Industrial energy bills join domestic ones in soaring leading to production fears

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by Shaun Richards

This summer has produced something of an energy price crunch as the issues we looked at back on the 10th of August have continued to build. It was only yesterday that we looked at the implications already for electricity prices in Spain which have risen so much they have become a national issue. Here is Catalan News on the subject.

Electricity in Spain cost €42.01 on August 31, 2020. A year later, the price continued on its unprecedented upwards trend, reaching a new high of €130.53 per MWh, a 209% increase. That is, Spaniards who have a contract in the regulated electricity market will pay three times more than they did on the same day last year.

The priciest time to use electrical appliances will be from 9 to 10 pm, when a MWh will cost €137.46.

The cheapest time to use them on Tuesday will be from 4 to 5 pm, when it will slightly fall to €123.35.

Actually they are already behind the times as they have been up to 140 Euros per MWh. The issue is in play elsewhere as Kathimerini points out.

Households and companies face significant hikes of up to 50% in their electricity bills from September as wholesale power prices broke all records in August.

Government officials, especially at the Energy Ministry, are alarmed by both the increased burden on consumers and the chain reaction on the prices of other products and services.

A catch here is that a fair bit of it is a deliberate policy.

However, there are no instruments at their disposal to mitigate the effect since the underlying reasons are external, specifically, the rally in carbon dioxide emissions prices as a result of European Union policies to mitigate climate change and the continuing rise in natural gas prices.

One factor in play here comes from the UK where renewable power has been a consistent disappointment this summer. Back on the 10th of August it was 1.44 GW and right now according to @UK_WindEnergy it is 2.07 GW with them adding this.

Today’s forecasted metered #Wind peak is 2,879MW between 22:00 and 23:00 GMT Tomorrow’s is 3,396MW between 23:00 and 24:00 GMT.

This is out of a theoretical maximum of 22 GW which according to the political rhetoric represented the UK  on its way to being “the Saudi Arabia of wind power”. The reality is rather different and sadly so is this compared to the hype.

That is supposed to reach 8 GW an hour at the peak but due to the dull summer has also been below par. On a more hopeful note the sun has just come out in Battersea but across the UK it is only doing this.

GB Grid: #Solar is generating 1.25GW (3.80%) out of 32.87GW

The graph also reminds us of a particular solar problem which is that it requires storage to work even on a daily basis. Something that Budweiser seem to have forgotten.

We’re proud to be installing solar panels on 100 pubs in Ireland, providing them with 100% renewable electricity.

So they close once it gets dark?

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Behind this there is the issue that via the interconnectors the UK is a drain on the European power supply. We are importing around 15% of our electricity with @UK_Imports providing the details.

GB Grid: #Imports are supplying 5.00GW (15.00%) out of 33.31GW

#Exports: 0.39GW

Interconnectors: France: 3.00GW

Ireland: -0.14GW

Netherlands: 1.00GW

Belgium: 1.00GW

Northern Ireland: -0.21GW

Norway: -0.04GW

 

So much for the hype about all the exports from our abundance of offshore wind.

Gas prices are lit too

The next part of the saga relates to gas and this is an international story as this from President Biden overnight highlights.

BIDEN SAYS HAS DIRECTED ENERGY DEPARTMENT TO USE ALL TOOLS, INCLUDING STRATEGIC PETROLEUM RESERVE, TO KEEP GAS FLOWING ( @DeltaOne)

Not the gas we are thinking of as they mean gasoline but I have seen reports that 83% of gas production in the Gulf of Mexico is offline.

If we switch back to the UK then the Financial Times is reporting this.

British Gas owner Centrica warns: Soaring prices Global supply shortages could raise household bills and force energy-intensive businesses to curb activity this winter.

Natural gas prices are at record levels throughout the year, trading about five times higher than they were two years ago. European countries may face supply problems this winter, when demand is strongest due to gas suppliers failing to fill storage during the summer.

They went further switching to an issue I have long expressed fears about..

Cassim Mangerah, who runs energy trading at Centrica, told the Financial Times that a prolonged or particularly cold winter was likely to spur prices higher, leaving some energy-intensive companies little option but to curb production. “We haven’t seen a price situation like this before. If you can’t attract supply the only alternative is to cut demand to balance the market,” Mangerah said.

Yes businesses may be made uneconomic by the prices.

“If we do see a supply crunch this winter the other way to balance the market is through economic activity. If prices are really high then some gas-dependent businesses in the UK and Europe may simply decide not to produce.”

In essence we are now dependent on whether we have a mild or a severe winter.

“Europe and the UK have enough gas at the moment to satisfy daily demand but we don’t have enough to fill storage,” Mangerah said. “If there is a long cold winter, based on where we are today, then we could have a problem. We would have to attract LNG almost regardless of the price to make sure demand can be met.” A milder or shorter winter could bring down gas prices but there are longer-term supply concerns.

There were previously alternatives but it has been official policy to close them.

“In the past we used to see more fuel switching — if gas prices are too high then utilities will switch to coal,” said Mangerah at Centrica. “But that is not really an option these days given the high carbon price and the phaseout of coal generation in the UK.”

Rather breathtakingly this was the official response.

The Department of Business, Energy and Industrial Strategy said the UK has “highly diverse sources of gas supply” but added that the country’s “exposure to volatile global gas prices underscores the importance of our plan to build a robust domestic renewable energy sector”.

That is riddled with contradictions and as we have looked at already the use of “robust” with regard to renewables will remain an outright lie until we have the ability to store power for ( sometimes literally) rainy days.

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Comment

The situation has been one of gross miss management. The UK for example has dithered over plans for its energy structure for more than a decade, so under government’s of all the main political hues. We have closed sources of power mainly coal but not properly replaced them as we again note a difference between theory and practice in the world of renewables. After all you can turn a coal power plant on quickly which presently we cannot do with the wind farms and until the wind blows simply cannot do.

So the pressure went on what the Rolling Stones described thus.

But it’s all right now, in fact, it’s a gas
But it’s all right, I’m Jumpin’ Jack Flash
It’s a gas! Gas! Gas

Relying ever more on one source makes you more vulnerable especially as others join the game.

Asian countries including Japan, South Korea and China have been increasing imports of liquefied natural gas (LNG), which can be moved on tankers and has helped globalise a market that previously more heavily relied on pipelines and links to oil for pricing. ( FT)

Russia has seen a chance and must be laughing at Europe as well as rubbing its hands together.

Russia, the largest gas exporter to Europe, has been criticised for sending lower supplies this year, ahead of the start-up of the Nord Stream 2 pipeline to Germany.

In fact the Chinese may be laughing too.

Frank Aaskov, energy and climate change policy manager at UK Steel, said rising fuel costs were becoming a huge concern for energy-intensive sectors such as steel, though he stopped short of saying the industry may need to restrict production.

But the overall picture is that by leaving ourselves vulnerable we have raised energy prices for both domestic and industrial consumers. Any cold still day may lead to power cuts as well whether via the price being to high or outright. So let us hope for a windy winter but not too much as we have to turn the wind farms off then too.

It really is a complete failure of planning….

 

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