Gas and oil prices in Europe smash records
The bold outlook of European leaders at the front of the battle against global warming is gradually subsiding, as is the mood of their constituents.

Rossiiskaya Gazeta

By Valery Lvov

   The climate change warriors hardly had the time to catch their breath from winter power supply disruptions in the “greenest” countries of Western Europe when a new calamity came upon them – a virtually becalmed North Sea.

    Production from wind generators – now the life preserver for Europe’s energy – fell 12 % in August and September. Rainfall to spur production from hydro stations in Europe’s north was in short supply. Solar panels continued along their merry way.

   And gas supplies from Russia – despite various obstacles with the now complete Nord Stream 2 pipeline and a desire to share energy with Europe – fell following a mishap at a compressor station.

    As a result, everything is as it was six months ago.

    Frenetic attempts to bring in coal-fired stations held in reserve in Britain and German, restrictions in power supplies from Sweden because of shortages there, accelerated maintenance at European nuclear power stations –not to mention other measures with which we are already familiar from last winter.

    And as usual, it is energy consumers who must shoulder the burden of errors in energy policy which, over the course of several years, took deliberate aim at reducing production from thermal and nuclear stations. They would be happy to live without energy supplies, but simply cannot – after the pandemic people are coming back to their plants and offices where there will be nothing to do unless computers and machines are in operation.

    It is far from cheap to heat your home with a fireplace and it is probably too late to swap light bulbs for candles. So demand for energy is on the rise.

    Gas prices eclipsed records set in 2018 of $950 per 1,000 cu.m. and electricity prices have soared well into the stratosphere. In Germany, wholesale prices per MWh have climbed to $106 – twice the level at the start of the year and in Britain they peaked at $395 – seven times where they stood a year ago!

    In our own terms, that is equivalent to 28,783 roubles per MWh — compared to the current wholesale market rate of 1,329 roubles. With the market price at about 1,600 roubles per MWh.

    Natrually, the increase in wholesale prices hit industry hard as well as households facing higher electricity rates. But how much higher? We will know more after the price rally is over. Retail prices change at the end of a given period and not day by day like on an exchange.

    Households in Europe are, for the moment, getting used to price rises in July when the wholesale prices of gas and electricity were not so noticeable,

    In Germany, the price of 1 KWh was already one of the highest in Europe – 32 euro cents or 27 roubles – a rate about seven times the tariff in Russia.

    In Britain, the increase for households is forecast to hit about 139 pounds a month. In Latvia, which still receives power in common with the Russian and Belarusian energy system, but dreams of disengaging itself quickly, the increase in rates in July amounted to 40 % but that, as they say, is merely the icing on the cake.

   The reasons for the rise in European energy prices are well known. They include the phasing out of cheap coal generation and strong support for renewable energy sources (for example, in Germany, the surchare imposed on electricity bills for construction of wind turbines exceeds 20% in the electricity tariff structure, this is a well-documented fact), as well as the introduction of carbon credits and other elements of green policy. Doubts on its effectiveness and usefulness for the climate are creeping more and more in European society, while the time frame for the implementation of green policy goals is gradually shifting.

   Even Joe Biden, a strong advocate of green policy measures, at the G7 summit resisted calls by European leaders to stop using coal for power generation. Such a resolution for the Glasgow climate summit was not approved. And Boris Johnson, a staunch fighter on climate change, abandoned the goals of the Paris Climate Agreement in order to enter into a trade agreement with Australia, a country that does not intend to give up coal and other fossil resources (along with China and India).

   Most importantly, Swiss voters rejected a climate law in a referendum that called for tax increases to reduce greenhouse gas emissions, including car and air travel fees. Other countries that have survived the uprising of the “yellow vests” fear a similar reaction. Goals are goals, but European politicians do not want to leave their voters out in the cold and make their industry uncompetitive.

   At the same time, in Russia, which over the past 40 years has done more to reduce greenhouse gas emissions than any other country in the world (the country managed to technically re-equip the industry, modernise the energy sector, develop cogeneration and diversify the fuel balance, as well as increase the size of ​​forested areas), no one is going to put the cart before the climate horse.

   At the plenary session of the Eastern Economic Forum, the President of Russia once again lucidly explained this, linking some of the energy transition measures to the fact “that some economies and some countries want to deprive other countries of their competitive advantages.” “We are certainly interested in working together to preserve nature, but we cannot agree with the proposed regulations,” the Russian President concluded.

   Well, let them use their results – the results are clear for all to see. In Moscow, the residential electricity tariff is 5 times lower than in Germany, while for Kuzbass, the key coal region of Russia, this difference is eightfold, and for Krasnoyarsk – twelvefold. But winter is coming. I wonder how Europe will spin windmills and heat up solar panels at that time.


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September 2021