Archive for March, 2014

Talk about distributed generation…CNN reports on a company called WiTricity, which is developing a technology to distribute electricity wirelessly through magnetic fields. The magnetic field will induce a current in the device. While this is new, it’s not entirely “new.”  In 1893, Tesla was developing wireless lighting and electricity distribution in his high-voltage, high-frequency power experiments. Read the CNN article here:

Wireless electricity? It’s here – CNN.com.

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The WSJ reports that under a FERC analysis model, concurrent attacks by saboteurs on only 9 key transformers could cause a prolonged nation-wide blackout:

U.S. Risks National Blackout From Small-Scale Attack – WSJ.com.

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Here’s a current poster in Simferopol on Putin’s trumped-up referendum on Crimea rejoining the Soviet Union:

Pro-Russian poster in Crimea urging vote for annexation.

Pro-Russian poster in Crimea urging vote for annexation.

It’s eery to compare this with the voting form used by the Nazis in 1938 to annex Austria to Hitler’s Reich:

1938 Anschluss ballot, with oversize "Ja" and undersized "nein."

1938 Anschluss ballot, with oversize “Ja” and undersized “nein.”

Not that I have much sympathy for the Austrians, who managed to convince the world that Hitler was a German, and that Beethoven was Viennese.

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The WSJ reports that the West is scrambling to loosen Russia’s energy stranglehold on Ukraine.

The options being considered by officials from Brussels to Washington include larger exports of U.S.-made natural gas, reversing the flow of natural gas through pipelines from Western Europe back into Ukraine, and accelerating plans across Europe to buy more energy from countries other than Russia.

via West Tries to Loosen Russia’s Gas Grip – WSJ.com.

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"Herr Hitler promised that this was the last of his territorial ambitions in Europe..."

“Herr Hitler promised that this was the last of his territorial ambitions in Europe…”

The WSJ reports that Putin is turning his biggest lever, and perhaps his only one apart from brute military force, the energy shutoff.

Gazprom said Ukraine owes the gas exporter $1.89 billion, and failed to meet a Friday deadline for payment for February deliveries. It warned that failure to pay the bill could result in a repeat of 2009, when Gazprom switched off supplies to Ukraine for weeks, raising prices and causing some shortages downstream in other parts of Europe. Read the story at:

Moscow Tightens Squeeze on Ukraine Over Energy – WSJ.com.

Time for the Energy Equivalent of Lend-Lease.

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It wasn't quite peace in our time.

It wasn’t quite peace in our time.

“Those who do not remember the pasta are condemned to reheat it.”

Vinny Santayana, of Vinny’s Collision and Engine Repair Shop, Avenue M, Brooklyn (later adapted by his cousin George).

The Sparkspread is hardly alone in advocating an energy supply strategy as a counter to Putin’s annexation of Crimea:

John Boehner: Counter Putin by Liberating U.S. Natural Gas – WSJ.com.

Back in 1938, then-PM Neville Chamberlain wrote off Hitler’s annexation of Czechoslovakia’s Sudetenland as a ‘quarrel in a far away country, between people of whom we know nothing.’  Europe wasn’t willing to move then, and the rest is history.  The Sudetenland is mountainous and has passes from which a single platoon with one or two surplus soixante-quinze cannon could hold off a Nazi division. Once annexed, this defense was gone and the door was open for the Nazis. The topography of Crimea is somewhat similar in its connection by an isthmus.

Only a few years later, FDR overcame the isolationist contingent in the Congress and got the Lend-Lease Act passed. Supplies and equipment went principally to Britain and Uncle Joe’s Soviet Union for the fight against Hitler.

Now Putin, if he’s not repeating history, is certainly rhyming with it.

I agree with one of the comments on an earlier Sparkspread post that the infrastructure isn’t in place for rapid shipment of LNG to Europe, but it could be within a reasonable period, and the will to complete the plan would affect pricing in forward markets. There is leverage in that given Putin’s need to obtain energy pricing above certain minimum levels to maintain his country’s political will, not to mention his own grip on power.

That’s why I suggest a plan along the lines of the Energy Equivalent of Lend-Lease, with deployment as rapid as it was back when our “Greatest Generation” did it.

One thing we’re lacking is a catchy acronym that can inspire the U.S. The treatment of acronyms as science can be dated to 1972, when some unthinking politicos formed the Committee to Re-Elect the President, or “CREEP.” That didn’t work out well. A few years later, and in the context of another, earlier energy crisis, Jimmy Carter lost sight of that valuable lesson when he declared the Moral Equivalent of War, or “MEOW.”  He served only one term.

EELL doesn’t quite have a ring to it either, so if Sparkspread readers have ideas, feel free to provide them in comments.

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The Wall St. Journal reports that the U.S. electric grid could take months to recover from a physical attack due to the difficulty in replacing one of its most critical components:

via Transformers Expose Limits In Securing Power Grids – WSJ.com.

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Vlad the Impaler ca. 1470

Vlad the Impaler ca. 1470

In thinking about sanctions against Czar Vladimir the First, whose Russian Bear Act is about to stomp all over Ukraine, the United States and the European Union should steal a page right out of Vlad’s own playbook: The Energy Weapon. Putin has used it dozens of times in the last decade against both Western Europe and Ukraine.

Vlad the Impaler ca. 2014

Vlad the Impaler ca. 2014

Remember the Sparkspread’s oft-stated first principle of anything having to do with energy: Energy is all about infrastructure. It’s almost Clausewitzian in its simplicity.

Applying that first principle to the current crisis, it’s obvious that Ukraine’s importance to Putin lies in its role as a crucial route to connect Russia’s oil and natural gas resources with Europe, which depends on imported energy. But until the last few years, Ukraine slouched towards the European Union, rather than towards Russia. It irritated Putin’s neo-Czarist sensibilities to see a former Soviet puppet state wean itself from Holy Mother Russia. So Russia increased natural gas prices to the Ukraine, while it kept them relatively lower for Putin-friendly places like Belarus or Moldova.

All of Russia’s natural gas activities are controlled by state-controlled giant Gazprom, which dominates production and holds a virtual monopoly on exports. Disputes over pricing between Russia and the Ukraine led Gazprom to reduce gas supplies to Ukraine in the winters of 2006 and 2009, and Ukraine was forced to pay the highest price in Europe. This stratospheric natural gas bill put enormous strains on Ukraine’s state finances, which is why it was looking to the EU for both energy and financial assistance. In the run-up to the expected deal with the EU, Russia halted natural gas supplies to Ukraine entirely in November 2013.

That was when Ukraine’s now ousted President Yanukovych did an about face, tossed the EU deal and announced an agreement with Russia that came with a cut in natural gas prices to Ukraine, a US$15bn loan and other goodies. Czar Vladimir’s deal also included a provision for Russian management Ukraine’s gas transportation network, meaning that Russia would have it’s hands on the pipelines that deliver Russian gas into core markets in Europe.

Putin’s Russia relies on its oil and gas industry for nearly half of its government budget, which accounts for the heavy taxation that Czar Vladimir imposes on the industry. Putin’s dilemma is that he needs to encourage further investment in Russia’s oil and gas industry, which means the industry needs more money, but at the same time he can’t afford reduce the industry’s contribution to the Kremlin’s coffers.

And there lies the knife’s edge for use by Obama and EU.

Ukraine's population after Putin gets finished with them.

Ukraine’s population after Putin gets finished with them.

The U.S. should start an accelerated program to ship LNG to Europe to undercut Gazprom. The greatest danger for Putin is a growing supply of LNG worldwide and intensification of European attempts to break free of energy dependence on Russia that could pry Gazprom’s fingers from around Europe’s throat. (You can substitute another anatomical reference for “throat,” but we’ll stick with that one for now.) Gazprom’s “soft underbelly” (to borrow the term from Churchill) is international competition that would reduce its market and its revenues.

The threat of losing market share in the global gas market is a major risk for the Kremlin. Reducing Gazprom’s revenues through a combination of lower gas prices and falling market share will severely jeopardise the Kremlin’s ability to support the lavish social spending it needs to maintain political support, not to mention the cost of financing its military adventurism in places like Ossetia and, now, Crimea.

It is the best of times for U.S. shale gas players to move on this front. They can take take advantage of both moral revulsion at Russian aggression and deep EU customer dissatisfaction with Russian natural gas pricing.

And Europe is hardly the only avenue of attack on the natural gas front. The Kremlin sees Asia as a future source of oil and gas export growth. If Obama wants to “pivot to Asia,” here’s a great chance to do it. Cheap shale gas exports from North America can reach Japan and China as LNG over the Pacific.

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