Daily on Energy: Tame winter means big drops in fuel prices

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WINTER REPRIEVE: Tame winter conditions are putting big dents in the prices of gas and coal, both of which have plunged from their 2022 highs in recent weeks.

Nearly the entire country will likely see temperatures at or above normal through mid-January, the National Oceanic and Atmospheric Administration said in its most recent outlook released yesterday, including the entire East.

Natural gas futures continue to trade at their lowest since summer of 2021 due to unseasonably low demand — demand which could reach a record low this January if mild temperatures keep tracking.

“Despite consistently robust LNG demand – totaling around 7 million tonnes – particularly from European buyers, prices are falling and expected to continue bearish momentum until winter weather returns,” Rystad Energy vice president Emily McClain said in a market note this morning.

The coal market is even more volatile. Spot prices plunged back to earth in the new year after ticking up consistently throughout 2022.

Spot averages for Northern and Central Appalachia coal fell 45% and 33% in just one week.

The upside: Power sector players and grid regulators issued strong warnings going into the winter about the price risks facing utility customers in the event of protracted cold, so ratepayers are being largely protected from that for now.

The Europeans began seeing these kinds of higher temperatures even sooner, and the gas market has predictably settled in kind. Benchmark gas futures there have fallen back near year-ago, pre-war levels.

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GM, FORD, GOOGLE JOIN FORCES TO SCALE UP VIRTUAL POWER PLANTS: Companies including GM, Ford, Google, and solar energy producers announced they will work together on a new project to establish standards on scaling up “virtual power plants” in the US— systems that pool together thousands of decentralized energy management sources, such as EV batteries, to help ease loads on power grids during periods of peak demand.

As part of the Virtual Power Plant Partnership, or VP3, companies will also seek to promote policies that utilize the virtual power plant system.

The effort will be overseen by the nonprofit group RMI. In a statement, the group estimates that by 2030, VPPs can reduce peak US energy demand by up to 60 GW—and by more than 200 GW by 2050.

“Virtual power plants will enable grid planners and grid operators to [better manage] growing electricity demand from vehicles, from buildings and from industry, and make sure that the grid can stay reliable even in the face of ongoing extreme weather challenges and aging physical infrastructure,” Mark Dyson, managing director of RMI’S carbon-free electricity program, told Reuters.

Tesla has launched similar efforts in California, Texas, Australia, and most recently, Japan. Its facilities consist of distributed Tesla powerwalls, organized for grid management, that allow households to get incentives for releasing solar-generated power during times of greater demand.

US AND JAPAN TO COOPERATE ON NEXT-GENERATION NUCLEAR REACTORS: Energy ministers from the US and Japan agreed yesterday to step up their cooperation on the development and construction of next-generation nuclear reactors, including small modular nuclear reactors, both “within each country and third countries,” as the US seeks to help Tokyo advance on its goals towards decarbonization.

Energy Secretary Jennifer Granholm and Japanese Industry Minister Yasutoshi Nishimura agreed during yesterday’s meeting to work more closely on other energy security matters as well, according to news reports from Tokyo, including helping Japan secure more LNG imports.

The two countries are expected to further outline their plans for cooperation further later this week, when Japanese Prime Minister Fumio Kishida travels to the White House Friday to meet with President Joe Biden.

BELGIUM TO REVERSE POLICY AND EXTEND LIFE OF TWO NUCLEAR REACTORS: Belgium reached an agreement with French utility Engie to extend the life of two of its nuclear reactors by another 10 years, a reversal of its earlier plan to exit nuclear power entirely by 2025, and one that comes as it grapples with the energy crisis caused by Russia’s war in Ukraine.

Belgian Prime Minister Alexander De Croo said the country’s Doel 4 and Tihange 3 reactors, which had been slated for permanent closure in 2025, will now undergo a period of maintenance work before restarting again in late 2026, after which they will remain operational for 10 years . “The extension of these two nuclear reactors is crucial to guarantee our energy security,” De Croo told reporters.

The decision comes after Belgium’s electric network operator warned that the country would face a significant energy shortfall by winter 2026 or 2027 if it were to permanently shutter its entire nuclear fleet. Even with its decision to extend the life of the Doel 4 and Tihange 3 reactors, Belgium is still expected to face a power generation gap in the coming years. Read more here.

UNIPER CHIEF TO STEP DOWN AFTER GERMAN GOVERNMENT BAILOUT: Klaus-Dieter Maubach said he will step down as the CEO of Uniper, the latest and most high-profile casualty of a management shake-up that comes as the German utility company seeks to recover from a deeply bruising year and one of the biggest corporate losses in the nation’s history.

Uniper, once among the EU’s largest importers of natural gas, began suffering major losses beginning in June, when Russia began steadily throttling its gas deliveries to Europe via its Nord Stream gas pipeline.

Those cuts caused Uniper to hemorrhage money, at times posting losses of more than $107 million per day. And Maubach, who had defended Russian gas giant Gazprom as a reliable supplier as recently as May, endured scathing public criticism.

“I am convinced that now is the right time to clear the way for a new management board team to take on the new challenges beyond the end of the stabilization measures,” Maubach said in a statement. He will stay on until the company finds a replacement.

Uniper posted losses of more than $39 billion in November, among the largest in corporate history, clearing the way for the government to purchase a controlling 99% stake in December.

MANCHIN HOSTS GATES FOR WEST VIRGINIA ENERGY TOUR: Sen. Joe Manchin and energy entrepreneur Bill Gates toured the site of a closed coal-fired power plant in West Virginia. The two met with local business leaders and discussed the siting of new energy production and manufacturing projects using funding from the bipartisan infrastructure law and the Inflation Reduction Act, according to Manchin’s office.

Gates’ TerraPower is working to convert an active coal plant in Kemmerer, Wyoming, into a demonstration plant at which the startup intends to demonstrate its novel advanced nuclear reactor.

No announcements have been made for a similar venture in West Virginia, but Gates has his eye on the state for potential future coal-to-nuclear conversions — something proponents, including the Biden Department of Energy, believe can be a proper solution to maintaining employment in the power sector as coal plants retire.

West Virginia lifted a ban on nuclear power plant construction last year.

POWELL SAYS FED WILL STAY OUT OF CLIMATE POLICY: Federal Reserve Chairman Jerome Powell pledged that the central bank will not be climate policymaker, saying climate policy lies outside its scope under current law.

“Without explicit congressional legislation, it would be inappropriate for us to use our monetary policy or supervisory tools to promote a greener economy or to achieve other climate-based goals,” Powell said this morning during a speech.

The comments from Powell, who took the reins during the Trump administration and was re-nominated by Biden, are a departure from the direction many Democrats want the Fed to go in. Sarah Bloom Raskin, for example, Biden’s failed pick for vice chairwoman of supervision, said climate change is happening and that “whether or not you believe in it, it’s the Fed’s job to be mitigating the impact of exogenous shock.”

The Biden administration has used other authorities to advance its climate policy via channels like Securities and Exchange Commission rulemakings that would mandate climate disclosures.

IOWA ETHANOL PRODUCTION REACHES NEW RECORD IN 2022: Iowa’s ethanol produces manufactured a record amount of renewable fuel last year, increasing total production to 4.5 billion gallons, according to data released by the Iowa Renewable Fuels Association yesterday.

Annual production increased from the previous record of 4.4 billion gallons in 2021. Renewable fuels were a big part of Biden’s strategy to reduce the high cost of gasoline last year, and the cheaper costs of E15 and E85 helped to drive ethanol sales up during the price spike, IRFA executive director Monte Shaw said.

The EPA is currently considering further increasing biofuel blending requirements with its 2023-2025 Renewable Fuel Standard rulemaking. The agency is holding its first of two public hearings today on its proposed RFS volumes for 2023-2025. A range of speakers, from biofuel trade groups favoring strong blending obligations to union workers who are lobbying for RFS reform, are scheduled to give testimony.

The Rundown

Bloomberg China has set its sights on cornering another green energy market: hydrogen

Wall Street Journal Energy bulls are getting paid to stay calm

E&E News EPA inks deal to clean up Keystone spill



3:45 pm A panel of representatives from the aviation, auto, and rail industries will discuss decarbonizing transportation at the annual Transportation Research Board meeting in Washington, DC


3:00 pm Walter E. Washington Convention Center. The Washington Council of Government’s Climate, Energy, and Environment Policy committee will host a meeting on accelerating electric vehicle deployment in the DMV. Learn more about the event here.

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