Is Wind Energy Becoming Too Expensive?

Editor OilPrice.com
Sun, October 16, 2022 

General Electric (GE) plans to make major job cuts in its U.S. wind operations and will consider its other markets too as windfarms are proving to be a major expense in the wake of Covid and the Russian invasion of Ukraine. Continued supply chain disruption and the high cost of wind turbines are deterring companies from investing in wind energy, as they look for cheaper alternatives.

It’s a question that has been being asked for years - are wind and solar power more expensive and less reliable? The two renewable energy sources have been repeatedly criticised for their intermittent power provision. Meanwhile, as the prices of steel and other materials continue to rise, solar and wind farms are proving to be more expensive to construct than previously hoped.

The prices of solar and wind power had been decreasing as technological innovations were made, thanks to huge amounts of investment worldwide in research and development. But in the wake of a pandemic that has wreaked havoc on global supply chains, the price of components has risen again and again. So, can the improved efficiency of wind turbine technology balance with rising material prices?

This month, reports suggested that GE would be laying off around 20 percent of its onshore wind workforce in the U.S., with employees in North America, Latin America, the Middle East, and Africa being notified of changes to the company. An assessment of its Europe and Asia wind markets is expected to follow. Last week, GE employees received a letter stating, “We are taking steps to streamline and size our onshore wind business for market realities to position us for future success. These are difficult decisions, which do not reflect on our employees’ dedication and hard work but are needed to ensure the business can compete and improve profitability over time.”

According to several sources, GE is planning to restructure and resize the business, citing weak demand, rising costs, and supply-chain delays as the primary challenges. GE confirmed it was “streamlining” its onshore wind operations, although has the firm has not commented on job cuts. A GE Renewables spokesperson stated: “These are difficult decisions, which do not reflect on our employees' dedication and hard work but are needed to ensure the business can compete and improve profitability over time.”

Related: The Most Consumed Energy Sources In Every Country Of Europe

This example highlights the broader challenge, as companies have been battling with the rising cost of wind power as they pump bigger investments into renewables in a bid to decarbonise operations. And wind turbine manufacturers that have seen demand soar in recent years are still struggling to turn a profit.

Even wind energy majors, such as Vestas Wind Systems, General Electric Co., and Siemens Gamesa Renewable Energy, are feeling the stress of high raw material and logistics costs as they race to build the tallest turbines. Ben Backwell, CEO of the trade group Global Wind Energy Council, explained “What I’m seeing is a colossal market failure.” He added, “The risk is we’re not on track for net zero [emissions] -- and the other risk is the supply chain contracts, instead of expanding.”

The potential move away from wind power could have major consequences, as the leading non-hydro renewable energy source globally. Wind power is expected to strongly support the worldwide transition away from fossil fuels to renewable alternatives. In addition, the geopolitical landscape could change if North American and European energy companies reign in their wind power funding while Asian powers, such as China, increase their investments in wind.

Earlier this year, several Western turbine manufacturers said they were competing for fewer projects in fewer markets, with plans to raise prices, streamline their product lineups, and cut manufacturing costs to strive for profits. This comes at a time of great potential for renewable energy projects, as the world faces fossil fuel scarcity and rising energy costs. But wind turbine makers have experienced losses in 2022, with rising material costs and stiff competition in the market.

Vestas and Siemens Gamesa, which together control around 70 percent of the market outside China, reported losses for the first quarter of 2022. The CEO of Siemens Gamesa, Jochen Eickholt, said: “The competition is rather fierce and, in the past, there was an element where people wanted to gain market share at the expense of profitability too often.” The two firms have increased their prices by a double-digit percentage over the last year and have both turned down low-paying projects, taking the business in another direction. Eickholt backed the bold change in strategy, but Siemen’s order intake between January and March fell 69 percent below estimates.

For the last decade, and particularly following COP26, the future of wind power appeared to be a given. Energy companies, governments, and environmentalists had high hopes for wind power, as it continued to become bigger and better than ever. But the spillover effects of the pandemic and the invasion of Ukraine have made this outlook less certain, as companies battle with the realities of rising costs and lower profits.

By Felicity Bradstock for Oilprice.com

Carbon Capture Projects Hit Record, But Would Mitigate Less Than 1% of Emissions

WOULD USE THEM TO FRACK OLD WELLS


James Fernyhough
Sun, October 16, 2022 

(Bloomberg) -- The number of carbon capture and storage projects in development grew to record levels this year on the back of rising carbon prices and government incentives, but would still only mitigate less than 1% of annual emissions, a new report finds.

There are now 153 CCS projects in the planning phase, 61 more than this time last year and more than at any time in history, the Melbourne-based Global CCS Institute found in its annual survey of the sector, released today. They would add to the 30 projects currently operating and a further 11 under construction.

The US leads the way with 34 new proposed CCS projects, followed by Canada, the UK, Norway, Australia, the Netherlands and Iceland. Favorable policies stimulated investment in these countries, including higher carbon prices, tax credits and direct grants, the report found.

Despite the jump in new capacity, all existing and proposed projects would be able to store just 244 million tons of CO₂ a year, less than 1% of the 36 billion tons of carbon dioxide the International Energy Agency estimates was added to the atmosphere last year.

Carbon capture and storage technology, which captures carbon dioxide from a range of sources and stores it underground, usually in depleted oil or gas reservoirs, has proved a controversial technology. Supporters say it has a vital role in the push to keep global warming to within the Paris Agreement’s stated target of 1.5 degrees celsius, with around 1.3 billion tons of storage capacity needed by 2030 to meet that target, according to the IEA. But critics argue CCS is an expensive, ineffective technology that serves to prolong the life of fossil fuels.

Early examples focused on capturing emissions from coal-fired power plants, while on the storage side, CO₂ was often injected into petroleum reservoirs to extract oil, a technique known as “enhanced oil recovery”. Both applications supported continued fossil fuel use, which is still the main area for CCS projects.

Natural gas processing is the most common application in existing CCS projects, while ethanol production, power generation, manufacture of hydrogen with natural gas (known as “blue hydrogen”) are the most common for those in development.

But attention has increasingly widened to technology such as “direct air carbon capture and storage” (DACCS) -- which removes CO₂ directly out of the atmosphere and stores it -- and capturing the emissions from hard to abate industries like cement and steel. These applications were advocated by international authorities and were found growing.

“CCS is the Swiss Army knife of climate mitigation -- it will continue to play multiple, unique roles in decarbonising the global economy,” said Jarad Daniels, Chief Executive Officer of the Global CCS Institute. “Many essential industries like cement and chemical production have no other viable path for deep decarbonisation other than CCS.”

The report did not say how much the planned projects would cost, but the Global CCS Institute last year estimated between $655 billion and $1.28 trillion of investment in carbon-capture technologies could reduce emissions by 15% by 2050 -- which it argued was “well within the capacity of the private sector”.

NOT WATER BEARS
'Water Batteries' Could Power 135,000 Homes in San Diego

Angely Mercado
Mon, October 17, 2022

A view of the San Diego skyline on November 21, 2020 in California.

The San Diego Water Authority wants to keep the lights on, even when the Sun goes down. It plans to use San Vicente Reservoir to store solar power energy in so-called water batteries to maximize the city’s renewable energy potential, NPR reports.

Cities across California have an abundance of sunny days, which is perfect for providing renewable energy… as long as the Sun is up. The proposed project could store 4,000 megawatt-hours of energy per day, which could power 135,000 homes after the Sun goes down. To make this possible, the San Diego Water Authority would create a smaller upper reservoir just above the existing San Vicente Reservoir. These would be connected by a tunnel system and an underground powerhouse.

“During off-peak periods – when power is inexpensive and renewable supplies from wind and solar facilities exceed demand – turbines will pump water to the upper reservoir where it will act as a battery of stored potential energy,” the San Diego County Water Authority’s website explains.

During times of high energy usage in the area, the system would discharge energy that was stored in the water from the upper reservoir to flow downhill through the turbines. The exchange would be closed-loop system, which means it won’t consume water while putting energy into the local grid.

Systems like this are called pumped storage hydropower, and the principle is already in operation at sites all over the country, according to NPR. Many were built in the 1970s and 1980s to store nuclear energy. The new project would take up to a decade to approve, plan, and construct.

Power storage initiatives like this one could qualify for the 30% tax credit that wind and solar projects are also eligible for, which would motivate investment in more of these projects. There are several closed-loop energy storage projects proposed currently, like one in Oregon that could be completed by 2040 and power about 125,000 homes in the Pacific Northwest, according to the Swan Lake Energy Storage Project’s website.

California officials are hard-pressed to find solutions for the state’s strained grid. Extreme heat and a historic drought have made the state’s residents vulnerable to blackouts. The high temperatures and dry conditions have significantly lowered water levels in large water reservoirs around California, which has slashed the reservoirs’ ability to provide hydroelectric power. The heat was so bad this past September that Twitter’s data center in Sacramento failed.

State officials have pushed even harder for renewable energy sources this year. In April, California’s grid briefly ran on 97.6% renewable energy, breaking a previous record. And as of April, California was also the fourth-largest electricity provider in the country. Pumped storage hydropower projects could not only lower emissions for the state but also be a safety net for communities at risk of power outages.

Climate change needs to be addressed to avoid irreversible damage



Barry Rowell
Sun, October 16, 2022 

I have been blessed or, maybe, cursed, with looking at life with a “seeing the end in the beginning” mentality. But it was that mentality I relied upon in my career. To see potential threats or emergencies before they happened and to have a strategy to respond.

It is how I look at the climate crisis now. We’re facing a slow possible mass extinction of species with our continued reliance upon fossil fuels. Our own species will certainly suffer greatly, yet our strategy for governments to act and avoid the worst is sorely lacking. Governments cannot supply the money at the level needed or the pace required. We have 10 years before certain natural forces are irreversibly changed. It’s scientific consensus.

But I’m not saying anything new here. We hear it everyday along with the stories of disasters as they mount. How many more Hurricane Ian’s? How many more Camp Fires? Where will the needed resources come from to stabilize and repair our Earth?

Right now, one of the largest climate funders is Laurene Powell Jobs, widow of Apple cofounder Steve Jobs. She has committed to giving away her $28 billion in assets during her life or shortly thereafter. But we cannot rely on a handful of billionaires. While more foundations are funding climate change initiatives, sadly, it’s not at a level that can stop the 10-year timetable to irreversible cataclysmic change.

Philanthropic foundations are divesting from fossil fuel investment more as they follow the science. It’s not enough. They need to declare a climate emergency. Moreover, they must consider giving away the majority of their assets to fund climate security within the next 10 years. Yes — the majority — in 10 years. That’s a total of over $1.5 trillion dollars according Harvard Kennedy School's Hauser Institute for Civil Society/Global Philanthropy Report.

To not do so at this inflection point in our human history would be immoral.

How can they justify holding back when the very people for whom they exist to help will, at worst, perish or, at best, be imperiled without their action? How can they justify giving only legal minimums from such vast, growing endowments?

Here is what declaring a philanthropic climate emergency should look like according to Ellen Dorsey, executive director of the Wallace Global Fund, in “Regeneration Ending the Climate Crisis In One Generation.” Wallace Global was first to call for divesting from fossil fuels in 2011, prior to their 10-year slide in value:
"Make climate central to the mission.

Making climate a priority will inform how we define our missions, advance change, build our strategies, and identify which grantees are most able to advance an urgent agenda.
Spend more, spend quickly, spend it all

Governments are failing to meet the challenge. We need both more money and smart money to address climate at all levels and create the transformative systemic change that will save us.

Drive systemic change

Climate change is no accident — it is the result of economic practices and political choices that placed profit and power over the common good. We cannot replace one extractive economy with another; the obligations of corporations and financial systems must be tied to climate risk. We will need to build a government that works for the people instead of its biggest donors. Every section of the economy will need to change, but therein lies new opportunity.

Collaborate with movements

History has taught us real change has never happened without mass public mobilization. We need to work with these movements and bring the best of the nonprofit world behind them to ensure their success instead of trivializing their power.
Deploy every bit of the endowment for good

Declaring a climate emergency means using all our tools. Getting the world to 100% renewable energy in time will require every institutional investor to put our assets into renewables, efficiency, clean tech and energy access. Foundations must use our voices as shareholders to put pressure on every industry to curb carbon use.

We are accountable to no one but our board, we have enormous privilege in the level of resources we expend and consume, and we have deep ties to the very system and economic players that produced this mess. We seldom challenge ourselves to the types of actions we demand of our grantees, governments and even business.”

This is our last, last chance.

Barry Rowell is a former Springfield fire chief.

This article originally appeared on Springfield News-Leader: Climate change needs to be addressed to avoid irreversible damage

As Pension Goes Broke, Bankruptcy Haunts City Near Philadelphia



Hadriana Lowenkron
Mon, October 17, 2022 

(Bloomberg) -- Decade after decade, Chester, Pennsylvania, has fallen deeper and deeper into a downward financial spiral.

As the city’s population dwindled to half its mid-century peak, shuttered factories near the banks of the Delaware River were replaced by a prison and one of the nation’s largest trash incinerators. A Major League Soccer stadium and casino did little to turn around the predominantly Black city just outside Philadelphia, where 30% of its 33,000 residents live below the poverty line. Debt piled up. The government struggled to balance the books.

Now, with its police pension set to run out of cash in months, a state-appointed receiver is considering a last resort that cities rarely take: filing for bankruptcy.

“The alarm that we’re sounding is very real,” said Vijay Kapoor, who does economic analysis for cities and is serving as the chief of staff for Chester’s receiver. “Chester is by far -- and I mean by far -- in the worst condition that any of us have ever seen and ever had to deal with.”

Few US cities are contending with financial strain as dire as Chester, which has been overseen by Pennsylvania’s program for distressed local governments for nearly three decades. But in another sense it’s far from alone: Like Chester, governments nationwide have failed to save enough to cover all the benefits promised to retirees, turning it into the latest cautionary tale about the reckoning when the bills finally come due.

In the years after the housing-market crash, three California cities, Detroit and Puerto Rico all went bankrupt, in large part because of retirement-fund debts. Such pensions are now being tested again, with the S&P 500 Index tumbling over 20% this year and bonds pummeled by the worst losses in decades.

“All of the headline general government bankruptcies this century have been largely due to unfunded pension liabilities,” said John Ceffalio, senior municipal credit analyst at CreditSights Inc. “It’s a common problem, particularly for poorer cities and cities that are suffering from declining populations.”

Chester’s population has been declining for more than a half century. It peaked at roughly 66,000 in 1950, before manufacturers like Ford Motor Co. shut down operations and White residents moved to the suburbs after the civil rights movement put an end to segregated schools and public housing. Retail stores closed, leaving vacant storefronts.

In 1995, Chester entered into Pennsylvania’s program that extends aid to financially distressed local governments. The city sought to spur development with a casino and a soccer stadium, though neither delivered an economic revival. Meanwhile, its income tax on residents and commuters served as another disincentive.

Faced with budget deficits, Chester shortchanged its pension funds, sinking deeper into the hole. The problem was magnified by miscalculations that allowed police officers to receive benefits based on their final year’s earnings instead of the last three, according to the receiver’s office.

It owes $53.9 million in pension contributions, enough to consume 88% of the city’s budget. That’s also far more than the approximately $16 million of bond debt the city has outstanding, excluding those related to the soccer stadium, according to figures from the receiver’s office.

Michael Doweary, who was appointed receiver of the city in 2020, is exploring options such as eliminating retiree health care, cutting the city’s costs for active employees’ medical benefits and reducing the city’s pension and debt-service costs.

But that’s virtually certain to draw resistance from employees, who would need to approve such changes. In February, Pennsylvania’s Department of Community and Economic Development gave Doweary the power to seek bankruptcy protection for Chester if such steps fall through.

“The answer is not to go to people and say we promised you if you work here for 25 years we’re going to give you post-retirement medical benefits, and then take it back,” said Les Neri, a former president of the Pennsylvania Fraternal Order of Police who is currently working with Chester’s officers. “At least current officers can make a decision to accept it and stay, or reject it and leave.”

Residents are divided on whether the city should go bankrupt, according to Zulene Mayfield, founder of Chester Residents Concerned for Quality Living, a local activist group. Some see it as a necessary step to finally steady its finances. But others worry it could saddle residents with higher costs if Chester winds up selling its water system to a private company in the process. Such a step could also at least temporarily jeopardize its ability to raise money in financial markets, or make it prohibitively expensive.

Mayfield also doubts that it would do anything to hasten economic development in the city. “They have plans to revitalize our waterfront, create condos and a marina-type atmosphere and a concert venue next to an incinerator -- and it makes no sense,” she said. “Would you buy a $200,000 condo next to an incinerator?”

But for Stefan Roots, who sits on the city council, there are few options other than going to court to pare Chester’s debts.

“Bankruptcy isn’t pretty, just like selling a water authority isn’t pretty, but is it necessary? Are there other options?” he asked. “If there are, please put them on the table, because I haven’t seen any.”

Teens are pouring milk out in grocery stores in new trend to raise awareness about dairy production emissions



Lawrence Richard
Sun, October 16, 2022 

The latest environmentalist trend is here: pouring out milk in grocery stores.

All across the United Kingdom, teenagers concerned about the environment are doing "milk pours." The new trend involves going into grocery stores, picking up cartons of cow-produced milk, and pouring out their contents, according to the animal rights group Animal Rebellion.

Videos that have popped up on social media show teens pouring milk onto the floor, over sales counters, and elsewhere in the store.

Milk prices are displayed in a supermarket in Washington, DC, on May 26, 2022, as Americans brace for summer sticker shock as inflation continues to grow.

"The dairy industry is incredibly environmentally destructive. The world’s top 5 meat and dairy corporations are now responsible for more GHG emissions than Exxon, Shell or BP," the organization said in a tweet Saturday.

"We NEED a plant based future now," it added.

The account also shared a report from Grain, an international non-profit organization, and the Institute for Agriculture and Trade Policy (IATP), which calls for the planet to "dramatically reduce its greenhouse gas emissions" by eliminating meat and dairy consumption.

According to Animal Rebellion, the "milk pours" took place at eight different locations Saturday, including London, Manchester, Norwich, and Edinburgh.

"Animal farming is THE leading cause of the loss of our wildlife and natural ecosystems," the group said in another tweet, which also called for the government to "support farmers in an urgent transition to a plant based food system and allow the freed up land to be rewilded in order to restore wildlife populations."

Several countries around the world have imposed regulations on the agriculture industry, such as limits on nitrogen emissions caused by dairy production. Environmentalists have encouraged the use of dairy alternatives, such as almond, soy, coconut and oat milk, though these too have been criticized.

The Biden administration has indicated that it intends to push changes on the US farming industry to tackle climate change.

In 2020, the EPA estimated that 11% of the U.S.'s total greenhouse gas emissions came from the agriculture sector, compared to 27% from transportation, 25% from energy, and 24% from industry.

Fox News' Teny Sahakian contributed to this report.

France Braces for Disruption as Railways to Join Strike Tuesday

Francois de Beaupuy
Mon, October 17, 2022 

(Bloomberg) -- France is bracing for more work and travel disruption Tuesday as the CGT and other labor unions ask workers across industries to join a walkout by some refinery employees to demand higher wages as inflation dents purchasing power.

RATP, the operator of the Paris transit system, said services of its express RER trains and buses will be affected, while Eurostar, the train operator linking Paris to London, has canceled two journeys Monday afternoon, and another four on Tuesday. Other high-speed rail services will be mildly affected and the CGT union wants port workers to stop for several hours Tuesday.

“The labor action is launched,” Philippe Martinez, head of the CGT union, said on France Inter radio Monday. “Employees will decide tomorrow if it’s a one-off, or if another action is needed.”

The labor strife at refineries, which has led to fuel shortages in many parts of France, is undermining an economy that’s already grappling with surging energy costs as Russia cuts natural gas deliveries to Europe. To make matters worse, some employees at Electricite de France SA, the country’s biggest power producer, have also walked off the job, forcing it to start reducing output and delaying some maintenance on nuclear reactors in recent days.

Government officials have become increasingly strident in their calls for striking refinery workers to return to work as fuel shortages persist. On Monday, French Finance Minister Bruno Le Maire said that the time for negotiations had passed and that “a handful of strikers” should not impose their will on the majority.

About 30% of filling stations in France were short of at least one fuel on Sunday, government data showed. That compares with 27% on Saturday. Shortages of gasoline will continue for at least a week even once the refinery strike ends, Transport Minister Clement Beaune said on Monday on France Inter radio.

Unblocking Depots

The Energy Transition Ministry ordered workers to unblock a large fuel deport near Lyon on Monday. It also renewed its requisition of employees to ensure that another large depot in the north of the country remains open.

The continued walkout at TotalEnergies’ sites contrasts with the return to work at two refineries owned by Exxon Mobil Corp. Exxon said Friday the refineries could return to full operation within two to three weeks.

CGT last week rejected TotalEnergies’ offer for a 7% increase in 2023 wages, after demanding a 10% raise. The French oil major called for all strikes to end as two other unions, which together represent a majority of workers, agreed to the deal.

In an interview with the French daily Les Echos on Monday, President Emmanuel Macron said it wasn’t surprising that oil companies were under pressure to share more of their profits with workers. “They’ve distributed a lot to their shareholders and their managers,” he told the newspaper. “Everyone is looking at these companies.”

But he added that it wasn’t the case in other sectors. “There are other industries that aren’t doing well, and for whom it’s not the right time to distribute to anyone.”

Inflation in excess of 6% and record profits at oil companies following Russia’s invasion of Ukraine have driven support for industrial action as well as raising economic anxiety levels in France. A poll released on Sunday by Ifop for the Journal du Dimanche showed that fighting inflation was the top policy concern for the French.

Chipotle ‘will probably have to raise prices’ because of California's fast food wage bill: CEO

Brian Sozzi
·Anchor, Editor-at-Large
Mon, October 17, 2022 

Chipotle CEO Brian Niccol says California governor Gavin Newsom's proposed changes to the minimum wage could cause the restaurant chain to rethink its presence in the state.

"We pay well beyond $15 an hour in California. So there there is legislation that has the potential to take the hourly wage up to $21, $22 an hour that will put organizations in a place where prices probably have to rise. It's unfortunate because it also impacts the economic model, and that could impact how many restaurants we open in the future in a state like California which is a shame," Niccol said at the Yahoo Finance All Markets Summit on Monday.

People are served in a Chipotle outlet in Manhattan, New York City, U.S., February 7, 2022. REUTERS/Andrew Kelly

About 15% of Chipotle's 3,000 plus locations in the U.S. are located in California.

In early September, Newsom signed into law a bill establishing a "Fast Food Council." The 10-member council will set standards for pay, hours and working conditions for fast-food workers in the Golden State. If the referendum receives roughly 623,000 signatures by the first week of December, the measure will appear on the November 2024 California ballot.

The legislation could pave the way for raising the minimum wage for fast food workers to $22 an hour for employers with more than 26 workers. Currently, the minimum wage stands at $15 in the state.

"Equitable? You signed a bill from the hills of Napa that singles out franchise owners with new rules and costs to appease your biggest campaign donors; will raise prices on lower income Californians and will accelerate business leaving the state," tweeted the CEO of the International Franchise Association Matt Haller to Newsom.

Niccol predicts any changes to the industry that come as a result of the Fast Food Council will ultimately backfire on Newsom.

"The brand is loved in California and the employees love working there, and the customers love getting our food. And hopefully that legislation doesn't get in the way of great economics that result in great opportunities for employees and customers. If it does, we will deal with it accordingly...it will be a shame," Niccol added.

SEE Chipotle gave huge payouts to its CEO and shareholders, then blamed workers for price increases

The U.S. Said It’d Give Billions to Chipmakers Like Intel. Now Come the Layoffs

Nik Popli
Mon, October 17, 2022

US-POLITICS-BIDEN

US President Joe Biden speaks on rebuilding US manufacturing through the CHIPS and Science Act at the groundbreaking of the new Intel semiconductor manufacturing facility near New Albany, Ohio, on September 9, 2022. Credit - Saul Loeb—AFP via Getty Images

When a group of semiconductor companies, including Intel Corp., lobbied Congress to pass the $52 billion chip-stimulus bill earlier this year—one of the biggest federal investments in a private industry—they argued in part that the subsidies and tax breaks would protect American jobs.

But now just months before the funding applications open, the nation’s largest semiconductor company is reportedly planning a major reduction in its workforce—yet could still receive billions in federal subsidies. Thousands of Intel employees are expected to be laid off later this month to cut costs amid a steep decline in demand for PC processors, according to Bloomberg. Some divisions, including sales and marketing, could lose 20% of their staff.

Intel is under intense pressure from investors, as its shares have fallen more than 50% this year. The company posted a net loss of $454 million in the second quarter, compared with a net income gain of $5 billion for the same period a year ago. Analysts are predicting more grim news to come out of the company’s upcoming earnings release, with an expected third-quarter revenue drop of roughly 15%.

Even so, the reported job cuts come at an awkward time for Intel, given that the company lobbied heavily for the subsidies and committed $20 billion to build a manufacturing mega-site on the outskirts of Columbus, Ohio earlier this year. The move also puts Intel chief executive Pat Gelsinger—who received a $179 million compensation package last year—in a difficult position. In December, he lobbied Congress to pass the funding, co-signing a letter to lawmakers that said federal subsidies would be “supporting millions of jobs for Americans.”

Intel, based in California, declined to comment on the reported layoffs to TIME. The chipmaker had 113,700 employees as of July, and plans to apply for federal funding in February when the Commerce Department starts dispersing subsidies and tax breaks to companies seeking to build factories inside the U.S, an Intel spokesperson said in a statement to TIME on Monday, adding: “We expect the Intel Ohio site to create 3,000 Intel jobs and 7,000 construction jobs.”

But the reported layoffs, which could happen as early as Oct. 27, highlight the perils of promising federal funds to private companies without enough guardrails in place, says Gary Hufbauer, a senior fellow at the Peterson Institute for International Economics who has surveyed U.S. industrial policy for over 40 years, including at the Department of Treasury.

“It was certainly foreseeable,” he tells TIME. The Biden administration “could have put in conditions that we’re not going to give grants to companies that are cutting back their capital outlays or firing workers. But there’s nothing like that in the bill.”
How jobs could play a role in funding decisions

Another industry stalwart, the Taiwan Semiconductor Manufacturing Company, also had to cut capital spending this year due to slower global chip demand—particularly for PC processors. TSMC executives said the spending cut was around 10% but did not specify whether there were layoffs.

The Taiwanese chipmaker is the world’s largest semiconductor manufacturer and has already started building a $12 billion computer-chip factory in Arizona, with plans to hire U.S. engineers to staff the facility. But the pace of construction largely depends on how much in federal subsidies the Commerce Department approves, a Taiwanese minister told The Washington Post in June.

A number of other major chip manufacturers, including GlobalFoundries and Samsung, have also suggested they may apply for funding to build or expand U.S. facilities in February. The Commerce Department said in a Sept. 6 strategy report that it will prioritize “investments in projects that connect workforce training dollars to quality jobs that exceed the local prevailing wage for an industry in the region.”

The Commerce Department declined to comment on how expected layoffs could impact funding decisions but did say that more information on specific guardrails and restrictions will be included in the funding application.

Some members of Congress raised these exact concerns during the negotiation process, including Sen. Bernie Sanders of Vermont, who described the program as a “corporate giveaway.”

“Over the last 20 years, the microchip industry has shut down over 780 manufacturing plants in the United States and eliminated 150,000 American jobs while moving most of its production overseas after receiving over $9.5 billion in government subsidies and loans,” Sanders said in July, before the Senate voted in favor of the bill. “In order to make more profits, these companies took government money and used it to ship good-paying jobs abroad.”

Others say the law will restore American leadership in the semiconductor industry after losing manufacturing to Taiwan and China, where the vast majority of advanced semiconductors and mature nodes are now made. There’s also a national security risk of relying on foreign nationals for chips, especially for military equipment. And the funding program could create millions of jobs, a senior advisor at the Commerce Department told TIME.

“This is not a blank check for companies,” Commerce Secretary Gina Raimondo said at a White House press briefing on Sept. 6. She added that the Commerce Department would use its authority to reclaim the money if recipients “fail to start their project on time, fail to complete their project on time, or fail to meet the commitments that they’ve made.”
Demand for chips could increase again soon

But even if Intel does slash thousands of jobs this month, it’s possible the company hires them back—or hires even more employees—after receiving the federal subsidies, says Bob Johnson, the lead analyst for semiconductor capital spending at Gartner, who has studied the industry for roughly 50 years.

“It’s a question of timing. It takes 18 months to two years to actually get the physical factories in place, during which time the jobs you’re supplying are construction jobs—not fab operators,” he tells TIME.

The overall economy may also start looking better in two years when the factories are built, as semiconductor companies are currently battling excess supply and decreased demand. “It’ll last about a year, and then everything will return to more normal,” Johnson says.

The American chip industry’s $1.5trn meltdown

Mon, October 17, 2022 

In licking county, Ohio, fleets of dump trucks and bulldozers are shifting earth on the future site of chip factories. Intel is building two “fabs” there at a cost of around $20bn. In March President Joe Biden called this expanse of dirt a “field of dreams” in his state-of-the-union speech. It was “the ground on which America’s future will be built”, he intoned.

In the spring it was easy to be dreamy about America’s chip industry. The pandemic-induced semiconductor crunch had proved just how crucial chips were to modern life. Demand was still rising for all sorts of chip-powered technology, which these days is most of it. Investors were less gloomy on chips than on other tech, which was taking a stockmarket beating. The CHIPS act was making its way through Congress, promising to plough subsidies worth $52bn into the domestic industry, in order to reduce America’s reliance on foreign fabs and support projects like Intel’s Ohio factory.

Half a year later the dreams look nightmarish. Demand for silicon appears to be falling as quickly as it had risen during the pandemic. In late September Micron, an Idaho-based maker of memory chips, reported a 20% year-on-year fall in quarterly sales. A week later AMD, a Californian chip designer, slashed its sales estimate for the third quarter by 16%. Within days Bloomberg reported that Intel plans to lay off thousands of staff, following a string of poor results that are likely to continue when it presents its latest quarterly report on October 27th. Since July a basket of America’s 30 or so biggest chip firms have cut revenue forecasts for the third quarter from $99bn to $88bn. So far this year more than $1.5trn has been wiped from the combined market value of American-listed semiconductor companies (see chart).

The chip industry is notoriously cyclical at the best of times: the new capacity built in response to rising demand takes several years to materialise, by which time the demand is no longer white-hot. In America this cycle is now being turbocharged by the government. The chips act, which became law in August to cheers from chip bosses, is stimulating the supply side of the semiconductor business just as the Biden administration is stepping up efforts to stop American-made chips and chipmaking equipment from going to China, dampening demand for American products in the world’s biggest semiconductor market.


Whether or not it makes strategic sense for America to bring more chip production home and to hamstring its geopolitical rival with export bans, the combination of more supply and less demand is a recipe for trouble. And if the American policies speed up China’s efforts to “resolutely win the battle in key core technologies”, as President Xi Jinping affirmed in a speech to the Communist Party congress on October 16th, they could give rise to powerful Chinese competitors. Field of dreams? It is enough to keep you awake in terror at night.

The cyclical slump has so far been felt most acutely in consumer goods. PCs and smartphones account for almost half the $600bn-worth of chips sold annually. Having splurged during the pandemic, inflation-weary shoppers are buying fewer gadgets. Gartner, a research firm, expects smartphone sales to drop by 6% this year and those of pcs by 10%. Firms like Intel, which in February was telling investors it expected PC demand to grow steadily for the next five years, are revising their outlooks as it becomes clear that many covid-era purchases were simply brought forward.

Many analysts think that other segments could be next. Panic buying amid last year’s global chip shortage has left many carmakers and manufacturers of business hardware with inventories overflowing with silicon. New Street Research, a firm of analysts, estimates that between April and June industrial firms’ stock of chips was about 40% above the historic level relative to sales. Inventories for pc-makers and car companies are similarly full. Intel and Micron blamed their recent weak results in part on high inventories.

The supply glut and sputtering demand is already hitting prices. The cost of memory chips is down by two-fifths in the past year, according to Future Horizons, a research firm. The price of logic chips, which process data and are less commoditised than memory chips, is down by 3% in the same period

Chip buyers will work through their inventories eventually. But after they do, they may buy less than in the past. In August Hewlett Packard Enterprise and Dell, two big hardware makers, hinted that demand from business customers was beginning to soften. Sales of both pcs and smartphones had started to plateau before the pandemic and this trend will probably resume in the coming years. Phonemakers cannot stuff ever more chips onto their devices for ever. For companies such as Qualcomm, which derives half its sales from smartphone chips, and Intel, which gets a similar share from those for pcs, that is a headache.

The chipmakers’ response has been to bet on fast-growing new markets. amd, Intel and Nvidia, another big chip-designer, are battling over the cloud-computing data centres, where chip demand is still increasing. Qualcomm is diversifying into cars. In September the firm’s bosses boasted it already had $30bn-worth of orders from carmakers. Intel, meanwhile, is expanding into semiconductors for networking gear and devices for the hyperconnected future of the “internet of things”. It is also getting into the contract-manufacturing business, hoping to win market share from tsmc of Taiwan, the world’s biggest chipmaker and contract manufacturer of choice for fabless chip-designers such as amd and Nvidia.

These efforts, however, are now running into geopolitics. Like their counterparts in China and Europe, politicians in America want to lessen their countries’ dependence on foreign chipmakers, in particular tsmc, which manufactures 90% of the world’s leading-edge chips. In response, America, China, the eu, Japan, South Korea and Taiwan together plan to subsidise domestic chipmaking to the tune of $85bn annually over the next three years, calculates Mark Lipacis of Jefferies, an investment bank. That would buy a fair bit of extra capacity globally.

At the same time, prospects for offloading the resulting chips are darkening, especially for American firms, as a result of America’s tightening controls on exports to China. Many American firms count the Asian giant, which imported $400bn-worth of semiconductors last year, as their biggest market. Intel’s Chinese sales made up $21bn of its overall revenues of $79bn last year. Nvidia said that an earlier round of restrictions, which limited sales of advanced data-centre chips to Chinese customers and to Russia after its invasion of Ukraine, would cost it $400m in third-quarter sales, equivalent to 6% of its total revenues.

The latest restrictions, which target Chinese supercomputing and artificial-intelligence efforts, are a particular concern for the companies which manufacture chipmaking tools. Three of the world’s five biggest such firms—Applied Materials, kla and Lam Research—are American. The share of the trio’s sales that go to China has risen fast in the past few years, to about a third. Toshiya Hari of Goldman Sachs, a bank, says that the controls are likely to cost the world’s toolmakers $6bn in lost revenues this year, equivalent to 9% of their projected sales. After the new American export controls were unveiled Applied Materials lowered its expected fourth-quarter revenue by 4% to $6.4bn. Its share price has fallen by 13% in the past two weeks. Those of kla and Lam Research have tumbled by a fifth.

American chip bosses now fear that China could retaliate, further restricting their firms’ access to its vast market. It is already redoubling efforts to nurture domestic champions such as smic (in logic chips) and ymtc (in memory), as well as domestic toolmakers, that could one day challenge America’s historic silicon supremacy. The result could be a diminished American industry with less global clout and more capacity than it knows what to do with. That is a shaky foundation on which to build America’s future.

© 2022 The Economist Newspaper Limited. All rights reserved.

Radioactive waste found at Missouri elementary school

Sun, October 16, 2022 

FLORISSANT, Mo. (AP) — There is significant radioactive contamination at an elementary school in suburban St. Louis where nuclear weapons were produced during World War II, according to a new report by environmental investigation consultants.

The report by Boston Chemical Data Corp. confirmed fears about contamination at Jana Elementary School in the Hazelwood School District in Florissant raised by a previous Army Corps of Engineers study.

The new report is based on samples taken in August from the school, according to the St. Louis Post-Dispatch. Boston Chemical did not say who or what requested and funded the report.

“I was heartbroken,” said Ashley Bernaugh, president of the Jana parent-teacher association who has a son at the school. “It sounds so cliché, but it takes your breath from you.”

The school sits in the flood plain of Coldwater Creek, which was contaminated by nuclear waste from weapons production during World War II. The waste was dumped at sites near the St. Louis Lambert International Airport, next to the creek that flows to the Missouri River. The Corps has been cleaning up the creek for more than 20 years.

The Corps’ report also found contamination in the area but at much at lower levels, and it didn’t take any samples within 300 feet of the school. The most recent report included samples taken from Jana’s library, kitchen, classrooms, fields and playgrounds.

Levels of the radioactive isotope lead-210, polonium, radium and other toxins were “far in excess” of what Boston Chemical had expected. Dust samples taken inside the school were found to be contaminated.

Inhaling or ingesting these radioactive materials can cause significant injury, the report said.

“A significant remedial program will be required to bring conditions at the school in line with expectations,” the report said.

The new report is expected to be a major topic at Tuesday's Hazelwood school board meeting. The district said in a statement that it will consult with its attorneys and experts to determine the next steps.

“Safety is absolutely our top priority for our staff and students,” board president Betsy Rachel said Saturday.

Christen Commuso with the Missouri Coalition for the Environment presented the results of the Corps' study to the school board in June after obtaining a copy through a Freedom of Information Act request.

“I wouldn’t want my child in this school,” she said. “The effect of these toxins is cumulative.”