"Energy Groups Call For Government Intervention As Power Prices Skyrocket" by City A.M.

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https://oilprice.com/Energy/Energy-General/Energy-Groups-Call-For-Government-Intervention-As-Power-Prices-Skyrocket.html

Energy Groups Call For Government Intervention As Power Prices Skyrocket

Energy Groups Call For Government Intervention As Power Prices Skyrocket

By City A.M - Dec 24, 2021, 9:00 AM CST

• Trade Association Energy UK has criticized chancellor Rishi Sunak for the lack of a clear plan to protect the industry.
• Market regulator Ofgem announced it will provide £1.83bn to suppliers that took on customers from collapsed rivals through the supplier of last resort process.
• The market regulator explained its “top priority” is protecting consumers and that it understands the challenges households and businesses are facing in light of the unprecedented increase in global gas prices.

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Trade Association Energy UK – which represents over 100 members – has described record wholesale gas and power prices as a “market-wide crisis” and has criticized chancellor Rishi Sunak for the lack of a clear plan to protect the industry. Speaking to The Financial Times, chief executive Emma Pinchbeck said: “Other treasuries in Europe have already responded to the crisis, but in the UK, the energy sector is still asking if the chancellor knows that energy bills going up by over 50 percent in the new year is a problem for ordinary people, businesses, and the economy.”

Pinchbeck was not alone in her criticism this week, with EDF Energy – the fourth-biggest supplier in the UK – warning the situation was now “critical” as it urged the government to “act now to support energy customers.”

Meanwhile, Good Energy’s shares dropped four percent amid profit warnings, with the supplier downgrading its expected earnings by £3m due to soaring wholesale prices and sustained market volatility.

In a trading update to the London Stock Exchange, Nigel Pocklington, chief executive of the energy supplier described the situation as a “national crisis” and warned that “no one in the industry is immune.”

He said: “We urge the UK government to support the industry at large in navigating these short-term challenges to protect bill-payers and those that serve them

Pocklington attributed the “unparalleled” price hikes to post-lockdown demand, supply and storage shortages, cold winter weather, and escalating geopolitical tensions between Russia and Europe, with the Nord Stream 2 pipeline still waiting to be certified.

The energy firm outlined that power and gas prices on a day-ahead basis for December compared to November have been on average 36 percent and 35 percent more expensive respectively, at £256 per megawatt-hour and £2.71 per therm.

This is in line with Bulb Energy’s statements following its de-facto nationalization through the special administration process, which revealed it was costing them £4 per therm to supply energy to their 1.7m customers, while the current consumer price cap prevented them from charging customers more than 70p per therm.

So far, 25 UK energy firms have ceased trading in the past three months, affecting four million domestic consumers.

Ofgem announces new funds for suppliers as regulator seeks to reform energy industry

Market regulator Ofgem announced yesterday it will provide £1.83bn to suppliers that took on customers from collapsed rivals through the supplier of last resort process.

The funds will compensate suppliers hit by escalating onboarding costs, and to ensure households are not left in the lurch this winter if further suppliers collapse.

However, these costs will eventually be felt by consumers – and support Investec’s recent analysis that UK households will suffer a £3.2bn collective bill this winter when combining the onboarding costs with the sums required to prop up Bulb through the winter until a new buyer can be found.

When asked for comment, the market regulator said: “Ofgem’s safety net has protected more than four million customers through the unprecedented global gas prices this year, making sure they have an energy supplier and household credit balances are honored. This comes at a cost, which we always seek to minimize. As we announced last week, we’re also stabilizing the retail market with robust stress tests for all suppliers.”

Ofgem has also announced proposals for stringent financial stress tests to ensure energy firms hedge against market shocks in the future.

It is also currently engaged in an industry consultation on the consumer price cap after industry bosses including Scottish Power CEO Keith Anderson have called for the mechanism to be reformed – with findings expected early next year.

Chief executive Jonathan Brearley told BBC’s Today Programme that consumers should expect the price cap to rise again next April, following the 12 percent hike in October.

He argued it was reasonable for the cap to reflect current market conditions with surging gas prices.

Brearley said: “The price cap has done a good job for consumers…but where you have legitimate price increases, those costs have to be passed on to consumers.”

Pantheon forecasts the price cap could increase by as much as 40 percent next Spring, while Investec predicts prices could rise by over 50 percent and reach £2,000 per year for average use.

According to The Times, UK ministers are considering a number of potential options targeted at households to mitigate the impact of the huge jump in bills.

Related: Cities Around The World Are Trying To Cut Out Natural Gas

This includes finding ways of spreading the price rises over a longer period, possible cut in the five percent value-added tax rate on energy bills; and an expansion of the Warm Homes Discount scheme, which supports 2.7m vulnerable households.

Meanwhile, Ofgem has not escaped criticism with Citizens Advice earlier this month accusing them of a “catalogue of errors” and for failing to proactively manage the industry, allowing unfit suppliers to stay in the market.

In response to the criticism, Ofgem told City A.M. it accepted “the energy market needs reform and quickly” as the “current system was not designed for this sort of extreme market event”.

The market regulator explained its “top priority” is protecting consumers and that it understands the challenges households and businesses are facing in light of the unprecedented increase in global gas prices.

By City AM

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https://www.zerohedge.com/commodities/european-firms-warn-unbearably-high-energy-costs-may-spark-wave-production-shutdowns

European Firms Warn "Unbearably High Energy Costs" May Spark Wave Of Production Shutdowns 

by Tyler Durden

Thursday, Dec 23, 2021 - 07:35 AM

Years of mindless green energy policies across the European continent are about to unleash an economic crisis. Energy-intensive companies are paying "unbearably high energy prices" that may force them to shutter operations.

Eleven European associations (from steel to fertilizers to cement to paper mills) published a press release Wednesday that warned the energy crisis that plagues the continent has worsened over the few months and accelerated in the last several days as European natural gas hit a record high on Tuesday. 

"The main reasons for this situation are the financial market speculation from financial players including hedge funds and commodity trading houses, the imbalances in the gas market, seasonally decreased renewable energy production, reduced nuclear energy production, coal mine closures, and increased carbon costs passed on in electricity prices," the eleven associations said in a press release. 

Europe's energy crisis has snowballed into what could be an economic downturn. The groups warned, "numerous industrial energy consumers" have "to curtail and/or temporarily close plants" because "energy prices have increased 4 to 5 times" and made the cost of operating uneconomical.

"The ongoing situation has severely impacted the competitiveness and profitability of energy-intensive sectors' European operations as they are most exposed to dramatic price spikes," the groups continued. 

They said, "a prolonged period of unbearably high energy prices could lead to severe losses, relocation of European companies and an increase of carbon leakage." 

The groups called on European leaders to combat the energy crisis and "quickly exploit the full potential of the toolbox presented by the European Commission in October. Furthermore, urgent actions are necessary at EU level to enable affected companies to overcome this situation." 

To sum up, the failure of political leaders to even remotely allow energy supplies to reach such low levels is stunning. Also, soaring natural gas prices is not a failure of the fossil fuel industry, but the total failure of politicians who crushed oil, gas, and coal power plants to guarantee the green transition would be easy. 

Things are going from bad to worse as the winter in the Northern Hemisphere gets underway. 

Thanks, Greta, for gaslighting Europeans... 

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https://www.zerohedge.com/energy/germanys-reaction-energy-crisis-could-be-catastrophic

Germany's Reaction To The Energy Crisis Could Be Catastrophic

by Tyler Durden

Friday, Dec 24, 2021 - 10:30 AM

Authored by Julianne Geiger via OilPrice.com,

• Germany's determination to go green despite an energy crisis in Europe could significantly impact the country's energy security

• While power prices in Europe have been soaring and natural gas prices have begun to drop, Germany is refusing to change its energy policy

• Specifically, it is Germany's decision to phase out nuclear power and accelerate the phase-out of coal-fired plants that has confused analysts

The European gas crisis has hogged energy headlines for months. But that hasn’t stopped Germany from retiring half of its nuclear capacity by the end of the year and pushing an accelerated phase-out of its coal-fired plants by 2030. And for Germany’s energy security, it could spell disaster. 

The commitments to greenifying Germany’s grid are noble. Unfortunately, they also appear ill-timed, as German baseload power for 2022 delivery—a European benchmark—hit a brand new contract high of 278.50 euros. This is an increase of 10%, as gas flows through a pipeline that brings natural gas from Russia to Germany switched direction to flow Eastward. 

But soaring power prices and sagging natural gas prices haven’t knocked Germany off its green ambitions—and it could have bigger ramifications than many realize. 

Coal and nuclear power, now on the ropes in Germany, rose in prominence this year, accounting for a larger percentage of Germany’s overall energy mix compared to 2020, BDEW said this week.

The rise in nuclear and coal-fired power was due mainly to lower wind speeds and increased demand. 

Coal and nuclear energy made up 40% of the overall energy mix in Germany. Meanwhile, renewables fell to 41% of the mix. Still, Germany is stuck on kicking its coal and nuclear habit—coal because it’s dirty, and nuclear because of Fukushima. The decision to retire the latter was made shortly after the Fukushima disaster, but since then, coal use has risen to fill in the gaps left by nuclear. 

This year, Germany plans to shut down the Grohnde, Gundremmingen C, and Brokdorf nuclear plants, which will leave Germany with just three. Those final three will be retired by the end of next year. 

For coal, Germany has agreed to phase out coal by 2030—up from its previous goal of retiring coal in the country by 2038. 

These two moves alone put Germany, gasping for energy, in a precarious position. But there’s more. 

Germany also has a plan to kick its natural gas habit, with plans to end power generation from gas by 2040. Currently, half of all German homes are heated with natural gas.  By 2026, a ban in Germany on the installation of heating in new homes using any type of petroleum products will go into effect in favor of heat pumps that draw electricity from the grid. 

This would be the grid that is currently struggling to supply power to its people, and the grid that currently relies 40% on nuclear energy and coal-fired power that is set to be retired.

Germany’s decision to phase out nuclear power is Germany has puzzled analysts, who argue that phasing out the zero-emissions created by nuclear power while relying on natural gas and coal-fired power (at least for now) seems counterintuitive. Add to that the current predicament that Germany finds itself in being short on natural gas, and analysts are puzzled even more. In addition, nuclear power has served as a rather reliable fill-in for renewables that rely on the intermittency of sun and wind—an intermittency that has been brought to light this year more than ever. 

These rising power prices in Europe are fueling inflation, and Trafigura has warned that Europe could experience rolling blackouts if this winter turns out to be a cold one. Meanwhile, natural gas flows from Russia are a big question mark, with tensions over Nord Stream 2 and Russia’s possible invasion of Ukraine exacerbating Europe’s power situation. 

[Tom Nolan + 2,441]

https://www.zerohedge.com/commodities/rolling-blackouts-hit-kosovo-amid-europes-energy-crunch

Rolling Blackouts Spread Across Europe Amid Energy Crisis

by Tyler Durden

Friday, Dec 24, 2021 - 09:17 AM

Europe's energy crisis worsened this week when Kosovo introduced rolling blackouts to most of its two million citizens, according to Bloomberg. 

On Thursday, the Kosovo Energy Distribution Services (KEDS) announced rolling two-hour power blackouts for 2 million people due to an "overload" of its electrical grid. 

KEDS asked customers to reduce power given "insufficient internal generation to cover consumption and the global energy crisis." 

The Balkan country, Europe's poorest nation, experienced a technical issue at its largest coal-fired power plant that had to shut down last month, which forced the government to import electricity at high prices.

Simultaneously, Serbia was forced to cut electricity to customers, Britain's network operator issued a power supply warning, and France's nuclear plant outage, all culminated into a perfect storm of straining the continent's grid, resulting in reduced power supplies and exorbitantly high prices.

Last week, Kosovo's economy minister, Artane Rizvanolli, said the shuttering of the nation's main coal-fired power plant had worsened the energy crisis. He said power imports were "extremely costly." 

Grid data from Entso-E shows electricity imports from Albania, Serbia, Montenegro, and North Macedonia plunged from 750 megawatts on Wednesday to about 469 megawatts on Thursday. 

Jeremy Weir, CEO of commodities trader Trafigura Group, warned that more European countries could face rolling blackouts in the event of a severe winter.

Eleven European associations (from steel to fertilizers to cement to paper mills) published a memo Thursday indicating energy-intensive companies are paying "unbearably high energy prices" that may force them to shutter operations. 

However, there is good news for the continent as benchmark Dutch front-month gas plunged as much as 43% from a peak of 180 euros per megawatt-hour to around 102 euros in the last several days as a flotilla of US liquefied natural gas (LNG) tankers is headed to the fuel-starved continent. 

More good news is that weather forecasts for Germany will turn milder. This will help keep a lid on gas prices. 

Europe remains caught in its worst energy crisis ever as some relief is on the way, but the worst may not be over as the Northern Hemisphere winter has just begun. 

[Tom Nolan + 2,441]

The ECB Has Launched The Japanization Of Europe... And Now It Cannot Back Down

by Tyler Durden

Friday, Dec 24, 2021 - 08:00 AM

Authored by Daniel Lacalle,

The Federal Reserve leaves the ECB alone and defenseless...

 

Inflation has skyrocketed and aggressive monetary policy is the key factor in understanding it. I already explained it in my article "Persistent inflation, a brake on the recovery." The Federal Reserve has finally recognized this and has given a 180 degree turn to its policy of keeping buybacks and rates low.

The Federal Reserve now expects core inflation to remain above 2.7% in 2022 (previously it expected 2.3%) and that it will be above 2% in 2023 and 2024. That means the CPI (price index consumption) will probably remain above 4% in that period. Taking into account that it will close the year above 6%, we are talking about an inflation of more than 14% in three years, a great risk for the recovery, real wages, family savings and investment.

The Federal Reserve has at least acted and will reduce its monthly sovereign bond purchase to $ 20 billion and $ 10 billion a month of mortgage-linked assets. In addition, it will accelerate the rate hike to three hikes in 2022, three in 2023 and two in 2024 to reach a 2.1% reference rate in 2024.

It is still a modest reduction for the magnitude and scope of an overly aggressive and even counterproductive stimulus program that has been active for too many years, since no one can understand what the Federal Reserve is doing buying mortgage-linked assets with the real estate market at its highest or raising rates to 2.1% with core inflation above 2% during 2022-2024.

But the Federal Reserve is doing something more important and key: It is generating much greater demand for dollars and absorbing savings from the world to the US, by making the investment safer (the US 10-year bond) more attractive to global investors.

The Federal Reserve takes the reins again and leaves the ECB with the changed pace and the wrong policy. Despite runaway inflation, the highest in three decades in the euro area, the ECB maintains its extremely aggressive monetary policy, negative rates and bond buybacks that account for 100% of the net issuance of the states.

The ECB is between a rock and a hard place

The ECB is between a rock and a hard place because it cannot take decisive action as states have become accustomed to an unprecedented monetization that has led the ECB's balance sheet to be 81% of eurozone GDP compared to 37% of the Federal Reserve with respect to the US GDP.

If the ECB reduces its so-called expansionary policy, states like Spain, which has shot up debt by 230,000 million in almost two years and continues to increase the structural deficit, will not be able to withstand the slightest rise in rates.

On the other hand, if the ECB maintains its huge buyback program and negative rates, the inflation tax and stagnation may condemn the eurozone to a stagflation that some countries have already experienced in the past.

The ECB has launched into the Japaneseization of Europe and now it cannot back down.

The Federal Reserve can afford a sharp change in policy

The Federal Reserve has once again exposed why the dollar is the world's reserve currency and why no one should copy Fed policy without the global demand for currency enjoyed by the dollar. The Federal Reserve can afford a sharp change in monetary policy and see how the markets reward it and attract more demand for dollars. The euro does not have that luxury.

The ball is now in the roof of Lagarde and the ECB: will it choose to continue inflating the bubble of debt and waste from deficit and fiscally irresponsible states, or will it choose to regain monetary sanity and avoid stagflation? I hope, for our sake, they choose the latter.

https://www.zerohedge.com/markets/ecb-has-launched-japanization-europe-and-now-it-cannot-back-down