European Energy Crisis Kills Industries // Obstacles to the Inflation Reduction Act's Success // California Unveils Proposal to Save Diablo

European Energy Crisis Kills Industries

Norsk Hydro ASA is closing an aluminum smelter in Slovakia due to high energy prices--a disturbing trend that's gaining steam as Europe's energy crisis deepens.

"Aluminum is one of the most energy-intensive metals to produce, and the closure of the Slovalco facility adds to growing signs of stress in Europe’s industrial economy as power prices surge to record highs," reports Bloomberg. "The region had already lost about half of its zinc and aluminum smelting capacity during the past year, mainly as producers dialed back output. Hydro and others are now moving to shut down plants entirely."

Even utilities are taking a brutal beating. Take the German utility giant Uniper. Half of its profits last year came from Russian natural gas. Waning flows from Russia provoked the Germany government to acquire 30% of the firm, which amounted to a $15 billion dollar bailout. Despite the state aid, Uniper has just announced $12.5 billion in losses, which have pushed it to the brink of insolvency.

“Uniper has, for months, been playing a crucial role in stabilizing Germany’s gas supply — at the cost of billions in losses resulting from the sharp drop in gas deliveries from Russia,” chief executive Klaus-Dieter Maubach said. "We at Uniper have de facto become a pawn in this conflict."

To get a clearer few of the crisis, we need only look at the harrowing price spikes in the natural gas market. In the graph above, the white is Henry Hub, the blue is TTF (Dutch), and the purple is Britain. TTF front month futures are up 30x in a matter of two years. The European electricity sector has become more reliant on gas in recent years, in part due to green policies that have onboarded renewables that require at least 1:1 rapid back up.

That's not the last of the bad news. Europe's heat wave and drought are sapping its rivers and draining its hydropower. Plus, it's making it a challenge to move fuel through rivers to get them to power plants. See the SPG visual below for more detail.

Obstacles to the Inflation Reduction Act's Success

While it has received incredible fanfare from climate hawks, there remain durable obstacles to the Inflation Reduction Act.

For solar, a suite of problems remain. "They range from tariffs and import controls that are driving up the cost of solar panels to state land-use laws over which the federal government has no control," reports the Financial Times.

Similar problems confront the wind industry. Barriers to transmission and interconnection continue to dog wind farm projects, reports E&E, though the Department of Energy is looking to ease wind's troubles in that department. Tariffs remain a problem too. "Executives in the US’s nascent offshore wind power sector are anxiously eyeing a separate piece of legislation that would require them to use only American vessels and crews when installing turbines," reports the Financial Times. Such a law would hamstring the industry as America has neither the crews nor the vessels at the moment.

The third challenge is political. Many of the provisions in the IRA don't go into effect until 2024. Policy experts Andrew Perez and Benjamin recently appeared on The Katie Halper Show bearing grim tidings for progressives: Republicans could dismantle significant portions of the act before it even kicks in.

California Unveils Proposal to Save Diablo

Governor Gavin Newsom has proposed a $1.4 billion dollar loan to keep the Diablo Canyon nuclear plant running.

"The loan would cover the fees to relicense the plant’s reactors until 2029 and 2030, with the possibility of extending its lifetime to 2035," reports the American Nuclear Society. "Both reactors are scheduled to shut down when their licenses expire in 2024 and 2025."

Predictably, major environmental groups gnashed their teeth. Environment California, Friends of the Earth, and the Natural Resources Defense Council released a statement saying, “With Governor Newsom and the legislature working to appropriate climate budget funds and advance ambitious climate legislation in the waning days of the legislative session, this proposal is a dangerous and costly distraction.”

The LA Times editorial board published a similarly baffling op-ed. "[W]e need to be sure that postponing the plant’s shutdown does not slow more aggressive climate action," they wrote. In an informative and likely unintentional moment of honesty, they worried that keeping Diablo online would slow the pace of wind and solar construction.

But there were also those who welcomed the news.

“Much of California’s energy future is planned as a result of complex modeling attempting to predict load. But regardless of what these scenarios demonstrate, it’s obvious we need more clean energy, right now,” Heather Hoff, a plant operator at Diablo Canyon and founding member of the advocacy organization Mothers for Nuclear, told ANS. “California’s electricity supply is 50 percent natural gas. And as climate change progresses and we experience more often and severe weather, and as we attempt to electrify transportation and residential sectors, we will need even more clean energy.”

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Conversation Starters

• Oil leases in the Gulf of Mexico are up in the air again. "A U.S. court of appeals has ruled that President Joe Biden’s pause on oil and gas leases on public land can be reinstated, just days after the passage of a landmark Inflation Reduction Act that calls for hastening fossil fuel production on federal lands," reports Oilprice.com.

• The National Academy of Sciences has sanctioned a White House science advisor. "Jane Lubchenco, deputy director at the White House Office of Science and Technology Policy, has been the target of an American Accountability Foundation petition over an article she peer-reviewed prior to joining the Biden administration," reports E&E News.

• Natural gas exports to Mexico have been ramping up at the West Texas Border. "U.S. natural gas pipeline exports from West Texas have grown steadily in recent years, doubling from 0.6 Bcf/d in 2019 to 1.2 Bcf/d in 2021 as more connecting pipelines in Central and Southwest Mexico have been placed in service in the past three years," reports the EIA. The uptick has occurred in part because more of Mexico's electricity supply is coming from natural gas.

Crom's Blessing