects would likely drop emissions slightly as the benefits to accelerating deployments of clean energy infrastructure outweigh the boost the legislation could give to fossil fuels. Even under the worst-case scenario, emissions remain on the same trajectory as today. That’s according to a hotly anticipated new analysis by the Rhodium Group, the consultancy whose U.S. emissions estimates are among the most widely cited in American politics. The report, shared first with my colleague Emily Pontecorvo, found that provisions in the Bipartisan American Affordability and Jobs Act largely counteract each other on climate. The bill makes building transmission lines much easier, a key step to patching more renewables onto the grid. But it also makes new gas pipelines simpler to permit, clearing the way for a buildout of the infrastructure for the fossil fuel already dominating U.S. electricity and heating systems. Still, under the best-case scenario, the legislation could cut U.S. economy-wide emissions by 5% below where they would otherwise go in 2040. The bill could also slash energy bills by $78 per year and support construction of more than 200 gigawatts of clean energy capacity, as compared to a world where it didn’t pass. The Rhodium report is at least the second analysis yet to find that the bill could modestly lower emissions. The first, as I reported last week, came from the think tank Resources for the Future, which saw a slight drop in power-sector emissions relative to a world without BAAJA.

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Exclusive: New Modeling Finds Permitting Bill Would Likely Cut Emissions

Even in the worst case scenario, BAAJA wouldn't increase emissions, an analysis by the Rhodium Group concludes.

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Heatmap Illustration/Getty Images

The bipartisan permitting reform bill is likely to slightly cut greenhouse gas emissions and lower electricity bills by 2040 — or at worst leave emissions on the same trajectory that they are on today — as compared to the status quo, according to a new analysis of many of its provisions by the Rhodium Group, an independent research firm.

The analysis examines the policies in the Bipartisan American Affordability and Jobs Act, or BAAJA, that would have the most-clear cut effects on climate pollution and the energy system. It is the most comprehensive account of the bill’s effects on emissions so far, although it does not examine all of its provisions.

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Meta Data Center Federal Pipeline Review Due Early Next Year

And more of the week’s top fights around development.

The United States.
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1. Richland Parish, Louisiana – Gird your loins for the coming fight over the Meta Hyperion data center’s gas pipeline.

  • On Wednesday, the Federal Energy Regulatory Commission laid out plans for an environmental assessment of the Entergy pipeline for the Meta data center under the National Environmental Policy Act and stated it’ll be issued in early January 2027. Federal agencies have been ordered by the panel to complete any remaining decisions on authorizations by April.
  • The decision to do an environmental assessment under NEPA will be controversial. The Sierra Club filed comments to FERC stating they wanted an environmental impact statement instead that took into account the environmental impacts of the data center being fed by the pipeline, as well as a review of the project’s cumulative impacts, as the activist group said they’re explicitly linked to the data center’s operations. “The power stations and data center are not remote or speculative developments unrelated to the proposed action,” their comments read.
  • This is quite similar to what’s playing out with the Green Chile pipeline in New Mexico for Oracle and OpenAI’s Project Jupiter, which we recently explained could turn into litigation with high stakes for future gas pipelines linked to data centers. But to me, this conflict with Meta feels like it has more at stake for this individual project, as it’s playing out while construction on gas power plants for the data center has been underway for almost a year after earlier being blessed by state regulators.
  • I asked Sierra Club what could happen next. Eric Huber, one of their managing attorneys, told me on Thursday, “I heard the EA is expected in January, but we are in wait and see mode and will decide on further steps when it comes out.” Meta and Entergy did not respond to a request for comment.

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