Alexander Stahel, CIO Of Switzerland-based Burggraben Holding AG
Bryce Power Hungry Podcast
I came across Alexander Stahel, a Zug, Switzerland-based commodities investor, on Twitter. On September 8, he posted a long thread on Twitter about Europe’s electric sector. It was excellent: comprehensive, had good graphics, and reflected a deep understanding of the crisis that has engulfed Europe. Much of that thread was used in a report that Stahel did in a report for the Global Warming Policy Foundation called “The Crisis of The European Energy System.” In this episode, Alex explained why Europe is facing years of electricity shortages, France’s mismanagement of its nuclear fleet, why Italy is in particularly bad shape, and the long history of anti-nuclear sentiment on the continent.
We also discussed oil production decline rates, Holland’s foolish decision to stop producing gas from the Groningen field, and why as he put it, for modern societies, “electricity is like air.” We recorded the episode on September 27, 2022. Here's a link to the audio and the transcript. As always, the episode is on YouTube.
Energy problems in Europe - Let’s talk
I will explain why, back it with data & kindly ask YOU to share it as the fix lies in voting for balanced policies. We must adapt, urgently!
For those of you short of time, attached a brief summary of the issue at hand.
I was asked to compare the 1970ies energy crisis with today's for a Turkish newspaper. My answer below.
For those of you with time, please read on.
The European electricity grid is a modern miracle. It is the largest synchronous electrical grid (by connected power) in the world. It interconnects 520 million end-customers in 32 countries, including non-European Union members such as Morocco or Turkey.
In 2019, the total net electricity consumption (known as load) on the Continent was 2,635 terawatt-hours (TWh). Including all European countries - Great Britain, Ireland, the Nordics/Baltics, which are not synchronous but connected, it gets >3,300TWh. Big!
Here is the thing. The grid builds on physics, not ideology. One such law says that the alternating current that flows through the grid needs to match generation with consumption – that is 525,960 minutes per year - because electricity cannot be stored in the grid.
If you skipped the above, go back to it now please.
It was the most important tweet of the thread. It is all that matters. All the rest (you will soon understand) is NOISE, often most dangerous NOISE.
Thank you for your trust. Now, please read on.
The grid's health condition, measured locally but of supra-regional significance, is the network FREQUENCY.
It reflects the indispensable balance bw generation and consumption. It MUST be kept in a VERY tight corridor to avoid infrastructure damage or a shut-down.
In order to keep the frequency STABLE, at any given moment across Europe load & generation are forecast, by the quarter-hour, hour, day, etc) & auctioned off among thousand of participants. All of this is, may I say, is high tech (unlike e-retailing) - major league tech.
Frequency deviations – incidents - happen for various reasons, require INSTANT addressing & increased with the share of wind & solar.
Embrace renewables but know that they are NOT dispatchable (reliable) sources of energy from a grid perspective (think minute by minute).
In fact, frequency incidents measured in time have increased to over 52 hours in 2021 versus 33 hours in 2020. That is an increase of more than 50% in just one year.
You see, by now nothing is "casual" anymore at grid level and I will explain why below.
So what?
Well, in 2021 alone the European Grid had two major incidents, classified as “Scale 2” incidents, for which final reports had to be prepared by an expert panel at Entso-e.
That is a bit like @potus calling the Fed due to 9.1% CPI print. So what is going on?
The problem is that the Continental grid is increasingly incapable to match load with generation.
The table below is the easiest way to illustrate it. It shows net exports & imports by countries over time (save the table; not easy to get the numbers).
Red numbers: bad.!
So where did Europe get the remaining electricity it did not have this year to cover its load?
Answer: from Norway, Sweden and the United Kingdom.
So what's the problem?
Basically, there are 4 major short-term "issues" & one gigantic structural long-term "problem".
Short-term:
a) Germany's shut-in of 35TWh pa nuclear output; b) France & the UK's reactor outputs; c) Norway's water reservoir levels; d) Ukraine's grid integration.
Now, before we go to each short-term issue, let us be very clear: none of the four would be issues if it wasn't for the failures of all net importers to get their own house in order.
Please go back to tweet 12: Italy is the worst with Austria & Hungary as close 2nd.
#Italy closed its nukes in the 1990s; never replaced lost capacities; Grid...
(a) does not have enough gen capacities for annual loads; (b) relies on natgas without secured access the needed molecules; (c) does not have 1 MW offshore wind;
So where did Europe get the remaining electricity it did not have this year to cover its load? Answer: from Norway, Sweden and the United Kingdom. So what's the problem? 13/n @alexstubb
Basically, there are 4 major short-term "issues" & one gigantic structural long-term "problem". Short-term: a) Germany's shut-in of 35TWh pa nuclear output; b) France & the UK's reactor outputs; c) Norway's water reservoir levels; d) Ukraine's grid integration.
Now, before we go to each short-term issue, let us be very clear: none of the four would be issues if it wasn't for the failures of all net importers to get their own house in order. Please go back to tweet 12: Italy is the worst with Austria & Hungary as close 2nd. 15/n
#Italy closed its nukes in the 1990s; never replaced lost capacities; Grid... (a) does not have enough gen capacities for annual loads; (b) relies on natgas without secured access the needed molecules; (c) does not have 1 MW offshore wind; Mama Mia 16/n @AlessioUrban
#Austria has hydro but hydro does not like heat (as we just had) while its generation never matched loads - after all the Germans had it, right? Issue is, the Energiewende is in year 20 & Merkel abandoned nukes in 2010. The Austrian government was asleep at the wheel.
Like #Austria, #Hungary built its grid on natgas, except that they do not have much themselves.
So you buy it from Russia, right? Well, you know the rest.
Hungary never seemed to have managed much at grid level. It needs much fixing.
Aren't we the champions of logistics & l-term planning? My a**.
Guilty as charged: We didn't replace 2 aging reactors at Beznau which will cost us 6TWh (10%) of generation in next 5y.
I will address it with my local MP - basta!
#Slovakia: it completed 2 new reactors after significant resistence from anti-nuclear lobbies (Enel lost bank financings).
The 17 year saga completed reactor 3 (reactor 4: 95%). Yet, Mochovce 3 is still not connected to the grid.
Message: Slovakia needs them now!
Similar story in Finland, for different reasons.
Poor project management out of the gate was predicted by a WNISR report back in 2006: "the project will lead to financial disaster."
Olkiluoto 3 is finally completed, at the grid and tested. Let's go #Finland.
O3 can reduce the Finish deficit by half according to our calculation.
With reservoir water levels rather lowish in Norway & the Sweds having their own little policy issues, I would love to see Finland narrowing the gap & for @MarinSanna to go celebrating it hard. My view
Belgium expanded its renewable fleet nicely, esp offshore wind (which usually is 50% more productive than onshore) & solar.
But like CH #Belgium has what we call an "age bomb" problem of its nuclear fleet that needs addressing (50% of generation). Now let us briefly touch the Dutch.
They rely heavily on natgas to keep the lights on. Nothing wrong with that as the #Netherlands has access to LNG regas & offshore production.
In fact, Groningen is a bit of a Ghawar for Europe. But you know the rest, do you?
We now look at the 4 short term issues & at the long term structural problem.
This is getting long. But I feel it is important to shed some light at this blackbox.
I will continue this thread but have to send out the first 25 tweets herewith to keep adding.
Short-term issue 1: Germany turns off 4 GW of nuclear power.
What does that mean?
That effectively means it turns off 32 Terawatt-hours (TWh) of electricity production (4 GW x 24 x 365 days x 92% capacity factor = 32,237 GWh or 32TWh.
This move will most likely turn Germany into a net importer of electricity come 2023.
By extension, it has to become a massive issue for the rest of Europe but certainly for Italy, Austria and Luxembourg.
Please study the below table again…
Now, doesn't Germany activate its so called "grid reserves", those mainly being coal-fired power plants.
Well, it does. But if you study my earlier thread on the European electricity crisis carefully, you will learn that this is not a god-given.
Because switching from gas to coal on an industrial scale cannot be easy. Some voices goes as far and say “only one of Germany’s 16 coal fired power plants will restart operations, and only this autumn.” I'm less sure but here are some of the challenges…
We took a closer look. First, most of German hard coal production (again, lignite is not imported), power or industrial use, has direct or indirect access to Germany's inland river system which transports most of its annual thermal coal imports of some 44 million tonnes.
The Rhine river alone transports some 75% of Germany’s hard coal imports due to its significant transportation cost advantages.
A modern Rhine coal barge carries 7kt of coal. At that load, it has a draught of >3 meters. We assume an avg power plant (100 – 1100 MW) requires 400 tonnes of feedstock per MWh of production. This would imply, say, EnBW requires 1-4 barges (class VIb) each day. Can it?
Well, that comes down to weather. The ongoing heat wave has impacted Rhine water levels. Within 6 weeks, large parts of the Rhine river are well below the required 1.5 meter gauge level for a barge to transport at full capacity.
According to our calculations, as at 3/8/22, large parts of the middle & upper Rhine river only allow for limited coal loadings (1/3 or less beyond Kaub). Such conditions, while not infrequent, will draw emergency stocks at coal plants.
Kaub is the “bottleneck” gauge station of the Rhine river in Germany. It reached a new seasonal all time low (another one!) and is now well below the required 1.5 meters (150cm) for full loadings.
Kaub's 14-day forecast is for water levels to approach unsafe levels for transportation. Yes, we like to go the extra mile for you :-)...
Lower loadings mean higher rates for merchants to break even. At some point, such rates may make purchasing coal uneconomic or simply restrict power production as the required daily feedstock supplies cannot be delivered. Barging may also be stopped due to safety concerns.
In short, barging a tonne of coal to a power plant in GER reached €600. Meanwhile, Coal Importers forecast 30mt for 2022 & then some for 2023 while the brokers promise to transport "to the point of nautical-technical impossibility." I believe them.
But can they? Our assessment for theoretical annual coal shipping capacities is based on many assumptions but suggests 75 days of low water may reduce shipping capacities to 24 million tonnes pa in 2022. Rail will have to do the rest. Can it? We will see.
Meanwhile, other waterways have low water issues too.
Maybe the weather gods want to give green party members one more time to reflect why they want to replace the best nukes in Europe with coal, given EU commitments to reduce CO2 emissions to 0 by 2050?