Conserving: The Power of Markets, Cooperation, and Community

September 7, 2022

California survived without widespread blackouts yesterday, in a record September heat wave that continues.
No guarantees, but the response to a statewide call for citizens to conserve showed the continuing positive power of communities mobilized by effective leadership, and suggests what humanity might be able to accomplish, working together.

Bloomberg:

A timely mobile alert may have prevented hundreds of thousands of Californians from being plunged into darkness in the middle of a heat wave Tuesday night.

Just before 5:30 p.m. local time, California’s grid operator ordered its highest level of emergency, warning that blackouts were imminent. Then, at 5:48 p.m., the state’s Office of Emergency Services sent out a text alert to people in targeted counties, asking them to conserve power if they could.

Within five minutes the grid emergency was all but over.

Power demand plunged by 1.2 gigawatts between 5:50 and 5:55 p.m., and would continue to drop in the hours after that, according to data from the California Independent System Operator. A gigawatt is enough to power about 750,000 Californian homes.

By 8 p.m., the grid operator canceled the highest level of emergency without calling for power cuts. More than 500,000 homes and businesses had been warned earlier in the day that they might lose service.

Now, what happens if you apply that to a continent – one that’s under attack with energy as the weapon?

In the 70s, OPEC raised the price of oil overnight by more than 300 percent, first reactions were that this meant the end of civilization. Very Serious People who had studied, and made, energy policy for decades were convinced, for example, that electricity production had to increase at 7 percent annually, or we would revert to the dark ages.
That didn’t happen of course – what did happen is that energy demand turned out to be extremely elastic and price sensitive. In very short order, energy consumers, especially big businesses, learned to operate with a lot less energy, and efficiency became a buzzword and an engineering specialty.
Is it time we learned that lesson again?

New York Times:

Not long after Russian forces invaded Ukraine, another mobilization began. European energy ministers and diplomats started jetting across the world and inking energy deals — racing to prepare for a rough winter should Russia choose to cut off its cheap gas in retaliation for Western sanctions.

Since then, President Vladimir V. Putin of Russia has fiddled with the gas tap to Europe repeatedly. Through Gazprom, the Kremlin-controlled gas monopoly, Russia has vastly reduced supplies or suspended them for days at a time — until last week, when it announced that it would indefinitely halt flows through the Nord Stream 1 pipeline that supplies Germany, and through it, much of Europe.

Yet when the blow finally came, it provoked more ridicule than outrage among European leaders, who say that by now they would expect nothing less from Mr. Putin and that they have accepted that the era of cheap Russian gas is over, unimaginable as that might have seemed just months ago.

In some corners, even as Europe’s leaders scramble to blunt the blow from lower gas supplies and higher prices, there is a growing sense that perhaps Russia’s weaponizing of gas exports is a strategy of diminishing returns — and that Mr. Putin may have overplayed his hand.

“It would have been surprising the other way around,” Robert Habeck, Germany’s economy minister, said this week of Russia’s announcement that Nord Stream 1 would remain shut. “The only thing from Russia that is reliable is the lies.”

Even the markets seemed to take the latest disruption in stride. After rising 5 percent on the heels of Gazprom’s announcement, prices are now lower than they were at the start of last week.

That does not mean that European nations are not feeling the pain, or have skirted the risk that the energy crunch could sow social unrest, fracturing their unity against the Kremlin this winter. But a lot of the damage has already been done, with gas prices several times above anything that would be considered normal and pressure mounting on consumers and businesses.

The question remains, then, of just how successful the hard pivot from Russian energy actually is — whether Europe has lined up enough new sources, whether its stockpiles can get it through the winter, whether conservation efforts can make a difference and whether governments can help shield consumers from rising prices.

Russian officials are watching and waiting for what they believe is the inevitable collapse of European resolve as the economic pain bites.

Russian state news outlets are full of reports of protests in Europe. Italians, Russian state media reported, are being told to boil their pasta for just two minutes before turning off the heat, while Germans are forgoing showers.

The message: Sooner or later, the Europeans’ unity against Russia will crumble under the weight of high gas prices, while Russia’s standing has been elevated.

“We have not lost anything and will not lose anything,” Mr. Putin said on Wednesday.

But increasingly, Europe’s leaders are signaling that, having spent months preparing for this moment, they are ready for the showdown.

“Now our work is paying off!” the European Commission president, Ursula von der Leyen, said on Wednesday in Brussels. “At the beginning of the war, Russia’s pipeline gas was 40 percent of all imported gas. Today it is now down to only 9 percent of our gas imports.”

That is because European leaders — especially those from Italy and Germany, which rely most on Russian energy — have crisscrossed the globe. From Algeria to Qatar, Senegal, Congo and Canada, they have been negotiating deals to replace Russian supplies.

Germany has also leaned heavily on Norway and the Netherlands, which agreed to extend the life of its biggest gas field to combat the energy crisis.

As a result, Germany’s dependency on cheap Russian gas — once more than half its overall gas imports — decreased to less than 10 percent in August.

In Italy, consumption from Moscow has dropped to 23 percent from 40 percent.

Chancellor Olaf Scholz of Germany and other European leaders are defiantly claiming the end of an era.

For decades, dating to the days of the Soviet Union, Moscow had insisted to Germany and others that it was a reliable energy partner, no matter the political context. But now, European leaders say, Mr. Putin has shattered that understanding.

“Something that held true throughout the Cold War no longer applies,” Mr. Scholz said last weekend. “Russia is no longer a reliable energy supplier. That is part of the new reality.”

In vulnerable Germany, gas consumers are finding creative ways to ride out the crisis, along with a firm resolve to never go back to the old, insecure ways.

New York Times:

Germany has filled its gas storage tanks to more than 82 percent capacity, well ahead of schedule to prepare for winter. Analysts said this was possible, even after Russia had cut routine deliveries via Nord Stream 1 to only 20 percent of normal capacity, because companies had found ways to use less natural gas.

“The reduction in industrial gas demand that we have seen is not because of a large output loss or economic downturn in these sectors,” but because of flexibility in production or the ability to find import substitutions, said Clemens Stiewe, an economist at the Hertie School in Berlin, who has studied energy savings in German companies.

Not every manufacturer can operate with less gas. And no one knows how Germany, Europe’s largest economy and the one most reliant on Russian gas, will fare this winter when chilly weather causes gas demand to soar.

But BASF, for one, said it had begun using oil instead of gas to generate power and steam, and reducing production at its European plants that use a lot of gas, especially its facility in Ludwigshafen, described as the world’s largest chemical complex.

Detailing BASF’s efforts in the earnings call, Mr. Brudermüller said the company was scaling back ammonia production, which requires natural gas, and seeking to buy it from outside suppliers. Ammonia plays a key role in the manufacturing of fertilizer, plastics and other products.

Hans Engel, BASF’s chief financial officer, indicated that the company was also relying on an ammonia plant the company runs as a joint venture in Freeport, Texas, where production is cheaper because the price of natural gas in the United States remains a fraction of that in Europe.

The European Union has proposed that its members reduce their overall consumption of natural gas by 15 percent. Germany is going further, targeting 20 percent to prevent having to resort to rationing later in the winter.

Mercedes-Benz recently said it could cut its natural gas use in half by sharing extra gas with other manufacturers in regional energy pools. And at the company’s Sindelfingen assembly plant, where the EQS and S-Class models are built, it said the plant’s paint shop could operate without gas in “emergency mode.”

With winter approaching, traditional gas-hungry industries may be left with no choice but to scale back or halt production entirely. But for those that have already found solutions, analysts said, the changes may prove lasting, regardless of what Russia does.

“The signal that energy security can’t be taken for granted is so clear that companies will continue to think of different scenarios even if there were a fast change, even if Russia were to deliver more gas and prices were to fall again,” said Eric Heymann, an economist with Deutsche Bank Research. “There is no going back to the way everything was before.”

Washington Post:

In the short term, the dash back to dirtier fuels looks like bad news for the climate. Further out, the crisis has made European governments more determined to ditch Russian gas, and fossil fuels in general, and accelerate adoption of cleaner technologies. They’ve stuck with the EU’s flagship climate policy, the Green Deal, which includes a massive package of laws to meet a target of zeroing-out greenhouse gas emissions by mid-century. The 27 countries in the EU got about a fifth of their total energy from renewables in 2020 and had planned to double that share to 40% by 2030. In the wake of the war in Ukraine, the target was raised to 45%. Germany, which relied on Russia for the bulk of its oil, natural gas and coal, brought forward its goal of 100% renewable power by more than a decade to 2035. That’s an ambitious challenge since wind and solar farms take years to plan and build.

One Response to “Conserving: The Power of Markets, Cooperation, and Community”

  1. J4Zonian Says:

    With a declared emergency, solar farms can easily take months, not years, to build. Factories should already be converted to heat pump production from game boys, as in WWII. (Yes, the production of game boys declined to about zero by 1943.) Private and commercial rooftop solar especially–on parking lots, roadways, canals, landfills, land wrecked by fuel extraction, processing, storage… anyplace there’s anything.

    Architect Friedensreich Hundertwasser suggested we should give everything back to nature by covering roads, buildings, etc. with soil & plants. The covering-everything-with-solar-cells variation, especially if combined with rainwater collection & storage & albedo reducing surfaces, allows less land to be taken in the first place, allowing more actual nature to be left alone. And it’s many, many times better than the constantly expanding Mordor of fuel wreckage.


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