Plenty of interesting discussion here.
This caught my attention: 40% of Euro nat gas comes from Russia? That's a rather substantial number , , ,
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BY ANDREW STUTTAFORDImageJanuary 08, 2022
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NR PLUS MEMBER FULL VIEW
Europe’s Energy Crisis: The Shape of Things to Come?
The New Year has not begun on the happiest of notes with Omicron stalking the land, the Fed upsetting the markets, an “interesting” jobs report, and the latest inflation numbers on the horizon (I suspect that we are not in for a nice surprise).
Then there’s Europe’s energy crunch. It hasn’t gone away.
CNBC:
Europe is facing continued volatility in its wholesale gas markets, prompting concerns across the region that an energy crisis could be about to get even worse.
The front-month gas price at the Dutch TTF hub, a European benchmark for natural gas trading, was around 5% higher by 1 p.m. London time on Wednesday, with the price reaching 93.3 euros per megawatt-hour. Contracts for March and April delivery were also up by 5% on Wednesday, according to New York’s Intercontinental Exchange . . .
Ole Hansen, head of commodity strategy at Saxo Bank, told CNBC in an email that gas prices in the EU and the U.K. remained at the mercy of the weather, the pace of shipments, and Russia.
“Into January, the price of gas has resumed its ascent, again with the prospect of colder weather driving increased demand for heating and very, very low supplies from Russia, especially via two important pipelines through Poland and Ukraine,” Hansen added. “Whether Russia is deliberately keeping supplies down due to Nord Stream 2 pipeline approval delays and the Ukraine border crisis is difficult to say. But it highlights failed energy and storage policies in Europe and the U.K., which has left the region very dependent on imports of gas, especially given the still unreliable level of power generation from renewable sources.”
To put a number on that, over 40 percent of Europe’s natural gas is currently supplied by Russia.
What could possibly go wrong?
On the topic of Russia, I suspect that Moscow’s intervention this week in Kazakhstan in the wake of the turmoil in that country (disturbances triggered, incidentally, by a sharp rise in fuel prices, although there were deeper underlying causes) may well reduce the chance that Russia will broaden its existing military operations in Ukraine for now. Although that doesn’t mean that it will neglect opportunities to toy with Europe’s gas supplies in order to “encourage” the granting of the final approvals needed for the Nord Stream 2 pipeline (a second northern route for the delivery of Russian gas to Europe) to open up for business, and, more generally, to show who is already, to an alarming extent, boss.
To repeat something that I have mentioned before, the reason for the current price spike in Europe does not (with the exception of the U.K. and, arguably, Germany) owe much to its climate policies, but it is a reminder that much of the continent’s energy supplies are less secure than had, until recently, been assumed. The “race to net zero” may, partly, be the product of panic, but it also owes a great deal to complacency. If there is anything good to come out of Europe’s current energy woes, it is that they may act as a useful reminder that the current trajectory of its climate-driven energy policy is an invitation to disaster. We simply are not yet at a stage where renewables can fill the gap opened up by the abandonment of fossil fuels. And it’s not easy to forecast when we will be. Fixing dates for hitting net zero is all very well, but one thing we should have learned after the 20th century is that when central planners ignore reality, disaster will follow.
And in this case, one uncomfortable reality is that both wind and solar are dogged by a range of problems caused by intermittency, the unalterable fact that the wind doesn’t always blow, and the sun doesn’t always shine. Moreover, the hours that the wind and the sun do what they are supposed to do are not entirely predictable: One cause of the U.K.’s energy problems this fall was that North Sea winds just didn’t do what was expected of them, a failure that extended over a fairly lengthy period of time.
Some have argued that the current difficulties are an argument for investing more in renewables, an argument based on the idea that this would reduce dependence on other energy sources. To an extent that’s obviously true, but it still doesn’t address the issue of intermittency. If the wind is not blowing, it doesn’t matter how many wind turbines have been installed. Rather than pouring more billions into the installation of a technology that is not yet ready for prime time (I suspect that this is much more the case for wind than for solar), it would be better to increase funding for research designed to find a way to work around intermittency. It would cost less and would be a far better use of resources.
Meanwhile, from Bloomberg:
The energy crisis roiling markets in Europe is a preview of what the U.S. will face over the next 10 years as it shifts to cleaner power sources, according to Ed Morse, Citigroup’s global head of commodities research.
“We are in the first crisis of the energy transition,” Morse said in an interview on Bloomberg Television. Switching away from fossil fuels is an “event that is going to be disruptive, dislodging and it’s going to create disharmony at home and internationally — and it is also going to make superb advances.”
We’ll have to see about the second half of that last sentence. Assuming the Biden administration continues on its current course, the rest of the excerpt will, I suspect, prove all too true, even if Morse puts it too gently. To be sure, the transition will be “disruptive” and “dislodging,” but those adjectives and the word “disharmony” may understate the extent of the economic, social, and geopolitical havoc to come if the present direction of climate policy is maintained.
Over at the Wall Street Journal, Bjorn Lomborg crunches some numbers:
Energy prices are soaring, and it’s likely a sign of things to come. The rise can be blamed on a variety of things, including the demand rebound after the lockdowns ended, a drop in renewable electricity output from a lack of wind in Europe during most of 2021, and increasingly costly climate policies. But while the pandemic will end and the wind will blow again, climate policies to achieve “net zero” emissions will keep hiking prices.
Barack Obama acknowledged in 2008 that electricity prices “would necessarily skyrocket” under his proposed climate policies. He was more candid than many of today’s politicians and advocates. Limiting the use of fossil fuels requires making them more expensive and pushing people toward green alternatives that remain pricier and less efficient . . .
Costs will continue to rise if politicians remain bent on achieving net-zero emissions globally. Bank of America finds that achieving net zero globally by 2050 will cost $150 trillion over 30 years—almost twice the combined annual gross domestic product of every country on earth. The annual cost ($5 trillion) is more than all the world’s governments and households spend every year on education. Academic studies find the policy is even costlier. The largest database on climate scenarios shows that keeping temperature rises to 2 degrees Celsius—a less stringent policy than net zero by midcentury—would likely cost $8.3 trillion, or 3.3% of world GDP, every year by 2050, and the costs keep escalating so that by the end of the century taxpayers will have paid about $1 quadrillion—a thousand trillion—in total.
I should mention that that estimate is based on the notion that “climate policy costs will be spread efficiently,” something Lomborg rightly concedes is a “heroic assumption” (a key part of his definition of “efficiently” is that “big emitters China and India” cut the most), meaning that more-conservative estimates of the real cost would likely be far higher.
A quadrillion here, a quadrillion there, and pretty soon you’re talking real money.
Lomborg later turns his attention to the U.S.:
For the U.S., one recent study in Nature found reducing emissions only 80% by 2050 will cost more than $2.1 trillion in today’s money annually by midcentury. That is more than $5,000 per American a year. The cost of achieving 100% reductions would be far higher. And this study assumes reductions will be carried out in the most efficient way possible—namely using a single national, steadily increasing carbon tax—but that’s unlikely, and with less-than-ideal policies, the price would be still higher.
Climate activists may not want to acknowledge these costs, but voters will force them to eventually . . .
But will they? As I have discussed on numerous occasions, the name of the climate game has been to remove as much climate policy from the political process as possible, whether by effectively delegating it to regulators in both the public (for example, the Fed, the SEC) or private sectors (accountancy rule makers, for instance) or, indeed, to the unsavory corporatists now setting the agenda on Wall Street and in the C-suite. Nevertheless, sooner or later the costs of the current approach to climate policy are going to become all too evident. If there’s any silver lining to be found in today’s very dark cloud, it is that this energy crunch will increase the chances that enough voters will understand what is coming before it is too late. If that, in due course, also prompts questions about the priorities of today’s climate policy, so much the better.
Where money should be spent, other than on intermittency workarounds, is on energy research, on nuclear power, on limiting the carbon emissions created by existing fossil-fuel resources (ask yourself whether that is more likely to take place in the West or in the OPEC countries or in Russia) and, of course, resilience. To take one example, a (job-intensive) policy of toughening up the flood defenses of low-lying coastal cities ought to appeal to many voters, wherever they stand on climate change. The same can be said of burying power lines in densely populated areas of the U.S.
Here and there, there are hints that an awareness that the current approach is not, to use a possibly unfortunate adjective, economically (and perhaps even politically) sustainable, is sinking in, even in Brussels. The EU Commission has proposed classifying some (there are some fairly stringent restrictions) nuclear and (natural) gas projects as sustainable for the purposes of the EU’s green “taxonomy,” a recognition, in the latter case, of the value of natural gas as a “bridge” fuel between now and a more thoroughly decarbonized future.
The Economist went into more detail on the taxonomy here.
An extract:
The idea emerged after the 2015 Paris climate deal, when the EU’s effort to craft a common green-bond standard for corporate and sovereign issuers revealed that members did not agree on what counted as green. Some countries have since worked on their own classifications, but Europe’s, which maps swathes of the economy over 550 pages, is the most comprehensive.
The taxonomy hopes to end the practice of greenwashing and boost investors’ faith in sustainable assets. It will offer a common set of criteria that investors and banks can use to screen potential investments. Most money managers already have their own teams and tools to measure greenery. But the lack of a shared benchmark means scorecards remain subjective and inconsistent across the industry, which confuses investors. Having a dictionary where they can look up whether an investment can be labelled green puts everyone on the same page . . .
The Commission’s proposal has attracted heavy criticism from, inevitably, Greens (many of whom not only harbor an ancient hatred for nuclear energy but also regard any recognition that natural gas can play a role in an energy transition as succumbing to the wicked allure of fossil fuels). The question of nuclear energy has also highlighted a rift within the EU.
Politico:
Countries like France and Poland have been pushing strongly for the inclusion of nuclear energy in the taxonomy list as they argue that it is a crucial low-carbon technology which is needed to provide energy security while the EU transitions to renewable energies in the coming decades.
Alongside Germany, other countries like Austria or Luxembourg fiercely oppose such a move amid concerns about nuclear accidents and waste. They would like to see nuclear energy disappear from the EU instead of encouraging the construction of new plants through the green labeling . . .
The proposal must win sufficient support from EU member states (which seems likely: It would take a “reverse reinforced qualified majority” to vote it down) and then the approval of the EU Parliament. To repeat a guess prediction that I made the other day, I think it will go through, a view bolstered by a report that Germany will, when it comes to a vote, abstain — a non-decision reflecting divisions in an unlikely governing coalition made up of the left-of-center SPD, the Green party and the free-market FDP. The FDP and SPD are in favor of the inclusion of gas, the Greens not so much.
That said, all three parties continue to favor phasing out nuclear power. At year end, three out of Germany’s six remaining reactors were switched off. The last three will have gone out of operation by the end of this year. Yes, this is nuts.
On the other hand, as Robert Zubrin reported for Capital Matters in December:
While a year ago French president Emmanuel Macron was calling for cutting the nuclear fraction of France’s electric power from its current 75 percent down to 50 percent (thereby eliminating the world’s only actually decarbonized major electric-power grid), on November 9 he called for “relaunching construction of nuclear reactors in our country . . . to guarantee France’s energy independence, to guarantee our country’s electricity supply and achieve our objectives, in particular carbon neutrality in 2050.”
And:
U.S. energy secretary Jennifer Granholm began her tenure ten months ago by announcing the Biden’s administration’s commitment to strangling the nuclear industry by blocking the establishment of a waste repository. But at the COP26 conference last month, she was all in for nuclear power: “We are very bullish on these advanced nuclear reactors,” Granholm said. “We have, in fact, invested a lot of money in the research and development of those. We are very supportive of that.”
It may be noted that Granholm was voicing support for types of reactors that do not yet exist.
But, it’s a start, I suppose.
