Wednesday 22 September 2021

Energy Crisis Rumbles On

This could get interesting.  Thus far, nothing fundamental has happened that should cause deep alarm, and the (UK) government has actually responded quite intelligently.  But there's an obvious risk that nerves are lost and mad policies get enacted in a hurry, which later become hard to unravel (see several of Sunak's little wheezes over Covid).

First of all, what does anyone expect when the whole world (a) is trying to stop using coal (yes, even China and India, though not trying very hard); (b) has installed epic quantities of wind power; and (c) is recovering strongly from the pandemic, including running big schemes for massive infrastructure development?  Oh, and the world's biggest producer (little Volodya, this means you) is willfully holding back supplies for political reasons?  

Commodity price spikes, that's what.

Although every country will have its special circumstances, the basic phenomenon is hitting everyone.  So - the market (and it's only relatively recently that the gas market has become global, thanks to LNG and the gradual cessation of mad oil-linked pricing in the Far East) is functioning correctly!    

One of the first things that will happen is that US shale producers (those still standing, that is) will be dusting off their drilling plans, having experienced an awful 18 months of rock-bottom gas prices.  That'll help.  (Wonder whether Boris will take another look at fracking, too ... but not this side of COP26!)   And not just gas production: the economics of a whole range of energy-related items will change, too: grid-scale batteries - the major beneficiaries of electricity price volatility, which is what we're seeing - are making absolute fortunes right now.  Some will benefit hugely, some will not:  the list is endless.

But what might policy makers stumble into at a time like this?  Actually, Kwasi Kwarteng gave a very good defence of the free market when he spoke over the weekend (as did Boris in his incoherent bumbling fashion): hopefully this means they aren't inclined to intervene in stupid ways.  The principles they've given for NOT bailing out the tiny suppliers (who shouldn't even exist - a real indictment of Ofgem that they ever got supply licences: many of them are outright scammers), but ensuring the smooth functioning of the "supplier of last resort" mechanism, seem prudent enough.  But the need to intervene in the chemicals industry (which I think is fair, given we are in uncharted territory) might result in mission-creep on other fronts.  The special-pleaders are forming a long queue ...    

What else?

Russia:  the Euro-wallahs are pretty angry with Putin's naked ransom-holding over Nord Stream 2.  What will they do?  Germany has an election coming up ...

Europe:  expect plans to shut down coal & lignite plants to be thrown into reverse (but not this side of COP26 ..!)  Even the Graun has noticed that Europe is fundamentally hooked on natural gas, whatever the greens might like to wish for.

Nukes:  EDF will be salivating at the prospect of a large-scale failure of nerve by HMG on a new public finance mechanism for more new nukes.  Rolls Royce won't be far behind with their odd "mini-nukes" plans (they aren't so "mini" at all).

Lefty-greens:  these types never miss an opportunity to set up their demented wails ("if only we had gone over to 100% wind five years ago, none of this would have happened ... oh, wait a minute ...";  "this shows the need for 100% nationalisation and a New Green Deal which involves everything we've ever wished for including Trans Rights, all bundled up together in green string") etc etc.  I think we may safely ignore them, just as Kier Starmer wisely does.

COP26:  The entertaining prospect emerges that November's COP26 might take place against a background of power cuts, if not to the conference hall then to industry.  (Actually I think that's more likely in Feb-March, but we'll see).  In any event, the whole thing has become more problematic for Boris and his longed-for global "king of the world" PR triumph, because even though most countries will politely defer big "retrograde" measures until after November, few of them will nowadays have quite as much stomach for "wind power solves all problems", or "you rich nations can easily afford $100bn p.a. for us developing nations" - in private, anyway. 

There are loads of other potential ramifications but I'll stop there for now.

Will the lights go out?  Regular readers will know I endlessly back National Grid to prevent this.  But this year, the cost of doing so will be very high indeed.  And you know what?  If we get a serious cold spell, they might actually fail this time.



Anonymous said...

Kwasi comes over as someone who understands the theory but won't be much use when shit hits the fan.

Where do they get these people from?

dearieme said...

"Where do they get these people from?"

Usually Oxford but in his case Cambridge and Harvard.

andrew said...

We used to have technocratic types who told us they knew and could do better.
Then we had managerialist types telling us that they know and can do better.

It is becoming increasingly apparent they do not.

Over the pond there is the rise of the rich(?) who tell us they know and can do better.

In some ways I prefer the continental model where at least to some extent knowledge and power is not concentrated in one set of hands.
I reserve the right to change my mind once AFD win in germany.

DJK said...

"Where do they get these people from?"

Eton, then classics and history at Cambridge. Then Harvard, as dearieme says. Rather oddly, he seems to be floating the idea of windfall taxes today. Not sure who it is who is reaping a windfall that needs to be taxed.

At least the wind has picked up today, so hopefully more power available.

Anonymous said...

Uranium prices at 6 year high. China is building nukes big time, while the West is shutting them down. We had 25% of capacity covered by nuclear fifteen years ago, now 15%, soon to be 5%. I asked ND in a previous thread where the power comes from on a still frosty day in winter.

China stepped up its efforts, with the nation accounting for over 60% of the new plants commissioned over the past decade, he says. The World Nuclear Association said the world’s roughly 440 nuclear reactors require some 79,500 metric tons of uranium oxide concentrate each year and in a 2019 report, it forecast a 26% increase in uranium demand from 2020 to 2030. Hinze says there are “clear signs that China’s government and leading nuclear companies are committing to large scale nuclear expansion following the release of the country’s 14 Five Year Plan,” and UxC expects China to surpass U.S. nuclear capacity before the year 2030.

Anonymous said...

"the Euro-wallahs are pretty angry with Putin's naked ransom-holding over Nord Stream 2"

The EU would never think of using economic pressure for political ends, would they?

A pity the UK can't say "OK, Vlad, we'll buy it!" and ask them to turn on the taps between NS2, Balgzand in Holland and Bacton. I didn't realise we had a potential connection to all that lovely Russian gas.

Anonymous said...

A thought occurs - North Sea gas and oil companies routinely remove millions of tons of CO2 from oil and gas, and inject it into rock formations, sometimes for storage and sometimes to flush out more oil and gas.

"Sleipner has since 1996 performed removal of CO2 from produced gas, and injected and stored more than 19 million tonnes of CO2 in the Utsira formation (by end of 2020)."

Why can't some of that be diverted to the UK? Obviously it'd need cleaning, but that shouldn't be too much of a job and the North Sea is covered with pipelines.

Anonymous said...

Usually Oxford but in his case Cambridge and Harvard.

Love the forelock tugging. Is it natural or were you trained?

Chris said...
This comment has been removed by the author.
Chris said...

Notice that (at time of writing) the price per MWh has dropped below £120, despite entering the evening pickup, thanks, one assumes, to wind generation (finally…) getting going.

The future must be on battery and pumped storage or, ah-hem, “demand management” via shedding loads either explicitly via smart meter limiting or pricing (or both). Not saying I’m in favour of any of this, but you can’t fight the inevitable.

Anonymous said...

"The future must be on battery and pumped storage"

The battery hasn't been invented yet that combines size/capacity/safety/recycling/carbon to produce.

Pumped storage - not an option in the UK, we just don't have enough steep-sided valleys, unless you want to flood the Lake District, Snowdonia and Scotland - and even then it wouldn't be enough. Norway, pumped storage kings, perfect geography, has less than 1.5gw of pumped generating capacity (the UK actually has nearly 1gw, but very small reservoirs so it soon runs out).

A question no one ever asks about pumped storage is "where do you get all that water to pump?". Can't use seawater unless you want to do huge damage.

I guess we'll have to wait for the Chinese to crack thorium salt reactors (once their uranium ones have produced sufficient plutonium) and then sell them to us, complete with built in remote kill switches.

Anonymous said...

(I should maybe have said, Norway don't really need pumped storage, as water keeps flowing downhill even if its dark or the wind drops, doubtless they could do more but why should they? They have nearly 33gw of hydro, about the same as current UK demand as I type)

Anonymous said...

Some visuals

Nick Drew said...

Gridwatch - yes, a very salutary month for wind power!

Nick Drew said...

Battery - tech improves all the time but yes, 2 hours' discharge is leading edge right now and is therefore only of use for frequency response and very short-term fixes before other stuff can limber up into action. For all Elon Musk's BS, his mega-storage in Oz is pitiful, relative to the rhetoric. There is a growing amount of grid-scale storage (50MW+) in UK, which has its uses, intelligently deployed (it's fantastically difficult to optimise, tho' of course software is improving rapidly too) - but the above comments apply.

Hydrogen via electrolysis is better for bulk storage over time (though not high efficiency)

Anonymous said...

"a growing amount of grid-scale storage (50MW+) in UK"

Sorry, ND, what does it consist of? (Not that 50mW is a lot, and how long does that last?)

rwendland said...

Anon @10:14 pm - AFAIK UK grid-scale battery storage amounts to 200MWh (250MWh by end of this year) or more.

Stocking Pelham 50MWh lithium-ion batteries came online in 2018 near Bishop's Stortford, Hertfordshire, co-located with some solar PV.

I believe there was another 50MWh in 2018: "40MW battery park in Glassenbury, Kent and a 10MW battery park in Cleator, Cumbria".

This year 150MWh is coming online in the Minety battery storage project, next to a major grid step-down transformer site, a bit north-west of Swindon. 100MWh online already, with another 50MWh by year end. LiFePo4 battery technology. Shell Energy Europe Limited is involved in the management, but not ownership, I believe. China Huaneng Group was the main contractor:

Don't know how long they are designed to discharge in, but I'd guess an hour or two. As ND says enough time in an emergency to get the contracted small diesel generators etc rolling. Also probably selling profitably into the daily peaks.

I'd guess we will see a slow stream of these fairly small schemes over the next few years.

rwendland said...

... I am seriously behind the times. says there was "1 GW of battery storage already in operation" in 2020:

This website says there was 1.3GW active in May this year, and a pipeline of "16GW of projects with the potential for deployment over the next few years":

Looks like it already economic, with a serious amount coming on-stream the next few years.

Nick Drew said...

We were waiting for you, Mr W

"probably selling profitably into the daily peaks": no, definitely making an absolute fortune right now (if they are well managed), actually beyond their wildest dreams: some projects have seen 18-month payback

One way these guys work is to place their 50MW jobbers at carefully chosen nodes on the grid (with NG collaboration) so that they can bypass the distribution companies, who are absolute dinosaurs (mostly) and just get in the way - which can't be allowed to persist because in principle they have a key role to play. (Ofgem is trying to hurry them along)

I must write a post about this ...

anything that can provide flexibility (primarily batteries and gas reciprocating engines, which have largely and mercifully supplanted the rash of dirty diesels of 5 years ago) that is up and running by the time this winter kicks in, will have paid back its investors in a single season

volatility is the name of the game; and these guys with their extreme optionality are "long vol". It was ever thus, (Enron was the pioneer) but the opportunities have grown beyond anything Enron was ever able to access

strategically, what's needed now is a blockchain-based scheme to share the benefits, because right now the LongVol types are creaming it all off for themselves where logically it "belongs to the system". Before you nod off and say, "blockchain, yeah yeah" ... this means you as potential beneficiary, BTW: although everyone talks about "price signals" to assist with "demand-side response" and optimising the time of day people use their electrical stuff and charge their cars, it's in its infancy right now

I need to write a post about blockchain ...

Anonymous said...

What the view here of gas storage - has the lack of gas storage in the UK played any part in the current situation?

Nick Drew said...

Storage - another big issue!

The new blogpost desiderata are stacking up ...

Elby the Beserk said...


China is not trying. They may be pretending to try, but they are not, and whilst they and India build coal powered stations nothing we do will make a blind bit of difference, apart from wrecking the economy and impoverishing all of us. Nothing we do will make any difference to CO2 (of that stuff worries you. Not me...

"The Sun is more active now than over the last 8000 years
An international team of scientists has reconstructed the Sun's activity over the last 11 millennia and forecasts decreased activity within a few decades

OCTOBER 28, 2004
The activity of the Sun over the last 11,400 years, i.e., back to the end of the last ice age on Earth, has now for the first time been reconstructed quantitatively by an international group of researchers led by Sami K. Solanki from the Max Planck Institute for Solar System Research (Katlenburg-Lindau, Germany). The scientists have analyzed the radioactive isotopes in trees that lived thousands of years ago. As the scientists from Germany, Finland, and Switzerland report in the current issue of the science journal "Nature" from October 28, one needs to go back over 8,000 years in order to find a time when the Sun was, on average, as active as in the last 60 years. Based on a statistical study of earlier periods of increased solar activity, the researchers predict that the current level of high solar activity will probably continue only for a few more decades."

... so these net zero carbon free idiocies seem to be intentionally malevolent.

Elby the Beserk said...

And I bet my bottom dollar this was not reckoned on...

"Missing wind variability means future impacts of climate change may be underestimated in Europe and North America

by University of Reading

Extratropical winds have a strong influence on climate in extratropical regions, and are known to vary from decade to decade. However, their variability is currently not factored into climate models making predictions for future climates in these regions. Researchers inserted these into predictions for how extratropical climates will change by the middle of the century, and found uncertainty increased significantly, meaning unusually hot, cold, dry or wet decades are likely to be more frequent here than previously thought."

We really really need to stop voting for cretinous fools who are ideologically possessed. No?

jim said...

Think I'll pass on LongVol.

A fleet of 50MW gen sets? Not a 5 minute job to set up and they drink 10,000L/hour of diesel or gas equivalent. Not for your average 3/4" gas pipe but 4 road tankers/day should provide say 12 hours running. Add in the logistics of feeding that lot and then copy/paste. The price would have to be pretty steep to make a profit on that lot - still its all down to Boris and if it stops the lights going out.... Thankfully my supplier has not gone bust - yet - and I'm locked in for a while.

I think the smartphone is to blame. Folk think, Oh my smartphone lasts ages, why can't we cobble a few together and power Newcastle. The electronics in smartphones have improved immensely, but the batteries not very much and there ain't no substitute for horsepower in a car or horsepower's worth as heat.

Smartphones = milliwatts average, towns = megawatts average, 1000,000,000 times greater. Cellphone battery = say 7 watt hours, Newcastle say 300 megawatts so 43,000,000 cellphones might keep Newcastle up for 1 hour. So that idea is a bit stuffed. BTW, 1 Gigawatt sounds a lot but is p%^s-all in national terms.

Don Cox said...

The people who are going to build Sizewell C are in a very strong negotiating position.

Don Cox

Anonymous said...

Jim - I take the opposite view having used smart phones / tablets.
Modern batteries have such a short shelf life of practical usability that if the same technology is being used in industrial sized operations, I can't see how they could ever be profitable.
Batteries that give 13 hours decent usage when new within months I find drop down considerably. My 2 year old tablet now only lasts a couple of hours on a charge.

Not sure I'd ever feel comfortable buying a used EV that was more than a year old, unless it came with a battery guarantee.

rwendland said...

On battery storage, what's amusing is you can go to Tesla's website and order yourself online a 50MWh Megapack - can you pay with Paypal? Only for installation in some US states right now. Costs $16.3 million + sales tax, with $62k/year annual maintenance (increasing by 2% every year).

But at Tesla prices I don't see how a profit could be made just from selling into the daily peaks. Anyway Megapack has a 4 hour discharge time, not really well suited for grid use, so I guess it is marketed to business that wants on-site emergency backup + a bit of tariff time shifting.

But it sure looks like a booming industry.

DJK said...

I don't think you can make money by smoothing grid power using a Tesla battery pack. But it makes more sense if you're not connected to the grid in the first place and all you have available is solar, and perhaps a small, diesel generator.

iOpener said...

Gasoline, diesel and most of the other hydrocarbons are virtually perfect media for the storage and transport of chemical energy.

Will any Mallards roosting here please tell me again why we need to replace them with the idiot contraptions they constantly propose?

Anonymous said...


Who doesn’t love breathing the by products of burnt hydro carbons
Puts feathers on yer chest
Quack Quack

Don Cox said...

"I don't think you can make money by smoothing grid power using a Tesla battery pack. But it makes more sense if you're not connected to the grid in the first place and all you have available is solar, and perhaps a small, diesel generator."

Yes, batteries could be helpful for isolated villages in Africa or Indonesia, where solar also makes sense. Perhaps also for a ranch in Texas, or for a Scottish island with wind power.

But I think they're too expensive for the African villagers. Maybe a clever African will come up with a cheaper alternative.


Don Cox

Anonymous said...

anon 6.58 - Humans have been breathing the products of burnt hydrocarbons since we first left the trees. I must admit there were a lot fewer of us though in those days.

In 1950 there were half as many humans in Africa as in Europe. Now there are 2.5 times as many Africans as Europeans, projected to be 4.5x by 2050 and 8x by 2100. European population has been pretty static.

As I like to point out, the population of Ethiopia has doubled since Live Aid in 1985. It's projected to be over 200m by 2050, not that far short of the entire African population in 1950.

It's weird how the Guardian/BBC axis considers climate change a huge threat to the planet but not population increase.

Anonymous said...

The BBC has some thin commentary, as ever.

What I can't get my head around is why Belgium's wholesale gas prices are dramatically lower than other European countries around it!

Can anyone provide some insight? :)

Anonymous said...

That's an interesting comment on the 50MW jobbers. You must write more about it.

Locally there is a chicken farmer who put their farm up for sale. Builder offered £1.2mn to put in the land bank as it is on the fringe of an expanding south coast town.

Farmer had a knock on the door and 2 strangers said they were in the energy business and would like to make an offer. Few days later, their surveyor turned up by helicopter along with reps from the company and offered £1.7mn as the land was crossed by distribution lines which they need to "connect to"

Seems there is more profit in watts that homes.