The shortage of electricity supply has led to record breaking electricity prices in the UK, and hydropower is the best solution

The energy dilemma is getting worse with the advent of severe cold, global energy supply has sounded the alarm

Recently, natural gas has become the commodity with the largest increase this year. Market data shows that in the past year, the price of LNG in Asia has skyrocketed by nearly 600%; the increase in natural gas in Europe is even more alarming. The price in July increased by more than 1,000% compared to May last year; even the United States, which is rich in natural gas resources, can’t stand it. , The gas price once hit the highest level in the past 10 years.
At the same time, oil soared to its highest point in several years. As of 9:10 on October 8, Beijing time, Brent crude oil futures rose more than 1% to $82.82 per barrel, the highest since October 2018. On the same day, WTI crude oil futures successfully topped US$78/barrel, the first time since November 2014.
Some analysts believe that the energy dilemma may become more serious with the advent of the severe winter, which has sounded the alarm for the global energy crisis.
According to the “Economic Daily” report, the average wholesale electricity price in Spain and Portugal at the beginning of September was about three times the average price six months ago, at 175 euros per MWh; the Dutch TTF wholesale electricity price was 74.15 euros per MWh. 4 times higher than in March; UK electricity prices have hit a record high of 183.84 euros.
The continued soaring of natural gas prices is the “culprit” of the European power crisis. The Chicago Mercantile Exchange Henry Hub natural gas futures and the Dutch Title Transfer Center (TTF) natural gas futures are the world’s two main natural gas pricing benchmarks. At present, the October contract prices of both have reached the highest point of the year. Data shows that natural gas prices in Asia have skyrocketed 6 times in the past year, Europe has risen 10 times in 14 months, and prices in the United States have reached their highest point in 10 years.

The EU ministerial meeting in late September specifically discussed the issue of soaring natural gas and electricity prices. The ministers agreed that the current situation is at a “critical juncture” and blamed the abnormal state of the 280% increase in natural gas prices this year on the low level of natural gas storage and Russian supply. Constraints, low renewable energy production and the commodity cycle under inflation are a series of factors.
Some EU member states are urgently formulating consumer protection measures: Spain subsidizes consumers by reducing electricity tariffs and recovering funds from utility companies; France provides energy subsidies and tax relief for poorer households; Italy and Greece are considering subsidies Or setting price caps and other measures to protect citizens from the impact of rising electricity costs, while also ensuring the normal operation of the public sector.
But the problem is that natural gas is an important part of Europe’s energy structure and is heavily dependent on Russian supplies. This dependence has become a major problem in most countries when prices are high.
The International Energy Agency believes that in a globalized world, energy supply problems may be widespread and long-term, especially in the context of various emergencies that cause damage to the supply chain and the reduction of fossil fuel investment in response to climate change.

At present, European renewable energy cannot fill the gap in energy demand. Data show that as of 2020, European renewable energy sources have generated 38% of the EU’s electricity, surpassing fossil fuels for the first time in history, and have become Europe’s main source of electricity. However, even in the most favorable weather conditions, wind and solar energy cannot generate enough electricity to meet 100% of the annual demand.
According to a study by Bruegel, a major EU think tank, in the short to medium term, EU countries will more or less continue to face energy crises before large-scale batteries for storing renewable energy are developed.

Britain: lack of fuel, lack of drivers!
Soaring natural gas prices have also made it difficult for the UK.
According to reports, the wholesale price of natural gas in the UK has risen by more than 250% during the year, and many suppliers who have not signed long-term wholesale price contracts have suffered huge losses due to the skyrocketing prices.
Since August, more than a dozen natural gas or energy companies in the UK have successively declared bankruptcy or forced to close their business, resulting in more than 1.7 million customers who have lost their suppliers, and the pressure on the energy industry has continued to rise.
The cost of using energy to generate electricity has also increased. As the supply and demand problems have become more prominent, the price of electricity in the UK has increased by more than 7 times compared with last year, directly setting the highest record since 1999. Affected by factors such as rising electricity and food shortages, some supermarkets in the UK were directly looted by the public.
The labor shortage caused by the “Brexit” and the new crown epidemic has exacerbated the tension in the UK’s supply chain.
Half of the gas stations in the UK have no gas to refill. The British government has urgently extended the visas of 5,000 foreign drivers to 2022, and on October 4, local time, it mobilized about 200 military personnel to participate in the operation of transporting fuel. However, experts believe that the problem is difficult to completely resolve in the short term.

Global: In the energy crisis?
It is not only European countries that are suffering from energy problems, some emerging market economies, and even the United States, a major energy exporter, are not immune.
According to Bloomberg News, Brazil’s worst drought in 91 years has led to the collapse of hydroelectric power generation. If electricity imports from Uruguay and Argentina are not increased, it may force the South American country to start restricting electricity supply.
In order to alleviate the collapse of the power grid, Brazil is starting natural gas generators to make up for the losses caused by hydroelectric power generation. This forces the government to compete with other countries in the tight global natural gas market, which may indirectly push up natural gas prices again.

On the other side of the world, India is also worried about electricity.
Nomura Financial Consulting and Securities India economist Aurodeep Nandi said that the Indian power industry is facing a perfect storm: high demand, low domestic supply, and no replenishment of inventory through imports.
At the same time, the price of coal in Indonesia, one of India’s major coal suppliers, rose from US$60 per ton in March to US$200 per ton in September, depressing Indian coal imports. If the supply is not replenished in time, India may have to cut power supply to energy-intensive businesses and residential buildings.
As a major natural gas exporter, the United States is also an important natural gas supplier in Europe. Affected by Hurricane Ida at the end of August, not only the supply of natural gas to Europe has been frustrated, but also the price of residential electricity in the United States has risen again.

The reduction of carbon emissions is deeply rooted and the northern hemisphere has entered a cold winter. While the thermal power generation capacity has been reduced, the demand for electricity has indeed increased, which has further widened the electricity gap. Electricity prices have risen rapidly in many countries around the world. Electricity prices in the UK have even risen 10 times. As an outstanding representative of renewable energy, environmentally friendly and low-carbon hydropower has a greater advantage at this time. In the context of rising prices in the international energy market , Vigorously develop hydropower projects, and use hydropower to fill the market gap left by the reduction in thermal power generation.

Post time: Oct-12-2021

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