Thanks Miguel! Your article highlighted an interesting short-term response of reducing the impact of coal dust bycinvesting in dust suppressors as well as increasing production capacity by investing in additional ship loader machinery at the loading ports, downstream of extraction. Further downstream, I’d be curious whether Drummond is addressing climate change with its power generation customers who could invest in technologies like scrubbers and/or carbon capture systems (CCS) to reduce their own output of carbon in the environment. Drummond’s mine is in Colombia, a country that is continuing to develop its economy; another interesting issue in climate change is the debate over whether or not it is equitable for all countries to adhere to the same clean energy standards. Should those who were allowed to develop using dirty-energy go penalty-free; should those who are developing now be forced to adhere to higher standards?
Fantastic summary of the issue- I wasn’t expecting this take on how digitalization will impact the energy industry in such a fascinating way. As you and Mike discuss, how the privacy issue is tackled has critical implications for how widely this trend will impact the commodities industry. As we saw with commodities trader Noble in FRC yesterday, companies have strong strategic reasons for not publicly revealing their cost and competitive information. It will be interesting to see how blockchain platforms can be paired with and adapt to cloud-based computing. Just as companies choose to transition to private/on-premise, public/off-premise and/or hybrid cloud computing, perhaps these blockchain platforms may transition to networks of companies choosing to band together on a platform together without joining completely public platforms that expose their information to everyone.
You bring up a valid concern of the short-term strategy to build up materials inventory by stockpiling panels at the pre-tariff rate, which is the negative financial impact of both the spot rate increases (raising COGS) and the increased inventory carrying cost. Depending on how Sunrun is able to negotiate payment terms with its suppliers, this may have strong impacts in the immediate horizon on their net working capital. Given the market’s response across the solar industry, there may not be strong appetite for the additional debt or equity infusion that could be needed to absorb that net working capital impact. Another important aspect of the pending ruling will be the decision on NAFTA and how panel production/finishing that could occur over the border in Mexico at a lower cost than in the U.S. will be treated. Pending this decision, the decision on long-term contracts with suppliers, incentivizing them to open up shop domestically, or starting to manufacture locally themselves will have additional capital implications for Sunrun.
Another threat to Westinghouse comes from the increased competition that distributed power generation creates once digitalization allows that generation to connect to the wider grid. As the previous commenter mentions, digitalization is further along in other parts of the energy generation industry like renewables. A new concept in renewable generation is the virtual power plant (VPP), which is a digital platform that aggregates distributed renewable generation from many different production sources and allows it to be bought and sold in the market. This could dampen demand for nuclear energy if distributed renewables can now be used in aggregate to provide baseload capacity in a way that they could not individually. I agree that Westinghouse needs to respond by digitalizing not only their supply chain and procurement, but also their product offerings to their customers in order to stay relevant and recover from their current performance and financial issues. Finally, the company could benefit from a review of its product development processes, as evidenced by their technical design issues.
Your introduction to the topic provided a tight, complete synthesis of NRG and its business model, and how climate change and the sustainability response to that trend will affect the company itself and the wider energy industry. As you point out, both their supply chain and their production processes themselves are threatened by the impacts and reactions to climate change. I found it most interesting that NRG’s mid-term solution of developing CCS systems is in itself “sustainable” by not only reducing the carbon released into the atmosphere at production plants, but also then recycling that same carbon as an input to increase overall yields at their oil extraction operations. Finally, the as-yet-unknown impact of trends like distributed generation and clean energy storage on the demand side of the equation is absolutely of utmost concern to the company in the long-term; the question will be to what extent these technologies replace baseload generation versus fill the gap in capacity growth.
Approaching the pending Rule 201 decision from the perspective of how a regulatory body, the EPA, will be strategically and operationally impacted brings a new lens to the situation. While the EPA is not a direct part of the solar development supply chain, in their goal to implement the Clean Power Plan (CPP) as part of their overall mission to “protect human and environmental health,” shifting power generation to clean sources like solar and away from traditional sources like oil & gas is a key factor. It would be interesting to further analyze the “supply chain” of a regulatory body by considering their key inputs (legislation passed by Congress/executive rules, external market research/studies like the Dept. of Health & Human Services one you recommended, academic and industry research, etc.), their process (how they transform information into policy & action), and their key outputs (implementation, monitoring and enforcement of regulation, support and partnership to other organizations, and environmental study and advocacy). As you point out, there is hope that the administration may take a more nuanced view of the situation and how it will holistically affect all of the key stakeholders – this will be one to watch.