Norway is challenging Russia with a new pricing mechanism for natural gas.  The Globe and Mail reported Norway is signing long-term contracts based on spot pricesrather than Gazprom’s crude oil linked pricing formula. Gazprom is Russia’s natural gas export monopoly. Recently Norway’s Statoil ASA signed a 10-year natural gas supply deal with Germany’s Wintershall AG based on spot pricing. The contract could start the creation of a flexible gas market in northwestern Europe for the first time. Statoil, Europe’s second biggest gas supplier after Gazprom, is now selling about half of its natural gas under spot terms. Gazprom insists that the established system of long-term deals linked to the price of crude oil and requires that customers pay penalties if they do not take the gas as agreed (take or pay). 80% of Gazprom’s exports go to Europe. The Gazprom contracts has angered European natural gas suppliers which often have to sell their gas to customers at retail prices linked to the freely traded spot market, which can be lower than the price paid to Gazprom.

“This is a serious challenge for Gazprom … If one major supplier goes to spot indexation, the other suppliers have to follow or risk losing market share,” said Bjorn Brochmann, head of gas market analysis at Oslo-based Thomson Reuters Point Carbon.

Russian gas exports to Western Europe already fell by 15 per cent during the last gas year, which ended on Sept. 30, while Norwegian supplies rose by 7 per cent, Mr. Brochmann added.

Earth’s Energy recently noted that Russia had agreed to its long-term natural gas price to Poland, partly due to worries about the impact shale gas exports from North America could have on Europe.

US shale gas has started to penetrate Eastern Canada observed the Globe and Mail. For the first time, some of the gas flowing into the Canadian province of Ontario is coming from the shale gas fields of Pennsylvania and displacing imports of conventional natural gas from fields in Western Canada. Earlier this month TransCanada Corp. began pumping gas from Pennsylvania’s massive Marcellus field across the Canadian border and can now supply up to 16% of the natural gas demand in Canada’s largest province. Another proposed pipeline called Nexus, backed by Enbridge Inc., DTE Energy and Spectra Energy Corp., is working to carry another billion cubic feet a day of Ohio-based Utica shale gas into southwestern Ontario. Those two projects have the ability to meet the entire average Ontario demand with U.S. shale gas. Ontario uses natural gas for heating in winter and to generate electricity. The displaced Ontario demand will likely find a new home in Asia.

The Energy Tribune wrote that Australia will be leading the liquified natural gas (LNG) future. GBI Research, a UK energy consultant group, predicts Australia will overtake Qatar by 2017 as the world’s largest LNG exporter. With the very large discoveries of natural gas offshore Western Australia and a gaping Chinese demand, it make sense that this would be a perfect fit for the LNG exports. The country’s total natural gas reserves (excluding shale gas) are estimated at 110 Tcf, making Australia the 12th largest gas nation n the world.

Der Spiegel discussed India’s massive nuclear expansion. “The 2011 disaster at Japan’s Fukushima plant led many countries to turn away from nuclear power. But a growing population and rising economy has prompted India to massively expand its nuclear program — even in the face of technological worries and fervent opposition…The nation of 1.2 billion urgently needs energy, as became glaringly evident last summer when large sections of the country went without power for days and more than 600 million people suffered in the heat without electricity. Blackouts are a common occurrence, and the lights go out, air-conditioners stop running and elevators get stuck every day even in the capital city of New Delhi.” To correct this, over the next 20 years India plans to expand the country’s nuclear capacity from 4.4 GW to roughly 63 GW. By 2050, India hopes to satisfy one-quarter of its electricity demands with nuclear energy.

Deutsche Welle explored Germany’s imminent solar boom as the price of electricity from solar PV panels rapidly declines. By 2020 prices for solar energy from small-scale plants in Germany could fall to 8 euro cents per kilowatt hour. Energy produced by big-scale plants in South Europe would fall to 4 to 5 euro cents. This would make solar energy even cheaper than coal. Currently Germans pay 25 euro cents for electricity from the grid and this could rise to 40 cents by 2020. Christian Breyer, CEO of the Reiner Lemoine Institute in Berlin, forecasts that by 2025, solar power will be cheaper than power from the grid in 90% of all countries.

Meanwhile, Der Spiegel looks at the unintended consequences of huge German subsidies to solar and wind power. The publication interviews Stephan Kohler, head of the German Energy Agency. “According to the generally accepted opinion, the transition to renewable energy sources means that we will give up nuclear power and rely on wind and solar instead. The reality is that we’ll need conventional power plants until at least 2050, even if we do create massive renewable energy sources. Many people dispute this. They say that we could replace power plants operated with fossil fuels by adding more renewable energy sources. My response to them is: It won’t work…75 percent of electricity goes to industry, for which a secure supply — that is, at every second, and with constant voltage — is indispensable. Neither solar nor wind power are suitable for that purpose today. Both fluctuate and provide either no secure supply or only a small fraction of a secure supply.” Deutsche Welle also looked at the downsides of Germany’s renewable energy revolution in Power exports peak, despite nuclear phase-out.

The World Trade Organization (WTO) is caught up in the renewable energy wars as countries jostle for a manufacturing advantage in their home markets. First it was the US and China going head-t0-head over alleged illegal subsidization of Chinese solar PV panels sold in the US. The US has since imposed tariffs on Chinese imports.  China responded by saying US renewable energy projects violate WTO rules. Then it is China and Europe going to battle. In July European solar manufacturers filed a complaint with the European Commission seeking tariffs on Chinese-made panels, alleging that Chinese manufacturers received illegal subsidies and were dumping at below-cost prices. Now China has gone to the WTO claiming Europe is illegally subsidizing its solar panels.  However, the poster boy for renewable energy subsidies is currently Canada. Its largest province, Ontario, openly subsidized wind and solar projects and gave the largest advantage to local firms that produced equipment in the province and created jobs. This brought complaints to the WTO from Europe and Japan and last week the WTO ruled against Ontario in a landmark decision affecting the global renewable energy industry. It is expected that Ontario, and other other jurisdiction, will be required to remove local manufacturing requirements from their renewable energy policies. See also WTO Backs EU, Japan on Canada’s Green Energy Program  The decision has led some to argue that green energy should be exempt from WTO rules because of its necessity to address climate change.  See International Business Times World Trade Rules Need an Exemption for Green Energy, The Harvard Business Review The Case for Clean Subsidies and Huffington Post Trade Ruling Undermines Efforts to Curb Climate ChaosAccording to the Globe and Mail, Canada will appeal the WTO decision.

 

 

 

 

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