Electricity in America // Germany Sees Power Prices 2x+ //

Electricity in America

America's manufacturing sector is getting hammered with high energy prices.

"On June 22, 600 workers at the second-largest aluminum mill in America, accounting for 20% of US supply, learned they were losing their jobs because the plant can’t afford an electricity tab that’s tripled in a matter of months," reports Bloomberg. "Century Aluminum Co. says it’ll idle the Hawesville, Kentucky, mill for as long as a year, taking out the biggest of its three US sites."

At least two steel mills have halted operations for the same reason. "In May, a group of factories across the US Midwest warned federal energy regulators that some were on the verge of closing for the summer or longer because of what they described as 'unjust and unreasonable' electricity costs," Bloomberg reports. "They asked to be wholly absolved of some power fees—a request that, if granted, would be unprecedented."

American manufacturers are staring down the barrel of record-setting energy costs. Most are dependent on both gas and electricity--both of which have been climbing. If this forces more manufacturers to suspend operations it could wound the industrial rebirth America has begun to experience as corporations have looked to reduce their dependence on China.

Bloomberg points out that manufacturing isn't the economic bellwether it once was, but it's still more than one-tenth of GDP.

The upshot is that what's been bad for manufacturing has been good for utilities. "US power plants are poised to reap their best summertime profits in nearly two decades thanks to soaring electricity prices that are outpacing the high costs of natural gas and coal," reports Bloomberg.

In some ways, it's heartening to see coal make so much money in PJM, as the graph below shows. Coal was recently priced out of PJM's capacity market, so maybe a windfall will keep those reliable thermal generators around a while longer.

But the major downside is that high electricity costs will hit households and businesses hard. And fuel prices look to remain high as America bails out Europe with LNG.

“I don’t think most of America understands how bad this problem with natural gas is,” Gary Cunningham, director of market research at risk management firm Tradition Energy, told Bloomberg, “They are about to see.”

Four ominous words: More Will Be Revealed.

Germany Sees Power Prices 2x+

In Germany, power prices more than doubled as wind lulled and Nordstream 1 halted flows for repairs.

The Energiewende's assault on everyday people and industry in Germany continues unabated.

"There was some relief on Monday though as European gas slumped as much as 12% after Canada said it would return a stranded turbine for the Nord Stream pipeline, easing tensions between the west and Moscow," reports Bloomberg. (See the coverage below for more on that development.)

Things might get even tougher for Germany as a heat wave threatens to hit the country at the end of the week.

Canada Waves Russian Sanctions to Help Germany

Canada will allow the export of necessary equipment to the Nordstream 1 pipeline, which connects Germany and Russia. Ottawa made the decision to exempt their own sanctions against Russia because it worries Berlin will be forced to ration energy without Russian gas.

Canada's natural resources minister, Jonathan Wilkinson, said, “Absent a necessary supply of natural gas, the German economy will suffer very significant hardship and Germans themselves will be at risk of being unable to heat their homes as winter approaches."

"Canada had blocked the delivery of a gas turbine used in the pipeline, which was being repaired by German manufacturer Siemens Energy at its plant in Montreal, because of its sanctions on the Russian energy sector," reports the Financial Times. "Moscow blamed this delay for its decision last month to cut the flow of gas through the pipeline by 60 percent, sending gas prices soaring."

But Siemens will need another waiver from the EU's sanctions in order to transport the turbine to Russia. Siemens said, “The political export decision is a necessary and important first step for the delivery of the turbine. Currently, our experts are working intensively on all further formal approvals and logistics; among other things, this involves legally required export and import control procedures. Our goal is to transport the turbine to its place of operation as quickly as possible.”

The German government welcomed Canada's aid. But the fact remains Russia still controls the taps. Even if the turbine helps with Nordstream 1's scheduled repairs this month, Germany is not in the driver's seat.

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Conversation Starters

• Spain is asking firms to lower their Russian LNG imports. "Imports of LNG from Russia represented nearly 12 percent of Spain’s gas imports in May, compared to a 6.6 percent share of Russian LNG in May 2021."

• Russia's energy exports are skyrocketing--along with its surplus which just hit a $70.1 billion record.

• Texas came close--again--to black outs. Wind performed at less than 3% of its capacity. Check out this thread from Isaac Orr over at Center of the America Experiment on this:

Crom's Blessing