The energy crisis

Cold weather combined with gas shortages is expected to force UK authorities to enact a “reasonable worst-case scenario,” providing for four days of blackouts during the upcoming winter, Bloomberg reports, citing people familiar with the government’s planning.

The probable outages may affect not only industry, but also the country’s households, as a result of an electricity capacity shortfall amounting to about a sixth of peak demand – even after emergency coal plants have been fired up.

At the same time, Britons are expected to see average annual energy bills rise above £4,200 ($5,086) in January from the current fee of just under £2,000, adding to the soaring consumer price inflation.

Meanwhile, the government’s base case scenario doesn’t include blackouts. The first stage of the UK’s emergency plan reportedly involves the network operator directing flows of gas on the system, temporarily overriding commercial agreements, while the second stage includes halting supplies to gas-fired power stations, triggering planned power cuts for industrial and domestic users.

The UK energy industry regulator Ofgem has said it would adjust its cap quarterly rather than half-yearly due to current volatility in energy markets, meaning bills are likely to rise again in January.

Britain, which has reportedly been shipping record amounts of gas to continental Europe, has very little domestic storage capacity. The UK Department for Business, Energy and Industrial Strategy (BEIS) said Britain isn’t dependent on Russian energy imports, as it has its own North Sea gas reserves and “steady imports from reliable partners.” It also pointed out that the UK has the second largest LNG port infrastructure in Europe and “a gas supply underpinned by robust legal contracts.”

www.rt.com/business/560579-uk-blackouts-industry-households-gas

Ryanair won't be offering flights at rock bottom prices any more thanks to the soaring cost of fuel, the budget airline's boss has admitted.

Chief executive Michael O'Leary says the era of the €10 ticket is over.

The airline's average fare would rise from around €40 (£33.75) last year to roughly €50 over the next five years, he told the BBC.

But he says he believes people will continue to fly frequently, despite the rising cost of living.

"There's no doubt that at the lower end of the marketplace, our really cheap promotional fares - the one euro fares, the €0.99 fares, even the €9.99 fares - I think you will not see those fares for the next number of years," Mr O'Leary told BBC Radio 4's Today programme.

The rise in fuel costs that is pushing up air fares, is also raising household energy bills, eating into people's disposable incomes. But the airline boss said, despite that, he expects customers to seek out lower-cost options rather than cut back on flights.

"We think people will continue to fly frequently. But I think people are going to become much more price sensitive and therefore my view of life is that people will trade down in their many millions."

As airfares have become cheaper in recent decades, the number of flights taken has risen, with more people taking short breaks abroad, on top of an annual holiday. Airlines like Ryanair, Easyjet, Vueling and Wizz Air have competed to offer low-cost no-frills services.

www.bbc.com/news/business-62495846

Swiss officials may place restrictions on energy consumption this coming winter, Thomas Grunwald, the spokesman for Switzerland's Federal Department of Economic Affairs, Education and Research (EAER), told RIA Novosti on Tuesday.

“In general, the country’s Economic Supply Office, as well as the Federal Office for the Protection of the Population, rank power shortages … among the most serious risks for Switzerland,” he said, adding that all institutions and businesses would be subject to a quota if there were power shortages.

His comments echo those made on Sunday by Werner Luginbuhl, the head of Switzerland’s electricity regulator ElCom, who in his interview with Swiss newspaper NZZ am Sonntag complained that electricity was being used “completely thoughtlessly” and urged citizens to stock up on candles and firewood due to possible power outages in the country this coming winter.

“The use of electrical devices in particular may be restricted or prohibited,” he said, noting that if residents “were just a little more aware that electricity isn't always going to be a matter of course, we could achieve a lot.” He also said that temporary restrictions in power use, especially with regard to large consumers, are being considered by authorities as a means to preserve the power supply.

www.rt.com/business/560549-switzerland-winter-energy-rationing

The Slovalco aluminum smelter in Slovakia announced on Wednesday it will shut down primary production by the end of September.

“The decision to terminate primary aluminum production at Slovalco comes in response to adverse framework conditions and high electricity prices, which show no signs of improvement in the short term,” the plant’s majority owner, Norsk Hydro, said in a statement.

It explained that the Slovalco casthouse in central Slovakia is continuing its recycling operation, serving customers in the region with 75,000 tons of recycled aluminum annually.

The plant’s CEO told media that the Slovalco plant was a key supplier for Slovak and other European companies. After stopping production, Europe will be forced to import aluminum from countries including Russia and China, he added.

Slovalco’s shutdown follows a similar decision this week to cease production at a zinc smelter in the Netherlands.

www.rt.com/business/561043-energy-crisis-eu-aluminum-plant

Myanmar has bought Russian fuel oil that will arrive in phases from September, the country’s leader Min Aung Hlaing said this week, according to Bloomberg.

The report reveals that the Southeast Asian country will import oil and petroleum products directly from Russia at a reasonable price for nationwide distribution. It also noted that a ten-member committee set up for the purchase, storage and distribution of Russian oil held a meeting this month on the issue.

“We discussed buying and distributing fuel oil from Russia months before our head of state’s visit to Russia in July,” government spokesman Zaw Min Tun was quoted as saying at a press briefing on Wednesday. “During his visit, the deal was successfully done. We aim to buy high-quality fuel oil at a cheap price from the country where we can get it quickly.”

It remains unclear how fuel from Russia will be transported to Myanmar, Bloomberg wrote, noting that the two sides have previously considered supplying the commodity via a pipeline through India or China.

Myanmar’s military government has initiated talks with Moscow for fuel shipments amid an exodus of international majors from the country’s oil and gas sector, which has resulted in power outages. Earlier this year, Chevron and TotalEnergies withdrew from a major Yadana gas project in Myanmar, which was an important source of revenue for the country.

www.rt.com/business/561017-russian-oil-headed-asia

Germany should certify the Nord Stream 2 gas pipeline and use it to get enough fuel from Russia to get through the upcoming cold season, Wolfgang Kubicki, the deputy speaker of the German parliament, said.

The move must be taken “as soon as possible to fill our gas storage for the winter,” the politician from the Free Democratic Party of Germany (FDP) told the RedaktionsNetzwerk Deutschland (RND) in an interview published on Friday. The party is part of the German ruling coalition.

Berlin suspended certification of the fully complete route for Russian natural gas to put pressure on Moscow amid the crisis in Ukraine. The German government said under no circumstances should it be used, even though the country faces gas shortages.

Russian gas giant Gazprom reduced supplies through the older Nord Stream 1 route citing technical problems caused by anti-Russian sanctions. Berlin said the move was politically motivated. Gazprom has also been unable to use a transit route through Ukraine to supply European customers, reporting that the operator was refusing its bids for capacity.

Kubicki argued that since Germany was getting gas from Russia to heat homes and run industries, it was irrelevant which pipeline was used to get the job done.

“Once the gas storage tanks are full, we can close Nord Stream 2 again – and the other pipelines too, once we have become independent. But we're not there yet,” he said.

www.rt.com/news/561136-germany-certification-nord-stream