New Euro energy collective

https://www.nytimes.com/2022/03/25/business/european-union-g…

**European Union countries agree to jointly purchase gas.**

**European leaders announced the agreement Friday, an effort to ease their reliance on Russia and contain energy costs.**
**By Monika Pronczuk, The New York Times, March 25, 2022**

**European Union countries have agreed to jointly buy and store gas, hydrogen and liquefied natural gas to address the challenge of reducing energy dependence on Russia while protecting Europeans from spiraling energy costs. They stopped short of imposing a ceiling on energy prices, however...**

**Willing E.U. members can team up and jointly negotiate gas purchases, increasing their bargaining power with the hope of influencing energy prices. Ukraine, Georgia and Moldova, as well as countries of the western Balkans, can join the collective gas purchasing.**

**Storage capacity can be shared so that all E.U. nations are prepared with sufficient supplies for next winter. Leaders also endorsed a proposal by the European Commission, the bloc’s executive arm, to fill up 80 percent of their underground storage facilities by November, and 90 percent by 2023, requiring mass purchases in the coming months. That would be a big jump from current storage levels, now about 25 percent, commission officials said....** [end quote]

The market for LNG is already tight. Oil and natgas prices are already rising.

https://stockcharts.com/freecharts/candleglance.html?$IRX,$U…

Ideas on how to ride this market?
Wendy

7 Likes

Find profitable nat gas firms and hold their stock until demand goes down–which won’t happen for some years, IMO. They should be profitable for some time, so look for firms that declare and pay dividends.

If you had asked how to support this market, would that have been a political post?

<If you had asked how to support this market, would that have been a political post? >

If it was to make a buck, no.

If it was to make a political partisan point, yes.

Wendy

8 Likes

If it was to make a political partisan point, yes.

What was the “political partisan point” in the SCOTUS vaccination case? I missed it.

The Captain

2 Likes

What was the “political partisan point” in the SCOTUS vaccination case? I missed it.

The Captain

Probably that it existed at all? Everyone I know … knows that the military profession requires the ability to go just about anywhere in the the world on short notice. That is only practical if they carry a full suite of vaccine protection already installed in their bodies?

So the whole argument was trying to score political nonsense points?

Anymouse

Oh, our diplomates are included as are our politicians. Goes with the job.

https://www.canada.ca/en/department-national-defence/campaig…

6 Likes

Ideas on how to ride this market?

Some people follow analysts’ recommendations; others don’t. At any rate, here are some energy stocks where the consensus is a strong buy and the price target for next year is more than 25% higher:

BOOM
CIVI
CPG
CRC
DEN
ET
MNRL

I have small positions in BOOM, CPG, AMTX and BKR. On a related theme, I also bought an ag ETF (MOO).

DB2

2 Likes

Ideas on how to ride this market?

In a Tesla Model Y!

The Captain

I can’t give any investment advice, but would like to illustrate how the price of natural gas impacts the price of electricity. Operating expenses for a power plants are generally broken down between Operation costs, Maintenance costs, and Fuel costs. O&M are fairly stable, but the price of fuel can vary, sometimes wildly depending on the fuel.

Here in the US, the Henry Hub natural gas futures are currently trading around $5.50 per million BTU (MMBTU).

https://www.cmegroup.com/markets/energy/natural-gas/natural-…

The average heat rate for natural gas power plants in the US is currently at 7732 BTU per kilowatt-hour of electricity.
https://www.eia.gov/electricity/annual/html/epa_08_01.html

Therefore, the average fuel cost is:
($5.50/MMBTU) x (7732 BTU/kwh) x (MMBTU/1E6 BTU) = $0.0425/kwh = 4.3 cents/kwh

If we add in another 0.5 cents/kwh for O&M for a combined cycle power plant, that puts total operating costs at 4.8 cents/kwh.

From the following, the February natural gas import price to Europe was $27.23/MMBTU! That puts the price of electricity from a power plant at $0.21/kwh or 21 cents/kwh, just for fuel.
https://ycharts.com/indicators/europe_natural_gas_price

From the following, the average total operating expenses for US nuclear power plants is 2.2 cents/kwh.
https://www.eia.gov/electricity/annual/html/epa_08_04.html

To summarize and compare:
US nuclear power, O&M plus fuel = 2.2 cents/kwh
US natural gas power, with gas at $5.50, = 4.3 cents/kwh
EU natural gas power, at $27.23, = 21 to 22 cents/kwh

I am constantly told that nuclear power is too expensive. Its actually one of the least expensive energy sources, with the exception of large hydro. But hydro can’t be built just anywhere. The capacity factors for the intermittent renewables such as wind and solar are so low (25% for solar), most of the power needs to be produced from reliable, dispatchable, energy sources such as fossil fuels or occasionally nuclear, in the case of France.

If you want to complain about the capital costs of nuclear power, then we should look to the Chinese, who routinely build nuclear plants on-time and on-budget. They just started up another plant last week.

https://www.world-nuclear-news.org/Articles/Second-Fuqing-Hu…

There is no fundamental reason the US couldn’t also have a large nuclear construction program, where experience is gained, lessons are learned, and costs are reduced, as more plants are built. But the chance of that happening, I recognize as very low.

  • Pete
8 Likes

Pete,

I wish the Fool permitted multiple rec’s.

Running away from nuclear is emotional, not logical. For the reasons you point out.

Tex

2 Likes

Running away from nuclear is emotional, not logical. For the reasons you point out.

I think it is important to include all the economic reasons. Waterfell’s analysis included fuel costs, but did not include capital costs. In other words, he was assuming the nuclear power plant itself is free. If you include capital costs, the economics of new nuclear changes a lot. And as we will see, even some existing nuclear plants are uneconomical.

First some context is in order. In the early 2000s rising natural gas prices caused re-examination of nuclear power, called the “nuclear renaissance.” From wiki:

Between 2007 and 2009, 13 companies applied to the Nuclear Regulatory Commission (NRC) for construction and operating licenses to build 31 new nuclear power reactors in the United States...

...The Energy Policy Act of 2005 offered the nuclear power industry financial incentives and economic subsidies that, according to economist John Quiggin, the "developers of wind and solar power could only dream of". The Act provides substantial loan guarantees, cost-overrun support of up to $2 billion total for multiple new nuclear power plants, and the extension of the Price-Anderson Nuclear Industries Indemnity Act through to 2025. The Act was promoted as a forerunner to a "nuclear renaissance" in the United States, with dozens of new plants being announced.[16]

https://en.wikipedia.org/wiki/Nuclear_renaissance_in_the_Uni…

But of those 31 applications for new nuclear power reactors, only one has been completed and two are scheduled to be completed. The rest have been canceled. The reasons are straightforward and have little to do with crowds of angry hippies. A solid majority of Americans support nuclear energy and have for decades. The main reason is cheap shale gas from fracking made new nuclear unattractive. But it is worse than that. Cheap natural gas has made even some existing nuclear unattractive:

Exelon Generation said Monday it is preparing to refuel its Byron and Dresden nuclear plants after the Illinois Senate passed legislation that will provide $700 million in subsidies for the struggling units, which the power giant was poised to close.

https://www.utilitydive.com/news/landmark-illinois-climate-b…

On April 1, 2021, the cost of New York's nuclear bailout will go up by a scheduled $49 million to a total of $590 million per year ($1.6 million per day). Every electricity consumer in the state pays for the bailout, including residents, businesses, and municipalities.

https://www.allianceforagreeneconomy.org/content/nuclear-sub…

Other states have similar arrangements. To be clear, there are good reasons why it is bad policy to shut down large portions of the nuclear fleet all at once. But you can’t argue that nuclear is cheap and ignore the fact even some existing facilities require subsidies just to remain in operation. Utility companies simply won’t build new nuclear plants if their existing plants are losing money. That is just objective reality and has nothing to do with emotion.

There are other rational reasons as well. Electricity consumption in the US has been pretty flat for 15+ years.

https://www.eia.gov/todayinenergy/detail.php?id=44055

Nuclear plants by nature are large. But there aren’t large increases in demand. So who are you going to sell all this power to? Most utilities don’t want big new plants. They want smaller plants that can built incrementally meet demand. That is a completely rational viewpoint to have.

4 Likes

It is more difficult for nuclear power to compete against natural gas priced at $2.00 compared to $5.50. The fracking revolution created a glut of nat gas in the US. Perhaps some of that glut will be reduced with an increasing export market to Europe. It is also more difficult for nuclear to compete against the $billions$ in federal, state and even local subsidies and tax breaks given to wind, solar and other renewables. To provide those subsidies to only the politically popular renewable energy sources does not result in a level playing field.

Will the nat gas price go back down to $2 if/when the Ukraine situation is resolved? We shall see, but I think Russia will be an international pariah for a while, and the EU lately seems more willing to purchase LNG via ship than have it delivered through pipelines.

There is a reason people diversify their stock portfolios. Having a basket of several different kinds of investment vehicles in multiple industries protects against a large impact if one or two sectors take a sudden hit. The same reasoning should apply to electric utilities. Having nuclear in an energy portfolio protects against a sudden increase in, say, natural gas prices due to international events. But today’s utility executives are often more concerned with the short term performance of their company’s stock price than with planning for the long term.

  • Pete
4 Likes

There is no fundamental reason the US couldn’t also have a large nuclear construction program, where experience is gained, lessons are learned, and costs are reduced, as more plants are built. But the chance of that happening, I recognize as very low.

  • Pete

===========================================================

There are several reasons why US can not have a large nuclear construction program.

  1. No utility has the financial capability to build more than one or two nuclear reactors

  2. Utilities do not wants to build large nuclear power plants

  3. The utility customers do not want nuclear power

  4. Levelized cost of electricity shows solar and wind power plants are the cheapest

Jaak

1 Like

Running away from nuclear is emotional, not logical. For the reasons you point out.

Tex

=====================================================

Texas has a couple of nuclear power plants that have been operating for years. However, Texas utilities and power generators do not want to invest in more nuclear power. Currently they are building solar and wind farms at breakneck speed. But Texas needs to upgrade some of their coal and natural gas fired power plants to be as reliable as wind and solar.

https://www.dallasfed.org/research/economics/2021/0817.aspx

Jaak

syke6 wrote:
Nuclear plants by nature are large. But there aren’t large increases in demand. So who are you going to sell all this power to? Most utilities don’t want big new plants. They want smaller plants that can built incrementally meet demand.

The Utah Associated Municipal Power System (UAMPS) will be installing 6 NuScale reactors at the Idaho National Laboratory site. The NuScale reactors are small, in the 50 to 77 MW range, and can be added incrementally. After the first 6 reactors are running, I expect the site will eventually grow to 12 small power plants.

https://www.world-nuclear-news.org/Articles/Fieldwork-comple…

From the link:
Preparation of the application, which is being managed by Fluor Enterprises under contract with CFPP, with support and technical expertise from NuScale Power, is scheduled for completion in early 2024, and startup operation of the plant is planned for 2029.

UAMPS expects to build six 77 MWe NuScale Power Modules - renamed VOYGR by NuScale late last year - at the Idaho National Laboratory site. The pressurised water reactor, with all the components for steam generation and heat exchange incorporated into a single unit, is the first SMR to receive NRC design approval.

Your comment also ignores the role of base-load power in an electrical grid. There is a certain amount of power that is always required, 24 hours a day. Below is one example for the California power system.
https://www.caiso.com/TodaysOutlook/Pages/default.aspx

The daily minimum is about 19,000 MW (for this time of year) and must always be there. Even the large nuclear plants are only in the 1100 to 1500 MW range, so it takes several of even the largest plants to meet the baseload demand. If that baseload can be supplied with inexpensive nuclear power, that saves the utility from spending on fossil fuels. The fossil plants can be used to provide the load-following function, to increase and decrease supply during the day to meet demand. The intermittent renewables such as wind and solar are useless for both baseload and load-following dispatchable power.

  • Pete
4 Likes