Ukraine’s energy giant Naftogaz will be out of default soon: CEO

Ukraine’s Naftogaz is in the process of finalizing the restructuring of its debt

The CEO of Ukrainian state energy giant Naftogaz said the company is working toward resolving its debt default problems quickly.

Yuriy Vitrenko told CNBC’s Hadley Gamble at the World Economic Forum in Davos on Tuesday that he is in the final stages of getting the company back on track.

“By the end of this month, we’re planning to find the consent solicitation with our bondholders to restructure,” Vitrenko said. “This is happening now quite intensively. My plan within two weeks is to finalize this process.”

Naftogaz was the first Ukrainian government-owned entity to default since Russia invaded the country in February. 

Last year, the company said the deadline for payments to holders of Naftogaz Eurobonds expired on July 26 without payment taking place.

“As this failure to meet its Eurobond obligations effectively deprives Naftogaz of access to international capital markets, the Cabinet of Ministers as the responsible party now assumes full responsibility for raising the funds necessary for the import of natural gas for the 2022-2023 heating season,” the company said.

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Vitrenko said as CEO of Naftogaz his responsibility is to secure production of natural gas in the country, “meaning facilitation and motivation of private producers to produce more and that’s what we’re doing,” he noted.

“Naftogaz will buy from private producers that produce gas on the market base price. Yeah, my task is to increase the production of natural gas in Ukraine.”

Prices have not peaked yet, says Unilever CEO

Unilever CEO Alan Jope photographed at the World Economic Forum in May 2022.

Hollie Adams | Bloomberg | Getty Images

The CEO of consumer goods giant Unilever said Tuesday that prices would likely continue to rise in the near term, adding that his firm had a playbook for high inflation thanks to its business dealings in markets like Argentina and Turkey.

Speaking to CNBC’s Joumanna Bercetche at the World Economic Forum in Davos, Switzerland, Alan Jope talked about how his firm was managing its operations in the current climate.

“For the last 18 months we’ve seen extraordinary input cost pressure … it runs across petrochemical derived products, agricultural derived products, energy, transport, logistics,” he said.

“It’s been feeding through for quite some time now and we’ve been accelerating the rate of price increases that we’ve had to put into the market,” he added.

“So far, the consumer response in terms of volume softness has been very muted, the consumer has been very resilient,” Jope said.

“We do see the prospect of higher volume elasticity as winter energy costs hit, as households’ savings levels come down and that buffer goes away and as prices continue to rise,” he said.

Unilever CEO: Inflation is at its peak, but further price rises are still to come

Last October, Unilever published its third-quarter results for 2022, with the firm reporting price growth of 12.5%.  

Jope was asked if he foresaw any moderation when it came to inflationary pressures. “It’s very hard to predict the future of commodity markets,” he replied.

“Even if you press the oil major CEOs, they’ll be a little cagey on giving an outlook on energy prices.”

Unilever’s view, he said, was that “we know for sure there’s more inflationary pressure coming through in our input costs.”

“We might be, at the moment, around peak inflation, but probably not peak prices,” he went on to state.

“There’s further pricing to come through, but the rate of price increases is probably peaking around now.”

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Unilever has a global footprint and owns brands including Ben & Jerry’s, Magnum and Wall’s.

During his interview with CNBC, Jope touched upon the international dimension of his business and how the experience of operating in a range of markets was steering it through the current climate.  

“Nobody running a business at the moment has really lived through global inflation, it’s a long time since we’ve had global inflation,” he said.

“But we’re used to high levels of inflation from doing business in places like Argentina, or Turkey, or parts of Southeast Asia,” he added.

“So we do have a playbook, and the playbook is that it’s important to protect the shape of the P&L by landing price.”

“And so it’s not that we’ve taken more price, we just started acting earlier than many of our peers, and the guidance that we’ve been getting from our investors is they support that and feel that that’s an appropriate action.”  

This, Jope explained, was “something we have learned from being in these high inflationary markets, though … much of that inflation is currency weakness, historically.”

“But now those markets are having to deal with the combination of commodity pressure and currency weakness. So our instinct is to act quickly when costs start coming through.”

Russian gas will eventually return to Europe as nations ‘forgive and forget,’ Qatari energy minister says

On Friday, Russian energy supplier Gazprom said it would not resume its supply of natural gas to Germany through the key Nord Stream 1 pipeline, blaming a malfunctioning turbine.

Hannibal Hanschke | Reuters

The European Union’s rejection of Russian energy commodities following Moscow’s invasion of Ukraine won’t last forever, Qatar’s Energy Minister said during an energy conference over the weekend.

“The Europeans today are saying there’s no way we’re going back” to buying Russian gas, Saad Sherida al-Kaabi, energy minister and head of state gas company QatarEnergy, said at the Atlantic Council Energy Forum in Abu Dhabi.

“We’re all blessed to have to be able to forget and to forgive. And I think things get mended with time… they learn from that situation and probably have a much bigger diversity [of energy intake].”

Europe has long been Russia’s largest customer of most energy commodities, especially natural gas. EU countries have dramatically cut down their imports of Russian energy supplies, imposing sanctions in response to Moscow’s brutal, full-scale invasion of Ukraine.

Gas exports from Russian state energy giant Gazprom to Switzerland and the EU fell by 55% in 2022, the company said earlier this month. The cut in imports has dramatically increased energy costs for Europe, sending leaders and oil and gas executives scrambling to develop new sources of energy and shore up alternative supplies.

“But Russian gas is going back, in my view, to Europe,” al-Kaabi said.

Russia’s invasion of Ukraine has so far taken tens, if not hundreds of thousands of lives, destroyed entire cities, and exiled more than 8 million people as refugees. Russian missiles and drone strikes regularly hit and decimate residential buildings, schools, hospitals, and vital energy infrastructure, leaving millions of Ukrainians without power.

A residential building destroyed after a Russian missile attack on Jan. 15, 2023, in Dnipro, Ukraine.

Global Images Ukraine | Getty Images News | Getty Images

Europe has managed to avert a major crisis this winter, owing to mild weather and substantial stocks of gas amassed over the last year. Energy officials and analysts warn of a more precarious situation in late 2023, when these supplies run out.

“Luckily they [Europe] haven’t had a very high demand for gas due to the warmer weather,” al-Kaabi said. “The issue is what’s going to happen when they want to replenish their storages this coming year, and there isn’t much gas coming into the market until ’25, ’26, ’27 … So I think it’s going to be a volatile situation for some time.”

Later during the conference, CNBC spoke to the CEO of Italian energy company Eni, Claudio Descalzi, who pushed back on the Qatari minister’s comments.

“I think that the war is still there, and it is not easy to forgive anybody when you kill innocent people, women and children and bomb hospitals,” Descalzi told CNBC’s Hadley Gamble. “And so I think that more than forgive, we have to understand the sense of life for our words. For our modern war, because that is [what is] happening there. So, when we talk about energy security, we talk about financing how you allocate your money, how much in the gas, how much in the renewables, and you think that people are killing close to you or far from you… That is the priority, that is the thing we have to solve.”

In 2023 the priority is Ukraine, Eni CEO Claudio Descalzi says

“Otherwise,” the CEO added, “there is a big elephant in the room. We hide to ourselves this kind of stuff, and when we hide something [it] is coming back bigger and bigger. If you’re forgiving, it means you are not looking at that, you are not thinking we have to solve this kind of issue.”

Descalzi said that the war in Ukraine and energy security are front of mind for him and his industry. Italy has dramatically reduced its reliance on Russian gas by replacing it with energy sources from alternative producers, such as Algeria. On Sunday, Eni announced a new gas discovery in an offshore field in the eastern Mediterranean, off the coast of Egypt.

“Honestly, energy security is a big problem… but I think that, in 2023, the priority is Ukraine,” Descalzi said. That’s from my point of view. It’s Russia. It’s the relationship with China.”

“I’m not a politician,” he added, “but I think you cannot manage and talk about money and talk about energy and industry — it’s clear that, if you are not looking at that, a lot of people are going to suffer. But from the other side you talk about freedom, democracy, and people that are dying.”

"This year is going to be about the war" in Ukraine, says presidential advisor Amos Hochstein

Russia’s fossil fuel earnings fall in December

European countries have been scrambling to find alternative sources of oil and gas following Russia’s full-scale invasion of Ukraine in Feb. 2021.

Bloomberg | Bloomberg | Getty Images

Russia’s revenues from fossil fuel exports collapsed in December, according to a new report, significantly hampering President Vladimir Putin’s ability to finance the war in Ukraine.

The findings, Ukrainian officials and campaigners say, illustrate the effectiveness of targeting Russia’s oil revenues and underscore the urgent need for Western policymakers to ratchet up the financial pressure on Moscow in order to help Kyiv prevail.

Published Wednesday by the Centre for Research on Energy and Clean Air, an independent Finnish think tank, the report found the first month of the European Union’s ban on seaborne imports of Russian crude and the G-7’s price cap had cost Moscow an estimated 160 million euros ($171.8 million) per day.

CREA’s report said the Western measures were largely responsible for a 17% fall in Russia’s earnings from fossil fuel exports in the final month of 2022. It means that Russia — one of the world’s top oil producers and exporters — saw revenues from fossil fuel exports slump to their lowest level since Putin launched his full-scale invasion of Ukraine in late February.

“The EU’s oil ban and the oil price cap have finally kicked in and the impact is as significant as expected,” Lauri Myllyvirta, lead analyst at CREA, said in a statement.

“This shows that we have the tools to help Ukraine prevail against Russia’s aggression. It’s essential to lower the price cap to a level that denies taxable oil profits to the Kremlin, and to restrict the remaining oil and gas imports from Russia,” Myllyvirta said.

The G-7, Australia and the EU implemented a $60-per-barrel price cap on Russian oil on Dec. 5. It came alongside a move by the EU and U.K. to impose a ban on the seaborne imports of Russian crude oil.

Together, the measures reflected by far the most significant step to curtail the fossil fuel export revenue that is funding the Kremlin’s onslaught in Ukraine.

Russian President Vladimir Putin attends a meeting at the Kremlin in Moscow on January 6, 2022.

Mikhail Klimentyev | Afp | Getty Images

Energy analysts had been skeptical about the impact of a price cap on Russian oil, particularly as Moscow had been able to reroute much of its European seaborne shipments to the likes of China, India and Turkey.

Russia retaliated to the Western measures late last month by banning oil sales to countries that abide by the price cap.

Kremlin spokesperson Dmitry Peskov has previously said a Western price cap on Russian oil would not impact its ability to sustain what it describes as its “special military operation” in Ukraine. Peskov also warned the measure would destabilize global energy markets, Reuters reported.

‘Financial bloodline for Putin’s war’

Oleg Ustenko, economic advisor to Ukrainian President Volodymyr Zelenskyy, said Wednesday that while it is “very good news” that Russia is losing revenue from fossil fuel exports as a result of the Western measures, they were “definitely not enough.”

Ustenko echoed Zelenskyy’s calls for a price cap that is set at a much lower level, saying at a briefing that each escalation of economic sanctions against the Kremlin should see the oil price cap come down to a target range of $20 to $30 a barrel.

There is “no reason to wait and see,” Ustenko said. “It is already clear.”

“The EU and G7 have the power and all means to cut this bloodline. Only force and money speak to the Kremlin.”

Svitlana Romanko

Founder and director of Razom We Stand

CREA’s report found that the measures caused a fall in shipment volumes and prices for Russian oil that has cut the country’s export revenues by 180 million euros per day.

By increasing exports of refined oil products to the EU and the rest of the world, the report said Moscow had been able to claw back 20 million euros per day, resulting in a net daily loss of 160 million euros since the Western measures came into force.

Russia still makes an estimated 640 million euros per day from exporting fossil fuels, the report said.

“The first month of the embargo proves what we’ve been saying from the beginning of the invasion: income from exports of fossil fuels is the financial bloodline for Putin’s war,” said Svitlana Romanko, founder and director of Ukrainian human rights group Razom We Stand (Together We Stand).

“The EU and G7 have the power and all means to cut this bloodline,” she added. “Only force and money speak to the Kremlin.”

Romanko called on the price cap coalition to lower the price limit, strengthen the enforcement of the embargo and introduce additional sanctions to close loopholes.

CREA’s report says lowering the oil price cap against Russia to between $25 to $30 a barrel, a range it notes is still “well above” production and transport costs, would slash Russia’s oil export revenue by at least 100 million euros per day.

It says that the Western price cap coalition boasts “strong leverage” to push down the price caps, adding that “Russia has not found a meaningful alternative to vessels owned and/or insured in the G7 for the transportation of Russian crude and oil products from Baltic and Black Sea ports.”

Inflation euro zone December 2022 drops as energy costs ease

Inflation in Europe has been impacted by higher energy prices and supply shortages. Analysts question how far central banks will go to bring inflation under control.

Bloomberg | Bloomberg | Getty Images

Inflation in the euro zone dropped for a second consecutive month in December, but analysts do not expect it to spark a change in tone from the European Central Bank.

Headline inflation, which includes food and energy costs, came in at 9.2% year on year in December, according to preliminary data Friday from the European statistics agency, Eurostat. It follows November’s headline inflation rate of 10.1%, which represented the first slight contraction in prices since June 2021.

The euro area economy has come under immense pressure in the wake of Russia’s invasion of Ukraine in February 2022, with energy and food costs soaring last year. In an effort to battle rising prices, the European Central Bank increased interest rates four times in 2022 and said it is likely to continue doing so this year. The bank’s main rate currently sits at 2%.

Despite further signs that inflation is easing, analysts say it is too early to celebrate and do not expect a pivot from the region’s central bank.

Interest rates will “get to 3(%) and probably have to hold that all through the year even as the recession becomes more and more evident,” Hetal Mehta of Legal & General Investment Management told CNBC’s “Street Signs Europe” on Thursday.

It comes after ECB President Christine Lagarde struck a particularly hawkish tone in December: “We’re not pivoting, we’re not wavering, we are showing determination.” She added that the bank has “more ground to cover.”

The ECB cannot and will not base its policy decisions on highly volatile energy prices.

Carsten Brzeski

global head of macro, ING Germany

Speaking earlier this week, ECB Governing Council member and Bank of France Governor Francois Villeroy de Galhau said interest rates might peak by this summer.

The ECB also said in December that it will start reducing its balance sheet in March at a pace of 15 billion euros ($15.8 billion) per month until the end of the second quarter. This step is also expected to address some of the region’s inflationary pressures.

At the time, the central bank forecast an average inflation rate of 8.4% for 2022, 6.3% for 2023 and 3.4% for 2024. The ECB’s mandate is to work toward a headline inflation figure of 2%.

Earlier this week, data out of Germany showed inflation dropping from 10% in November to 8.6% in December.

Carsten Brzeski, global head of macro at ING Germany, said these numbers “are not a relief, yet, only a reminder that euro zone inflation is still mainly an energy price phenomenon.”

Energy costs have dropped in Europe in recent months. Natural gas prices, for instance, traded at around 72.42 euros per megawatt hour on Friday — sharply lower than their peak of 349.90 euros per megawatt hour in August.

Among inflation components, energy continued to represent the biggest driver in December, but came off from previous levels. Energy costs dropped from 34.9% in November to an estimated 25.7% in December, according to the latest figures.

“The ECB cannot and will not base its policy decisions on highly volatile energy prices. Instead, the central bank will, in our view, hike interest rates at the next two meetings by a total of 100 basis points,” Brzeski said in a note.

Claus Vistesen, chief euro zone economist at Pantheon Macroeconomics, also said in a note this week that he sees “little relief” in the inflation data, “which will keep the ECB on alert at the start of the year.” He expects two rate hikes of 50 basis points in the first quarter.

In terms of national breakdown, the Baltic nations once again registered the highest jumps in inflation, with a rate of about 20%.

S&P Global Market Intelligence: Fears of soaring inflation and energy crunch alleviating

These 6 Club stocks look reasonably priced as Wall Street shuns high flyers

A Halliburton oil well fielder works on a well head at a fracking rig site January 27, 2016 near Stillwater, Oklahoma.

J. Pat Carter | Getty Images

We’re growing increasingly worried about some richly valued companies in our portfolio, including the likes of Nvidia (NVDA) and Microsoft (MSFT). Expensive stocks remain out of favor on Wall Street — just as they had been for much of last year — and there could be more room for them to fall as recession fears mount.

Shell to pay $2 billion in additional EU, UK taxes for the fourth quarter

The logo of Shell on an oil storage silo, beyond railway tanker wagons at the company’s Pernis refinery in Rotterdam, Netherlands, on Sunday, Oct. 23, 2022.

Bloomberg | Bloomberg | Getty Images

Oil and gas major Shell said Friday it expects to pay an extra $2 billion in new taxes for the fourth quarter in the European Union and U.K.

“The Q4’22 earnings impact of recently announced additional taxes in the EU (the solidarity contribution)
and the deferred tax impact from the increased UK Energy Profits Levy is expected to be around $2 billion,” the company said in a trading update.

The EU agreed in September that oil and gas companies will pay a levy on the surplus profits made in 2022 or 2023. The “solidarity contribution” will see firms pay 33% of profits above their average taxable profits.

Meanwhile, U.K. Finance Minister Jeremy Hunt said in his November Autumn Statement that the energy industry will be subject to an expanded windfall tax of 35%.

Energy companies’ revenues have soared following Western sanctions blocking access to Russian supplies.

Shell, which will release its full fourth-quarter results on Feb. 2, also said it expects between $550 million and $750 million of losses in adjusted earnings over the period. The EU and U.K. levies will not affect the adjusted earnings figures, the company said.

This is a developing news story and will be updated shortly.

Why isn’t the U.S. electrical grid run on 100% renewable energy yet?

Solar panels are set up in the solar farm at the University of California, Merced, in Merced, California, August 17, 2022.

Nathan Frandino | Reuters

Generating electricity to power homes and businesses is a significant contributor to climate change. In the United States, one quarter of greenhouse gas emissions come from electricity production, according to the Environmental Protection Agency.

Solar panels and wind farms can generate electricity without releasing any greenhouse gas emissions. Nuclear power plants can too, although today’s plants generate long-lasting radioactive waste, which has no permanent storage repository.

But the U.S. electrical sector is still dependent on fossil fuels. In 2021, 61 percent of electricity generation came from burning coal, natural gas, or petroleum. Only 20 percent of the electricity in the U.S. came from renewables, mostly wind energy, hydropower and solar energy, according to the U.S. Energy Information Administration. Another 19 percent came from nuclear power.

The contribution from renewables has been increasing steadily since the 1990s, and the rate of increase has accelerated. For example, wind power provided only 2.8 billion kilowatt-hours of electricity in 1990, doubling to 5.6 billion in 2000. But from there, it skyrocketed, growing to 94.6 billion in 2010 and 379.8 billion in 2021.

That’s progress, but it’s not happening fast enough to eliminate the worst effects of climate change for our descendants.

“We need to eliminate global emissions of greenhouse gases by 2050,” philanthropist and technologist Bill Gates wrote in his 2023 annual letter. “Extreme weather is already causing more suffering, and if we don’t get to net-zero emissions, our grandchildren will grow up in a world that is dramatically worse off.”

And the problem is actually bigger than it looks.

“We need not just to create as much electricity as we have now, but three times as much,” says Saul Griffith, an entrepreneur who’s sold companies to Google and Autodesk and has written books on mass electrification. To get to zero emissions, all the cars and heating systems and stoves will have to be powered with electricity, said Griffith. Electricity is not necessarily clean, but at least it it can be, unlike gas-powered stoves or gasoline-powered cars.

The technology to generate electricity with wind and solar has existed for decades. So why isn’t the electric grid already 100% powered by renewables? And what will it take to get there?

The economics of power generation

Intermittency and transmission

One of the biggest barriers to a 100% renewable grid is the intermittency of many renewable power sources. The wind doesn’t always blow and the sun doesn’t always shine — and the windiest and sunniest places are not close to all the country’s major population centers.

Wind resources in the United States, according to the the National Renewable Energy Laboratory, a national laboratory of the U.S. Department of Energy.

National Renewable Energy Laboratory, a national laboratory of the U.S. Department of Energy.

The solution is a combination of batteries to store excess power for times when generation is low, and transmission lines to take the power where it is needed.

Long-duration batteries are under development, but Denholm said a lot of progress can be made simply with utility-scale batteries that store energy for a few hours.

“One of the biggest problems right now is shifting a little bit of solar energy, for instance, from say, 11 a.m. and noon to the peak demand at 6 p.m. or 7 p.m. So you really only need a few hours of batteries,” Denholm told CNBC. “You can actually meet that with conventional lithium ion batteries. This is very close to the type of batteries that are being put in cars today. You can go really far with that.”

So far, battery usage has been low because wind and solar are primarily used to buffer the grid when energy sources are low, rather than as a primary source. For the first 20% to 40% of the electricity in a region to come from wind and solar, battery storage is not needed, Denholm said. When renewable penetration starts reaching closer to 50%, then battery storage becomes necessary. And building and deploying all those batteries will take time and money.

Solar resources in the United States, according to the the National Renewable Energy Laboratory, a national laboratory of the U.S. Department of Energy.

National Renewable Energy Laboratory, a national laboratory of the U.S. Department of Energy.

Transmission lines are another limiting factor.

“We have been able to build a fair amount of wind and solar without adding new transmission, but we’re really kind of running up to the limits, especially for wind, because there’s not a whole lot of transmission located in the places in the country where it’s super windy,” Denholm said. “So we absolutely do need to build more transmission to tap into those super-high quality wind resources, particularly in the middle of the country.”

The transmission system in the U.S. is built for the electricity capacity that is already on the grid, and building new transmission lines that run hundreds of miles can take anywhere from 10 to 15 years, John Moura, the director of reliability assessment at the North American Electric Reliability Corp., told CNBC. “The type of transmission we’re talking about here are 1,000 [or] 2,000 miles long, large projects.”

Currently, when a utility wants to add electricity to the existing grid, it has to pay for the upgraded transmission line and for the interconnection, which is where multiple local grids are brought together. Those grid upgrades are expensive, and the permit process is slow.

Several components of the Infrastructure Investment and Jobs Act signed in November 2021 gave the Federal Energy Regulatory Commission much stronger permitting authority, transmission line analyst Rob Gramlich told CNBC. Still, some key rule changes did not get across the finish line. There was no transmission tax credit included in this year’s Inflation Reduction Act, and efforts by Sen. Joe Manchin, D.-W.Va., to reform permitting have so far failed to pass.

“Transmission was not meaningfully addressed in the 117th Congress. There is a lot of unfinished business on the transmission front, for sure,” Gramlich told CNBC.

Putting transmission lines underground is another option, but that’s prohibitively expensive.

“Your classical old-school, large overhead transmission lines are pretty much the only thing that we are likely to see at least in the next decade or two,” Denholm said.

Land requirements? Not that big a deal

One commonly cited worry is that going 100% renewable will require massive tracts of land covered with solar panels or wind farms.

But “that is definitively not the challenge,” Moura said.

It would take a total of 0.84 percent of U.S. land to support an entirely renewable-powered energy system, Stanford professor Mark Jacobson told CNBC. By comparison, the fossil fuel industry takes up 1.3 percent of U.S. land.

“Offshore wind, tidal, and wave power do not take up any new land. Rooftop photovoltaic does not take up any new land,” he said.

So really, the only new land required would be for solar facilities run by utilities, and for wind turbines on land.

But many people are reluctant to embrace a new way of doing things when they can’t see what the future will look like, and when maintaining the status quo is the path of least resistance, according to Griffith, the mass-electrification advocate

“The biggest barrier is a lack of imagination,” Griffith told CNBC in a video interview from Australia, where he currently lives. “So everyone is like, ‘Well, I’m not quite willing to do this, because I don’t know what it’s going to look like. And maybe it’s going to be terrible.'”

So what would a 100% renewable-powered world look like, according to Griffith?

“It’s going to look like every house has solar on its roof. There’ll be solar over every parking structure. Some roads will probably have a solar panels elevated down the middle of the road. And every time you go driving in the countryside, you’ll see some wind somewhere on the horizon,” Griffith said.

“And otherwise, the future is going to look a lot like it does.”

‘The right thing to do is not the easy thing to do’

Firm and consistent rules from the federal government are another shortcoming in the U.S., and that comes down to politics.

“In Norway, you can’t buy a gasoline vehicle after 2025. That creates a huge amount of market certainty. Everyone knows when it’s going to happen, what you have to do,” Griffith said.

The Inflation Reduction Act in August 2022 was chock full of incentives to push renewables forward, but it didn’t put any firm sunsetting dates on fossil fuel generation.

“It doesn’t really clearly send a signal to the utilities that, ‘No, you can’t install natural gas networks to heat homes anymore. No, you can’t do this or that or the other.’ So I think more regulatory, legislative certainty would help America a lot,” said Griffith.

Until then, its going to continue to be cheaper and easier to keep doing things the same old way.

Saul Griffith’s electric home in San Francisco.

Photo courtesy Saul Griffith

Griffith lived in the U.S. for more than two decades and built an all-electric home in San Francisco starting in 2014. It took him eight years and cost an estimated extra $80,000 compared to building a traditional home, he said.

“There’s sort of that inertia and red tape and at every single level the system,” Griffith said. “And then even after I finished and build that house, it’s hard to turn on. There are people who are really skilled at maintaining a digital electric house, [but] there’s no software that makes it easy yet. There’s a couple of startups working on it. … It’s like the early days of the cellphone.”

Even incremental repairs are harder to do with an all-electric home.

“If you call a contractor and say, ‘I’d like to install an induction cooktop, I’d like to get take the gas out of the kitchen,’ the contractor is probably going to tell you, ‘You’re crazy, buy natural gas instead.’ Or if you call them at midnight and say, ‘My water heater’s gone, can you please replace it with an electric heat pump,’ which would be the right choice for climate and even for economics, the contractor will be like, ‘No, no, no, I’ll have a natural gas one there in the morning, but the heat pump will take me six weeks,'” Griffith said.

“So we’ve got a skills and capacity and supply chain shortage on all of these things, which means that the right thing to do is not the easy thing to do,” he said.

In Australia, more than 30 percent of homes have rooftop solar and it’s “the cheapest energy that humanity has ever had,” Griffith said. In the U.S., only about 1 to 2 percent of homes have rooftop solar.

“In America, it’s more expensive than electricity from the grid. That’s a regulatory and a workforce training problem in the U.S.”

For instance, in Australia, Griffith said he can call 10 companies and get 10 quotes for rooftop solar the next day at 65 cents per watt. In California, rooftop solar cost him $5.80 per watt. Even given the higher cost of living in San Francisco in general, “it shouldn’t be 10 times more expensive than in Australia,” he said.

Saul Griffith’s electric home in San Francisco.

Photo courtesy Saul Griffith

It’s his view that in the U.S. it all comes down to regulation and preserving the status quo.

“America thinks it’s all about free markets and anti-regulation, but really, it’s the most over-regulated, most f—– up energy market in the world,” Griffith said.

For example, many utility companies provide both electricity and gas to their customers in the U.S.

“One of their businesses is in conflict with the other and they haven’t resolved that,” Griffith said. “So we’re still handicapping electric solutions versus natural gas solutions.”

For all of this to change, he said Americans will have to see a better alternative actually working outside of the U.S. — and then push politicians and private industry to do better at home.

“You just got to show that this works somewhere. And once you’ve done that, that might unlock America’s full political paralysis,” Griffith said.

In the U.S., the successful pitch for rooftop solar will revolve more around escaping utility bills and rebelling against utilities and governments, than it will around saving the Earth, Griffith added. Given those economic and political realities, he said it’s more likely that rooftop solar will first take off in more conservative states like Texas or Florida.

“It’ll be a company named Liberation Solar — it will be the largest solar installer in the U.S.” he said, perhaps only partly in jest.

Why the U.S. power grid has become unreliable

European natural gas prices return to pre-Ukraine war levels

A worker walks past gas pipes that connect a Floating Storage and Regasification Unit ship with the main land in Wilhelmshaven, northern Germany on December 17, 2022. EU energy ministers are wrangling over a proposed price cap on gas.

Michael Sohn | Afp | Getty Images

LONDON — European natural gas prices fell this week to levels not seen since before Russia’s invasion of Ukraine.

Front-month natural gas futures on the Dutch Title Transfer Facility, the benchmark contract in Europe, plunged in recent weeks to bottom out below 77 euros ($81.91) per megawatt hour, a level not seen since February — prior to the beginning of a full scale war in Ukraine.

As of Thursday morning, they were trading at around 81.5 euros.

At their peak in August, European gas prices topped 345 euros/MWh as Russia’s weaponization of its natural gas exports to the rest of the continent in response to punitive EU sanctions, and sky-high temperatures over the summer, drove up demand while constricting supply.

The spiking prices sent household energy bills soaring and have fueled a cost-of-living crisis across much of the continent.

However, unseasonably warm weather through winter in much of northwest Europe has reduced demand for heating and allowed the continent to replenish its gas inventory following drawdowns during several cold snaps over the last few months.

Goldman Sachs in November predicted a sharp fall in European gas prices in the coming months as nations gained a temporary upper hand on supply issues.

“As a rule of thumb, a rise or fall in gas prices by €100 per MWh changes the gas bill of the euro zone economy — at 2021 gas consumption — by an amount equal to almost 3% of GDP once households and consumers have to bear the full costs of the change in gas prices,” Berenberg Chief Economist Holger Schmieding explained in a note last month.

The Russia-Ukraine war is unlikely to end in the foreseeable future, analyst says

“As the EU imports some gas under longer-term fixed-price contracts, the actual impact on the gas import bill is not quite as pronounced … but as electricity prices are still largely linked to gas prices, the total pain of high gas prices — and the relief from any correction — may be more pronounced than the rule of thumb suggests.”

The European Union last week agreed upon a temporary mechanism to limit excessive gas prices, which comes into force on Feb. 15.

The “market correction” mechanism will be triggered automatically if the front-month TTF price exceeds 180 euros/MWh for three consecutive days, and if it deviates by 35 euros or more from a reference price for global LNG (liquefied natural gas) over the same three days.

Bitcoin miner Core Scientific filing for bankruptcy, will keep mining

Core Scientific’s 104 megawatt Bitcoin mining data center in Marble, North Carolina

Carey McKelvey

Core Scientific, one of the largest publicly traded crypto mining companies in the U.S., is filing for Chapter 11 bankruptcy protection in Texas early Wednesday morning, according to a person familiar with the company’s finances. The move follows a year of plunging cryptocurrency prices and rising energy prices.

Core Scientific mines for proof-of-work cryptocurrencies like bitcoin. The process involves powering data centers across the country, packed with highly specialized computers that crunch math equations in order to validate transactions and simultaneously create new tokens. The process requires expensive equipment, some technical know-how, and a lot of electricity.

Core’s market capitalization had fallen to $78 million as of end of trading Tuesday, down from a $4.3 billion valuation in July 2021 when the company went public through a special purpose acquisition vehicle, or SPAC. The stock has fallen more than 98% in the last year.

The company is still generating positive cashflow, but that cash is not sufficient to repay the financing debt owed on equipment it was leasing, according to a person familiar with the company’s situation. The company will not liquidate, but will continue to operate normally while reaching a deal with senior security noteholders, which hold the bulk of the company’s debt, according to this person, who declined to be named discussing confidential company matters.

Core had previously said in a filing in October that holders of its common stock could suffer “a total loss of their investment,” but that may not be the case if the overall industry recovers. The deal cut with Core’s convertible note holders is structured in such a way that if, in fact, the business environment for bitcoin improves, common equity holders may not get totally wiped out. The company also disclosed that it would not make its debt payments coming due in late Oct. and early Nov. — and said that creditors were free to sue the company for nonpayment.

Core, which primarily mints bitcoin, has seen the price of the token drop from an all-time high above $69,000 in Nov. 2021, to around $16,800 That loss in value, paired with greater competition among miners — and increased energy prices — have compressed its profit margins.

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The Austin, Texas-based miner, which has operations in North Dakota, North Carolina, Georgia, and Kentucky, said in its October filing that “operating performance and liquidity have been severely impacted by the prolonged decrease in the price of bitcoin, the increase in electricity costs,” as well as “the increase in the global bitcoin network hash rate” — a term used to describe the computing power of all miners in the bitcoin network.

Crypto lender Celsius, which filed for bankruptcy protection in July, was a Core customer. When Celsius’ debts were wiped out during its bankruptcy proceedings, that put a strain on Core’s balance sheet, in yet another example of the contagion effect rippling across the crypto sector this year.

Core — which is one of the largest providers of blockchain infrastructure and hosting, as well as one of the largest digital asset miners, in North America — isn’t alone in its struggles.

Compute North, which provides hosting services and infrastructure for crypto mining, filed for Chapter 11 bankruptcy in Sept., and another miner, Marathon Digital Holdings, reported an $80 million exposure to Compute North.

Meanwhile, Greenidge Generation, a vertically integrated crypto miner, reported second quarter net losses of more than $100 million in August and hit “pause” on plans to expand into Texas. And shares in Argo plunged 60% after its announcement on Oct. 31 that its plan to raise $27 million with a “strategic investor” was no longer happening.

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