Europe’s Energy Freakout

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Bogeyman 

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Damn, so we really did succeed in weaning Europe at least partially off Russian gas and going with the US offer instead.
 

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Putin says Nord Stream 2 link ready to calm gas prices​

Russian President Vladimir Putin said on Wednesday the Nord Stream 2 undersea gas pipeline would help to calm a surge in European gas prices and was ready to start exports now a second stretch of the pipeline has been filled.

Nord Stream 2, completed in September but awaiting regulatory approval from Germany and the European Union, faces resistance from the United States and several countries including Poland and Ukraine, which say it will increase Russia's leverage over Europe.


The pipeline had been scheduled to be completed in 2019, but construction was suspended following the threat of sanctions by the U.S. administration of Donald Trump and the subsequent withdrawal of the Swiss-Dutch company Allseas from pipe-laying.

Russia had to complete it with its own fleet.


Putin said on Wednesday the second stretch of the twin pipeline has been filled with gas.

"I'd like to congratulate Gazprom and your partners in Nord Stream 2 on the completion of work and the creation of this additional large trunk-route and that it is ready for work," Putin told a government meeting, attended by the head of Gazprom Alexei Miller.


The $11 billion pipeline has been built by the Kremlin-controlled gas giant Gazprom and half of the cost has been paid by European energy companies, namely Germany's Uniper (UN01.DE) and BASF's (BASFn.DE) Wintershall Dea (WINT.UL), international oil major Shell (RDSa.L), Austria's OMV (OMVV.VI) and France's Engie (ENGIE.PA).

LONG WAIT FOR APPROVAL

The certification of the link along the bed of the Baltic Sea from Russia to Germany is not expected before the end of the first half of 2022. read more

Europe has seen natural gas prices hit record highs as economic recovery and robust energy demand has strained supplies.

Some politicians and experts have blamed Russia for restraining its gas exports as the wait continues for regulatory approval and a broader standoff with the West plays out over Ukraine, which fears Moscow will launch a military invasion. Russia has denied plans to attack Ukraine.

Putin said the launch of Nord Stream will reduce gas prices in Europe as well as in Ukraine by increasing gas supplies.

"This, for sure, will have an immediate impact on price on the market, on the spot. And all the countries, the consumers in those countries that consume the Russian gas, of course, will feel it themselves," Putin said.

Upward pressure on Europe's gas prices has increased following the flow reversal in the Yamal - Europe pipeline, another major route for the Russian gas to Europe, to eastward earlier this month.

The gas flowed from Germany to Poland via the pipeline for a ninth straight day on Wednesday, data from German network operator Gascade showed. read more
 

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Alcoa to Curb Aluminum Output in Spain As Energy Costs Soar​

  • Production of primary aluminum to be halted for two years
  • Majority of workers at San Ciprian plant back proposal


Alcoa Corp. is set to halt primary aluminum production at its plant in Spain for two years, the latest casualty of soaring energy prices in Europe.

The curbs at Europe’s second-largest aluminum plant come after energy costs spiked to fresh records last week, putting heavy industries under increasing financial strain. Aluminium Dunkerque Industries France, the region’s top smelter of the metal, trimmed output earlier this month.

Alcoa welcomed a vote by a majority of workers at the San Ciprian plant in Galicia to back the proposal to stop output until the end of 2023, said a spokeswoman for the company. She said the plan offers a chance of a viable future to the troubled plant. Alcoa has been trying for years to close the operations, saying the smelter was “uncompetitive.”

The smelter will continue to supply strategic clients in the pharmaceutical and food industries by remelting aluminum, while maximizing billet production of 65,000 tons per year and producing more than 25,000 tons of aluminum slab. During the halt, Alcoa has agreed to keep paying workers and not to cut jobs.

While aluminum prices have rallied more than 40% this year, profitability is being eroded by the far greater surge in power prices.

“What’s come to pass here is no surprise given where power prices in Europe are trading,” said Duncan Hobbs, a London-based metals analyst at Concord Resources. “It’s pretty clear that it’s not profitable to be making metal today at today’s spot power prices.”


Smelters usually secure the majority of their energy needs on a long-term basis, but spot prices can influence negotiations for electricity supply and prove expensive if smelters have short-term exposure.

Market concerns over energy supply are impacting the physical aluminum market. Cash-settled premiums for duty-paid aluminum in Europe were last at $320.94 per ton on the London Metal Exchange, an increase of 15% since the start of December. That’s heaping more cost onto industries already feeling inflationary pressure, such as automakers and building companies.

“It’s being driven in part by this power supply situation and buyers starting to worry about being caught short, with the market being tight and the possibility of production being curtailed,” said Concord’s Hobbs.

Alcoa said it will invest $103 million to improve the plant’s viability, including the cost of restarting electrolysis tanks to recommence primary aluminum production in two years time. Aluminum smelters are typically slow to curb production as the costs of shutting down and restarting capacity are high.

Alcoa recently signed a pre-agreement with Greenalia SA to provide the plant with green energy for 10 years from 2024.
 

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Due to rising energy prices in Germany, Stromio has become the seventh energy supplier to stop deliveries since October. Many even had to file for bankruptcy.


Another bankruptcy due to rising energy prices in Germany. Saxon electricity and gas supplier Dreischtrom GmbH had to file for bankruptcy.

In the meantime, Stromio's bankruptcy announcement on the subject can be seen on its website.
 

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No more greenwashing, a science-based and credible taxonomy is needed​

20. December 2021

A group of three EU lawmakers have written to express concerns about strong political pressure to include gas and nuclear power in the EU’s green finance taxonomy.


This opinion article is co-signed by three members of the European Parliament: Michèle Rivasi (Greens/EFA, France), Andreas Schieder (S&D, Austria), and Cornelia Ernst (The Left, Germany).

The EU taxonomy is a tool to define which economic activities are considered “sustainable”. A proposal to include additional activities in the taxonomy is to be published by the European Commission before Christmas.

We, members of the European Parliament, are concerned about strong political pressure to include gas and nuclear power in the taxonomy, despite the fact that this tool is initially based on science.

A few weeks before the start of the French presidency of the European Union, we warn that putting these two polluting energies on the same level as renewable energies will sabotage the European energy transition.

The inclusion of nuclear and gas energies, even as transitional activities, is incompatible with the scientific principles set out in the taxonomy regulation. Fossil gas contributes directly to climate change and will block us for decades.

The IPCC’s 1.5 report clearly states that no new fossil fuel infrastructure can be built if this temperature target is to be met. Nuclear power, for its part, is too dangerous, too wasteful, too expensive and too slow to respond to environmental challenges.

There are good reasons nuclear power and fossil gas have not been included in the taxonomy developed by the Commission’s original group of technical experts, because of its inability to meet the taxonomy’s “do not no significant harm” principle.

Indeed, the risks of nuclear power cannot be denied: nuclear power has caused several major disasters with immeasurable consequences, it lacks resilience to climate change, and uranium mining and processing takes place outside the EU, where it cannot be monitored.

Through the use of nuclear power 300,000 tonnes of highly radioactive material have already been accumulated around the world. This is a catastrophic environmental burden that we will leave behind for future generations for many thousands of years.

The only existing deep disposal sites (Asse in Germany and WIPP in the US) pose complex technical and administrative problems for the authorities and are a great burden for the local environment and population.

Nuclear power is an expensive technology, slow to develop and subject to major delays, as illustrated by the Flamanville EPR project in France. And yet we need to drastically reduce our emissions in less than a decade.

Including harmful and polluting activities in the EU taxonomy would destroy the credibility of the European Union in this field. After all, the green taxonomy does not prohibit investment in polluting activities, it is a transparency tool that prevents unsustainable activities from being presented to investors as “green”.

Recent statements by the European Commission have been met with strong criticism, including from national governments, UN bodies, environmental groups and investors who will lose confidence in the tool. The Net-Zero Asset Owner Alliance, formed by the United Nations and representing 10 trillion dollars in assets, has said it would oppose such a decision.

Above all, there is no legal basis for including nuclear energy in the European green taxonomy. A legal analysis commissioned by the Austrian government states that this inclusion is incompatible with the legal basis of Article 10 of the Taxonomy Regulation.

The conclusion is clear: nuclear power can neither be considered a green activity nor a transitional activity. The latter covers only carbon-intense activities and requires not to be an obstacle to low-carbon alternatives. This is not the case for nuclear.

Austria, as well as Germany, Denmark, Luxembourg and Portugal, can count on our support to challenge this decision before the Court. Taxonomy is built on scientific principles, which cannot simply be changed at political discretion. That is not what serious policy is about.

Classifying investments that have no long-term future as “green” under the Green Deal would make it difficult to create green markets at home and abroad. We cannot afford such a mistake. Time is running out. The decade to address climate change has already begun.


LEAK: EU drafts plan to label gas and nuclear investments as green​


The European Union, has drawn up plans to label some natural gas and nuclear energy power plants as “transitional” or “green” investments provided they meet specific criteria such as displacing more polluting coal plants.

The European Commission is expected to propose rules in January deciding whether gas and nuclear projects will be included in the EU “sustainable finance taxonomy”.

This is a list of economic activies and the environmental criteria they must meet to be labelled as green investments. By restricting the “green” label to truly climate friendly projects, the system aims to make those investments more attractive to private capital, and stop “greenwashing”, where companies or investors overstate their eco-friendly credentials.

Brussels has also made moves to apply the taxonomy to some EU funding, meaning the rules could decide which projects are eligible for certain public finance.

A draft of the Commission’s proposal, obtained by EURACTIV, would label nuclear power plant investments as green if the project has a plan, funds and a site to safely dispose of radioactive waste. To be deemed green, new nuclear plants must receive construction permits before 2045.

The lifetime extension of existing power plants will also be considered green “in view of the long lead times for investments in new nuclear generation capacity,” the draft says. To be considered green, these will however need to “include modifications and safety upgrades” to ensure they comply with “the highest achievable safety standards”, according to the draft.

Investments in natural gas power plants would also be deemed green if they produce emissions below 270g of CO2 equivalent per kilowatt hour, replace a more polluting fossil fuel plant, and receive a construction permit by Dec. 31 2030. Such plants must meet other conditions including that they are technically equipped to burn low-carbon gases.

Gas power generation would be labelled green on the grounds that it is a “transitional” activity – defined as one that is not fully sustainable, but which has emissions below industry average and does not lock in polluting assets during the shift to clean energy.

The Commission could not immediately be reached for comment.

Scrutiny

EU countries and a panel of expert advisors will scrutinise the draft proposal, which could change before it is due to be published later in January. EU member states were given until 12 January to provide feedback, EURACTIV understands.

Once published, the proposal can be vetoed by a majority of EU countries or by the European Parliament, but it cannot be amended.

The policy has been mired in lobbying from governments for more than a year and EU countries disagree on which fuels are truly sustainable.

Natural gas emits roughly half the CO2 emissions of coal when burned in power plants, but gas infrastructure is also associated with leaks of methane, a potent planet-warming gas.

The EU’s expert advisers had recommended that gas plants not be labelled as green investments unless they met a lower 100g CO2/kwh emissions limit, based on the deep emissions cuts scientists say are needed to avoid disastrous climate change.

Nuclear power produces very low CO2 emissions but the Commission sought expert advice this year on whether the fuel should be deemed green given the potential environmental impact of radioactive waste disposal.

Brussels finished the rules last year for parts of the green list including sectors such as buildings and transport and from this month investments not included in the taxonomy cannot be marketed as climate-friendly in the EU. The gas and nuclear rules will kick in later.
 

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High Energy Prices To Persist In Europe Despite Arrival Of U.S. Gas​

  • A flotilla of liquefied natural gas (LNG) tankers from the U.S. has started to arrive on European shores
  • Bloomberg NEF's Andrew Hill: Europe's gas problem may not go away in 2022
  • Electricity and gas suppliers are warning the energy crunch will persist through 2023
Europe's energy crunch is far from over, but a flotilla of liquefied natural gas (LNG) tankers from the U.S. are set to resupply the fuel-starved continent. European gas prices fell for the sixth day, the longest decline in more than a year. Even though natural gas prices are retreating from record highs, household power bills, especially in Great Britain, are likely to remain high until 2023.

This year, Dutch TTF natural gas prices surged more than 400% on low supplies ahead of the Northern Hemisphere winter and Russia reducing flows. The news of the flotilla of U.S. LNG tankers headed to the region last week began the decline, nearly halving gas prices. On Wednesday, prices slumped again, down as much as 10%, for the sixth consecutive session but remained five times higher than the five-year average.

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Even though new data shows, the US-EU shipping lane is clogged with LNG tankers headed for Europe, as many as 20 at the moment -- there is reason to believe this will only be a temporary relief.


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"Europe's gas problem may not go away next year," said Andrew Hill, head of European gas analysis at BloombergNEF, in a report on Wednesday.

"Geopolitical issues and acrimony with Russia, particularly around the Nord Stream 2 pipeline, will increase the scope for Russia to limit flows to Europe in the first half of the year, and potentially much longer," Hill explained.

The good news is that LNG supplies are entering the grid as current weather outlooks are mild for the time being.

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Also, electricity and gas suppliers are warning the energy crunch will persist through 2023. According to the Financial Times, British households will feel the pain of unprecedented power bills for at least another 18 months.

Martin Young, an analyst at Investec, said, "directionally, we could see further upward pressure on household energy bills come October 2022."

"This has now moved from an energy supplier crisis to a cost of living crisis," Young added.

Business secretary Kwasi Kwarteng told attendees at a virtual conference on Monday that more relief would be needed for households.

"This is a train wreck that we've seen coming for months." It was time for the government to "step in and support those who will be battered hardest by an inevitable price storm," Adam Scorer, chief executive of charity National Energy Action said.

To sum up, temporary relief will be seen as new supplies from the U.S. enter the European grid. The energy crisis is far from over as it may persist well into late 2022 or even 2023. Perhaps German regulators should stop twiddling their thumbs and certify Russia's Nord Stream 2 pipeline to resupply Europe's depleted reserves before summer.
 

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Europe Desperately Needs a New Gas Storage Strategy​


Europe subcontracted its energy security to President Vladimir Putin — now it’s paying the price.

If European energy regulators learn any lesson from this winter’s soaring gas and electricity prices, it ought to be that they need a new set of rules governing gas storage ahead of the cold winter months.

It seemed like such a good idea allowing Gazprom PJSC — Europe’s major gas supplier — to buy up storage facilities close to its customers. After all, Russia has been a reliable supplier of gas to Europe since the 1960s, with flows of the vital winter heating and power generation fuel largely untroubled by the Cold War, the breakup of the Soviet Union and the subsequent reassertion by Russia of its superpower status.

Russian gas flows to Europe haven’t been curtailed by the northern migration of its gas production heartland to the Yamal Peninsula, the emergence of China as a major new destination for export pipelines, nor the Kremlin’s 30-year policy of cutting transit countries — like Belarus, Poland, Ukraine, and the Baltic states — out of its oil and gas export routes.

By selling gas storage sites to Gazprom, European consumers retained the comfort of a large store of readily available fuel on their doorstep without distribution companies and utilities having to actually buy the gas until they needed it.

The European utilities were very happy to let Gazprom incur the financial cost of buying the gas and storing it, often in what are called backwardated markets — where future prices are lower than current ones — when there wasn’t any money to be made in storage. But the very same utilities are crying today about the lack of gas.

The system works just fine, as long as the storage facilities are filled before the cold weather comes. This winter, they weren’t. And the reason is clear: Gazprom, which controls nearly one-quarter of Germany’s gas storage capacity through astora GmbH, failed to fill its storage caverns.

Unfilled​

Gazprom failed to fill its German gas storage facilities ahead of winter and has done nothing to rectify that as the season has progressed

For consumers, the fact that storage caverns were left unfilled is more important than the reason behind it. European utilities weren’t in any rush to lease storage space and Gazprom either couldn’t, or wouldn’t, fill the storage it owns. Whatever the cause, the result for consumers is the same: fears of shortages and skyrocketing prices.

Pipe Pressure​

European natural gas prices soared this winter, hitting new highs in December

Russia has suddenly become an unreliable supplier. But the fact that Europe never insisted on minimum inventory levels for foreign entities — or domestic ones — owning storage facilities is perplexing.


If Europe is going to allow important gas storage facilities to remain in the hands of a trade partner controlled by a foreign government that may not always wish it well, it needs to take concrete steps to ensure that the low inventory levels at the start of this winter aren’t repeated.

To be clear, Europe’s gas storage capacity is adequate … it just needs to be filled. Ownership of gas storage facilities in Europe ought to come with an obligation to fill them ahead of winter, backed up by legal sanction if they aren’t.

Failure to address the issue will leave Europe hostage to the political aims of its biggest supplier — and winter weather won’t always be on its side.
 
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