First Oil: Electricity problems reflect poor energy/resource policy

Yes, Russia’s war with Ukraine has thrown total chaos into Europe’s energy supply, and energy security. What seemed to be such a nifty idea by European politicians to put all their natural gas eggs into one Russian basket while they tilted at windmills and squinted at solar panel reflections has now come home to roost. 

As this page was written, numerous stories were run by news outlets, all describing how electricity prices continue to spike throughout Europe. For instance, on the European power futures market, Germany on Aug. 17 passed up Italy for the first time this year, with a futures price of €552 per MWh, setting a new daily record for the country. Meanwhile, Italy hit €538 per MWh, and the UK also reached a new record high of €486 per MWh. 

In Germany, low wind speeds, along with high prices for coal- and natural gas-generated power, were blamed for high electricity rates. Low wind speeds were also blamed for high prices in the UK. 

The German example. There is no better example of poor energy policies and decision-making in Europe than what has occurred in Germany. The regime of former Chancellor Angela Merkel thought the country could cheat reality by handing over the vast majority of Germany’s natural gas needs to Russian suppliers while pursuing grandiose plans for a fossil fuel-free world of renewables. And her successor, Chancellor Olaf Scholz, continued her policies until the Russian-Ukrainian conflict smacked them down. 

Thus, Germany shut down many of its coal-burning plants, with a goal to eliminate all coal-fired power generation by 2038. Nearly simultaneously, the country shut down most of its nuclear-generated power. Before 2010, Germany had 17 operating nuclear power plants. But in March 2011, an earthquake caused a 15-m tsunami that slammed into the Japanese coastline and disabled three Fukushima Daiichi reactors, causing a nuclear accident. Overreacting to this event, German officials began shuttering nuclear power plants in earnest. 

So, it’s no surprise that the loss of both coal- and nuclear-generated power, combined with the sudden gas shortage caused by Russia/Ukraine, has brought a real shortage of easily accessible energy resources and spiked electricity rates that are nearly six times what they were a year ago. In response, Germany’s government, on Aug. 16, before the latest price record was hit, seemed to regain some rationality, stating that it would keep its three remaining nuclear power plants operating beyond their intended shutdown dates. Furthermore, during the week of Aug. 1, officials began re-starting operations at a number of coals plants in the country. Of course, there’s one little problem with that—Germany closed its last remaining hard coal mine in 2018 and has since relied on imports. For instance, in 2020, Germany imported all 31.8 million tons that it consumed. The biggest suppliers were Russia (45.4%), the U.S. (18.3%) and Australia (12.3%).  

The U.S. could help out with greater LNG exports to Europe. However, the extent to which American firms can boost LNG exports depends on how much gas they can get out of U.S. producing regions. U.S. producers need more pipeline capacity to transport more gas for export. But they’re having one heck of a time building more pipelines, thanks to some federal and state legislators and government bureaucrats, who have oversubscribed to the climate change bandwagon and are blocking new projects. 

World Oil Award finalists announced. We are pleased to announce that 97 finalists for 18 categories of the World Oil Awards have been selected from the original 303 submissions, per a list released on Aug. 12. Just over 50 companies are represented by the finalist technologies and individuals. The winners will be announced at the 2022 World Oil Awards ceremony on Oct. 13 at The Houstonian in Houston, Texas.  

About the Authors

Kurt Abraham

World Oil

Kurt Abraham kurt.abraham@worldoil.com