NORTHERN EUROPE is forecast to experience colder-than normal temperatures through the first half of December, which will boost gas and electricity consumption. The European Centre for Medium-Range Weather Forecasting is predicting colder-than-average seasonal temperatures for the weeks from December 5 to 12 (first chart) and December 12 to 19 (second chart):
U.S. MANFACTURERS reported business activity started to decline last month, for the first time since the first wave of the pandemic. The ISM composite index slipped to 49.0 in November (22nd percentile for all months since 1980) from 50.2 in October (31st percentile) and 60.6 a year ago (96th percentile).
Manufacturing growth has decelerated progressively this year and activity now shows the first sign of falling in absolute terms. Firms signalled a further decline in new business last month. The new orders component slipped to just 47.2 in November from 49.2 in October and 61.4 a year ago. It is well-below the threshold dividing expanding activity from a contraction – implying activity is likely to slow further over the next few months:
¹ This article seems to be merging the related but separate concepts of rotating power cuts to cope with possible electricity shortages caused by insufficient gas-fired and renewable generation this winter with restarting the grid after a total failure such as might be caused by an accident or sabotage.
“Yarrow” sounds like a plan for a “black start” of generation, transmission and distribution systems following complete failure. Electricity network managers in the United Kingdom and other countries have planned for a black start for decades. It is one of those remote “high impact low probability” risks commonly used in scenario planning.
The United Kingdom has never had to undertake a nationwide black start though a regional one was necessary in parts of the southeast following damage caused by the Great Storm of October 1987.
Black starts involve a complicated series of steps and would take several days to complete. Designated generating units would have to be started up autonomously, following by limited energisation of the transmission grid, first regionally and then nationally.
Black start sites often have auxiliary diesel-fired generators maintained at a high state of readiness that can restart without external power. The auxiliary generator is then used to start one or more main generators (usually oil, coal or gas-fired) on the same site which are then reconnected to the grid.
Progressively more generators would be started up and synchronised to the network, which would start to provide limited power to the local distribution systems. Protected sites would start to receive power and then more customers as sufficient power becomes available.
The process could take up to 5-7 days in the event of total failure. In the meantime most customers would receive no power or be subject to rotating power cuts to limit demand while generation is restored gradually.
The complexity and time needed for a full black start explains why grid managers attempt to avoid them at all costs. Temporary but controlled load-shedding directed by grid managers is preferable to uncontrolled cascading failure of the power grid leading to collapse and forcing a black start.
Black start should be a very remote risk in a well-run grid. But the sabotage of the Nord Stream pipelines has focused attention on the risks of deliberate attacks on energy infrastructure and will make black start a higher priority for emergency planners.
EUROZONE manufacturers reported an accelerating decline in activity last month as the region’s economy was hit by inflation, soaring energy prices, supply chain problems, Russia’s invasion of Ukraine and the EU sanctions imposed in response. The composite purchasing managers’ index slipped to 46.2 in October (12th percentile for all months since 2006) from 48.4 in September (24th percentile) and 58.3 in October 2021 (92nd percentile). The composite index has been below the 50-point threshold dividing expanding activity from a contraction for four months running, confirming the zone’s economy is entering a recession:
EUROPE’s gas futures prices for November and December have continued to fall as regional storage facilities near maximum capacity. There is enough gas in stock to ensure supplies through the first half of the winter. But the risk to supplies in the second half and during next year’s refill season is keeping prices for 2023 high:
INDIA’s electricity transmission system is in a much healthier condition than this time last year. Power grid frequency has been kept much closer to its target of 50.0 Hertz indicating a much closer and more stable balance between generation and load. Frequency has only fallen below the acceptable threshold of 49.9 Hertz 3.9% of the time in the first ten days of October compared with 14.4% of the time in the same period last year.
Cooler temperatures have helped by reducing air-conditioning and refrigeration demand. Temperatures were -2.5°C below the long-term seasonal average in the first ten days of October compared with +1.0°C above average in the same period last year.
Coal inventories are also more plentiful ensuring generators can remain online. Stocks at power plants are currently 24.7 million tonnes compared with just 7.3 million tonnes at the same point last year:
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EU28 GAS STOCKS were +158 TWh (+19%) higher on October 3 than on the same date in 2021, after one of the largest inventory accumulations on record this summer:
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NORTHWEST EUROPE faces the first test of whether it can lower energy consumption this winter. After warmer than normal temperatures in the first half of September, temperatures were below average in the second half, creating the first significant heating demand earlier than normal:
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REUTERS has appointed Guy Faulconbridge as its new bureau chief for Russia and the CIS. Guy is one of the most talented journalists of my generation and an outstanding choice for the toughest job in journalism at the moment. For the most accurate, insightful and unbiased coverage of Russia, I strongly recommend following him on Twitter @GuyReuters
U.S./China hold round of economic discussions (trans.)
GLOBAL COAL-FIRED power generation rose to a record 10,244 terawatt-hours (TWh) in 2021, passing the previous peak of 10,098 TWh set before the pandemic in 2018. Coal combustion is set to rise further in 2022 as China and India focus on indigenous energy resources to improve their energy security and reduce the cost of imports, and Europe tries to reduce its consumption of Russian gas:
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* The IMF’s usual response to a balance of payments crisis is to recommend a “structural adjustment programme” with higher taxes/charges and lower government spending/subsidies to reduce internal demand and shore up the budget combined with a devaluation of the exchange rate to boost exports and reduce imports. Some external lending can be provided to smooth the adjustment. Because IMF loans are “conditional” they are also designed to encourage the adoption of unpopular policies and perseverance with them.
FREEPORT LNG’s statement on incident at its export terminal and likely resumption of operations – key items:
* incident … resulted in the release of LNG, leading to the formation and ignition of a natural gas vapor cloud, and subsequent fire at the facility
* LNG vapor cloud dispersion and ignition thereof were at all times contained within the fence line of the liquefaction facility, lasting approximately 10 seconds
* fire and associated smoke visible thereafter were from the burning of materials in and around the location where the incident occurred, such as piping insulation and cabling
* incident occurred in pipe racks that support the transfer of LNG from the facility’s LNG storage tank area to the terminal’s dock facilities
* none of the liquefaction trains, LNG storage tanks, dock facilities, or LNG process areas were impacted
* preliminary observations suggest that the incident resulted from the overpressure and rupture of a segment of an LNG transfer line, leading to the rapid flashing of LNG and the release and ignition of the vapor cloud
* completion of all necessary repairs and a return to full plant operations is not expected until late 2022. Given the relatively contained area of the … incident, a resumption of partial operations is targeted to be achieved in approximately 90 days
FREEPORT’s updated timeline for the resumption of exports is more delayed than traders initially anticipated. The premium for gas delivered in Northwest Europe compared with Louisiana’s Henry Hub has widened to €77/MWh up from €50 before the incident, with the adjustment coming via upward pressure on European prices and downward pressure on prices in the United States:
TEXAS temperatures and therefore air-conditioning and refrigeration demand remain much higher than normal. Temperatures have been at or above average on 56 of the 74 days since the start of April. Cumulative cooling demand since the start of the year has been almost 36% higher than the long-term average:
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CATERPILLAR is the world’s largest maker of equipment for the construction and mining sectors, as well as a range of transportation equipment. Caterpillar is a bellwether for heavy industry and its share price is closely correlated with the business cycle. The company’s share price has fallen by almost -15% compared with the same month last year, a decline that suggests a slowdown is already underway:
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EUROPEAN gas oil and Brent twelve-month calendar spreads are both trading in the 99.9th percentile for all trading days since 2000 as traders anticipate possible severe shortages of both crude and products stemming from Russia’s invasion of Ukraine and U.S./EU sanctions imposed in response:
EUROZONE manufacturers reported a less widespread expansion this month as war in Ukraine and inflation pushes the region’s economy towards a cyclical slowdown. Preliminary readings put the purchasing managers’ index at 57.0, down from 58.2 in February, and the lowest since January 2021, when economy was still gripped by pandemic:
GERMANY’s IFO business expectations index fell to 85.1 in March from 98.4 in February, a level only normally seen during a recession, as employers prepare for the impact of the war and sanctions to be felt on the domestic economy:
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