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- The EU vs. The Ruble // Drought Chokes the American West // Post-Quake Japan Flickers in the Night
The EU vs. The Ruble // Drought Chokes the American West // Post-Quake Japan Flickers in the Night
Happy Friday. Here's what we're looking at today.
The EU vs. The Ruble
Earlier this week, German Chancellor Olaf Scholz dug his heels in on the embargo question. In response to the call for a ban on Russian energy, Scholz said, "To do that from one day to the next would mean plunging our country and the whole of Europe into a recession. Hundreds of thousands of jobs would be at risk. Entire branches of industry are on the brink.” Germany's main banking lobby suggested that an embargo would rip the EU to pieces.
Meanwhile, Putin's played a shrewd move in response to western sanctions. If "unfriendly countries" want Russia's oil and gas, they have to pay in rubles. In short, if they want their economies to survive, they would have to prop up Russia's foundering currency. This is how Putin means to rescue the ruble from brutalizing sanctions. Reuters reports, "According to Gazprom, 58% of its sales of natural gas to Europe and other countries as of Jan. 27 were settled in euros."
Germany and Poland assert this is a breach of contract that they won't accept. The question is whether they can afford not to accept it.
For her part, European Commission President Ursula von der Leyen said "the move was an attempt to circumvent EU sanctions against Russia. 'We will not allow our sanctions to be circumvented. The time when energy could be used to blackmail us is over." It is, in fact, unclear if that time is over. Russia supplies 40% of Europe's gas.
The White House has responded to questions about whether it will allow gas-hungry allies to buy in rubles in a tight-lipped fashion. They need to consult with allies.
While Russia has yet to find a mechanism for Putin's play, his gesture has added more uncertainty to an already dire energy situation. This is a dangerous game of chicken. Russia and Europe's respective economies are in a staredown while the people of Ukraine hang in the balance. Can Europe, two years after lockdown, handle new and more intense economic disruption? If they can, then Russia sinks further down. If not, then commodities, not clout, have reassumed their kingship. And geopolitical calculus will have to shift.
Drought Chokes the American West
The American West faces a megadrought, which couldn't come at a worse time. Lake Powell, which spans a 186-mile length along the Utah-Colorado border and serves as an anchor for the Colorado River, reported a disturbing metric. Grist reports, "Last week, the lake reached a disturbing new milestone: water levels fell to their lowest threshold ever since the lake was created by the damming of the Colorado in 1963."
Lake Powell also supports the Glen Canyon Dam, which serves 2 million people. If the lake dips below the minimum level, then the dam can't generate electricity. That will force those who rely on it for energy to buy on the spot market, which sports eye-wateringly high prices right now--and there's a good bet that that will continue. The dam is already suffering. Lisa Meiman of the Western Area Power Administration told Grist, “We are already seeing reduced generation from Glen Canyon Dam. [Generation] has been dropping pretty consistently as the lake elevations have declined, so we’re about a third less efficient in terms of power production now than we are at an average elevation.”
Panning to California, which saw its hydro suffer last year during a drought, a rainy December inspired hopes for a lush year of churning dams. Clear skies since have put those dreams to bed.
“That one dry month of January just wiped out whatever head start we had as we head toward the end of winter,” Sean de Guzman of the California Department of Water Resources told a press conference in February. This could mean worse wildfires, lower crop yields--the Golden State gives America much of its produce--and greater intensification of the energy crunch currently hammering the state.
The energy and food crisis can indeed happen here.
Post-Quake Japan Flickers in the Night
Japan experienced a 7.4 magnitude earthquake that knocked out many power generators. Since then, Japan's grid has struggled. Here's a look at Tokyo's situation:
The region nearly experience a full-blown crisis but evaded it through rationing. Like many countries that've faced energy crises, Japan was already vulnerable to an outside contingency to make a bad situation worse. Since Fukushima, Japan has been running on lean energy supplies.
But the energy transition also played a role. In its haste to go green without its nuclear fleet, Japan cut baseload fossil fuel plants out of its energy portfolio without much to back them up. Japan hoped liberalizing its power sector would spur on greater competition and more energy abundance.
Instead, regional utilities got competitive by retiring expensive and inefficient power plants to give customers a better deal. Supply tightened. And the biggest players moved away from building more generation to hawking retail electricity through the spot market or purchase agreements with existing power plants. By the time the quake hit, Bloomberg reports:
"Japan had only 142 gigawatts worth of available power capacity before last week’s earthquake, according to data from its electricity exchange. That is 23% lower than in 2016, a few weeks before the market liberalization. Oil-fired power capacity -- the most expensive of the fossil fuels -- dropped by 73% over the same period.
Meanwhile, Japan introduced a feed-in tariff program in 2012 that boosted installations of solar panels. While wildly successful, it also crowded the nation’s grid with intermittent power output, making it difficult -- and sometimes not very cost-effective -- to replace retiring thermal power plants.
So when last week’s earthquake hit and knocked offline 12 power plants, Japan had little spare capacity to call upon. The sudden cold blast boosted demand but reduced solar output, forcing the nation’s top utility to ask businesses and households to lower consumption."
Japan's latest troubles recall Texas's blackouts during Uri. Wealthy countries seemed to have thrown their faith in liberalized electricity markets and renewable energy schemes only to be rewarded with scarcity, volatility, and hardship. Pain teaches the spoiled and the stubborn alike--harshly. Let's hope we're learning.
Headlines
This new Teamsters union boss could start the biggest strike in decades. (MSN)
Tech billionaires rally around nuclear as energy crisis looms. (TX)
China aims to expand nuclear power program amid threat of global energy crisis following Ukraine invasion. (SCMP)
New York takes first steps in preparing electric grid for more renewables. (SPW)
Texas has enough wind and solar power to replace coal almost entirely. (TH)
Word of the Day
Baseload (n.)
That part of electricity demand which is continuous, and does not vary over a 24-hour period. Approximately equivalent to the minimum daily load.
Crom's Blessing
Ain't nothin' but a peanut. Ronnie Coleman squats 800lbs for a double like it's air.