Mutually Assured Debilitation // Fights Over Retirements in MISO // The Lobbyists Are Coming, the Lobbyists Are Coming

Mutually Assured Debilitation

After Gazprom announced it was cutting all gas flows to Bulgaria and Poland, gas prices in Europe shot up. The Financial Times reports, "Futures contracts tracking Europe’s wholesale gas price gained about 20%, before paring gains to trade 8% higher at €106 [$112] per megawatt-hour. Prices are more than six times higher than a year ago."

The EU has responded by calling Russia's move "blackmail." Many are looking to see how Germany and Italy, Europe's two largest Russian gas importers, respond. So far, it seems like they are holding the line--neither has agreed to set up a Gazprom bank account so their payments in euros can be converted to rubles.

Yet some major industries will be in big trouble if fuel prices continue to rise, a necessary result of Russia cutting off gas flows. Here are some examples:

• BASF SE - This German chemical titan needs Russian gas to produce vital compounds for Germany's car, pharmaceutical, and agricultural industries.

• YARA International ASA - A Norwegian fertilizer maker, YARA has already cut its production substantially in response to the energy crisis. It's reliant on Russia for the natural gas to make nitrogen.

• Aluminum Dunkerque Industries France - Another industrial giant battered by the energy crisis, ADIF's plans to re-ramp its production have been halted as energy prices have surged again.

• Trimet Aluminium SE - A German steel company, Tritium said before "this week’s surge that manufacturing the metal already wasn’t economical. It cut production by a third last October at three of its five German smelters. Then last month, it halved output at a plant in Essen, again citing cost pressures."

• Acerinox SA - This Spanish steel company has already laid off 1,800 workers and stopped production at several sites.

Though Germany seems to have softened on its resistance to phasing out Russian oil, it remains firm in its warning about swift embargos on Russian gas. Energy dependence on Russia seems to be creating as many tensions as solidarities within the EU. There are already whispers that four buyers made payments through Gazprom bank accounts and ten other companies have set up accounts.

FT's Lex calls this stand-off a threat of "mutually assured debilitation." If Europe doesn't pay up, its core industries will lie in tatters. If Russia cannot sell gas, it will mean disaster for its economy. It should also be noted that while Poland has publicly said it will no longer buy Russian gas, it is doing so via Germany.

Fights Over Retirements in MISO

The Midcontinent Independent System Operator is changing its generator retirement process to make sure there aren't capacity shortfalls. This comes after some truly eye-watering prices in its midwestern zones cleared during its 2022-23 capacity auction.

On April 15, MISO presented the information to stakeholders during its annual Planning Resource Auction presentation. The price jump was alarming. Utility Dive reported that the price leaped "to $236.66/MW-day from $5/MW-day a year ago across the grid operator's central and northern regions" due to an increase in projected electricity use coupled with a drop in power supply.

Retirements fed into the high prices, MISO said. So, in a recent Planning Advisory Committee meeting, it has introduced the idea of providing more transparency on which resources will retire. While there's nothing firm on how they will do that, many seem to believe that some kind of transparency would improve planning ability and thus reliability.

But a familiar fight has sparked over the retirements. On the one hand, as SPG reports, "MISO noted that state decarbonization goals, as well as Environmental Protection Agency rules on coal ash and air emissions, are contributing to the trend toward increased retirements."

On the other hand, there are those who think that inadequate transmission locks new generators out of the market. Environmental regulations and decarbonization goals are not the problem--a lack of transmission is. What could these new generators be? Likely wind and solar.

This argument is between those who believe dispatchable, reliable energy is necessary and those who believe intermittent energy with massive transmission buildout makes dispatchable energy irrelevant.

The Lobbyists Are Coming, The Lobbyists Are Coming

In response to the Biden administration's tariff probe into Asian PV cell imports, the solar industry is flooding Washington with lobbyists.

Here's the rundown:

• California's Auxin Solar petitioned the Biden administration to investigate if imports from Malaysia, Thailand, Vietnam, and Cambodia (where about 80% of US solar imports come from) are circumventing existing duties on Chinese products.

• The investigation was opened on April 1.

• Execs from both utility-scale and residential solar firms claim the investigation has forestalled new projects and inspired order cancellations in response to uncertainty about future product prices if Commerce imposes new duties.

• The investigation has riven the solar industry, as we covered last week.

• Those who believe we need potentially slave-labor-made solar panels in China to hit climate goals are in conflict with those who want an American-made solar industry.

Conversation Starters

• Russian hackers have attacked European renewables installations. Russian cyberattacks have hit three German wind farms in the last two months.

• The Department of Energy has approved more LNG exports to Europe to ease the energy strain over there.

• Governor R Desantis vetoed a bill that would allow utility companies to limit how much solar customers could sell back their excess energy.

Crom's Blessing

Annexe B Control Room at Battersea Power Station in London.