What’s Next? Self-Driving Cars and Asia's LNG Market Breaks Free

(Bloomberg Opinion) -- BloombergNEF held its annual New York Summit this week. Analysts hosted dozens of sessions on topics as varied as the future of lithium-ion storage battery innovation and market opportunities in Colombia. Here are a handful of key ideas worth noting for the coming years (and decades) of development in energy, transport, industry and technology.

California leads on autonomous vehicle testing, but China is catching up

My colleague Nick Albanese gave a presentation on the evolving landscape of autonomous mobility that included this chart. More than 60 companies have permits to test autonomous vehicles on public roads in California. In China, there are half as many permitted to do the same. There’s no overlap between the top testers (in terms of miles driven) in the two markets. General Motors Co. subsidiary Cruise Automation Inc. and Alphabet Inc.’s Waymo LLC have the most autonomous miles driven in California; China’s top testers include Baidu Inc. and China FAW Group Co. Ltd.

What’s Next? Self-Driving Cars and Asia's LNG Market Breaks Free

Cars are less metal than they used to be

Julia Attwood, head of BNEF’s advanced materials analysis, presented a chart showing how the composition of U.S. automobiles has changed since 1995. Cars today use a higher proportion of more advanced materials, such as high-strength steel, aluminum, plastics and composites, than they did two decades ago.

Manufacturers are making these significant changes for a lot of reasons, Attwood says:

Automakers are under pressure to make their product more sustainable. This means improving the fuel economy and reducing vehicle carbon footprints. Both of these goals require a shift in materials use. Moving from emissions intensive metals like steel, to aluminum, which is processed with electricity, delivers a route to decarbonizing material production, and therefore products. We should note that things have changed even since 2015, with more mass-market vehicles moving to aluminum frames, and luxury vehicles incorporating more advanced materials.

What’s Next? Self-Driving Cars and Asia's LNG Market Breaks Free

U.S. electrical grid spending is growing, but productivity is not

BloombergNEF’s James Sprinz delivered a thoughtful talk on the U.S. power grid and its growth and productivity paradoxes. U.S. power demand has increased by 20 percent since 1994; at the same time, spending on the U.S. power grid (transmission and distribution lines, capital and operating expenditure) has nearly doubled.

What’s Next? Self-Driving Cars and Asia's LNG Market Breaks Free

While the grid is growing, productivity is declining. Cumulative total productivity in transmission and distribution is negative since 1994 (and markedly so for transmission). Low productivity makes grid investment a less attractive asset class, a challenging proposition when more transmission, in particular, will be needed to integrate ever-more-renewable power generation.

What’s Next? Self-Driving Cars and Asia's LNG Market Breaks Free

Liquefied gas is approaching a key free moment in Asia

Ashish Sethia, BloombergNEF’s head of Asia Pacific research as well as global head of commodities analysis, gave an entertaining talk on how the global liquefied natural gas market “wants to break free” (with Queen making an appearance).

Freedom, for LNG, takes many forms — freedom for buyers, freedom for sellers and freedom from contract structures, which historically have featured prices fixed for decades. As an illustration, Sethia showed the dramatic increase in open interest (the number of outstanding contracts) in the Japan Korea Marker, Asia’s key LNG benchmark. Open interest barely existed five years ago. Today, JKM open interest is nearly as big as open interest in  Australian Newcastle coal, one of Asia’s most venerable, most liquid energy contracts. The volume reflects not only liquidity and transparency in Asian LNG markets, but also the intense competition, on an energy basis, between LNG and coal.

What’s Next? Self-Driving Cars and Asia's LNG Market Breaks Free

To Sethia’s (and Freddie Mercury’s) point, LNG wants to break free. A liquid futures market in Asia, rivaling one of the world’s most important coal markets, is a step in that direction.

For more conference videos, including CEO interviews and executive roundtables, go here.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Nathaniel Bullard is a BloombergNEF energy analyst, covering technology and business model innovation and system-wide resource transitions.

©2019 Bloomberg L.P.

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