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Wednesday, October 6, 2021

GWPF Newsletter: Europe's energy crisis risks derailing UN climate summit

 




Europe sees a renaissance in coal power generation

In this newsletter:

1) Europe's energy crisis risks derailing UN climate summit
EurActiv, 4 October 2021

2) Europe sees a renaissance in coal power generation
FX Empire, 4 October 2021

  
3) Renewable power fuels Europe’s energy crisis
Las Vegas Review Journal, 4 October 2021
  
4) Judith Sloan: Left powerless and in a world of renewables pain
The Australian, 4 October 2021
 
5) David Davis: Tory MPs are sick of tax hikes and green spending
The Daily Telegraph, 2 October 2021
 
6) Patrick O'Flynn: Green issues will be the end of this Government 
The Daily Telegraph, 5 October 2021
 
7) Francis Menton: More news on the progress toward eliminating fossil fuels
Manhattan Contrarian, 3 October 2021

Full details:

1) Europe's energy crisis risks derailing UN climate summit
EurActiv, 4 October 2021
 
To mitigate the impacts of the price crunch, coal power plants have been reopened and  governments have rolled back taxes for energy companies, essentially providing subsidies for fossil fuels.
 
The current hike in energy prices is threatening to overshadow the COP26 climate summit this November as countries scramble to tackle the rising costs of electricity, oil and gas, warned a senior executive at Spanish power firm Iberdrola.

As the world reopens after the COVID-19 pandemic, the sudden high demand for gas, conflated by other factors, has caused a spike in energy prices.
 
But policies brought in by European governments to try and tackle the soaring prices risk looking hypocritical in light of the climate ambition they are demanding from the rest of the world at the COP26 summit.

Spain, for instance, has capped gas prices and cut taxes in order to help alleviate some of the strain.

“Despite the positive perspective for the energy transition at the EU level, soaring energy prices could jeopardise EU climate action,” said Gonzalo Sáenz de Miera, director of climate change and alliances at Iberdrola, the Spanish multinational electricity company.

“This situation is threatening the case for a rapid shift to clean energy sources by some measures recently passed by some EU member states,” he told a EURACTIV event on Thursday (30 September), supported by Iberdrola.

Leaders of European Union countries will discuss surging energy prices when they meet next month, as governments scramble to cushion households from the soaring cost of gas and power.
 
Conflicting messages

The energy price crunch comes amid calls from the UK’s lead on COP26 for a global agreement to end the use of coal power and switch to renewables.

Yet there is a danger that the energy price crunch is having the opposite effect, undermining the incentive to decarbonise created by Europe’s carbon market, the Emissions Trading Scheme (ETS), where prices reached an all-time high of €65 per tonne last week.

To try and mitigate the impacts of the price crunch, coal power plants have been reopened and  governments have rolled back taxes for energy companies, essentially providing subsidies for fossil fuels.

“What is happening now, for instance in Spain, is that there is a charge for non-emitting plants to extract the income from high gas prices and from high CO2 prices. This is a very bad message in Europe,” warned de Miera.

“It does not comply with the European single market. It may break the ETS if some populist governments in EU countries say ‘Spanish users are not paying for CO2, why do I have to pay for it?’ So this is a very dangerous movement,” said de Miera.

De Miera warned that this also creates confusion in the energy market and will cause a drop in investments in renewables.
 
Full story
 
2) Europe sees a renaissance in coal power generation
FX Empire, 4 October 2021
 
A steep rise in gas prices during the third quarter significantly improved the profitability of coal-fired power generation in Europe.













In August, NWE front-month clean dark spreads for 40pc-efficient units recorded on average a €8/MWh premium over clean spark spreads for 55pc gas plants, while in September the gap between the two indicators surpassed €35/MWh.
 
Given the acute vulnerabilities in the UK energy system, everyone’s attention has been especially drawn to that country in recent weeks. To avoid shortages in electricity supply, Britain was forced to fire up its remaining coal power plants.

Utilities on the other side of the English Channel did the same thing in late summer. For instance, September’s share of electricity coming from coal in Germany reached its highest level since the end of 2018, while the weight of coal generation in the electricity mixes of Italy, the Netherlands and France combined rose by more than 4 percentage points over the past month. In other market environment, a big portion of the coal-fired units, which are in use now, would obviously not be brought back to life.

As coal power plants are still operating far below capacity in Western Europe, there is potential for intensifying their usage. The question is what effect further fuel switching to coal may have on gas market in today’s conditions?
 
Full story
 
3) Renewable power fuels Europe’s energy crisis
Las Vegas Review Journal, 4 October 2021
 
First World countries in Europe are struggling with a Third World problem. They’re running short on electricity, and prices are surging.


 
Europe is in the midst of a full-scale energy crisis. Unusually calm weather this year reduced wind power production in countries, including Germany and Denmark.
 
SSE, an energy company in the United Kingdom, saw its renewable energy assets produce 32 percent less electricity than expected since April. Along with less wind, a dry summer reduced hydropower production.
 
Coal and nuclear power plants could have been picking up the slack. But European countries have been shuttering coal plants for years in an effort to reduce carbon emissions. Even nuclear energy, which produces power without carbon emissions, has faced opposition. For instance, Sweden has shut down two nuclear power plants over the past two years.
 
That leaves natural gas, which produces fewer carbon emissions than coal. But worldwide demand for natural gas has soared — along with the price. In January 2019, the European price of a megawatt hour of electricity from natural gas was around 20 euros. That dropped to under 5 euros in May 2020 as the pandemic reduced demand. Today, it’s more than 70 euros.

More supply would help, but the U.K. and Germany have outlawed hydraulic fracking despite their having available gas shale reserves. A massive natural gas field in the Netherlands is being shut down, too. That leaves Europe dependent on natural gas from Russia. It may be reducing deliveries to play political games involving its Nord Stream 2 pipeline.

Things are so bad that Britain recently increased output from coal plants to boost supply. But coal prices have soared, too — they have nearly quadrupled from a year ago.

The coming winter months threaten to make this worse. Shortages of gas, which is used for heat, can have deadly consequences.
 
In France, energy bills have gone up 57 percent since January. In response, France instituted a price freeze on natural gas and electricity. Prime Minister Jean Castex said he thought gas prices would rise by around 30 percent over the next few months. That either means shortages or that the government — read: taxpayers — will be paying the difference. Then there’s Europe’s cap-and-trade program, which forces prices even higher.

Energy shortages have rippled through the economy with severe consequences. Energy providers, steel plants, fertilizer producers and even soda makers are facing problems. Shortages seem inevitable.

What’s happening in Europe should be a warning to the United States When it’s needed most, renewable energy isn’t yet prepared to deliver without significant help from traditional — and reliable — power sources.
 
4) Judith Sloan: Left powerless and in a world of renewables pain
The Australian, 4 October 2021

The truth be told, the lead-up to the COP26 climate conference in Glasgow is turning out to be the exact opposite of what British Prime Minister Boris Johnson would have wanted.

His boast of Britain becoming the Saudi Arabia of wind energy is looking like a bad joke as an extended wind drought affected the UK and Europe. This past northern summer, renewable generation in Britain (which is overwhelmingly wind) fell by 16 per cent while generation from fossil fuels rose by 15 per cent.

Just recently, an old coal-fired power plant had to be switched on to ensure there was sufficient supply to meet demand. The few remaining coal-fired plants in Britain are being paid to hang around for this precise eventuality, although the government’s plan (possibly to be revised) is that these plants will be shut down in the next year or two.

Regulated energy bills in Britain have just increased by £139, pushing the average household bill to nearly £1300 (about $2400). About a quarter of electricity bills is made up of environmental and social costs that are designed to fund the government’s decarbonisation energy strategy.

A further substantial increase in household energy bills is expected in six months. Nine energy suppliers in Britain collapsed last month and the industry regulator, the Office of Gas and Electricity Markets, is preparing for the possible collapse of a large supplier.

In the meantime, the energy crisis facing Britain is being mirrored around the world – with the exception of Australia at this stage – with the price of fossil fuel energy skyrocketing. Thermal coal, for instance, is trading at more than $US200 ($275) a tonne, up from a little more than $US50 a tonne this time last year.

Electricity prices are rising rapidly in Spain, where all the coal-fired electricity plants have been closed. Household electricity bills have risen by 35 per cent this year, with the wholesale price of electricity soaring by 250 per cent. The government is attempting to tweak the taxes and charges imposed on electricity bills as well as levy a super-profits tax on suppliers. Electricity prices also are skyrocketing in Italy.

Earlier in the year we saw an energy catastrophe occur in Texas when millions of customers were without power during a particularly cold snap. The state had gone headlong into renewables without creating a capacity market for dispatchable power and without adequate interconnectors with other states (which were short of power in any case). It was only a matter of time before such a calamity would arise.

More recently, California has encountered energy problems, with households facing a series of rolling blackouts. The Californian government had to apply to the federal government to operate a gas-fired power plant at full capacity, contrary to federal climate regulations. There are now plans to build more gas plants. Bizarrely, the one large nuclear plant in California is slated for closure in coming years.

Germany was once the poster child of the transition away from fossil fuels but is facing serious energy problems in relation to supply and price.

Having made the fateful decision to close all its nuclear plants, a process that will be completed in the next few years, Germany is highly reliant on natural gas sourced from Russia. And in the first six months of this year, coal produced more electricity in Germany than wind.

China has been rationing its electricity output with some factories forced to work at less than full capacity and consumers facing potential blackouts. Just last week, a decision was made by the central government to ramp up the stores of coal and liquefied natural gas to ensure the continuity of electricity for the country in the coming cooler months.

Now there is always a possibility that these worldwide problems are short-lived, although the futures markets indicate otherwise. There will be adjustments to demand and supply. But when it comes to supply, there are often long lead times between decisions to invest and the supply coming on. In Britain, for instance, no new gas drilling licences have been granted since 2016.

And while there is a commitment to open a new nuclear installation in Britain – Hinkley Point C – it won’t become operational until 2026. It uses French technology and is funded by Chinese interests. In the meantime, the net contribution from nuclear power in Britain will drop significantly. During the past decade, nuclear power capacity fell by 27,000 megawatts.

More generally across the world, there has been a relative capital strike when it comes to investment in new fossil fuel supplies as investors have decided to mark down any association with fuel sources that are deemed to be inconsistent with action on climate change. It has been easier making money chasing government subsidies for renewable energy and profiting from climate-related financial products.

Even in the US where fracking was the principal reason for that country’s record on reducing emissions – emissions were 14 per cent lower in 2017 compared with 2005 – there has been relatively little recent spending on new gas wells. There are political pressures to impose restrictions on US gas suppliers exporting LNG. Several South American countries are importing gas from the US to offset reduced hydro-sourced electricity.

So as the Glasgow climate conference approaches – and all the hype that goes with it – Johnson may already be regretting his recent assertion made to the UN General Assembly that “it is easy to be green”. It’s clear that it is not easy going green, even though there is generally some low-hanging fruit to pick when the penetration of renewable energy in a grid is relatively small.
 
 
5) David Davis: Tory MPs are sick of tax hikes and green spending
The Daily Telegraph, 2 October 2021
 
The French politician Jean-Baptiste Colbert described the tax riddle best: “The art of taxation consists in so plucking the goose as to obtain the largest possible amount of feathers with the smallest possible amount of hissing.”

Well, there has been a lot of hissing on the Tory benches of late after Boris Johnson’s decision to rack up national insurance payments. True, after much honking and squawking, the din died down by the time the NI hike came to a vote. But many of us remain deeply disturbed by the direction of Government economic policy.

We are heading down a road that history teaches led to national ruination and political disaster for my party when it was last attempted. At 36 per cent of national output the tax burden in the UK is at its highest level for 70 years and is set to go even higher. For Tory MPs fearful of losing their seats, it is worth bearing in mind that no government in recent times has raised taxes and then gone on to win an election.

Margaret Thatcher cut taxes sharply and went on to win three elections. John Major put them up and lost spectacularly. Tony Blair fought off attempts by Gordon Brown to raise taxes and won twice. Brown, as Prime Minister, put them up and lost. David Cameron resisted pressure for higher taxes in the austerity years and won.

Of course, the public finances have been knocked for six by the pandemic as the Government has borrowed eye-watering sums - £400 billion at the last count – to finance lockdown. This money will have to be paid back – ultimately – but slapping more taxes on a population already groaning under a burden last seen in the aftermath of World War II is not the way to do it.

If taxes are high, so is spending. According to the latest ONS figures, total managed expenditure now sits at the dizzying height of 52 per cent of national output – 12 percentage points higher than before the virus struck.

As a former Brexit Secretary and ardent advocate of quitting the EU, I find it ironic that we have broken free of the Brussels yoke only to embrace Continental levels of taxation and public spending. We should not forget that since the formation of the Eurozone 20 years ago, the UK has grown faster than the members of that club, which include the supposed economic powerhouses of France and Germany. Who would bet that on our present trajectory, we will be able to say the same 20 years from now?

Raising taxes beyond a certain point – and we have reached it – just does not work.

First, it depresses economic activity, stifling the growth that we need to maintain and then raise living standards. It pushes up unemployment and restricts the formation of dynamic new firms essential for prosperity.

Second, we should stop obsessing about how to share out the national cake. We should concentrate on baking a bigger cake so there is more to go round. The Chancellor’s decision in his last Budget to raise corporation tax – the tax on company profits – from 19 per cent to 25 per cent, reversing the downward path of recent years, is exactly calculated to bake a smaller cake.

Third, we should remember the policies of Nigel Lawson, probably our greatest post-war chancellor, who cut tax rates and increased the tax take. By cutting  taxes, he helped transform Great Britain from the sick man of  Europe to the envy of the western world.  And the corollary of his policy is that beyond a certain point, increasing taxes reduces revenue to the Treasury.

With higher taxes people in general work less hard and for fewer hours. Why slog away for 60-70 hours a week (as many owners of small businesses do) only to see most of the extra wages disappearing into the Treasury black hole? As for the well-off, they just hire more and better tax lawyers. Or leave the country, along with their investments. Right now, the top one per cent of earners pay nearly 30 per cent of all income tax. Push tax rates higher and they are going to find more ways of escaping the clutches of the taxman.

But it is not just our quasi-socialist tax and spend policy that bothers me. Cheap energy was the foundation stone of UK prosperity. The Industrial Revolution, which transformed our country and in time the rest of the Western world, was built on coal. But now, under intense pressure from global warming radicals, we have embraced a policy of expensive energy.

Coal has gone, nuclear is dying, gas and oil are being phased out. Before us looms the energy gap – not enough energy to keep the lights on – and after that will come a combination of a swingeing increase in bills for domestic and industrial consumers and, as the current crisis illustrates, insecurity of supply.

The Government’s hell for leather pursuit of net zero carbon emissions by 2050 (including the banning of new petrol and diesel cars by 2030) threatens a huge drop in living standards for our children and grandchildren.
This might be worthwhile if it did any good for the climate. But Britain accounts for one per cent of global CO2 emissions.  Meanwhile, China merrily carries on building legions of new coal-fired power stations while relishing our self-inflicted penury to come.

It is perfectly proper for the government to pursue a rigorous policy to deal with climate change, but it must think through the consequences for ordinary working people, their cost of living, their jobs, their energy security.   Whether this involves more nuclear power, or even more exotic ideas like the proposed enormous electrical interlinks with Moroccan wind farms, the policy demands that they match their enthusiasm with more imagination and more careful planning.

If not, the current combination of tax, energy and regulatory policies, far from levelling up, will impose a crushing cost of living crisis on the ordinary working families.   Increasing wages may help a bit, but these will feed into more inflation if not matched by increasing productivity.  That will demand more investment, which will not be helped by the corporation tax hike.   It will also demand more deregulation, more competition, and more - not less - economic freedom.

We need a whole new, Conservative, economic strategy. It starts by dealing with the £400 billion cost of Covid. We should treat it like war debt and get it off the nation’s short term balance sheet. We should issue long-dated Covid bonds and sell them at home and abroad. Then in  50 years from now Covid will be just a distant memory and cost.

Once we have done that we have a reasonable chance of balancing the books, which should primarily be done by encouraging economic growth, not cruel tax hikes.  Savings will have to be made, but they should be achieved with an eye always on the impact both on the ordinary family and on our economic growth.  We might start by saving at least £100 billion with the cancellation of HS2.

Boris was once the nation’s foremost advocate of creating a dynamic, low tax, high investment, light-regulation, high productivity society and economy - the one that we all dreamed of when we voted to leave the EU.  

Let us hope that when we return from our conference he will have been reinvigorated in his belief in these foundational concepts of conservatism. They have worked so well for our country down the decades, and only by embracing them will he deliver the prosperity that this nation is capable of. 
 
6) Patrick O'Flynn: Green issues will be the end of this Government 
The Daily Telegraph, 5 October 2021
 
In relation to the fantastically expensive race to achieve “net zero” Boris Johnson has become a true believer, ready to follow the cause with the zeal of a convert.














Throughout his political career, Boris Johnson has faced attacks from opponents on grounds of being an opportunist – someone ready to hitch a ride on any passing bandwagon if he thought it would help him get to Downing Street.
 
He is, for example, often accused of exploiting Brexit in such a manner after having prepared two columns for this newspaper – one in favour and one against - as an intellectual exercise to help him clarify his mind.
 
But in relation to environmental policy and the fantastically expensive race to achieve “net zero” carbon emissions, I am afraid things are very much worse than that. Johnson has become a true believer, ready to follow the cause with the zeal of a convert.
 
One of his big set piece announcements during this Tory conference week is reportedly going to be an improbable-sounding promise that all of Britain’s electricity will come from renewable sources by 2035 – just 14 years from now. The lot. Every last gigawatt.
 
So radical-sounding is this policy that not only will it disable Labour from being able to accuse him of being unprepared to go fast enough to tackle the “climate emergency” (copyright all broadcasters), but it even pretty much disables the Green Party from pursuing the same charge.
 
It is telling that one person cheering on the Prime Minister, quoted in today’s Times, is Joss Garman, the UK director of something called the European Climate Foundation, who said: “This will go a very long way to putting Britain on track to net zero.”
 
Note that this is the very same Joss Garman who not long ago was a campaign leader for Greenpeace UK and also an official adviser to Lisa Nandy when she was shadow secretary of state for energy and climate change.
 
There is now a case for saying that Boris Johnson is not merely winning the approval of the UK Green movement, but that he is becoming the embodiment of the UK Green movement. Our very own Greta Thunberg, minus the scowls.
 
Reading between the lines of outline reports of his impending new energy policy yields one note of reassurance – that the Prime Minister has decided to define nuclear as a source of green, or “clean”, energy.
 
So not only will he aim to increase offshore wind output from 10GW of electricity a year to 40GW by the end of the decade and to 60GW soon after, but he has also decided “to get back into nuclear…to increase our clean energy generation”.
 
Thus, when the wind doesn’t blow and the sun doesn’t shine, the splitting of atoms will keep the lights on instead of the burning of gas, oil and coal doing that job. It has been obvious to most sensible people for some time that an expanded nuclear capacity was necessary. But it is doubtful that the darkest Greens will ever be quite won round to the fuel source involved in the Chernobyl and Fukushima disasters.
 
A much bigger danger for Johnson and the Tories is how the British public as a whole will react once someone puts a price tag on this new double-quick abandonment of fossil fuels.
 
In case the PM has forgotten, it was only on Friday that the energy price cap was relaxed, enabling suppliers to jack up domestic power bills by 12 per cent, or around £140 per year. Further relaxations are, as they say, in the pipeline and will have a similar depressing impact on living standards.
 
Mr Johnson appears to think that dangling the prospect of being liberated from dependency on gas, coal and oil, will cheer people suffering right now from price spikes in fossil fuels, billing renewables as a way to “bring the cost of energy down and bring down the cost of transport”.
 
But will that really wash? Isn’t there a danger that someone soon will remind families just how much the huge expenditure on green energy is costing them in terms of extra levies and charges on their power bills right now?
 
After all, when we last saw acute public concern about domestic energy bills, back in 2013, David Cameron reacted in a very different way. As a leader who had come to power under the slogan “Vote Blue Go Green”, Cameron nonetheless immediately sensed danger in being seen as someone who prioritised being an eco-visionary over the more mundane reality of how much it was costing people to put the kettle on. So he reportedly stomped around Downing Street telling officials to “get rid of all this green crap” from domestic bills.
 
It is notable that the Chancellor Rishi Sunak is far more cautious than is Mr Johnson in talking up the net zero policy. Back in the summer when interviewed by Andrew Neil on GB News he even drew short of explicitly endorsing a mass switchover of households from gas boilers to heat pumps. And he also stressed the importance of keeping a check on the overall cost of net zero, something he said the Treasury had in hand.
 
Full post (£)
 
7) Francis Menton: More news on the progress toward eliminating fossil fuels
Manhattan Contrarian, 3 October 2021
 
The bureaucrats of the world, particularly in the UN and developed countries, have the idea that they are going to eliminate all use of fossil fuels by somewhere around 2040-50. They have no conception of how to accomplish that, other than to order from on high that it shall occur and assume that somebody else will figure out the details.
 
This gives the rest of us the opportunity to sit on the sidelines and observe how bureaucratic fantasy gradually runs into the brick wall of physical reality.

Back in June I covered the Report just out from Ren21 Renewables Now wherein we learned that in the ten years from 2009 to 2019, despite hundreds of billions of dollars of subsidies for intermittent wind and solar power, the percent of world final energy consumption coming from fossil fuels had dropped all the way from 80.3% to 80.2%.
 
Oh, but world final energy consumption was substantially up over that decade from about 320 to 385 exajoules, so despite all the strenuous efforts to reduce their use, in fact annual fossil fuel consumption had increased from about 260 to 310 exajoules.
 
And then just two weeks ago I covered the unfolding energy crisis in the UK. There, the mad rush to close coal plants and build wind turbines had left the country completely subject to just-in-time natural gas deliveries from others, particularly Russia. When a period of calm hit the North Sea wind farms, gas prices spiked by a multiple, and Britain was left closing factories and begging Russia for supply.
 
And there is plenty more news coming out on the same subject.
 
Full post

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 at www.thegwpf.com.

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