Regulators, Mount Up
On federal regulation, I am going to touch several specific newsworthy rules, although these all follow a common pattern – the regulatory circle of life. Early in an administration’s term, they do all their homework, then they announce a new rule, people argue about it and submit comments, the administration digests the comments, and if things go according to plan, they publish a final rule (which is almost always less aggressive than the original proposals). This enables the administration to advance a priority, while still taking industry and stakeholder viewpoints into account. These new rules will all significantly impact their respective industries, even if they have been dialed back a bit.
First off, passenger vehicles. The new rule will encourage more electric vehicles and hybrids; the fleet-wide standard will really start to ramp up in 2030 (delayed from the original rule, in line with how automakers are downscaling some of their EV growth plans on lower than expected demand. EVs are still growing, and I think it will really accelerate in the 2026-2027 timeframe. People like what they like; in the US that is midsize and large SUVs. But those types of vehicles are just beginning to come to market (in 2023, you couldn’t buy an EV that was a three row SUV or a minivan for under 75k, by the end of 2024 there will be options under 50K in both categories).
Next – trucking. Heavy duty vehicles make up 5% of the nation’s vehicles but 20% of the emissions. And unlike passenger vehicles, where it’s obvious that most or all vehicles will electrify, heavy duty vehicles are harder because of their size and weight. Day cabs will likely electrify, but the jury is out on long haul trucking – it’ll likely be some combination of electrification, hydrogen fuel cells, and alternative fuels. Since this market is more nascent, there are very different (and less aggressive) rules for trucks compared to cars – these wouldn’t kick in until 2027.
Finally: SEC climate disclosure. This rule changed the most of the three, dropping a requirement to report scope three (supply chain) emissions (and scope 1 and 2 are only required for large companies, and only if material). It is also on hold amid state lawsuits. So, while it’s less comprehensive, it is a step change from 0 to 1 in that these are data sets and information that weren’t required to be tracked and reported before, now they will be.
Credit: New York Times
Energy, In Demand
Electricity demand is growing in the US – this is relatively new! There was a period after World War II where demand grew for a long time, essentially in step with economic growth. Then for the last 15 or so years, there was a relatively flat period, largely as the result of energy efficiency measures with growth at or under 1%. Now, growth is projected again, as a result of the growing energy demand of data centers, as well as additional factors like new domestic manufacturing and electric vehicles. AI is a wild card here, either pushing demand up a bit, or a lot, depending on how intensive the models end up being over time – I’m guessing they will get a lot more efficient as specific applications and tools develop and they become part of typical workflows, but we’ll see.
This is a mixed bag. More demand means we’ll use more fossil fuels longer, and is leading some utilities to invest in more fossil fuel plants. On the other hand, data centers are well suited to being powered by renewables – many large tech companies are already running in this direction because it is cheap and more sustainable, and also because the work of a data center is fungible, so tasks could be routed to data centers with the lowest emissions profile of power at a given time.
Illinois Auto Manufacturing Innovation
Credit: Rivian
Rivian announced several new models, including a cheaper, smaller midsize SUV (R2, coming out in 2026, selling in the 40k’s) and a cheaperer smallerer compact SUV (R3, for 2027, selling in the 30k’s). They also scrapped plans for another facility for now and will build the R2 in Illinois, as they do with their other models currently. I think Rivian is interesting because they seem to represent a lot of things that Americans want in a vehicle: SUV form factor and long range (and it probably helps them that their CEO is not polarizing).
Although it is a few years out, we are now getting to a point where we can see the mass market cost competitive electric vehicles. On that note, Gartner Research thinks EVs will be cheaper to produce than internal combustion vehicles in 2027, driven by battery pack efficiencies and cost improvements.
Other News
EV charging stations have gotten a lot busier, with many doubling their utilization rates in the last year.
Illinois announced $680 millions in investments for the Illinois Fermentation and Agriculture Biomanufacturing (iFAB) Tech Hub, to make the state a leader in bioprocessing. This hub is in the running for additional large scale funding from the Economic Development Administration.
Lithium Americas received a Department of Energy loan for the only domestic lithium mining project (important for electric vehicles).
