Gas Levy Could Triple Household Heating Bills In Germany
Germany plans to introduce a levy for all its gas consumers beginning in October as the government looks to avoid a wave of collapsing gas-importing and gas-trading companies amid record-high natural gas prices, a new bill seen by Reuters showed on Thursday. Russia is further reducing flows via Nord Stream this week, to just 20% of the pipeline’s capacity, days after restarting the link at 40% capacity after regular maintenance. The German government has already intervened to rescue energy group Uniper, Russia’s single largest gas buyer in Germany. Uniper—and many other German gas traders and suppliers—have been reeling from reduced Russian supply and soaring prices of non-Russian gas. Germany and Uniper agreed last week on a $15 billion bailout package, including the German government taking a 30-percent stake in the company and making more liquidity and credit lines available to the group. Under the plans of the government, all consumers of gas, including households, will have to pay an additional levy, which will go to support Germany’s gas importing companies, which struggle with a lack of Russian gas and sky-high prices of non-Russian alternatives. The details of the bill are set to be announced next month. Households and industrial consumers are expected to pay the levy through September 2024, according to the draft Reuters has seen. “One doesn’t know exactly how much (gas) will cost in November, but the bitter news is that it’s definitely a few hundred euros per household,” German Economy Minister Robert Habeck was quoted by Reuters as saying on Thursday. Marcel Fratzscher, president of DIW, the German Institute for Economic Research, told Düsseldorf’s Rheinischen Post newspaper that German households should prepare for at least tripled costs of heating on gas. The levy should be accompanied by a relief package for lower-income households, otherwise the new charge could lead to a “social catastrophe,” Fratzscher added.
Why The U.S. Is Desperate For A Russian Oil Price Cap
The United States is looking to convince major oil importers, including Russia’s key buyers these days, China and India, to endorse a plan to cap the price of Russian oil they are buying. The U.S. and other major developed Western economies are wary of letting international crude oil prices spike later this year when the EU ban on providing insurance and financing for seaborne transportation of Russian oil takes effect in December. Russia will be effectively shut out of more than 90% of the global oil shipment insurance market as most of the ports do not allow tankers to dock unless they have full insurance coverage, including insurance from the UK-based International Group of P&I Clubs, which handles 95% of the global tanker insurance market and consists mostly of UK, U.S., and European insurers. This would severely cripple the flow of Russian oil globally, potentially leading to record-high oil prices, which the Biden Administration simply cannot afford to have right now, especially after boasting just a few days ago that “Gas prices are declining at one of the fastest rates we have seen in over a decade – we’re not letting up on our work to lower costs even further.” In addition, soaring fuel prices would further stoke already four-decade high inflation and further complicate the Fed’s efforts to tame that inflation with aggressive key interest rate hikes. So, the G7 group of leading industrialized nations, led by the U.S., is considering waiving the ban on insurance and all services enabling transportation of Russian oil if that oil is bought at or below a certain price, yet to be decided. U.S. Looks To Rally Major Importers To Join Price Cap The Biden Administration and U.S. Treasury Secretary Janet Yellen have been pushing for weeks to have as many oil buyers as possible agree to a price cap plan. The alternative – choking off a large part of Russian exports by denying altogether maritime transportation services – would send oil prices to never-seen highs, tanking the global economy with enormous fuel and energy costs and sending rampant inflation even higher. The U.S. Administration is holding talks on a possible price cap with major oil importers, including China and India, officials have told the Financial Times. China and India have stepped up purchases of heavily discounted Russian oil in recent months, while European buyers are retreating and winding down imports ahead of the EU embargo on imports of Russian seaborne crude and refined products set to kick in at the end of this year. “Russian production is going to fall when the services ban fully kicks in, unless we use the price cap to allow exports to continue,” an official close to the talks told FT, adding, “It is the one way of preventing a significant rise in prices.” The U.S. Administration believes that the insurance ban on Russian oil exports could severely cripple Moscow’s supply to the market, pushing up oil prices. Russian crude and products exports are too big as a share of the global oil market to not have access to tankers and insurance, U.S. officials tell FT. Therefore, the U.S. is trying to rally major oil importers around the idea that they would pay less for Russian oil under a price cap mechanism, while at the same time looking not to stifle 7-8% of the daily global oil and product flows. Cutting off most of Russia’s exports via the insurance ban without exemptions with a price cap would result in soaring oil prices which will negate any efforts to cut Putin’s revenues from oil, U.S. officials argue. “We want to keep it being sold somewhere in the global economy to hold down global oil prices generally, but we want to ensure that Russia doesn’t make undue profit from those sales,” Treasury Secretary Yellen told NPR last week. “And a price cap is the answer we’ve come up with to serve both of those objectives.” While negotiations are ongoing, an agreement is still a way away. “We’re trying to perfect the mechanism of how that would actually look and how it would work. We’re not at a point where we have an agreement,” Amos Hochstein, the special U.S. presidential coordinator for international energy affairs, told Yahoo Finance this weekend. “We have an agreement in principle with the major economies of the G7, but not an actual agreement,” Hochstein added. The implementation of a price cap would be a challenging undertaking and would ideally need China and India on board to have a real impact. The two large Asian importers could be inclined to entertain the idea of a price cap as this would reduce their energy import bills, a senior G7 official told Reuters this week. Russian Retaliation? Some analysts warn that a price cap would not only be difficult to implement, but it could also prompt Russia to retaliate by stopping the export of oil. Last week, Russian Deputy Prime Minister Alexander Novak said that Russia would not supply oil to the global markets if the price cap being discussed was set at a level below Russia’s cost of production. U.S. Treasury Secretary Yellen has repeatedly said that the price cap would not be set below Russia’s cost of production. But last Friday, Russia issued a not-so-veiled warning to the countries considering joining a price cap mechanism. Russia’s Central Bank Governor Elvira Nabiullina told Russian reporters on Friday that “as far as I understand, we will not supply oil to countries that will have imposed a price cap.” Russia will redirect its crude and refined products exports to those countries that “are ready to cooperate with us,” Nabiullina added.
ONGC, partners to splash $ 6.2 billion on green energy projects
ONGC and its partners will invest $ 6.2 billion in green energy projects to produce carbon-free hydrogen and green ammonia as part of an ambitious decarbonization drive, officials said. India’s top oil explorer ONGC and its partners will invest USD 6.2 billion (Rs 500 billion) in green energy projects to produce carbon-free hydrogen and green ammonia as part of an ambitious decarbonization drive, officials said. State-owned Oil and Natural Gas Corporation (ONGC) has signed a pact with Greenko, one of India’s largest renewable energy companies, to form a 50:50 joint venture for green energy projects. The JV will set up 5.5-7 gigawatts (GW) of solar and wind power projects, and use electricity generated from such plants to split water in an electrolyzer to produce green hydrogen, which in turn would be used for manufacturing green ammonia, they said. The renewable plants together with Greenko’s pump storage power generation system will give 1.4 GW of round-the-clock (RTC) electricity that would be used to produce 0.18 million tonne of green hydrogen per annum (about 20 kg per hour). This hydrogen will be mixed with nitrogen to produce 1 million tonne per annum of green ammonia, which in the initial years will be exported to Europe, Japan and Korea and used within the country when the market develops, they said. Officials said the renewable energy component of the chain would cost about USD 5 billion while the hydrogen and ammonia plant will cost USD 1.2 billion. ONGC is looking to set up the hydrogen and ammonia plants, which are likely to start production in 2026, on the west coast, preferably near Mangalore, where it has an oil refinery. In case the land is not available, the project may shift to Gujarat, they said. ONGC, the nation’s biggest producer of crude oil and natural gas, joins the likes of Reliance Industries Ltd and the Adani group in chasing carbon-free hydrogen. The two private groups have announced multi-billion projects as part of India’s net-zero goals. While hydrogen is the cleanest known fuel with zero carbon emission, it is difficult to transport and a vast majority of its production globally is used in-situ (onsite). And for these reasons, ONGC is looking at manufacturing green ammonia from hydrogen. Ammonia, which is widely used as a fertilizer, can easily be shipped. The production cost of green ammonia is high, and so its usage in India will be limited to begin with. In countries like Japan and Korea, the law provides for use of a certain percentage of green ammonia and so they can be a natural market. Green ammonia can also be used as a marine fuel. Globally, hydrogen is seen as a decarbonization fuel as it can replace polluting fossil fuels. India is targeting the production of 5 million tonne of green hydrogen per annum by 2030. Hydrogen is the lightest and most abundant element in the universe, but it barely exists in a pure form. Instead, it is abundant in chemical compounds, most notably bonded with oxygen in water or carbon to form hydrocarbons like fossil fuels. For that reason, hydrogen is not considered an energy source but an energy carrier or vector. Once separated from other elements, hydrogen’s utility increases: it can be converted into electricity through fuel cells, it can be combusted to produce heat or power without emitting carbon dioxide, used as a chemical feedstock, or as a reducing agent to reduce iron ores to pure iron for steel production. “Transporting hydrogen is an issue and so it is consumed in-situ,” one of the officials said. “And so green ammonia makes sense for us. We have ready availability of nitrogen.” Globally, around 85 per cent of hydrogen is captive, produced and consumed on-site, mainly at petroleum refineries. Most of the hydrogen currently produced in India is either grey (produced from fossil fuel) or blue (produced from natural gas with the carbon dioxide by-product being captured and stored). Green hydrogen is made using electrolysis powered by renewable energy to split water molecules into oxygen and hydrogen, creating an emissions-free fuel. Fossil-based hydrogen currently costs about USD 1.80 per kilogram, while the cost of blue hydrogen, which is produced using natural gas and carbon capture, is estimated to be about USD 2.40 per kilogram. Green hydrogen costs USD 3-4.
India’s transition towards a hydrogen economy
Announcement of the ‘National Hydrogen Mission’ on 15 August 2021 will be considered as one of the milestones in the energy transition history of India. The shift to hydrogen can fetch positive results in terms of reduced emissions, reduced dependence on imported fuel and therefore a reduced financial and ecological burden. Globally, hydrogen energy has gained much needed attention as a means to achieve NetZero targets and to fulfill increasing energy demands. The Covid-19 pandemic, dwindling economies due to the RussiaUkraine conflict, fear of economic recession and disrupted supply chains pose serious threats to various measures to reduce emissions. It is disheartening to see that countries have witnessed short-term shift towards coal again which can affect climate mitigation policies and programmes. India is using hydrogen as fuel and feedstock in various sectors, but a major shift towards hydrogen in refining petroleum, ammonia industry, power sector, feedstock for methanol production, steel industry, long haul freight and heavy-duty vehicles is needed to remain in the race to reach net-zero targets. The International Energy Agency (IEA) projects an increase in hydrogen demand from 287 mt (sustainable development scenario) to 528 mt (Net Zero Scenario) which can result in mitigation of 1.6 – 3.5 mt of GHGs emissions annually by 2050. In 2020, a total of 900 Mt of carbon emissions was emitted due to hydrogen production globally (IEA, 2021). Thus, the need of scaling up green hydrogen is quite clear. Hydrogen can be produced by many ways and according to its production mechanisms, it is categorized into various shades (i.e. blue, green, and grey). Green hydrogen is one of the best bets to make India a hydrogen-based economy. It uses renewable energy like solar or wind in electrolysis of water for hydrogen production and thus the cleanest of them all. In February 2022, the Government of India floated the Green hydrogen policy 2022 which aimed to make India a hub of production and export of green hydrogen. Grey hydrogen uses fossil fuel i.e natural gas, coal and methane, for hydrogen production which leads to carbon dioxide emissions in the atmosphere and blue hydrogen is produced using natural gas using steam reforming method. During this method, hydrogen and carbon dioxide are produced. This carbon dioxide is captured and stored for further use. Other not-so prominent shades of hydrogen include pink, turquoise, brown, yellow, and white. Pink hydrogen is produced by electrolysis powered by nuclear energy. Turquoise hydrogen uses methane pyrolysis process using natural gas. Brown hydrogen uses steam methane reforming process powered by coal which produces carbon dioxide emissions. Yellow hydrogen uses solar energy for electrolysis. White hydrogen is produced from natural underground deposits and red hydrogen. The recently published NITI Aayog report ‘Harnessing green hydrogen: opportunities for deep decarbonization in India’ gives a roadmap for achieving targets of decarbonizing the economy by charting out near term, medium term and long-term policy pathways. Emphasis is on decarbonizing hard-to-abate sectors which was earlier difficult to decarbonize due to technological limitations, unavailability of suitable fuels and high price involved in decarbonization. The sectors include petroleum, ammonia industry, power sector, feedstock for methanol production, steel industry, long haul freight and heavy-duty vehicles. The pathways suggested by the report show ways to make green hydrogen cost effective and making India a hub for green hydrogen. For a smooth transition towards green hydrogen, a shift or overhaul of the complete system is required to ensure it is well accepted by all stakeholders. This will include setting up of institutions, developing supply chains, formation of physical infrastructure, R&D and favourable policies. Public participation and engagement in policymaking around green hydrogen is equally important to ensure its diffusion especially in transportation sector. The acceptance of hydrogen among the social system will depend on how hydrogen is made relatively advantageous when compared to other energy sources. Moreover, the public should be able to understand and accept hydrogen as future fuel which will require understanding of various systems, its components and their interaction. This science-policy interface needs to be dealt swiftly to smoothen the adoption of hydrogen. The cost of producing green hydrogen is 2-3 times higher than grey hydrogen and India seeks to achieve the target of producing 5Mt of green hydrogen by 2030. Thus, finance will be the most important aspect to fuel this transition as the cost involved in green hydrogen production, technology, storage and delivery is exorbitant. The Ministry of Power has provided Production linked Incentives (PLI), concessions and benefits to green hydrogen producers to encourage production. There is also a need to focus on financing the public and private sector R&D with major emphasis on development of innovative and costeffective technologies e.g. electrolysers and storage technologies. Grants to universities and institutes should also be provided to encourage R&D and promote collaborations. So, even though the path to sustainability is long and difficult, but it’s high time to again focus on achieving sustainable Development Goals in more strict and realistic manner.