Jakarta, CNBC Indonesia – The energy crisis is hitting a number of countries, both in Europe such as the UK to Asia such as China and India. The majority of these countries are experiencing an electricity crisis, as a result of soaring world natural gas prices in recent times.
In Europe, natural gas prices have soared again, prompting more utilities to turn to high-carbon coal to generate electricity, just as Europe is in full swing trying to stop the use of polluting fuels.
While European coal and carbon prices have also soared in recent months, both have slowed the spike in gas prices that led to the near-term marginal cost of switching to using coal to generate electricity.
The benchmark carbon price allowed by the European Union’s Emissions Trading System (ETS) has almost doubled since the start of the year, while European coal futures have also more than doubled.
On the other hand, gas-fired power plants are cheaper to operate than coal-fired power plants due to the added cost of carbon emissions, but that changed around July this year.
High gas prices have also prompted a switch to oil in the UK, where coal accounts for just 2% of the electricity mix, with the country facing tight power supplies this winter.
Meanwhile in India, the local government has asked electricity producers to import up to 10% of their coal needs.
This comes amid a fuel shortage in India and has warned the state that companies will limit their electricity supply if they are caught selling electricity on power exchanges to cash back in when prices soar.
India is the second largest coal producer in the world, with the fourth largest reserves in the world. However, soaring electricity demand that has exceeded pre-pandemic levels means India’s state-run coal supply is no longer sufficient to meet the demand.
On Tuesday (12/10/2021), India’s Ministry of Electricity, reported Reuters, asked companies or industries that depend on local coal to import up to 10% of their coal needs to be mixed with domestic grades to meet the increasing demand for electricity.
More than half of India’s 135 coal-fired power plants supply about 70% of India’s electricity, currently having fuel stocks that will last approximately three days.
As for Japan, electricity prices have risen to their highest level in nine months this week due to rising global prices for oil, liquefied natural gas and coal.
On Tuesday, the price for rush hour electricity delivery in the spot market reached 50 yen per kilowatt hour (kWh) or US$ 0.44/kWh. However, on Monday (11/10/2021), the electricity price touched 50.01 yen/kWh, which was the highest level since January.
Japan’s electricity price hike also revived history last winter, when prices hit record highs and Japan’s power grid nearly failed in the country’s worst energy crisis since the Fukushima disaster.
As in last winter, rising costs for LNG and coal pushed up electricity prices in Japan. With cooler temperatures just weeks away, major Japanese companies have taken steps to prevent a similar crisis.
“LNG inventories have increased and are now above 2.4 million tonnes, about 600,000 tonnes more than the four-year average for this year,” Japan’s Ministry of Industry said.
Meanwhile in China, the energy crisis in the Panda Country is predicted to get worse. Because the flood disaster hit the main coal production center in China, Shanxi Province.
Citing the province’s Emergency Management Bureau, heavy rains forced the closure of 60 coal mines in the province, where a quarter of the production of ‘black gold’ is generated. About 1,900 buildings were destroyed and 1.75 million residents were affected.
This made the price of thermal coal futures, especially for generating electricity, soar to an all-time high last Monday (11/10/2021) in the local commodity market Zhengzhou Commodity Exchange. The price has doubled so far this year, as much as 12% to 1,408 yuan (US$219) per metric ton.
Whereas coal is the main energy source in China, both for heating, power generation and steelmaking. Last year, coal dominated China’s total energy use, up to 60%.
This is believed to make electricity for residents even more difficult in the middle of the cold winter season. At least the energy crisis in China has widened to 20 provinces in recent weeks and has caused electricity rationing by the government to both household and industrial consumers.
The energy crisis, especially electricity in a number of countries, has indeed made market players worried again, because the increase in natural gas prices which is the main trigger can move other energy prices such as coal and oil.
This is also a continuing concern, where if demand continues to soar and makes prices continue to soar, then inflation will be higher and of course it will last a long time.
If global inflation rises, the previously optimistic attitude of global market players will now return to pessimism.
Inflation that will continue to rise this year will scare the market, because people’s current income has not fully recovered due to the impact of the corona virus pandemic (Covid-19).
(chd / chd)
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