Europe’s energy crisis is making the market nervous. And analysts expect record-high prices to persist

Published

3 years ago

September 16, 2021

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Round bales of straw drying on the field are seen in front of the power station operated by RWE AG near Rommerskirchen, Germany on August 10, 2021. The cost of natural gas and electricity has surged across Europe.

Ying Tang | NurPhoto | Getty Images

LONDON — European power prices have spiraled to multi-year highs on a confluence of factors in recent weeks, ranging from extremely strong commodity and carbon prices to low wind output.

What’s more, the record run in energy prices is not expected to end any time soon, with energy analysts warning market nervousness is likely to persist throughout winter.

The October gas price at the Dutch TTF hub, a European benchmark, was seen to climb to a record high of 79 euros ($93.31) a megawatt-hour on Wednesday. The contract has risen more than 250% since January, according to Reuters, while benchmark power contracts in France and Germany have both doubled.

In the U.K., where electricity bills are now the most expensive in Europe, power prices have soared amid the country’s high dependence on gas and renewables to generate electricity.

British day-ahead electricity prices rose nearly 19% to reach 475 pounds ($656.5) on Wednesday, Reuters reported. The contract was already trading near record highs shortly after a fire at a U.K.-France power link cut electricity imports to Britain.

“By far the biggest factor is gas prices,” Glenn Rickson, head of European power analysis at S&P Global Platts Analytics, told CNBC via email.

Higher gas prices have also been a “big driver” in lifting carbon and coal prices to record highs too, Rickson said, although he noted there are other supporting factors at play, such as low wind generation and nuclear plant unavailability across the continent.

Carbon prices in Europe have nearly trebled this year as the European Union reduces the supply of emissions credits. The EU’s benchmark carbon price climbed above 60 euros per metric ton for the first time ever in recent weeks, trading slightly below this threshold on Thursday.

The EU’s Emissions Trading System is the world’s largest carbon trading program, covering around 40% of the bloc’s greenhouse gas emissions and charging emitters for every metric ton of carbon dioxide they emit. Record carbon prices have made highly polluting sources of energy generation even less attractive because coal, for example, emits more carbon dioxide when burnt.

Rickson said the outlook for European power prices this winter will be “highly dependent” on gas prices, adding that he expects gas prices to rise even further in the coming months. “Aside from the ‘average’ picture, we expect prices to be highly volatile, with swings from low or even negative hourly prices when wind generation is high, to very high prices as already seen when wind is low, and demand is high.”

How did we get here?

European gas prices have accelerated since the start of April, when unseasonably cold weather conditions meant Europe’s gas in storage dipped below the pre-pandemic five-year average, indicating a potential supply crunch.

Europe has since struggled to bring gas supplies that are necessary for the winter period back to where they should be. An economic rebound as countries eased Covid-19 restrictions also coincided with higher-than-expected demand that led to a shortage of gas.

An output filtration facility of a gas treatment unit at the Slavyanskaya compressor station (operated by Gazprom), the starting point of the Nord Stream 2 offshore natural gas pipeline. According to Russia’s Deputy Prime Minister Alexander Novak, the construction of Nord Stream 2 will be completed by the end of this year.

Peter Kovalev | TASS | Getty Images

Further to this, Russia has been seen to slow its delivery of piped natural gas to the region, raising questions about whether this may be a deliberate move to bolster its case for starting flows via Nord Stream 2. The controversial pipeline, bringing natural gas to Europe from Russia, bypassing Ukraine and Poland, is soon expected to be fully operational and could resolve some of the region’s supply problems.

This deficit is “making the market nervous as we approach winter,” Stefan Konstantinov, senior analyst at ICIS Energy, a commodity intelligence service, told CNBC. “That is coupled with the very significant competition for LNG supplies from Asia and South America, which is driving gas prices up.”

Climate crisis concerns

Earlier this month, soaring gas prices and low wind output prompted the U.K. to fire up an old coal power plant to meet its electricity needs.

The move raises serious questions about the government’s environmental commitments amid the climate crisis. To be sure, coal is the most carbon-intensive fossil fuel in terms of emissions and therefore the most important target for replacement in the proposed pivot to renewable alternatives.

When asked how the U.K.’s decision to turn to coal could possibly be squared with the urgent need to dramatically scale down fossil fuel use, Konstantinov replied: “It’s a bit ironic isn’t it?”

Activists march with flags and placards, during the march at Extinction Rebellion’s Nature Protest held in Central London about how nature is in crisis.

Loredana Sangiuliano | SOPA Images | LightRocket | Getty Images

“If there was enough wind, it could maybe meet more than half or two-thirds of U.K. power demand on a relatively low power demand day. But instead what we are seeing is that actually we’ve got no wind and we are forced to fire up polluting coal-fired generation.”

“At first glance, that doesn’t tally up with the government’s ambition to decarbonize. But this is very much driven by the intermittent nature of renewables: both wind and solar,” he added.

The U.K. has committed to phasing out coal power completely by Oct. 2024 to cut carbon emissions.

“The fundamental drivers, i.e. high gas prices and high carbon prices, we at ICIS believe they are here to stay for the coming months,” Konstantinov said.

Analysts at Wood Mackenzie, a global natural resources consultancy, also expect U.K. and European gas prices “to remain elevated at current levels throughout winter.”

“A recovery in UK gas production is critical for this winter,” they added. “And going forward, investment into domestic gas supply remains crucial to ensure a smooth energy transition to renewables and new technologies.”

Environment

Volvo EX30 tops Mini in Europe as low-cost EV’s sales surge in May

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3 hours ago

June 21, 2024

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Volvo EX30 tops Mini in Europe as low-cost EV's sales surge in May

The cheapest and smallest Volvo EV is off to a hot start. After only five months on the market, the Volvo EX30 topped BMW’s Mini in Europe’s small premium segment as sales continued surging.

Volvo EX30 passes Mini in EU sales

Since EX30 production began in Zhangjiakoui, China, last fall, Volvo’s compact EV is already a top seller.

Despite its small size, the Volvo EX30 is having a significant impact. According to global data collection firm Dataforce, Volvo’s sales rose 27% last month in Europe. With over 32,800 models sold, Volvo propelled to number 14, up from 17 last year.

The EX30 accounted for the majority of the growth. Volvo’s EX30 topped the small premium segment, surpassing BMW’s Mini by 1,029 in sales.

Volvo’s EX30 is the third-best-selling EV in Europe through May, with 30,195 models sold. The Tesla Model Y took the top spot with over 79,100. Tesla’s Model 3 was second with 38,863 units sold, up 38% YOY.

The growth comes after the EU revealed plans for additional tariffs on EVs made in China last week. Volvo’s deputy CEO, Bjorn Annwall, criticized the decision, saying it would only hurt the buyer.

Starting at around 36,000 euros ($38,500), Volvo’s EX30 is one of the most affordable EVs on the market.

Although Volvo had already planned to begin EX30 production in the EU in 2025, Annwall hinted the US-bound model would likely come from Belgium.

Volvo plans to introduce the EX30 in over 90 countries by the end of the year. In the US, the EX30 starts at $34,950. It’s available in two powertrains, a single-motor extended range, and a twin-motor performance, offering up to 275 miles of range.

As you would expect from Volvo, the EX30 has the latest safety and connectivity tech. It includes Google built-in with Apple CarPlay as standard.

Electrek’s Take

Volvo EX30 sales surging in Europe is no surprise as demand for affordable EVs continues climbing. Most automakers are planning or have already launched low-cost EVs.

Kia opened orders for its EV3 in Korea, starting at $30,700 (KRW 42.08 million). Next year, Kia is expected to launch the EV4, an entry-level electric sedan, starting at around $35,000 (see a video of it captured in the wild).

Volkswagen finished design work on its ID.2all, a $27,000 (25,000) euro electric car. The production ID.2all is expected to debut later this year, with sales kicking off in 2025.

Hyundai, Ford, GM, BMW, Nissan, and others have all revealed plans to launch more affordable EVs over the next few years.

Volvo’s early commitment to go all-electric is already paying off as the EX30 takes market share.

Source: Automotive News

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Environment

Ferrari’s new solar-powered e-building opens ahead of first EV sports car debut

Published

5 hours ago

June 21, 2024

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Ferrari's new solar-powered e-building opens ahead of first EV sports car debut

The Italian luxury sports car maker is preparing to launch its first EV. Ferrari’s new e-building opened its doors on Friday with Italian President Sergio Mattarella in attendance. The new plant, entirely powered by renewable energy, is set to launch the first Ferrari EV sports car.

Ferrari’s first fully electric sports car will be built at the new e-building. CEO Benedetto Vigna said the new factory will “light up” Ferrari’s future.

The e-building will enable Ferrari to continue to “audaciously redefine the limits of what’s possible.” Ferrari’s first EV sports car will be built at the facility alongside its next-gen hybrids and ICE vehicles. The facility will also produce batteries, electric motors, and inverters for Ferrari’s EV.

Ferrari has invested roughly $214 million (200 million euros) to make the facility a reality. After opening the doors Friday, Ferrari said the plant will help improve efficiency and flexibility.

The building will be entirely powered by renewable energy. Over 3,000 solar panels on the roof produce 1.3 MW of energy. Ferrari said that by reusing rainwater and energy in the production cycle, 60% of the energy used for battery and motor testing would be recovered and redirected.

Ferrari’s new e-building opens with first EV coming soon

The new inauguration comes after sources told Reuters this week that Ferrari’s first EV sports car will cost at least $535,000 (500,000 euros).

According to the sources, Ferrari is already developing its second electric vehicle. It’s still in its early stages but will be built at the new e-building.

Ferrari launched its first plug-in hybrid last year, the SF90 Stradale, as it electrifies the brand. By 2026, Ferrari aims for EVs and PHEVs to account for 60% of sales.

The first fully electric Ferrari is expected to be revealed by the end of the year. Check back soon for more info.

Meanwhile, luxury rival Lamborghini revealed its first electric car, the Lanzador EV, last August (check out Lamborghini’s first EV here). Lamborghini is expected to launch the Lanzador in 2028.

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Environment

Spy photos hint at Xiaomi’s quick encore to the SU7 EV to compete against the Tesla Model Y

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5 hours ago

June 21, 2024

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Spy photos hint at Xiaomi's quick encore to the SU7 EV to compete against the Tesla Model Y

It’s only been six months since Xiaomi Automobile launched its first-ever BEV – the SU7. Following early success, Xiaomi has been developing a second model, and spy images from local media outlets in China have given us a (camouflaged) glimpse at the EV’s exterior design.

Xiaomi Automobile is the EV-centric arm of one of China’s largest smartphone and electronics manufacturers, founded three years ago. After following much of its surprisingly quick and encouraging process in BEV development, Xiaomi launched its flagship SU7 EV in December of 2023, garnering an impressive number of orders from Chinese consumers loyal to the parent brand.

The infant EV model received over 50,000 orders in the first 27 minutes of going on sale, creating a waitlist of up to seven months. This incited Xiaomi Automobile to restructure its production strategy to manufacture and deliver more SU7s than initially planned to keep up with growing demand.

After just 32 days of production, Xiaomi celebrated its 10,000th SU7 build. By May 2024, we reported the young automaker was already developing a second all-electric model to compete against the globally popular Tesla Model Y.

Most recently, local media outlets in China have captured spy photos of what appears to be Xiaomi’s new EV – a sleek SUV coupe.

Source: Xchuxing.com

Spy images show a sleek new Xiaomi coupe SUV EV

Local media outlet Xchuxing posted the spy images seen above, which appear to be the public’s first glimpse at Xiaomi’s next EV. The report also states the new model is a coupe SUV with a design similar to the Ferrari Purosangue and is expected to be released sometime in 2025.

These details align with our previous reports on Xiaomi’s second EV, which is expected to continue competing against Porsche and, in this instance, Tesla.

As you can see from the spy images, the covered Xiaomi EV has a LiDAR sensor on its roof, expected to be the same as its SU7 sibling, to enable the automaker’s NOA (Navigate on Pilot) ADAS.

The rear is larger than the SU7 sedan but appears to feature the same tail light design, further hinting that these spy images are, in fact, Xiaomi’s next EV. We will know more once the Chinese automaker publicly confirms the new model, hopefully alongside some non-camouflaged images.

However, from what we’ve seen so far, it looks sharp. We hope to learn more soon and report back.

Credit for all images: xchuxing.com

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