Following the results of last year in UES of Russia the historical record of electricity consumption (1090,44 billion kilowatt-hour) and capacities (161,4 GW) was set. At the moment the plan of buildings for association Unified Energy System of the East and Siberia prepares.

The East Ground project is realized. The power supply system of the country works like clock-work and the world around lives in conditions of an energy crisis. Someone (for example, China) is more adapted for extraordinary conditions, and someone (for example, Europe and the USA) has to look for guilty of the troubles and appoints Russia.

In Great Britain consumers of a number of operators saw an amazing thing: at a tariff ceiling in 1277 pounds sterling a year that rose to 3,5 thousand pounds sterling. Most of the British suppliers of the electric power or at all ceased to offer clients opportunity to pass to a tariff with the fixed price, or estimated such a tariff more than at 3 thousand pounds sterling.

The International Power Agency (IPA) composed very amusing plans for refusal of the Russian gas for European Commission. There are absolutely striking options among them. So, for decrease in «dependence of the EU on the Russian gas» it is offered to make a compromise with «green» conscience. IPA urges to increase consumption of coal and fuel oil.

And the large industrial enterprises in Europe are compelled to reduce production or at all to be closed. Such is a destiny of seven Spanish cement works of the Portland Valderrivas Cementos company, steel foundry of Lech-Stahlwerke in Germany and one of the world’s largest suppliers of mineral fertilizers — the Norwegian company Yara. And the energy companies in the European Union revise the forecast of profit towards increase, after all energy carriers rise in price.

But how did Europe face such a life? Reading news in the western mass media and articles applying for the status analytical involuntarily there is an impression that the world power did not exist until the end of February, 2022 that in Europe everything was good and here from the East hostile whirlwinds blew. But we will tell how the world power industry developed last year and by that we will remind of a global energy crisis which nobody cancelled with peal of bells in the night of December 31, 2021 for January 1, 2022.

For the sake of crisis

Though nominally crisis began in 2021, its roots were traced at least till 2019. Then against surplus of the offer of gas there was a noticeable reduction of prices which struck on the European companies which pumped natural gas in underground storages in the summer to sell it in the winter. Gas in a cold season is usually more expensive than in warm, but in 2019 it turned out on the contrary. Having faced in January-February, 2020 losses instead of desired profit, the European players learned a bitter lesson from the situation which played with them a dirty trick in the 2021.
Last year the private European companies reluctantly accumulated gas by winter as they did not believe that high prices will last long. On the contrary, some European players hurried to sell the gas which in the summer is just pumped, but already in time to rise in price.

It is possible to see a number of prerequisites of an energy crisis and in 2020. The pandemic became main among them, leaving far beyond fuel and energy complex. Because of it the power branch missed a considerable share of capital investments. Projects which could satisfy sharply increased demand for natural gas were not started.

According to preliminary estimates, demand for natural gas in China only increased for last year by 40 billion cubic meters — to 370 billion cubic meters. The most part of this growth was satisfied with the liquefied natural gas, and pipeline deliveries to force of regional specifics made considerably a smaller contribution.

It is also possible to allocate such prerequisite as climatic pressure. On financial institutions press obligations to stimulate «green» power transition. Why to give money for oil and gas if it is possible to give out them on a wind and the sun, especially as both the European politicians and their American colleagues predict fast falling of traditional power under mighty blow of the renewables (RES)? How it is possible not to trust the U.S. President Joseph Biden who intends to invest trillions of dollars in development of RES and to refuse fossil fuel? It is necessary to trust such a worthy person. Respectively, investments to the oil and gas sphere start being perceived as high-risk.

A huge contribution in an aggravation of an energy crisis in 2021 was brought by weather conditions. The hot summer in the Northern hemisphere urged on demand for the electric power. Unexpectedly there was a new peak of consumption of energy carriers — summer. This circumstance struck additional blow to the shaken gas prices. Natural gas was required much more than usually. From Great Britain to India, from Russia to the USA — everywhere there was abnormally great demand on the electric power. For example, in the States at the end of summer, according to Energy Information Administration (EIA), the consumption record — 720 GW-hours was set. And in our country numerous records noted South Unified Energy System but also in scales of all Russia during last summer the top bar of a summer maximum was several times raised. At the end of June even three records in a row were set.

And, of course, how not to mention a wind farm (VF). The wind incredibly strongly brought those countries which staked on this renewable source of energy. In Germany possessing at the moment 64,3 GW of wind generation last year electricity generation was reduced by VFs from 131,85 terawatt-hours in 2020 to 113,51 terawatt-hours. That is demand for the electric power increased, but RES could not help — it was necessary to use gas and coal.

The gas became more expensive, the more actively it replaced with coal. Production of coal was not in time behind suddenly increased demand — the prices went up.
In other words, everything that could go wrong went wrong. A perfect storm that made everything work to create a crisis. But it did not hit everyone equally.

The protected China

If the energy crisis was connected with shortage of the offer, that, turns out, it could be stopped easily, having simply increased production of energy resources. China did just that.
As well as Europe, the People’s Republic of China faced a lack of coal. The prices went up, having dangerously come nearer to a mark of 300 dollars for ton. Futures for thermal coal at Zhengzhou commodity exchange reached a maximum on October 19, and then fell in 10 days to 56%, spot quotations on coal in Guangzhou for the same period decreased by 44%. It was made at the expense of sharp increase in production.

According to the State committee on development and reforms of the People’s Republic of China, daily production of coal in China increased by December more than to 12 million tons. In only two months coal reserves at power plants increased approximately on 70 million tons — to 147 million tons. Coal mining in the People’s Republic of China in relation to 2020 increased by 4,7% — to 4,07 billion tons.

Rated capacity of power plants of China too did not stand still: within last year it grew by 7,9% (to 2,38 TVT). From the point of view of a share RES most actively developed: rated capacity of solar power stations (SES) rose by 20,9% (to 306,56 GW), and wind — for 16,6% (to 328,48 GW). But where it is more important that indicators not only renewable sources, but also traditional generation increased: The NPP — for 6,8% (to 53,26 GW), hydroelectric power stations — for 5,6% (to 390,92 GW), and thermal power plant — for 4,1% (to 1297 GW).
Solar generation (plus 53 GW) became the first on a pure gain, and the second place took thermal (plus 50,5 GW). Besides we after all remember that these GWs are inadequate. The efficiency of rated capacity of the Chinese SES last year made 12,18% that for this type of generation is quite good result. But at thermal power plants the similar indicator reached 49,7%. The «thermal» GW was four times more effective than «solar».

In general electricity generation in China increased last year in comparison with indicators of 2020 by 9,8% (to 8377 terawatt-hours). And it is not low base, after all and electricity generation in the People’s Republic of China grew in the 2020th — for 4%.

If to summarize a subject of the Chinese achievements in power industry, it is worth allocating the main thing: we see harmonious development of all types of electric generation. There are no RES for the sake of RES. Such (and only such) an approach provides preservation of stability of a power supply system at the growing consumption. It is possible to object, of course, as China faced last year interruptions in power supply against demand peaks. And this is true. But the main thing here with what speed the power supply system adapted for new calls and how successfully the thermal power plant managed to provide with energy carriers.

If to speak about gas which shortage started an energy crisis, the most part of contracts contains oil binding in China. It means quite simple thing: exchange quotations in Asia are usually higher than in Europe, but an average price of gas in ATR depends on price of oil much more. The situation is opposite In Europe.

Vulnerable Europe

In January, 2021 at the European exchange TTF gas reached a point about 250 dollars for 1 thousand CBM. And on Asian platforms (Platts JKM) at the same time it cost 300 dollars. At the beginning of 2022 the difference in quotations was similar, but they fluctuated around 1 thousand dollars za1 thousand CBM. Thus the average prices in Asia, by the existing estimates, were lower, than in Europe.

Since 2009 the European Union systematically went on the special way to areas of energy industry. Sincerely including himself the market of the buyer, the EU sought to liberalize at the same time as much as possible the energy markets and to introduce fine antimonopoly measures in a naive not turbidity. Any player should not have had even theoretical opportunity to reach a dominant position in the market. But any new supplier easily and easy got access to the European market.

The authorities of the European Union did not confuse at all that implementation of new large projects in the field of gas deliveries demanded an exception of these projects from under action of so fine and thought-over rules. The market worked.

Of course, when reforms started, reduction of prices of energy carriers were promised to common Europeans. For example, citizens of Germany were assured that the new market model will allow reducing prices of electricity of time in two. Instead they grew up by the beginning of 2021 three times, and Germany won doubtful first place in the world on high cost of the electric power for households.

The extremely debatable is the question of a role of renewables in an increase in prices for electricity in Europe. Periodically similar discussions try to stop the powerful thesis that Europeans (especially Germans) very rich therefore all these high prices mean nothing to them. And we even would agree with this argument if rich Europeans did not start taking to the streets in 2021, looking on meaningless rise in prices.

The fact remains: the European market of the electric power was inadequate to the calls generated by a world energy crisis. Its inadequacy is defined by a sharp increase in prices and that blow which this growth struck to the European economy.

In the majority of EU countries in 2021 the five-six fold growth of wholesale prices for the electric power was observed. So, in the wholesale market of Spain in December the record — 273,61 euros / megawatt-hours was set. Also its neighbors in the continent did not lag behind: France — 282,52 euros, Portugal — 212,24 euros, Germany — 265,39 euros, Italy — 269,73 euros. Great Britain which left the EU, but kept its economic model went in the general course — 253,05 euros /megawatt-hour.

By present moment the situation was only aggravated. We already mentioned the large Spanish producer of cement who was compelled to suspend work of seven enterprises. The reason was in expenses on the electric power (285-370 euros /megawatt-hour). Now Portland Valderrivas Cementos waits for the moment when the electricity falls in price at least to 200 euros /megawatt-hour.
Though recently at the European authorities the desire to appoint the reason of all problems Russia increased, but problems of the Spanish producers of cement began in October of last year. Then they for the first time started talking about an inevitable suspension of work if the high prices of the electric power remain. But what were they answered at that moment? The Agency of the European Union on Cooperation of Power Regulators (ACER) started assuring that the prices of natural gas and the electric power have to fall considerably in April, 2022. That is it was offered to wait.

However, we will not be excessively categorical: the government of Spain tried to solve a problem of high prices of the electric power due to decrease in taxes. But this measure had the same improving effect as painting of the deck on the vessel with a huge hole below the waterline.

In this sense Germany interestingly arrived. Its management too decided to reduce the tax (tariff) pressure upon electric power cost. But it plans to make in July, 2022. The dropping-out income of operators of systems of transfer (the network companies) at the expense of which want to solve a problem, will be compensated for the account of means special «Power and climatic fund» of the federal government.

Coal plugs the holes

But what did cause vulnerability of Europe? Why did the prices grow so promptly? The same economic model elected by the European Union within which from suppliers of energy resources it was required to pass to the exchange principles of work is guilty. So, suppliers of gas were transferred for years from contracts with oil binding for contracts with a binding to exchange quotations. And in the conditions of shortage of the offer on a global scale the exchange appeared the bad assistant.

Besides, against Europe also the design (organization) of a power supply system played. More precisely, excess capacities of wind generation. And from the beginning of 2022 the situation did not improve much more.

Following the results of the two first months of the current year VFs of Germany made 36,58 terawatt-hours of electric power. For the same period of last year that indicator made 25 terawatt-hours, and in record the 2020th — 36,74 terawatt-hours. Also can seem that though the record and was not beaten, but wind farms as much as possible came nearer to it. But there is one «but»: in two years their rated capacity increased by 5 GW.

Besides if in January the wind provided 34,9% of the electric power developed in Germany, in February of 46,2%, for the first two weeks of March its share was reduced to 18,3%. But loading of gas and coal power plants grew.

Coal rendered huge service to the European power supply system in the 2021and the beginning of 2022. Not only replaced with it the rising in price gas, but also stopped up power holes. Here France which once again faced breakages on the NPPs that demanded to load in addition two coal power plants which remained in the country can be the most indicative example.

And the situation in Europe not strongly differed from the universal. In any case, if we speak about level of demand. The international power agency noted that electricity generation from coal following the results of 2021 grew by 9%, having taken a record mark in 10 350 terawatt-hours. And 2022 has every chance to bring a new historical record on cumulative demand for coal.

Whether but forced a world energy crisis to revise plans of the European Union for refusal of coal generation? No way. Moreover, the speech does not go even about a suspension of implementation of these plans — the countries of Europe completely ignore the risks connected with abnormally high prices of energy carriers. In December of last year Germany stopped three nuclear reactors and 11 coal thermal power plants without a shadow of doubt.

Stores with a spark

All responsible persons in the EU only for the last three-four months managed to declare repeatedly that no deviations from initial plans for «gardening» of power are present and cannot be. The analytical company Ember even acted in January with incredibly timely idea how to resolve an issue of the electricity which is rising in price because of gas. According to wise analysts who urged «not to revive coal earlier», it is enough to refuse natural gas and to construct more wind-driven generators. Next day after the publication of this amazing solution of all problems daily electricity generation from a wind fell in Germany more than four times — to 94,6 GW-hours.

The growing demand for traditional energy carriers even was called a last breath for production of fossil fuel. In parallel with this IPA noted that since the beginning of 2020 the price on polysilicon grew more than four times, steel rose in price for 50%, aluminum — for 80%, copper — for 60%. In addition solar photo-electric modules and wind turbines in the USA, India and the European Union rose in price. And it means that cost of electricity generation from RES grows. However, this factor not so we mean against the gas testing a mark of 4 thousand dollars for 1 thousand CBM and coal which price increased from 186 dollars for ton at the end of February to 460 dollars for ton to the middle of March.

At the same time lithium continues to rise in price. And quite naturally batteries which are used in electric cars and as stores of the «green» electric power started rising in price. According to the forecast of BloombergNEF, the price of lithium — ion accumulators in 2022 will increase by 2,3% but considering that from the moment of the publication of this forecast of lithium rose in price more than twice, such an assessment seems excessively optimistic.

The Solar Power Europe Company in the annual report of European Market Outlook for Residential Battery Storage 2021-2025 noted that in 2020 the number of solar batteries and stores in houses of Europe grew by 44%, to 140 thousand established units. In only 12 months more than 100 thousand systems of storage of energy were installed. According to the forecast, household solar generation in combination with stores of energy will increase more than by 400% (with 3 GW-hours to 12,8 GW-hours by 2025).

Systems of this sort (even more expensive because of rising battery prices) can make sense if in your country prices of electricity abnormally grew, and you have opportunity to hand over the saved-up surplus in a network. But there is a nuance.

In March, 2022 the German supplier of Senec batteries declared that its systems of storage automatically switch in an adjustable waiting mode. «It is a voluntary preventive measure, — the company assures. — There are no signs of that there are any technical problems with our systems». A background for remote shutdown were at once three messages on explosions in houses in which systems of storage of Senec — because of technical defect were installed as the fire service reported, the battery lit up. It is undermines appeal of installation of accumulators in houses a little.

Taxonomy of the EU

At the beginning of February the European Commission approved the historical document — the additional delegated act of climate for decarbonization acceleration. It included concrete types of the nuclear and gas power in the list of the types of economic activity covered by taxonomy of the EU.

The taxonomy of the European Union is a system of the classification establishing the list of ecologically steady types of economic activity. In principle it has to direct private investments into power areas on the most effective way which is obliged to lead Europe to climatic neutrality.

The European Commission included nuclear power and gas plants (their certain types) in the second category of kinds of activity. In practice it means the following: The NPP and gas thermal power plants cannot be replaced technologically and economically expedient low-carbon alternatives yet. Respectively, they admit transitional power sources.

Unfortunately, it was not the indulgence allowing investing freely in reliable traditional generation. So, investing in new gas power plant in the territory of the European Union, you have to be ready to transfer completely object to renewable or low-carbonaceous gases (most likely, hydrogen) by December 31, 2035. The same approach, by the way, in the fall of 2021 was designated in the coalition agreement which signed the German parties which won elective race.

But the nuclear power for the first time officially was called low-carbon. Moreover, the European Commission directly declared that emissions of carbon dioxide from the NPP during all their life cycle are comparable to emissions from power plants on renewables. And this completely corresponded to views of the nuclear leader of the EU — France and the countries of Europe which adjoined it. But all this did not mean automatic rehabilitation before a face of «the green transaction» and the bright carbon-free future.

The Council of Europe and European Parliament will have four months to study the document. Both institutions can request two additional months for check. After this procedure, as expected, the delegated act will come into force only since January 1, 2023. And right there everyone will have strictly regulated opportunities to invest in gas and nuclear generation.

However there came the end of February and the situation sharply changed.

IPA loads a cartridge into the cylinder

The acute reaction of Europe on special operation of Russia in the territory of Ukraine was in general expected. Nature of actions of the authorities of the European Union was also predicted. But here that at first sight does not give in to a reasonable explanation, so it is attempts of the EU to aggravate the already difficult situation in the field of power. How differently it is possible to perceive statements of numerous European politicians and officials who started going on about a ban on the Russian energy carriers?

The Russian companies continue delivering gas, oil, oil products, and coal and so on within the contractual obligations. More than obviously what to refuse these deliveries borrowing to a half of cumulative import of the EU it was impossible even in more safe years and furthermore now, in the conditions of shortage of the offer on a global scale.

But loud statements about a potential ban create uncertainty against which the prices start setting the new records beating on purses of buyers. If Europe has hit Russian energy by now, it is only with an extra sack of money. Europe, producing ill-considered statements, seems to have decided to play Russian roulette with its energy industry.

And the International Energy Agency suddenly decided, figuratively speaking, to put a cartridge in the drum. It issued «The plan from 10 points on reduction of dependence of the European Union on the Russian natural gas». If it was not the product applying for the status analytical, this plan could get an award as the best comic work of the last ten years. The only thing that it is not ridiculous: it was discussed in all seriousness by the European leaders.

What amuses us in this plan? About a third in it holds positions which already the EU tries to realize for the last 20 years. Among them are refusal of long-term contracts, search of alternative suppliers, increase in quantity of new wind and solar power stations. A half — appeals to Europeans to reduce energy consumption and to increase electricity generation from the dispatched low-carbon sources (by whom already there is no place to increase production). You experience difficulties with payment of accounts and are compelled to save? Start saving is will solve your problems even more!

Separately it is worth mentioning the strange offer on the minimum obligations for gas storage («for increase of stability of the market»). In fact it is very reasonable. By strange it is done by absolute impracticality under such initiatives of design of the European energy market which is built since the end of the 2000s.

The only unconditionally standing point in this plan speaks about a need «to take short-term measures for protection of vulnerable consumers of the electric power against high prices». In the explanation of IPA is written the following: «with the current design of the market the high prices of gas in the EU lead to high wholesale prices for the electric power». It is unclear what this has to do with Russian gas in particular, if the European Union is paying dearly for any gas, and the price crisis in the electricity sector has been raging since early last fall.

Most importantly, in our view, this is an implicit acknowledgement of the failed design of the energy market. There could be it other and reduce the price pressure upon the population? Absolutely, the example of China is a help to Europe But the real measures which would allow the EU to cope with the current crisis and to avoid its repetition in the future, consist in refusal of a number of the fundamental reforms which are the cornerstone of the modern energy market of the European Union. None of the politicians will implement such measures, especially when it is possible to accuse Russia of all the troubles.

A manager won’t solve a problem as long as there’s someone to blame. Therefore frankly senseless plan «on refusal of the Russian gas» is discussed at the top level. In other words, accusing our country, many European politicians simply decline all responsibility and hackney eyes to the citizens.

To the middle of May the European Commission is going to submit even more convincing offers on refusal of the Russian energy carriers (by 2027). We believe there will be many spells about RES, «green» power transition and search of alternative suppliers. That is nobody is going to solve real problems. And world crisis proceeds (differently the prices in Asia would already start falling), and in the summer it can go to the second, even more frightening round. Europe decided to play further with the power the Russian roulette. We sincerely hope she is not flirting.

And Russia is always ready to help reducing the detrimental impact of the global energy crisis on the European economy. The main thing is for this help to be accepted.