Oglethorpe Power to build biomass generation

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Oglethorpe Power Corporation plans to build as many as three 100 MW biomass electric generating facilities in Georgia.

Designed to use woody biomass the power plants will provide power to OPC's 38 member cooperatives. The plants could cost as much as $500 million each, or $5,000/kW.

The first two biomass power plants are scheduled to be built and placed into operation in 2014 and 2015. A third unit could also be completed and placed into service in 2015.

Each plant will require an annual investment of more than $30 million for fuel stock.

The power plants will be steam-electric generation stations using conventional fluidized bed boiler/steam turbine technology.

The plants will be designed to allow for the co-firing of other types of biomass, such as pecan hulls and peanut shells. There are no plans to use any fossil fuels.

Depending on the location, water would be obtained either from onsite wells, nearby surface waters, from municipal sources or grey water from nearby industries.

OPC has approximately $5 billion in assets, and serves 38 Electric Membership Corporations which, collectively, provide electricity to 4.1 million Georgia citizens. Its energy portfolio includes natural gas, hydroelectric, coal, and nuclear generating plants with a combined capacity of approximately 4,700 MW, as well as purchased power.

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N.L. lags behind Canada in energy efficiency, but there's a silver lining to the stats

Newfoundland and Labrador Energy Efficiency faces low rankings yet signs of progress: heat pumps, EV charging networks, stricter building codes, electrification to tap Muskrat Falls power and cut greenhouse gas emissions and energy poverty.

 

Key Points

Policies and programs improving N.L.'s energy use via electrification, EVs, heat pumps, and stronger building codes.

✅ Ranks last provincially but showing policy momentum

✅ Heat pump grants and EV charging network underway

✅ Stronger building codes and electrification can cut emissions

 

Ah, another day, another depressing study that places Newfoundland and Labrador as lagging behind the rest of Canada.

We've been in this place before — least-fit kids, lowest birthrate — and now we can add a new dubious distinction to the pile: a ranking of the provinces according to energy efficiency placed Newfoundland and Labrador last.

Efficiency Canada released its first-ever provincial scorecard Nov. 20, comparing energy efficiency policies among the provinces. With energy efficiency a key part of reducing greenhouse gas emissions, Newfoundland and Labrador sat in 10th place, noted for its lack of policies on everything from promoting EV uptake in Atlantic Canada to improving efficient construction codes.

But before you click away to a happier story (about, say, a feline Instagram superstar) one of the scorecard's authors says there's a silver lining to the statistics.

"It's not that Newfoundland and Labrador is doing anything badly; it's just that it could do more," said Brendan Haley, the policy director at Efficiency Canada, a new think tank based at Carleton University.

"There's just a general lack of attention to implementing efficiency policies relative to other jurisdictions, including New Brunswick's EV rebate programs on transportation."

Looking at the scorecard and comparing N.L. with British Columbia, which snagged the No. 1 spot, isn't a great look. B.C. scored 56 points out of a possible 100, while N.L. got just 15.

Haley pointed out that B.C.'s provincial government is charting progress toward 2032, when all new builds will have to be net-zero energy ready; that is, buildings that can produce as much clean energy as they consume.  

While it might not be feasible to emulate that to a T here, Haley said the province could be mandating better energy efficiency standards for new, large building projects, and, at the same time, promote electrification of such projects as a way to soak up some of that surplus Muskrat Falls electricity.

Staring down Muskrat's 'extraordinary' pressure on N.L. electricity rates

It's impossible to talk about energy efficiency in N.L. without considering that dam dilemma. As Muskrat Falls comes online, likely at the end of 2020, customer power rates are set to rise in order to pay for it, and the province is still trying to figure out the headache that is rate mitigation.

"There is a strategic choice to be made in Newfoundland and Labrador," Haley told CBC Radio's On The Go.

While having more customers using Muskrat Falls power can help with rate mitigation, including through initiatives like N.L.'s EV push to grow demand, Haley noted simply using its excess electricity for the sake of it isn't a great goal.

"That should not be an excuse, I think, to almost have a policy of wasting energy on purpose, or saying that we don't need programs that help save electricity anymore," he said.

Energy poverty
Lots of N.L. homeowners are currently feeling a chill from the spectre of rising electricity rates.

Of course, that draft could be coming from a poorly insulated and heated house, as Efficiency Canada noted 38 per cent of all households in N.L. live in what it calls "energy poverty," where they spend more than six per cent of their after-tax income on energy — that's the second highest such rate in the country.

That poverty speaks for a need for N.L.to boost efficiency incentives for vulnerable populations, although Haley noted the government is making progress. The province recently expanded its home energy savings program, doubling in the last budget year to $2 million, which gives grants to low income households for upgrades like insulation.

Can you guess what products are selling like hotcakes as Muskrat Falls looms? Heat pumps

And since Efficiency Canada compiled its scorecard, the province has introduced a $1-million heat pump program, in which 1,000 homeowners could receive $1,000 toward the purchase of a heat pump. 

That program began accepting applications Oct. 15, and one month in, has had 682 people apply, according to the Department of Municipal Affairs and Environment, along with thousands of inquiries.

Heat pump popularity
Even without that program, heat pump sales have skyrocketed in the province since 2017. That popularity doesn't come as much of a surprise to Darren Brake, the president of KSAB Construction in Corner Brook.

With more than two decades in the home building business, he's been seeing consumer demand for home energy efficiency rise to the point where a year ago, his company transitioned into only building third-party certified energy efficient homes.

"Everybody's really concerned about the escalating power costs and energy costs, I assume because of Muskrat Falls," he said.

"It's evolving now, as we speak. Everybody is all about that monthly payment."

Brake uses spray foam installation in every house he builds, to seal up any potential leaks. Without sealing the building envelope, he says, a heat pump is far less efficient. (Lindsay Bird/CBC)
And in the weakest housing market in the province in half a century, Brake has been steadily moving his, building and selling seven in the last year.

Brake's houses include heat pumps, but he said the real savings come from their heavily insulated walls, roof and floors. Homeowners looking to install a heat pump in their leaky old house, he said, won't see lower power bills in quite the same way.

"They are energy efficient, but it's more about the building envelope to make a home efficient and easy to heat. You can put a heat pump in an older home that leaks a lot of air, and you won't get the same results," he said.

Charging network coming
The other big piece to the efficiency puzzle — in the scorecard's eyes — is electric vehicles. Those could, again, use some of that Muskrat Falls energy, as well as curtail gas guzzling, but Efficiency Canada pointed to a lack of policies and incentives surrounding electrifying transportation, such as Nova Scotia's vehicle-to-grid pilot that illustrates innovation elsewhere.

Unlike Quebec or B.C., the province doesn't offer a rebate for buying EVs, even as N.W.T. encourages EVs through targeted measures, and while electric vehicles got loud applause at the House of Assembly last week, it was absent of any policy or announcement beyond the province unveiling a EV licence plate design to be used in the near future.

Electric-vehicle charging network planned for N.L. in 2020

But since the scorecard was tallied, NL Hydro has unveiled plans for a Level 3 charging network for EVs across the island, dependent on funding, with N.L.'s first fast-charging network seen as just the beginning for local drivers.

NL Hydro says while its request for proposals for an island-wide charging network closed earlier in November, there is no progress update yet, even as N.B.'s fast-charging rollout advances along the Trans-Canada. (Credit: iStock/Getty Images)
That cash appears to still be in limbo, as "we are still progressing through the funding process," said an NL Hydro spokesperson in an email, with no "additional details to release at this time."

Still, the promise of a charging network — plus the swift uptake on the heat pump program — could boost N.L.'s energy efficiency scorecard next time it's tallied, said Haley.

"It is encouraging to see the province moving forward on smart and efficient electrification," he said.

 

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Lump sum credit on electricity bills as soon as July

NL Hydro electricity credit delivers a one-time on-bill rebate from the rate stabilization fund, linked to oil prices and the Holyrood plant, via the Public Utilities Board, with payment deferrals and interest relief for customers.

 

Key Points

A one-time on-bill credit from the rate stabilization fund to cut power costs as oil prices remain low.

✅ One-time on-bill credit via the Public Utilities Board

✅ Funded by surplus in the rate stabilization fund

✅ Deferrals and 15 months interest assistance available

 

Most people who pay electricity bills will get a one-time credit as early as July.

The provincial government on Thursday outlined a new directive to the Public Utilities Board to provide a one-time credit for customers whose electricity rates are affected by the price of oil, part of an effort to shield ratepayers from Muskrat Falls overruns through recent agreements.

Electricity customers who are not a part of the Labrador interconnected system, including those using diesel on the north coast of Labrador, will receive the credit.

The credit, announced at a press conference Thursday morning, will come from the rate stabilization fund and comes as many customers have begun paying for Muskrat Falls on their bills, which has an estimated surplus of about $50 million because low oil prices mean NL Hydro has spent less on fuel for the Holyrood thermal generating station.

Normally a surplus would be paid out over a year, but customers this year will get the credit in a lump sum, as early as July, with the amount varying based on electricity usage.

"Given the difficult times many are finding themselves in, we believe an upfront, one-time on-bill credit would be much more helpful for customers than a small monthly decrease over the next 12 months," said Natural Resources Minister Siobhan Coady at the provincial government's announcement Thursday morning.

Premier Dwight Ball said with many households and businesses experiencing financial hardship, the one-time credit is meant to make life a little easier, noting that Nova Scotia's premier has urged regulators to reject a major hike elsewhere.

"We have requested that the board of commissioners of the Public Utilities Board, even as Nova Scotia's regulator approved a 14% increase recently, adopt a policy so that a credit will be dispersed immediately," Ball said.

"This is to help people when they need it the most.… We're doing what we can to support you."

The provincial government estimates someone whose power costs an average of $200 a month would get a one-time credit of about $130. Details of the plan will be left to the PUB.

Deferred payments allowed
Ball said the credit will make a "significant impact" on customers' July bills.

Both businesses and residential customers will also be able to defer payments, similar to Alberta's deferral program that shifted costs for unpaid bills, with up to $2.5 million in interest being waived on overdue accounts. Customers will be required to make agreed-upon monthly payments to their account, and there will be interest assistance for 15 months, beginning June 1.

Coady said customers can renegotiate their bills and defer payments, with the province picking up the tab for the interest.

"You can speak to a customer service agent and they will make accommodations, but you have to continue to make some version of a monthly payment," Coady

"The interest that may be accrued is going to be paid for by the provincial government, so if you're a business, a person, and you're having difficulty and you can't make what I would say is your normal payment, call your utility, make some arrangements."

Labrador's interconnected grid isn't affected by the price of oil, but those customers can take advantage of the interest relief.

Relief policies already put in place during the pandemic, like not disconnecting customers and providing options for more flexible bill payments, will continue, as utilities such as Hydro One reconnecting customers demonstrate in Ontario.

Credit not enough to support customers: PCs
While Ball said his government is doing what they can to help ratepayers, the opposition doesn't believe the announcement does enough to support those who need it.

Tony Wakeham, the Progressive Conservative MHA for Stephenville-Port au Port, said in a statement Thursday the credit simply gives people's money back to them, after the NL Consumer Advocate called an 18% rate hike unacceptable, and Newfoundland Power stands to benefit. 

"The Liberal government would like ratepayers to believe that they are getting electricity rate relief, but in reality, customers would have been entitled to receive the value of this credit anyway over a 12-month period. Furthermore, in providing a one-time credit, Newfoundland Power will also be able to collect an administrative fee, adding to their revenues," Wakeham said in the statement.

"People and businesses in this province are struggling to pay their utility bills, and the Liberal government should help them by putting extra money into their pockets, not by recycling an already existing program to the benefit of a large corporation."

Wakeham called on government to direct the PUB to lower Newfoundland Power's guaranteed rate of return to give cash refunds to customers, and for Newfoundland Power to waive its fees.

 

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Russia suspected as hackers breach systems at power plants across US

US Power Grid Cyberattacks target utilities and nuclear plants, probing SCADA, ICS, and business networks at sites like Wolf Creek; suspected Russian actors, malware, and spear-phishing trigger DHS and FBI alerts on critical infrastructure resilience.

 

Key Points

Intrusions on energy networks probing ICS and SCADA, seeking persistence and elevating risks to critical infrastructure.

✅ Wolf Creek nuclear plant targeted; no operational systems breached

✅ Attackers leveraged stolen credentials, malware, and spear-phishing

✅ DHS and FBI issued alerts; utilities enhance cyber resilience

 

Hackers working for a foreign government recently breached at least a dozen US power plants, including the Wolf Creek nuclear facility in Kansas, according to current and former US officials, sparking concerns the attackers were searching for vulnerabilities in the electrical grid.

The rivals could be positioning themselves to eventually disrupt the nation’s power supply, warned the officials, who noted that a general alert, prompting a renewed focus on protecting the U.S. power grid, was distributed to utilities a week ago. Adding to those concerns, hackers recently infiltrated an unidentified company that makes control systems for equipment used in the power industry, an attack that officials believe may be related.

The chief suspect is Russia, according to three people familiar with the continuing effort to eject the hackers from the computer networks. One of those networks belongs to an ageing nuclear generating facility known as Wolf Creek -- owned by Westar Energy Inc, Great Plains Energy Inc, and Kansas Electric Power Cooperative Inc -- on a lake shore near Burlington, Kansas.

The possibility of a Russia connection is particularly worrying, former and current official s say, because Russian hackers have previously taken down parts of the electrical grid in Ukraine and appear to be testing increasingly advanced tools, including cyber weapons to disrupt power grids, to disrupt power supplies.

The hacks come as international tensions have flared over US intelligence agencies’ conclusion that Russia tried to influence the 2016 presidential election, and amid U.S. government condemnation of Russian power-grid hacking in recent advisories. The US, which has several continuing investigations into Russia’s activities, is known to possess digital weapons capable of disrupting the electricity grids of rival nations.

“We don’t pay attention to such anonymous fakes,” Kremlin spokesman Dmitry Peskov said, in response to a request to comment on alleged Russian involvement.

It was unclear whether President Donald Trump was planning to address the cyber attacks at his meeting on Friday with Russian President Vladimir Putin. In an earlier speech in Warsaw, Trump called out Russia’s “destabilising activities” and urged the country to join “the community of responsible nations.”

The Department of Homeland Security and Federal Bureau of Investigation said they are aware of a potential intrusion in the energy sector. The alert issued to utilities cited activities by hackers since May.

“There is no indication of a threat to public safety, as any potential impact appears to be limited to administrative and business networks,” the government agencies said in a joint statement.

The Department of Energy also said the impact appears limited to administrative and business networks and said it was working with utilities and grid operators to enhance security and resilience.

“Regardless of whether malicious actors attempt to exploit business networks or operational systems, we take any reports of malicious cyber activity potentially targeting our nation’s energy infrastructure seriously and respond accordingly,” the department said in an emailed statement.

Representatives of the National Security Council, the Director of National Intelligence and the Nuclear Regulatory Commission declined to comment. While Bloomberg News was waiting for responses from the government, the New York Times reported that hacks were targeting nuclear power stations.

The North American Electric Reliability Corp, a nonprofit that works to ensure the reliability of the continent’s power system, said it was aware of the incident and was exchanging information with the industry through a secure portal.

“At this time, there has been no bulk power system impact in North America,” the corporation said in an emailed statement.

In addition, the operational controls at Wolf Creek were not pierced, according to government officials, even as attackers accessed utility control rooms elsewhere in the U.S., according to separate reports. “There was absolutely no operational impact to Wolf Creek,” Jenny Hageman, a spokeswoman for the nuclear plant, said in a statement to Bloomberg News.

“The reason that is true is because the operational computer systems are completely separate from the corporate network.”

Determining who is behind an attack can be tricky. Government officials look at the sophistication of the tools, among other key markers, when gauging whether a foreign government is sponsoring cyber activities.

Several private security firms, including Symantec researchers, are studying data on the attacks, but none has linked the work to a particular hacking team or country.

“We don’t tie this to any known group at this point,” said Sean McBride, a lead analyst for FireEye Inc, a global cyber security firm. “It’s not to say it’s not related, but we don’t have the evidence at this point.”

US intelligence officials have long been concerned about the security of the country’s electrical grid. The recent attack, striking almost simultaneously at multiple locations, is testing the government’s ability to coordinate an effective response among several private utilities, state and local officials, and industry regulators.

Specialised teams from Homeland Security and the FBI have been scrambled to help extricate the hackers from the power stations, in some cases without informing local and state officials. Meanwhile, the US National Security Agency is working to confirm the identity of the hackers, who are said to be using computer servers in Germany, Italy, Malaysia and Turkey to cover their tracks.

Many of the power plants are conventional, but the targeting of a nuclear facility adds to the pressure. While the core of a nuclear generator is heavily protected, a sudden shutdown of the turbine can trigger safety systems. These safety devices are designed to disperse excess heat while the nuclear reaction is halted, but the safety systems themselves may be vulnerable to attack.

Homeland Security and the FBI sent out a general warning about the cyber attack to utilities and related parties on June 28, though it contained few details or the number of plants affected. The government said it was most concerned about the “persistence” of the attacks on choke points of the US power supply. That language suggests hackers are trying to establish backdoors on the plants’ systems for later use, according to a former senior DHS official who asked not to be identified.

Those backdoors can be used to insert software specifically designed to penetrate a facility’s operational controls and disrupt critical systems, according to Galina Antova, co-founder of Claroty, a New York firm that specialises in securing industrial control systems.

“We’re moving to a point where a major attack like this is very, very possible,” Antova said. “Once you’re into the control systems -- and you can get into the control systems by hacking into the plant’s regular computer network -- then the basic security mechanisms you’d expect are simply not there.”

The situation is a little different at nuclear facilities. Backup power supplies and other safeguards at nuclear sites are meant to ensure that “you can’t really cause a nuclear plant to melt down just by taking out the secondary systems that are connected to the grid,” Edwin Lyman, a nuclear expert with the Union of Concerned Scientists, said in a phone interview.

The operating systems at nuclear plants also tend to be legacy controls built decades ago and don’t have digital control systems that can be exploited by hackers. Wolf Creek, for example, began operations in 1985. “They’re relatively impervious to that kind of attack,” Lyman said.

The alert sent out last week inadvertently identified Wolf Creek as one of the victims of the attack. An analysis of one of the tools used by the hackers had the stolen credentials of a plant employee, a senior engineer. A US official acknowledged the error was not caught until after the alert was distributed.

According to a security researcher who has seen the report, the malware that activated the engineer’s username and password was designed to be used once the hackers were already inside the plant’s computer systems.

The tool tries to connect to non-public computers, and may have been intended to identify systems related to Wolf Creek’s generation plant, a part of the facility typically more modern than the nuclear reactor control room, according to a security expert who asked to note be identified because the alert is not public.

Even if there is no indication that the hackers gained access to those control systems, the design of the malware suggests they may have at least been looking for ways to do so, the expert said.

Stan Luke, the mayor of Burlington, the largest community near Wolf Creek, which is surrounded by corn fields and cattle pastures, said he learned about a cyber threat at the plant only recently, and then only through golfing buddies.

With a population of just 2,700, Burlington boasts a community pool with three water slides and a high school football stadium that would be the envy of any junior college. Luke said those amenities lead back to the tax dollars poured into the community by Wolf Creek, Coffey County’s largest employer with some 1,000 workers, 600 of whom live in the county.

E&E News first reported on digital attacks targeting US nuclear plants, adding it was code-named Nuclear 17. A senior US official told Bloomberg that there was a bigger breach of conventional plants, which could affect multiple regions.

Industry experts and US officials say the attack is being taken seriously, in part because of recent events in Ukraine. Antova said that the Ukrainian power grid has been disrupted at least twice, first in 2015, and then in a more automated attack last year, suggesting the hackers are testing methods.

Scott Aaronson, executive director for security and business continuity at the Edison Electric Institute, an industry trade group, said utilities, grid operators and federal officials were already dissecting the attack on Ukraine’s electric sector to apply lessons in North America before the US government issued the latest warning to “energy and critical manufacturing sectors”. The current threat is unrelated to recently publicised ransomware incidents or the CrashOverride malware, Mr Aaronson said in an emailed statement.

Neither attack in Ukraine caused long-term damage. But with each escalation, the hackers may be gauging the world’s willingness to push back.

“If you think about a typical war, some of the acts that have been taken against critical infrastructure in Ukraine and even in the US, those would be considered crossing red lines,” Antova said.

 

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Rolls-Royce signs MoU with Exelon for compact nuclear power stations

Rolls-Royce and Exelon UKSMR Partnership accelerates factory-built small modular reactors, nuclear power, clean energy, 440MW units, advanced manufacturing, fleet deployment, net zero goals, and resilient, low-cost baseload generation in the UK and globally.

 

Key Points

A partnership to deploy factory-built SMR stations, providing 440MW low-carbon baseload for the UK and export markets.

✅ 440MW factory-built SMR units with rapid modular assembly

✅ Exelon to operate and enhance high capacity factors

✅ Supports UK net zero, jobs, and export-led manufacturing

 

Rolls-Royce and Exelon Generation have signed a Memorandum of Understanding to pursue the potential for Exelon Generation to operate compact nuclear power stations both in the UK and internationally, including markets such as Canada where New Brunswick SMR questions are prompting public debate today.

Exelon Generation will be using their operational experience to assist Rolls Royce in the development and deployment of the UKSMR.

Rolls-Royce is leading a consortium that is designing a low-cost factory built nuclear power station, known as a small modular reactor (SMR), with UK mini-reactor approval anticipated as development progresses. Its standardised, factory-made components and advanced manufacturing processes push costs down, while the rapid assembly of the modules and components inside a weatherproof canopy on the power station site itself avoid costly schedule disruptions.

The consortium is working with its partners and UK Government to secure a commitment for a fleet of factory built nuclear power stations, each providing 440MW of electricity, to be operational within a decade, helping the UK meet its net zero obligations in line with the green industrial revolution policy set out by government. A fleet deployment in the UK will lead to the creation of new factories that will make the components and modules which will help the economy recover from the Covid-19 pandemic and pave the way for significant export opportunities as well.

The consortium members feature the best of nuclear engineering, construction and infrastructure expertise in Assystem, Atkins, BAM Nuttall, Jacobs, Laing O'Rourke, National Nuclear Laboratory, Nuclear Advanced Manufacturing Research Centre, Rolls-Royce and TWI. Exelon will add valuable operational experience to the team.

Tom Samson, interim Chief Executive Officer of the UKSMR consortium, said: 'Nuclear power is central to tackling climate change and economic recovery, but it must be affordable, reliable and investable and the way we manufacture and assemble our power station brings its cost down to be comparable with offshore wind.

'It's a compelling proposition that could draw new players into the UK's power generation landscape, improving choice for consumers and providing uninterrupted low carbon energy to homes and businesses.

'The opportunity to partner with Exelon is a very exciting prospect for our program, complementing our existing Consortium partnerships with one of the world's largest nuclear operator adds an important dimension to our growth ambitions, embodies the strength of the UK and USA alliance on nuclear matters and reflects wider international moves, such as a Canadian premiers' SMR initiative to accelerate technology development, and offers our future customers the ability to achieve the highest performance standards associated with Exelon's outstanding operational track record.'

The power stations will be built by the UKSMR consortium, before being handed over to be operated by power generation companies. Exelon Generation will work closely with the consortium during the pre-operation period. Exelon Nuclear operates 21 nuclear reactors in America, and U.S. regulators recently issued a final safety evaluation for a NuScale SMR that underscores momentum in the sector. The Exelon nuclear fleet is an integral part of the U.S. clean power mix; it produces more than 158 million megawatt-hours of clean electricity every year.

Bryan Hanson, EVP and COO of Exelon Generation said: 'We believe that SMRs are a crucial part of the world's clean energy mix, as projects like Darlington SMRs advance in Ontario. With our experience both in the US and internationally, Exelon is confident that we can help Rolls Royce ensure SMRs play a key role in the UK's energy future. We've had a very strong record of performance for 20 consecutive years, with a 2019 capacity factor of 95.7 percent. We will leverage this experience to achieve sustainably high capacity factors for the UKSMRs.'

Ralph Hunter, Managing Director of Exelon Nuclear Partners, who runs Exelon's international clean energy business, said: 'We have a strong track record of success to be the operator of choice for the UKSMR. We will help develop operational capability, training and human capacity development in the UK, as utilities such as Ontario Power Generation commit to SMRs abroad, ensuring localisation of skills and a strong culture of safety, performance and efficiency.'

By 2050 a full UK programme of a fleet of factory built nuclear power stations in the UK could create:

Up to 40,000 jobs GBP52BN of value to the UK economy GBP250BN of exports

The current phase of the programme has been jointly funded by all consortium members and UK Research and Innovation.

 

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Opinion: UK Natural Gas, Rising Prices and Electricity

European Energy Market Crisis drives record natural gas and electricity prices across the EU, as LNG supply constraints, Russian pipeline dependence, marginal pricing, and renewables integration expose volatility in liberalised power markets.

 

Key Points

A 2021 surge in European gas and electricity prices from supply strains, demand rebounds, and marginal pricing exposure.

✅ Record TTF gas and day-ahead power prices across Europe

✅ LNG constraints and Russian pipeline dependence tightened supply

✅ Debate over marginal pricing vs regulated models intensifies

 

By Ronan Bolton

The year 2021 was a turbulent one for energy markets across Europe, as Europe's energy nightmare deepened across the region. Skyrocketing natural gas prices have created a sense of crisis and will lead to cost-of-living problems for many households, as wholesale costs feed through into retail prices for gas and electricity over the coming months.

This has created immediate challenges for governments, but it should also encourage us to rethink the fundamental design of our energy markets as we seek to transition to net zero, with many viewing it as a wake-up call to ditch fossil fuels across the bloc.

This energy crisis was driven by a combination of factors: the relaxation of Covid-19 lockdowns across Europe created a surge in demand, while cold weather early in the year diminished storage levels and contributed to increasing demand from Asian economies. A number of technical issues and supply-side constraints also combined to limit imports of liquefied natural gas (LNG) into the continent.

Europe’s reliance on pipeline imports from Russia has once again been called into question, as Gazprom has refused to ride to the rescue, only fulfilling its pre-existing contracts. The combination of these, and other, factors resulted in record prices – the European benchmark price (the Dutch TTF Gas Futures Contract) reached almost €180/MWh on 21 December, with average day-ahead electricity prices exceeding €300/MWh across much of the continent in the following days.

Countries which rely heavily on natural gas as a source of electricity generation have been particularly exposed, with governments quickly put under pressure to intervene in the market.

In Spain the government and large energy companies have clashed over a proposed windfall tax on power producers. In Ireland, where wind and gas meet much of the country’s surging electricity demand, the government is proposing a €100 rebate for all domestic energy consumers in early 2022; while the UK government is currently negotiating a sector-wide bailout of the energy supply sector and considering ending the gas-electricity price link to curb bills.

This follows the collapse of a number of suppliers who had based their business models on attracting customers with low prices by buying cheap on the spot market. The rising wholesale prices, combined with the retail price cap previously introduced by the Theresa May government, led to their collapse.

While individual governments have little control over prices in an increasingly globalised and interconnected natural gas market, they can exert influence over electricity prices as these markets remain largely national and strongly influenced by domestic policy and regulation. Arising from this, the intersection of gas and power markets has become a key site of contestation and comment about the role of government in mitigating the impacts on consumers of rising fuel bills, even as several EU states oppose major reforms amid the price spike.

Given that renewables are constituting an ever-greater share of production capacity, many are now questioning why gas prices play such a determining role in electricity markets.

As I outline in my forthcoming book, Making Energy Markets, a particular feature of the ‘European model’ of liberalised electricity trade since the 1990s has been a reliance on spot markets to improve the efficiency of electricity systems. The idea was that high marginal prices – often set by expensive-to-run gas peaking plants – would signal when capacity limits are reached, providing clear incentives to consumers to reduce or delay demand at these peak periods.

This, in theory, would lead to an overall more efficient system, and in the long run, if average prices exceeded the costs of entering the market, new investments would be made, thus pushing the more expensive and inefficient plants off the system.

The free-market model became established during a more stable era when domestically-sourced coal, along with gas purchased on long-term contracts from European sources (the North Sea and the Netherlands), constituted a much greater proportion of electricity generation.

While prices fluctuated, they were within a somewhat predictable range, and provided a stable benchmark for the long-term contracts underpinning investment decisions. This is no longer the case as energy markets become increasingly volatile and disrupted during the energy transition.

The idea that free price formation in a competitive market, with governments standing back, would benefit electricity consumers and lead to more efficient systems was rooted in sound economic theory, and is the basis on which other major commodity markets, such as metals and agricultural crops, have been organised for decades.

The free-market model applied to electricity had clear limitations, however, as the majority of domestic consumers have not been exposed directly to real-time price signals. While this is changing with the roll-out of smart meters in many countries, the extent to which the average consumer will be willing or able to reduce demand in a predicable way during peak periods remains uncertain.

Also, experience shows that governments often come under pressure to intervene in markets if prices rise sharply during periods of scarcity, thus undermining a basic tenet of the market model, with EU gas price cap strategies floated as one option.

Given that gas continues to play a crucial role in balancing supply and demand for electricity, the options available to governments are limited, illustrating why rolling back electricity prices is harder than it appears for policymakers. One approach would be would be to keep faith with the liberalised market model, with limited interventions to help consumers in the short term, while ultimately relying on innovations in demand side technologies and alternatives to gas as a means of balancing systems with high shares of variable renewables.

An alternative scenario may see a return to old style national pricing policies, involving a move away from marginal pricing and spot markets, even as the EU prepares to revamp its electricity market in response. In the past, in particular during the post-WWII decades, and until markets were liberalised in the 1990s, governments have taken such an approach, centrally determining prices based on the costs of delivering long term system plans. The operation of gas plants and fuel procurement would become a much more regulated activity under such a model.

Many argue that this ‘traditional model’ better suits a world in which governments have committed to long-term decarbonisation targets, and zero marginal cost sources, such as wind and solar, play a more dominant role in markets and begin to push down prices.

A crucial question for energy policy makers is how to exploit this deflationary effect of renewables and pass-on cost savings to consumers, whilst ensuring that the lights stay on.

Despite the promise of storage technologies such as grid-scale batteries and hydrogen produced from electrolysis, aside from highly polluting coal, no alternative to internationally sourced natural gas as a means of balancing electricity systems and ensuring our energy security is immediately available.

This fact, above all else, will constrain the ambitions of governments to fundamentally transform energy markets.

Ronan Bolton is Reader at the School of Social and Political Science, University of Edinburgh and Co-Director of the UK Energy Research Centre. His book Making Energy Markets: The Origins of Electricity Liberalisation in Europe is to be published by Palgrave Macmillan in 2022.

 

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Proposed underground power line could bring Iowa wind turbine electricity to Chicago

SOO Green Underground Transmission Line proposes an HVDC corridor buried along Canadian Pacific railroad rights-of-way to deliver Iowa wind energy to Chicago, enhance grid interconnection, and reduce landowner disruption from new overhead lines.

 

Key Points

A proposed HVDC project burying lines along a railroad to move Iowa wind power to Chicago and link two grids.

✅ HVDC link from Mason City, IA, to Plano, IL

✅ Buried in Canadian Pacific railroad right-of-way

✅ Connects MISO and PJM grids for renewable exchange

 

The company behind a proposed underground transmission line that would carry electricity generated mostly by wind turbines in Iowa to the Chicago area said Monday that the $2.5 billion project could be operational in 2024 if regulators approve it, reflecting federal transmission funding trends seen recently.

Direct Connect Development Co. said it has lined up three major investors to back the project. It plans to bury the transmission line in land that runs along existing Canadian Pacific railroad tracks, hopefully reducing the disruption to landowners. It's not unusual for pipelines or fiber optic lines to be buried along railroad tracks in the land the railroad controls.

CEO Trey Ward said he "believes that the SOO Green project will set the standard regarding how transmission lines are developed and constructed in the U.S."

A similar proposal from a different company for an overhead transmission line was withdrawn in 2016 after landowners raised concerns, even as projects like the Great Northern Transmission Line advanced in the region. That $2 billion Rock Island Clean Line was supposed to run from northwest Iowa into Illinois.

The new proposed line, which was first announced in 2017, would run from Mason City, Iowa, to Plano, Ill., a trend echoed by Canadian hydropower to New York projects. The investors announced Monday were Copenhagen Infrastructure Partners, Jingoli Power and Siemens Financial Services.

The underground line would also connect two different regional power operating grids, as seen with U.S.-Canada cross-border transmission approvals in recent years, which would allow the transfer of renewable energy back and forth between customers and producers in the two regions.

More than 36 percent of Iowa's electricity comes from wind turbines across the state.

Jingoli Power CEO Karl Miller said the line would improve the reliability of regional power operators and benefit utilities and corporate customers in Chicago, even amid debates such as Hydro-Quebec line opposition in the Northeast.

 

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