Global power networks are about to face their greatest challenge in decades, as electricity output in the world’s leading economies is stifled.
Conflict. Drought. Production deficits. historically low stock levels. And epidemic retaliation. Over the past year, energy markets on every continent have been strained, and consumers have borne the burden of skyrocketing costs. However, things are projected to get considerably worse.
The blame lies with the heat. Throughout the majority of the Northern Hemisphere, electricity use peaks in the summer. As climate change strengthens its hold, this year will be extremely hot. In some regions of South Asia, the ambient temperature is already scorching enough to roast raw salmon. The upcoming months in the United States will be extremely hot, according to forecasts by scientists. As households and businesses turn on their air conditioners, energy consumption will skyrocket.
The concern is that energy supplies are so vulnerable that there won’t be enough to go around, and power outages will endanger life because there will be no fans or air conditioners to provide relief from the scorching heat.
In Pakistan, Myanmar, Sri Lanka, and India, the heatwave has produced hours-long daily blackouts, putting more than a billion people at risk, with little relief in sight. Six power plants in Texas failed earlier this month as the summer heat was just beginning to arrive, foreshadowing what is to come. This summer, at least a dozen states in the United States, from California to the Great Lakes, are at danger for power disruptions. In China and Japan, power supply will be limited. South Africa is on track for a record-breaking year of power outages. And Europe is in a perilous position that is maintained by Russia; if Russia turns off natural gas to the continent, it might lead to rolling blackouts in several nations.
Analyst Shantanu Jaiswal of BloombergNEF stated, “War and sanctions are interrupting supply and demand, and harsh weather and an economic bounce from Covid are raising power consumption.” “The convergence of so many variables is pretty exceptional. I cannot recollect the last time they all occurred together.”
Why power outages cause suffering and economic hardship?
Without authority, human welfare will be threatened. Poverty, old age, and closeness to the equator will raise the probability of disease and mortality due to extreme heat. Tens of thousands may lose access to potable water if prolonged outages persist.
If outages continue and firms close, there will be a massive economic shock.
In India, power shortages in many states have already reached levels comparable to 2014, when they were projected to have reduced the country’s gross domestic product by 5 percent. If the disruptions grow more widespread and extend throughout the year, this would result in a savings of about $100 billion. A surge in demand for electricity would also likely lead to further gains in the power and fuel markets, resulting in higher utility bills and further inflationary pressure. This month, when facilities on the Texas power grid failed, wholesale power rates in Houston briefly above the $5,000 per megawatt-hour price ceiling, increasing 22 times the average cost of on-peak electricity that had been obtained for the day.
Henning Gloystein, an analyst at Eurasia Group, stated that the world is facing “more than two years of global supply chain disruption caused by the epidemic, the spreading consequences from the war in Ukraine, and extreme weather driven by climate change.” “The greatest danger is that if we see big blackouts on top of all the aforementioned concerns this year, it might precipitate a humanitarian disaster on a scale not seen in decades due to food and energy shortages.”
How the Energy Transition Causes Difficulty?
This year may go down in history as the year with the greatest strain on global power, but the obstacles are unlikely to disappear very soon. Extreme heatwaves will grow more frequent as a result of climate change, continuing to strain electrical supplies.
In addition, a lack of investment in fossil fuels over the past few years, coupled with robust demand growth, particularly in Asian emerging countries, could keep markets tight over the next few years, according to Alex Whitworth, an analyst at Wood Mackenzie Ltd. in Shanghai. And while wind and solar’s proportion of total capacity is anticipated to increase over the next decade, he added that until energy storage facilities catch up to the transition, grids would be under even more strain.
“Every time there are clouds or storms or a wind drought for a week, you’ll face a supply scare,” Whitworth said. We anticipate a significant deterioration of these issues during the next five years.
Obviously, the transition to renewable energy is essential to combating climate change. Burning additional coal today to address the electricity crisis would only raise emissions, creating a vicious cycle that could lead to further heatwaves and increased strain on the systems.
Here is a glimpse at what is occurring throughout the world.
US
Nationally, supplies of natural gas, the leading fuel for power plants in the United States, are constrained and prices are skyrocketing.
According to the North American Electric Reliability Corporation, there will be a power shortage in a large portion of the United States and a portion of Canada.
This is one of the most dismal assessments ever issued by the regulatory agency.
Consumers will be requested to reduce their consumption to assist maintain the grid’s stability.
In California, the most populous state, gas supplies are even more constrained due to a pipeline rupture that restricted imports last year. In addition, climate change exacerbates drought, drastically reducing hydropower supply. Due to harsh weather, the California Independent System Operator stated this month that the state may see power outages in the coming summers.
On the Midcontinent Independent System Operator’s (15-state) grid, users in 11 states are vulnerable to outages. This summer, MISO, which serves over 42 million people, anticipates “insufficient” electricity supply to satisfy peak demand, particularly not its Midwestern states. The grid has never before issued a such warning prior to the start of summer demand.
Gary Cunningham, head of market research at brokerage Tradition Energy, stated that despite the state’s efforts to strengthen resilience during a February 2021 winter storm that left millions without power for days, the grid in Texas “remains at danger” of shortages.
Teri Viswanath, lead economist for power, energy, and water at CoBank ACB, stated that ageing infrastructure and maintenance delays during the pandemic had exacerbated the issue of more severe weather.
She stated that the United States experiences more power disruptions than any other industrialised nation. Approximately 70% of our grid is nearing the end of its useful life.
Asia
The core of the outages has thus far been South and Southeast Asia, where extreme heat waves have caused air conditioners to operate at maximum capacity. Pakistan, Sri Lanka, and Myanmar, with a combined population of 300 million, have experienced widespread power outages. A state official reported this month that 16 of India’s 28 states, home to more than 700 million people, have been experiencing power disruptions of two to ten hours every day.
In an effort to increase fuel supplies, the Indian government has recently encouraged companies to purchase more expensive imported coal and to relax environmental regulations for mine expansions. However, it remains to be seen whether these measures will alleviate the pressure. The approaching monsoon season should bring cooler temperatures and reduce energy consumption, but it can also cause flooding in mining zones and disrupt fuel supply.
In Vietnam, the state-owned utility has been preparing for power shortages for over a month due to rising demand, dwindling domestic coal supply, and rising foreign fuel costs.
In China, where coal shortages caused severe power outages in 2018, officials have pledged to keep the lights on in 2022 and have encouraged coal miners to increase output to record levels. Even yet, industry experts have cautioned that the electricity situation will be precarious this summer in the heavily industrialised south of the United States, which is distant from inland mining areas and consequently more reliant on costly imported coal and gas.
In March, Japan experienced a power scare when a cold wave caused a demand spike just days after an earthquake rendered some coal and gas plants inoperable. According to grid predictions, power supply will be constrained during the forthcoming summer months, and demand will likely surpass supply again next winter. The Tokyo Metropolitan Government has launched an energy saving campaign, urging residents to reduce their television viewing.
Europe
Europe has a lesser danger of blackouts since fewer people use air conditioning at home. Additionally, the continent is racing to replenish its gas storage.
However, there is minimal margin for error. A dry spring in Norway limits the availability of hydropower. Extended outages at Electricité de France SA’s nuclear reactors exert pressure on both costs and supplies. The largest producer in the region has reduced its nuclear output target for the third time this year, the latest indication that Europe’s energy situation is deepening.
Fabian Ronningen, a power markets expert at Rystad Energy, stated that if Russia were to cut off natural gas supplies to the region, it may result in rolling blackouts in some countries.
While he stated that the likelihood of Russia making such a big action is “doubtful,” he has gotten more gloomy as the war in Ukraine continues; two months ago, he stated that the likelihood was “very unlikely.”
Spain, France, and the United Kingdom, among others, have been receiving massive imports of liquefied natural gas and would likely have ample stocks to withstand the impact. In Eastern Europe, where countries such as Greece, Latvia, and Hungary generate a major amount of their electricity from natural gas and are highly dependent on Russian supply, the situation may be different. Ronningen stated that the probability of blackouts would be highest there.
“I don’t believe European customers could even conceive of such a scenario,” he remarked. It has never occurred within our lifetimes.
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