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Sunday, October 23, 2016
GWPF Newsletter: Global Cooling: Stronger-Than-Expected La Niña May Be Brewing
1) Global Cooling: Stronger-Than-Expected La Niña May Be Brewing Reuters, 20 October 2016 Karen Braun
Cooling sea surface temperatures in the key Niño 3.4 region have touched the levels of early 2012.
Many have doubted forecasts calling for the onset of the first La Niña in almost five years, believing that its failure to materialize in convincing fashion last summer – as originally predicted – means that it may be off the table for 2016-17.
But in recent weeks, the oceans and atmosphere have been pulling everything into place to facilitate a potentially stronger La Niña than previously thought, so those who follow commodities markets may want to take a second look.
Last Thursday, the U.S. Climate Prediction Center reissued the La Niña watch that was removed in early September. The watch indicates that conditions are favorable for the phenomenon’s development within the next six months.
El Niño-Southern Oscillation, with its cool phase La Niña and warm phase El Niño, is one of the most reliable long-term indicators for global climate. The ENSO phases can have drastically different impacts on commodities worldwide – from energy use to grain yields.
La Niña, characterized by cooler-than-normal surface waters in the equatorial Pacific Ocean, has not officially been in place since the first quarter of 2012. But recently, cooling sea surface temperatures in the key Niño 3.4 region have touched the levels of early 2012 (reut.rs/2e2lI7y). CPC now says there is a 70 percent chance that La Niña will develop during the Northern Hemisphere autumn 2016 and there is a 55 percent chance it will persist during winter 2016-17. This is up from last month’s forecast of a 40 to 45 percent chance of development.
The environment has not fully committed to the La Niña cycle for Northern Hemispheric winter as the sea surface temperature anomalies have at times hesitated to maintain the downward plunge.
But there are larger-scale features in the oceans and atmosphere that appear consistent with soon welcoming a full-on La Niña, rather than a borderline event or a neutral ENSO.
PACIFIC COOPERATION Over the past few months, there has been a considerable shift in the Pacific Decadal Oscillation or PDO, a large-scale, long-term climate variability in the North Pacific Ocean that is closely associated with ENSO cycles.
A positive PDO index is associated with anomalously cool waters and below-average sea level pressure in the interior North Pacific, while a negative PDO index is the inverse scenario. Positive PDO is often correlated with El Niño and negative PDO typically coincides with La Niña.
The PDO index has been unusually positive over the past two years, which is not surprising given the record-strong El Niño observed late last year. Since 1900, the first six months of 2016 and 2015 ranked third and fourth for highest average PDO index, behind 1941 and 1940 (reut.rs/2e2gB7l).
But the index has been on a steep decline over the past couple of months, and September’s reading of 0.45 was the lowest value since February 2014. PDO has not been negative since December 2013.
This substantial shift in overall oceanic-atmospheric conditions certainly makes a good case for La Niña, so a close watch on PDO trends over the next few months may hint at whether La Niña conditions could stick around, or whether neutral ENSO or a reversal back to El Niño is possible in 2017.
The French government is set to drop plans to introduce a carbon tax, French financial daily Les Echos said on Thursday.
The newspaper, quoting several sources, said the socialist government will not include the carbon tax in a draft 2016 budget update currently being discussed.
Environment Minister Segolene Royal had said in May that France would unilaterally introduce a carbon price floor of about 30 euros ($33) a tonne with a view to kickstart broader European action to cut emissions and drive forward the December 2015 United Nations-led international climate accord.
The plan had pushed power prices higher in the spring.
Les Echos quoted a source as saying that the measure is too complicated to put in place and might be unconstitutional.
The paper said that state-owned electric utility EDF, which produces mostly carbon-free nuclear power, was in favor of the measure, but that gas utility Engie SA had lobbied against the tax because it would make its gas-fired power plants less competitive than similar plants in neighboring countries.
A source close to the French government told Reuters that nothing had been decided yet on the carbon tax but confirmed there were doubts about it.
3) France Burns Coal Like It's 1984 as Prices Jump on Atomic Woes Bloomberg 18 October 2016 Rachel Morison
France produced the most power from fossil fuels for September in 32 years to help meet demand as nuclear generation dropped.
Output from coal and gas plants more than doubled as Paris-based Electricite de France SA was forced to keep reactors offline for inspections. French month-ahead power prices have risen to near the highest since 2009.
“The availability of French nuclear continues to alarm market participants,” said Bruno Brunetti, managing director of global power at Pira Energy Group in New York. “With the lack of French exports supporting thermal generation, we have revised upward forecasts of coal-fired dispatching by roughly 5 terawatt-hours through 2017 in western Europe.” EDF’s reactors produced 26.6 terawatt-hours of electricity in September, the least since August 1998, prompting “heavy use” of stations burning coal and gas in a trend that has been increasing since April, according to a report by French grid operator Reseau de transport d’electricite. Thermal power generation was 4,132 gigawatt-hours, or 11 percent of the total.
France has seven fewer reactors available than at the same time last year after EDF announced it needed more time to carry out inspections to rule out potential anomalies on steam generators at 18 of its 58 units ordered by the nation’s nuclear regulator. EDF cut its nuclear output targets for the year on Sept. 21 after the safety checks were taking longer than expected. Six reactors are due to return this week.
The recent South Australian blackout has triggered a debate about the manifest risks of wind farms to the security of electricity networks. National Grid’s 2016/17 Winter Outlook reinforces previous concerns that low-carbon policy mandates are resulting in electricity systems that are likely to be fragile in the face of external shock, and are therefore more difficult and consequently more expensive to manage.
The UK’s National Grid has just published its Winter Outlook for 2016/17, in which it describes the situation this winter as “tight but manageable” (Overview section, p. 14).
The margin of “derated capacity” over expected peak load is roughly 3.4 GW over about 52.7 GW expected peak load, or a margin that National Grid quotes as 6.6%. However, the constitution of this margin both undermines confidence in its resilience, and reminds us that security of supply is increasingly dearly bought in the United Kingdom.
The margin in fact is critically dependent on the 3.5 GW of contingency balancing reserves (defined on p. 14, as “additional capacity held outside the market”, meaning all sorts of odds and ends). It is interesting to note that, on page three, that National Grid observes that some units in the supplemental balancing reserve need more than one day’s notice of operation, which is not encouraging, either for reliability or for cost (plant brought in good time may become surplus to requirements, but will have to be paid in any case).
Excluding the (derated) contingency balancing reserve the margin is only 1% over a peak load of 52.7 GW, ie a margin of about 580 MW, with Loss of Load Expectation of 8.8 hours per year. This is not attractive, and shows how reliant the system has become on expensive contingency balancing reserves.
Furthermore, net interconnector imports are assumed as 2 GW. It must be questionable whether that is a safe assumption. We know from ample empirical evidence in Europe that interconnectors should not be relied upon in a tight corner, since they must reduce transit or even disconnect to protect themselves. In any case, if the market on the other side of the interconnector is also somewhat tight, they may be very little use at all. The news that the French system is likely to be itself experiencing tight capacity margins this winter, due to the safety inspections in the nuclear fleet is a reminder that this is no merely theoretical concern. [….]
Read together, National Grid’s UK Winter Outlook and AEMO’s reports on the South Australian case, suggest that systems heavily exposed to wind generation tend to be fragile, and rendering such systems adequately robust is both difficult and, crucially, expensive.
The UK has joined Poland and a small group of other EU countries lobbying to delay tougher pollution rules for coal power stations ahead of discussions in Brussels on Thursday.
In a letter seen by the FT, Thérèse Coffey, the UK’s environment minister, warned the EU environment commissioner, Karmenu Vella, that the “uncertain global economic climate” means new pollution regulations should not impose “a disproportionate financial cost or technical burden on industry”.
Along with her counterparts from Poland, Greece, Finland and the Czech Republic, Ms Coffey believes more time should be given to a “comprehensive consideration” of the “significant” impact of new limits to be set under the EU’s main industry pollution law, the Industrial Emissions Directive.
The letter, written in September, suggested the Commission set up a “technical working group” to do more assessment of the rules before EU countries decide on them in a vote due early next year.
Oil and gas companies are valued largely on reserves that will be produced over the next 15 years, meaning that their investors are not vulnerable to longer-term changes in energy markets, a leading industry adviser has said.
Daniel Yergin of IHS Markit rejected warnings of a “carbon bubble” that could destabilise financial markets as policies to combat climate change hit fossil fuel producers, saying the transition to renewable energy would take decades and investors would have time to adjust their holdings.
The dangers for financial assets created by climate change have become an increasingl prominent issue for investors. Last year, ministers from the Group of 20 countries instructed the Financial Stability Board of their regulators and policymakers to start looking at the risks and how to address them.
Mark Carney, governor of the Bank of England who chairs the FSB, argued in a speech last year that regulators needed to address the problem now, because “once climate change becomes a defining issue for financial stability, it may already be too late”.
The action by regulators could restrict the flow of capital to oil and gas companies by making it harder for banks and other financial institutions to lend to and invest in the industry.
In a paper published on Wednesday, Mr Yergin argued that the concerns expressed by Mr Carney and others have been overdone, because investors generally look at relatively short time horizons when valuing oil and gas assets.
A former Greenpeace leader butted heads Tuesday with the anti-fracking movement by insisting that hydraulic fracturing is needed to help fight global warming.
Stephen Tindale, who was executive director of Greenpeace U.K. from 2000 to 2005, said that fracking, used to extract natural gas and oil from underground rock, helps combat greenhouse-gas emissions by reducing reliance on coal.
“[T]oday Britain faces its biggest environmental challenge ever — tackling global warming while still keeping the lights on,” Mr. Tindale said in the Tuesday article for the [U.K.] Sun. “And as a lifelong champion of the Green cause, I’m convinced that fracking is not the problem but a central part of the answer.”
He praised the British government’s recent approval of a shale-gas project in Lancashire, calling it “a great start, but that’s all it is. We need dozens more like it if Britain is to meet our energy needs in the decades to come.”
The London-based Global Warming Policy Forum is a world leading think tank on global warming policy issues. The GWPF newsletter is prepared by Director Dr Benny Peiser - for more information, please visit the website atwww.thegwpf.com.
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The newspaper, quoting several sources, said the socialist government will not include the carbon tax in a draft 2016 budget update currently being discussed.
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