NEWS OF THE DAY:
Europe’s Climate Lesson for America
The Editorial Board, The Wall Street Journal, September 15, 2021
As wind power flags, energy prices are soaring amid fuel shortages.
Energy prices are soaring in Europe, and the effects are rippling across the Atlantic. Blame anti-carbon policies of the kind that the Biden Administration wants to impose in the U.S.
Electricity prices in the U.K. this week jumped to a record £354 ($490) per megawatt hour, a 700% increase from the 2010 to 2020 average. Germany’s electricity benchmark has doubled this year. Last month’s 12.3% increase was the largest since 1974 and contributed to the highest inflation reading since 1993. Other economies are experiencing similar spikes.
Europe’s anti-carbon policies have created a fossil-fuel shortage. Governments have heavily subsidized renewables like wind and solar and shut down coal plants to meet their commitments under the Paris climate accord. But wind power this summer has flagged, so countries are scrambling to import more fossil fuels to power their grids.
European natural-gas spot prices have increased five-fold in the last year. Some energy providers are burning cheaper coal, but its prices have tripled. Rising fossil-fuel consumption has caused demand and prices for carbon permits under the Continent’s cap-and-trade scheme to surge, which has pushed electricity prices even higher.
Russia has exploited the chaos by slowing gas deliveries, ostensibly to increase pressure on Germany to finish the Nord Stream 2 pipeline certification. Vladimir Putin last week took a swipe at the “smart alecs” in the European Commission for “market-based” pricing that increased competition in gas, including from U.S. liquefied natural gas imports.
Mr. Putin can throw his weight around in Europe because the rest of the world also needs his gas. Drought has reduced hydropower in Asia, and manufacturers are using more energy to supply the West with more goods. Due to a gas and coal shortage, China has rationed power to its aluminum smelters and aluminum prices this week hit a 13-year high.
The U.S. is the world’s largest gas producer, but it isn’t immune from turmoil in energy markets. Natural gas spot prices in the U.S. have doubled over the past year in part because producers have increased exports to Europe and Asia. Exports are up more than 40% during the first six months this year over last.
This underscores how fossil fuels are a U.S. economic and strategic asset. The Biden Administration’s plan to curtail oil, gas and coal production by regulation would empower adversaries, especially Russia, Iran, and China, which are the world’s three largest gas producers after the U.S.
Americans are already feeling the pain of rising energy prices. Electricity and utility gas prices were up 5.2% and 21.1%, respectively, over the last 12 months in August. Higher energy costs are bleeding into inflation. Some analysts predict that gas prices could double this winter if U.S. production doesn’t increase, and global demand remains high.
Europe is showing the folly of trying to purge CO2 from the economy. No matter how heavily subsidized, renewables can’t replace fossil fuels in a modern economy. Households and businesses get stuck with higher energy bills even as CO2 emissions increase. Europe’s problems are a warning to the U.S., if only Democrats would heed it.
Oil prices jump over $2/bbl after drawdown in U.S. stocks
Jessica Resnick-ault, Reuters, September 15, 2021
- U.S. crude, fuel stockpiles fall in wake of Hurricane Ida -EIA
- Vaccines set to unleash pent-up oil demand, IEA says
- China’s daily oil refinery output hits 15-month low in August
NEW YORK, Sept 15 (Reuters) – Oil prices rose over $2 a barrel on Wednesday after government data showed a larger-than-expected drawdown in U.S. crude inventories, and on expectations demand will rise as vaccination rollouts widen.
U.S. crude oil stockpiles fell last week to the lowest since September 2019, the U.S. Energy Information Administration said, extending their drawdown after Hurricane Ida’s hit late August shut numerous refineries and offshore drilling production.
Brent crude rose $2.12, or 2.9%, to $75.72 a barrel by 11:14 a.m. ET (1514 GMT), while U.S. West Texas Intermediate (WTI) crude climbed $2.28, or 3.3%, to $72.75 a barrel.
Earlier in the session, Brent touched $76.13 a barrel, a contract high, and the highest outright price since late July.
U.S. crude and distillate inventories last week fell more than analysts expected, while gasoline stocks also declined, but fell slightly short of analysts’ expectations.
Crude inventories (USOILC=ECI) fell by 6.4 million barrels in the week to Sept. 10 to 417.4 million barrels, compared with analysts’ expectations in a Reuters poll for a 3.5 million-barrel drop.
“We have seen large crude and product draws which is supportive to the energy complex,” said Tony Headrick, energy market analyst at CHS Hedging. “The tropical storm that just came through slowed down recovery efforts from Hurricane Ida and we will continue to see the effects from Ida for the next few reports.”
Tropical Storm Nicholas moved slowly through the Gulf Coast on Tuesday, leaving hundreds of thousands of homes and businesses without power, although Texas refineries ran normally. read more
Damage from the storm comes two weeks after Ida knocked a significant amount of Gulf Coast refining capacity offline.
“This year’s hurricane season has a much greater and longer-lasting impact on the global oil balance than in previous years,” said Tamas Varga, oil analyst at London brokerage PVM Oil Associates.
Oil prices also found support from the International Energy Agency (IEA), which said on Tuesday vaccine rollouts would power a rebound, after a three-month slide in global oil demand due to the spread of the Delta coronavirus variant and renewed pandemic restrictions. read more
But oil price gains were capped by a fall in China’s crude throughput in August with daily refinery runs hitting the lowest since May 2020 and overall factory output faltering. read more
Alaska Journal of Commerce
September 5, 2021
Janet Weiss and Dennis Michel were appointed to the Alaska Gasline Development Corp. board of directors. Weiss received her bachelor’s degree in chemical engineering from Oklahoma State University and has more than 35 years of experience working in the oil and gas industry in various engineering and leadership roles for ARCO and BP including being as president of the Alaska Region for seven years. Michel received his bachelor’s degree in business administration from University of Southern California Marshall School of Business and his MBA with a concentration in corporate finance from University of Denver. He has more than 17 years of experience working in finance and information services in management and consulting. Weiss term is effective Aug. 23 through Dec. 1, 2025. Michel’s term is effective Dec. 1 through Dec. 1, 2026.
Democrats’ energy plan will kill US coal by 2030, miners say
Bloomberg News, September 14, 2021
A plan to push utilities to use more clean energy could eliminate coal from the US power grid by the end of the decade, according to a trade group that represents coal miners.
The Clean Electricity Performance Program proposed by House Democrats authorizes $150 billion in incentives for utilities that deliver at least 4% more clean energy to customers. Those that don’t will have to pay a penalty to the US Energy Department.
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The program is a key part of President Joe Biden’s signature climate goal of decarbonizing the electric grid by 2035. For the coal industry, the carrot-and-stick approach is a serious threat, according to America’s Power, which represents miners including Peabody Energy Corp. and Consol Energy Inc.
“The CEPP would eliminate coal-fired electricity by 2030, if not sooner,” Michelle Bloodworth, the group’s chief executive officer, wrote in a letter Monday to leaders of the House Committee on Energy & Commerce. It would also “eliminate or at least drastically curtail the use of natural gas to generate electricity.”
The trade group said that U.S. utilities are already shifting away from fossil fuels but pushing for such a rapid transition requires rapid adoption of more wind and solar energy, potentially threatening the stability of the power grid.
Alaska governor will let stand dividend lawmakers passed
Becky Bohrer, Associated Press, September 15, 2021
The Alaska Senate approved a roughly $1,100 dividend on the last day of a special session Tuesday, after the House canceled its floor session and left the Senate with what amounted to a take-it-or-leave-it decision on the check for residents that the House had previously passed.
The Senate Finance Committee sent the House version of the bill to the Senate floor on Tuesday where it passed 12-7 after efforts to amend the bill in favor of a higher payout failed.
Sen. Bert Stedman, the committee co-chair, had said that if the Senate adopted any changes, the bill would die.
House Speaker Louise Stutes, in a statement announcing the canceled floor session, said legislative rules bar concurrence the same day the other chamber passes legislation and that there was no time left for a conference committee if the Senate made any changes.
Legislators could waive those rules with two-thirds support in each chamber. But she told reporters later that she has had challenges all year in reaching that threshold in the sharply divided House. She said it “was the most expedient to just cancel session.”
“The Senate came through,” she said of the dividend vote.
Gov. Mike Dunleavy, who has advocated for a roughly $2,350 check, late Tuesday said he would not veto the dividend approved by lawmakers, though he considered it a “partial” dividend. He said Alaskans “need help now.”
Dunleavy said he would push to get a fuller dividend and for action on a fiscal plan during another special session, which he said would begin Oct. 1. It would be the fourth special session this year.
There have been different views on whether some of the funds targeted for use for the dividend in the bill that passed are readily available. Without those, the dividend would be estimated at $585, according to the Legislative Finance Division.
The bill would use general funds and money from the statutory budget reserve fund for this year’s dividend. The reserve fund was long considered among the accounts subject to being swept into the constitutional budget reserve to repay it for money that had been used from it. Lawmakers can reverse the sweep and restore funds to their original accounts. But earlier this year, they failed to secure the votes to do so.
The director of Legislative Legal Services has said a recent court decision suggests the statutory reserve is not subject to the sweep. Dunleavy spokesperson Jeff Turner last month said the fund “has been swept” and that the Legislature could change that with a three-quarters vote.
Turner, in a statement Tuesday, said the Legislature is the appropriating body and that lawmakers have put on the record multiple times since the court decision the belief that the statutory budget reserve is a valid fund source for the dividend.
Dunleavy “continues to believe that view is not as certain as the Legislature has made it seem, and the issue may have to be resolved by the courts. Right now, Governor Dunleavy believes it is more important to get PFD checks into the hands of Alaskans as quickly as possible to help them recover from the economic fallout of the pandemic,” Turner’s statement said. PFD refers to the permanent fund dividend.
Dividend checks are typically paid in the fall. Genevieve Wojtusik, with the state Department of Revenue, has said residents could expect a check 30 days after an appropriation has been finalized by the Legislature.
During debate on the Senate floor, Sen. Mike Shower, a Wasilla Republican, expressed frustration that more progress was not being made toward an overall fiscal plan and that the dividend debate was taken up on the last day of session.
“I’m tired of getting slow-rolled,” he said, adding that lawmakers were being “backed into a corner” on a dividend vote.
“It feels like a setup to me, I’ll be honest with you,” said Shower, who supported a higher dividend and was a no vote on the bill.
The Senate narrowly passed an amendment that Sen. David Wilson, another Wasilla Republican, said would have amounted to a roughly $2,350 dividend but that vote was rescinded, and the proposal failed on a second vote. Sen. Scott Kawasaki, a Fairbanks Democrat, made the rescind motion after voting in favor of the $2,350 check.
Kawasaki said while he supported the higher dividend, if the Senate changed the bill, it would leave this year’s check unresolved and in limbo. He said he could not do that to his constituents.
Most senators who had previously excused absences from the floor were present for Tuesday’s debate, including Sen. Lora Reinbold. The Eagle River Republican last week requested an excused absence from Sept. 11 until mid-January, citing the challenges of traveling to Juneau after she was suspended from flying on Alaska Airlines earlier this year.
Juneau is accessible by air or water. Delta Air Lines has said its seasonal Juneau service was to end on Sept. 12.
Alaska Airlines has said Reinbold was suspended “for her continued refusal to comply with employee instruction regarding the current mask policy.” Reinbold has said she was in compliance.
She said Tuesday that she is a “team player.” She said regardless of the personal consequences because of the ban, which she called political, she “wanted to be here to vote on behalf of my constituents.” She voted against the bill, after supporting two failed efforts for a larger dividend, one for the roughly $2,350 and one that called for dividends in line with a longstanding formula last used in 2015, estimated to be around $3,800.
Senate President Peter Micciche told reporters after the vote that he will not allow the Senate again to “get down to the last minute to where we don’t have the room to negotiate. We’ve seen this before. It can’t happen again.”
He said he does not consider lawmakers’ work for this year complete and wants to see continued work toward a fiscal plan.
Lawmakers earlier this year proposed an $1,100 check, using funds cobbled together from various pots and tying strings to that amount. It failed to win enough support, and what remained was estimated to be a $525 check that Dunleavy vetoed.
Lawmakers in recent years have sought to limit annual withdrawals from the earnings of Alaska’s oil-wealth fund for dividends and government costs, though they can breach the cap if they choose to do so. Stutes has said that members of the bipartisan coalition that she leads are willing to do that only if it is tied to a comprehensive fiscal solution. Some lawmakers are worried that if the cap is broken, it will be easier for lawmakers to keep dipping further into earnings in the future.
The bill that passed Tuesday would not exceed the cap.
Other lawmakers have argued that people need help amid the economic fallout from the pandemic and the state has the resources to do that.
CLIMATE CHANGE :
Major utility questions Biden’s signature climate plan
Benjamin Storrow, CLIMATEWIRE, September 15, 2021
One of America’s largest power companies is raising concerns that the president’s signature climate proposal would force utilities to develop clean energy “too rapidly.”
American Electric Power asserted in a letter to other utilities and congressional offices that the Clean Electricity Performance Program would “adversely impact the reliability and resilience of the electric grid.”
AEP’s letter comes as investor-owned utilities, which provide about 70% of the country’s electricity, are offering qualified support for the CEPP, a program designed to spur utilities to generate more renewable energy through grants and fees. But details of the proposal released last week sent many companies scrambling to determine if they could meet the measure’s annual threshold for clean electricity sales, industry representatives said.
AEP is entering the political debate at a critical juncture for President Biden and congressional Democrats, who are banking on the clean energy proposal to meet their goal of slashing power sector emissions 80% by 2030. The House Energy and Commerce Committee passed the CEPP yesterday in an incremental victory toward providing $150 billion in grants over seven years to help utilities buy or build increasing amounts of zero-carbon electricity (E&E News PM, Sept. 14).
But the program faces a treacherous path in the Senate. Sen. Joe Manchin, the conservative Democrat from West Virginia, raised doubts about the proposal this week by questioning whether utilities should receive federal funding to accelerate the transition to clean energy, which he says is already happening (Climatewire, Sept 13).
AEP operates two large coal plants in West Virginia. The Columbus, Ohio-based utility is one of America’s biggest power companies, serving 5.5 million customers in 11 states. And it is illustrative of the uneven nature of the clean energy transition.
The company has been one of the country’s largest coal burners, but in recent years it has announced plans to pivot away from the fuel. It plans on installing 16 gigawatts of renewable energy by 2030, amounting to about half its fleet, and it announced plans to cut carbon dioxide emissions 80% of 2000 levels by the end of the decade.
Even so, the company is expected to run three of its largest coal plants until 2040. In 2019, it ranked fourth among U.S. utilities for emissions when it released nearly 70 million tons of CO2, according to an analysis by M.J. Bradley & Associates, a consultancy. Most decarbonization studies show that coal will need to be virtually eliminated in the U.S. by 2030 to keep global temperature rise below 2 degrees Celsius.
Industry representatives said AEP’s letter reflected a debate in utility circles whether the CEPP’s requirements are achievable. Under the proposal, utilities would be eligible to receive a federal grant if they grow clean electricity sales 4 percent annually between 2023 and 2030. The grant would be worth $150 per megawatt-hour on 2.5 percent of a power company’s new clean electricity sales. Nuclear qualifies under the proposal, as do wind and solar.
Utilities that fail to meet the 4 percent threshold would have to pay a $40 per MWh fine.
“I think uniformly across the members we see the 4 percent as pretty aggressive,” said Emily Fisher, a senior vice president at the Edison Electric Institute, a trade association representing investor-owned utilities.
Edison has offered qualified support for the CEPP, arguing that the plan should be technology neutral and provide flexibility for companies to meet its targets. Fisher said she did not see AEP’s letter as a signal that the company would oppose the plan, but as an attempt to improve the legislation.
“We would like to have a program that we can achieve. That is what we are focused on,” she said.
AEP, for its part, expressed concern the CEPP would jeopardize reliability if it’s not accompanied by similar investments in dispatchable resources like energy storage and supporting infrastructure like transmission. And it raised the prospect of rising costs for renewable projects as a result of the government’s programs.
“We expect that the market would not have the ability to correct this in a timely fashion, given that the demand for projects is likely to exceed the supply of projects for years to come,” Anthony Kavanagh, AEP vice president for government relations, wrote in the letter.
The letter also raised concerns about the requirement that any fine be paid by shareholders and it expressed worry that developers could be penalized if their plans to obtain clean electricity are rejected by state utility regulators.
Tammy Ridout, an AEP spokeswoman, said the CEPP aligned with the company’s plans to advance clean energy.
“The key will be to ensure that the timeline and incentives will allow us to maintain a reliable, resilient and affordable energy system for customers during the transition to cleaner resources.”
Not all utilities have balked at the requirements. Exelon Corp., a large nuclear generator, has thrown its support behind the plan, saying the CEPP can support the country’s build-out of clean electricity. Including penalties can help ensure the program is successful, said David Brown, Exelon senior vice president for government.
But a compromise might be had on the annual requirement for new clean electricity sales, he said. The CEPP is part of a wider $3.5 trillion budget reconciliation plan. CEPP grants could be extended until 2032, the last year allowed under reconciliation. That would enable Congress to lower the annual threshold for new clean energy sales, making the program more palatable for some companies, Brown said.
“I think the industry is interested in long-term certainty, and hopefully we won’t let the perfect be the enemy of the very good,” he said.
The CEPP represents the main thrust of Biden’s climate agenda. Most climate analyses show the U.S. will not meet the president’s goal of reducing emissions 50% of 2005 levels by 2030 without major legislative action, and look to the electric power sector to deliver much of the cuts (Climatewire, July 12).
The Rhodium Group, an economic consulting firm, reckons the U.S. needs to cut emissions by 1.7 billion to 2.3 billion tons to meet Biden’s goal. The six major climate provisionsin the reconciliation package would deliver a cut of 830 million to 936 million tons, with the CEPP and tax incentives for renewables providing a reduction of 715 million tons.
Supporters of the plan point to modeling by the University of California, Berkeley, which shows that it is possible for utilities to increase clean electricity sales by 4% annually. And they argue it’s important to include penalties to ensure utilities meet their commitments.
“You wouldn’t want consumers to pay for utilities’ maleficence, or for their failure to achieve a goal that is feasible,” said Mike O’Boyle, director of electricity policy at Energy Innovation, a think tank supportive of the plan.