Boris Johnson pays the price for energy crisis
In this newsletter:
1) Net Zero industry: Rising energy costs could force metal producers from Europe
Reuters, 27 September 2021
The Times, 27 September 2021
3) Boris Johnson pays the price for energy crisis
Daily Mail, 27 September 2021
4) Tim Stanley: As Boris Johnson embraces green socialism, the poor pick up the bill and Conservative activists are getting angry
The Daily Telegraph, 27 September 2021
Bloomberg, 27 September 2021
6) Britain forced to rely on coal power amid energy crisis
AFP, 24 September 2021
7) Coal shortage deepens in India amid plunging plant inventories
Bloomberg, 27 September 2021
8) China power crunch spreads, shutting factories and dimming growth outlook
Reuters, 27 September 2021
9) And finally: Britain is doomed to a Winter of Discontent, warns Ukraine’s gas king
Ambrose Evans-Pritchard, The Daily Telegraph, 27 September 2021
Full details:
1) Net Zero industry: Rising energy costs could force metal producers from Europe
Reuters, 27 September 2021
LONDON, Sept 27 (Reuters) - Rising power prices could lead to metal producers moving operations away from Europe and undermine EU carbon-cutting plans, non-ferrous metals industry association Eurometaux has warned the European Commission.
Governments across Europe are coming under pressure to help curb soaring energy costs for companies and households caused by a global surge in wholesale gas prices, as economies emerge slowly from the coronavirus pandemic. read more
"Rising electricity prices have already led to curtailments and could lead to further relocation of our sector outside Europe if not addressed," said the letter from Eurometaux addressed to Kadri Simson, European Commissioner for Energy.
"We are also concerned that if electricity remains too expensive, it will disincentivise industrial electrification as a decarbonisation route, undermining the EU’s Green Deal objectives."
Full story
2) Go woke, go broke: Angela Merkel’s CDU suffers worst election result in history
Angela Merkel’s conservatives have suffered the worst general election result in their history as they were defeated by the left-leaning Social Democrats last night.
The Christian Democratic Union’s (CDU) losses included Merkel’s constituency on the Baltic coast, which fell to the Social Democrats (SPD) with a swing of more than 25 points after she had held it for all 31 years, since German reunification.
At the other end of the country, the CDU also lost Aachen, the home city of its leader, Armin Laschet, 60, to the Green party.
However, the outcome was close enough that Laschet still has a plausible chance of becoming chancellor if he can persuade two smaller parties to join the CDU in a coalition.
Merkel, 67, will remain in post until either Laschet or his SPD opponent Olaf Scholz, the finance minister, can assemble a parliamentary majority.
Both the rivals are trying to build Germany’s first three-party ruling coalition since the early 1950s with the Greens and the economically liberal Free Democrats (FDP).
Scholz and Laschet each predicted that the negotiations would be concluded by Christmas, but analysts said that they were likely to drag on into early 2022.
Full story (£)
3) Boris Johnson pays the price for energy crisis
Daily Mail, 27 September 2021
As the country struggles with fuel shortages and rising prices, research by Ipsos MORI found Mr Johnson has seen his popularity plummet.
Boris Johnson looks to be paying the price for the energy crisis as a poll today found Keir Starmer has drawn level on 'best PM' ratings for the first time.
As the country struggles with fuel shortages and rising prices, research by Ipsos MORI found Mr Johnson has seen his popularity plummet.
He is now neck-and-neck with Sir Keir on 38 per cent on preferences for the premier - the first time a Labour leader has been on an even footing with a Tory since 2008.
Mr Johnson's rating has plummeted from 47 per cent in March, and in another sign that will set alarm bells ringing in the research was done last week before fuel panic buying really kicked in.
Overall Labour support was up six points from August, while the Tories were down two points at 39 per cent.
The results, in a poll for the Evening Standard, are a timely boost for Sir Keir as he attempts to get a grip on his party at its annual conference in Brighton.....
Full story
4) Tim Stanley: As Boris Johnson embraces green socialism, the poor pick up the bill and Conservative activists are getting angry
The Daily Telegraph, 27 September 2021
Tory conference starts this weekend and many activists will turn up cheesed off. It’s easy to see why. Almost the same day Boris told the UN it’s easy to go green, my mother’s gas bill doubled. So did mine, but I’m under 40: if I need money, I can always retrain as a truck driver.
But when you try to eliminate fossil-fuel power generation, rely on wind and solar and, hey presto, the wind doesn’t blow or the sun doesn’t shine, the cost is picked up by the consumer. The poorest are set to lose 16 per cent of their disposable income. Is this what they mean by “climate justice”?
No, this is not the only reason bills have jumped and, yes, I’m 100 per cent for going green; my complaint is that politicians are never honest about the costs. They set targets without addressing the consequences of using less coal and gas. The tech isn’t there yet to plug the gap: the boilers are unaffordable; the cost of electric cars has been under-estimated.
We need to insulate and conserve, which means expense and pain to be dished out in the fairest way possible – but instead the PM gives the impression we are weeks away from a boffin inventing a widget you stick on your chimney that converts carbon to candy floss. Thumbs up. Photo op. Job done.
What is the difference between Labour and the Tories right now? Labour is reconciled to Brexit; the Tories, to socialism. We were told in 2015 to vote Conservative or we will get chaos with Ed Miliband, but we have wound up with both the chaos and the policies of Mr Miliband, paid for by the highest taxes in decades. Up go National Insurance and business taxes; council tax to follow.
Full post (£)
Bloomberg, 27 September 2021
Nations are more reliant than ever on natural gas to heat homes and power industries amid efforts to quit coal and increase the use of cleaner energy sources.
But there isn’t enough gas to fuel the post-pandemic recovery and refill depleted stocks before the cold months. Countries are trying to outbid one another for supplies as exporters such as Russia move to keep more natural gas home. The crunch will get a lot worse when temperatures drop.
The crisis in Europe presages trouble for the rest of the planet as the continent’s energy shortage has governments warning of blackouts and factories being forced to shut.
Inventories at European storage facilities are at historically low levels for this time of year. Pipeline flows from Russia and Norway have been limited. That’s worrying as calmer weather has reduced output from wind turbines while Europe’s aging nuclear plants are being phased out or are more prone to outages—making gas even more necessary. No wonder European gas prices surged by almost 500% in the past year and are trading near record.
The spike has forced some fertilizer producers in Europe to reduce output, with more expected to follow, threatening to increase costs for farmers and potentially adding to global food inflation. In the U.K., high energy prices have forced several suppliers out of business.
Even a normally cold winter in the Northern Hemisphere is expected to drive up natural gas prices further across much of the world. In China, industrial users including makers of ceramics, glass, and cement may respond by raising prices; households in Brazil will face expensive power bills. Economies that can’t afford the fuel—such as Pakistan or Bangladesh—could simply grind to a halt.
Full story
6) Britain forced to rely on coal power amid energy crisis
AFP, 24 September 2021
Britain, which faces soaring natural gas prices, has been forced to run coal-fired power stations in order to secure energy supplies, electricity generation company Drax said on Thursday.
The country is particularly exposed to Europe's ongoing energy crisis due to its reliance on natural gas to generate electricity. The price of European gas futures has more than doubled since May.
"These facilities have fulfilled a critical role in keeping the lights on at a time when the energy system is under considerable pressure," the group said in a statement emailed to AFP.
Drax -- which owns the nation's biggest facility in Yorkshire, northern England -- had planned to switch from coal to biomass this year to help tackle climate change.
The group could now extend the use of coal, Chief Executive Will Gardiner told the Financial Times.
"We're very aware that the country might have a significant problem and if there's something Drax can do we will absolutely think about doing that," Gardiner told the business-focused newspaper.
Any delay could complicate Britain's plans to scrap coal-powered electricity generation by October 2024.
Prime Minister Boris Johnson's government, which seeks to reduce Britain's carbon emissions to net zero by 2050, will in November host the COP26 United Nations climate summit in Glasgow.
Full story
Bloomberg, 27 September 2021
India’s massive fleet of coal plants are running dangerously low on stockpiles, which may force the nation to buy expensive shipments of the fuel or else risk blackouts.
Stockpiles have fallen to the lowest since November 2017, data from the Central Electricity Authority showed. The South Asian nation isn’t alone in facing a fuel crisis. Buyers from the U.K to China are grappling with energy shortages as a rebound in demand outpaces supply.
As inventories dry up, plants may be forced to buy expensive imported coal or pay hefty premiums at domestic auctions, said Debasish Mishra, a Mumbai-based partner at Deloitte Touche Tohmatsu. That may raise costs across an economy that’s already battling high petroleum fuel prices.
“A sharp rise in post-pandemic electricity demand is straining fuel supply chains across the globe,” said Mishra. “India has done well to expand its power generation capacity, but has failed to give similar attention to coal supply infrastructure.”
Electricity demand from India’s state distribution utilities rose more than 10% in July and 18% in August as economic activity rebounded after a second wave of the pandemic receded and more citizens were vaccinated.
Full story
Reuters, 27 September 2021
Tight coal supplies and toughening emission standards have driven the power shortages across China.
Widening power shortages in China have halted production at numerous factories including many supplying Apple and Tesla, while some shops in the northeast operated by candlelight and malls shut earlier as the economic toll of the squeeze mounted.
Rationing has been implemented during peak hours in many parts of northeastern China since last week, and residents of cities including Changchun said cuts were occurring sooner and lasting for longer, state media reported.
On Monday, State Grid Corp pledged to ensure basic power supply and avoid electricity cuts. read more
China's power crunch, caused by tight coal supplies and toughening emissions standards, has hurt production in industries across several regions and is dragging on the country's economic growth outlook, analysts said.
The impact on homes and non-industrial users comes as night-time temperatures slip to near-freezing in China's northernmost cities. The National Energy Administration (NEA) has told coal and natural gas firms to ensure sufficient energy supplies to keep homes warm during winter. read more
Liaoning province said power generation had declined significantly since July, and the supply gap widened to a "severe level" last week. It expanded power cuts from industrial firms to residential areas last week.
The city of Huludao told residents not to use high energy-consuming electronics like water heaters and microwave ovens during peak periods, and a resident of Harbin city in Heilongjiang province told Reuters that many shopping malls were closing earlier than usual at 4 p.m. (0800 GMT).
The power squeeze is unnerving Chinese stock markets at a time when the world's second-largest economy is already showing signs of slowing. read more
Tight coal supplies and toughening emission standards have driven the power shortages across China.
China has vowed to cut energy intensity by around 3% in 2021 to meet its climate goals. Provincial authorities have also stepped up the enforcement of emissions curbs in recent months after only 10 of 30 mainland regions managed to achieve their energy goals in the first half of the year. read more
The power pinch has been affecting manufacturers in key industrial hubs on the eastern and southern coasts for weeks. Several key suppliers of Apple (AAPL.O) and Tesla (TSLA.O) halted production at some plants. read more
Full story
9) And finally: Britain is doomed to a Winter of Discontent, warns Ukraine’s gas king
Ambrose Evans-Pritchard, The Daily Telegraph, 27 September 2021
The Kremlin has taken advantage of an acute global gas shortage to weaponise flows to Europe
Ukraine’s pipeline chief has a stark winter warning for Britain: the geopolitics of Europe’s escalating gas war with Russia are intractable, and the coming supply crunch is likely to force brutal demand destruction in industry and homes.
Yuriy Vitrenko, head of the Ukrainian energy and pipeline nexus Naftogaz, said that Western capitulation to Vladimir Putin’s gas blackmail would embolden Russia to launch a full-scale war on former Soviet territory.
He warned that the Kremlin has taken advantage of an acute global gas shortage to weaponise flows to Europe. “Last year Gazprom booked 65bcm (billion cubic metres) of transit through Ukraine and this year it is only 40bcm. That’s why you are not getting your 25bcm of gas. It’s as easy as that,” he told The Daily Telegraph.
The alleged aim is to force German regulators to nod through a “quick and dirty” approval of the ultra-political Nord Stream 2 pipeline; or, failing that, to secure emergency “pre-certification” flows, which establish an irreversible dependency on the new Baltic route. Both options deprive Ukraine and Poland of self-defence leverage and change the balance of power in Eastern Europe.
“They had planned to ship 25bcm through Nord Stream 2 this year and didn’t expect it to be held up. So now they are withholding the gas. If that is not a gas war, I don’t know what is,” he said.
Britain is just as exposed as the rest of Europe to this Gothic drama, even though it buys very little gas directly from the Russian state monopoly Gazprom. “We have an integrated European gas market. Russian gas that goes to Germany or the Netherlands can go on physically to the UK. Prices are the same and they’re going up for the entire European market together,” he said.
“Nord Stream 2 is clearly not compliant with the letter and spirit of EU rules so they need to put pressure on the regulator, basically the German authorities. But it is part of a bigger geopolitical game: Putin is testing the Biden administration. It’s a very Soviet tactic, they were always testing the West like that,” said Mr Vitrenko.
Gazprom supplied normal volumes to Europe over the first half of the year but that was not enough to prevent stocks falling to drastically low levels following a wet, cold spring and the V-shaped economic recovery that caught forecasters off-guard.
Flows through the Ukraine pipeline system then dropped abruptly at the end of June, just at the moment when surging East Asian and Chinese demand was soaking up the global supply of liquefied natural gas.
Gazprom has since been working to rule, delivering basic contract volumes but not the usual season top-up flows. It booked almost no extra capacity for July, August, September, and now October. It has booked minimal amounts through the Polish Yamal pipeline, another twist that is seriously alarming markets.
Gazprom says it has made up much of the shortfall to Europe with extra flows through the southern Turk Stream pipeline, which opened last year. Whether this comes close to compensating is hotly disputed.
Mr Vitrenko says the Kremlin was emboldened after President Joe Biden overrode US Congressional sanctions against Nord Stream 2 and subsequently agreed to a fig-leaf deal with Germany’s Angela Merkel that gave Moscow what it wanted. “The Russians perceived it as a chance to increase pressure. Right after they started to withhold gas and prices sky-rocketed,” he said.
Mr Biden was arguably playing the “reverse Kissinger” card, hoping to dial down tensions with Moscow and head off a deeper strategic alliance between Vladimir Putin and China’s Xi Jinping. But the accord has been bitterly criticised, decried as a latter day Yalta that throws Ukraine to the wolves.
Gazprom has made clear that Europe’s gas woes could end quickly if Nord Stream 2 is given the green light. Export chief Elena Burmistrova says the company “would be able to cover additional demand” once certification goes through. Kremlin officials have made similar noises.
Mr Vitrenko warned that giving in to energy blackmail would be to trade an immediate fuel crisis for an even bigger geopolitical crisis down the road. “If there are no longer any physical flows through Ukraine there will be a full-scale war between Ukraine and Russia,” he said.
Once Mr Putin is able to ship all his export gas to Europe via Nord Stream and other pipelines under his control, there will no longer be a deterrent. “Russia has a myriad of opportunities to provoke a war: by controlling separatists in the Donbas; or by creating a water supply crisis in Crimea, and claiming that it is intervening to prevent a humanitarian catastrophe,” he said.
“If there is a war we’re afraid that all we’ll hear from European politicians are expressions of ‘deep concern’ but Russia is not afraid of ‘deep concerns’,” he said.
Counter-pressure against Russia is building. Over 40 Euro-MPs have called on Brussels to investigate Gazprom for alleged price manipulation. The International Energy Agency (IEA) has issued a rare statement saying Russia “could do more to increase gas availability to Europe” and should attend to its reputation as a “reliable supplier”.
Not everyone agrees that Gazprom can produce more gas quickly after running down investment in drilling and exploration. The old Cenomanian fields of Western Siberia dating back to the 1970s are in terminal decline.
“Gazprom is firing on all cylinders to satisfy growing demand at home and abroad,” said Vitaly Yermakov from the Oxford Institute for Energy Studies.
“It cannot wave a magic wand and deliver extra gas to any place in Europe that requires it on short notice. No matter how hard Gazprom tries, it cannot single-handedly balance such a huge market as Europe,” he said. Russia needs to refill its own depleted inventories. Stocks were just 25bcm in late June, far short of the 75bcm deemed the safe threshold for the long winter.
Mr Yermakov says the whole structure of Russia’s industry is changing as the centre of gravity moves to new Arctic fields in the Yamal Peninsula. More gas is earmarked for Asia over time. Russia cannot quickly replace the 40bcm slide in Dutch output from the Groningen fields over the last five years.
It makes commercial and ecological sense for Gazprom to supply Europe through the upper Baltic route rather than piping the gas through leaky Soviet infrastructure into the Ukrainian nexus, which also entails extra transit fees. This transition creates a mismatch: the old Soviet system is in decay but the new Yamal system is not yet fully up and running.
Expert opinion is split. Most analysts agree with the IEA that Russia has been playing games with gas supply. “They could easily have pushed another 5bcm so far this year via Ukraine,” said Prof Thierry Bros, a former gas strategist at the French economy ministry and now at Sciences Po.
Prof Bros said storage in Europe would still have been low but at least within historical bands, eliminating some of the panic premium currently driving gas prices.
Mr Vitrenko said the argument that Gazprom cannot produce more contradicts the stated rationale for the Baltic pipeline. “If that were the case, you wouldn’t need Nord Stream 2 at all. Russia can easily ramp up production, not overnight perhaps, but I can remember times when daily flows through Ukraine were three times as much,” he said.
Whatever the commercial arguments, no major European state is likely to take Moscow’s word at face value after the invasion of Crimea. Gazprom has long served as an instrument of Kremlin geostrategy. The new Turk Stream infrastructure has dual military usage, with a sonar surveillance system installed.
Many in Europe clearly wish to secure gas whatever the political price. They are pushing for immediate pre-certification flows through Nord Stream 2 before the industrial core of the Ruhr Valley starts to shut down, and aborts the economic recovery.
But events in Washington have again intruded. The US House of Representative passed a fresh amendment last week demanding the reimposition of sanctions. If the Senate follows suit, the White House may be forced to act. “No one will buy gas from Gazprom going through Nord Stream 2,” said Mr Vitrenko.
Mr Vitrenko said the mix of tightening US policy, a Polish legal challenge within the EU and Mr Putin’s behaviour are all now conspiring to block the pipeline for the foreseeable future. The Greens may soon be in the German government. They want to axe Nord Stream 2 altogether.
Full story (£)
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.
1 comment:
Electricity generation struggling all over the world, it would seem.
The New Zealand governments solution : Convert our transport fleet to all electric vehicles. Yes, that should really help.
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