The Picture of Energy Dependence

Happy Friday. Here's what they're looking at today: Putin invades Ukraine, European natural gas spikes, European renewables stocks surge, Ukrainian nuclear plants are safe, and Texas leaders play hot potato over Uri freeze. 

Headlines

• Putin shatters peace in Europe as Russia storms Ukraine. (FT)

• Stock and energy markets reel after Russian attack on Ukraine. (NYT)

• US companies brace for cyberattacks after Russia threatens critics. (BBG)

• Neon Gas Supply Disruption May Impact Semicon Supply/Demand. (BK)

• EU will unveil a strategy to break free from Russian gas, after decades of dependence. (WP)

Fossil

• European natural gas prices skyrocket 60% as Russia threatens to cut supply. (OP)

• China says no immediate plans to intervene as oil prices soar. (BBG)

• European firms rush to buy Russian gas even after attack. (BBG)

• US refiners buy most Russian Pacific crude in eight months. (BBG)

• Asian buyers fear that sanctions on Russia could complicate oil trade. (OP)

Renewables

• LG electronics shutters Alabama solar facility amid "rising commodity costs." (ZH)

• European renewables stocks surge as Ukraine fuels energy reckoning. (BBG)

• Why aren't wind stocks soaring? (OP)

• Texas emerges as solar's next frontier as power demand booms. (BBG)

• Wind industry warns EU to take urgent action as China rises. (BBG)

Nuclear

• Oklahoma showing interest in nuclear. (ANS)

• Ukrainian nuclear plants are "ready for safe operation" Energoatom chief says. (ANS)

• Chinese nuclear steam project launched. (WNN)

• House of Lords considers UK nuclear financing plan. (WNN)

• Dairyland considers deployment of NuScale SMR. (WNN)

Grid

• Despite years of preparation, Ukraine's electric grid still easy target for Russian hackers. (Politico)

• Three men plead guilty in plot to attack US power grid. (NYT)

• The former head of ERCOT said he was following Gov. Abbott's orders when amassing billions in electricity bills during freeze. (BI)

• New England takes detour on electric grid reform; pushback ensures. (HC)

• FERC doubles down to deny Killingly rehearing. (RTOI)

The Picture of Energy Dependence

The EU relies heavily on Russian gas and now, since Putin has invaded Ukraine, it's looking for exit signs. In 2020, Gazprom, the Russian gas company, supplied a third of all gas consumed in Europe. In 2021, a wind drought sapped wind's effectiveness as demand rebounded post-pandemic right when Europe's gas reserves were low. And since some of the biggest economies in Europe still plan to close coal, and in some cases even nuclear, it's unclear what Europe can really do.

Some argue that massive renewables buildouts will curtail the need for gas. Renewables like wind and solar have the advantage of being fast and easy to build. But they're both intermittent and non-dispatchable. This means they can't show up all the time and can't be made to show up when they're needed--that's the cost of weather dependence. It places enormous limits on what supplemental energy tech like wind and solar can do to displace "power when and where you need it" fossil fuel. 

Others might point to France's nuclear build-out in the seventies. It's the most successful decarbonization effort in human history and it was done primarily for energy sovereignty reasons. France hopes to build more reactors in the years to come. But nuclear takes years to build. Plus, powerful countries in the EU are aligned against it--namely, Germany. 

This puts Europe in a tough spot. There's no such thing as an energy optional economy and winter's not over. European natural gas prices jumped 60%, Germany's March power contracts lept by 40%, and Brent crude futures passed the $100/barrel mark (at time of writing).

While it's true that sanctions will hammer the Russian economy, the West's leverage looks limited. Russia's major commodities--metals, fertilizers, and fossil fuels--were left untouched likely because it would be too painful for Europe and US. Energy is life's main ingredient, so price shocks via sanctions would likely spiral out into other sectors at a time of already high inflation.

But high prices are good for Gazprom and Europe needs what they're selling. Putin already has his foothold. This is what energy dependence looks like. 

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