Taps Coogan – November 9th, 2021

Enjoy The Sounding Line? Click here to subscribe for free.

One month ago today, we noted that Gazprom’s natural gas storage sites across Europe were sitting nearly empty and Russian gas flows to Europe were slowing to a trickle at the very time that the EU needed to be building gas inventories for the winter heating season.

One month later, the heating season has started and gas flows through one of the three pipelines that feed Russian gas into the EU have stopped all together, as the following chart from Nordea’s Andreas Steno Larsen highlights.

The Mallnow terminal is the entry point for Russian gas into the EU via Poland. The other two routes are through Ukraine and NordStream 1.

As we explained last time, import capacity isn’t the limiting factor for the EU. However, you can’t import gas that doesn’t exist. Global natural gas production is the real limit and supply tightness is popping up everywhere from Russia, to Asia, to South America.

That problem stems in large part from the West continuing to do everything in its power to discourage natural gas production and associated infrastructure, while eliminating coal (justifiably), and dismantling the nuclear power industry. At the same time, global demand for natural gas as a cleaner alternative to coal continues to grow robustly.

The very people that don’t understand how their past policy choices have contributed to the current energy crisis are the first ones to propose battery storage as a solution to these problems, yet again in defiance of reality.

The grid scale battery applications being built in increasing numbers are almost universally aimed at shifting solar energy output a few hours into the future: from solar noon to roughly 7:00 pm the same day (when electricity demand typically peaks). That’s a useful thing, but unrelated to the current energy crisis.

There is essentially zero battery storage being built to store solar (or wind) energy for the six months required to handle the seasonal trends in renewable production and electricity consumption, not to mention winter heating.

For the foreseeable future all the grid scale battery capacity the world can produce is likely to be consumed smoothing out the intraday variability of wind and solar. In the meantime, the only truly scalable way to bridge the huge seasonal variations in wind and solar and energy consumption while simultaneously reducing carbon emissions is coal-to-gas switching and nuclear.

However, if the US and Europe decided to start building large numbers of nuclear plants tomorrow, few if any would be completed before 2030. That means coal-to-gas switching remains by far the best way for countries like the US, Germany, India, China, etc.. to reduce carbon emissions without causing rolling blackouts, rationing, and ridiculous heating bills.

That of course would require more natural gas production, which would in turn require less vilification and black-listing of the industry and the infrastructure that supports it, so don’t expect it to happen any time soon.

In the meantime, for those that can manage one, a wood stove is likely to be the only respite from brutal heating bills, something which is likely to rile the ‘environmentalists’ to no end.