Today’s Key Takeaways: Contract prices for renewables jumped 28.5% in North America and 27.5% in Europe in the last year. Think you can live fossil fuel free? Take the challenge. Alaska makes Fraser Survey top ten for mining potential. Just don’t call it Keystone.
NEWS OF THE DAY:
Global renewable power prices soar on heavy demand, chaotic supply chain
Nichola Groom, Isla Binnie, Reuters, April 12, 2022
Prices for wind and solar power in major global markets have climbed nearly 30% in a year as developers have struggled with chaotic supply chains and surging costs for everything from shipping to parts to labor, according to a report published on Wednesday.
Contract prices for renewables jumped 28.5% in North America and 27.5% in Europe in the last year, according to a quarterly index by LevelTen Energy that tracks the deals, known in the industry as power purchase agreements (PPAs).
In the first quarter alone, prices rose 9.7% in North America and 8.6% in Europe, LevelTen said.
Economic, logistical, and labor market disruptions during the coronavirus pandemic have worsened since the Russian invasion of Ukraine, reversing a decade of cost declines for the renewable energy sector.
There is a risk higher costs could slow demand growth at a time when the United Nations has called for clean energy to expand more rapidly to avoid the worst effects of a warming climate.
“We still need keep the foot on the gas here,” Rob Collier, vice president of LevelTen’s energy marketplace, said in an interview.
Aggravating challenges in North America, the sector is uncertain whether U.S. lawmakers will extend tax breaks for renewable energy facilities, part of President Joe Biden’s climate change agenda. Developers also are worried about a U.S. Commerce Department investigation initiated this year that could result in tariffs on solar panel imports from Asia, pushing up costs.
“There’s just intractable problems right now with our supply chain,” Reagan Farr, chief executive of U.S. solar developer Silicon Ranch, said in an interview.
In Europe, the war in Ukraine has led governments to try to reduce dependence on natural gas from Russia, further boosting robust demand for renewables.
The war has been “the last straw for a market where there was already a lot of price tension,” Oscar Perez, a partner at Spain-based fund manager and renewable energy developer Q-Energy, said in an interview.
Higher costs for renewables in Europe, along with the continent’s aggressive climate policies, should boost the appeal of pricier technologies like green hydrogen and biofuels, according to Raymond James analyst Graham Price.
For now, soaring prices have not slowed demand, LevelTen said. In a poll the company conducted of 21 sustainability and energy advisers, 75% said their clients have accelerated or maintained procurement plans, according to the report.
“It’s not about demand,” Luigi Sacco, head of PPA origination at Milan-based Falck Renewables, said. “Demand is there but supply is struggling a bit in several markets.”
One factor luring buyers to renewables is the soaring cost of fossil fuels.
“The ready alternative to renewable generation right now is gas, and gas prices are up 100% as well,” Farr said. “So, you pick your poison.”
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As Henry Hub Soars, EIA Predicts Rising U.S. Production, LNG Exports in 2022
Jeremiah Shelor, Natural Gas Intelligence, April 12, 2022
U.S. dry natural gas production should average 96.9 Bcf/d in April and 97.4 Bcf/d for full-year 2022, which would reflect a 3.8 Bcf/d increase over 2021 levels, according to updated forecasting from the Energy Information Administration (EIA).
As the market has keyed in on supply adequacy fears and sent prices soaring well above $6.500/MMBtu this month, domestic production trends have taken on increased significance in setting the tone for prices.
In its latest Short-Term Energy Outlook (STEO), EIA estimated domestic output of 96.2 Bcf/d in March, up 1.2 Bcf/d from February levels.
“Similar to January and February, production in March was lower than in December because of brief periods of freezing temperatures in certain production regions and, in part, because of maintenance, according to public sources,” researchers said.
Henry Hub spot prices averaged $4.90 in March, up from $4.69 in February, EIA said. Drawing support from increased liquefied natural gas (LNG) exports over March levels, April Henry Hub spot prices are forecast to average $5.95; prices should average $5.68 for the second quarter and $5.23 for full-year 2022, the agency forecast.
Perhaps unsurprisingly in the context of recent price trends, the latest STEO Henry Hub forecast reflects a marked increase from the 2Q2022 average of $3.83 the agency modeled a month earlier.
Rising LNG Exports
U.S. LNG exports increased 0.7 Bcf/d sequentially to 11.9 Bcf/d on average in March, EIA said.
“LNG prices in Europe remain high amid supply uncertainties due to Russia’s further invasion of Ukraine and the need to replenish Europe’s natural gas inventories, which has kept Europe’s demand for LNG elevated,” researchers said. “Inventories in Europe were 26% full as of March 31, compared with the five-year average of 34%.”
U.S. LNG exports are expected to remain at “high levels” through the year, with an anticipated 2022 average of 12.2 Bcf/d, a 25% year/year increase, according to the latest STEO.
Domestic natural gas consumption, meanwhile, is set to average 84.1 Bcf/d for 2022, a 1% increase over 2021 levels. Researchers attributed the higher forecast demand in 2022 to increased residential/commercial demand and higher industrial consumption “in response to expanding economic activity.”
The latest STEO projections assume 3.4% growth in U.S. gross domestic product in 2022 and 3.1% growth in 2023, versus growth of 5.7% in 2021.
“A wide range of potential macroeconomic outcomes could significantly affect energy markets during the forecast period,” researchers said. “Energy supply uncertainty results from the conflict in Ukraine, the production decisions of OPEC-plus, and the rate at which U.S. oil and natural gas producers increase drilling.”
Alaska, Yukon make Fraser Survey top ten
Shane Lasley, North of 60 Mining News, April 13, 2022
With its world-class mineral potential and favorable mining policies, Western Australia reclaimed the crown as the best place to discover, permit, and build a mine, according to the mining executives that ranked 84 global jurisdictions for the Fraser Institute’s Annual Survey of Mining Companies, 2021.
Each year, Canada-based Fraser Institute calls on mining executives from around the world to rank global mining jurisdictions when it comes to mineral potential and a broad range of issues related to mining policies. Averaging out the responses to this survey, the Canada-based think tank ranks each mining jurisdiction’s “investment attractiveness index.”
With respondents ranking Western Australia as the richest mineral province on Earth and the fourth best in terms of mining policy, this important mining state beat out 83 other jurisdictions as the most attractive place to invest in mining.
Saskatchewan, a Canadian province that has surged in recent years, came in at a close second.
“The Fraser Institute’s mining survey is the most comprehensive report on government policies that either encourages or discourages mining investment, and Saskatchewan remains not only the top choice in Canada, but second overall globally,” said Elmira Aliakbari, director of the Fraser Institute’s Centre for Natural Resource Studies and co-author of the mining survey.
Nevada, which held the top position last year, dropped to No. 3; Alaska, which always does well on the mineral potential side of the equation, moved up one position to No. 4; and Arizona, a Southwest United States neighbor to Nevada, dropped from No. 2 last year to No. 5 on the 2021 survey.
Mining executives that responded to the 2021 Fraser Survey had a more favorable view of all five North of 60 Mining News jurisdictions when compared to last year.
Yukon, which landed at No. 9, returns to the top ten most attractive jurisdictions for the first time since 2018. The Fraser Survey attributes this rebound to the territory’s recent perceived policy improvements building off its foundational rich mineral potential.
“A sound and predictable regulatory regime coupled with competitive fiscal policies help make a jurisdiction attractive in the eyes of mining investors,” said Aliakbari.
Rounding out the North of 60 Mining News jurisdictions, British Columbia moved up one spot to No. 16, Nunavut jumped 11 positions to No. 28, and Northwest Territories rebounded from No. 46 to No. 35.
When it comes to mineral potential, there is little argument that North of 60 Mining News jurisdictions are some of the richest on Earth.
Whether it is Alaska’s Tintina Gold Belt, British Columbia’s Golden Triangle, Yukon’s White Gold District, Northwest Territories’ Lac de Gras diamond region, or the gold-rich greenstone belts in Nunavut, the North of 60 Mining region hosts the potential for company-making deposits of base, precious, and critical minerals.
Each year, the Fraser Institute asks mining executives to set aside any policy considerations and provide their views of the pure geological endowment of global mining jurisdictions.
Alaska always lands near the top on this section of the Fraser Survey, dubbed the “Best Practices Mineral Potential Index,” and 2021 was no different. Respondents ranked America’s Far North State as the second richest mineral province in the world, just behind Western Australia.
Rounding out the top five when it comes to perceptions of minerals endowment are Arizona, Saskatchewan, and Nevada.
Canada’s Yukon came in at No. 6 on the mineral potential index, up from No. 12 a year ago; British Columbia fell one spot to No. 11; Northwest Territories gained an impressive 13 positions to land at No. 23; and Nunavut climbed three spots to No. 26.
Consistent policies needed
While all agree that Canada’s territories, British Columbia, and Alaska are blessed with rich mineral endowments, all five North of 60 Mining jurisdictions could stand to improve their image when it comes to policy, an important factor to mining companies and their investors that understand rich mineral deposits have little meaning if a mine cannot be developed.
“Policymakers in every province and territory should understand that mineral deposits alone are not enough to attract investment,” said Aliakbari.
The top five jurisdictions on the 2021 Fraser Institute Survey of Mining Companies’ “Policy Perception Index” are Republic of Ireland, Morocco, Northern Ireland, Western Australia, and Quebec.
Alaska, the top North of 60 Mining jurisdiction, held steady at No. 13; Yukon lands at No. 23, up significantly from 36; British Columbia is at No. 28, a jump from 41; Nunavut came in at No. 35, a 16-point climb from 51; and Northwest Territories dropped to No. 59, from an already dismal 54 the previous year.
“Regulatory duplication and inconsistencies, coupled with a lack of collaboration from regulatory authorities, are major areas of concern for investors,” the manager of a mining company with more than US$50 million in assets commented on Northwest Territories’ mining policies.
This is a topic that all the North of 60 Mining jurisdictions could improve upon, according to mining executives.
Yukon was ranked 21st globally when it comes to regulatory duplication and inconsistencies, followed by Alaska at 26th, British Columbia at 30th, Nunavut at 41st, and Northwest Territories near the bottom at 63rd.
An even bigger concern, however, is clarity on what areas are open to mineral exploration and mine development.
When it comes to certainty concerning protected areas, Alaska is ranked 32nd, Yukon is 55th, Nunavut is 60th, British Columbia is 64th, and Northwest Territories is 80th.
Venezuela, Democratic Republic of Congo, New Zealand, and Tanzania are the only place on Earth where mining companies are less certain about protected areas than in Canada’s Northwest Territories.
Roads to better perceptions
As frontier jurisdictions at and beyond the north end of North America’s road and rail network, North of 60 Mining jurisdictions are also hampered by a lack of infrastructure, a dearth that makes exploration and mining more expensive.
British Columbia, which happens to be completely south of the 60th parallel and better connected, ranked 33rd when it comes to quality of infrastructure.
Yukon, which borders BC to the north, came in at 50th; Alaska ranked a dismal 64th, falling between Tanzania and Mauritania; Northwest Territories came in right below Nicaragua at 69th; and Nunavut ranked 74th, leaving only 10 jurisdictions considered worse in terms of infrastructure.
From the Grays Bay Road and Port Project extending from Northwest Territories to the Arctic shores of Nunavut, to the Resource Gateway project in the Yukon and the Ambler Road project in Alaska, the lack of infrastructure needed for accessing mineral projects is being addressed across the North.
Completion of these projects could pave the way for mineral policy perceptions that come closer to the undeniable mineral riches across Alaska and Canada’s North.
From the Washington Examiner, Daily on Energy:
JUST DON’T CALL IT ‘KEYSTONE XL’: Sen. Joe Manchin, speaking at a conference in Alberta yesterday with Premier Jason Kenney, regretted the Biden administration’s cancellation of the Keystone XL pipeline and suggested it could be brought back – but only with a new name.
“The brand for the XL pipeline is probably gone,” Manchin said, according to Bloomberg. “Can it be re-branded? Can it be rerouted? We need this product. You all have a product that we have to have.”
What’s on Manchin’s mind: Separately, Manchin focused on energy production in an angry statement on yesterday’s report that inflation is at the highest rate since 1981.
Controlling inflation not only demands tighter monetary policy and decreased federal spending, Manchin said, it also “demands the Administration and Congress, Democrats and Republicans alike, support an all-the-above energy policy because that is the only way to bring down the high price of gas and energy while attacking climate change.”