The EU agreed to limit gas prices, but some analysts are skeptical
Pipes run along a technical facility for compressing natural gas on the site of astora GmbH’s Rehden natural gas storage facility, the largest in Western Europe.
Picture Alliance | Picture Alliance | Getty Images
The European Union Monday concluded two months of heated talks over how to protect households from rising energy prices — but some analysts argue the bloc’s solution is unsustainable and might not withstand the realities of a 2023 gas supply crunch.
EU members compromised by adopting a “dynamic” cap on the price that can be bid for front-month gas contracts on Europe’s benchmark trading facility.
The level at which the cap is triggered was lowered to 180 euros per megawatt hour, after an initial proposal of 275 euros per megawatt hour was criticized as far too high by countries including Poland, Spain and Greece.
The 180 euro limit must be surpassed for three working days on the Dutch Title Transfer Facility (TTF), and it must be 35 euros per megawatt above the global reference price for liquefied natural gas over the same period.
Several conditions were inserted to allay the concerns of members such as Germany, which had argued that the scheme could result in gas shortages next year. These clauses prompt an automatic suspension of the cap and include the dynamic bidding rate dropping below 180 euros per megawatt hour for three consecutive working days, or the European Commission declaring an emergency.
Germany eventually voted in favor of the so-called “market correction mechanism,” but the Netherlands and Austria abstained.
Austria’s ministry for climate action said in a Tuesday statement that while it was “confident that the market correction mechanism can play an important role to avoid extreme spikes in European gas prices, the last minute extension of the mechanism on more gas hubs than the TTF does issue some concerns.”
The ministry noted that “there are some risks that the necessary safeguards are undermined by this extension.” Austria depends on Russian gas.
Rob Jetten, Dutch energy minister, said that the mechanism remained “unsafe” despite the latest improvements. He flagged that it could disrupt the European energy market, risk security of supply and have wider financial implications.
“From its inception, we have been very clear about this mechanism: it does not solve the core problem,” he said, adding that the Netherlands’ concerns were shared by the European Central Bank and by ICE (Intercontinental Exchange), the operator of the key natural-gas market in Europe.
The ECB earlier this month said “the current design of the proposed market correction mechanism may, in some circumstances, jeopardize financial stability in the euro area.” It declined to provide further comment to CNBC following the EU announcement.
ICE said in a statement it had “consistently voiced concerns” about the destabilizing impact of a price cap. It added that it would now review the details of the EU announcement to see whether it “can continue to operate fair and orderly markets for TTF from the Netherlands as per our European regulatory obligations.”
Easy to overturn?
The EU argued the mechanism will be monitored regularly and can be stopped if financial stressors or supply challenges are raised, in response to concerns flagged by the likes of the ECB.
Analysts told CNBC that these conditions called into question the ability of the mechanism to limit energy price rises.
“It reflects the challenge between strong rhetoric and the realities of the security of supply,” Nathan Piper, head of oil and gas research at Investec, said by phone. “It’s a cap, but allows them to operate above the cap if they really need the gas. The fact on the ground is, if you need the gas, you will pay any price, which is what Europe did in 2022.”
Piper listed two possible areas of additional upcoming demand: China and Europe. Beijing this month abruptly relaxed the zero-Covid policy it pursued this year. Europe has meanwhile managed to get its gas stores near-full for this winter by continuing to import Russian gas supplies — but plans to drop this intake drastically in 2023.
Europe and Asia remain net oil and gas importers, Piper continued, which means that intense competition for spot cargoes lies ahead. Around 70% of liquefied natural gas (LNG) is tied up in long-term contracts, leaving 30% available on a spot basis.
In a Tuesday interview with Reuters, Norway’s prime minister Jonas Gahr Støre said he did not expect more Norwegian LNG to be exported outside of Europe as a result of the new EU measure.
But Piper said, “There is no motivation for spot LNG carriers [other] than the highest price. So volumes could go up elsewhere, and [European] security would be jeopardized.”
Janko Lukac, senior analyst at Moody’s Investors Service, echoed this sentiment to CNBC: “The efficiency of an unilateral cap on purchase prices from the EU is highly uncertain.”
“LNG markets globally and structurally will be short for the next couple of years. Hence, if an international buyer is willing to pay a higher price, Europe runs the risk that the respective volumes will go to another buyer,” he said.
Long-term measures
Energy Minister Rob Jetten said it was more important for the EU to focus on its electricity savings targets, on joint gas purchasing agreements and on issuing faster permits for renewable energy schemes.
Ending energy dependency was the key reason why Pavel Molchanov, managing director for renewable energy at wealth management firm Raymond James, said the mechanism was a “stop-gap measure.”
“The solution for Europe will be to diversify its energy mix away from fossil fuels entirely,” Molchanov told CNBC’s “Squawk Box Asia” Tuesday.
“As it stands, about 20% of Europe’s electricity comes from natural gas, 10% comes from coal. Both of these commodities are up dramatically as a result of the war, and the Kremlin’s weaponization of energy exports.”
Energy transition solutions — such as wind, solar and green hydrogen, as well as increasing energy efficiency and removing coal from the electricity mix — could be put on an accelerated timetable to rid Europe of natural gas concerns within five years, he said.
Ending the war premium
EU ministers in favor of the mechanism were upbeat about its impact.
Kadri Simson, European commissioner for energy, said the initiative would “take away the war premium, the mark-up compared to global LNG prices, that Europe pays” due to pricing on the Dutch TTF.
Tinne Van der Straeten, Belgium’s energy minister, said the move would ensure security of supply while protecting citizens and the economy from higher prices.
Investec’s Nathan Piper also said that there were strong reasons why Europe needed to bring down gas prices beyond the strain on households.
“Very high gas prices for multiple years will have major impacts on the competitiveness of European industry. The U.S. gas price is a fraction of Europe’s because they are self-sufficient, so industry could move to where input costs are lower,” he said. “That means a long-term risk for Europe and the U.K. if energy costs can’t come down.”
Thanks to a clever, fully electric swing system and “boom up” power assist features, the big PC365-11 hybrid excavator from Komatsu promises better performance and serious fuel savings compared to conventional diesel machines.
Komatsu says its PC365-11 hybrid excavator uses a “boom-up” power assist feature that captures and stores kinetic energy during different operation cycles, then taps into that power to provide an extra energy boost when needed. The result is 15% more productivity and a 20% improvement in fuel efficiency when compared to non-hybrid excavators in ~40 ton class.
“The PC365LC-11 was engineered for excellence in multifunction applications by leveraging its innovative electric powertrain system to boost job site productivity while reducing fuel consumption,” says Matthew Moen, Komatsu’s product manager. “To highlight these performance enhancements, we’re emphasizing the concept of ‘multifunction plus’ as the defining feature of this machine.”
How it works
Komatsu’s hybrid system replaces the conventional hydraulic swing function with a fully electric swing motor that draws power from an ultracapacitor (as opposed to a battery) energy storage unit. As excavator slows or stops swinging, something like a regenerative braking system captures the kinetic energy that would normally be lost as heat and stores it in the capacitor. Once there, the stored energy can be quickly released to power the swing motor or assist the engine, delivering up to an extra 70 hp when needed to support heavy lifting or digging cycles.
And, thanks to Komatsu’s proprietary software, all of this energy capture and reuse happens automagically during normal work, without the need for external charging. The fuel savings happen because removing the hydraulic load from the ICE engine allows it to run at an ultra-low idle, while the productivity comes from the greater power and overall speed of the electric operations vs. conventional hydraulics.
Electrek’s Take
Trust me when I tell you that Komatsu didn’t wake up one day and decide to build a capacitor-based hybrid crane. One of their customers had the idea and came to them, promising orders. That’s what Komatsu does – from undersea remote control dozers to lunar mining rigs (above), if you bring Komatsu an order, they will absolutely find a way to fill it.
As for PC365-11 hybrid excavator, it’s packed with clever tech, overall – offering significant fuel, emissions, and TCO reductions without dramatically changing the operational logistics of an existing fleet’s operations. That’s all the sales pitch it needs.
SOURCE: Komatsu, via Equipment World.
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For serious fleet buyers, safety isn’t a “nice-to-have,” it’s an absolute must – and Kia’s new PV5 electric van meets that need with a positively stellar, five-star safety rating on the tough European NCAP safety test.
The new “do-it-all” Kia PV5 showed strong performance across a number of key safety categories, including Occupant Protection, Safety Assist/Crash Avoidance, and Post-Crash Safety. The PV5’s robust suite of standard ADAS technologies that includes AEB, Lane Support System, and Speed Assistance System also helped the new electric work van to deliver top marks in the NCAP’s “real world” test scenarios.
“The PV5 opens a new chapter in practical, electrified mobility, offering generous space and modular versatility for everyday use,” explains Sangdae Kim, Executive Vice President and Head of the (relatively) new PBV Business Division at Kia. “Achieving the top Euro NCAP five-star rating is clear validation of its safety performance and will serve as strong momentum as Kia expands its PBV lineup across Europe.”
The Euro NCAP tests highlighted the strong performance of a number of the PV5’s ADAS features, specifically calling out the following:
- Demonstrated strong responsiveness in vehicle-to-vehicle scenarios
- Provides additional protection for pedestrians behind the vehicle
- Avoided collisions in most pedestrian and cyclist test cases
The Kia PV5 slots into familiar territory for US buyers, landing roughly in the same size class as the Ford Transit Connect or Ram ProMaster City, with ~180 cubic feet of interior cargo space available, which is plenty to make it attractive for last-mile delivery and trade work in tight urban markets.
Globally, the PV5 is offered with a number of battery options, including a smaller 43.3 kWh Lithium-Iron-Phosphate (LFP) pack, as well as larger Nickel-Cobalt-Manganese (NCM) packs at 51.5 kWh and 71.2 kWh. The longest-range versions are good for about 250 miles of estimated range – more than enough for Kia to make a case for it as a practical, city-focused alternative to much larger (and pricier) electric vans.
Larger vans, by the way, that may not have that 5 star Euro NCAP rating.
Kia PV5
SOURCE | IMAGES: Kia; photo by Scooter Doll.
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