Avangrid: Commonwealth Wind Can't Be Financed // FERC's Glick Takes a Bow // Norway Disappoints on Hydrocarbons

Avangrid: Commonwealth Wind Can't Be Financed

A subsidiary of Avangrid has asked regulators to dismiss their review of the power purchase agreements associated with the over 1,200 megawatt Commonwealth offshore wind project in Massachusetts.

Eversource Energy, National Grid, and Unitil held Commonwealth under contract to help Massachusetts meet its goal of adding 5.6 gigwatts of offshore wind. Commonwealth was slated to begin operations in 2028. Avangrid maintains that the project cannot be financed at the agreed upon $72 per megawatt-hour PPA price.

“Among other factors, the prolonged war in Ukraine has unsettled markets and increased costs for many products, inflation has been persistent, interest rates have increased in a manner unprecedented in recent times, commodity prices have risen sharply and supply shortages and supply-chain constraints once thought to be temporary remain pervasive,” Commonwealth Wind said.

"Eversource Energy, National Grid and Unitil refused to renegotiate the 1.2-GW PPAs, Commonwealth Wind, the subsidiary, said, noting it plans to rebid the project in an upcoming solicitation, according to a filing at the Massachusetts Department of Public Utilities," reports Utility Dive.

Solar and offshore wind have been plagued with delays, cost run-ups, transmission bottlenecks, and a variety of other issues that have rendered projects less economical than promised.

FERC's Glick Takes a Bow

The Federal Energy Regulatory Commission's chairman Richard Glick will not continue in his position, as the Senate has not re-upped his appointment. He will leave the chairmanship on January 3.

“Congress is adjourning very soon. I think it’s pretty clear that there’s not a path forward anymore for the president’s nomination for me to serve a second term,” Glick said.

"During Glick’s tenure as chairman, FERC advanced proposals to spur transmission development, strenghthen natural gas pipeline reviews and protect the grid from extreme weather, among other initiatives. Many of those efforts are ongoing," reports Utility Dive.

Glick said that the commission's efforts have been “inextricably linked” to the energy transition, some of which has been controversial.

“I don’t expect that that’s going to change,” Glick said. “If anything, I think that’s going to increase. It’s just the nature of our society, but it’s the nature of what’s going on [with] the transition that’s underway.”

His departure will leave a clutch of 2-2 deadlocks on the commission, with two Democrats, Allison Clements and Willie Phillips, and two Republicans, James Danly and Mark Christie. Some worry that the deadlock will frustrate the energy transition.

Norway Disappoints on Hydrocarbons

Norway's oil and natural gas production dipped below the government's November expectations.

"Norway’s crude oil production averaged 1.74 million barrels per day (bpd) in November, data from the Norwegian Petroleum Directorate (NPD) showed today. That was 8.7% below the forecast of 1.905 million bpd and slightly below the October crude oil output of 1.749 million bpd," reports Oilprice.com. "Natural gas production was 1.8% below government forecasts and averaged 346.4 million cubic meters per day, also slightly down compared to the October production."

The good news is that the Johan Sverdrup oilfield, western Europe's largest, will ramp up production soon to 180,000 barrels per day.

“Johan Sverdrup accounts for large and important energy deliveries, and in the current market situation, most of the volumes will go to Europe,” said Geir Tungesvik, Equinor’s executive vice president for Projects, Drilling & Procurement.

"Johan Sverdrup produces 535,000 bpd, and with Johan Sverdrup 2, the giant oilfield will produce 720,000 bpd at plateau," reports Oilprice.com. Equinor claims that Johan Sverdrup could meet 6-7% of Europe's daily oil demand at that rate of production.

As for natural gas, Norway's production is expected to increase by 8% this year according to government estimates. Norway supplies a quarter of the gas consumed in the EU and UK.

Though a temporary dip is disappointing, Norway's future increases are welcome news to Europe, which must replace Russia's half a million barrels per day (and possibly more if seaborne imports are included).

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Conversation Starters

1. European countries are looking the energy transition in the face and flinching. "France, the Netherlands, Ireland, and several other EU countries are reluctant to back a European Commission proposal to boost the EU’s renewable energy objective for 2030 in response to Russia’s war in Ukraine," reports Euractiv. "European Union countries are currently debating plans to increase the bloc’s renewable energy target to 45% by 2030, in line with European Commission proposals tabled in May this year. The revised target was put forward as Europe seeks to exit Russian fossil fuels 'well before 2030' in a bid to stop financing the Kremlin’s war effort."

2. Azerbaijan is set to export more gas to Europe next year, according to the country's president, Ilham Aliyev. "It is a win-win situation, because Europe needs to strengthen its energy security, and Azerbaijan needs a reliable market to sell the tremendous amount of its energy sources," the Aliyev said. "In total, Azerbaijan aims to export 24 billion cubic meters of natural gas in 2023, with 11.6 billion cubic meters going to Europe," reports Oilprice.com.

3. The EU has finally settled on a gas price cap. "European nations reached a deal to cap natural gas prices at €180, ending months of political wrangling over whether to intervene in an energy crisis that has risked pushing the region into a recession," reports Bloomberg. "The so-called gas market correction mechanism — a temporary measure designed to prevent extreme price swings — will apply for one year from Feb. 15. The cap is significantly lower than an earlier proposal by the European Commission, which wouldn’t have prevented the spikes that the region saw earlier this year as Russia curbed gas supplies in the wake of its war in Ukraine."

Crom's Blessing