Subscribe today to the Washington Examiner magazine and get Washington Briefing: politics and policy stories that will keep you up to date with what’s going on in Washington. SUBSCRIBE NOW: Just $1.00 an issue!
RECOUNTING THE WILD YEAR FOR GAS IN EUROPE: Energy markets have had a rollercoaster year in the time since Russia invaded Ukraine a year ago today, an event that drove gas prices to record highs in Europe and triggered fears of rationing.
The result has been total realignment of the global energy trade.
What’s changed: A Czech official warned his country would “burn anything we can” during winter to keep people warm. Not only did he, and Europe, avoid that fate — buyers there are paying less now for natural gas on the futures market than at any time since December 2021.
The road to here came at an immense cost, but Europe has been able to avoid a worst-case scenario of this post-invasion fallout and diminishing Russian imports thanks to a mix of increased shipments of gas from the United States, Qatar, and other non-EU allies; demand control; and a stroke of good fortune.
U.S. LNG producers have played a big part. The United States constituted 7.1% of extra-EU gas imports in 2021. By Q1 of 2022, the U.S. share doubled, and it peaked at 17.6% in Q2. Data for the fourth quarter will be published next month, but it’ll likely be lower, as it was in Q3, due to the Freeport LNG outage.
This increase was mostly driven by the reorientation of shipments. Asian buyers were getting most of the exported U.S. LNG volumes before the war. Things have changed. In December of last year, the U.K., Netherlands, France, and Spain all out-imported South Korea — the top leading cumulative importer of U.S. LNG since 2016, Energy Department export data show.
Some have stressed that only so much gas can be diverted, cautioning of the limits of what else the U.S. can do to increase shipments over the next few years until new export terminals are finalized and built. LNG companies are getting the deals to do that, as we detailed Wednesday.
“We are seeing fast and very strong progress in the U.S. in developing and pushing forward a next generation of LNG plants,” Michael Stoppard, chief strategist of global gas at S&P Global, told Jeremy. “We’ve seen some final investment decisions last year on new projects, and we expect to see further and final investment decisions in the first half of this year because there’s been a lot of long-term contract signing.”
U.S. LNG is not the only big player in town. Norway’s and Qatar’s shares of exports to the EU increased, too, as Russian volumes fell from 31% of imports in Q1 2022 to 15% in Q3.
Ironically, although its pipeline shipments are falling, Russia is currently the no. 2 supplier of additional LNG to Europe after the U.S.
The price point: The IEA has warned the Europeans still face the threat of a shortage of supply in 2023, but futures prices are much more tame for now, having fallen back from their peak above 338 euros per megawatt-hour in August to around 50 euros today.
Mild weather and a reduction of Europe’s gas demand by some 15% have been key factors.
“[We said] the only way the market can balance without Russian pipeline gas is reduced demand, and that has been exactly what’s happened,” Stoppard said.
In the U.S. market: Production remains up near record levels, and storage is above the five-year average for the time of year while prices have tanked, returning to early COVID-19 era levels after mounting a multi-year high last summer.
“We would still expect international prices to be at a very significant premium to the U.S. Henry Hub price, and therefore we see an attractive arbitrage for exporters of the U.S. to look at,” Stoppard said.
Welcome to Daily on Energy, written by Washington Examiner Energy and Environment Writers Jeremy Beaman (@jeremywbeaman) and Breanne Deppisch (@breanne_dep). Email [email protected] or [email protected] for tips, suggestions, calendar items, and anything else. If a friend sent this to you and you’d like to sign up, click here. If signing up doesn’t work, shoot us an email, and we’ll add you to our list.
MORE ON THE YEAR SINCE RUSSIA’S INVASION: As Ukrainian President Volodymyr Zelensky has said of Russia’s invasion: “We woke up early … and haven’t fallen asleep since.” We’ve rounded up some of the most significant effects the war has had on energy markets. Read it here.
EAST PALESTINE UPDATE: NTSB Chair Jennifer Homendy said yesterday that the East Palestine train derailment might have been avoided if Norfolk Southern’s alarm system had given engineers earlier warnings about when to stop, via its temperature-detecting sensors, or wayside hot-bearing detectors, which are deployed every 10-30 miles along major railroads.
As Homendy explained, these sensors are designed to flag high, or rising wheel temperatures on large trains—thus giving the crew time to deploy emergency brakes.
“Had there been a detector earlier, that derailment may not have occurred. But that’s something we have to look at,” she said.
But Norfolk Southern’s train had passed through two such detectors without incident—-and by the time it passed the third, its wheel temperatures were more than 250 degrees above average, and far too high for the crew to come to a safe or controlled stop.
Homendy said one option for the NTSB could be to recommend railroad companies lower the temperature thresholds that would trigger the emergency alarm.
… OHIO NATURAL RESOURCES IDENTIFY 45,000 NEW DEAD ANIMALS LINKED TO DERAILMENT: The Ohio Department of Natural Resources (ODNR) increased its estimate of the number of animals killed in the East Palestine train derailment to 44,000, up from just 3,500 estimated last week.
In addition, ODNR said it is awaiting test results for the deaths of several non-aquatic animals, including several birds and an opossum.
Most of the animals found dead include minnows, small fish, crayfish, amphibians, and macroinvertebrates, ODNR Director Mary Merks said yesterday. She said they appear to have died in the days immediately following the derailment.
ODNR said last week that it had dispatched a team to monitor the waterways after the derailment, but were warned by EPA officials that it was “too dangerous to enter the water without specialized gear and equipment.”
Health officials have since cleared the town’s water as safe to drink, though many have opted to stick to bottled water for the time being.
PJM WARNS OF COMING CAPACITY SHORTFALL: PJM Interconnection faces a steep capacity shortfall in coming years as traditional generator retirements outpace additions, according to a new analysis that will be published today by the grid operator.
Scott Benner, a PJM analyst, detailed the forecast in a presentation yesterday before the regional transmission organization’s reliability committee, showing that 40 gigawatts of generating capacity is scheduled to retire by 2030.
That represents 21% of the service area’s total capacity. Some 90% of planned retirements are coal and gas.
Meanwhile, the grid operator expects no more than 31 GW of additions over the same period.
“There is a concern that we may not be replacing the exiting generation at the rate needed to maintain resource adequacy,” Benner said.
Other grid operators, including the neighboring Midcontinent Independent System Operator, are facing the same issue as utilities retire more and more fossil fuel generation.
Regulators at NERC have warned against retiring traditional generation sources too rapidly or else risk running significant shortages, which could lead to more frequent blackouts in extreme weather.
EPA POORLY ADMINISTERING TOXIC CHEMICAL LAW: GAO: The Environmental Protection Agency has missed most deadlines for testing chemicals under the Toxic Substances Control Act over the past six years, according to a new report from the Government Accountability Office.
Congress updated TSCA in 2016 to require the agency to review the environmental and health effects of existing chemicals and to test new ones before they can be manufactured. For new chemicals, EPA completed pre-manufacture reviews on schedule less than 10% of the time between 2017 and 2022, GAO found.
EPA struggled to recruit qualified staff to do the review work, the report said, something the agency blamed on insufficient funding from Congress. Energy and Commerce Ranking Member Frank Pallone called for additional appropriations for EPA in response to the report.
The Biden administration is planning to introduce a TSCA rulemaking this year that would change procedures for chemical reviews in hopes of speeding them up, according to the Unified Regulatory Agenda.
UK MINISTER: U.S. AND IRA ARE PLAYING CATCH-UP ON CLIMATE: U.K. Finance Minister Jeremy Hunt said today that the Inflation Reduction Act is Biden’s attempt to play “catch-up” in the clean energy space and make up for inaction by his predecessor.
“We have to recognize that the United States is coming to this from behind,” he told CNBC today, adding that the U.S for years had severely underestimated the green energy transition underfoot in the West.
“They had a president previously who was very skeptical about anything to do with climate change, and so there is a bit of catch-up going on in the U.S.,” he said.
Asked whether the U.K. felt pressure to compete with the billions of dollars in clean energy incentives included in the IRA, Hunt said only that the U.K. would continue to do things its “own way.” “We will make sure that the U.K. continues to be a very attractive place for all clean energy investments, but we’ll do it in a different way, our own way,” he said.
His remarks come days after European Commission president Ursula von der Leyen said that the EU is drafting its own clean energy subsidies to compete with the IRA provisions and create a “level playing field.”
….MEANWHILE, FRENCH UTILITY CHIEF CALLS FOR SUBSIDIES A LA THE U.S.: The head of the French utility chief Engie said Europe should take a page out of Washington’s book and do more to boost its own renewable energy supply chains—citing the lucrative offerings provided in the IRA that piqued her own desire to do business in the U.S.
Engie CEO Catherine MacGregor told the Financial Times in an interview that the incentives have spurred “quite a bit of interest” from her group to pursue hydrogen and battery storage projects.
“We were already developing and operating very large renewable projects in the US but we are seeing an acceleration,” MacGregor said. In fact, she added, a “big chunk” of Engie’s 10 GW battery capacity target by 2030 would be in the U.S.
She said Europe should be inspired by the IRA, which rewards companies who produce goods at home and contains “buy America” provisions designed to reshore clean energy production and supply chains.
“Europe has to think about protecting or making sure its industry flourishes,” MacGregor said. “From a business standpoint, that is also a way to mitigate my risk — to have local, healthy suppliers.”
The Rundown
E&E News How NSF uses ‘absurd’ health reasons to block scientists from polar missions
Calendar
WEDNESDAY | MARCH 1
The American Bar Association will host the Environmental Summit of the Americas in New York City, where environmental, social, and governance will be on the agenda.
MONDAY | MARCH 6
The annual CERAWeek conference kicks off in Houston, Texas. Learn more and register here.
TIME AND DATE TBA
The Senate Environment and Public Works Committee will hold a hearing in early March on the emergency response and cleanup effort related to the train derailment in East Palestine, Ohio.
