Energy News Beat

Long-term yields matter more to the economy than the Fed’s short-term policy rates; hence the efforts to push them down.

By Wolf Richter for WOLF STREET.

The 10-year Treasury yield dropped by 8 basis points on Friday, to 4.43%, perhaps inspired by iffy feelings elsewhere as stocks careened lower and investors sought safety.

Since January 10, the 10-year yield has now given up 34 basis points of that 114-basis-point spike that it had experienced from mid-September 2024, just before the Fed’s first cut, through January 10, 2025. Over this period of surging long-term yields, the Fed had cut its short-term policy rates by 100 basis points.

The Effective Federal Funds Rate (EFFR), which the Fed targets with its policy rates, has remained at 4.33% since the December rate cut, down by 100 basis points from the pre-cut levels (blue).

One of the reasons for this massive disconnect was the market’s assumption that the Fed, amid its rate cuts and rate-cut talk, would be lax about inflation, which just at the nick of time had started to re-accelerate. And further rate cuts could provide additional fuel for it. Rising inflation and a lax Fed spook the long-term fixed-income market.

Long-term yields really matter to the economy. They reflect the borrowing costs for businesses and households. There is some debt with floating rates, but the majority of the debt has fixed rates that track 10-year Treasury yields, and higher 10-year yields would increase actual borrowing costs for new debt in the economy and tighten financial conditions and eventually slow the economy.

These rate cuts, and the formerly-projected future rate cuts, in light of the inflation scenario developing over the past few months, had the effect of spooking investors who wanted to be compensated more for those higher inflation risks over those 10 years, which pushed up long-term yields.

So how to you get the 10-year yield to go down?

Not with rate cuts, obviously. That flopped and had the opposite effect. But with a three-pronged strategy:

1. The Fed gets more hawkish about inflation and puts further rate cuts on ice.
2. The Treasury Department minimizes the supply of long-term Treasury securities, by shifting issuance to short-term securities, which it has been doing for over a year; and by deficit reduction, which is new.
3. The Fed and Treasury Department both talk down the 10-year Treasury yield.

So the Fed got more concerned about inflation at the December meeting, when it cut one more time, but projected only two cuts in 2025, and saw higher inflation and higher “longer run” rates. At the January meeting when it didn’t cut, the Fed pivoted to wait-and-see and put further cuts on ice.

Then on February 6, Treasury Secretary Scott Bessent came out and said in an interview that “The president wants lower rates,” but that “he and I are focused on the 10-year Treasury and what is the yield of that.”

So lower long-term rates. And how do you get long-term rates down? Get inflation down and keep it down. And that’s the Fed’s job. And rate cuts won’t do that job. The Fed cannot be lax about inflation, that became abundantly clear, because a lax Fed in an inflationary environment would drive up long-term yields.

Short-term yields stayed put.

Short-term yields essentially haven’t budged since early December when they had already fully priced in the rate cut at the time.

The six-month yield no longer prices in any rate cuts in its window through mid-2025 before it matures, hovering right around the EFFR.

The yield curve flattened.

With the Fed having put rate cuts on ice, short-term yields stayed put at around the EFFR, while long-term yields came down some. As a result, the yield curve flattened some.

The chart below shows the yield curve of Treasury yields across the maturity spectrum, from 1 month to 30 years, on three key dates:

• Red: January 10, 2025, just before the Fed pivoted to wait-and-see.
• Gold: Friday, February 21, 2025.
• Blue: September 16, 2024, just before the Fed’s rate cuts started.

This yield curve has a dip at the one-year yield, with the 6-month yield being higher than yields in the range of 1-5 years.

But mortgage rates remain close to 7%.

From the initial rate cut in September through mid-January, just before the Fed pivoted to wait-and-see, the average 30-year fixed mortgage rate had risen by 96 basis points, to 7.04%, according to Freddie Mac’s weekly measure, while the Fed had cut by 100 basis points.

Mortgage rates have since given up only 19 basis points of this 96-basis point surge, and at 6.85% are at the upper end of the 6-7% range in which they have been since September 2022.

Over the three decades between 1972 and 2002, 7% was the lower edge of the range, and for most of that time, rates were above 8%.

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The post Treasury Yield Curve Flattens as 10-Year Yield Falls, Short-Term Yields Stay Put: Fed’s Pivot to Wait-and-See in Inflationary Times. But Mortgage Rates Stay Near 7% appeared first on Energy News Beat.

Energy News Beat

Demand destruction because prices are too high after the 50% price explosion during the pandemic.

By Wolf Richter for WOLF STREET.

Demand in the resale market just keeps getting crushed after every little sign of green shoots. Sales of existing single-family houses, townhouses, condos, and co-ops that closed in January dropped by 4.9% from December, seasonally adjusted, to an annual rate of 4.08 million sales, according to the National Association of Realtors today.

This rate of sales was up just 2.0% from the abysmally low levels a year ago – 2024 as a whole had been the worst sales year since 1995 – and flat with the abysmally low levels two years ago.

Compared to January 2021, the sales rate was down by 36%, compared to January 2019, the sales rate was down by 25% (historical data from YCharts):

Actual sales, not seasonally adjusted and not annual rate, at 240,000 in January, were up by 2.6% from the abysmally low levels a year ago, and down by 31% from January 2022. The blue lines connect the Januarys.

Demand destruction by region.

The charts below show the seasonally adjusted annual rate of sales (SAAR) in the four Census Regions of the US. A map of the four regions is in the comments below the article.

Northeastern US: The seasonally adjusted annual rate of sales fell to 500,000 homes:

Midwestern US: The seasonally adjusted annual rate of sales remained at 1,000,000 homes.

Southern US: The seasonally adjusted annual rate of sales fell to 1,830,000 homes.

Western US: The seasonally adjusted annual rate of sales rose 750,000:

Highest supply since January 2019.

Supply of unsold existing homes on the market jumped to 3.5 months in January, the highest since January 2019 (3.8 months), higher than January 2018 (3.4 months), and same as January 2017. January 2025 is shown as the red square.

Active Listings doubled since 2021.

Active listings – total inventory for sale minus homes whose sales are pending – rose to 829,400 (red square in the chart below), the highest for any January since 2020, according to data from Realtor.com.

Active listings have more than doubled since January 2022, while actual sales in January have plunged by 31% from January 2022.

Days on the market lengthen to 73 days.

The median number of days before the home is either sold or pulled off the market because it failed to sell rose to 73 days in January, the highest for any January since 2020, and up from 69 days a year ago, according to Realtor.com.

Days on the market track the mix of two factors: How motivated sellers are by letting their home sit on the market when it doesn’t sell right away, before they pull it, and how quickly homes sell that do sell.

I’ll just vent here about the metric, “median price.”

To get the national median price, the NAR essentially puts all homes that sold in the US on a list sorted by price and takes the price of the one home that is in the middle of that list (=median price).

The median price is heavily skewed by changes in the mix of homes that sold. In the spring, nationally, more higher-end homes come on the market and sell, which changes the mix of what sold and skews the median price higher. It then does the reverse in the fall and winter and skews the median price lower. These seasonal ups and downs in prices are at least in part due to this shift in the mix. In individual markets, median prices jump up and down wildly on a monthly basis, based largely on the mix of what sold.

The median home price is the second worst measure for home prices, after “average home prices” (sum of all home prices divided by number of homes). Today, there are far better methods available, based on huge amounts of data from all sources, including public records, with sales-pairs relationships.

I use one of those massive data sets that is not based on a median price to depict visually the largest most expensive 33 markets – those where prices have dropped sharply since their peak in 2022 and those  where prices have continued to rise, for my series, The Most Splendid Housing Bubbles in America, Jan 2025: The Price Drops & Gains in 33 of the Largest Housing Markets.

These 33 large metros are bookended by the Austin metro with the biggest drop from peak (-23% from June 2022), and by the New York metro with the biggest year-over-year gain (+6.0% yoy):

But the NAR still puts out its national median price as it has for decades.

Single-family houses: In January, the national median price declined along seasonal lines to $402,000 from the downwardly revised December median price. This trimmed down the year-over-year increase to +5.0% in January, from +5.9% in December (originally reported as +6.1%).

Based on the pre-pandemic seasonality, the median price drops sharply in January, and January or February marks the seasonal low point. The high points are in June.

The 50% price explosion between June 2019 and June 2022, on top of the large price gains in the prior 10 years, was driven by the Fed’s interest-rate repression and money-printing schemes which have created the #1 problem in the housing market today, which is why demand has plunged: Prices are way too high.

Condos and co-ops. Prices dropped by 2.9% in January from December, the biggest December-January drop since 2015, to $349,500. This drop, which was far more than the typical seasonal drop in January, cut the year-over-year gain to 2.9% in January, from 4.5% in December.

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Energy News Beat

The United States will not lift any sanctions on Russia unless Moscow noticeably changes its behavior, U.S. Secretary of State Marco Rubio told European leaders in a call after the U.S.-Russia meeting in Riyadh.

European leaders are concerned that they are being left out of talks and of the apparent major pivot in U.S. foreign policy after the top officials from the United States and Russia met earlier this week in Saudi Arabia to discuss a potential end to the war in Ukraine.

Following the meeting with Russia, Rubio sought to assure the Europeans in a call with officials from the UK, France, Germany, and Italy that no deal would be imposed on Ukraine or Europe and that sanctions would not be lifted, at least not soon, The New York Times reports, citing a summary of the call it had reviewed.

The U.S. Administration will not be lifting sanctions on Russia unless a noticeable change in Moscow’s behavior is seen, Rubio told the European officials.

However, the U.S. Secretary of State “left the door open to easing some sanctions in limited ways if the Russians began taking steps that the administration was seeking,” NYT reports, based on the summary of the call prepared by European officials.

Rubio also told the Europeans that the U.S. Administration was very much aware that Russia could try to use the U.S.-Russia talks to create rifts and divisions among the Western allies, according to the NYT’s account of the call.

The latest U.S. sanctions on Russia’s oil trade, the most aggressive sanctions yet imposed in the last days of the Biden Administration, have upended global oil trade as Asia rushes to cover Russian barrels with alternative supply and tanker rates soar amid significantly decreased availability of non-sanctioned vessels.

The Biden Administration’s farewell sanctions on Russian oil trade sanctioned dozens of vessels that Russia used to ship the ESPO crude blend from Kozmino to China’s independent refiners.

Meanwhile, the EU this week agreed on a new package of sanctions against Moscow, including a ban on Russian aluminum imports and the designation of 73 shadow fleet vessels.

By Charles Kennedy for Oilprice.com

The post Rubio Says U.S. Could Ease Sanctions Only If Russia Noticeably Changes Behavior appeared first on Energy News Beat.

Energy News Beat

Subsea cables channel data and power, but they face escalating risks.

 

By Jared Cohen, the president of global affairs at Goldman Sachs and co-head of the Goldman Sachs Global Institute.

The artificial intelligence-powered economy has a massive vulnerability: the ocean.

The digital world is connected by subsea cables, a roughly 750,000-mile network that could circle the globe 30 times. Laid as deep as five miles below the surface, these cords make daily life—and the global marketplace—possible. While 80 percent of international trade by volume is transported on the sea’s surface, 95 percent of international data flows under it, including instant messages, an estimated $10 trillion in daily financial transactions, and countries’ national-security secrets. Meanwhile, power generated offshore, a growing share of global energy, is often transported via subsea cables.

The artificial intelligence-powered economy has a massive vulnerability: the ocean.

The digital world is connected by subsea cables, a roughly 750,000-mile network that could circle the globe 30 times. Laid as deep as five miles below the surface, these cords make daily life—and the global marketplace—possible. While 80 percent of international trade by volume is transported on the sea’s surface, 95 percent of international data flows under it, including instant messages, an estimated $10 trillion in daily financial transactions, and countries’ national-security secrets. Meanwhile, power generated offshore, a growing share of global energy, is often transported via subsea cables.

These two elements—data and power—are the foundations of the AI economy. But the subsea cables through which they flow face escalating dangers, and multiple incidents in the past few months have highlighted those risks.

In November, a Chinese vessel reportedly dragged its anchor along the Baltic seabed for more than 100 miles, severing data cables between Sweden and Lithuania as well as between Finland and Germany. NATO ships had to intervene. A month later, a Russian oil tanker believed to be part of Moscow’s “ghost fleet” cut a cable carrying power between Finland and Estonia, only to be seized by Finnish authorities.

The German foreign minister called these incidents a “wake-up call” for Europe. NATO has since established a new mission in the Baltic to protect undersea infrastructure. But the challenge is global and persistent—in a sign of the heightened tempo of such incidents, another undersea cable—located to the north of Taiwan, which is connected to the outside digital world through just 15 cables—was damaged in early January, potentially by a Chinese ship. Shortly after, two cables to the Taiwan-governed Matsu Islands disconnected due to what Taiwan’s Digital Affairs Ministry called “natural deterioration,” though backup microwave communications were activated to keep the islands’ 14,000 residents online.

In some cases, disruptions are accidental. Backup systems can often limit the negative effects, as they did during the most recent Matsu incident. However, whatever their causes, the consequences of the approximately 150 cable-breaking incidents a year can often be severe, and include internet shutdowns, espionage, and costly repairs and delays.

In one dire incident in 2008, the severing of two Mediterranean cables shut down internet access in 14 countries, including 100 percent of connections in the Maldives, and 82 percent in India. What makes today’s risks even more vexing than they were then are questions of scale and significance. One-off cable cuts are relatively straightforward to fix. But if cables are damaged at particularly sensitive times or places, or on a wider geographic scale, then that task is much more challenging.

Meanwhile, subsea cables are growing even more necessary to daily life as artificial intelligence increases demands for global data transmission, including through overseas data centers connected to the global cable networks.

Hundreds of billions of dollars are being invested in AI infrastructure every year. But that infrastructure is often connected through one of the thinnest, and potentially most vulnerable, physical networks on the planet.

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A historic black-and-white illustration shows a side view of the laying of a trans-Atlantic cable between two ships, with the cords sloping in a U-shape between them above the ocean floor.

An illustration shows the laying of the trans-Atlantic cable intended to link Europe and North America in the 1800s.Corbis via Getty Images

The individual fiber optic strands that, combined, make up the subsea cables through which world’s information flows are often barely thicker than a human hair. And that delicate infrastructure predates the digital age. The first undersea cables made trans-Atlantic telegraph communication possible in the 1850s, and through the technological revolutions since, they’ve connected telephones, modern telecommunications devices, and now the global AI infrastructure.

In recent decades, three main players, analogous to national champions, have dominated the global subsea cable market: SubCom in the United States, NEC Corporation in Japan, and Alcatel Submarine Networks in France. As of 2021, these three companies held a 87 percent global market share.

However, in recent years, China has disrupted the subsea cable ecosystem. Huawei Marine Networks was founded in 2008, and it soon became the fastest-growing subsea cable provider and the fourth-largest in the industry. From 2018 to 2022, HMN Tech, as it was renamed in the intervening years, supplied 18 percent of new cables based on total length. The company’s success followed the playbook of many Chinese technology champions, with subsidies from the Chinese government allowing it to submit lower bids on projects than free-market competitors.

A wide coil of fiber optic wires wrapped into hose surrounds a round scaffolded space, inside of which workers move around as they install an electric submarine cable and optical fiber. A cloud-covered sky is partly visible overhead.

Workers install an electric submarine cable and optical fiber between Quiberon and Belle-Île-en-Mer, western France, on March 11, 2015.Jean-Sebastien Evrard/AFP via Getty Images

The latest, and perhaps most consequential, market shift in the industry is happening now: the proliferation of artificial intelligence. As data has become the foundation for both the digital economy and the emerging AI industry over the past decade, hyperscalers—or large computing and cloud services providers such as Google, Meta, Microsoft, and Amazon—have become major players in the subsea cable market. Most cables are now built by consortiums of hyperscaler and telecommunication companies. As technology companies build up their cloud and AI capabilities and construct more data centers globally, they also invest in more subsea cables. Today, Google is a part or sole owner of roughly 33 cables.

Even in a stable international environment, it would be impossible to separate subsea cables from geopolitics. There are always risks of sabotage or espionage and the need to adapt to national and international standards-setting. Every international cable project needs government approvals along its routes.

But in a more competitive—even combative—period in global affairs, the subsea cable market has become a more contested arena.

In 2023, FP columnist Elizabeth Braw argued that we are “entering the era of the undersea Iron Curtain.” The public debut of ChatGPT in late 2022 and the proliferation of AI-enabled tools since have brought this 20th-century division into a new period in the history of technology. Because of the rise of AI, these cables are more important than they were even two years ago.

The contest over subsea cables entails old tools of statecraft, such as deterrence and incentives, deployed in new domains. And in recent years, that contest has played out in every major geopolitical theater, affecting global consumers and many of the world’s leading companies.

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A Russian Navy nuclear submarine is seen partly submerged in the distance at a harbor beneath a hazy sky. Slightly out of focus in the foreground, two adults are seen looking out over the rounded lip of a low concrete wall. One has a small child on his shoulders, also looking at the submarine.

A Russian Navy nuclear submarine is prepared for the Navy Day parade in Kronshtadt, Russia on July 29, 2017.Igor Russak/NurPhoto via Getty Images

In Europe, a Chinese-flagged ship is suspected of having damaged a Baltic subsea cable in October 2023, a year before the Baltic Sea sabotage that triggered a NATO response a few weeks ago. In another incident earlier in 2023, another Chinese-flagged vessel reportedly damaged the cables connecting Taiwan with its aforementioned outlying Matsu Islands, leaving them without internet for weeks.

And the warning signs flashed even brighter in 2024. Early last year in the Middle East, three cables in the Red Sea—where 90 percent of Europe-Asia communication flows—were damaged when the anchor of a commercial ship sunk by Houthi missiles dragged along the ocean floor. And U.S. officials told CNN last fall that Russia is developing a deep sea-focused military unit, a capability that could give Moscow new tools for aggression and gray-zone operations and attacks that fall short of war.

The United States’ concern about subsea cables is growing and bipartisan. In 2019, worried about China’s civil-military fusion, espionage, and cyberthreats, the first Trump administration sanctioned Chinese telecommunications giant Huawei. The Trump era’s State Department’s multilateral Clean Network initiative included a “Clean Cable” pillar “to ensure undersea cables connecting [the U.S.] to the global internet are not subverted for intelligence gathering by the [People’s Republic of China] at hyper scale.”

In 2024, under the Biden administration, the State Department built on those initiatives released the “New York Joint Statement on the Security and Resilience of Undersea Cables,” a set of principles endorsed by 30 countries at the United Nations General Assembly. The United States is also a member of the Quad Partnership for Cable Connectivity and Resilience, announced in 2023.

An operator in a yellow reflective vest works at the edge of the sea, his feet in the water as he reaches down to poke at a fiber optic cable that runs up the sand of the beach as well as out beyond the worker and into the water, where a line of buoys marks its path to a ship in the distance.

An operator works during the mooring of an undersea fiber optic cable near the Sopelana, Spain on June 13, 2017. Ander Gillenea/AFP via Getty Images

As world powers vie for regional influence and partnerships, subsea cable infrastructure contracts have become commercial contests for spheres of geopolitical influence. In 2021, HMN Tech was pushed out of a project linking three Pacific islands, including the Federated States of Micronesia, which has a defense agreement with the United States. The project was scrapped and later replaced by the East Micronesia Cable project, jointly funded by the United States, Australia, and Japan.

Meanwhile, Vietnam—which has five aging subsea cables—is upgrading its infrastructure, creating a new opening for international ties. U.S. officials and telecommunications companies have held multiple meetings with Vietnamese officials to dissuade them from using geopolitically problematic companies, with officials reportedly pointing out that the choice of infrastructure providers could make Vietnam more or less attractive for international investment.

For many countries, physical connections to Chinese cables are viewed as vulnerabilities. The United States government in 2020 set up Team Telecom, an interagency group tasked with safeguarding United States telecommunications infrastructure and preventing direct cable connections between the U.S. and mainland China or Hong Kong. Team Telecom recommended that the Federal Communications Commission block the Hong Kong segment of four planned subsea cable routes. The project owners of these cables, both hyperscalers, switched their termination points to the Philippines and Taiwan, rather than Hong Kong, at an estimated cost of tens of millions of dollars.

The contest over subsea cables isn’t just playing out in foreign ministries—it’s also altering how companies are governed and how the world is wired. Due in part to U.S. pressure, Huawei divested from Huawei Marine Networks in 2020, when the company rebranded to HMN Tech.

More significantly than a change in name or structure, other companies have been squeezed out of projects since then. The SeaMeWe-6 cable, now under construction, will connect more than a dozen countries across Southeast Asia, the Middle East, and Western Europe. HMN Tech was poised to win the contract in 2020 with a bid that was approximately one-third lower than competitors’, but the United States offered five foreign telecom companies training grants worth a total of $3.8 million if they selected SubCom instead, while warning consortium members of potential sanctions against HMN Tech. SubCom ultimately won the SeaMeWe-6 contract, and Chinese companies left the consortium, to be replaced by enterprises from Malaysia and Indonesia.

The results of such commercial and diplomatic maneuvering are clear: Chinese companies are losing ground in international markets. There are now only three new cables with connections in Hong Kong scheduled for 2025, and none after. For comparison, Singapore, historically a smaller market competitor than Hong Kong, has 26 subsea cables landing at three landing sites, with plans to double the number of sites by 2033. Under the sea as well as over it, the world is becoming more divided.

The geography of subsea connections mirrors geopolitical divides. Rather than transiting the contested South China Sea, for example, Western consortiums now often pursue less direct avenues, such as through the Java Sea. They cover a greater distance at greater cost, but with less geopolitical risk. Guam, Japan, the Philippines, and Singapore may stand to benefit from new routes, especially as they become greater data center hubs. Meanwhile, China has increased its push for new subsea cable projects to the global south and parts of the world that are tied to its Digital Silk Road initiative, where Western interests hold less sway.

A world divided into blocs by digital infrastructure may be more resilient, but security doesn’t come without trade-offs. At $40,000 to $60,000 per kilometer, cables are expensive to lay, and once they’re set and connected to facilities like data centers, they cannot be easily ripped out and replaced. Delayed, canceled, or rerouted subsea cables add uncertainty, complicating market dynamics. Longer cables laid over less efficient routes also mean more latency, as data must travel greater distances.

And while casual internet users may not recognize slower speeds, quick data transfer time is critical across many industries—even milliseconds matter when it comes to executing financial transactions, let alone in military applications.

Employees are seen from overhead as they work on a massive circular coil of submarine cable that fills the floor of an entire factory room. Both workers wear matching blue shirts and red hard hats.

Employees make submarine cables at Qingdao Hanhe Cable Co., Ltd. in China on May 28, 2024. VCG via Getty Images

In the competition over subsea cables, countries can work to increase the security of their infrastructure, but it’s not clear what victory looks like. When it comes to AI, the United States has aimed to keep and develop what former National Security Advisor Jake Sullivan described as “as large a lead as possible,” especially in advanced logic and memory chips, with chip export controls and other measures in place to impede competitors’ progress.

But despite the differences in products made by each enterprise, Chinese companies and the Chinese government have largely achieved self-reliance in subsea cables, with capabilities comparable to Western alternatives. That means that export controls alone can’t ensure Western advantage.

While Beijing’s access to international markets has been curtailed, China possesses the technology and capabilities across the stack to manufacture all components of subsea cables at home. China also has a history of pouring heavy subsidies into the cable industry, a trend that carries across other industries from solar power to electric vehicles, and that gives it asymmetric advantages that distort markets. As a result, despite pressure, HMN Tech remains competitive, can offer lower prices, and is planning to build its own $500 million Europe-Middle East-Asia cable, a rival to the SeaMeWe-6 cable.

China also has a strong foothold in cable maintenance and repair, which are critical and complex components of the infrastructure’s life cycle. The cable maintenance industry divides the ocean into zones, with certain repair ships designated to cover each. As a result, U.S.-owned cables may rely on Chinese repair ships in certain places, which could make them vulnerable to spyware, whatever their ownership.

In one concerning incident, a Chinese repair company that worked on cables owned by U.S. hyperscalers appeared to hide its vessels’ locations near Taiwan and Indonesia, according to shipping data reviewed by the Wall Street Journal. This unusual and unexplained behavior raised alarm about what the vessel was doing and where it was doing it. And repairs are even more complicated and costly in conflict zones, such as during the clashes in the Red Sea last year.

Even in the absence of conflict, competing claims to vital sea lanes can distort the subsea cable market. While the United States has exerted pressure to push Chinese companies out of certain projects, China has gone further, delaying or blocking permits for cables with U.S. involvement, including in the South China Sea.

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Eight workers in matching orange coveralls stand in a line as they haul part of a fiber optic cable to the shore from a large ship gloating on the water near the shore where they stand. A cloudy sky is visible overhead.

Workers haul part of a fibre optic cable onto the shore at the Kenyan port town of Mombasa on June 12, 2009.AFP via Getty Images

The rising risks to subsea cable networks are connected to crises above the surface. The Iranian-backed Houthi attacks on international shipping have damaged undersea cables in the Red Sea. Taiwan’s subsea connections are potential targets in coercion campaigns against the island. And even if Western Europe isn’t yet directly engaged in a military conflict with Moscow, its infrastructure is under threat by an expansionist Russia—and NATO is responding to that very real threat.

Rather than wait for something to happen, there are proactive strategies to protect subsea cables and deter bad actors. Enhanced coordination in monitoring and management of the seas can help. Such measures may include increased patrols as well as potentially boarding and inspecting suspicious vessels, particularly in shallow areas with significant concentrations of cables. This approach could deter attacks and improve attribution when they do occur. Meanwhile, AI itself may solve some of subsea cables’ greatest vulnerabilities. The Wall Street Journal reports that AI-enabled underwater systems such as drones are already being used to identify and combat threats, even at the bottom of the ocean.

Where such forward defenses don’t succeed and cable repairs need to be made, especially in contested waters, partners can protect repair ships in the short term and prevent and eliminate threats as they arise. Increased redundancy in sensitive areas, combined with more ex-China repair capacity, including expanding their fleets of cable-laying ships, could decrease downtimes and build on Washington’s Cable Security Program, which authorized and subsidized U.S. repair ships.

Meanwhile, streamlined permitting processes could speed up repairs and build-outs, which once took under 12 months, but can now last for more than three years because of a complex regulatory environment that requires engagement with multiple levels of government, often with uncertain and competing priorities.

An improved regulatory environment can also speed up innovation, which may help build more resilient, diversified cable networks. In the next few years, alternatives to subsea cables—such as satellites and other space-based systems such as satellites in low-earth orbit—have shown promise, though they currently have less capacity than subsea cable networks and are still vulnerable to natural and humanmade disasters. Still, such options, bolstered by a growing private-sector space industry, may provide new data transmission options and backups in certain sectors.

Indeed, a NATO-funded project launched in July 2024 aims to reroute more internet traffic to space, in case of infrastructure disruptions on Earth. And when the two subsea cables connecting Taiwan with the Matsu Islands were disconnected in January, the backup microwave systems were activated almost instantly. Still, such measures currently provide only limited bandwidth. That may suffice for a country’s sparsely populated outlying islands, but it would likely fall short in urban areas or when it comes to high-volume, low-latency data centers.

There is no comprehensive backup for the world’s subsea cable networks. But the seabed, like the surface, is not as peaceful as it once was. A lesson of the 2020s so far has been that when deterrence—whether by denial, punishment, or entanglement—fails in one domain, it can soon collapse elsewhere. That’s also true beneath the waves.

• 
  Science and Technology
  

Jared Cohen is the president of global affairs at Goldman Sachs and co-head of the Goldman Sachs Global Institute.

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EM-DAT data challenges claims that climate-related disasters are rising, contradicting MSM and IPCC narratives on CO2 emissions and extreme weather.

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In previous articles, I’ve delved into the discourse surrounding climate-related natural disasters and their purported increase due to rising greenhouse gas emissions. [emphasis, links added]

Today, I aim to update this analysis with the most recent data from 2024, a year that mainstream media (MSM) has widely proclaimed as the hottest on record.

For instance, The Guardian reported that two-thirds of the Earth’s surface experienced record-breaking heat in 2024, attributing this to human-induced climate change.

Despite these alarming headlines, an examination of the Emergency Events Database (EM-DAT) reveals a different narrative.

The data indicates that since 2000 there has been no significant increase in climate-related natural disasters such as extreme weather events, wildfires, droughts, and floods.

This finding challenges the prevalent assertion that higher CO2 emissions and rising global temperatures directly correlate with an uptick in such disasters.

Analyzing the EM-DAT Data:

EM-DAT, maintained by the Centre for Research on the Epidemiology of Disasters (CRED), offers a comprehensive global record of natural and technological disasters.

Focusing on climate-related events, specifically floods, droughts, extreme temperatures, storms, and wildfires, I observed that from 2000 to 2022, the frequency of these events remained relatively stable.

Contrary to popular belief, certain years in the early 2000s even recorded higher counts than more recent years.

This finding is particularly intriguing given that the 21st century has seen unprecedented CO2 emissions and supposedly some of the hottest years on record.

If the widely accepted narrative held true, we would expect a corresponding increase in climate-related natural disasters.

The absence of such a trend in the EM-DAT data suggests that the relationship between GHG emissions, rising global temperatures, and [disaster frequency] is more complex than often portrayed. …snip…

Similarly, the Intergovernmental Panel on Climate Change (IPCC) has stated…

These assertions contribute to a pervasive belief that climate-related disasters are on the rise, a narrative that is not substantiated by the EM-DAT data.

Irrational Fear is written by climatologist Dr. Matthew Wielicki and is reader-supported. If you value what you have read here, please consider subscribing and supporting the work that goes into it.

Read full post at Irrational Fear

The post Climatologist: No Rise In Climate Disasters Despite Record CO2 appeared first on Energy News Beat.

Energy News Beat

Trump froze trillions in funding, leaving green energy projects floundering and causing panic among media and green groups.

​President Donald Trump froze trillions of dollars in funding last month. Federal court rulings temporarily paused some of Trump’s orders, but numerous reports say if taxpayer funding is ultimately terminated, renewable projects will be in serious jeopardy. [emphasis, links added]

During the Biden-Harris administration, President Joe Biden and the Democrats passed hundreds of regulations against the oil, gas, and coal industries. [emphasis, links added]

The National Review noted the [“breathtaking cronyism that characterized] President Obama’s entire ‘green jobs’ agenda, noting that four out of every five ‘green’ energy companies to receive taxpayer support were ‘run by or primarily owned by Obama financial backers.’ ”

Despite the unfriendly regulatory environment, the U.S. is producing more oil and gas than any nation in history.

Renewable energy proponents often claim that wind and solar are cheaper than fossil fuels, and many have claimed that Trump’s actions will raise the cost of energy.

If it’s true that renewable energy is cheaper, it seems odd that renewable energy projects would flounder when federal funding is blocked.

“What we’re seeing is the eco-left movement proving in real time that their schemes cannot stand without taxpayer support. The free market should be deciding what products Americans do or don’t want to buy, and not the government picking winners and losers. It’s really simple,” Larry Behrens, communications director for Power the Future, told Just the News.

Media frenzy

The legacy media attacked Trump’s funding freeze order immediately after it was announced.

E&E News reported that Trump blocked $90 million in funding that the Hopi Tribe in Arizona was hoping to use for solar projects that would replace jobs lost after a coal plant closed in 2019.

The projects would also, the tribe hoped, end blackouts that have caused food to spoil and medical equipment to malfunction.

Pennsylvania was hoping for $156 million to support a program that helps low-income homeowners install solar panels, according to The Philadelphia Inquirer.

The upgrades, the Inquirer reports, would lower electric bills after the millions in taxpayer funding are doled out for the supposedly cheaper form of energy.

In an op-ed in the Reno Gazette-Journal, former Nevada Lieutenant Gov. Kate Marshall claimed that wind and solar power were projected to drop Nevada’s electricity rates by 22% to 35% over the next 30 years.

The claim includes a now-broken link [archived here] to an article on the Department of Energy website, likely removed since Trump took office and Chris Wright replaced Jennifer Granholm as energy secretary.

Colorado Gov. Jared Polis declared that Trump is threatening “clean, affordable energy.” The Guardian reports the freeze is causing “panic,” and Newsweek reports that contractors stopped work on solar projects.

“Outlandish”

These are just a sample of the media reports and statements from officials spreading in the wake of Trump’s funding freeze.

By contrast, the oil and gas industry under former President Joe Biden, who campaigned on a promise to “end fossil fuels,” saw production increase to record highs.

Rather than raise doubt about the ability of intermittent wind and solar to replace fossil fuels and lower costs, the oil and gas industry’s success has been used to dispute that the Biden administration ever warred against the oil and gas industry.

Read rest at Just The News

The post Trump’s Funding Freeze Leaves Renewables Floundering, Media And Green Groups In Panic appeared first on Energy News Beat.

Energy News Beat

Many people in Europe either do not know, or forget that the Norwegian hydro system is not a pumped system. This means that when the water runs out it is no longer available to serve domestic customers. The lack of pumping (only 1.4 GW of the 33 GW system has any pumps and some of those have cumbersome coupling methods which mean they are only used a few times a year) means there is no way of replacing the water. Imports can only serve to displace water use, but the very short-term nature of the pricing means that Norwegian prices will only rise once shortages actually hit, and by then it would be too late.

Background to Norwegian politics

To understand what has happened in the past weeks it is necessary to understand something of the political system in Norway. Like the UK, Norway is a Parliamentary democracy with a monarch as Head of State. Unlike the UK, Norway has fixed term Parliaments – there is no opportunity to call for new elections within the four-year electoral term. There are no by-elections. The next elections to the Storting (Parliament) will take place in September. If a government collapses, the King can ask the leader of another party if he /she can form a government, until the next elections take place.

Until 30 January, the Norwegian Government was formed of a coalition of two parties: the larger being the Labour Party (considered to be centre-left) and the junior partner was the Centre Party (described as a euro-sceptic centrist party) which has the third largest number of seats in the Storting. Following the collapse of the coalition, the Labour Party will govern alone until the September elections, unless it loses a vote of no confidence, in which case, the King may approach the leader of the second largest party, the Conservatives, to see if it can form a government. Most commentators seem to assume that Labour will govern until September.

Norway is not part of the European Union, but it is part of the European Economic Area and as such is required to implement certain EU rules.

Historically, the Centre Party was more protectionist about Norway’s energy relationships with Europe, for example, Trygve Slagsvold Vedum, who was Finance Minister under the coalition, had called for the Skagerrak interconnectors with Denmark not to be renewed when they expire in a couple of years’ time. Only more recently did Labour adopt this position, and in December, both coalition partners were on the same page about not extending them and Labour saying it would campaign in the September elections to turn off the interconnectors to Denmark when they come up for renewal in 2026. This would cut cross-border capacity with Denmark by about a third.

This change of heart was prompted by high electricity prices in NO2 (southern Norway) as a lack of wind in Germany and the North Sea caused high levels of exports. NO2 prices rose to NOK 13.16 (US$1.18) /kWh in mid-December, their highest level since 2009 and almost 20 times their level the previous week. Energy Minister (of the Labour Party), Terje Aasland said “It’s an absolutely shit situation,” in uncharacteristically blunt language.

The EU is not happy with the recent negativity regarding electricity exports from Norway, with diplomats as well as politicians using increasingly strident terms to describe their opposition to the moves.

“We are not happy with Norway. The sentiment is as bad as I have known it. Norway looks selfish, trying to keep this electricity for itself even as it makes so much money from selling gas to us,”
– an EU ambassador in Oslo

But sharp increases in Norwegian electricity prices in recent winters have created a political backlash against interconnection in Norway, meaning the issue is likely to be a key subject in the upcoming elections. Polls predict that a centre-right government will emerge after the next elections. The right-wing Progress party, which is leading the polls, also wants to scrap the Skagerrak interconnectors and to reform the deals with the UK and Germany to reduce “the price infection” to Norway from elsewhere in Europe.

Collapse of the coalition caused by a dispute over energy policy

On 30 January, the Centre Party left the governing coalition leaving the Labour Party to continue as the sole party in government until the September elections. While Labour will now form a minority government, this was also true of the coalition, so Norwegian parties in the Storting are used to negotiation in order to pass legislation. Norwegian colleagues tell me that Labour should not encounter too many barriers to its legislative programme for the remainder of this Parliament.

There is some debate as to whether the Centre Party left or was pushed out of the coalition. The disagreement over energy appears to be somewhat moot in that following the collapse of the coalition, Labour announced energy measures that were not that dis-similar to those being pushed by the Centre Party, not least in terms of energy integration with Europe. Labour intends to implement three EU energy directives but to defer the more controversial measures that were the real source of disagreement.

Prime Minister Jonas Støre said his Government had no plans to implement the other five parts of the EU’s clean energy package, which relate to the electricity market – while this will play well with Norwegian voters, it will not go down well in Brussels – the European Commission has given Norway until May to implement the package.

Upon leaving the coalition, the Centre Party published a statement from party leader, Trygve Slagsvold Vedum, outlining its objections to closer energy integration with Europe and a desire to regain control over Norway’s electricity market. He claims that the interconnectors are creating “price contagion” leading to high and unstable prices in Norway. This is also seen as an appeal to voters, and an effort to boost the Centre Party’s poor position in recent polls.

“The high and unstable electricity prices have created great uncertainty for people, and problems for Norwegian businesses. For the Centre Party, it is crucial that we take back national control of electricity policy so that low and stable electricity prices once again become a benefit for Norwegian households, and a competitive advantage for Norwegian businesses. In December 2024, people in parts of Norway experienced a brief period where electricity cost 13 NOK/kWh. This happened despite Norwegian reservoirs being full of water. This shows how dysfunctional the electricity market has become in Norway,”
 – Trygve Slagsvold Vedum, Leader of the Centre Party of Norway

Mr Vedum went on to say that the first step is not to transfer more and more power over electricity policy to the EU, rejecting the EU’s ambition to have a common electricity market throughout Europe. He points out that several countries in the EU have weakened their electricity markets by building electricity systems that to a large extent only produce electricity when it is windy or sunny, and that the goal of the fourth EU energy market package is for Norwegian hydropower to supply the EU with electricity when it is not windy or sunny. The Centre Party believes this would create higher and more volatile electricity prices in Norway, and is therefore determined to oppose its introduction into Norwegian law.

Secondly, the Centre Party wants to “take control” of the interconnectors with the UK and Germany – the most recent to be built – by renegotiating the agreements entered by the previous Conservative-Liberal coalition government with the UK and Germany. An expert committee appointed by the Norwegian Government has described how this can be done (see below).

On the domestic front, the Centre Party believes that Norway should become more restrictive in its use of electricity, reflecting the fact that water is a scarce resource. The Party therefore disagrees with the current plans for electrification, including of the offshore oil and gas infrastructure.

The fourth EU energy market package of legislation sets targets for economy wide energy efficiency improvements, the share of renewables in the overall mix, and the energy performance of buildings, as well as broadening the powers of EU’s regulatory agency ACER. Some of this is relatively minor for Norway, for example the energy performance of buildings requirements would involved small changes to building codes, while the share of renewables is irrelevant to Norway since it already far exceeds the EU target. However, expanding ACER’s powers is more controversial, and the introduction of the REMIT regulation is no longer under consideration.

The EU has in the past been sympathetic to the slow speed of adoption of EU rules in Norway, but there are signs its patience over the 2019 energy package are running out. The fact Europe has relied on Norwegian gas since the Russian invasion of Ukraine is a source of tension – Norway is seen as profiting at the expense of the EU. This is somewhat unfair – Norway has invested heavily over the years in both its oil and gas infrastructure and hydro-electric system, and is entitled to realise the benefits of these investments. The EU’s lack of energy security should not be Norway’s problem. Given Europe’s reliance on Norwegian gas, and Norway’s wealth as a nation, it would seem that it has the upper hand in the situation, but that does not prevent the Labour Party from believing there are risks in not implementing EU laws as required.

Energy Commission suggests more needs to be done to ensure energy security in Norway

In 2022, the Norwegian Government appointed an Energy Commission led by Professor Lars Sørgard, the former Director General of the Norwegian Competition Authority to assess the challenges faced by Norwegian energy policy towards 2030 and 2050, and how different policy choices will affect the long-term development of the Norwegian power system. The commission also examined:

• How Norway is affected by rapidly changing energy markets
• Perspectives on the development of power consumption
• The potential for socio-economically profitable power
• Perspectives for the security of electricity supply
• Key conflicts of interest within the energy policy field

The Commission’s report is only available in Norwegian but I ran it through Google Translate. Here is the English version – please use with the appropriate levels of caution.

Historically, Norwegian power prices were low in wet years and high in dry years, however since 2021 when two large (1.4 GW) interconnectors were built between Norway and GB and Germany, Norway has experienced greater price volatility as a result of the impact of weather-based renewables in those countries. Norwegians, who over time invested a lot of public money into a hydro system that broadly delivered low and stable power prices, were suddenly exposed to very high prices (since these interconnectors coincided with record reservoir lows) and higher price volatility. This has become politically sensitive.

The charts above show that since the interconnectors with GB and Germany opened, prices in NO2, the region to which these cables connect, have risen significantly. Also the spread between NO2 in the south of Norway and NO4 in the north has widened. Some commentators have argued this indicates there is insufficient transmission capacity between the northern and southern regions, and in 2022, reservoir levels were better in the north, so more power lines could have mitigated the price pressures in the south.

However, in the subsequent years, when hydro levels were more normal, the spread is still very wide, reflecting the impact of British and German pricing on power prices in southern Norway. The Energy Commission made an alternative argument which was that if Germany were to split its single bidding zone into two separate zones, one in the north and one in the south, this price effect could be reduced.

People have also suggested that the high prices and high exports benefitted Norwegians and that this benefit offset the impact on bills. However the Norwegian Energy Commission agreed with Ofgem’s analysis that while profits do indeed accrue to generators, they are not shared with consumers – exporting results in a consumer dis-benefit that is not mitigated by higher generator profits.

“High spot prices provide a significant redistribution, where some manufacturers achieve a large profit while the end users pay a very high price. This is precisely the situation we have experienced in 2022 in parts of Norway, in that southern Norway has had very high prices. At the same time, power producers have had a significant profit. Part of the profits accrue to the state through the basic interest tax for hydropower. Some power producers have also entered into agreements on price hedging for parts of the production, which means that they have received a relatively low price compared to the high price of the power exchange for that part of production,”
 – “More of everything – faster”, Norwegian Energy Commission report

In line with other European countries, Norway is electrifying large parts of its economy. This is driving a need for more generation capacity, and Norway has plans to develop more wind and solar power (at the time of writing, the Commission did not see nuclear as a viable solution for Norway). This leaves a dilemma for policy-makers: access to imports of cheap wind power are attractive, particularly in dry years, when the market is tight, but there is a risk that scarce water supplies are exported when wind output in Norway and its neighbours is low.

The Energy Commission believes that:

• Norwegian interests must be clearly defined based on its unique advantages and challenges. Norway should actively participate in discussions on new rules for market design and power trade to ensure a favourable trade regime for Norway, including its consumers and businesses;
• Long-term operation of interconnectors should be managed in a way that balances the interests of both parties in a power system increasingly reliant on non-regulatable renewable energy;
• A majority in the Energy Commission (members Gotaas, Heia, Ringkjøb, Roland, Rollefsen, Seim, Stubholt, Tomasgard, and Ulriksen) believes that a study should explore how interconnector exchanges can be structured to prevent price contagion from large external power markets from undermining Norwegian energy policy goals;
• When the concession period for an interconnector expires, an assessment should be made on whether its renewal is in the public interest, similar to the process for new interconnectors;
• The need for new cables or hybrid connections should be evaluated in light of Norwegian interests;
• The responsibility for interconnectors between Norway and other Nordic countries should be transferred from NVE to the Ministry of Petroleum and Energy (OED) to ensure political accountability;
• A majority in the Energy Commission (members Gotaas, Heia, Ringkjøb, Roland, Seim, Stubholt, Tomasgard, and Ulriksen) believe that Norwegian authorities must actively engage in dialogue with the EU to ensure that regulations account for Norway’s unique characteristics.

Independent research group, Sintef wrote a report, Assessment of the Power Situation 2021-2022, to examine what happened in an unusually dry year immediately following the opening of interconnectors with GB and Germany (English version, as above from Google translate). One of the findings was that forward curves consistently under-estimated future price trends (while forward curve are not a predictor of future prices, curves should nevertheless have a relationship with the expected price trajectory, for example, summer prices would normally be lower than winter prices).

This matters in Norway because generators need to decide when to use their water – if prices are expected to be lower in future there is an incentive to use the water in the short term. If these price signals turn out to be unreliable, or reflective of wishful thinking in the market, then the stock of water will be undervalued and depleted too quickly.

Sintef also simulated the development of the power system in weeks 36 to 52 in 2021, with and without the interconnectors to Germany and GB. The simulation was performed for 40 different weather years. Sintef found that in the cases with the interconnectors, reservoir levels fell more and prices in Eastern Norway (NO1) rose more than they would without the interconnectors. The cables contributed to increasing Norwegian power prices by around 15-25 øre/kWh, equivalent to between 14% and 26%. (According to Sintef, price differentials between the southern Norwegian bidding zones are small, and as NO1 has the largest demand, it decided to only simulate price development in that zone.) Sintef concluded that there would be significant economic benefits if water use was restricted to ensure security of supply by not allowing resources to be used too quickly.

The Energy Commission’s report also references research by Afry and Menon which modelled a halving of the export capacity between NO2 and GB, Germany and the Netherlands (import capacity was not curtailed). They found that the export restriction had a limited effect on reservoir filling in southern Norway, but did result in a lower power price in southern Norway. This effect increased with higher gas prices.

In the scenario where export capacity was set to zero from the south-west of Norway (Germany, GB, the Netherlands and Denmark), the minimum reservoir filling for all price areas in southern Norway (NO1, NO2 and NO5) increased. These simulations indicated that the water loss during snowmelt could be large without these export opportunities, although found a significant reduction in power prices in all price areas in Norway, particularly in southern Norway in years with high influx of water.

Afry and Menon also analysed the impact of an export tax. Where there is a relatively large price differential between the Nordics and Europe, Afry and Menon found that an export tax had to be relatively high to have an impact on trade. The effect of a high export tax on exports from NO2 was similar to the effect of limiting export capacity, both in terms of price and reservoir levels. Afry and Menon considered that export reductions would generally be contrary to current agreements on free trade, but highlight the existence of exceptions for measures aimed at preventing product shortages. However the impact of reciprocal action should also be considered ie in the case when Norway has import needs.

Afry and Menon considered the impact of increasing transmission capacity between the north and south of Norway. They examined two options: increased transmission capacity in Norway from north to south, and increased transmission capacity in the Nordic region more broadly. Greater transmission capacity would allow greater utilisation of the flexibility of hydropower; water loss would be reduced and security of supply in the south of Norway would improve. In central and northern Norway, increased transmission capacity would likely contribute to a price increase while the price reduction in southern Norway would be more modest.

The Energy Commission, somewhat randomly, decided to comment on the structure of the German power market, suggesting that splitting it into two, north-south bidding zones would benefit Norway. Given that Germany has a lot of wind generation in the north, industrial demand in the south, and insufficient internal transmission capacity, this would allow Norway to benefit from low prices when it is windy in Germany, but protect it from high prices when it is not (because it would be insulated from the price effects driven by demand in southern Germany).

The Commission concluded that so far, Norway has typically been able to import electricity when prices are low at night and export when prices are high during the day. With more weather-based production in other countries towards 2030, it sees more opportunities for Norway to import cheap energy, and although its vulnerability to dry years will change, it will not necessarily increase. Where it does see increased risk is from the greater volatility and unpredictability of power flows, as a result of the increased reliance on intermittent renewables in neighbouring countries. Net imports would likely be more variable, and net exports could be expected even when Norwegain reservoir levels are low, it wind output in these countries is low.

The Commission suggested that Europe must resolve its own energy challenges, and that it is unlikely that Europe will accept any solution linked to extended demand curtailment, meaning that Europe will invest in suitable backup for wind and solar energy. This may be optimistic – the Europe has long coveted the Norwegian hydro system as the answer to its intermittency problem, with then National Grid Chief Sustainability Officer, Duncan Burt saying in 2021:

“Norway will basically act as Europe’s battery. When we’ve got high renewables, we’ll send it to Norway and they’ll use that power, or they’ll use it to pump water and store the energy in the hydro power stations. And then when we need power in the UK, the power will flow back from Norway to the UK.”

And in 2010, Nobuo Tanaka, executive director of the International Energy Agency said:

“Norway can help Europe introduce more volatile renewable energy sources into the market by providing a sustainable backup… To have more renewables, we need more interconnectivity.”

Interestingly, there was far more such talk from Norwegian commentators than EU ones, with Statkraft CEO Rynning-Toennesen saying, also in 2010:

“For the British it [interconnection] would cost a lot less than building new power plants as a back-up for wind.”

Now of course, the tone from Norway is different.

The Commission concluded that despite possible developments in batteries, hydrogen demand side flexibility, “it cannot be ruled out that challenges may arise with access to imports during periods, or that imports become very expensive”. It went on that while current regulation of the power market gives hydro producers incentives to avoid a situation where reservoirs are drained so that there is no water left in the spring, today’s arrangements were developed for today’s power system, and not necessarily new types of risk. Changes in the power systems of neighbouring countries can happen quickly and cause events that are difficult to predict and plan for, and for that reason there are arguments for having instruments that better ensure national security of supply.

New government’s response to high electricity prices in Norway

The day after the collapse of its coalition with the Centre Party, the Labour Party announced a series of measures to support consumers with high electricity prices.

The primary measure will be to offer households a choice between a subsidy 90% of electricity prices above the threshold value of 0.75 øre /kWh excluding VAT (NOK 7.3 /MWh) based on hourly spot prices, or a fixed price tariff at 40 øre/kWh. There was a similar subsidy in 2024, with a slightly lower threshold value of 0.73 øre /kWh. In fact, after the subsidy was introduced in 2022 with an initial level of 55%, it has always been either 80% (September 2022 – March 2023, and June 2023 – August 2023) or 90%. The scheme covers ordinary households, housing associations, people connected to farm and village networks, and district heating networks, and people who live full time in holiday homes. When the hourly spot price exceeds 75 øre /kWh excluding VAT, the subsidy will cover 90% of the price above this level, for electricity consumption up to 5,000 kWh per month per meter point.

The scheme costs have been as follows:

• NOK 16.4 bn in 2023
• NOK 3.7 bn in 2024
• NOK 4.8 bn (forecast)

Now the government is also proposing a new fixed price contract (“Norgespris”) of 40 øre/kWh, excluding VAT. The proposal is for the scheme to come into effect on 1 October 2025 and will cover households and holiday homes. Those who do not opt for the fixed price tariff will receive the 90% subsidy.

The Government expects that for an average household in southern Norway (price area NO2), the Norgespris would provide support of NOK 2,800 per year, mostly in the winter when prices are high. For a household that has the current electricity subsidy, the corresponding support would be NOK 1,265, but these households will also benefit from periods with low electricity prices, particularly in the summer.

“In a situation of great instability in the European power markets, the government does not want to tie Norway more strongly to the European power system. Therefore, we are saying no to new foreign cables and are not introducing the controversial market regulations”
– Terje Aasland, Norwegian Energy Minister

In addition, the Government has proposed to cut VAT on network costs. There is high demand for grid capacity throughout Norway, but large parts of the grid infrastructure are old. Electrification and digitisation are driving a need for increased network capacity, but when more grid is built, network costs increase, raising electricity bills. To reduce this impact, the Government has proposed to reduce VAT on network costs from 25% to 15% from 1 July 2025. Households will collectively save around NOK 1.8 billion per year from this measure. The reduced rate is seen as the first step towards the full abolition of VAT on network costs, which the Labour Party proposed to remove entirely if it is elected to the next Parliament.

In recognition of the high sensitivity of the issue of greater integration with EU energy markets, Labour has committed not to introduce the EU’s “controversial” market regulations in the Clean Energy Package either in this Parliamentary term or the next.

“It is the government’s responsibility to ensure a continued well-functioning electricity supply in Norway. The instability in the power markets is great, and each directive must be assessed separately. In this situation, it is not in Norway’s interest to process these directives. It is objectively well-founded and I expect that it is something that the EU side understands. It does not challenge the credibility of the EEA Agreement itself, “
– Terje Aasland, Norwegian Energy Minister

The Government says it will, among other things, assess the EU’s work to improve competitiveness and facilitate low and stable energy prices, and evaluate and follow up on the review of the member states’ division into price areas for the purchase and sale of electricity.

The Norwegian Government also intends to initiate greater Nordic cooperation, with the aim of assessing various measures to reduce extreme electricity price fluctuations as a result of cross-border electricity flows in Northern Europe to safeguard the “well-functioning” Nordic power system. Through the Nordic Council of Ministers, the Government is working to assess the organisation of the electricity market, including changes that are being considered neighbouring countries connected to the Nordic market. This includes Germany, the Netherlands and the UK. The results are expected to be published in early 2026.

The Labour Party has also committed not to approve any new interconnectors with other countries in the current or next Parliamentary terms, and will ask Statnett not to start planning new submarine inter-island connections until 2029. Statnett’s work to consider the future of the Skagerrak cables with Denmark will continue. In December, Energy Minister Aasland outlined that Statnett will have to chose whether to abandon the renewal project or whether to proceed with an application. No license application is expected before 2026 at the earliest, and the Labour Party has said it will not authorise such an application. Should a new Conservative government emerge after the elections that supports new interconnection with Denmark, the earliest it could enter the market would be 2034.

The Labour Party has recently made its own political capital from the fact that its coalition with the Centre Party cancelled the NorthConnect scheme with Scotland which the previous Conservative government had pursued, and that the Conservatives had been responsible for the now controversial interconnectors with the UK and Germany.

What does this mean for European co-operation?

The idea of European co-operation is largely a mirage – often it boils down to countries wanting their neighbours to help when they need it, but being reluctant to reciprocate, or to compromise on their own national priorities and preferences: I will act in my own best interests and I expect everyone else to also act in my best interests. For example, did Germany consider the impact on Norway when deciding to close its nuclear reactors?

The EU appears to view the Norwegian hydro system as a huge battery that should be used to balance renewable generation elsewhere in Europe. When the lack of pumping is raised, non-Norwegians suggest Norway should invest in pumping so it can more effectively balance the European market. But there is no commensurate suggestion of contributing financially to such investments – on the contrary, it is assumed this would be “good” for Norwegians.

Yet in 2021, Ofgem wrote a report outlining that once a country becomes a net exporter of electricity there is a consumer dis-benefit to interconnection: interconnectors cause prices in the exporting country to rise. On this basis, it declined all but one of the projects in Window 3 of the cap and floor mechanism. In a meeting with senior officials at Ofgem I suggested that countries exporting to us might make a similar determination and was told that it’s important countries are not “selfish” and that interconnection is a benefit for everyone. When I pointed out that Ofgem’s decision embeds the exact protectionist mentality it had just criticised, the reaction was one of surprise. A prime example of only wanting the benefits and not the costs of cross-border co-operation!

The impact on Norway is more extreme than in other countries because its electricity is limited by the volume of water in the hydro system. The relative lack of pumping means that once the water is gone, there is limited ability to generate electricity at which point prices rise dramatically Norway has 9 GW of cross-border capacity, against peak electricity demand of about 25 GW, so there is no way that the country could meet its energy needs purely from imports if the water ran out.

Cross-border trading is based on short-term prices (day-ahead or within-day) which are generally reflective of the short-term marginal cost of generation. In the case of Norway, this does not take account of the option value embedded in the stock of water – it might be more beneficial to keep the water for use on another day, for example when prices might be higher. It also does not take account of the fact that the stock of water is limited. Only once stock levels fall does scarcity start to be reflected in prices, but by then it is too late – the scarcity is already happening. The price signals for avoiding scarcity are weak or non-existent.

This why Norway has twice amended its Energy Act to give itself powers to restrict electricity exports – initially in the case of water shortages, and now also in the case of potential water shortages. Given recent high and volatile prices, Norway is looking at its options, one of which is the imposition of export tariffs which would artificially inflate the price of Norwegian electricity available for export. This would reduce the number of hours in which Norway is a net exporter allowing it to save its water. It would similarly attract more imports, displacing the need for the use of water. Currently such imports are minimal and often occur at times of low demand, such as overnight, so the water saving is reduced.

In my view, this would be a sensible measure for Norway to take. Not only should a value be attributed to the stock of water, prices should provide signals to deter other countries from abusing the Norwegian hydro system. If Germany, the UK and others choose not to invest in dispatchable generation, they should be exposed to the full long-run costs of this decision and pay their share of the capital costs of Norwegian hydro rather than just short-term marginal costs. Outsourcing capital investment but only paying short-term operating costs is not fair or reasonable.

The EU may feel aggrieved at having to pay more for Norwegian electricity when it is also paying a lot for Norwegian gas, but it is not the fault of Norwegian tax-payers that the EU has failed to invest in its own energy security and allowed itself to depend on politically risky suppliers. Norwegians have repeatedly rejected EU membership, they should not now be forced to pay the price of poor EU decisions which they cleverly managed to avoid making themselves. While some argue that Norway is blessed with geological resources, this is not a compelling reason for it to bail out its neighbours.

France lacks any significant geological resources and made a strategic decision decades ago to invest heavily in nuclear power. It now has among the cheapest electricity prices in Europe and, ironically, among the lowest carbon generation. Like the Norwegians, the French made significant capital investments to secure their access to cheap and reliable electricity. Unlike the Norwegians, French nuclear does not risk running out although since the country took its eye off the ball in terms of renewing its nuclear fleet, it is now encountering reliability problems and faces another round of major capital investment at a time when its wider financial position is precarious.

EU countries may bluster about international co-operation, but the hypocrisy of their positions is not lost on Norwegians who have had enough of paying for the energy policy choices of its neighbours. And since Europe depends on Norwegian gas, Norway has a strong position in this particular negotiation. Europe should pay attention to the concerns of Norwegian voters and their representatives. Norway is transparently laying out what everyone knows deep down – that countries will prioritise their own national interest before any international co-operation.

Norway is also exposing the double standards at the heart of European bluster about co-operation and integration – true co-operation would require countries to consult each other before deciding to rely on intermittent generation or prematurely closing generation for political reasons (coal in the UK and nuclear in Germany). It’s hard to see any country in Europe giving up the right to make its own decisions about its energy mix. Which is fine, but they should not then expect countries which take a different approach to accommodate them against the interests (or even simple wishes, because people have the right to make choices that are not aligned with self-interest) of their voters. If Norway wants to protect the voters which actually paid for its energy infrastructure, it has the right to do so. The rest of Europe will have to lump it.

.

Three years ago I wrote the following:

“Power market trading under market coupling is intended to flow seamlessly from markets with higher capacity margins (and lower prices) to those with lower capacity margins and higher prices. As more and more markets rely on wind, this creates increasing tensions when it isn’t windy, particularly when those weather systems sit across the Continent, depressing wind output in all of the connected markets.

But on the other hand, energy policy is not harmonised – each country makes its own decisions about how much and which type of generation and transmission capacity it should build. Because it is relatively easy to subsidise renewable generation into existence, that has been prioritised, but the investments in transmission, storage and low carbon baseload generation (nuclear) which are needed to efficiently manage this new renewable generation capacity has been lacking. To make matters worse, the economics of gas generation are declining, as utilisation levels drop, pushing efficient gas plant out of the market altogether in some cases (for example the Calon CCGTs in the UK [which have subsequently re-opened]).

It is difficult to see how this situation can continue much further without significant change. In particular, it is hard to see why Norwegian consumers should be exposed to the high electricity prices that are the result of lack of investment by other European countries. So to answer the question posed at the start of this blog…can Norway be the battery of Europe…perhaps, but should it? Probably not.”

This is every bit as true now as when I wrote it, and the Norwegians are beginning to agree.

The post Norway turning away from electricity interconnection appeared first on Energy News Beat.

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Cheniere’s Corpus Christi plant currently liquefies natural gas at three operational trains, each with a capacity of about 5 mtpa.

In addition, Cheniere just produced the first cargo at the Corpus Christi Stage 3 expansion project in Texas.

This project includes building seven midscale trains, each with an expected liquefaction capacity of about 1.49 mtpa.

The CCL midscale trains 8 and 9 project will include two trains, nearly identical in design to trains 1-7 and each capable of producing up to 1.64 mtpa of LNG, on-site refrigerant storage, a 220,000-cbm LNG storage tank, a BOG compressor, and an increase in the authorized LNG loading rate.

The project could have a capacity of about 5 mtpa when debottlenecking potential is included.

Cheniere told LNG Prime in May 2024 that the company is on track to take a final investment decision (FID) in 2025 to build two more midscale trains at its Corpus Christi LNG plant.

“We are committed to getting Corpus Christi mid-scale trains 8 and 9 to FID. As I just mentioned, we look forward to receiving the remaining regulatory permits in the near future and are taking the steps necessary in preparation for an FID later this year,” Fusco said during the company’s earnings call on Thursday.

“During 2024, we locked in approximately half a billion dollars of long-lead time equipment and other costs under limited notices to proceed with Bechtel related to trains 8 and 9, helping to ensure the project can maximize efficiencies on both cost and schedule,” he said.

Besides the Corpus Christi expansion, Cheniere also plans to build two new liquefaction trains as part of the Sabine Pass Stage 5 expansion project to add up to 20 mtpa of capacity to the giant 30 mtpa facility in Louisiana.

Cheniere needs both FERC and DOE approvals for this project.

Last month, President Donald Trump lifted a moratorium on non-FTA LNG export permits by the former Biden administration.

Trump issued the executive order, which was widely expected, just hours after officially taking over his second four-year term as the president.

“We intend to strategically pursue permits to ensure the long-term growth optionality of our Sabine Pass and Corpus Christi facilities,” Fusco said.

“We are actively engaged with the new administration and are very encouraged by the early action and stated policy goals prioritizing a clear, transparent, and durable permitting process,” he said.

“Given that improvement in the permitting environment for LNG projects here in the US, which is a stark contrast from just a few months ago, we have an opportunity and a strategic imperative to secure permits for significant growth at both Sabine and Corpus in order to de-risk the permitting requirements of future project development, with line of sight to a total capacity of over 90 million tonnes per annum,” Fusco said.

“We will, of course, always adhere to our disciplined capital investment parameters so that any incremental capacity is likely to be built under a phased approach while optimizing our brownfield advantages at both facilities. But while we have this window, we intend to aggressively pursue permits at both sites and give ourselves a path to potentially more than double our current operating capacity once permits and our accretive economics align,” he added.

The post Cheniere still targets 2025 FID on two more Corpus Christi LNG trains appeared first on Energy News Beat.

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EIA said in its weekly report, citing shipping data provided by Bloomberg Finance, that the total capacity of these 29 LNG vessels is 110 Bcf.

This compares to 30 shipments and 114 Bcf in the week ending February 12.

According to data from S&P Global Commodity Insights, average natural gas deliveries to US LNG export terminals increased 0.4 Bcf/d from last week to 16.1 Bcf/d.

Natural gas deliveries to terminals in South Louisiana increased by 3.1 percent (0.3 Bcf/d) to 10.1 Bcf/d, and natural gas deliveries to terminals in South Texas increased by 3.3 percent (0.2 Bcf/d) to 4.9 Bcf/d

EIA said natural gas deliveries to terminals outside the Gulf Coast decreased by 3.3 percent (less than 0.1 Bcf/d) to 1.2 Bcf/d this week.

During the week under review, Cheniere’s Sabine Pass plant shipped 11 LNG cargoes, and the company’s Corpus Christi facility sent five shipments.

Moreover, the Freeport LNG terminal and Sempra Infrastructure’s Cameron LNG terminal each shipped four cargoes this week.

Venture Global LNG’s Calcasieu Pass and Plaquemines LNG terminals each shipped two shipments.

In addition, the Cove Point facility sent one shipment while the Elba Island facility did not ship cargoes during the week under review.

EIA said that the Henry Hub spot price rose price $3.84 from $3.94 per million British thermal units (MMBtu) last Wednesday to $7.78/MMBtu this Wednesday as colder weather spread across much of the United States.

The price of the March 2025 NYMEX contract increased 72 cents, from $3.565/MMBtu last Wednesday to $4.280/MMBtu this Wednesday.

Also, the price of the 12-month strip averaging March 2025 through February 2026 futures contracts rose 48 cents to $4.557/MMBtu.

The agency said that international natural gas futures decreased this report week.

Bloomberg Finance reported that average front-month futures prices for LNG cargoes in East Asia decreased 13 cents to a weekly average of $14.64/MMBtu.

Natural gas futures for delivery at the Title Transfer Facility (TTF) in the Netherlands decreased $1.80 to a weekly average of $15.30/MMBtu.

In the same week last year (week ending February 21, 2024), the prices were $8.65/MMBtu in East Asia and $7.75/MMBtu at TTF, EIA said.

The post US LNG exports reach 29 cargoes appeared first on Energy News Beat.