Wednesday, October 20, 2021
Price spike highlights how switching to greener energy will be a dirty job
The world is living through the first major energy crisis of the clean-power transition. It won't be the last. The shortages jolting natural gas and electricity markets from the UK to China are unfolding just as demand roars back from the pandemic.
But the planet has faced volatile energy markets and supply squeezes for decades. What’s different now is that the richest economies are also undergoing one of the most ambitious overhauls of their power systems since the dawn of the electric age — with no easy way to store the energy generated from renewable sources.
The transition to cleaner energy is designed to make those systems more resilient, not less. But the actual switch will take decades, during which the world will still rely on fossil fuels even as major producers are now drastically shifting their output strategies.
One of the biggest obstacles ahead will be storing power generated by intermittent wind and water sources. Solutions do exist, but it will be years before we have them at the scale on which they’re needed
“It is a cautionary message about how complex the energy transition is going to be,” said Daniel Yergin, one of the world's foremost energy analysts and author of The New Map: Energy, Climate and the Clash of Nations. In the throes of fundamental change, the world’s energy system has become strikingly more fragile and easier to shock.
Take the turmoil in Europe. After a colder-than-normal winter depleted natural gas inventories, gas and electricity prices soared as demand from rebounding economies surged too fast for supplies to match. Something similar probably would have happened had Covid-19 struck 20 years ago.
But now, the UK and Europe rely on a very different mix of energy sources. Coal has been cut back drastically, replaced in many instances by cleaner-burning gas. But surging global demand this year has left gas supplies scarce.
At the same time, two other sources of power – wind and water – have had unusually low output, thanks to unexpectedly slower wind speeds and low rainfall in areas including Norway. In other words: a strained global gas market triggered Europe's record-setting spike for electricity prices — and the transition amplified it.
The pain hitting Europe is an ominous sign of the types of shocks that could strike more of the globe. Even as solar and wind power become increasingly plentiful and cheap, many parts of the world will for decades still depend on natural gas and other fossil fuels as backups. And yet, investor and company interest in producing more of them is waning.
That’s a good recipe for volatility, Nikos Tsafos, from the Centre for Strategic and International Studies, wrote in a recent analysis. “You're definitely moving into a system that’s more vulnerable,” Tsafos, the centre’s James R Schlesinger chair for energy and geopolitics, said in an interview.
To be clear, the transition itself – imperative for the planet – didn't cause the squeeze. But any big, complex system can become more fragile when it's undergoing major change.
All this is happening at a time when power consumption is projected to increase 60 per cent by 2050, according to Bloomberg NEF, as the world phases out fossil fuels and switches to cars, stoves and heating systems that run on electricity.
Continued economic and population growth will also drive consumption higher. And as the world moves even more into all things digital, it will mean that this heightened vulnerability comes at a time when people need reliable power more than ever.
The surge in electricity demand combined with fuel-price volatility means the world could be in a for a rocky few decades
The surge in electricity demand combined with fuel-price volatility means the world could be in a for a rocky few decades. The consequences will likely range from periods of energy-driven inflation, exacerbating income inequalities, to the looming threat of power outages and lost economic growth and production.
The planet's energy systems are interconnected, so the crisis and its spill over are being felt across the world. The crunch has had knock-on effects across industries, obstructing silicon production, disrupting food supplies and snarling supply chains.
In the US, natural gas futures have already more than doubled this year, before the peak demand that comes with the winter cold. With 40 per cent of the country’s electricity now generated by burning gas, those higher prices will inevitably push up electricity and heating bills.
In China, even as the government pushes to ramp up renewable power, the industrial economy still relies heavily on fossil fuels: coal, gas and oil. And when its factories started humming again during the pandemic rebound, the country simply didn’t have enough fuel.
Chinese manufacturing contracted in September for the first time in 19 months, suggesting that soaring energy costs have become the biggest shock to strike the economy since the beginning of the pandemic.
China's government is now vowing to stabilise the situation by procuring more overseas coal and liquefied natural gas. That puts the nation in direct competition with Europe, threatening to starve the continent of fuel and worsen that crisis. There will be an inevitable fight over what exports are available, leaving some developing countries such as India and Pakistan worried they can’t compete.
As major western producers from BP to Royal Dutch Shell work to reduce emissions and America’s shale drillers take a step back from expansion, the finite amount of exportable supplies is growing tighter. Jeff Currie, global head of commodities research at Goldman Sachs, points to underinvestment in fossil fuels as a big part of the problem.
Investors seeking the big returns that come from new businesses have been pouring money into alternative energy stocks rather than fossil fuel companies. Others are actively dumping coal and oil stocks, seeing them as a risk while the energy transition accelerates.
The current price spike has served as a reminder that even as the world is trying to build a new energy system, it’s still reliant on the old one
And some fossil fuel companies have themselves started directing investments into the low-carbon future rather than focusing solely on their old role of finding, pumping and delivering more oil and gas.
“In many parts of the world, you’ve overbuilt wind, you’ve overbuilt solar,” Currie said in an interview on Bloomberg TV. “The new economy is over-invested and the old economy is starved.”
Wind and solar power production have soared in the past decade. But both renewable sources are notoriously fickle – available at some times and not at others. And electricity, unlike gas or coal, is difficult to store in meaningful quantities.
That’s a problem, because on the electrical grid, supply and demand must be constantly, perfectly balanced. Throw that balance out of whack, and blackouts result. So far, natural gas plants have served as the stable backup that wind and solar power need. That interdependence works fine, so long as gas prices aren’t going through the roof.
One of the biggest obstacles ahead will be storing power generated by intermittent wind and water sources. Solutions do exist, but it will be years before we have them at the scale on which they’re needed. “The transition is both the challenge and the opportunity,” said Amy Myers Jaffe, managing director of the Climate Policy Lab at Tufts University.
Australia and California are plugging massive batteries into the grid to keep power supplies steady when the sun sets on solar plants. That deployment is just in nascent stages, and the batteries themselves are limited, usually supplying electricity for about four hours at a time.
Many countries and companies have pinned their hopes on hydrogen, seeing it both as a way to store energy and as a fuel for transportation and industry. Hydrogen can be split from water using machines called electrolysers powered by renewable energy, whenever it’s abundant. The process produces no greenhouse gases.
The hydrogen can then be burned in a turbine or fed through a fuel cell to generate electricity – all without carbon emissions. And unlike oil, gas and coal, such “green hydrogen” can be produced almost anywhere where there’s water and strong sun or wind.
The first wave of green hydrogen plants is still in planning stages. Many of the potential users – heavy industries and utility companies – are still studying whether the solution will work for them. The point at which hydrogen could underpin our global energy system, if it arrives, is likely years away.
In the short term, a warm winter across the northern hemisphere would bring gas prices down and allow storage fields to fill back up. But the current price spike has served as a reminder that even as the world is trying to build a new energy system, it’s still reliant on the old one.
“It’s not just about capacity of the amount of power we can get onto the network, it’s about the flexibility and the ability to deliver that power at the right time,” said James Basden, founder and director of Zenobe Energy Ltd., which is building Europe’s biggest battery.
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Poland seeks EU climate policy rethink amid high energy prices
Poland on Monday called for the European Union to cancel or delay parts of its plan to tackle climate change ahead of a summit at which EU leaders will wrangle over their response to surging gas and electricity prices.
EU country leaders, who meet on Thursday and Friday, are divided over whether short-term national measures like tax cuts are sufficient to address the recent energy price spike, or whether deeper reforms of EU energy regulation are needed.
In a paper circulated to other countries ahead of the EU summit, Poland said Brussels should change or delay parts of its planned climate policies, warning that if an "excessive burden" is put on consumers, they may reject the EU's climate aims.
"We should analyse in detail all elements of the Fit for 55 package that can have a negative impact on the energy price and consider their revision or postponement," the paper said.
"Fit for 55" refers to the EU policy package to cut emissions by 55% from 1990 levels by 2030.
The paper, seen by Reuters, singled out the EU's plan to launch a carbon market for transport and buildings, which has faced resistance from some countries over concerns it could increase consumer bills. The European Commission has said a new multi-billion-euro EU fund would shield vulnerable consumers from any price increase.
Poland also said the EU should maintain its current minimum energy tax rates. Brussels wants to overhaul the system to end tax exemptions for kerosene - a move supported by countries including the Netherlands and France - and increase rates on other polluting fuels.
EU tax changes require unanimous approval, meaning one country can block them.
While other states have warned that high energy prices could erode support for ambitious climate policies, Poland's demands are likely to face opposition from countries which say the recent gas price spike should encourage Europe to accelerate its green shift away from volatile fossil fuel prices.
Meeting the EU's legally binding climate targets will require huge investments. Brussels says this will create jobs and economic growth in green industries, while the cost of not tackling climate change would be far higher, in the form of devastating floods, droughts and wildfires.
Poland also called for the EU to create new financial mechanisms to reduce energy poverty, limit speculators' participation in the EU carbon market and introduce a gas storage obligation for each EU country.
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UK: New plans for net zero are unrealistic at best, irresponsible at worst
Boris Johnson’s net zero strategy fails to address the concerns that the available technologies are either too expensive or cannot be delivered at scale
Yesterday, months behind schedule, the government’s strategy for decarbonising the nation’s homes finally appeared. The long wait is understandable though - it is widely recognised that bringing the UK’s housing stock to net zero carbon emissions will be difficult and eye-wateringly expensive.
That’s because the only relevant net zero technology that is at hand is the electric heat pump, which carries a price tag of well over £10,000 once you have added in the bill for installation and the necessary upgrades to plumbing and radiators.
On top of that, most homes will also need much higher standards of insulation, adding thousands of pounds more. It’s little wonder that some estimates of the cost to the country run into the trillions of pounds.
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Greenhouse gas dispute in Australia
On Sunday, the Minister for Industry, Energy and Emissions Reductions Angus Taylor presented the Nationals with the government’s plan to reduce emissions of greenhouse gases, the compounds such as carbon dioxide, methane and nitrous oxide which contribute to global warming and help trigger climate change.
Under the Paris Agreement, signed in 2015, Australia promised to reduce emissions by 26-28 per cent by 2030.
There were two main components to the government’s plan on Sunday – bringing emissions to net zero by 2050, and increasing our 2030 target.
While there were hopes the Sunday meeting would complete negotiations, after four hours this proved not to be the case, with the Nationals presenting a host of objections.
On Tuesday the Prime Minister told parliament Australia would not be updating its 2030 emissions goal.
He has also said the 2050 net zero goal will become a decision for national cabinet, rather than the Coalition party room.
The Nationals expressed a range of objections, chiefly about the impact of net zero policies on the regions and wanting increased support for existing high-emitting fossil fuel industries such as coal and gas.
A number of Nationals also want the government to explore the possibility of Australia developing nuclear power.
There is also an historical element to the Nationals’ discontent. When John Howard signed the Kyoto Protocol (the forerunner to the Paris Agreement) in 1997, it prompted state and territory governments to ban land clearing.
This measure is regarded as the primary factor that’s enabled Australia to reduce its emissions by around 20 per cent already, as the uncleared land effectively retains carbon in vegetation, which would otherwise be released into the atmosphere.
But many farmers say clearing bans have prevented them from making a decent profit from their land, so there is a sentiment that people in the regions should not be further burdened by further emissions cuts.
There are huge divisions. Some MPs, such as former leader Michael McCormack and Darren Chester, now cautiously support net zero as a global economic and environmental necessity (Mr McCormack was previously opposed).
Agriculture Minister David Littleproud sees himself as something of a centrist on the issue, telling reporters this week that “zealots from both sides need to bugger off”.
Queensland Senator Matt Canavan is perhaps the most hard line opponent, and has threatened to cross the floor if any net zero legislation is to come before parliament.
He has also raised concerns about the lack of detail in the government’s modelling and called for it to be made public. “We’re getting very little details about this and I’m in a position of being asked to marry a girl I haven’t met. That’s not how the Nationals party room works,” he said this week.
Nationals leader Barnaby Joyce has himself been a fierce critic of net zero in the past but has cast himself as a broker. On Tuesday he said he would be seeking further input from Nationals MPs over coming days, and he would communicate them to the Prime Minister.
The latest quarterly figures from the National Greenhouse Gas Inventory show Australia has reduced its emissions by just over 20 per cent on 2005 levels.
Mr Taylor has said on current projections, Australia could actually end up cutting emissions by around 32-35 per cent by 2030.
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My other blogs. Main ones below
http://dissectleft.blogspot.com (DISSECTING LEFTISM )
http://edwatch.blogspot.com (EDUCATION WATCH)
http://pcwatch.blogspot.com (POLITICAL CORRECTNESS WATCH)
http://australian-politics.blogspot.com (AUSTRALIAN POLITICS)
http://snorphty.blogspot.com/ (TONGUE-TIED)
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