Electricity

Scottish Windfarm Starts Producing Electricity

The Braes of Doune windfarm, Scotland   © Getty Images

Organisations, especially those that are doing well, can easily get stuck on narrow views of the future and their own role within it. It can be useful and creative in those circumstances to give people the opportunity to think more widely. One method that I have seen used to great effect is to ask people to imagine the world in 10 years’ time and suggest what might have changed, particularly against the expectations of the conventional wisdom. The process can provide a useful counterweight to long-term forecasts, which tend to do no more than roll forward recent history.

In that spirit, and for the holidays, here are a few stories on the energy sector from the FT in 2025. These are not forecasts — just possibilities. Readers would be welcome to suggest additions to the list.

1. In Moscow, ShellGaz — the world’s largest energy company as measured by its listing on the FTNikkei 250 — announces that it is proceeding with Eaststream3, the latest in a series of export projects from eastern Siberia. Eaststream3 will take gas by pipeline to the rapidly growing cities of northern India. ShellGaz was formed in 2017 through the merger of Royal Dutch Shell and Gazprom and represented the first fruit of the reset of European-Russian relations after the agreed federalisation of Ukraine. Read more

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Politicians and policy makers can only focus on one problem at a time. With all attention concentrated on Greece for the past month there is a real danger that an even greater problem is developing, almost unnoticed, in Ukraine. The economy there is in deep trouble. A further collapse, perhaps triggered by a debt default, could lead to an outflow of refugees that would make the problem of migrants crossing the Mediterranean look trivial. Energy is at the heart of the crisis but could just possibly be part of the solution.

The basic story is well known. Since the Maidan demonstrations in November 2013, the Ukrainian economy has shrunk. A 5 per cent fall last year is variously forecast to be followed by a contraction of between 5 and 10 per cent in 2015. Investment has ground to a halt and in the energy sector big potential projects such as the shale gas developments planned by Shell and Chevron have been halted. The fighting in the east has cut off coal supplies to the rest of the country from the 300 mines in the Donbass region. The Russian annexation of Crimea has cut off gas supplies from the developments managed by Chernomorneftegaz in the Black Sea. Ukraine, as a result, has become even more dependent on imports of coal and gas from South Africa, Australia, other parts of Europe and even ironically from Russia. These supplies do not come cheap and in many cases suppliers will only do business if they are paid in advance and in hard currency. Read more

Political Leaders Meet As Greece Crisis Intensifies

Sigmar Gabriel and Angela Merkel  © Getty Images

Last week’s decision on the future of the German energy policy by Sigmar Gabriel — the economics minister and Angela Merkel’s number two and would-be successor — was complicated and multifaceted. The net result, however, is simple. The German coal industry will survive and coal will remain a major, and probably the largest, fuel source for power generation for another decade and perhaps longer. Read more

Power Station For Both Fishing And Solar Energy Built In Jiaxing

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According to the International Energy Agency in their most recent World Outlook the amount of money required to meet energy needs over the next twenty five years is $51tn. That is in real terms measured in 2013 dollars and amounts to approximately 14 times current German gross domestic product.

Energy investment as defined by the IEA includes the exploration, production, distribution, transportation and processing of all forms of energy. It includes new ventures and replacement of the existing capital stock. Some $30tn of the total is expected to be devoted to fossil fuel extraction, transportation and oil refining, while most of the remainder goes to the power sector including $7.4tn to renewables and $1.5tn to nuclear; $8.7tn goes to the development of transmission and distribution systems. This is, of course, an indicative forecast built around the IEA’s assumptions of some progress towards emissions reduction. The detail is less important than the total. Read more

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“I am convinced that the nuclear industry has a future, that it is a strength of our country.” The fact that Manuel Valls, the prime minister, had to make such a statement in the National Assembly in Paris two weeks ago is a dramatic indication of the depths of the problems the nuclear sector in France is facing. Read more

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The conflict at the heart of Germany’s energy policy is finally coming to a head. Can Germany claim to be an environmental leader while continuing to burn more coal than any other developed country apart from the US?

The issue is easier to describe than to resolve. Germany has led the EU in adopting “green” policies, including the promotion and subsidy of renewables. Energy consumers, including industry, have tolerated ever-rising energy costs. Electricity in Germany costs over 90 per cent more than in the US. The country has begun the process of closing its nuclear power stations — the last will be closed in 2022, although a vexed question remains over how the decommissioning will be paid for. Energy policy enjoys support across the political spectrum. The Green party won just 7.3 per cent of the vote in the last federal election but green ideas permeate the thinking of all the other parties. The grand coalition between the Christian Democrats and the Social Democrats is committed to reducing emissions by 40 per cent by 2020, 70 per cent by 2040 and 80 to 95 per cent by 2050. The whole plan is explained in a post by Mat Hope on the CarbonBrief website. The German approach is now being exported to Brussels with a determined effort under the new European Commission to shape an EU energy policy along the same lines. Read more

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Amber Rudd  © Getty Images

Last week’s decision by the UK’s new energy secretary, Amber Rudd, to approve Centrica’s plans for a dramatic increase in gas imports from Gazprom has cast a cloud of uncertainty over Britain’s policy on sanctions against Russia. In recent months the UK, along with the US, has been one of the strongest advocates of tough sanctions. In Europe, opinion has been more equivocal and divided. The German Chancellor, Angela Merkel, called the Russian occupation of Ukraine “a criminal act” when she was in Moscow last weekend. Many in Germany and France, however, see sanctions as pointless. To them, Russia is a neighbour, difficult at times certainly, but a presence to be lived with. Ukraine on this view is of no strategic importance and its multiple problems stem from its own corruption. Now it seems that the UK has switched sides in this debate.

The first thing to be made clear is that Centrica has done nothing wrong. The company’s intention of doing business with Russia was signalled at the AGM three weeks ago when its chairman said that Russia would be a major supplier of gas to Europe for a long time to come. I don’t doubt that Centrica has got a very good deal. Having won approval so easily I wouldn’t be surprised if they do more business with Gazprom. Read more

British Government Signs A Deal For New Nuclear Power Plant

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The election is over and against all expectations we have a clear result. When it comes to energy policy, however, the agenda will be set not by what the Conservative party has promised in its manifesto but by external events. A number of looming issues are already obvious and the government will have no control over most of them.

The first is the further postponement of the plans for nuclear development starting at Hinkley Point in Somerset. Two new reactors capable of supplying some 7 per cent of total UK electricity demand are planned. The first was originally supposed to be on stream in time to cook Christmas dinner in 2017. But despite the prospect of a lavish price — index linked for 35 years regardless of what happens to global energy prices – and £10bn of even more generous financial guarantees, funding for the investment required is not in place. The reluctance of investors to commit will not be helped by the technical problems in the reactor vessels, which are now under investigation by the French nuclear regulator. This problem has widespread implications for the companies involved (Areva and EDF) and for nuclear development in many countries across the world, starting with France itself. Read more

View of the Grangemouth oil refinery nea

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Keeping the lights on is one of the core responsibilities of any government. If the lights go out, the government soon follows. Concern about energy security has grown in the UK over recent years with repeated suggestions that demand is pushing dangerously close to the capacity of the power grid. That is why the commitment from Ed Balls, shadow chancellor, to create an Energy Security Board is more interesting than most of the announcements made during the election campaign.

Energy policy has been largely absent from the election debate, which is probably a relief to the industry. The issues at stake are too complicated and detailed to lend themselves to sound bites and instant solutions. The complexity of the challenge is why a security board is potentially a good idea as part of a much needed renewal of energy policy. Read more

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I have never given much credence to the idea that an international agreement on climate change capable of establishing a global carbon price was likely to be reached – either in Paris this December or anywhere else – anytime soon.

If Europe, which is way ahead of the rest of the world when it comes to climate policy, can’t set its own carbon price, what hope is there that the US, India and all the others will?

As a result I’ve never taken seriously the view that a vast amount of energy investment by the oil and gas companies will be left stranded as carbon-generating fuels are priced out of the market. The argument has always felt like wishful thinking. If everyone obeyed the Ten Commandments there would be no prisons and the police forces of the world would be redundant.

But, and it is a very important qualification, change doesn’t come just through legislation and international treaties. Technology is arguably much more important and there is growing evidence that some fundamental changes are coming that will over time put a question mark over investments in the old energy systems. Read more

Meet EVA — the latest racing car. EVA has an elegant shape, with aerodynamics worthy of any of the cars which race in Formula One. The difference is that EVA is solar powered. Read more

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One of the many lessons to be learnt from the dramatic developments in the world energy market over the past six months is that outcomes are driven primarily by economics – often at the micro level. Another is the extent to which the market, in its rough and ready way, is linked globally and across the range of fuels. In the oil market, for example, a mild downturn in China upset expectations and started to pull down oil prices across the world because China has been the main engine of demand growth. Once the fall began, it turned out that no one had the power to call a halt. The result has been a fall beyond all expectations, with consequences across the world – from Libya to Angola, from Russia to Mexico and Venezuela. In the coal market, prices fell globally because shale gas was pushing coal out of the US power sector and because of Chinese import tariffs. Politicians in one country or another can try to cut themselves off from the underlying economics, but they rarely succeed for long. The economic impacts are not limited to the oil and coal markets. A set of changes beginning in the US is set to transform the global petrochemical business. A surplus of ethane, driven by shale gas development, is undermining the status quo. Read more

The sun sets behind Hinkley Point B, and (R) Hinkley Point A nuclear power stations besides the Bristol Channel near Bridgwater on November 12, 2013 in Somerset, England (Photo by Matt Cardy/Getty Images)

  © Matt Cardy/Getty Images

The EU approval of the nuclear development at Hinkley Point marks an important, if not decisive, chapter in the story of new nuclear in the UK. There are still legal challenges to be overcome and a financing package to be finalised within the constraints set by the EU ruling but this is a good moment to identify winners and losers.

The obvious losers are the UK’s consumers who are trapped into paying a price for electricity that is double the current wholesale price for 35 years after the plant starts up. The deal will go down in history, alongside the privatisation of the Royal Mail, as an example of the inability of the British government – ministers and civil servants alike – to negotiate complex commercial deals. The phrase “rolled over” will enter the French language and be accompanied always with a Gallic smile. Still, one should recognise talent and so chapeau to the French negotiators. Read more

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Why are renewables moving so slowly? Of course the output of renewable energy is growing in absolute terms and in terms of market share in most countries in the world. But the growth starts from a very low base. On the International Energy Agency’s latest numbers, renewables provide just 13 per cent of total global energy needs at the moment, and will provide only 18 per cent by 2035. If traditional biomass is excluded the figures are 7 per cent and 14 per cent.

The problem is cost. Electricity produced from offshore wind and solar costs somewhere between 50 and 100 per cent more per MW/hr than power from natural gas and, with some variations, will continue to do so for the next decade unless one makes the assumption that gas prices are going to increase. Onshore wind is cheaper and in the US in particular is the closest of all the renewables to being competitive without subsidies. Read more

A 220-page document entitled “Commission Staff Working Document: In-depth study of European Energy Security” is hardly designed to be a best-seller. Few outside Brussels will read the European Commission paper in full, which is a pity because it is an excellent piece of work. It also provides the basis for a series of proposals contained in an accompanying document, which if accepted and carried through could create a common energy policy for the EU comparable in scale, scope and cost to the Common Agricultural PolicyRead more

Photo by Sanjay Kanojia/AFP/Getty Images

Imagine being elected prime minister of a country with one and a quarter billion people, about 300m of whom live in absolute poverty. That is the challenge facing Narendra Modi in India. The hardest question must be to know where to start.

When it comes to energy Mr Modi’s first acts have been encouraging. He has set a high but achievable target for the installation of solar, on and off the grid, building on his experience in the state of Gujarat. He has also forced together three key ministries – covering power, coal and renewables – under a new minister, Piyush Goyal. He should probably have gone further and added petroleum and natural gas as well. Structural change in the complex bureaucracy of the Indian government matters a lot. Read more

For a long time it has looked as if the large-scale gas finds in the eastern Mediterranean would be stranded. The Leviathan field, located 80 miles off Haifa in Israel, which holds some 16tn cubic feet of gas was discovered five years ago but remains undeveloped and is not even completely defined. Israel has enough gas for its own needs from the smaller Tamar field, and politics and economics have combined to deter any of the wider development options. Now though a new option is emerging which makes development much more likely. The gas can be sent to Egypt. The move is rich in irony but it makes commercial and political sense. It could also mark an important moment of change in relationships across the region. Read more

Energy storage has long been regarded as something close to a holy grail. Of course, there are ways of storing some forms of energy – using pumped water or compressed air for instance. There are conventional batteries – and there have been advances in their capacity over the last few years. But the search for storage systems which are simultaneously economic and practical for use at scale in the modern energy market has long been a source of frustration.

Recent advances made by scientists in the US suggest, however, that real progress is now being made and that major breakthroughs are close. The whole of the energy sector should be watching because any such breakthrough could transform the economics of the whole industry. Read more

The subtle redesign of Germany energy policy agreed by the government in Berlin last week sends some important signals not for the German market but for the rest of Europe. Far from damaging the renewables business the move could be the salvation of the sector. Other countries, the UK included would do well to adopt similar measures. This would be the most effective way of responding to the urgency expressed in the latest IPCC report. Read more

The full-scale competition review of the UK’s energy market which will be announced later this week is a challenge the industry should welcome. The inquiry will absorb a huge amount of time and effort over the next year but it offers the chance both for the industry to clear its name by removing the cloud of public suspicion over pricing policies and simultaneously for individual companies to examine their own strategic positioning in a market which is changing rapidly.

Of course, the competition review will add to uncertainty and will reinforce the reluctance to invest in new generating capacity, which is already evident, but the sense of doubt will exist in any case, and the review may help to produce some longer-term clarity. In the short term the government will have to find a new mechanism to ensure that supply is adequate to meet demand – and doing so with an expensive plan for emergency electricity supplies. But that is a separate issue from this fundamental analysis Read more