Catalyst with Shayle Kann - Natural gas whiplash

Episode Date: January 12, 2023

The natural gas market has been through a wild ride, especially in Europe. The pandemic first pushed the prices way down. Then a resurgent economy and an unusually long European winter sent them back up to record heights. And by September of last year, Russia had dramatically cut natural gas flows to Europe, further squeezing supply. The high prices were especially painful for the continent, which relies heavily on the fuel for home heating, industry and power plants. But high prices also catalyzed efforts to shift to lower carbon technologies like renewables, hydrogen and heat pumps. Then fast forward to this past December, and now gas prices have plummeted again. What’s going on? What’s causing these rapid swings and what might happen next? In this episode, Shayle talks to Anne-Sophie Corbeau, research scholar at Columbia University’s SIPA Center on Global Energy Policy where she studies natural gas and hydrogen. Her article, “Putin’s energy gambit fizzles as warm winter saves Europe” recently ran in Bloomberg. They discuss how we got here, covering topics like: The range of factors at play, such as LNG cargos, a European drought, and unusual weather patterns Whether Europe might resume large-scale natural gas imports from Russia Why China’s zero covid policy and an unusually warm winter amounted to a lucky break for Europe What topics should we cover on the show? Send us an email or voice memo to [e-mail]. Catalyst is a co-production of Post Script Media and Canary Media. Catalyst is supported by Antenna Group. For 25 years, Antenna has partnered with leading clean-economy innovators to build their brands and accelerate business growth. If you're a startup, investor, enterprise, or innovation ecosystem that's creating positive change, Antenna is ready to power your impact. Visit antennagroup.com to learn more.

from the studios of PostScript Media and Canary Media. I'm Shail Khan, and this is Catalyst. So what I'm hearing is that this unseasonably warm winter in Europe was an incredibly lucky break for Europe. Exactly. It's up, it's down, it's a crisis. Wait, no, it's not. Is it?

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Learn more at energy hub.com. I'm Shail Khan. I'm a partner at the venture capital firm Energy Impact Partners. Welcome. Well, you'd be forgiven if you're feeling a bit of whiplash these days. It seems like just yesterday, the world, and particularly Europe, was completely freaking out, for good reason, I should add, about the price of natural gas. And in fact, it wasn't all that long ago that prices were insanely high. Prices on the EU benchmark index peaked in August last year, August 2022. And the spot must market above 340 euros per megawatt hour. But over the ensuing five months, it's been basically down, down, down, such that prices today are less than a fifth what they were in August. So what

happened? And what does it mean for the future of energy and decarbonization? I'm sure I don't need to tell you this, but natural gas markets and prices have enormous knock-on effects for all sorts of other decarbonization technologies, from renewables and batteries and electricity to industry and fertilizer and fuels and more. So consider this a What's Up with That podcast? And that here is natural gas. And who is Anne Sophie Corbeau? She's a global research scholar at Columbia University's CEPA Center on Global Energy Policy. And before that, notably, not that long ago, in the midst of this price spike, she was the head of gas analysis at BP. So here's Anne Sophie to help us figure out what is going on.

Anne Sophie, welcome to Catalyst. Thank you very much for having me. I'm excited to have you school me on what is going on in natural gas or what has been going on in natural gas so that I can finally understand it. Let's start with a bit of recent history. So I think the time to begin with is early 2020 when COVID hit. That seems like the first moment when sort of the recent weirdness in the natural gas market emerged. So take me back to March 2020.

What was the state of natural gas markets at that point? And then what happened post-COVID? Well, I think in March 2020, we had not yet fully grasped, you know, how serious the situation would be. But it started to emerge in mid-March when everybody realized, and it was the beginning of the lockdown in Europe, that the situation was extremely serious. And step by step, this is when we started to see gas prices coming down to really low levels. I mean, we have seen prices in Europe at, you know, almost $1 per MmbTU, which is not something that we have ever seen. I mean, prices in Europe over, you know, the past few years had been around $6 to $8 per MBTU. So seeing prices at that level was extremely surprising.

And then suddenly, you know, we had, of course, a decline in natural gas demand in some, part of the market. But what was really interesting was what happened subsequently in 2021. Can we just talk before we get into 2021? What are the major swing factors in natural gas demand? So like what actually happened? Where was the demand erosion in 2020 as after COVID hit? Because natural gas is not primarily a transportation fuel. I mean, you can easily imagine this in the context of like of petroleum and gasoline where People stopped traveling because of COVID. And so obviously there was a lot of demand erosion.

I think it's a little less obvious in natural gas. Well, you have to think that natural gas is primarily consumed in three different sectors. The first one is residential. So you are using natural gas for heating, for warm water, for cooking as well. But most of the consumption in the residential commercial sector is for heating your house or your shop. Then the second sector is the industrial sector. So you are using natural. gas for processes either as a raw material or in order to generate heat or electricity.

And then the third big sector is, of course, natural gas for generation of electricity. So this is also a very important sector. So, I mean, if I really wanted to simplify, I would say that, you know, about a third, a third, a third of gas markets, of gas. Okay, I have to stop here because actually I don't remember exactly the numbers on top of my head, so maybe I am going to stop there. But, you know, these three sectors are really representing the bulk of natural gas consumption. Now, when COVID hit, of course, you know, we had different impact.

In particular, we had a lot of factories which were closing down. So there was an immediate impact on industrial gas consumption. So that was, you know, very, very important. And of course, you had also at the same. same time, an impact also on the power generation sector. And here, you know, what really happened is that, I mean, there were two effects. So there was one effect which was, indeed, you have a much lower electricity demand, but at the same time, gas prices were so low that gas was extremely competitive.

So, in fact, you know, the generation. of gas fire generation did decrease a little bit, but not that much. And then it rebounded extremely strongly in 2021. Okay, so the bulk of the price crash in 2020 was probably due to the industrial sector demand declining precipitously? It was also the fact that supply didn't adjust immediately. And in particular, you have to understand that in regions like Europe, you have two main sources of supply.

You have on one side pipeline suppliers, especially Russia, and you have on the other side, LNG. And what happened when we suddenly had this COVID crisis is that, yes, gas demand started to decline, but also LNG supply was increasing. And suddenly, you know, all these LNG cargoes were looking for a home. What is really very important to understand about the European market is that this is basically the supply adjustment for the global gas market.

So if you have a very tight market, then the LNG is going to go away from Europe. Think of Fukushima, for example. You know, when Fukushima happened, suddenly Japan needed a lot of natural gas in order to replace nuclear generation. So all the LNG cargoes went to Japan. So we had a very tight market. The LNG went away from Europe. But in 2020, exactly the opposite happened. The LNG cargos were looking for home.

the European market is actually a market where it's relatively easy for LNG cargo to arrive and to basically be imported because we have third-party access to LNG import terminal, so it's relatively flexible, and on top of that you know exactly what kind of price you are going to get, you are going to get the spot prices, the European spot prices. And then what happened is that in Europe's and storage was extremely full. So this is what basically caused this imbalance between supply and the market. who the gas prices to crash. And in particular, you know, Russia was particularly hit in terms of lowering their pipeline

gas supplies in 2020. Okay. So COVID hits, natural gas prices crashed to levels that we've never seen before. Then fast forward to 2021. And this is prior to Russia invading Ukraine, things had already started to take. turn in the opposite direction. So what started happening then? Well, actually, it started as soon as January 2021. I remember because at that time, I was still working for BP. I was in the office of the chief economist, and we saw the prices in Asia skyrocketing to levels that we had never seen

before. And the reason for that is that it became extremely cold in Asia, very, very cold to, I mean, levels that we had not seen in China in 15 years. So people had taken the fact that LNG cargoes will be available for granted. So they had prepared for the winter, but they were not particularly worried about, you know, the possibility of getting an LNG cargo because we were just, you know, emerging from a big crisis, a big supply crisis. You know, there was a lot of LNG available. it was actually, you know, too much supply available.

So no problem to face the winter. And then suddenly people realize, oh, wow, the market has been tightening. I need to get LNG as soon as possible because my stocks are really declining. And you have to understand that in Japan, Korea, but also China, they do not have as much storage as we do have in Europe and the US. China is relatively big market. But, you know, the level of storage that they have, you know, compared to Europe, is relatively small because they have not been able to build up as fast as, you know, they could

or as fast as the market was growing. And as far as Japan is concerned, I mean, they do not really have the geology in order to have underground gas storage. So they mostly rely on LNG storage. So these markets were a little bit caught by surprise, and these really sent the LNG prices skyrocketing. And that was the first signal that, okay, that's strange, you know, something is happening. And then the second big event in 2021 was happening in the United States.

You probably remember February 2021. That was the Texas freeze when the Henry of gas prices went through the roof because, again, you know, suddenly we had a very strange, abnormal weather event which really sent gas prices again for the roof. And that was the second event. And what we saw over the year 2021 was that gas prices. One was that gas prices were progressively increasing, increasing, increasing. So in fact, you can really say that there were six different reasons for this progressive tightening of the global gas market. The first one was that we were just getting out of COVID. So what happens is that energy demand and gas demand in particular has been rebounding.

So that was the first thing. The second thing was all these very abnormal weather events. So very cold weather in Asia, we had also very long winter in Europe. I mean, I remember I was still hitting my place in May 2021, which is very unusual. Usually you stop by April. So that was the second thing. And on top of that, we had also a very hot summer. So when you have a hot summer, you need more air conditioning, so you need more power generation,

and therefore you tend to use more gas-fired generation. But we had also very strange things happening with renewable generation. And that's the third factor. Think about exceptional droughts in China, in Brazil. So what do then in order to replace that? Well, gas for gas-fow generation. We had also something very strange happening in Europe, which was a decline in wind generation in spring 2021.

That's very strange because we were adding new wind power, but the generation was actually dropping. So a very interesting thing. And then in general, all the commodity prices were increasing. So coal prices were increasing, oil prices were increasing, carbon prices were increasing. And you can think of a loop whereby everything is basically pushing each other. And then those are all, you know, the demand factors. Then if I turn to supply, my fifth factor would be, well, the global energy market is extremely tight.

Because, you know, it was working relatively well, but we had all these very strange accidents. So there was a plant in Norway which had a fire. So the plant was done for more than a year and a half. We had a lot of force measure in different plants. We had some technical issues. We had maintenance, which was originally scheduled for 2020, happening in 2021. So that made the global LNG market a little bit tight. than what was expected by the market.

And then came the sixth factor, Russia. So we started thinking that, you know, there was something very strange happening with Russia, I think in April, May 2021. Because, I mean, Russia was actually not booking more capacity in order to send gas to the market. So we had the impression that they were a little bit withholding, you know, gas supplies. But the Russians were saying,

well, you know, I mean, we had also very, very good winter, so we need to refill our storage because, you know, in our place, the winter season is extremely serious, so we cannot have our citizens freezing in the dark. Therefore, we need to refill our storage. And then it continued, and I think, you know, the alarm bell started ringing in the fall in September when the prices started to increase to $30 per MMP2 and more. So remember, you know, compared to an average of six to eight, that was suddenly pretty high, and we had never seen prices that high.

So, okay, so we go six to eight average down to one, up to 30, and this is prior to Russia invading Ukraine. As you said, there were signals from Russia that were interesting, but the invasion did not actually occur. Before we talk about that, though, I guess one thing is making me think about, you know, on the demand side, all those factors you described, most of those are weather-related. And as you said, there were a bunch of, you know, you call them

weird, strange, semi-anomalous weather events. But as climate change progresses, presumably those types of things, whether it is a drought in China or a heat wave in the summer in Europe or a cold snap in Texas in the United States, whatever it might be, like those will all become more frequent. So is the presumption that the volatility in gas markets will increase over time just purely as a function of increasing volatility in weather? Oh, and I should say also dependence on renewables, right? Same thing, right? Like all these things are affected by the weather. And so if the weather becomes more volatile, do these markets just inherently become more volatile? I personally think so. I mean, you know, we are completely unable to predict, you know, what the

weather is going to be. If I look at Europe, over the past month, we have had extremely cold weather during the first two weeks of December, and now we have completely abnormal weather. I mean, it's 15 degrees outside, and I am in Paris. It's very, very strange. I mean, people were, you know, in the south of France eating ice cream during Christmas outside because, and they were, you know, even going swimming in the sea. Okay, they have to be crudious because it was a little bit cold. But this not the type of thing that you see during the Christmas break. So it's extremely strange. And indeed, because gas for a generation is usually the flexible thing which is helping in the power sector, in my opinion, there is no doubt that we are going to see more and more of that. And also

natural gas is used for heating. So it's becoming extremely difficult to predict, you know, how much natural gas you will need for the residential sector from one year to another. I have to say that right now we are pleased in Europe that, you know, the weather is so mild because this is reducing our natural gas demand. But part of me is thinking, okay, but this is going to have implications for later, because, for example, if we don't have enough snow, we might have lower hydro levels down the line. Lower hydro levels, that means that we are going to need more natural gas biogeneration, eventually during summer. And this is exactly what happened. actually in 2022, but I think we will come back to that later.

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They're up in the $30 per megawatt hour. I'm sorry, 30 euro per megawatt hour range prior to Russia invading Ukraine, then Russia actually invades Ukraine. So what happened? It sort of supercharged this trend line that was already occurring. What did it look like in natural gas markets, you know, from the point at which Russia invaded Ukraine until, I guess, August of last year, 2022? I think I should add that we had a lot of drama also during the fall, 2021 and the beginning of the winter. I mean, you know, there were all these stories about, we have not scheme to or not, you know, it was the pipeline from Russia to Germany, which was about

to be commissioned. And we had a change in the German government. People were thinking, I mean, do we want this pipeline to be commissioned? Of course, the Russians were adamant that this pipeline should be commissioned. The new government was not so sure. We had a lot of regulatory issues around this pipeline. And this was happening on the back of, okay, Russia is is really doing some very strange things with the supply because, okay, they are fulfilling their long-term contracts, but usually on top of that they are selling more gas and they are no longer selling more gas.

And suddenly there is no reason for them to sell that little gas. And Russia was owning and operating some storage facilities in Europe, in continental Europe, and these storage facilities were empty. So there were people in Europe who were suddenly thinking, okay, this doesn't look good at all. And then the war started. The invasion of Ukraine by Russia started in February 2020. And people realize, ah, okay, well, we need to do something.

And it's very interesting because the European Commission was actually preparing some sort of document on the high gas prices or the high gas prices, or the high energy prices in general and how to deal with them. And that document was expected to be published in very early March. And they had completely changed to publish one week later, the Repower EU, and how we are actually in Europe dealing with the invasion of Ukraine by Russia. And how we are going to try to reduce our dependency on Russian fossilism. fuse because you have to understand that, you know, of course, everybody is talking about

Europe depends very much on Russian gas, but we were also depending on Russian coal and on Russian oil and on Russian refined products. So, you know, there were three things to deal with at the same time. So I think, you know, the basics of what happened then are probably reasonably well known. So prices continue to rise, even from their already historically elevated levels. The war progresses Europe goes through this sort of frenzied process of trying to figure out how to reduce its reliance on Russian fossil fuels in general, both, I guess, in the immediate term and also, ideally for the longer term, to avoid this sort of geopolitical exposure that Europe had. How successful has Europe been in reducing its reliance on Russian fossil fuels? Has that been a success? Do we know yet? Well, I mean, first of all, there was a ban on coal imports, which actually started in August. Then we have been putting in place this embargo on oil, which started in December. Then we are going to have the embargo on refined products, which is going to start in February.

And we have been also reducing our imports of natural gas from Russia. But this is where, actually, I disagree with the European Commission. Because the European Commission is always very prompt at saying, oh, we have been very very successful at reducing our imports of Russian gas. I mean, look, you know, they have been really down. And I'm saying, well, I am very sorry, but actually you have not, Mr. Putin cut the gas, because this is exactly what happened. And when you were saying that, you know, the gas prices were increasing, actually the gas prices were going up and down. I mean, the gas prices have never been so volatile. So for example, I remember I was at a conference speaking. There was somebody

from the IA who was presenting just before me and he was talking about how the gas prices were volatile and, you know, how they were increasing, etc. And I was looking at my phone thinking, oh my God, what is happening? The gas prices have just doubled during the morning. And this is because Mr. Novak was saying that maybe they would be considering cutting the pipeline Nord Stream 1. So the one which was operating, not the one which was considered to be operating, the one which was operating, which was delivering 55 billion cubic meters of Russian natural gas to Europe. Just to compare 55 billion cubic meters, the European Union was importing 114 billion cubic meters of Russian gas in 2021. So that's a big chunk. The

prices went through the roof during that day and then they came down. But we had a lot of volatility. And I think this volatility even went in August. So this is when we had a lot of volatility again because of the drama around the Nord Stream pipeline. Prices went to $100 per MMBTU. So with all due respect to my old friends, we in the gas market have reached $580 per barrel. And you are complaining about $100 per barrel oil?

Come on. You know, I mean, there is no comparison. Our prices are absolutely dreadfully high. So if I'm interpreting what you're saying, right, you're saying that indeed Europe started, let's just stay focused on natural gas for a moment. Indeed, Europe did sort of shift toward importing less Russian natural gas, but you're saying it wasn't necessarily due to the act.

of the European Union so much as it was the actions of Russia in cutting off gas supply. And that was presumably a deliberate decision related to the war and trying to exert geopolitical leverage from Russia that appears to not be working as well as Putin might have thought. But I guess the question that seems more salient to me is if it was really a function of Russia throttling supply rather than Europe successfully shifting its demand, that, then could Russia just turn the spigot right back on and everything goes back to how it was beforehand? Or has anything changed fundamentally that is going to reorient how Europe gets its energy in the future? Well, a certain number of things have changed.

The first one is that the trust, which kind of existed between Europe and Russia, is dead. I mean, this is never going to be restored again. I could think of, you know, European countries accepting to import again a little bit more Russian gas. There are still some countries importing Russian gas, by the way. I mean, I told you, in 2021 we were importing 140 billion cubic meters of Russian pipeline gas. Now we are importing the equivalent of 25. So you can see that the reduction is pretty steep. But there are still countries, such as Hungary, for example, which are very happy to import Russian pipeline gas.

So the first problem is indeed the trust. The second problem is that, you know, there are a certain number of countries which would never want to be depending on Russia again and which we are actually preparing to be independent of Russian pipeline gas. That's the case for Poland, which has inaugurated a new pipeline coming from Norway a few months ago and which was also increasing its dependency on LNG. And then the third problem is that, well, we have a small infrastructure problem, You remember this Nord Stream 1 and Nord Stream 2 pipelines?

Well, they are gone. So, you know, if you want to import as much Russian gas as you did before, that means only one thing. You need to import a lot of gas going through Ukraine. And I have thought about whether this is realistic, given the situation. I mean, first of all, I am absolutely amazed that nobody has managed to actually destroy a gas pipeline within Ukraine. I mean, this is like miraculous

because, I mean, we know that, you know, accidents happen, but very still, Russian gas going through Ukraine, as I speak, very strangely. But, you know, thinking that we could go to, I don't know, 100 billion cubic meters

of Russian pipeline gas going through Ukraine, not immediately and probably not in a long time. One thing that I need to have, however, we are importing Russian LNG. And, you know, I wrote a little note on that, and suddenly everybody realized, oh, actually,

Russian LNG is still coming to Europe. Yes, it's still coming. Nobody's talking about that. This is actually included in the global LNG supplies, which is coming to Europe's squeeze cube. But, in fact, part of that is Russian LNG. Right. Okay, so lots of complex dynamics here.

The result, though, so what has been surprising, I think for those of us who are not as deeply embedded in natural gas markets as you are. I think, you know, we saw prices running up in 2021. We saw Russia invade Ukraine. We saw prices spike, or as you said, they got very volatile, but at various points they did spike after that. Culminating in sort of summer 2022, where prices hit these, like, insane record levels you alluded to in the hundreds of dollars per MMBTO.

again, as compared to a historic average of six to eight and a low of one just a couple of years earlier. So the expectation, I think, for those of us who maybe weren't able to predict it, is that maybe prices would come down from those ridiculous, you know, three-figure per MMTU levels, but that they would remain elevated for some extended period of time. And I think as it pertains to the types of things that I think about, which is, you know, what is our long-term trajectory and what's going to replace natural gas in some sectors. You know, there's expected to be, I think, a, you know, a long-term, mid-to-long-term signal to switch off of natural gas. Instead, what has happened, at least as of this recording, is that prices since

August have, there have been some, there's been volatility continually, as there always is, but they've basically been on a downward trajectory to the point where today, as of this recording, they have fallen below the pre-invasion level. So gone down by a factor of five plus since their peak. So what happened? Well, what happened is what I told you, we have experiencing very, very warm weather.

And basically, so it's very difficult to think that we are going to go to lower levels in terms of Russian gas, so we are already at a low. Gas demand has adapted, but gas demand is really, really low because of this warm weather. There has been also a lot of destruction in the industrial sector, and on top of that, our storage are still relatively full, so I think, you know, the market has been calming down a little bit. And on top of that, you know, the fuel which is also competing with natural gas in the power generation sector, which is cold. The prices have come down as well. Before, they used to be around 300 something dollars per ton, which was also completely crazily high. And now I just check there

at about 180 dollars per ton. So, you know, we have seen also things coming down a little bit. But really, the main factor is weather, weather and weather again. Okay. And so weather surprised us all and now it's warm in the winter in Europe and demand is lower. and prices have come down, I guess, help me distinguish between these short-term weather-driven phenomena and the long-term, or I guess even the medium-term future for European natural gas. Imagine that, you know, we get through this winter and then weather goes back to some version of historical norm. What does it look like over the next year, then? Do prices spike right back up, assuming that Russia is continuing to throttle supply?

Are we potentially entering a low-priced environment for an extended period of time? Like, what is the outlook? I know predicting is clearly nearly impossible, given what's happened recently? But what are the dynamics that will affect it? Absolutely, totally impossible. But let me give you some very important benchmark. So first of all, we said that gas prices are lower, but they are still about three to four times higher.

than what they were before the invasion. So I was just checking before, you know, we are at about 60 euro per megawatt hour, which is roughly $20 per MMBTU. So we are high. We are not in a normal environment, not yet. The second thing is that unfortunately for Europe, this invasion and the whole thing happened just when global LNG markets were tightening. And this is something that we knew was going to happen

years ahead, because in the LNG market, it takes a lot of time to bring supply online. Usually for a normal, onshore, LNG liquefaction plant, you will need about five years to build it. The record has been built, broken, sorry, by Calcasio, which has done his plant in about three years, but this is more an exception than the rule. And in fact, many LNG liquefaction plants actually tend to be built. with a lot of delays. So we know that the period between 22 and 25 is going to see relatively little additional capacity of energy.

And actually where it's getting even more tricky is that the biggest LNG plant which was expected to start is Arctic LNG2, which is in Russia. And this plant is very likely to be hit by sanctions. so we have absolutely no idea whether it's going to start as planned this year or not and whether the free trades are going to be operational as expected. So this is adding a little bit more uncertainty on the global energy market. So to your question, the markets are very likely to be tight up until 2025

because we know that in 2025 a certain number of new energy plans are going to start. Golden Pass, who they have said 24 potentially, but I tend to be cautious, the Katari-LNG, Sabine Pass, Corpus Christi, the expansion at the end of the year 2025, a lot of plans are going to arrive at that time. And this is where we really expect global LNG market to be less tight. But between now and 2025, it's going to be tight. Remember something very important.

One of the main reasons why Europe has been going through the past year is because of Xinjiang and its zero COVID policy. Because Chinese gas demand has been muted, its LNG imports have declined massively. And China in 2021 was the largest LNG importer. And that's why we got, I think, think about 20 billion cubic meters back to Europe. And when I was looking at the Repower EU announcement March 2022,

I was thinking there is no way. We are going to add an additional 50 billion cubic meters of energy to Europe in 2022. There is no way. Well, we did, but because I had not expected the zero-COVID policy to hit China that way. Now, you are looking at the situation in China. Of course, right now people are suffering from this COVID outbreak. But eventually, you know, if China comes back, well, this is actually bad news for Europe because if China comes back, they have been contracting so much LNG over the past two years

that, you know, this is going to offer serious competition for European market. And the market might become tight again. So what I'm hearing is that this unseasonably warm winter in Europe was an incredibly lucky break for Europe. Exactly. Because in the absence of that, we've got tight LNG for the next couple of years at least. We've got the possible reemergence of demand in China, which would be a huge swing factor. And we could have theoretically ended up in a situation where those insanely elevated prices. We still have the historically elevated, but not completely bananas,

elevated prices right now, those insane elevated prices could have remained for substantially longer. And in fact, could theoretically come back, you're saying, because just over the next couple of years, before LNG really opens up and if China suddenly spikes in terms of demand. Absolutely. And something that we have not discussed, although maybe a little bit, is that in Europe, we don't only have a gas crisis. we also have a power crisis. Because what has actually happened is that gas demand in the power sector, so the gas fuel generation has actually increased year over year.

So, for example, over the first 11 month of 2022, gas fire generation in the EU has increased by almost 4%. And why is that? Because of a reduction in nuclear generation and because of a reduction in high-year. So the reduction in nuclear generation is because Germany has decommissioned free nuclear power plants at the end of 2021. And because France has a lot of issues with its nuclear power plants. Part of the issue is because these power plants are 40 years old.

They need to go through a thorough inspection that was planned years ago. But this is happening now. And the second problem is because of corrosion. The hydrogeneration drop, so this is definitely because of climate change. But believe me, I mean, we have never seen such low levels of hydrogeneration across Europe. This is frightening, actually. And this is, you know, why this crisis in the power generation sector is impacting the gas sector, because if we didn't have that problem, then we could.

have had a reduction of gas demand in the power sector, and the situation would be much less tight. But because we are accumulating these two problems, then the situation is becoming extremely complicated to handle. I guess final question for you. What seems like we're going to be the near-term outcomes, as prices were spiking in Europe, was going to be a catalyzing effect on alternatives

in some of the areas and some, some decarbonization areas. So say, for example, heat pumps, there's a big push for heat pumps in Europe to replace natural gas with electricity, more efficient electricity in heating, or residential behind the meter solar, all these kinds of things that were sort of hedges against natural gas prices or fuel switching from natural gas to electricity. As you pointed out, Europe also has an electricity crisis, so it's not like switching from natural gas to electricity directly necessarily drives the benefit, but it was, it did seem like there was a galvanizing effect. Do you see that being muted by the fact that prices have crashed again? Or was the run-up in prices as sort of an excuse for

the European Union to accelerate a push for a bunch of technologies that they wanted to push anyway? This is actually an opportunity, but what I observe is that it's still taking a lot of time in order to push all this technology. So we are talking about heat pumps, we are talking about deploying wind and solar more rapidly. We are talking about pushing hydrogen as well. But the thing is that these investments are not happening overnight. I mean, you know, we are trying in my place to have a heat pump. Well, you know, between all the authorization, etc., convincing the owners of the overflats,

I mean, you know, it's going to take us maybe one year to install the heat pumps. So, you know, it's not something which is happening overnight. So, you know, there is the objectives, you know, the ambitions, and there is the reality on the ground. If I talk to people who want to install windmills, well, they are going to tell me, oh, you know, I mean, we really absolutely need to simplify all these processes, all these permits, because what is really restricting us right now is all the permitting. It's taking forever. So, you know, we need to simplify. And I think the European Commission has understood that, countries have understood that, but there is still a gap between aspirations and what is happening on the ground.

So we need to go much faster. But to go back to your point, I think it's very clear for most people that despite the current drop in prices, the situation is still very serious. We need to continue to save energy and in particular natural gas. And we need to go faster on this energy transition. Well, Anne Sophie, I feel like I have a 50% better understanding of what the hell's going on in natural gas markets, which is saying something for a 45-minute conversation. So thank you so much for illuminating me. Thank you for having me.

It was a pleasure. Anne Sophie Corbeau is a global research scholar at Columbia University's SEPA Center on Global Energy Policy, where she focuses on hydrogen and, as you now know, natural gas. So what did you think? What questions do you have for this show? If you want me to cover a topic that is near and dear to your heart, now is the perfect time to let us know. We're hosting an Ask Me Anything episode where I answer or at least attempt to answer all of your questions,

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or wherever you get this show and leave us a rating and review. This show is a co-production of PostScript Media and Canary Media. You can head over to canarymedia.com for links to today's topics. And as always, PostScript is supported by Prelude Ventures, venture capital firm that partners with entrepreneurs

to address climate change across a range of sectors, including advanced energy, food and ag, transportation, and logistics, advanced materials in manufacturing, and advanced computing. This episode was produced by Daniel Waldorf, mixing by Roy Campanella and Sean Marquand, theme song by Sean Marquand. I'm Shale Khan, and this is Catalyst.