Analysis Energy
Price oil and electricity higher, hydrogen no wonder
Electricity prices started the week with a significant dip before rising steadily due to lower yields from solar panels. Oil prices also rose this week. OPEC+ members expect a rapid economic recovery with the same demand for oil and dare to cautiously increase production. Experts warn against seeing hydrogen as a panacea against climate change.
Crude is slowly gaining some upward momentum. On Monday, Brent crude was trading at $65,82 a barrel. Yesterday (Thurs, April 29) it rose to $68,55 a barrel, before dropping back to $67,55 a barrel today.
Optimism at OPEC+
OPEC+ announced on Thursday that member countries want to gradually increase production by 3 million barrels per day over the next 2 months. For May it has been decided to increase production by 600.000 barrels per day. This is based on optimism about the vaccination programs and economic stimulus schemes of major economies.
Some analysts question whether these estimates are too optimistic. They see in India an example of the limited control that there is now over coronavirus. There, a new revival of the corona virus causes a sharp drop in the demand for oil. India is an important market, after the US and China, the country is the largest oil user in the world.
Diesel is getting more expensive
Diesel prices have also risen this week. Last Friday (April 23) the price was €101,67 per 100 litres. Today that is more than €1 more and the price is €102,82 per 100 litres. The price is therefore returning to the level of the first half of March.
Opportunities for hydrogen
Hydrogen is not a panacea for achieving the climate goals. This is the conclusion reached by participants in a panel discussion hosted by S&P Global Platts last Monday (April 26). Hydrogen will mainly play an additional role in achieving the climate goals. According to the participants, this does not alter the fact that hydrogen could account for 30% of the international energy requirement in 15 years' time.
“Questions around hydrogen are now focused on efficiency, production costs and scale,” said David Bryson, COO of Uniper, during the S&P webinar. "Those problems are surmountable and not the biggest limiting factors for large-scale market introduction." Research and investments are needed to really get green hydrogen production off the ground in the next 10 years, according to the panel members.
In the EU, 2 types of hydrogen are currently being used: green hydrogen made from electricity and blue hydrogen made from natural gas but where the CO2 is captured. "In the long term, we want to move towards exclusively green hydrogen," said Kadri Simson, the European Commissioner for Energy. "Blue hydrogen can play an important role for scaling up hydrogen production."
Imbalance in the electricity market
The fact that the weather is having an increasing influence on the electricity market has once again become apparent this week. On Sunday (April 25), the Epex spot quote dropped to €37,49 per MWh due to the increasing wind and sunny weather. As a result, the electricity price was negative for several hours in the afternoon. Yesterday (Thursday, April 29), the rainfall area over a large part of the Netherlands caused a shortage of electricity. In the afternoon, therefore, emergency power was called out by Tennet.
The rising price of emission rights has played a major role in the electricity market in recent weeks. Companies that are obliged to participate in the European emission allowance system have until today (Friday 30 April) to buy allowances to cover their emissions for 2020. Now that this date is almost behind us, analysts expect that the price of emission rights will fall again in the short term and, consequently, the price of electricity. The forecast showery weather for next week will reduce the supply of solar power.
Investments needed in electricity grid
The energy transition and the ambition to bring CO2 emissions to zero by 2050 require major adjustments to the electricity grid. This is apparent from the Integrated Infrastructure Outlook 2030-2050 that Netbeheer Nederland presented this week. Windmills and solar parks are located in different locations than the current power plants. An additional limitation is that these new energy sources are not always close to large power users.
The grid operators expect the peak of electricity demand to double in 2050 compared to current consumption. This is due to electrification of industry, logistics and households. As a result, the gap between supply and demand is widening. Reinforcing the net alone is not enough. According to the grid operators, storage and conversion of power are desperately needed to guarantee stability on the grid.
Jurphaas Lugtenburg
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