China Restarts Coal Supply Talks With Australian Miners // Dominion and Duke Ditch Solar // Europe's Energy Crisis Bill: $853 Billion and Counting

China Restarts Coal Supply Talks With Australian Miners

Australian coal miners have begun receiving offers from eager Chinese buyers.

"China has so far permitted only three state-owned power utilities and a steelmaker to source coal from Australia again, analysts and industry insiders say, but expectations are building across the sector that a complete lifting of the ban is possible within weeks," reports The Sydney Morning Herald. "Several coal producers in the NSW Hunter Valley and Queensland have confirmed that Chinese buyers have asked about supplies of thermal coal for power generation and metallurgical coal, which is used in steel-making furnaces."

The interest from Chinese buyers comes after the country rose tariffs against Australian goods and outright banned on coal when diplomatic ties between the two countries frayed. Wood Mackenzie believes that a complete lifting of the ban could occur as early as next month.

But diplomacy isn't the only obstacle. Many Australian miners say they lack enough spare capacity to enter into new supply deals after last year's energy crunch.

Dominion and Duke Ditch Solar

Dominion Energy and Duke Energy are cutting back on renewables.

Dominion Energy announced that it will no longer invest in unregulated solar projects; it has taken a $1.5 billion impairment charge on its portfolio of solar projects. Dominion's CFO, Steven Ridge, said, “There were two primary purposes for the development of the portfolio,” he said. “The first was to develop expertise in developing solar so we could employ that expertise credibly across our regulated footprint, which is what we’re doing right now. So, in effect, that task has been completed. The second was to generate investment tax credits.”

Duke Energy's situation is slightly different. The utility is taking a $1.3 billion impairment charge due to losses in recoverable value in the fourth quarter and is looking to sell its entire commercial renewable energy business for around $4 billion. Duke CEO Lynn Good said, "The thing to recognize with an impairment charge, is this an accounting adjustment that’s driven by the earnings profile of renewables where a lot of the profit that’s in the early part of the life then depreciates over a longer period of time. So when you make a decision to exit before the end of the useful life, you’ve set yourself up for an impairment.”

Michael Doyle, an equity analyst at Edward Jones, told Utility Dive that "Dominion’s retreat from unregulated assets reflects a larger trend in utilities, because the market 'tends to assign' a higher price earnings multiple to companies that derive a larger percentage of their earnings from regulated operations. In addition, the sale of this solar portfolio would provide the company with useful cash."

Europe's Energy Crisis Bill: $853 Billion and Counting

The European price tag on survival could make your eyes water: over $853 billion and the show's not over.

"European Union countries have now earmarked or allocated 681 billion euros in energy crisis spending, while Britain allocated 103 billion euros and Norway 8.1 billon euros since September 2021," reports Reuters. "Germany topped the spending chart, allocating nearly 270 billion euros - a sum that eclipsed all other countries. Britain, Italy and France were the next highest, although each spent less than 150 billion euros. Most EU states spent a fraction of that."

The think tank Bruegel, which crunched the spending numbers in a recent report, has called for more targeted spending to tackle the energy crisis. Bruegel suggests changing the current focus from non-targeted measures like VAT cuts on petrol or retail power price caps to income-support policies targeted towards the lowest income groups and strategic sectors of the economy.

European expenditures to weather the energy crisis now match what they spent surviving Covid. Two back to back crises that inspired hefty state spending will impact the Continent for years to come. The update comes as the EU debates proposals to loosen state aid rules for green technology projects.

And they said nuclear was too expensive...

Like what you're reading? Click the button below to get Grid Brief right in your inbox!

Conversation Starters

1. Indiana lawmakers are working with Rolls Royce on advanced nuclear. "British engine maker Rolls Royce is working to develop a nuclear reactor that’s larger than what Indiana state law allows. Lawmakers are working to change the law to accommodate the company — even though it could be a decade before the reactor is ready for launch," reports WFYI Indianapolis. "Last year, Indiana passed a law instructing a state utility commission to lay the groundwork and offer incentives for small modular nuclear reactors or SMRs. The new bill,SB 176, would up the megawatt capacity limit from 350 megawatts to what Rolls Royce’s is expected to be — 470 megawatts."

2. Several European countries have come out in opposition of a proposed energy market overhaul. "Denmark, Germany, the Netherlands, Estonia, Finland, Luxembourg and Latvia have warned Brussels not to rush into major changes to the European Union's electricity market in response to the energy crisis, calling instead for limited tweaks to the system," reports Reuters. "The European Commission is drafting a revamp of EU electricity market rules, with the aim of better cushioning consumer bills from fossil fuel price spikes and avoiding a repeat of the surge in electricity spices triggered last year by cuts to Russian gas supply."

3. Japanese industry is gearing up to help the government reach its nuclear goals. "Mitsubishi Heavy Industries has decided to increase the number of new graduates and mid-career recruits in the nuclear power sector to a maximum of about 130 people for the next two years, about 40% more than this year," reports NHK. "The number of employees in the company's nuclear power department has decreased by 1,000 to 4,000, including affiliated companies, compared to before the accident at TEPCO's Fukushima Daiichi Nuclear Power Station." [translated with Google Translate]

Nuclear Barbarians: There's Climate Science and Then There's "Climate Science" ft. Roger Pielke, Jr.

Climate scientist and author Roger Pielke Jr. joined me to talk about origins of 1.5c, climate modeling, the dangers of expertise, and more!

Crom's Blessing