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EU ESCALATES AGAINST RUSSIA: European Union leaders announced a plan to cap the price of Russian gas yesterday in an attempt to siphon Russia’s main source of funding for its war in Ukraine while also curbing “astronomic” energy prices for consumers, which under the EU’s power market system are tied to the cost of natural gas.
European Commission president Ursula von der Leyen announced the proposal yesterday in Brussels, where EU energy ministers will arrive for an emergency meeting later this week. (In May, the EU published its formal plan to end reliance on all Russian fossil fuels by 2027, a timeline that was upended this summer, when Russia began throttling gas supplies via Nord Stream 1.)
Leaders will also consider a 10% reduction in energy use, as well as passing a windfall tax on energy companies. The surplus funds would then be funneled back to consumers in an effort to alleviate the soaring electricity prices.
The proposal is an escalation by the EU and raises the risk of gas rationing for some countries, including Germany, whose storage tanks are at heightened risk of running out before March.
Putin’s take: Speaking yesterday in the Russian city of Vladivostok, Vladimir Putin described the EU’s gas price cap proposal as “stupid,” arguing it would have the opposite effect and cause prices to climb even higher.
“We will not supply anything at all if it contradicts our interests,” Putin said. "We will not supply gas, oil, coal, heating oil—we will not supply anything." (The EU continues to receive a small amount of Russian gas via alternative pipelines, including the Yamal-Europe line, which make up a small share of the bloc’s Russian gas imports.)
In threatening Europe, Putin invoked a famous Russian fairy tale, "The Sister-Fox and the Wolf," warning that, without its fossil fuels, the West would be “frozen” like the wolf’s tail in the fable.
But European leaders are also hoping to some degree that they can call Putin’s bluff, banking on the idea that Russia cannot afford to halt its natural gas production, which is a crucial source of war revenue.
The plan is not without significant risks: EU commissioners noted that such efforts could trigger so-called “force majeure” clauses in existing contracts with Russian state-owned gas giant, Gazprom, and carry a “possible escalation of geopolitical tensions.”
Norwegian prime minister Jonas Gahr Støre warned that the bloc should proceed carefully, especially in adopting measures that could threaten EU energy supplies ahead of a tough winter. “One should carefully evaluate the implications of certain measures so that the result is not a reduction of supply,” he told the Financial Times.
Others argue that, after months of Russia throttling supply and abruptly halting deliveries, the EU has little left to lose. "Significant disruptions [to Russian energy supply] are already taking place without a price cap," the European Commission told Reuters in a statement.
Another important point: Russia cannot just turn its natural gas production on and off at will: Since Russia delivers most of its gas via pipeline, it does not have LNG capacity for overseas shipment, analysts note—making any short-term redirection difficult.
“Somebody like Putin loves the optics of closing the pipeline, closing the supply spigot — but in reality, natural gas doesn’t really work like that,” Margarita Balmaceda, a professor and author of a book about Russian energy chains, told Marketplace Morning Report. “You cannot really stop producing natural gas so quickly. And if you do not have somewhere to store natural gas that you have already produced, your only choice is either to let it flare in the air, or to continue shipping it.”
“Unless Russia wants to permanently shut down their [natural gas] industry, or at least for the foreseeable future, they have to continue to produce, and have to disperse supplies somehow,” Daniel Vadjdich, a lobbyist and senior fellow at the Atlantic Council’s Europe Center, told Breanne.
Welcome to Daily on Energy, written by Washington Examiner Energy and Environment Writers Jeremy Beaman (@jeremywbeaman) and Breanne Deppisch (@breanne_dep). Email jbeaman@washingtonexaminer.com or bdeppisch@washingtonexaminer.com for tips, suggestions, calendar items, and anything else. If a friend sent this to you and you’d like to sign up, click here. If signing up doesn’t work, shoot us an email, and we’ll add you to our list.
RUSSIA UPS IMPORTS TO CHINA AND INDIA AHEAD OF OIL PRICE CAP: Russia significantly increased its energy exports to Asia this summer, a new report found, in a sign that Moscow plans to redirect its supplies to other consumers as Western countries try to end dependence on Russian fossil fuels.
According to the Centre for Research on Energy and Clean Air, Russia received roughly $158 billion in revenue from its sales of natural gas, oil, and coal between February and August, diverting more than half of supplies it planned to sell to EU consumers before the start of the war.
China topped the list of buyers for the six-month period, buying roughly $35 billion in Russian energy supplies.
MEANWHILE, GERMANY RELUCTANTLY EMBRACES NUCLEAR: German Vice Chancellor Robert Habeck confirmed that Germany will keep two of its three remaining nuclear reactors on “standby” through April 2023 in case of a supply emergency— a remarkable turnabout from a country known for its long-held opposition to nuclear power.
Speaking in Berlin, Habek said leaders in his country no longer believe that Russia will resume its gas deliveries. "We will have to solve our energy problems without any further regard to Putin's erratic decisions,” he said, according to Reuters.
In announcing the plan, Habeck stressed Germany would keep the plants online only as an option in the event of an emergency, and would not even equip them with fresh fuel elements. "We have to prepare for the worst," he said, adding that the plants “will only reopen when more power is needed."
Some argued that Habeck did not go far enough in helping Germany stave off a potential energy crisis: “When we demand solidarity [from Europe on a 15% gas rationing plan], we should also make our contribution to energy generation," said German conservative parliamentary leader, Steffen Bilger.
Some pro-business Free Democrats also voiced criticism, arguing that the nuclear reactors should run longer rather than be relegated to a last-ditch, standby option. "It's simply a matter of reason to enable every climate-neutral kilowatt hour now," FDP deputy leader Johannes Vogel said.
BOTH U.S. AND EU UPPED RUSSIAN METAL IMPORTS IN MONTHS AFTER WAR BEGAN: The U.S. and EU have ramped up their imports of Russian aluminum and nickel in the months following Russia’s invasion of Ukraine. Citing U.N. Comtrade data, Reuters reports that the EU and U.S. increased aluminum and nickel imports from Russia by as much as 70% between March and June—amounting to a total value of $1.98 billion.
The increase underscores the difficulty in taking action against Russia’s industrial metals, for which there are few alternative suppliers.
Russia is the world’s second largest aluminum producer, second only to China, and accounts for roughly 6% of global supply. It also exports about 15-20% of the world’s battery-grade nickel.
In many cases, countries simply lack alternative sources of supply, analysts from S&P Global said in a report earlier this year. And since the West has largely avoided targeting Russian metals in their sanctions packages, companies “have had to make individual decisions about whether to continue buying Russian metals,” analysts said.
NEAR EAST FACING PARTICULARLY BAD CLIMATE CHANGE – STUDY: The eastern Mediterranean and Middle East are warming nearly twice as fast as the global average, a new report found, with temperatures forecasted to rise by up to 9 degrees Fahrenheit by the end of the decade unless quick and decisive action is taken to reduce greenhouse gas emissions and global warming.
The study, published in the journal Reviews of Geophysics, said that unless this trend is reversed, the region is on track to experience “unprecedented” heat waves, severe drought, dust storms, and a litany of other extreme weather events that will compromise water and food security for roughly 400 million people living in the areas.
The area’s unique geographic features, such as lower water levels and sweeping desert expanses, make it uniquely vulnerable to the effects of climate change, scientists said. In the near-term, scientists called for reducing emissions in the energy and transportation sectors.
CALIFORNIA AVOIDS ROLLING BLACKOUTS, BUT PUNISHING HEATWAVE CONTINUES: California avoided ordering rolling blackouts yesterday as a punishing heat wave strained the state’s electric grid, bringing triple digit temperatures and threatening outages for some 500,000 homes and businesses in parts of the state.
California Independent System Operators issued a Stage 3 alert yesterday, the highest level of its energy emergency scale, and asked consumers to voluntarily curb their power use for the seventh consecutive day.
"I know this has been a very long heat wave and we're not asking you to do even more," CAISO chief executive Elliot Mainzer said in a video shared on Twitter yesterday. "But please stick with us and don't use any more power than is absolutely necessary."
Ultimately, operators said consumer conservation “played a big part in protecting electric grid reliability.”
The heat wave sent temperatures in many parts of the state soaring into the triple digits, including Sacramento, where conditions reached 115 degrees Fahrenheit for the first time ever.
The state is under a flex alert again today for 4 p.m. to 9 p.m.
TRUSS EXPECTED TO UNVEIL ENERGY PLANS THURSDAY: Newly appointed Prime Minister Liz Truss is expected to lay out her energy plans Thursday, as the U.K. faces the prospect of soaring energy bills that would mean a very cold winter for many.
The plan is expected to cap typical energy bills at around £2,500, or about $2,900, according to the BBC. Household bills are expected to soar north of the equivalent of $4,000 by October without the cap.
The energy plan is supposed to cost the government around £100bn, a significant sum for the U.K.
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The Verge A utility company locked thousands of customers out of their smart thermostats in Colorado
Politico EU Not easy being green: Rutte’s climate agenda falters amid Dutch farmer backlash
2:30 p.m. 406 Dirksen The Senate Environment and Public Works’ Subcommittee on Clean Air, Climate, and Nuclear Safety will consider the nominations of three pending members of the Tennessee Valley Authority.