Hence, there needs to be a pecking order on what sources of power we shut down. Coal, as you can see here, is still in demand, at least during peak periods. How do we replace this source? Why does the world go so quickly from a glut to dearth on natural gas?
We think cuts in use, storage, better management of demand and smart grid tech will balance out energy supplies going forward, and cut costs, for utilities and consumers, as we don't end up paying high fees during frenzied buying.
- Coal, gas and power supply running short across Europe
- French gas surging to a record as LNG cargoes urgently sought
From the rivers criss-crossing eastern Europe to the Mediterranean ports of Greece and France, everyone is hunting for energy supplies.
Blizzards, gale force winds, arctic temperatures and river ice thicker than a house has left the stewards of the European energy business frenzied. Prices of natural gas, primarily a heating fuel, has soared to the highest in more than two years. Blackouts across Eastern Europe caused electricity rates to spike to record levels.
It’s chaotic, but yet familiar. While energy grid operators, producers and traders prepare for winter’s chill every year, they tend to rely on meteorological forecasts that sometimes turn out to be dead wrong. So when a winter that’s expected to be mild develops into an extended deep freeze, a mad dash to meet demand ensues.
“Those who became sure that such a cold spell was unlikely given the overall trend in global warming are like those who get drowned in a stream that averages three inches deep,” said Zach Allen, president of Pan Eurasian Enterprises, an industry consultant in Rhode Island. “The Black Swan is your constant companion.”
January will be one of Europe’s coldest months of the past five years and the chill will linger for at least another two weeks, according to Giacomo Masato, a meteorologist at energy broker Marex Spectron Group Ltd. in London.
“The more you go inland, the more likely it will be that even maximum temperatures will be around zero,” Masato said. “That’s cold.”
Waste of Time
When Andreas Speer, a commodities analyst at Bayerische Landesbank in Munich, last month looked at the long-range weather forecasts for January, he saw mild weather.
“That’s not what I see when I look out the window,” he said on Friday, referring to winds of 110 kilometers an hour (68 miles per hour) and freezing temperatures. “Models are a waste of time and money beyond three weeks. The cold snap caught people by surprise.”
For Europe’s natural gas traders, this winter was supposed to be boring, with a glut damping any potential for wild price swings. Norway and Russia exported at record levels, while the increasingly global liquefied natural gas trade gave utilities a cushion. By September, prices from gas to power were still near six-year lows.
But gas ended the year with its biggest bull run in a decade as Centrica Plc delayed the return of the U.K.’s biggest gas store by more than two months after the start of the heating season. Long-term reserves in the region’s biggest gas market are now only about half of normal.
Emergency Evacuations
The scramble for supplies intensified by the end of last year as temperatures plunged. In Turkey, the state-owned gas grid operator asked private power plants to reduce gas demand by 90 percent as Istanbul got covered in snow. France issued its strongest warning that the southeast part of the country had an urgent need for extra gas. Bulgaria, Romania and Serbia last week deployed emergency services to evacuate remote villages where people were stranded without electricity or heat.
As the world’s power brokers gather in Davos, Switzerland, this week, they’ll need to wrap up warm as a low pressure system is forecast to send temperatures to below minus 20 Celsius (minus 4 Fahrenheit). The country may get its lowest seasonal average in a decade, with a mean of minus 8 Celsius across the country.
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