OT: European Power Grid

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Interesting Twitter thread on the impending European power grid “catastrophe”. Tangentially on topic as BHE constitutes a large part of the US power grid.

"So now, we have a dilemma that needs urgent addressing by policy makers. The perception of the people (at least in Europe) is to get rid of hydrocarbons while the reality is that those same people do not reduce hydrocarbon consumption. Meanwhile, the hydrocarbon industry is an extractive industry that needs US$ 300 billion of re-investment every year just to keep production flat. However, we will consume more, not less hydrocarbons in the future, and if only because the world population is set to grow to as much as 12 billion people. Yet, the industry invests not even half the necessary amounts while OPEC cannot compensate global under-investments for long. The implications for oil and gas prices will become ever more dramatic. In fact, higher oil prices will likely shorten global economic cycles from so far 6-9 years to more like 3 years because overshooting prices will cause recessions. We like to call this part “Fossilflation”

Here is the big difference to the 1970ies. Europe is also in an electricity crisis. Take German baseload wholesale prices for November. They currently stand at €700/MWh and should be €50. Of course, European politicians love to blame Putin for this. That is only half of the truth. Yes, because of the war gas-fired electricity generation has the highest cost in the so called “merit order system” of the European electricity market that prices all atoms according to the price of the highest cost generation. However, it is also true that by shutting down dispatchable baseload-critical nuclear and coal power facilities and replacing them with intermittent renewable energy sources such as wind and solar, Germany left itself - and by extension the entire European Union - vulnerable to electricity shortages and higher prices.

https://twitter.com/BurggrabenH/status/1567929340737863680?r…

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Front page of today’s WSJ:

“Europe’s energy crisis has left few businesses untouched, from steel and aluminum to cars, glass, ceramics, sugar and toilet-paper makers. Some industries, such as the energy-intensive metals sector, are shutting factories that analysts and executives say might never reopen, imperiling thousands of jobs. The question is whether the current pain is temporary, or marks the start of a new era of deindustrialization in Europe. The bloc has scoured the world for alternative gas supplies, striking deals to buy gas from the U.S., Qatar and elsewhere. But the continent might never again have access to the cheap Russian gas that helped it compete with the resource-rich U.S. and offset high labor costs, rigid employment rules and stringent environmental regulations.”

https://www.wsj.com/articles/europe-manufacturers-factories-…

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"Europe is bracing for an unprecedented energy crisis this winter, and Russia’s war in Ukraine is as much to blame as European politicians say. What they don’t want you to know, however, is how their own climate-change policies are making everything worse. We’ll explain, since they won’t.

Like prices for fossil fuels, CO2-emissions permits in the European Union’s emissions-trading system (ETS) have skyrocketed in price. A certificate to emit one metric ton of CO2 now costs about €80 and last month nearly hit €100, up from €25 in late 2019. The rising emissions price translates into higher costs for electricity consumers, as well as a squeeze for industries already scrambling to absorb sky-high fuel prices.

https://www.wsj.com/articles/europes-latest-carbon-fiasco-em…

“It ain’t easy being green.” - Kermit the Frog

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A certificate to emit one metric ton of CO2 now costs about €80 and last month nearly hit €100, up from €25 in late 2019.

More carbon credits to Tesla. Free money. Same story in US.

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The real “Green New Deal”.

"…if you seek “climate risk” to financial stability, look around you. It has arrived, although in exactly the opposite manner to what our current crop of eco-financiers predicted. Europe’s plight tells a tale that could become all too familiar in the U.S. soon.

The U.K. may be facing a wave of business bankruptcies exceeding anything witnessed during the post-2008 panic and recession. Some 100,000 firms could be forced into insolvency in coming months, bankruptcy consultancy Red Flag Alert warned this week. These are otherwise healthy firms with at least £1 million in annual revenue. Business failures on this scale would dwarf the roughly 65,000 firms of any size that went under from 2008-10.

…

Matters are probably worse in Germany, the eurozone’s largest economy. Some 73% of small and medium-sized enterprises in one survey reported feeling heavy pressure from energy prices, and 10% of those say they believe they face “existential” threats to their businesses over the next six months. And that poll, from the small-business association BMD, is the optimistic one. A separate survey published this week by the BDI, a major industry association, found 34% of respondents describing energy prices as an “existential challenge.” Business failures will ripple up and down supply chains and quickly into the banks."

https://www.wsj.com/articles/the-coming-global-crisis-of-cli…

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The U.K. may be facing a wave of business bankruptcies exceeding anything witnessed during the post-2008 panic and recession.

Not just businesses.
The average UK person in bottom-quintile income is about to see energy costs rise from 14% of net income to 41%.
Ouch.
Their other two of their three top expenditure categories are housing, and food and non-alcoholic beverages.
Housing is hard to trim on short notice, so I suspect their spending on food and non-alcoholic beverages will tank.

Jim

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Germany’s Uniper says government might take controlling stake

DUESSELDORF/FRANKFURT, Sept 14 (Reuters) - Germany’s Uniper (UN01.DE) said on Wednesday the government might take a controlling stake in the company as the ailing gas importer seeks further aid, sending its shares tumbling by a fifth.

Uniper, Germany’s largest importer of Russian gas, burned through its cash reserves sourcing gas on the expensive spot market after Moscow slashed flows to Germany, triggering a rescue package with Berlin agreed in July.

But that package, which has grown to 19 billion euros ($19 billion), is no longer enough, and Uniper needs more.

“The parties are looking into alternative solutions, inter alia a straight equity increase that would result in a significant majority participation by the German Government,” Uniper said in a statement.

https://www.reuters.com/markets/europe/germany-weighs-nation…

"Uniper is an international energy company that operates roughly 33 GW of generating capacity in Europe and Russia, which ranks us among the world’s largest power producers. Based in Düsseldorf, Uniper is currently one of Germany’s largest publicly listed energy supply companies. Together with our main shareholder Fortum, we are also Europe’s third-largest producer of zero-carbon energy.

https://www.uniper.energy/about-uniper

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we are also Europe’s third-largest producer of zero-carbon energy.

Looks to be that they’ll soon be a large producer of zero energy.

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JUST ASKING QUESTIONS SEPT. 13, 2022
How Europe Stumbled Into an Energy Catastrophe

"You recently wrote that “with each passing day, Europe risks crossing the point of no return.” What does the point of no return look like in your view?

?The point of no return is literally heading into the winter of 2022–23 with insufficient molecules — think natural gas, oil, and so on — to get through that winter, based on any sort of reasonable, Monte Carlo simulation of the degree of winter’s severity. But also, and just as importantly, no efficient mechanisms for rationing.

You can’t print molecules. You can’t print energy. If you head into the winter without enough energy — and because of Putin’s decisions, Europe almost certainly will — and then you also have a very sloppy, guaranteed-not-to-work rationing mechanism, you could have chaos. And that’s our main concern. We’d argue we’re kind of already there. What we’re experiencing today — bailouts by the hundreds of billion — electricity prices up by a factor of 14 or 15 before coming down by a third and everybody cheering … this is Weimar-like stuff. If even just three months ago we had said this was going to happen, we would have been dismissed, and I would say correctly, as alarmists."

https://nymag.com/intelligencer/2022/09/europe-energy-catast…

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Here’s an example of anti-market policies that are likely to make things worse in Europe:

A draft of the Commission proposals, seen by Reuters, would skim off excess revenues from Europe’s non-gas fuelled power plants and have governments spend the cash on helping businesses and retail consumers with their bills.

Wind and solar farms and nuclear plants would face a cap of 180 euros ($180) per megawatt hour (MWh) on the revenue they receive for generating electricity, according to the draft, which could still change before it is due to be published on Wednesday afternoon.

That would cap generators’ revenues at less than half of current market prices. Germany’s front-year electricity price hit a record high of more than 1,000 euros/MWh last month and was trading at just below 500 euros/MWh on Wednesday.
https://www.france24.com/en/europe/20220914-energy-crisis-to…

In other words, if you are a European energy utility that had the foresight to build windfarms and keep your nuclear power running, your price will be capped at about a fifth the current market price, reducing incentives to increase your non-fossil capacity, And those skimmed profits will go to help consumers with their bills, so that they won’t need to cut back so much on their use of electricity and their use of methane for heating.

I don’t know how you could imagine a plan that would be more counterproductive than this one. But I don’t doubt that the EU is working on it.

dtb

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I don’t know how you could imagine a plan that would be more counterproductive than this one. But I don’t doubt that the EU is working on it.

Has anything the EU has done in this kerfuffle been not counterproductive?

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Has anything the EU has done in this kerfuffle been not counterproductive?

I don’t know. Maybe, but I haven’t heard anything that impressed me as being sensible.

Europe is basically at war with Russia - it’s a war that I agree with, but I fear that a lot of people that support the war are not really aware of how severe the consequences are likely to be on European life, as long as it lasts. Giving support to Ukraine is expensive already, but affordable, but being abruptly cut off from a major source of energy, without much time to adjust (like reinstating mothballed nuclear energy, or building LNG terminals, or insulating old buildings) is going to hurt a lot. I think they should be talking about turning thermostats way down, basically shutting down non-essential travel, putting huge surtaxes on fossil fuels, increased (not decreased) electricity rates, etc., but all those things are very hard to promote, in a democracy where they will all be extremely impopular.

Since I’m not living in Europe, I can’t assess how seriously this looming winter crisis is being taken, but I haven’t heard of a lot of concrete actions to get ready for it. Maybe some of the Europeans on this board could give us a better idea of what ordinary Europeans are anticipating?

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Joke:

Q: What did Greens use for light before candles?

A: Electricity.

“welcome to the “subsidize demand and arrest anyone who tries to take advantage of the price caps” stage of the greendemic of darkness sweeping the globe as deeply unserious people propose deeply unserious “solutions” to entirely avoidable problems of their own making.”

https://boriquagato.substack.com/p/eu-physics-denial-has-com…

Recommend reading comments and a book recommendation.

https://www.amazon.com/Shorting-Grid-Hidden-Fragility-Electr…

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In the second half of the 16th century, Britain plunged into an energy crisis. At the time, the primary source of energy driving the British economy was heat derived from the burning of wood, and Britain was literally running out of trees.

…it might surprise our followers to learn that the European Union and Britain are incentivizing a return to the primitive concept of burning wood for energy on a massive scale.

…A single pellet of uranium fuel no bigger than your fingertip provides as much energy as a ton of coal (and certainly even more wood). How many trees will be clearcut before this boondoggle of absurdity is stopped?"

https://twitter.com/DoombergT/status/1571063488860286977

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…it might surprise our followers to learn that the European Union and Britain are incentivizing a return to the primitive concept of burning wood for energy on a massive scale…
How many trees will be clearcut before this boondoggle of absurdity is stopped?"

It might be wise co consider whether what the fellow is saying is making any sense.
Which of course it isn’t.
Nobody clear cuts forests to make fuel to burn.
Yes, it would surprise me to learn they are incentivising burning wood, because they aren’t.

Pellet fuel “can be made from any one of five general categories of biomass: industrial waste
and co-products, food waste, agricultural residues, energy crops, and untreated lumber.” (wikipedia)
Sawdust is most common, but it depends on the location. In some places it’s bagasse or rice husks.
Sawdust, needless to say, is not the same product as wood. It’s hard to build a chair out of sawdust and nails.

Creating and shipping pellets takes some energy, for sure. Every power production chain has losses.
And it would indeed be pretty foolhardy to use farmland to grow crops specifically to be burned, except in exceptional circumstances.

But would it really be better to dump that waste stuff to rot and emit the same CO2 to no-one’s benefit?

Rather than Twitter (or Youtube or Facebook etc), might I humbly suggest you use as primary data sources things that end in “.gov”.
Or reputable peer reviewed journals.

Jim

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It might be wise co consider whether what the fellow is saying is making any sense.
Which of course it isn’t.
Nobody clear cuts forests to make fuel to burn.
Yes, it would surprise me to learn they are incentivising burning wood, because they aren’t.

Then it might surprise you that 80% of the wood pellets burnt in the Drax power plant is low grade round wood, that’s not waste or a byproduct. Drax also has received billions of subsidies.
Coincidentally, I have read a couple of articles about this recently, here are two of them:
https://www.theguardian.com/environment/2022/aug/11/burning-…

https://www.bbc.com/news/business-59546281

I’m not interested enough in the subject to do serious research but I suspect the guy is correct.

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Okay,I just spent 5 minutes and found this paper:

https://www.sciencedirect.com/science/article/pii/S096195341…

‘The calculations showed in the best case results in GHG reductions of 83% compared to coal-fired electricity generation. When parameters such as different drying fuels, storage emission, dry matter losses and feedstock market changes were included the bioenergy emission profiles showed strong variation with up to 73% higher GHG emissions compared to coal.’

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I subscribe to the NY Times just to support their investigative reporting. Here’s a disturbing report, with photos to back it up, on virgin forests being clear cut, ground to pellets and shipped to power plants to meet climate related targets:

“Europe Is Sacrificing Its Ancient Forests for Energy
Governments bet billions on burning timber for green power. The Times went deep into one of the continent’s oldest woodlands to track the hidden cost.”

https://www.nytimes.com/interactive/2022/09/07/world/europe/…

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forests being clear cut, ground to pellets and shipped to power plants to meet climate related targets

This has been documented in the US southeast, as well.

While I can understand the logic behind using industrial wood waste as source for pellets, I think other sources should be banned. In the case of tree harvest residues (branches, small trees, shrubs which are cut incidentally to tree harvest), some of which would be left to rot on the ground and have much of their biomass end up as CO2 within a decade, one could make the argument that these should be okay to use as fuel sources, but there are other factors to consider: leaving them on the ground to rot provides ground cover that helps prevent erosion and provide shelter for wildlife. As it rots, it feeds all kinds of organisms: fungus, plants, insects and therefor animals, and builds the soil, so that the forest can regenerate faster and with more diversity of life.

It may not make sense to leave all the harvest residue on the ground, as it could be a large amount that would contribute to excessive fire risk and smother existing plant life. Lots of time that residue could be used for other purposes, like particle board, which would keep the CO2 out of the air longer and avoid other pollution.

“Why Burning Trees for Energy Harms the Climate”
https://www.wri.org/insights/insider-why-burning-trees-energ…

The Dogwood Alliance is a local (to me) environmental non-profit that has done investigative reporting to document the clear-cutting of forests with whole large trees headed to the pellet factory to be burned in the region or shipped to Europe.

https://www.dogwoodalliance.org/our-work/wood-pellet-biomass…

This report is a little dated now, but I’m pretty sure a lot of what is in it is still common practice: https://media.dogwoodalliance.org/wp-content/uploads/2012/11…

All subsidies for wood pellets in the name of climate change mitigation should be immediately revoked, and policies should be put in place minimizing its use, and penalizing it for air pollution including CO2 emissions as with other fuel sources.

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And it would indeed be pretty foolhardy to use farmland to grow crops specifically to be burned, except in exceptional circumstances.

Amen. Our biofuel policies encourage exactly that. The last time I checked, the US was growing 5 billion bushels of corn per year to convert it into ethanol and burn it. The Europeans aren’t much better with their biodiesel mandates.

SJ

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