In the most recent Capital Letter, I wrote about the (natural) gas crunch that will lie ahead for Germany if Moscow either fails to reopen the Nord Stream 1 pipelines (currently just beginning their annual shutdown for maintenance) or, when they reopen (due July 22), maintains the flow through those pipelines at their current reduced levels.
Under the circumstances there is a somewhat painful irony about this story from Bloomberg’s Rachel Morison (my emphasis added):
Short-term German power prices more than doubled as calm weather and the expected halt of gas flows on the Nord Stream pipeline crimped supplies.
Power for Monday surged to the highest since early March with wind generation forecast to remain at very low levels for the next few days. There will also be less gas available for power plants with Nord Stream scheduled to halt on Monday. . . .
Wind power output in Europe’s biggest power market peaked at 8,242 megawatts at midnight and is poised to fall to about 2,000 megawatts on Tuesday, according to a Bloomberg model.
Never mind. Even if the Russians have been letting Germany down (an event that has been predictable since Germany built up a dependency on “cheap” Russian gas without any plan B during the Merkel years), and even if the wind hasn’t been blowing as much as might have been hoped (something that has been predictably unpredictable over the ages), at least the sun will come to the rescue:
♪♪The sun has got his hat on, hip-hip-hip-hooray
The sun has got his hat on and he’s coming out today
Now we’ll all be happy, hip-hip-hip-hooray
The sun has got his hat on and he’s coming out today..♪♪
Well, yes and no.
Bloomberg:
[Germany’s] solar panels will generate a peak of 24,254 megawatts on Monday, far below the record of 36,833 megawatts set on June 15.
Mind you:
Prices are likely to come under more pressure this week as a heatwave spreads to Germany from July 16. Temperatures in Frankfurt are forecast to reach 37.5 degrees Celsius on July 18, according to Maxar Technologies LLC.
One of the great achievements of modernity has been the degree to which it has enabled an increasingly large segment of humanity to carry on its business regardless of the weather. That achievement is now going into reverse and, worse still, been treated as if it were some sort of sin.
But Germany’s failure is also a monumental failure of planning (words that, when government is involved, tend to go together) somewhat at odds with the public image of Merkel as an epitome of prudence.
Germany’s mistake was Germany’s mistake, but, as reckless and ill-conceived as it was, it’s an error that will be dwarfed in both stupidity and arrogance if the U.S. chooses to go the same way.
But that couldn’t happen here, could it?
Today’s clean energy technologies are a critical part of the arsenal we must harness to lower energy costs for families, reduce risks to our power grid, and tackle the urgent crisis of a changing climate. From day one, President Biden has mobilized investment in these critical technologies. Thanks to his clean energy and climate agenda, last year marked the largest deployment of solar, wind, and batteries in United States history. . . .
Oh.
To be clear, I am not saying that there is no role for renewables. There clearly is, but in the right place, and in the right time, and with reliable backup. That, however, is not where Germany is, and it’s not where the U.S. will be either, not for now. Under the circumstances, to neglect (or underinvest in) our existing energy systems is an act of quite astonishing recklessness, but that seems to be the direction in which we are heading.
Meanwhile, looking back at Europe, Bloomberg’s (indispensable) Javier Blas warns that (natural gas) markets are pricing in higher prices for rather longer than the immediate crunch (my emphasis added):
European natural gas prices are still well below the all-time high set in March. Dig a bit deeper, however, and they are signaling a more protracted disruption than markets anticipated in the immediate aftermath of Vladimir Putin’s invasion of Ukraine.
While the gas market then priced in a short-lived crisis, lasting perhaps a couple of months, it’s now flashing extreme danger for next winter, through 2023 and, increasingly, into 2024. Over the last few days, the whole European gas price curve has repriced at a much higher level.
The shift in the forward curve has been the most notable development of the gas market in the past month — one that’s not gathering enough attention in European capitals. But industry is keenly aware, as it’s bearing the cost. Back in March, a German manufacturer could lock in gas prices for all of 2023 at about 80 euros per megawatt hour; now, it has to pay a record high 145 euros to hedge the same price risk. . . .
The market is right to reprice the gas curve; the only question is why it took so long. There’s further risk ahead: At some point, Moscow will completely turn off the tap, probably just before the winter, to try to bring the German economy to its knees. That’s an outcome the market hasn’t priced yet.
And it should be stressed that this is not just a German problem, although both the failings of its existing policy and its vital strategic role give it a starring role in this miserable, and largely avoidable, drama.
So, for instance, scarred by memories of the 1970s, France has taken a more sensible approach to its energy supplies and has emphasized nuclear energy for decades. That was (and is) wise, although the aging of its network is — something that Paris is planning to reverse — now causing difficulties.
Even without that additional problem, a shortage of gas is still going to cause trouble, and the country’s economy and finance minister is sounding the alarm.
French Economy and Finance Minister Bruno Le Maire today warned there is a strong chance that Moscow will totally halt gas supplies to Europe.
“Let’s prepare for a total cut-off of Russian gas; Today that is the most likely option,” Le Maire told the Rencontres Economiques, an economy-focused event in the southern city of Aix-en-Provence.
The minister said the French government was working to identify companies that should get priority protection in case of supply disruption. . . .