The perfect storm is on the lips of every trader all around the globe. In Europe the energy markets are in a perfect tornado and once in a while it’s the stock markets, bonds or whatever.
But as I see it at the moment, the energy markets might even be in a perfect tornado in Europe. Especially on the electricity grids. I have had no clearcut answers from TSO’s what will happen in a shortage sitiation – and have thus not been answered where the interconnectors are in the priority. They state that in effect we shall see “brown outs” where a company can get cut off the grid for 2 hours – but is that before or after electricity on the interconnectors have been filled?
Oil to electricity
The importance of answers to this question is enormous as we face a battle on capacity in the coming months. And what we need the least is a quarrel between countries that for so long have been good old neighbours with a well-functioning electricity market.
The transition towards a greener future is dependent on the collaboration, but the interconnectors have simply gone ahead of the reality of where the “environmently friendlier” production capacity is at. Wind and sun cannot bear the full of nuclear and coal-plants just yet.
The sad results are that it can be necessary to fire up even darker production than needed – latest the oil-plant in Karlshamn were on the grid due to lack of production capacity.
See the article from DN.se here.
Smarter consumption is needed in a perfect tornado
So we are all working for a greener future as there are no PlanetB – but we simply have gone ahead of ourself. Denmark, Norway and the Nordics in general have a very high percentage share of “green power” – but the interconnectors have been overdimensioned for long due to TSO’s calling them “security meassures” to secure capacity.
The thruth is that only the lobby of producers are happy at the moment. And who knows if they can keep it that way if inflation keeps this pace. Because then their pile of cash will also deminish very fast.
On a positive note – if we have not all learned to consume more wisely on the electricity grid or for the use of natural gas we most certainly will be preassured to do so this winter. And even though a local energy company as an example are in the news with big half year results – the fact is those results come from the pockets of companies not able to book a firm price through their own energy company since February. And if that very same energi firm has a portfolio containing wind-power-producers. Well – I think it got smelly in the bakery? But I do not believe it is me, who has to leave the bakery.
Coal plants in Denmark might be needed
I was interview for Finans.dk where I commented on three coal plants on DK2 which are to close late Q1 2023. But in the current light of the circumstances this should really be considered postponed. We simply need the productioncapacity and the risk is black outs.
Another note here (which can be viewed without payment).
See also this post in Danish here.
Put some speed on the green transition
In Denmark we need more speed on the projects currently sitting at authorities waiting to approve them. Maybe because they are affraid to approve them – but as our country already have all the eggs in the basket with the whole of Europe as the interconnectors are there – and Viking Link starting next year – we simply need more production capacity rather now than tomorrow.
And is the choise between keeping coal plants running or putting up nuclear, wind, solar or other less polluting capacity, I know what I would choose. There are actually also energy companies in Denmark working on working together with the consumers on this matter. Adding opportunities of Power Purchase Agreements (PPA). Those are most often 10-year contracts though and I have seen many which are not actually PPA’s but some hybrid to put the most of the benefit in the pockets of the energy company.
We need to work together to fix the Planet. There are no PlanetB and the time for greed has run out long ago.