Welcome to Grid Brief! Here’s what we’re looking at today: California gives three gas plants a life extension, Siemens has scrapped its profit outlook thanks to its wind turbine division, US supertanker rates are sky high, and more.

California Grants Gas Plants Life Extension

California’s grid has suffered during summer heatwaves for the last few years. To help keep the lights on, California is looking to keep three gas plants online.

“The natural gas-fired power plants in Huntington Beach, Long Beach and Oxnard were supposed to shut down in 2020, under a regulation designed to protect marine life. But officials voted to let the polluting generators keep churning out power another three years, just a few weeks after California experienced its first rolling blackouts since the early-2000s energy crisis,” reports the LA Times. Now regulators are gearing up to approve another three-year extension, which would allow the plants to run through 2026.”

This has upset various environmental groups in the state, who believe that Newsom’s willingness to keep the plants running exacerbates climate change.

“Claiming climate leadership and then demanding an all-of-the-above [energy] strategy is not climate leadership,” Shana Lazerow, legal director at Communities for a Better Environment, said.

But Newsom stands by his decision. One of his spokesmen told the LA Times that the gas plants are “an essential backup resource that can be activated quickly to help prevent Californians from losing power” when the grid is strained. The spokesman pointed out that that under Newsom’s leadership, California “has done more than any other state to transition to 100% clean electricity and slash air pollution in our communities,” marshaling tens of billions of dollars in investments.

Newsom and the environmental movement are butting heads more and more. Recently, the Governor expressed his frustrations with the movement’s bad habit of fighting against the energy projects they lobby for.

Wind Turbine Troubles Trash Siemens’s Profits

Siemens Energy scrapped its profit outlook as problems in its wind turbine division, Siemens Gamesa, are expected to cost the company $1.1 billion.

“Siemens Energy said that an extended technical review of Siemens Gamesa's installed turbine fleet and product designs was launched following that is says was a substantial increase in failure rates of components,” reports Reuters. “The company, which was spun off from Siemens, said the review suggests that it will be significantly more expensive than initially thought to reach the desired product quality of certain onshore turbines.”

"We are also reviewing assumptions critical to the existing business plans given productivity improvements are not materializing to the extent previously expected," Siemens Energy said. "In addition, we continue to experience ramp up challenges in Offshore."

Despite the plagued wind unit, Siemens’s gas turbine unit has performed quite well. Its revenue growth is forecasted at 10-12%.

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US Supertanker Rates Skyrocket

US-loading supertanker rates dropped earlier this year, but now they’re shooting back up. The average spot rates for old very large crude tankers (VLCCs) jumped to $83,300 per day, while the rates for their younger and more fuel efficient sisters hit $91,000 per day. What gives?

“Shipping rates tend to rise during periods of heightened demand or geopolitical tensions,” reports Oilprice.com. “Operators demand higher compensation to send their vessels into dangerous waters, and underwriters bump up the cost to insure ships and their cargo against potential threats, increasing war risk premiums. Sanctions on Russia’s energy and maritime shipping sectors have forced crude oil buyers in Europe to purchase their crude oil imports from other markets.”

We can expect shipping rates to say high as demand for cheaper American crude in Asia climbs with higher regional crude prices.

Conversation Starters

• Nuclear is coming to Alabama. “After a year-long search, Ultra Safe Nuclear Corporation (USNC) has announced the selection of Gadsden, Alabama, as the location for a USD232 million plant to manufacture, assemble, test, and inspect the non-radiological modules needed to construct the company's Micro-Modular Reactor (MMR). Construction of the plant is to begin next year,” reports World Nuclear News. “Factors including site suitability and infrastructure, skilled workforce availability, and overall project economics were taken into account during the search process, which spanned 16 states and hundreds of potential sites, the company said. The highly automated MMR Assembly Plant - or MAP - will employ 250 professional and technical workers when operational, with potential for expansion. There is also "high potential" for USNC suppliers to establish a local presence, creating further opportunities for local growth, the company noted.”

• Dolphin Drilling continues to grow its fleet. “Semisub rig owner Dolphin Drilling has snapped up a pair of Transocean rigs, the 1987-built Paul B Loyd Jr and the Transocean Leader in a deal worth $61.5m,” reports Splash 247. “The Øystein Stray Spetalen-backed owner of three rigs will raise around $60m via a private placement of shares to finance the deal, which includes an unspecified additional $3m figure. The company’s two largest shareholders Strategic Value Partners and Spetalen’s SD Standard ETC have pre-committed to subscribe for around $13m and $7m, worth of shares, respectively and to back Dolphin with a $15m revolving credit.”

• Sizewell C gets the court’s blessing. “Britain's approval of the planned Sizewell C nuclear plant was lawful, London's High Court ruled on Thursday, dismissing a legal challenge over the environmental impact of the project,” reports Reuters. “The building of the plant by French energy giant EDF in southeast England, capable of producing around 3.2 gigawatts of electricity or enough to power around 6 million homes, was approved in July 2022.“

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