Why Germans Are Being Paid To Use Power

Authored by Kent Moor via OilPrice.com,

Germany’s drive to use renewable sources of energy seems to be bearing fruit. Beginning last weekend, prices for electricity in the country declined below zero.

 

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That means consumers are being paid to use the power, rather than the other way around.

This isn’t even the first time this has happened. According to one of Europe’s largest electricity trading exchanges (the EPEX Spot), it has happened more than 100 times in 2017.

All of this would seem to bode well for German households, long regarded as operating under the highest energy prices on the continent.

Well, not quite.

But someone else is getting paid.

And the whole matter has crucial implications for where the energy industry is going next…

Given the heavy amount of taxes and fees charged for power, the wholesale cost factors in only about 20 percent of the real price charged to the average residence.

That means that, while the period of negative costs helps, prices are still going up for German households.

Meanwhile, bigger wholesale users – industry, factories, and other primary end users – do see a nice pop. According to EPEX Spot figures, for example on December 24, such major consumers were paid about €50 ($59.50 at current exchange rates) per megawatt-hour (MWh).

The price decline results from a combination of low demand, warmer than usual temperatures, and the prevalence of ample winds that provided an abundance of wind power generation.

All of this results in excess supply that needs to be moved along the grid.

Due to the lack of efficient or effective battery and storage systems, electricity that is produced must be used.

It has become a traditional tradeoff between peak and off-peak hour generation or usage. The recently emerging German largess in solar and wind power has just accentuated the situation.

Meanwhile, variations on the demand side tend to contribute to supply excesses during times of low usage, such as weekends, and holiday periods. Both of those, of course, hit this past Sunday.

With the price tag for Germany now well over €100 billion, it would appear that the move to renewable, cleaner, energy has been successful.

Well, not so fast…

What the Future of Energy Will Look Like

Negative prices notwithstanding, the move to increase the contribution made by solar and wind has created its own uncertainties. Both sources need backup energy sources for when sunlight and wind are not present.

And then there is the opposite extreme. Wind on average provides less than 14 percent of the daily power on the German grid.

But on very windy days it can easily provide many times that.

Unfortunately, traditional sources such as coal-fueled power plants and the nuclear reactors that are being phased out nationwide cannot be turned down rapidly enough when renewables dump additional power on the system.

The result is either negative prices or lack of immediate access to power during those spells in which the combination of sources don’t meet expectations.

Other European countries – France, Belgium, Switzerland, the Netherlands, and even Great Britain – have also had their own experiences with negative pricing. France generates well over 70 percent of its power from nuclear, meaning the negative pricing phenomenon is hardly a result of only new renewable energy volume.

Nonetheless, German experiences have been more persistent, even when the country has been able to export excess power. The late December episode is the most recent.

But a similar bout in October resulted in payouts to consumers almost twice as high.

Experts are pointing toward the major revision both Germany and the wider European grid system must now undertake. Until this spasm of negative pricing, the older view of global power systems had been considered adequate.

Not any longer.

As one specialist noted this week, “we now have technology that cannot produce according to the demand, but is producing according to the weather.” This has become the main uncertain ingredient in the new age of rising renewable sourcing.

And one thing that’s becoming increasingly evident is that the new environment is providing a new stress on the wider power system.

This sets the stage for a range of possible changes in regulations and fee structures meant to encourage average households to tailor their energy use to periods of energy supply. That would seem to oblige some “carrot rather than stick” approaches.

Of course, that would mean benefits in lower costs moving directly down to the household level. That may take a bit more politics than just oddities in the energy grid.

Which means the push for renewables and energy storage will continue unabated in 2018.

Global Disasters Wreaked Havoc In 2017 – Total Economic Losses Top $300 Billion

According to a new reinsurance report issued by the Swiss Re Institute, total economic losses from natural and man-made disasters have soared 63 percent in 2017 to an estimated $306 billion, up from $188 billion in 2016.

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Globally, insurers lost $136 billion from natural and man-made disasters in 2017, up from $65 billion in 2016, the third highest on record. This is “well above the previous 10-year annual average, and the third highest on sigma records,” Swiss Re said in its report. Natural disasters accounted for $131 billion of 2017’s insured losses, and man-made disasters for the remaining $5 billion. The human loss totaled around 11,000 deaths, similar to 2016.

 

Martin Bertogg, Head of Catastrophe Perils at Swiss Re said, “in recent years, annual insurance losses from disaster events have exceeded USD 100 billion a few times. The insurance industry has demonstrated that it can cope very well with such high losses.”

“However, significant protection gaps remain and if the industry is able to extend its reach, many more people and businesses can become better equipped to withstand the fallout from disaster events,” he added.

According to Swiss Re, “extreme weather in the US in the second half of 2017” has been the primary driver for high insured losses:

In August and September, three category 4+ hurricanes – Harvey, Irma, and Maria (HIM) – made landfall in the US. Destruction from the three hurricanes stretched from the Texas coast (Harvey) through West Florida to the Caribbean (Irma and Maria), together causing insured losses estimated to be almost USD 93 billion.

Given the vast geographic footprint of the hurricanes, which affected multiple locations in quick succession and impacted multiple lines of business, a full assessment of the insured losses is still ongoing.

Given the vast geographic footprint of the hurricanes, which affected multiple locations in quick succession and impacted multiple lines of business, a full assessment of the insured losses is still ongoing.

The economic losses from the three events will be much higher given the significant flood damage – often uninsured – from hurricane Harvey in densely populated Houston, Texas, an extended power outage in Puerto Rico after hurricane Maria, and post-event loss amplification. 

The United States was the hardest hit according to the report, which indicated hurricanes: Harvey, Irma, and Maria made 2017 the “second costliest hurricane season on sigma records after 2005.”

Wildfires and thunderstorms in the US were also mentioned in the report:

Also in the second half of 2017, hot and dry weather in California created favourable conditions for wildfires to ignite and spread to urban areas. There were three major fire events in October in Northern California: Tubbs, Atlas and Mendocino Lake. Both residential and commercial property (including vineyards) were impacted. According to preliminary estimates from Property Claims Services, the major fire events triggered combined insured property losses of USD 7.3 billion. Fires are still raging in Southern California in December, and the as-yet undetermined full-year losses from wildfires will likely be higher.

Other extreme weather in the US led to a high number of severe convective storms (thunderstorms). Five separate severe thunderstorm events from February to June caused insured losses of more than USD 1 billion each. The most intense and costly event was a four-day long storm in May with heavy damage to property inflicted by hail in Colorado and strong winds in other parts of southern and central states. The economic losses of this storm alone were USD 2.8 billion, with insured losses of USD 2.5 billion.

Elsewhere, Swiss Re discussed extreme weather events of various forms around the world:

In mid-September, two powerful earthquakes in Tehuantepec and Puebla, Mexico, led to numerous building collapses, claiming a large number of victims and resulting in insured losses of more than USD 2 billion. Earlier in the year, in late March, the category 4 tropical Cyclone Debbie hit the northeastern coast of Australia. Wind gusts of up to 263 km/h and widespread flooding in central and southeast Queensland and northeast New South Wales led to insured losses of USD 1.3 billion.

And at the end of April, Europe suffered a cold snap, followed by a summer of heat waves and record temperatures in several locations, making 2017 a year of weather extremes. Further, severe floods in South East Asia caused large devastation and, sadly, a large number or victims.

Worldwide losses (USD bln) for man-made and natural catastrophes have absolutely exploded since 1990, according to a Swiss Re.

While natural and man-made disasters wreaked havoc globally and in the United States for the 2017 time period. Will the S&P Insurers index break the neckline?

 

 

 

Would Trump Nuking North Korea ‘Make America Great Again’?

Authored by Andrew Korybko via Oriental Review,

If Trump is willing to accept the enormous loss of American life — which are the only people that he cares about as the US President — then turning the Korean Peninsula into Asia’s nuclear panhandle would indeed “Make America Great Again” by permanently handicapping its Russian & Chinese geostrategic competitors as well as its Japanese & South Korean economic ones.

The war of words between North Korean leader Kim Jong Un and US President Donald J. Trump has suddenly taken a very foreboding turn, with both men now talking about “nuclear buttons” and openly hinting at the prospects of carrying out a preemptive first strike against the other.

The first thing to remember is that Trump is dead serious (pun intended) about his desire to “Make America Great Again”, and that he will stop at nothing to see his vision fulfilled in the future, including if he has to use nuclear weapons to make it happen.

Normative objections like arguing about how “terrible” and “evil” this is have absolutely no effect on Trump, who has come to be the literal embodiment of the “Mad Man Theory” and cares nothing about such concerns, ruthlessly viewing the world through a Neo-Realist prism where everything revolves around power.

If there’s any “emotional” point that would give Trump pause to think, then it’s about the lives of the nearly quarter-million Americans (including servicemen and their families) living in South Korea who could easily be killed in the opening days of a Korean Continuation War, and this is the only reason why Trump has yet to use nuclear weapons against North Korea.

Right now the President whose opponents label as a “heartless psychopath” is actually very concerned about the moral responsibility that he would have to forever shoulder in potentially sacrificing so many Americans, but if he ever surmounts his conscientious objections to this or is misled by the “deep state” into believing that North Korea is in the imminent process of launching its own preemptive strike (or is provoked by the military to already do so), the he might “make peace with himself” in the “comfort” that “only” 250,000 Americans had to die (notwithstanding the millions of Asians that he doesn’t care about) in order to “Make America Great Again”.

US bases in South Korea

Brutally speaking, the only real consequence that the US would suffer from nuking North Korea is the death of its South Korean-based compatriots as “collateral damage”, and the possibility of a Chinese military response to America’s brazen bombing(s?) could be avoided if Washington provokes Pyongyang into striking first because of Beijing’s previous pledge not to intervene if its wayward “ally” is the one most directly “responsible” for reigniting hostilities.

Accepting that the US would quickly emerge as militarily victorious in this conflict, it’s now time to examine how the destructive consequences of nuking North Korea would actually “Make America Great Again” from Trump’s “Kraken”-like Neo-Realist perspective.

To begin with, almost all of North Korea’s territory could be rendered inhospitable depending on the scale and scope of the US’ nuclear arms use, thus turning it into the ultimate “buffer zone” and thereforr making the decades-long question of whether the (now-former) country would be occupied by Chinese or American-South Korean troops after a speculative continuation war moot.

Secondly, the atmospheric aftereffects of America’s nuclear weapons use are difficult to precisely predict and should be left to more competent experts to comment upon in detail, but it can confidently be presumed that this would affect South Korea, Japan, China, and Russia, up to and including making some of their territory also inhospitable.

Not only that, but Seoul and even Tokyo could be wiped out if Pyongyang is successful in nuking them in its final moments, and even if they’re not destroyed, then the resultant nuclear atmospheric damage to South Korea and Japan would devastate these once-strong Asian economies and reduce them to uncompetitive “Third World” states.

The same can also happen to a large chunk of China in its rustbelt “Manchurian” region of the Northeast, as well as the base of Russia’s Pacific Fleet and its “Window to Asia” in Vladivostok, though the exact consequences are again subject to the atmospheric ramifications resulting from the scope and scale of any speculative American nuclear bombing of North Korea.

One of the relevant tangential developments that could unfold is that China’s domestic agricultural industry could collapse, and this could combine with the widespread fear resulting from the nearby radioactive panhandle to produce unpredictable socio-political consequences in the People’s Republic.

Furthermore, the nuclear destruction of North Korea and the attendant apocalyptic aftereffects that this would have for Northeast Asia would for all intents and purposes remove each of these victimized nation-states from the geopolitical game except for perhaps Russia, seeing as how they’d all be wreaked with internal turmoil in dealing with the long-term radioactive fallout of what happened, thus restoring the US to its immediate post-World War II “glorious” position in recapturing the majority of the global economy and literally “Making America Great Again”.

It’s precisely this “reward” that is so tempting to Trump and why his finger is itching to press the nuclear button, but then again he’s still held back by the thought of the quarter-million American lives that might have to be sacrificed as a result, though he might “console” himself with the “excuse” that this was “necessary” in order for the remaining 320+ million to “rule the world”.

As for the millions upon millions of Asians who would surely die in this scenario, Trump would “rationalize” it by convincing himself that he was taking North Korean “slaves” “out of their misery” and that all the others who allowed Kim Jong Un to “get out of control” and launch what the Pentagon might provoke to be Pyongyang’s first strike “deserved it”, shedding all personal responsibility for this by claiming that he “inherited an impossible mess” from his hated predecessors who already made its dynamics “irreversible” and therefore its conclusion “inevitable”.

The only realistic chance that Trump can be stopped from nuking North Korea in the event that he “gets over” the potential deaths of a quarter-million Americans (considering that the deaths of Asians aren’t anything that he cares about) and/or is misled into thinking that North Korea is on the cusp of launching its own imminent first strike (or was provoked into doing so) is if Russia and China convey the message to the US — whether openly or discretely — that they will respond with nuclear weapons if Washington dares to use them.

This brinksmanship would be very dangerous because there’s no telling whether Kim Jong Un would introduce nukes into any forthcoming conflict first, though from Pyongyang’s perspective it would have to in order to ensure its survival or “go out with a bang” like it’s been threatening, resultantly giving the US a semi-“plausible” right to respond in kind, albeit much more disproportionately.

However much some people may wish, it is unlikely that Russia and/or China would go to nuclear war against the US over North Korea, especially in the event that Pyongyang used nukes first (whether justifiably or not), and in spite of the long-term radioactive fallout that could devastate their two countries (China much more so than Russia in this case).

In addition, it can be assured that any US nuclear (counter-)attack against North Korea would be preceded by the scrupulous monitoring of all Chinese nuclear assets “just in case”, meaning that Washington would be on “red alert” to nuke China if Washington thought that Beijing was about to bomb its overseas bases or homeland in preemptive response for the deadly radioactive future that the US would be giving it, thus representing an unimaginably dangerous situation fraught with the risk of even the smallest misstep leading to a nuclear war between the US and China and further diminishing the chance that Beijing would strike back.

All in all, Trump is proving himself to be the consummate risk-taker who’s not afraid to up the stakes in any situation, and a thorough read of his personality proves that he wouldn’t shy away from using nuclear weapons against North Korea, deeply believing that it’s the key to “Make America Great Again” even if this would run the chance of a nuclear war with China too.

Trump is a modern-day Machiavelli who doesn’t care about morals, ethics, and principles when it comes to advancing his country’s grand strategic interests on the world stage, but it’s because of the little bit of “humanity” that’s still left within him in caring about the fate of a quarter-million Americans that he has yet to push the nuclear red button that’s sitting so tantalizingly close on his desk.