Climate rescue postponed due to price hikes / Economy / Nezavisimaya Gazeta

It turns out that Russia is the beneficiary of the increased cost of renewable energy sources

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The transition to green energy turned out to be more difficult than expected. One reason is the high cost of alternative energy and energy itself. So, for the first time in seven years, the cost of solar power rose in the second quarter, say analysts at Wood Mackenzie. The main reason is problems in the global supply chain and rising prices for commodities such as steel and aluminum. The energy transition is complicated not only by the high prices of renewables (RES), but also by their general shortages. The speculative rise in gas prices and the rise in electricity prices in the European Union are increasing countries’ interest in coal despite the goal of abandoning it. Russia, as the main supplier of traditional raw materials, turned out to be the main beneficiary of the overall energy crisis.

Solar prices rose in the second quarter of 2021 for the first time since 2014, according to a joint study by Wood Mackenzie and the Solar Energy Industries Association (SEIA). The increase in value occurred on a quarterly and annual basis in all market segments. Bloomberg reported that in the second quarter, residential solar was $3/watt and commercial solar was $1.4 compared to $2.9 and $1.3/watt in the previous quarter, respectively. Wood Mackenzie believes the problem will become more apparent in 2022, as many developers now have enough active projects.

He notes that the cost of solar energy has gone up due to rising costs, as well as the failure of global supply chains. Rystad Energy reports that solar panel prices are up 16% year over year, with total panel shipping costs up 12% in 2021. In addition, Wood Mackenzie is seeing an increase in the cost of raw materials such as aluminum and steel.

“This is a defining moment for our climate future, but rising prices, supply chain disruptions, and a host of business threats threaten our ability to decarbonize the grid,” said Abigail Huber, CEO of SEIA.

However, over the past decade, the number of solar power installations in the world has increased by about 19 times, leading to the closure of many coal and gas plants, analysts say. “The dynamic pace of the shift is due to the fact that panel prices have fallen by 89% in that time, making solar installations one of the cheapest and most expensive sources of energy,” Wood Mackenzie said in a review.

The company expects further growth in solar demand. So, during the second quarter, more than 5.7 GW of solar capacities were built in the USA alone, which is 45% more than for the whole of 2020. As a result, the installed capacity of solar panels in the US was 108.7 GW.

In a joint report, Wood Mackenzie and SEIA forecast that average annual solar energy use will be around 29 gigawatts between 2021 and 2026. At the same time, according to results for the current year, solar capacity will increase by 26.4 gigawatts, analysts predict.

This is significantly below the goals of the US authorities. Remember, the US goal is to raise the share of renewables to 50% by 2050. To date, they represent only 3% of the country’s electricity. To achieve these goals, the solar industry must install more than 80 gigawatts of solar capacity annually from 2022 to 2035, says Wood Mackenzie.

Experts assure that solar energy, despite the demand, faces many problems – from high prices for equipment to complex communications. Not the last role is played by constraints in supply chains.

In turn, calm in the North Sea in recent weeks has brought wind farms to a standstill in Europe. Against the background of reduced supplies of natural gas from Russia, as well as a decrease in stocks of standard raw materials in underground gas storage facilities (UGS), this has led to a significant increase in electricity prices in the region. In Britain, electricity prices soared to £285 ($395) per megawatt-hour in September, breaking a 22-year high, according to data from analytics firm ICIS. In Germany, the wholesale cost of electricity for connection early next year has reached 90 euros per megawatt-hour ($106), the Financial Times reports. That’s nearly double what it was in January. “This price hike has surprised many. If it is repeated in the winter, when demand grows, the stability of the European energy system will be in jeopardy,” ICIS analysts warn.

At the same time, it is becoming more difficult today to compensate for the decline in electricity generation from traditional sources. Last Wednesday, the cost of natural gas in Europe exceeded $950 per thousand cubic meters. m against the backdrop of increasing demand for blue fuels in Asia and lower gas injection rates at European UGSFs. Some countries have decided to use coal-fired power plants. In particular, Britain has already resorted to such a practice against the background of gas shortages.

However, the ability to increase the use of coal today is very limited. Independent European think tank E3G reports that since the signing of the Paris Agreement in 2015, 1,175 GW of coal-fired projects have been canceled globally. “The world has avoided a 56% increase in the total global coal fleet (as of June 2021), which is equivalent to China’s second addition (1,047 gigawatts) to global coal capacity,” the center says.

Spain plans to phase out coal-fired power plants by 2027, and Germany plans to do so by 2038. Meanwhile, according to data published by the German Federal Statistical Office, electricity production from “conventional” energy sources has increased by 21% in half The first of this year. Overall, conventional energy sources, including coal, natural gas and nuclear power, made up 56% of the total electricity supplied to the German power grid, Deutsche Welle writes. At the same time, coal accounted for 27% of Germany’s electricity, while the share of wind energy fell from 29% to 22%.

Against the background of this energy crisis, Russia is increasing the supply of coal exports. According to the Federal Customs Service, in the first seven months of this year, the country exported 116.4 million tons of coal, an increase of 11% over the previous year. In terms of value, coal exports reached nearly $8 billion, up 15.8% year-on-year. The cost of Russian thermal coal in Europe was $137 per ton in August.

So far, Russia appears to be some kind of beneficiary of the European energy crisis, and the other question is for how long.

Anatoly Chubais, the Special Representative of the President of the Russian Federation for Relations with International Organizations to Achieve the Sustainable Development Goals, said two weeks ago that Russia’s coal mining industry could “run into a wall”. In his opinion, the global energy transition will force Russia to significantly accelerate the development of renewable energy.

Natural gas experts report that the fourth energy transition, associated with an increase in the share of renewables in the energy balance, and among other things, due to tasks to combat climate change, has been going on for more than a year. At the same time, the high prices of solar panels at the present time will become a challenge to the implementation of plans to increase this generation, but it will not cause any fundamental shift in the process of energy transition, believes Alexei Khokhlov, head of the Electric Power Department. Industry in the Energy Center of the Moscow School of Management Skolkovo.

What is happening now in the renewable energy sector, and transformation plans to reduce harmful emissions and decarbonize the economy are growth problems, says Artem Dave, head of analytics at AMarkets. In his opinion, such sharp increases in resource consumption will occur, and will not keep pace with the share of renewables in power generation, as was expected. “The epidemic, which has drastically reduced demand and production of energy resources, has confused all the cards and has become an additional factor. Now, after a sharp decline in oil production and a drop in coal prices in 2020, there are many imbalances in the market, and it will take time for this to end, as Indicates.

At the same time, the expert admits that for Russia, as one of the main suppliers of energy resources in the world, high oil, gas and coal prices are a big plus. “Extraction companies are making higher profits and demand is rising very quickly,” he says.

Russia is one of the world’s largest energy exporters. The more expensive it is to produce green energy, the less incentives consumers will have to reject for Russian oil, gas and coal,” agrees Artem Tozov, Executive Director of Capital Market Management at Univer Capital. However, he recalls, the EU’s zero-emissions strategy by 2050 is Long-term strategy So a short-term rise in green energy prices is generally considered neutral for Russia, the analyst believes.

According to Tuzov, the current crisis in the energy market is local. “Oil does not grow like that after gas. That is, the demand for oil does not exceed the supply. The gas situation in Europe is also temporary.

Alfa Capital’s director of analysis, Vladimir Bragin, believes that the reason is very high expectations about the possible speed of the transition to renewable energy. “This has been exacerbated by the pandemic, supply chain disruptions, cold winters, etc. But this does not change the overall trend in the modern green energy agenda,” he said.

Russia only benefits from rising solar energy prices and a slowdown in green energy formation, says assistant professor at the Russian University of Economics. Plekhanov Oleg Kalinov. In his opinion, it is unlikely that in the near future humanity will be able to completely switch from traditional sources of energy to renewable ones. “It is still too early to say that some energy carriers will completely become a thing of the past. The world is developing unevenly. And if Europe is fairly close to low-carbon energy, some countries are still actively using firewood and coal “, says the economist .

Kalinov notes the high potential of Russia as a gas producer. At the moment, our country has about 47 trillion cubic meters of world reserves of this resource. m. Over the past decade, world gas consumption has increased by 20%. Given the increase in demand in the coming years, it is not worth waiting for low prices for conventional energy resources,” he does not rule out.

According to Tatyana Lanshina, a senior researcher in the Center for Economic Modeling of Energy and Environment at RANEPA, the fact that the cost of solar electricity increased by several percent in the second quarter of 2021 changes nothing globally. “Going forward, solar and wind energy will continue to decline due to continued advances in technology and economies of scale,” she says. Boris Fine, director of RANEPA’s Center for Economic Research on Infrastructure Industries, said Doubts.

Green energy has turned into a fairy tale in public relations, says economist Andrei Loboda. If the industry is truly successful, it will gain market shares from oil, gas and coal. So far, everything is just the opposite. Calm weather has proven to be a weak link in Western European energy and an epiphany for investors, electricity prices in the UK, Germany, France and the Netherlands have already risen by more than 100%. The energy sector in Western Europe has been shown to be powerless in the face of recovering demand on the back of gas shortages and an unprecedented acceleration of speculation in blue fuel prices.”


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