Prof. ST Hsieh
Director, US-China Energy Industry Forum
December 14, 2022
The war in Ukraine is a major event in 2022, it is a geopolitical quagmire that no one has a solution. War is cruel, both Russia and Ukraine have suffered significant casualties on the battlefield already. Sadly, no end is near! Now the costs of this global energy crisis are being paid by the millions of innocent people across the globe. Europeans are facing the blunt of this energy crisis, specifically, most of the Ukrainians are risking their life now. But President Zelenskiy and his staff are well protected, so he has no real intention to end this war.
As one reader in the US commented after reading the first article: The policies of our own government has (sic) created a global energy problem.
First, political leaders in Europe decided to end “a successful 50-year partnership on gas between Russia and Europe.” But these politicians never had any back up plan for replacing the Russian gas. Then, after the war broke out, hastily imposed Western sanctions on Russian energy backfired immediately and left Europe with unprecedented energy shortage. Now these same politicians are taking a band-aid approach to relief the burdens of their people. There is no assurance they will be successful, but they have to try so that they can keep their positions. If they fail badly, many European governments may face voters’ challenges or protests.
However, their band-aid approaches amount to dismantling the existing and functional global energy market system. Instead, they depend on government interventions with price caps, nationalization of energy companies, “friendshoring” of strategic supplies with high cost but diminished industry outputs.
The collective damages caused by the war in Ukraine will be felt around the world for years to come. Sadly, the new energy market system will also be full of risks!
The year Russia turbocharged a global energy crisis
Tue, December 13, 2022 at 4:13 AM
(Reuters) – For the energy industry, 2022 will be remembered as the year Russia’s invasion of Ukraine accelerated a global energy crisis.
The world’s top energy companies beat a hasty retreat from Russia and wrote off tens of billions of dollars in assets. European nations scrambled to make sure they could keep the lights on and their residents from freezing to death.
Natural gas prices hit multi-year highs and oil nearly $140 a barrel, not far from an all-time record, turbocharging a post-pandemic inflationary spiral that caused a cost-of-living crisis in many countries.
The invasion and subsequent Western sanctions led to a breakdown in supply relationships that had existed for decades.
Major world economies scrambled to find energy sources – using anything and everything they could find to keep the lights on. Governments pushed to accelerate the deployment of solar and wind – but also to buy coal. Climate change targets went on the back burner.
Governments spent billions of dollars to prop up major utilities like Germany’s Uniper. South Africa experienced its worst power cuts in history. Sri Lanka, short on foreign cash reserves, simply ran out of fuel.
WHY IT MATTERS
Russia’s invasion of Ukraine caused European countries to re-evaluate their relationship with that nation, long the continent’s primary supplier of natural gas.
Western nations have since discussed and began to implement a price cap on Russian oil, while Europe is discussing a gas price cap and investing more heavily in liquefied natural gas (LNG) to meet energy needs.
“We are seeing nothing less than the termination of a successful 50-year partnership on gas between Russia and Europe,” said Michael Stoppard, special adviser and global gas analyst at S&P Global Commodity Insights. “That is leading to a recalibration of supply and demand and that will take time, and we will suffer the pain of that through 2023 and beyond.”
That dichotomy is evident in numerous countries. Poland is Europe’s fastest-growing market in terms of adding heat pumps. At the same time, rules to limit smog have been postponed, and residents are increasingly burning whatever materials they can, be it harmful lignite oil and trash to heat their homes. In Klodzko, a town of 28,000 in southwestern Poland, people are saving trash for fuel, said the mayor, Michal Piszko.
WHAT DOES IT MEAN FOR 2023?
The disarray has not ended. Major industrialized economies are girding for supply constraints in 2023 as well, if not for years after that.
Governments in the United States and Europe both openly shifted to supporting “friendshoring” of strategic supplies to allies, regardless of the likely higher cost, and amped up the use of tax and aid packages to develop nuclear, solar, wind, and hydrogen resources. Their moves are not just meant as a specific response to Russia, but to counter China as well, by developing resources to offset that nation’s dominance in production of solar panels and mining for key materials for batteries.
“It will be regarded as a seminal year, or really the beginning of a completely new system,” said Francesco Starace, CEO of Italy’s Enel, one of the world’s largest power companies. “The year ’22 and part of ’23 we will all say, that’s when all these consequential things took place. It’s a year of breaking habits and changing very, very clearly.”
As the year comes to a close, costs for natural gas and heating fuel have ebbed as economic activity declines. But people are still struggling and could continue to for some time as tight supply causes more price shocks.
“I warm only the room that I’m in and I would only put the heating on for an hour. And then I sit with a jumper, hat and coat on,” said Ruth Johanne, unemployed in Coventry, England, who cannot afford to heat her whole house in winter.
Can Europe survive the dreaded dunkelflaute?
Tue, December 13, 2022 at 4:51 AM
Will Europe be able to supply affordable, reliable electricity this winter? The answer depends on, among other factors, the whims of Russian natural gas exporters and maintenance work on nuclear power plants in France. But it also depends on the weather—not just the temperature, but the severity of a curious meteorological phenomenon called “dunkelflaute.”
A German compound word meaning “dark doldrums,” dunkelflaute is used by energy experts to refer to a period that is cloudy, cold, and windless. It creates a headache for anyone operating an electric grid that relies a lot on solar and wind energy and that supplies households with electric heating—as is the case in much of Europe and the UK.
The UK is a case in point. The country is currently experiencing a dunkelflaute, with cold, cloudy, still weather. Wind energy production, which is normally about one-fifth of the UK’s electricity mix, is now less than 4%. Gas plants are running full-steam to catch up, and some scarcely used coal stations have been brought on standby, although they haven’t been used yet.
How do dunkelflaute events happen?
Dunkelflaute events lasting a day or two are fairly common in Europe between November and January, adding up to 50-100 hours on average per month, according to a 2021 study by the Delft University of Technology.
Typically the effect is muted by the interconnectedness of Europe’s electric grid. A country experiencing dunkelflaute can just import more electricity from a neighbor. Events lasting a couple of days can also be managed by pausing industrial activity and EV charging, and drawing on utility-scale battery storage, said Lukas Bunsen, head of research for central Europe at Aurora, an energy market analytics firm.
“But after about two days, you’re in a world where batteries can’t help you much anymore, and industries may not be willing to pause production for that long,” he said. Events that cover a majority of the continent and last more than two days happen about once every five years, Bunsen said.
How Europe can prepare for dunkelflaute
This year, dunkelflaute poses a bigger risk than normal. About half of France’s nuclear plants are offline for maintenance, removing a key source of backup electricity for the continent. EU electricity prices, although lower than their record peaks in August, are still above €400 per megawatt-hour, far higher than before the war in Ukraine. European countries have stored away enough gas to make blackouts unlikely, but if the weather turns exceptionally bad, all bets are off.
In a 2021 analysis, Bunsen’s firm projected that in Germany, once the country reaches its goal to run entirely on renewables, the gap between electricity demand and supply during the most extreme dunkelflautes could be about 10 gigawatts. That’s equal to about a dozen typical gas or nuclear plants.
Creative market designs, better batteries, more wide-reaching grids, and smart-grid technologies that automatically turn down power-guzzling machines during times of peak demand will all be needed to keep the dreaded dunkelflaute from becoming too dangerous.
Europe’s Cold Week Strains Power Grids and Piles on Costs
Tue, December 13, 2022 at 5:32 AM
(Bloomberg) — A cold week in Europe is sending short-term power prices soaring as grid operators balance supply and pay power stations to keep the region’s lights from flickering.