Impact of Ukraine war on Germany: report and panel discussion | 14 July 2022 | in German

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Robbie Morrison

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Jul 9, 2022, 7:08:21 AMJul 9
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Hello German speakers

The Energy Systems of the Future (ESYS) project is releasing a report on energy supply security concerning Germany next week on Zoom:

  • Thursday 14 July 2022 15:30 CEST / two hours

That on‑line event is titled "Welche Auswirkungen hat der Ukrainekrieg auf Energiepreise und Versorgungssicherheit?" or "What impact will the Ukraine war have on energy prices and security of supply?"  Register here:

The situation in Germany is difficult.  Gas supply is tight and domestic prices are rising.  Any extension of the runtime for Germany's shuttered nuclear fleet has now been categorically ruled out on technical grounds.  The German Constitution expressly prioritizes household supply before industrial demand.  The European energy regulator is considering forcing German electricity generators to supply France under EU solidarity provisions, thereby diverting gas that could fuel German industry — a significant part of the aging French nuclear fleet is currently off‑line for engineering reasons.  A host of shipped LNG projects are being shunted through.  Looking forward a little further, German industry will no longer have access to cheap piped natural gas and that will affect international competitiveness.  And somewhat related, Germany is currently trying to co‑establish industrial green hydrogen projects in Australia and elsewhere — while noting that there are no at‑scale (say 20MW) electrolysis pilot plants yet running anywhere in the world.

I am currently trying to find out if the underlying report will be translated into English — if so, I will post back with details.

tschüß, Robbie

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Robbie Morrison
Address: Schillerstrasse 85, 10627 Berlin, Germany
Phone: +49.30.612-87617

Robbie Morrison

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Jul 14, 2022, 5:50:30 AMJul 14
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Hello German speakers

The associated "Russian gas" report is now public:

Key points (unofficial translation):

  • if Russian natural gas imports cease in the next few months, around 25% of Europe's natural gas demand could not be met at peak times in winter, based on 2021
  • the shortfall is due to a lack of transport infrastructure such as pipeline capacity and LNG terminals — this supply gap can be closed by 2025 if natural gas consumption falls by 20% across Europe and infrastructure is expanded at the same time
  • energy prices in Europe are expected to remain high in the medium and long term
  • this will require a socially balanced approach to energy supply and measures to protect industrial competitiveness
  • maintaining security of supply in Europe requires a pan-European strategy for expanding and operating gas infrastructures, which should be complemented by a common European purchasing policy for natural gas
  • in addition to an increase in energy efficiency, the accelerated expansion of renewable energies should be addressed with high priority — both will also have a dampening effect on the development of energy prices

My comments:

  • on the question of pipeline capacity, much of the piped gas infrastructure was not designed to run "backwards" and there are now a number of projects to install compressor stations that can support reverse flows
  • industrial competitiveness for Germany going forward is a key concern — piped natural gas was cheap and the floor price of gas, whatever its origin, is expected to be set by shipped LNG
  • a common European purchasing policy on natural gas could be considered monopsony behavior

The online presentation (see below) is due to start in four hours using Zoom.  Apparently questions can be submitted as text (using the Zoom Q+A function I guess).  I have not checked the German press today but this report should be covered in the major dailies.

with best wishes, Robbie

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Robbie Morrison

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Jul 15, 2022, 7:18:58 AMJul 15
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Hello again

The two underpinning reports for the ESYS study (for completeness):

The mix‑and‑match scenarios used in these reports as follows:
  • mEL: moderate electrification, constant gas demand
  • hEL: high electrification, decreasing gas demand
  • oRU: without availability of Russian raw materials (including natural gas)
  • nRU: low availability of Russian raw materials (including natural gas)
Prices are going haywire in France to due to the "second crisis": a number of nuclear power plants were forcibly shut in 2022 due to stress corrosion cracking on pipework providing primary cooling. This lead to French national utility EDF to estimate a loss of 70 TWh of production (or around 13% of annual generation) for the year 2022 and a fall in profits of €19 billion. And Hirth (2022) also observes (unchecked translation):

"Market prices [for France] already show the drama of the situation: for the December peak forward contract, i.e. the price of electricity with delivery during the day, €1500/MWh is currently being paid — 15 times more than a year ago and almost three times as much as in Germany, which is plagued by gas shortages. Forward prices suggest that the spot price is likely to reach four digits during hundreds of hours in winter. This price is also several times higher than the generation costs of gas turbine power plants. These staggering prices are obviously necessary to ensure that enough industrial plants cease production to generate enough electricity at all.The fuel costs of gas-fired power plants alone cannot otherwise explain such high prices."

Source:

The German government has been very active on the supply‑side while demand‑side measures have languished.  Many German households will understand the gas crisis when their very delayed gas and apartment rental bills arrive (rental because heating is bundled and the owner pays first) — one to several thousand euros above last year.  And possibly coercive rationing and technical outages also?

with best wishes, Robbie

Pamela De la O

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Jul 15, 2022, 9:10:07 AMJul 15
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Hello all,

Does anyone know the source of Hirth's figure of €1500/MWh ?

Regards,
Pamela

Ingmar Schlecht

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Jul 15, 2022, 9:39:04 AMJul 15
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Dear Pamela,

sure. Here you go: https://www.theice.com/products/57609952/French-Power-Financial-Peak-Futures/data

After we wrote the article, the price even rose even further, so it now stands at 1900 EUR/MWh for power delivered during peak-hours of the days, which is from 8am to 8pm.

Exactly the same product (DEC 22 Peak Load) used to cost 70 Euro/MWh less than two years ago, but now costs this much. Crazy times, and France is facing a severe electricity crisis.

Best
Ingmar



---------------------------------------------
Dr. Ingmar Schlecht
Director
Neon Neue Energieökonomik
schl...@neon.energy | +49-177-8633526


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