Energy Agenda

by ISPI Energy Watch - Storage companies are entering the market with the idea to provide energy independence to utility customers by installing and financing batteries plus smart software behind the meter. It’s a game-shifter directly striking at the core of the “shut up, use it, pay it” old-style electric utility business model that has granted relatively stable returns for those who had large customer bases and were used to measure their market capitalisation on life-time customer value.

by ISPI Energy Watch - Some time ago we discussed whether US independents could become the new “swing producers”. It does not seem so. Or maybe it is going to happen. April figures and new information leave us in the middle of nowhere, as no piece of the puzzle seems to fit into the other.
EIA and IEA have each revised upwards their 2015 oil demand forecast (respectively to 1 and 1.1 million bbl/day). This should be good news in terms of market rebalancing; and it heralds a potential for price increase. Except that oversupply keeps raiding on top of the increase in demand and stays around 1.7 million bbl/day. Forecasts suggest that it should lower in the second half of the year; but all or almost all forecasts confirm that oversupply is here to stay, and so at least for the whole of 2015.

by ISPI Energy Watch - The current market situation is disappointing for all players in the power generation industry, whether they rely upon conventional or renewable sources, be they subsidized or unsubsidized.
Despite poor market performance, however, some actors can still strike a profit in the electricity industry. Consider the role that RAB – Regulatory Asset Base – plays in regulated business. When a business is regulated, it is not so easy to attract private investment, all the more so when the deal involves assets with a very long life cycle, which require huge investments. Over the past couple of decades, we have observed a wide variety of RAB models, which have been instrumental in attracting significant amounts of capital and channel it towards infrastructural projects.

by ISPI Energy Watch - GSE recently released 2014 data on costs and subsidies. The “cost” of renewables gross of incentives was quoted by GSE at € 15.8 billion in 2014; cost of incentives alone stood at € 13.4 billion. The lion’s share went – as expected – to PV, which took over 42% of the pie at a cost, of € 30.7 cents per kWh. The good (?) news should be that, thanks to subsidies, PV has reached approximately a 7.5% share of Italian power consumption and an 8.7% share of domestic power production. It could be mixing oranges with apples, but it is striking to note that in 2014 Italy’s overall natural gas imports priced at € 14.8 billion, i.e. that we spent less for gas imports than we did for “feeding in” renewables.

by ISPI Energy Watch - The biofuels sector in Italy is in a sorry state, and it is partly the government’s fault. This time, however, finger-pointing is not as easy as it may appear at first: more than anything else, we think it might be a matter of diplomatic weakness, coupled with a lack of awareness of other EU Member States’ legislation.

by ISPI Energy Watch - Italy is usually depicted as a laggard that shows significant delays in achieving policy targets set at the European level. However, such representation does not hold true, at least as far as renewable energy sources are concerned. According to Directive 2009/28/EC, Italy shall obtain at least 17% of its gross final consumption of energy from renewable sources like sun, wind or biomasses by 2020.

by ISPI Energy Watch - Glimpses of hybris appear to emerge in the European energy policy and the debate surrounding it. Or, at least, evidence of a new assertiveness. Once upon a time, it was just fear of supply insecurity. Ten years ago it would have been unthinkable, or at least scary, to face a disruption from any of our significant energy suppliers.

by ISPI Energy Watch - On December 17, 2014, Governor Andrew Cuomo announced a ban to fracking in New York State. In itself, the decision will have almost no material impact on the industry development, as it just prevents operations on a minor edge of the Marcellus shale. The 2005 Energy Policy Act exempted certain fracking-related activities from the federal standards of the Safe Drinking Act and of the Clean Water Act respectively, leaving to each State to set its own; and since then the stringency of the standards has often been inversely proportional to the enacting State’s shale potential. This time, it is voiced, it could be different. The decision could be the first of a series, and potentially initiate a rally against fracking elsewhere in the US.

by ISPI Energy Watch - Shale oil industry is the most closely observed player amid recent oil dynamics. It is the real element of novelty in the current oil crisis, having allowed a once-in-a-lifetime unexpected and largely underestimated increase of the US production by 80% since 2008, from just 5 Mbbl/d to more than 9 Mbbl/d. As oil prices started to drop – when the robust global supply fed by shale lymph matched in June 2014 with signals that Chinese demand was hitting the brakes – many betted that shale oil would have been the most likely production to be taken out of the market. However, after 7 months and a 60% drop in international prices, there is still not much evidence that this will happen.