News | Headlines Energy price hikes – an IEA perspective
Gas, coal and electricity prices have recently risen to their highest levels in decades. These increases have been caused by a combination of factors, but it is inaccurate and misleading to lay the responsibility at the door of the clean energy transition, argue Carlos Fernandez Alvarez and Gergely Molnar of the IEA in a commentary dated 12 October. The historic plunge in global energy consumption in the early months of the Covid-19 crisis last year drove the prices of many fuels to their lowest levels in decades, they note, but since then, they have rebounded strongly, mainly as a result of an exceptionally rapid global economic recovery (this year is on track for the fastest post-recession growth in 80 years, they say), a cold and long winter in the Northern Hemisphere, and a weaker-than- expected increase in supply.
Natural gas prices have seen the biggest increase, with European and Asian benchmark prices hitting all-time records in early October – around ten times their level a year ago. US month-ahead natural gas prices have more than tripled since October 2020 to reach their highest level since 2008, and international coal prices are around five times their level a year ago, with coal power plants in China and India having very low stocks ahead of the winter season, the commentary notes.
The strong increases in natural gas prices have prompted substantial switching to the use of coal rather than natural gas to generate electricity in key markets, including the United States, Europe and Asia, the commentary says,
with increased use of coal in turn driving up CO2 emissions from electricity generation globally. The higher gas and coal prices, combined with rising European carbon prices, have resulted in higher electricity prices. In Germany, electricity prices in October leapt to their
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highest level on record, up more than six times from a year ago, the commentary observes, while in Spain, where gas-fired power generation plays a larger role in setting electricity prices, the increase was even higher, and lower-than-expected wind generation has provided further upward pressure. In China, rigid electricity tariffs have not followed the large increase in coal prices, the commentary says, and as a result, coal power producers have insufficient coal on hand and rolling blackouts have occurred across two-thirds of Chinese provinces.
In India, the economic recovery and related increase in energy demand are also causing a coal shortage, the commentary notes, and power plants that rely on imported coal have slowed or even halted operations, while some plants that rely on domestic coal are starting to run out.
The current high coal and gas prices are not the result of a single “shock event” on the demand or supply side, Alvarez and Molnar argue, “rather, they result from a combination of supply and demand factors.”
Investments in oil and natural gas have declined in recent years as a result of two commodity price collapses – in 2014-15 and in 2020. “This has made supply more vulnerable to the sorts of exceptional circumstances that we see today. At the same time, governments have not been pursuing strong enough policies to scale up clean energy sources and technologies to fill the gap.”
Unplanned outages at LNG liquefaction plants, upstream supply issues, unforeseen repair works, and project delays have all contributed to tightening of the global gas market, Alvarez and Molnar suggest. Gazprom, while honouring its long-term supply contracts, “reduced its exposure to short-term sales and has not replenished its own storage sites in Europe to the levels seen in previous years”, while “gas supplies from the Groningen fields in the Netherlands, which are being closed in 2022, continue to be reduced as planned.”
Source:
https://www.iea.org/commentaries/ what-is-behind-soaring-energy-prices-and-what- happens-next
North Sea Link commences operations Norway/UK T & D
National Grid’s €1.6 billion North Sea Link (NSL), the world’s longest subsea electricity interconnector and a joint venture with Norwegian system operator Statnett, has started commercial operations. The 4 October start also marks what is being called a major milestone in the UK’s journey to net zero. By enabling the trade of renewable energy between the two countries, North Sea Link is expected to help reduce the burning of fossil fuels in the UK and avoid 23 million tonnes of carbon dioxide emissions by 2030. The 450 mile cable, which connects Blyth in Northumberland with the Norwegian village of Kvilldal, near Stavanger, starts with a maximum capacity of 700 MW, but will
gradually increase this to the link’s full capacity of 1400 MW over a three-month period. The gradual increase in capacity follows the Norwegian system operator’s standard approach for integrating new interconnectors.
North Sea Link will be the fifth
interconnector for National Grid, which also operates links to Belgium, France and the Netherlands. By 2030, 90% of electricity imported via National Grid’s interconnectors will be from zero carbon sources, saving 100 million tonnes of carbon dioxide emissions. NSL has taken six years to build, in total. Laying of the undersea cables began in 2018 and more than four million working hours have been spent on the project, including
10 | October 2021 |
www.modernpowersystems.com
5880 working days at sea.
It is expected that energy flow via the interconnector will be bi-directional. Norwegian power generation is sourced from hydropower plants connected to large reservoirs, which can respond faster to fluctuations in demand compared to other major generation technologies. However, as the water level in reservoirs is subject to weather conditions, production varies throughout seasons and years. When wind generation is high and electricity demand low in Britain, NSL will enable renewable power to be exported from the UK, conserving water in Norway’s reservoirs. When demand is high in Britain and there is low wind generation, hydro power can be imported from Norway.
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