Germany’s TenneT Grid Takeover

The German government is in talks to pay over €20 billion ($21 billion) for the local unit of power grid operator TenneT Holding BV. The purchase could begin the consolidation of the country’s grid.

The deal would help Germany clinch affordable power and curb its dependency on Russian gas, as well as hit its 2045 climate goals. In other words, the German government is buying back this Dutch-owned part of its grid in order to press forward with the energy transition. The Dutch government is about to make a killer return, as it purchased TenneT for €1.1 billion ($1.2 billion) in 2010.

“[TenneT] has been burdened by the Netherlands with high debts, as a result of which it is no longer able to make the necessary investments,” reports Investico. “The German state would be willing to pay billions for it to 'accelerate the energy transition.’”

The German government plans to finance the TenneT deal sans extra federal debt by borrowing through the state-run KfW bank.

“Officials are hashing out the structure of a potential deal with Dutch state-controlled TenneT, and negotiations could take several months,” according to unnamed sources in a Bloomberg article. “The deal would come on top of an equity need of about €15 billion to upgrade the net.”

“A great deal is being invested everywhere, but the backbone of this newly emerging economy is, of course, high-performance electricity grids, which must be massively expanded,” German chancellor Olaf Scholz told the press. “That’s umpteen billions, hundreds of billions that have to be invested to ensure our security.”

The Great Base Metal Shortage?

The world may have a large shortage in base metals according to the natural resources investment firm Goehring & Rozecwajg.

Environmental, social, and governance (ESG) pressures have had a significant impact on the global mining industry's capital expenditures, making it increasingly hard to bring greenfield and brownfield mine development projects into production. G&R predict this trend to lead to a significant metal shortage. As evidence, they cite the decline in base metals inventories at three major metal trading exchanges, which are down 90% from their peak in Q1 2013.

“Since peaking at 9 mm tonnes of inventory in Q1 2013, base metals inventories have drawn steadily and are down 90% today. Today, exchange inventories have fallen below 1 mm tonnes and are dangerously low. Adjusted for days of consumption, inventories have never been lower,” the firm reports. “In Q4 2022, exchange metal inventory covered daily consumption by only 2.7 days, surpassing 45% of the lows seen in 2005-2006 of approximately five days and reaching the lows seen 35 years ago back in 1988-1989.”

A recent study by S&P confirms that there is a structural deficit in the copper market, which includes the metal intensity of renewable investments. The inventory of exchange copper adjusted for consumption has reached record low levels, and the gap between copper demand and supply is growing.

G&R expects the copper market to experience severe shortage characteristics, making it the first base metals market to do so. This shortage indicates a broader trend of shortages across multiple commodity markets.

“Base metals markets give investors a great example of what a looming base metals shortage looks like,” G&R observes, adding: “We find it fascinating that investors are paying no attention to base metals inventories that have reached record lows.”

Biden Admin Offers Funding to Palisades

The Biden administration is offering $1.2 billion in aid to maintain and extend the life of distressed nuclear power plants in the US, including Michigan’s Palisades nuclear power plant.

The crucial change comes from a new caveat in the funding qualifications: plants that have stopped operating after Nov. 15, 2021 can now access funds from the Civil Nuclear Credit program. The move could allow the Palisades plant in Michigan to apply, even though it closed in May 2022.

Holtec, the company that acquired Palisades for decommission, has been fighting to keep the plant running. The company had previously filed for funding from the CNC program to no avail—despite gubernatorial support from Gretchen Whitmer—because Palisades did not qualify.

“Last month, Holtec, which has said it will take more than $1 billion to reopen Palisades, applied for a different source of funding, from the DOE's Loan Programs Office, to reopen the plant,” reports Reuters.

The company met the news of Palisades potential salvation with good cheer.

"This is great news for the industry, and our country, to consider nuclear so vital for our energy future that the idea of what we are trying to accomplish with Palisades, returning a shutdown nuclear plant back to operation, is something that should happen," Holtec’s Director of Government Affairs, Patrick O'Brien, told Reuters.

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

Conversation Starters

1. According to the International Energy Agency, energy-related CO2 emissions broke records last year. “Global energy-related CO₂ emissions grew by 0.9% or 321 Mt in 2022, reaching a new high of over 36.8 Gt. Following two years of exceptional oscillations in energy use and emissions, caused in part by the Covid-19 pandemic, last year’s growth was much slower than 2021’s rebound of more than 6%,” the agency reports. “Emissions from energy combustion increased by 423 Mt, while emissions from industrial processes decreased by 102 Mt.”

2. Western power prices climbed as a winter storm escalated thermal power usage. “The Western US was the only region with higher prices in February as wholesale power prices climbed an average of 88% year over year on below-normal temperatures that drove up thermal usage despite elevated natural gas prices,” reports S&P Global. “Population-weighted average temperatures in the California Independent System Operator footprint were 8% lower than a year ago in February, causing a 48% jump in heating degrees days, according to CustomWeather data.”

3. Korea’s nuclear reactor design has been approved by the major European utility regulator. “Korea Hydro & Nuclear Power's (KHNP's) APR1000 reactor design has been formally certified as compliant by the European Utility Requirements (EUR) organisation - a technical advisory group for European utilities on nuclear power plants. The Korean nuclear industry - including KHNP, KEPCO E&C, KEPCO NF, and Doosan Enerbility - officially applied for EUR certification in November 2019. The assessment was launched in February 2021,” reports World Nuclear News. “The process of design assessment for EUR certification requires at least two sponsors from EUR members as one of the prerequisites to a new assessment. For the APR1000 standard design assessment, three sponsors and six supporters - more than half of the total EUR members - participated in the evaluation, KHNP said.”

Crom’s Blessing