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The tremendous global interaction and views of his landing page, podcast, and articles are amazing. Having a total “Energy Thread” covering so many different areas with huge impacting issues around the globe is viewed through an academic view with a twist. George has been around the world and in the areas he talks about. After you read all of his articles and watch the first podcast and the second soon to be released, things will start making sense. What color pill are you taking? Buckle up and follow George on his LinkedIn HERE. https://www.linkedin.com/in/george-mcmillan-5665b015/

As economist Jeffrey Sachs has been arguing over the last year and a half, the US is sleep-walking towards World War Three and the preponderance of people are not aware of the policy alternatives. The difference between political and economic development theories and the geopolitical theories needs to be more widely understood. – George McMillan

George McMillan III, CEO, McMillan and Associates and Energy News Beat Contributing Author.

The purpose for this series of articles is twofold: first, to explain the role of energy in geopolitics to people in the oil and natural gas industries, which also explains the logical coherence of American Foreign policy in the post 9/11 Global War on Terror (GWOT) era to those who were deployed overseas and are puzzled by the chaotic withdrawal from Afghanistan.

The premise is that the more one understands the history of post-Mahan ‘sea power versus sea power’ and post-Mackinder ‘sea power versus land power’ geopolitical strategies, the more one will understand the underlying reasons for the continual conflict zones of Eastern Europe and every single area of the post-colonial Eurasian perimeter.

That includes the invasion of Afghanistan and Iraq, as well as the other countries that retired General Wesley Clark discussed repeatedly in his 2007 presidential campaign; in which he claimed that there had been a “foreign policy coup” in the US and that needed to be brought to light and discussed in a democratic forum.

Since it is not the place of the more discrete government agencies of either side to disclose their strategic plans, intentions, and counter strategies, it is up to alternative media content providers to discuss possible explanations of prevailing fact patterns. This series of papers explains the history of Geopolitical thought in the context of the ongoing conflict of the sea faring colonial powers on the coastal perimeter of West Asia, South Asia, Southeast Asia and East Asia in the current era in search for answers.

The more one realizes that the current conflicts are ongoing conflicts of the past the more people will look for the underlying causes of human nature and geography which are the components of geopolitical and geostrategic thought respectively.

The Difference Between Economic Development Strategies and Mercantile Geopolitical Strategies

What is particularly useful in understanding international relations theory is the difference between political and economic development theories and geostrategic theory.

As demonstrated by my Unified Behavioral Theory of the Philosophical and Social Sciences the complete lateral integration of micro and macro human behavioral theories can be placed in terms of the two extremes of human behavior of positive-sum gain relationships versus negative-sum sabotage relationships.

Since measurement systems are based on (a) devising a nominal continuum of extremes of human behavior; (b) dividing the nominal continuum into gradations of a constructive behavioral dynamic half of the continuum and a destructive behavioral dynamic half of the continuum to attain ordinal level of measures, which (c) sets the stage for the ordinal level dichotomy to be further segmented into major categories to attain interval level measurement scales; which (d) is the prerequisite of making a causal relationship between the two in which two interval level scales can be correlated in a causal relationship to form an (X) and (Y) axis pairing where the ratio level of modeling is achieved.

It is the ratio level of modeling where the theorist can plot graphs, develop a rise/run and calculate slope to develop equations and statistical models.

Human Behavioral Frameworks

With this understanding of the four fundamental steps of theoretical model building, it is important to know that human behavior can be placed into (1) gradations of mutually beneficial positive-sum relationships on the constructive half of the behavioral continuum, (2) gradations of zero-sum extractive relationship on the first quarter of the destructive behavioral half of the continuum; and (3) negative-sum sabotage on the extreme antagonistic quarter of the most destructive end of the continuum.

It is this reality that the “real theories” of human behavior that meet the criteria of George Casper Homans “Sociological Theory” in “The Handbook of Sociology” (edited, R. E. L. Faris 1964) and John Harsanyi “Explanation and Comparative Dynamics in Social Science” (Behavioral Science, 1960), have the common element that they all have a “constructive versus destructive” behavioral dynamic.

The prime example is Aristotle’s Six Forms of Government based on the three neutral Forms of the rule of the one, the rule of the few and the rule of the many. These are valued in the Proper Forms of Monarchy, Aristocracy and Constitutional Democracy (Republic) and the Perverted Forms Tyranny, Oligarchy and Mob Rule Democracy.

The Proper Forms, in modern economic terms, are characterized by elites who invest in their own societies which leads to a higher multiplier and Gini coefficients indicative of a rising economy while the Perverted Forms are characterized by lower multiplier and Gini coefficients indicative of an extractive elite. The key feature of this framework to this article is that it is an interval level model that explains the full range of human behaviors in a singular macro framework.

Aristotle’s Six Forms is the time-tested cornerstone for the analytical system that readily integrates with Fromm’s productive versus sadomasochistic character orientation model on the initial independent variable micro-end of the model, and virtuous versus vicious economic growth cycles on the macro dependent variable end of the model; where the outcome measure framework is expressed in the categories of: First and Second First World more developed countries (MDCs) or Third and Fourth Word less developed countries (LDCs).

Since the MDCs tend to have higher levels of economic growth and lower levels of population growth, and the LDCs have lower levels of economic growth and higher levels of population growth, it is the economic growth/population growth proportions that define the wage labor market rate which ultimately defines the Geopolitical Form category when taken in a modal sense.

An Ideal World and its Discontents

The significance of this is that a utopian world comprised of Republics with democratic process as discussed in Kant’s “Perpetual Peace” 1795 can only be achieved with (a) more accurate theories of human behavior following the nomos-physis (constructive-destructive behaviors) distinction of the Ancient Greeks, and (b) the positive-sum gain aspect of political and economic development theories as explained by: Seymour Lipset in “Some Social Requisites for Democracy” (1959), Walt Whitman Rostow in “The Stages of Economic Growth: A Non-Communist Manifesto” (1960) and the role of technological innovation and infrastructure in economic growth captured in Solow-Swan models.

Of importance in this series of articles is the emphasis that Rostow placed on targeting petroleum fields, as well as delivery and storage facilities that supported the German War machine for aerial bombardment while he was working for the OSS during World War Two. He also was a strong advocate for a strategic petroleum plan for the United States to supports its allies during World War Two and afterwards during the Cold War peripheral conflicts. Today the same type of energy independence plan is needed in distinction to utopian “net-zero” ideals that the ruling coalitions in the Western “democracies” extol and the working class is skeptical of.

Rostow would later become a leading theorist on economic development theory and national security adviser to John F. Kennedy. He emphasized the importance of the US in using soft power diplomacy to guide countries through the five stages of growth: (1) traditional society, (2) pre-conditions for take-off, (3) take-off, (4) drive to maturity, and (5) high mass consumption.

The more one understands how a country must go through the five stages of growth to attain full sectoral development as discussed by Baumol and Blinder’s “Macroeconomics” (1988) text and other writings, the better one is able to understand the basis of post-Mahan and post Mackinder Grand Strategies—overt and covert geostrategic plans are based on preventing an adversary from attaining all five stages.

In contrast, the land power strategies of Friedrich Ratzel and Karl Haushofer are essentially based on the idea of land-powers using their overland logistical supply routes to attain all five stages themselves while assisting their allies to attain all five stages and full sectoral development also. (The result is a positive-sum gain relationship for the region under Proper Forms of government as defined in my Unified Behavioral Theory writings.)

The Kantian Ideal of Pareto-optimality and the Reality of Nash Equilibriums

From this simple synopsis one can see how political and economic development and modernization theory is designed to achieved positive-sum relationships enroute to a Kantian ideal, while geopolitical strategy is based on the “sole super power supremacy” of Wolfowitz (Defense Planning Guidance, FY 1994-99) and zero-sum antagonistic relationships that give rise to low intensity conflicts and the phenomenon of the “never-ending wars” that the Western middle and working classes are getting tired of.

This distinction between the role of energy in modernization theory, democratic peace and prosperity ideals, and foreign policy based on geostrategic “beggar-thy-neighbor” mercantilism needs to be understood as this series of articles progresses. As economist Jeffrey Sachs has been arguing over the last year and a half, the US is sleep-walking towards World War Three and the preponderance of people are not aware of the policy alternatives. The difference between political and economic development theories and the geopolitical theories needs to be more widely understood.

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People are becoming increasingly concerned about the mineral requirements for the energy transition and how these will be met.

In October, the International Energy Agency (“IEA”) published a report entitled Electricity Grids and Secure Energy Transitions in which it sets out the grid-related challenges to the energy transition. It identifies regulatory reform, planning reform, increased grid investment and development of supply chains and workforce skills as the steps necessary to enable these challenges to be overcome.

“To achieve countries’ national energy and climate goals, the world’s electricity use needs to grow 20% faster in the next decade than it did in the previous one…Reaching national goals also means adding or refurbishing a total of over 80 million kilometres of grids by 2040, the equivalent of the entire existing global grid,”
– IEA, Electricity Grids and Secure Energy Transition

The main recommendations were as follows:

Regulatory reform: regulation needs to be reviewed and updated to both better use existing assets and the deployment of new infrastructure. Regulation needs to incentivise the investments necessary to keep pace with changes in electricity demand and supply. This requires addressing administrative barriers, rewarding high performance and reliability, and spurring innovation. Regulatory risk assessments also need to improve to enable accelerated buildout and efficient use of infrastructure.

Planning reform: grid planning processes need to be better aligned with wider long-term planning processes by governments. New grid infrastructure often takes between five and fifteen years to plan, permit and complete, compared with one to five years for new renewables projects and under two years for new EV charging infrastructure. Stakeholder and public engagement are key both to inform scenario development and to ensure public acceptance – the public needs understand the link between grids and a successful energy transition.

Increased grid investment: grid investment needs to almost double by 2030 to over US$ 600 billion per year after over a decade of stagnation: emerging and developing economies, excluding China, have seen a decline in grid investment in recent years, despite robust electricity demand growth, while advanced economies have seen steady growth in grid investment, but at too slow a pace.

Developing supply chains and workforce skills: the expansion of supply chains can be supported by creating firm and transparent project pipelines and standardising procurement and technical installations. There is also a significant need for skilled professionals across the entire supply chain, as well as at operators and regulatory institutions.

According to the IEA, the most important barriers to grid development differ by region. The financial health of utilities is a central challenge in some countries, including India, Indonesia and Korea, while access to finance and high cost of capital are key barriers in many emerging market and developing economies, particularly in Sub-Saharan Africa. For other jurisdictions, such as Europe, the United States, Chile and Japan, the strongest barriers relate to public acceptance of new projects and the need for regulatory reform. Here, policy makers can speed up progress on grids by enhancing planning, ensuring regulatory risk assessments allow for anticipatory investments and streamlining administrative processes.

Developed world power grids are aging at a time when expansion is necessary

Grid length has almost doubled over the past 30 years, growing at a rate of about 1 million km per year, primarily driven by expansion of distribution networks which account for about 93% of the total length. In 2021, there were almost 80 million km of overhead power lines and underground cables worldwide, which equates to about one hundred trips to the moon and back.

Some 15 million km of distribution lines have been constructed in the past decade, with emerging markets and developing nations accounting for almost 12.5 million km. India alone contributed more than 3.5 million km, while China added nearly 2.2 million km and Brazil added 1.7 million km. Advanced economies experienced a modest rise of around 9% over the past ten years. The US added around 925 000 km of new distribution lines, and EU countries added around 715 000 km. Japan’s grid only experienced a 3% increase, equivalent to fewer than 40 000 km.

In terms of transmission infrastructure, China accounts for over one-third of global expansion in the past decade, having constructed over half a million km of transmission lines. India and Brazil have also undertaken significant expansion – India has added nearly 180 000 km of transmission lines over the past decade, an increase of around 60%, while Brazil added over 92 000 km during the same period, growing by more than 50%. Advanced economies saw a more modest 9% transmission system growth.

Grids, particularly in the developed world, are aging, posing safety and reliability risks as well as a requirement for additional investment. Only around 23% of grid infrastructure in advanced economies is under 10 years old, and more than half is over 20 years old. Countries such as Japan, the US and those in Europe, have a high proportion of their grids dating back over 20 years.

Transformers, circuit breakers and other switchgear in substations typically have a design life of 30 to 40 years. Underground and subsea cables are generally designed for 40 years, although newer versions may be expected to last for 50 years, while overhead transmission lines can go for up to 60 years before requiring a major overhaul. However, expensive items such as transformers are often kept in use past their expected lifetime, due to their high cost of replacement.

The digital elements of power grids have a much shorter lifetime, but also have faster innovation cycles. Control and protection systems often have a design life of 15 to 20 years, which offers significant opportunities to introduce new functionality that increases the flexibility and reliability of grid operation, however, issues such as software life cycles and cybersecurity must also be taken into account with updated equipment.

Grid reliability varies widely by region. Issues of reliability are growing in importance with increased electrification. Reliability data are hard to come by, and few countries differentiate between interruptions originating from generators, from transmission or from distribution networks. In four countries that do provide this information – the US, Japan, Australia and Chile – over 90% of power supply interruptions originate in distribution grids. In the EU, although comprehensive data for individual outage events is not available, reliability indicators show that most outages originate in low-voltage grids.

The IEA estimates that grid-originated technical/equipment failures caused outages that amounted to a global economic loss of at least US$ 100 billion in 2021. Most direct economic losses from outages arise from lost productivity at businesses experiencing interruptions, supply chain interruptions and potential damage to equipment. More indirect economic losses, such as those from fuel consumption in back-up diesel generators, can also be significant – for example, in Nigeria 40% of electricity is produced from back-up generation.

Common sources of technical failure are power transformers, instrument transformers and cables. In regions subject to high levels of precipitation, storms, monsoons and tornadoes, weather events typically account for a higher share of the outages. Human-related factors such as accidental damage, faulty installations and vandalism remain significant in many regions, with a notable trend in some countries toward increasing theft, vandalism and cyber attacks on grids.

Power system interconnection is being used to strengthen grids to accelerate renewables integration

Until relatively recently, power systems generally operated independently, but with the increase in electricity demand, and the deployment of renewables, regional co-operation has grown, and with it, there has been growth in cross-border connectivity. This is generally seen as beneficial – countries with surplus electricity can support those with a deficit, however since the Russian invasion of Ukraine and water shortages last year in Norway, there has been an increase in energy nationalism in Europe that is likely to be indicative of sentiment more broadly in times of regional system stress.

For the most part, cross border flows work well, but have the potential to create problems in neighbouring grids. For example, Germany built a large amount of renewable generation in the north of the country but did not build the necessary transmission capacity to move that electricity to demand centres in the south, choosing instead to send this electricity south via the Polish and Czech grids. This caused problems with local overloading in those countries leading them to complain to Acer (the Agency for Co-operation of Energy Regulators in Europe) and install circuit-breakers on their borders. Germany and Austria were forced to split their single bidding zone as a result.

Electricity shortages last year in typically exporting countries (France and Norway), together with concerns over gas supplies due to the Ukraine war, prompted concerns over energy nationalism in Europe with some grid operators suggesting privately they would protect their domestic interests irrespective of market rules. Even without explicit energy nationalism, with many countries sharing both similar weather and a growing dependence on weather-based energy resources, interconnection could create risks in times of system stress since many countries could face shortages at the same time. A prolonged heatwave across much of Europe last year highlighted this risk as many countries experienced several weeks with low wind output.

It may be the case that in normal times, increased interconnection allows more efficient use of energy resources, but in times of system stress, countries display a reluctance to export unless their own market is adequately supplied, regardless of price signals.

Importance of digitisation currently focused on EV infrastructure and smart meters

The IEA asserts that digitisation is a major trend in modern power grids, but its data suggest that aside from the introduction of EV charging infrastructure and the deployment of smart meters, this trend is actually quite weak. While smart meters can provide grid operators with instantaneous information about demand, there is limited evidence that this is happening in practice, generally because the structures necessary to capture these information flows have yet to be developed.

There is a couple of challenges here. One is driven by ownership of the meter itself and the underlying customer relationships. In most countries, electricity meters are owned and operated by network operators, so they have direct access to the data, however in the UK, suppliers sit between the customer and network operator, meaning that data protection requirements must be met which may reduce the transparency with which data can be shared. Secondly, different markets have different settlement rules – in GB, many classes of consumers are still part of the old demand profiling system where demand profiles rather than actual consumption inform settlements at the supplier level and there is no half-hourly settlement for consumers who are billed on consumption during longer periods of time (weeks and months).

Increasing digitisation of both distribution and transmission networks can also be used to help network operators understand what is happening on their grids, and the health of equipment. Remote control of the grid minimises intervention times and the number of operations that need to be performed locally, making operation possible from a single control centre using dedicated supervisory control and data acquisition (“SCADA”). Advanced automation tools allow the grid to act autonomously, quickly identifying and isolating the faulty element. For example, self-healing automation of the medium- and low-voltage grid, already implemented in some countries, ensures automatic containment preventing cascading power outages. Machine learning is increasingly being used to process the growing amounts of grid data being collected, to predict demand patterns and potential grid issues.

In transmission grids, flexible alternating current transmission system components such as static VAR compensators (“SVCs”) or Static Synchronous Compensators (“STATCOMs”) enable real-time control of power flows, voltage levels and other stability characteristics. They could also modulate the generation of reactive power depending on need, further enhancing grid stability, however these devices are currently relatively rare, with higher deployment observed in Europe and Australia. The use of grid forming power electronics is expected to grow as the share of inverter based generation increases.

However, with increased digitisation comes a greater need for up-to-date cyber security measures as grids become more vulnerable to cyber attacks. Electricity transmission systems are considered to be critical national infrastructure, for example, the 2023 UK National Risk Register puts the likelihood of a cyber attack on critical infrastructure at between 5% and 25%, ranking as moderate, with a potential impact of hundreds of millions of pounds in losses.

In recent years, the number of cyber incidents has increased and there have been many cases in which cyber attacks on key infrastructure have caused major social disruption, such as the power outages that occurred in Ukraine in 2015 and 2016. The first outage in western Ukraine, including Kyiv, took up to six hours to restore and affected 225 000 people; in the second outage in Kyiv in December 2016, attackers disrupted power grid control equipment through unauthorised access, resulting in a 200 MW outage for about an hour. While the 2015 attack consisted of a multi-stage attack in which malware stole information and used it to remotely operate the control system, the 2016 attack is believed to have involved malware directly manipulating power grid equipment. This indicates a marked increase in the sophistication of attack methods even within a short period.

Another example is the military cyber attack on a satellite in February 2022, as a result of which around 5,800 wind turbines in Germany lost their internet connections, making remote monitoring and control difficult.

Congestion and connection queues holding back the energy transition

The dual trends of increased electrification and deployment of renewable generation, particularly in distribution grids, is increasing the demand on grid infrastructure leading to problems with congestion and difficulties in obtaining grid connections.

Grid congestion is a growing concern for both network operators and policy makers. Congestion arises when there is not enough network capacity to transmit all the available power from one point on the grid to another. This means that generation is not dispatched optimally as generation on one side of the constraint may need to be curtailed while potentially more expensive generation downstream of the constraint is used instead. This frequently occurs in GB where Scottish wind is curtailed in favour of gas generation in England due to a lack of north-south transmission capacity.

Congestion management data are not always reported, particularly in regions where the system operator owns and operates generators as well as the grid. In markets where system operators are required to report congestion costs, the indicators may also differ based on congestion management techniques. From those countries which do report such data, congestion costs are increasing. In Germany, congestion management costs reached more than €4 billion per year in 2022 while a recent study estimated that transmission grid congestion costs in the US more than tripled from over US$ 6 billion in 2019 to almost US$ 21 billion in 2022. In winter 2021/22 alone (November-March), Great Britain spent almost £1 billion due to balancing in response to transmission constraints.

“There is a direct link between renewable curtailment caused by grid congestion and (the lack of) progress on transmission and distribution capacity deployment. Even though some complementary solutions such as electricity storage via flexible EV charging can be beneficial, investing in grids will in many cases be essential to unlock the full potential of renewable resources,”
– IEA

Issues with grid congestion also effect the ability of network operators to connect new assets or loads to the grid. The US, Spain, Brazil, Italy, Japan, the UK, Germany, Australia, Mexico, Chile, India and Colombia collectively have grid connection requests totalling almost 3,000 GW of solar PV, wind, hydropower and bioenergy capacity. According to the data presented (which conflict with the text due to what looks like a typo) of this, 500 GW relates to advanced projects with a grid connection, or one close to being agreed, 1,000 GW are projects that are currently under review, and the rest – about half of the total – are still in the early stages of the development process. A significant investment in grid infrastructure will be needed to accommodate many of these new projects.

The addition of both grid-scale transmission-connected renewable generation and distribution-connected renewables are giving rise to a requirement for more grid infrastructure. This is easier said than done – deploying additional network capacity is complex, involves multiple stakeholders and can take many years. Large transmission projects can take a decade or more to complete, often much longer than building the new wind and solar projects that connect to them.

Significantly shorter lead times for transmission lines are observed in China and India compared to advanced economies, largely as a result of more centralised decision-making. In more advanced economies there is a greater emphasis on public engagement and support – in the autumn budget, the UK’s Chancellor of the Exchequer announced utility bill discounts to people living close to new power lines in order to reduce the impact of public opposition to these projects.

Power grid project development typically goes through three phases: scoping, permitting and construction. Unlike local projects such as generation, power grid projects often involve multiple authorities and jurisdictions along the entire route, which all need to review and accept plans before granting approval. For example, the 340 km long Ultranet line in Germany requires around 13,500 permits. Significant delays can result from complex permitting procedures, flawed government agency review processes, subjective interpretation or insufficient review of regulations, complex land use change requirements, and estimation errors. In Europe, over a quarter of electricity projects of common interest are subject to delay, most frequently due to permitting. Similar problems are observed the US and Australia.

Lack of public support can also considerably increase lead times – according to ENTSO-E, the most discussed issues driving public opposition include the visual aspects, human and animal health, audible noise and biodiversity. As a result, it may become necessary to adjust the route, and consider burying some sections, essentially re-starting the entire design and planning process.

Tightness in supply chains holding back grid upgrades and expansion

Further delays in the delivery of new grid infrastructure relate to the availability of materials. Global supply chains of all kinds have faced bottlenecks in recent years, in part due to the effects of the covid pandemic and the Russian invasion of Ukraine. Prices for both energy and raw materials have soared and there have been shortages of certain critical minerals, semiconductors and other components. Grid technology supply chains were severely affected, for example 50 MVA power transformers had typical procurement times of 11 months before the pandemic, but are now over 18 months as manufacturers struggle to cope with labour and material shortages.

Building transmission lines is more complex than people think, requiring a number of different components and technologies – not just cables and lines, but transformers, substations and control systems, each requiring different materials and technologies. The material requirements depend on the voltage level – transmission capacity is the product of current and voltage: if the voltage is increased with the same current, transmission capacity increases.

Current determines the thickness of the conductor as well as its losses –  the higher the current, the greater the conductor’s thickness and the higher the losses. Voltage determines the amount of insulation needed – either air for an overhead line or insulating material such as cross-linked polyethylene, PVC, cross-linked ethylene-propylene polymer and silicone rubber in the case of cables. The higher the voltage, the higher the need for insulation. The amount of conductor material and electricity losses can be reduced by increasing transmission voltage.

Copper and aluminium are the principal raw materials for cables and lines. Historically, copper has been preferred due to its good electrical conductivity and malleability, however it is three times heavier and much more expensive than aluminium. Aluminium has approximately 60% of the conductivity of copper, so wires need to be much thicker for the same capacity, but as it has a better conductivity-to-weight ratio than copper, it is usually preferred for overhead power lines and is increasingly also used for underground and subsea transmission lines, although copper is still more commonly used for these applications. An overhead ac transmission line requires around 11 kg aluminium per MW and per km (kg/MW/km), compared with 65 kg/MW/km for an overhead distribution line operating at a much lower voltage.

Wood, steel and concrete are used for the pylons in the distribution grid, while steel is used for transmission towers. Underground cables require 101 kg/MW/km of copper for transmission and 438 kg/MW/km for distribution.

An HVDC line requires around 5 kg/MW/km of aluminium for an overhead HVDC line and 29 kg/MW/km of copper for an underground cable. Reactive power makes a big difference in the material needs of HVAC lines compared with HVDC lines of the same capacity, as a significant portion of the power capacity of an ac line is used by reactive power (MVAr). This is not the case for HVDC lines, which is entirely used for active power transmission (MW). HVDC systems usually operate at higher voltages, which further reduces the material needs relative to ac for the same transmission capacity.

In addition to access to raw materials, there are other sources of bottlenecks in the supply chain. For example, subsea cables require cable-laying vessels, of which there are only 45 in operation worldwide, which can lay a total of 4,200-7,000 km of cable per year (depending on the type of project).

Electricity grids also rely on transformers to allow electricity to move across different voltage levels. Almost half of the material (by weight) required for their manufacture is steel, of which more than 60% is grain-oriented electrical steel (“GOES”) with specific magnetic properties and high permeability, while the remainder is construction steel. GOES is almost 2.5 times more expensive than construction steel, and is also a key raw material for power generators and EV charging stations. High permeability GOES enables transformers to be smaller, have lower losses and require less oil for insulation.

The cost of GOES in the transformer core represents more than 20% of a transformer’s total cost. Other raw materials include copper, aluminium, transformer oil for insulation, insulation material, pressboard, paper, plastics, porcelain and rubber. Aluminium is mainly used in low-voltage distribution transformers, while mineral oil is used in all types of transformers to insulate and cool the transformer windings (copper coils) and core.

Transformer manufacturing varies according to the size of the transformer. The production of medium-voltage and distribution transformers (building of the core, production of the windings and the oil tank, assembly of the core and windings and final assembly of the transformer and testing) is not particularly technologically demanding, and there are many factories around the world making them. However, production of large transformers is concentrated in a few companies since special facilities are required (drying ovens for windings, high power testing laboratories, etc.). More than the 40% of the global market is accounted for by just ten companies.

The transformer industry has been facing shortages of GOES, which led to price increases of 70% in 2022 compared with 2020. Sanctions on material exports from Russia, which accounted for almost 10% of global GOES production capacity in 2020, is an important factor. In addition, demand for non-oriented electrical steel has led some steel producers to switch part of their production away from GOES, reducing capacity.

There are also challenges obtaining HVDC convertor stations. A two-year supply shortage in the semiconductors market is expected to last into next year, and many of the materials required for components such as insulated-gate bipolar transistors, capacitors, switches/breakers, resistors, inductors, power transformers, DC filters, control systems and measuring instruments all face shortages of silicon, steel, aluminium, copper, nickel, polymer and zinc. The expected increase in demand for HVDC equipment over the next ten years will put supply chains under additional pressure. This could be amplified by a lack of experienced personnel in manufacturing and areas such as engineering, construction and project management, as well as drives to improve the sustainability of power grid components with several jurisdictions considering banning the use of materials such as lead and SF6, which have few alternatives.

The next phase of the energy transition will involve massive capital expenditure and may be unaffordable

Often in industry gatherings I hear people articulate a desire to “adopt best practice”, by learning from the experiences of others doing the same thing. This sounds great in theory, but in practice risks embedding bad ideas, which are unsuitable as circumstances change. This is largely what has happened with grid management – many advanced economies have similar approaches to things like grid connection queue management, having shared best practice for a world characterised by small numbers of large generation projects connecting to transmission systems, with largely passive distribution networks. All are now scrambling to adapt to an increasingly de-centralised grid environment.

But the developed world now faces a major challenge to ensure the grid infrastructure necessary for the energy transition is in place, and the necessary expansion of power girds is coinciding with a need to upgrade and refresh existing infrastructure, presenting a major funding and resourcing challenge. There are definitely things that can be done to improve matters – managing grid queues better and streamlining permitting processes. But availability of raw materials is likely to be a serious barrier that defeats these improvements, as I will describe in a forthcoming post.

Policy-makers are proud of the de-carbonisation that has been achieved so far in electricity systems (although in some places such as Britain, this progress was largely due to a need to move from coal to gas as coal reserves declined and cheaper North Sea gas came onstream), but this has very much been the low-hanging fruit. There is complacency about the next steps with several countries adopting 2035 as a target for a net zero power grid. But this means that many countries will be chasing the same resources at the same time. The transition so far has been expensive due to the need to subsidise renewable generation and the backup power needed to manage intermittency – the next phase is likely to cost even more as the cost of grid expansion in an environment of material scarcity begins to bite.

The questions of how this will be paid for have so far been ignored. But consumers in many countries are already struggling with both energy bills and the wider cost of living, so it is far from clear that these massive investments will be affordable. Policy-makers may well find that the next phase of the transition is harder, more expensive and has less public support than what has gone before, and that risks de-railing the entire enterprise. It’s all very well to argue about phasing out fossil fuels, as at the recent COP gathering, but developing the necessary replacements will be easier said than done, and it’s far from clear that this will be achievable over the desired timeframes. The net zero train may be about to hit the buffers.

Source: Watt-logic.com

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The Biden administration on Friday finalized a plan to dramatically curb the number of offshore oil and gas lease sales over the next five years as it continues to aggressively push green energy development.

The Department of the Interior’s (DOI) five-year offshore oil and gas leasing program schedules just three Gulf of Mexico lease sales through 2029, marking the fewest number of sales ever included in such a plan, which the agency is mandated to issue periodically. According to the DOI, holding the sales will enable future offshore wind leases under an Inflation Reduction Act (IRA) provision that tethers the two.

“President Biden’s approach to severely limit leasing significantly curtails access to a critical national asset,” Erik Milito, the president of the National Ocean Industries Association, which represents both traditional and renewable offshore energy producers, said in a statement Friday. “The White House simply ignores energy realities by once again limiting U.S. energy production opportunities.”

“With global demand at record levels and continuing to rise, regressive policies will harm Americans of all walks of life by putting upward pressure on prices at the pump, destroying good-paying jobs that form the fabric of Gulf Coast communities, and relinquishing geopolitical advantages of energy production to countries like Russia, Iran and China,” he continued.

Milito added that policies limiting offshore production in the U.S. only serve to force greater reliance on energy imports, including from nations with higher emissions and worse environmental standards.

“This jeopardizes our energy security, and economic prosperity, and undermines our efforts to reduce emissions and combat climate change — goals purportedly championed by the current administration,” he said.

Under the plan, the DOI’s Bureau of Ocean Energy Management will hold the three sales of parcels in the Gulf of Mexico in 2025, 2027 and 2029. It also rules out any leasing off the Alaskan coast, and in the Atlantic and Pacific Oceans, in another departure from previous plans.

The administration, meanwhile, signaled that it could have pursued an even more restrictive five-year program if not for the IRA. That legislation — Democrats’ $739 billion climate and tax package signed by President Biden in 2022 — ties new offshore wind energy leases to new oil and gas leases, meaning the former could be threatened without consistent fossil fuel leasing.

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Energy News Beat

Heating demand might increase by more than 20% after a UK household switches from gas boilers to heat pump, new research from Cambridge University have shown.

In the study “How do heat demand and energy consumption change when households transition from gas boilers to heat pumps in the UK,” published in Energy & Buildings, the research group explained that heat demand should increase due to the change in heating patterns households experience after replacing their heating system, as they are typically recommended to maintain a constant setback temperature of 2-5 C less than the desired temperature.

“Households are often advised to increase the setback temperature to reduce the need for a rapid warm-up at the start of each heating period,” the scientists noted. “Home Energy Scotland suggests a setback temperature 5 C lower than the household’s preferred daytime indoor temperature. This would be 16 C for a preferred daytime indoor temperature of 21 C. Most other sources recommend only 2-3 C lower.”

The scientists believe that with the transition to heat pumps UK households may still suffer from high heat losses, due to the lack of good insulation, which would in turn may raise energy demand by 20%. For houses with better walls, practicing a twice-a-day heat pattern, a 15% increase is recorded; while houses that only heat the home once a day will experience a 5% increase in heat demand after switching to heat pumps.

“A problem is that electricity from the grid costs 32 euro cents ($0.35) per kWh, whereas gas costs about 9 euro cents per kWh, so it’s not guaranteed that the expense of installing a heat pump will pay for itself,” research co-author, Ray Galvin, told pv magazine. “Another step is to add rooftop photovoltaics, which reduces the energy coming into the building even more, and provides more or less free electricity for the times when the sun is shining and the heat pump is pumping.”

The researchers also explained that a change in heating patterns is crucial for the advice of a household in terms of energy costs. “The most usual practice in the UK is to base the estimate on existing bills or the heating requirement stated on the dwelling Energy Performance Certificate,” they stressed. “In either case this heat demand is for the heating pattern with the old heating system, leading to an underestimate of the electricity demand for the heat pump.”

The scientists believe, by contrast, that the increment in heating demand can be accurately predicted based on heating hours, local climate, heat loss and thermal mass. They also recommended including heat loss and thermal mass parameters in buildings’ energy performance certificates, so households can make more informed decisions before changing their system.

“Unfortunately this information is not available at the point when a householder asks an installer for a quote,” they added. “The householder is often asked to accept a quote based on an unrealistic prediction of their bills rather than an actual survey.”

In conducting this research, the scientist used 12 archetypes of homes prevalent across the UK and assumed them to run on gas boilers across the cities of Aberdeen, Finningley and Gatwick. They then measured their heat needs under different setback heating patterns, and finally transformed the consumption change to electricity usage of an air source heat pump would need.

“My usual definition of ‘heat pump ready’ is a heat pump that does not cost more, or at least not much more, than I pay now for my heating,’” co-author, Nicola Terry, told pv magazine. “This of course depends a great deal on the relative cost of gas and electricity, but also on the heat loss of your house and your radiator sizes.”

Source: Pv-magazine.com

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Energy News Beat

A new study from Lawrence Berkeley National Lab offers fresh insights into the impact of wind farms on the values of nearby homes.

The analysis, “Commercial Wind Turbines and Residential Home Values: New Evidence from the Universe of Land-Based Wind Projects in the United States,” scrutinized a dataset of 500,000 home sales near 428 wind farms across 34 states, spanning from 2005 to 2020. What’s unique here is the timeframe of the study – it covers a period from four years before announcement to more than six years after they began operating.

The construction of wind farms can affect local economies in various ways – job creation, tax revenue, and, yes, home sale prices. While previous studies hadn’t found significant impacts on home values in the US, this new report sheds light on some nuanced trends.

Graph: Berkeley Lab

The study found that home sale prices within one mile of a wind farm tend to dip post-announcement and decrease further during construction. But interestingly, they bounce back to pre-announcement levels within three to five years of the project being online. Homes within a mile of the wind farms saw an average price reduction of around 11%. However, homes located within one to two miles of a commercial wind farm experience much smaller impacts, and homes located farther than two miles away are unaffected.

Another intriguing find is the geographical variation. The impact on home prices was more pronounced in populous counties (those with over 250,000 people) than their rural counterparts. In more rural areas, the study didn’t observe any significant changes in home prices near wind farms.

It’s worth noting that the study didn’t explore certain aspects, like comparing wind communities to non-wind ones or the potential offsetting economic benefits like increased local tax revenue. The researchers hope to tackle these in future studies.

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Source: Electrek.co

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The advent of the LNG Export Era has had a dramatic impact on the North American Natural Gas Market. Nearly 13% of all natural gas produced in North America is shipped overseas to trading partners; exposing domestic customers to international markets. This global market exposure has been highlighted by the events in Ukraine when Russian pipeline deliveries were shut off and Europeans were left high and dry. Europe was able to avoid disaster by a combination of large quantities of LNG imports and two warmer-than-normal winters. The impacts of such unforeseen situations to Europe and North America show the importance of scenario analysis–not just for geo-political conflicts, but for natural disasters and/or weather events as well. Similarly, considering the impact that Freeport LNG’s outage had last summer on supply/demand balances and prices, vetting the effects an LNG export stoppage could have on the North American Market is of particular interest.  One way to model this kind of demand impact is to create a scenario that incorporates a large-scale hurricane which assumes LNG export terminal shutting down for more than just a few days.

Recent hurricanes have largely spared the Texas and Louisiana coasts, where LNG export facilities are predominantly located. However unlikely, the probability of a large-scale hurricane causing an extended outage is not zero – e.g., previous large-scale, slow-moving hurricanes have caused flooding issues at refineries/petrochemical facilities causing extended outages. We at RBAC, Inc. used GPCM® Market Simulator for North American Gas and LNG to simulate exactly that, hurricane related extended outages. Three scenarios; simulating a 30-day, 60-day, and 90-day suspension of LNG exports out of the Gulf as well as corresponding reduction in offshore natural gas production from the Gulf.  We will look at pricing impacts to major pricing hubs, to production, as well as how storage acts as a buffer.

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Energy News Beat

Greece’s first floating storage and regasification unit (FSRU) has arrived in Alexandroupolis, where it will soon start serving Gastrade’s LNG import project.

According to its AIS data, the 153,600-cbm Alexandroupolis was on Sunday anchored offshore the Greek port of Alexandroupolis.

Greece’s Gastrade confirmed the arrival of the FSRU in the waters of the Thracian Sea in a statement issued late on Sunday.

The firm previously said that the FSRU would arrive in the port on December 17 from Singapore.

Last month, the vessel left Seatrium’s yard in Singapore following the completion of the conversion work at the yard.

Gastrade’s shareholder and Greek LNG shipping firm GasLog told Keppel Offshore & Marine, now Seatrium, in February last year to proceed with the conversion of the 2010-built, GasLog Chelsea, to an FSRU.

The vessel entered the yard in February this year and the partners renamed it to Alexandroupolis.

GasLog will sell this unit to Gastrade for about $265 million.

Besides GasLog, Gastrade’s shareholders include founder Copelouzou, DESFA, DEPA, and Bulgartransgaz.

The Greek company took the final investment decision on the project worth about 363.7 million euros ($397 million) in January last year and officially started construction in May the same year.

Image: GasLog

The Alexandroupolis LNG terminal will have a capacity of 5.5 Bcm.

With this project, Greece will get its first FSRU and also the second LNG import facility, adding to DESFA’s import terminal located on the island of Revithoussa.

In addition to this unit, Gastrade is also planning to install a second FSRU offshore Alexandroupolis.

The first FSRU will be permanently moored at a fixed point and at a distance of 17.6 km SW from the port of Alexandroupolis and 10 km from the nearest coast of Makri.

Three new tugs, owned by Denmark’s Svitzer, will serve Gastrade’s FSRU-based LNG import terminal.

Image: Gastrade

In the following days, the FSRU will be anchored through a spread 12-point mooring system, Gastrade said.

The FSRU will then be connected to the high-pressure subsea and onshore gas transmission pipeline.

Once operational, the pipeline will deliver natural gas to the Greek transmission system and onwards to the final consumers in Greece, Bulgaria, Romania, North Macedonia, Serbia and further to Moldova and Ukraine to the East and Hungary and Slovakia to the West, Gastrade said.

Gastrade recently extended the bid deadline to December 15 for its tender seeking a liquefied natural gas cargo for the commissioning of the FSRU.

The company previously told LNG Prime that it expects to receive the commissioning cargo in January and to launch commercial operations by the end of the first quarter.

(Updated with a statement by Gastrade.)

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Energy News Beat

A unit of Japan’s city gas supplier and LNG importer, Tokyo Gas, has agreed to buy Texas-based natural gas producer Rockcliff Energy from private equity firm Quantum Energy Partners for $2.7 billion.

Tokyo Gas America decided to acquire all shares of Rockcliff Energy II through its ownership interest in TG Natural Resources (TGNR), according to a statement by Tokyo Gas.

TGNR is a unit of Tokyo Gas America in which the firm has a 79 percent stake while a unit of Castleton Commodities International holds the rest.

Tokyo Gas has been expanding its upstream business in the US through TGNR, which becameits subsidiary in 2020.

Rockcliff’s main business is upstream development in Texas and Louisiana targeting Haynesville shale and Cotton Valley formations.

Tokyo Gas said it is expanding its shale gas business as demand for gas is expected to increase in the US due to the construction of new LNG export terminals.

Also, TGNR has been seeking to acquire “superior” assets around its existing assets in Texas and Louisiana.

“With this acquisition, the outcome from TGNR will become the base of overseas earnings,” Tokyo Gas said.

As a result of this acquisition, the production volume of gas and natural gas liquids held by TGNRwill increase by about 4 times from some 330 million cubic feet per day (9.3 million m3/day, gas equivalent) to 1,300 million cubic feet per day (37 million m3/day, gas equivalent), it said.

In the US, Tokyo Gas is working with its partners Osaka Gas, Toho Gas, Mitsubishi, and also Sempra Infrastructure to produce e-methane in Texas or Louisiana, liquefy it at Sempra’s Cameron LNG facility, and transport it to Japan.

E-methane is a synthetic gas produced from renewable hydrogen and carbon dioxide and can be transported via the existing gas infrastructure, including the LNG supply chain.

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Energy News Beat

Germany’s first FSRU-based import facility in Wilhelmshaven has received 42 liquefied natural gas (LNG) cargoes since its commissioning in December 2022, according to state-owned energy firm Uniper.

The 170,000-cbm FSRU Hoegh Esperanza, owned by Norway’s Hoegh LNG and chartered by the German government, received its first LNG cargo in Wilhelmshaven from the US in early January.

Prior to that, the chartered FSRU arrived in Wilhelmshaven on December 15 with a cargo from Spain’s Sagunto terminal, while Uniper and its partners launched the facility two days later. The vessel started supplying this gas to the German grid on December 21.

Germany’s first LNG terminal at the Hooksiel outer harbor near Wilhelmshaven celebrated its first anniversary on December 17, 2023.

The contract awarded to Uniper by the German government in March 2022, enabling the import of LNG via the terminal in Wilhelmshaven, was completed in record time with a construction period of nine months, Uniper said in a statement.

“Since commissioning on December 21, 2022, the terminal has been running almost without interruption. 42 LNG carriers have so far delivered around 7 million cubic meters of LNG via the FSRU Hoegh Esperanza,” the company said.

This LNG has been converted into around four billion cubic meters of natural gas and fed into the German gas grid.

According to Uniper, around six percent of German gas consumption in 2023 could thus be covered by the liquefied natural gas imported at this location.

“It is already certain that the capacities of the FSRU will also be fully utilized for 2024,” the firm said.

Uniper’s unit LNG Terminal Wilhelmshaven (LTeW) is responsible for the operational and technical management of the terminal and acts on behalf of the state-owned Deutsche Energy Terminal (DET), which is responsible for the operation and marketing of all LNG terminals built on the German North Sea coast on behalf of the federal government.

In October, DET allocated 60 regasification slots at the Brunsbüttel and Wilhelmshaven 1 sites and is now working to launch the second Wilhelmshaven FSRU and the Stade FSRU.

The Wilhelmshaven 1 terminal has a capacity of 6 bcm per year and the Brunsbüttel terminal has a capacity of 3,5-5 bcm per year.

Besides these four FSRUs, the German government sub-chartered the FSRU Transgas Power to private firm Deutsche Regas to serve the planned LNG import terminal in the port of Mukran.

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Energy News Beat

State-owned LNG terminal operator Deutsche Energy Terminal has allocated 11 regasification slots at its FSRU-based LNG import terminal in Germany’s Stade as it works to launch the facility in February next year.

DET held capacity auctions on December 11 and 14 for in total 15 regasification slots.

This is the second time DET marketed regasification capacities for its FSRU-based terminals in digital auction rounds after auctions for the Brunsbüttel and Wilhelmshaven 1 sites.

DET said in a statement that market participants were able to acquire 50 percent of the total slots for the use of short-term regasification capacities in the period from April to December 2024 at the Stade terminal.

Slots were allocated both with and without delivery obligations for market participants.

DET said 11 of the total of 15 slots on offer were allocated at prices of 55 euro cents/MMBtu each.

The remaining four slots of capacity at this terminal will be awarded at a “later date”, it said.

Image: DET

“Given that we are experiencing a mild winter so far, are seeing full gas storage levels and most gas traders have already finalized their annual planning in October, we are very satisfied with the result of our auctions for the Stade terminal,” Peter Röttgen, managing director of DET, said.

He said that the result confirms DET’s assumption that there is a demand for regasification capacities on the German coast despite the current market conditions.

“It should also be noted that capacities were marketed for a terminal that is currently still under construction. Nevertheless, DET has made a conscious decision to offer all bookable capacities at an early stage in order to ensure planning security for traders,” Röttgen said.

Further auctions for both short-term and long-term capacity are planned for all four DET FSRU-based terminals in April 2024.

The 174,000-cbm FSRU Transgas Force, owned by Dynagas, recently left Germany’s Bremerhaven and now works as an LNG carrier until mid-February when it is expected to be deployed in Stade.

Image: Ports of Bremen and Bremerhaven

German port firm Niedersachsen Ports (NPorts) also just completed the new LNG jetty in Stade which will welcome the 2021-built FSRU Transgas Force, according to DET.

The Stade FSRU-based LNG terminal will have a capacity of some 6 bcm per year and will be replaced by Hanseatic Energy Hub’s planned onshore LNG import terminal in 2027.

DET is planning to commission both its FSRU-based facilities in Stade and Wilhelmshaven in the first quarter of 2024.

Following the launch of these two facilities, DET will operate in total four FSRU-based LNG terminals as Uniper and RWE already installed Hoegh LNG’s FSRUs Hoegh Esperanza and Hoegh Gannet in Wilhelmshaven and Brunsbüttel.

Also, the German government sub-chartered the FSRU Transgas Power, owned by Dynagas, to private firm Deutsche Regas to serve the planned LNG import terminal in the port of Mukran.

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