Breaking barriers to accelerate energy transition

Russian gas curbs and related impacts led to a net loss of Eur12.4 billion ($12.6 billion) for Uniper in the first half of 2022, the company majority-owned by Finland's Fortum said Aug. 17. Some Eur6.5 billion are directly related to Russian gas curbs and its anticipated future impact under IFRS rules with the remainder also reflecting impairments of Eur2.7 billion to Nord Stream 2 loans and goodwills of the Global Commodities and Russian Power Generation segments, the company that was bailed out by the German government July 22 said. "Our top priority now is to swiftly implement the stabilization package," CEO Klaus-Dieter Maubach said. CFO Tiina Tuomela expects an earnings improvement in 2023 and aims to leave the loss zone in 2024. The current volatile price environment doesn't permit an earnings forecast within an adequate range for the current financial year, she added. Dutch TTF gas for year-ahead delivery was assessed by Platts Aug. 16 at a record Eur206.83/MWh, almost tripling over the past two month alone, pricing data by S&P Global Commodity Insights showed. ➡The war in #Ukraine & subsequent sanctions on #Moscow have led to concerns over European #gas shortages this winter. Watch the video for insights on #price trends & the outlook for the year ahead. #ONGT #Russia #EU #Europe #naturalgas #LNG #NordStream #LPG @stuartelliott50 pic.twitter.com/r7n72dg47C — Commodity Insights Gas (@SPGCIGas) August 17, 2022 Uniper has to bear losses from procuring gas at current record-highs to replace its Russian gas portfolio and existing fixed contracts in Germany until the new gas levy comes into place Oct. 1 which allows it to reclaim up to 90% of that loss until March 2024. Unfavorable proxy hedge European Generation earnings were also lower partly attributable to an increase in the fair value of provisions for carbon allowances, which are offset by hedges that will not be settled until the fourth quarter, it said. The Nordic hydro unit also recorded significantly lower earnings owing to price discrepancies between so-called system prices and delivery prices in the relevant price bidding zones. While prices in South Sweden rose sharply towards Continental European levels averaging Eur137.63/MWh in the second quarter, those in the two Northern bidding zones remained very low. In addition, due to reactor closures and limited liquidity in Nordic forward markets, Uniper hedged a significant part of the exposure with German Power several years ago, effectively transferring a Nordic outright long position into a spread position (long Nordic, short German Power), it said. This spread position has developed unfavorably from low double-digits to around minus Eur250/MWh, it added. Lower income from the UK capacity market and higher delivery and procurement costs for coal likewise adversely affected earnings. Earnings at the Russian Power Generation segment however were significantly above the prior-year level following recommissioning of Beryozovskaya 3 and higher sales volume and prices in the Siberian price zone, it added. UNIPER POWER GENERATION (TWH) H1 2022 H1 2021 Russian Gas 20.6 19.1 Swedish Nuclear 6.3 6.5 UK Gas 5.6 6 Russian Lignite 5.0 2.7 German Coal 5.0 3.6 Swedish Hydro 4.5 4.3 German Hydro 2.3 2.3 UK Coal 2.1 1.5 Dutch Coal 2.1 2.3 German Gas 1.9 2.2 Hungarian Gas 1.3 1 Dutch Gas 0.6 0.7 German Lignite 0 1.1 Total 57.4 53.3 Source: Uniper

Recent moves by several governments to halt export of carbon credits have hindered new investment in carbon project development and prompted changes in business strategy, Kelvin Fu, co-founder and managing partner with Gunung Capital said in an interview with S&P Global Commodity Insights. Singapore-based Gunung Capital, an asset management company with businesses in steel, cement and carbon, initially planned for direct investment in projects that generate carbon credits, but these plans are on hold due to "regulatory uncertainties". Fu said the company, which is the largest shareholder in one of Indonesia's biggest private steel companies, is now diversifying its investments along the rest of the carbon value chain, such as carbon emissions monitoring, reporting, and verification, or MRV, and tech-removal credits that face fewer policy risks. In recent months, at least four countries have banned, or announced plans to ban the sale of carbon credits generated locally to foreign markets, including Indonesia, Papua New Guinea, Honduras, and India. This raised concerns among carbon project developers, carbon credit suppliers and buyers as to whether more countries will follow suit and limit market access. "We are actually putting some of our investment plans on hold until there's more regulatory certainty," Fu said, adding that, 6-9 months ago, his company was evaluating several nature-based, REDD+ carbon projects based in Indonesia, but will now need to reevaluate the situation. REDD+ projects aim at reducing emissions resulting from deforestation and forest degradation. "I would say that there's still a lot of confusion. In fact, I was on a call with several friends who are involved in some of the carbon projects yesterday, and all of them had the same consensus," Fu said. "To invest in a large amount of carbon offsets, we are actually very exposed to the regulatory risks." Regulatory overhang Fu said that while carbon investments by large multinational trading houses may look substantial, they are still relatively small when compared with their commodity portfolios; but smaller market players like Gunung Capital are more vulnerable to regulatory headwinds. Currently, most internationally traded carbon credits are issued by carbon registries like Verra's VCS and Gold Standard. "I think the national ones [registries] will dominate in the end," Fu said. "Conceptually, considering that governments are now starting to look at carbon assets as their national assets, I think governments have to set up their own national registries," he added. Fu said regulatory uncertainty had become "an overhang on carbon credit prices and trade volumes" and his strategy to hedge policy risks was to invest in tech-removal credits like carbon capture and storage, or CCS, and companies that provide MRV services. Technology like CCS is crucial for decarbonizing industrial sectors, and such credits are also subject to fewer regulatory uncertainties. "These [projects for tech-removals] are mostly privately funded projects. These are commercial capital, so the government can't really nationalize corporate assets," Fu said. Tech-removal credits are priced at around $200/mtCO2e, despite giants like Microsoft having purchased a large bulk of them when most companies cannot afford to do so. Fu said Gunung plans to start with small-scale investments and inject more capital as technologies scale up and realize economies of scale. He said it is also crucial to build up carbon MRV capabilities, especially domestic capabilities within Indonesia, to overcome information asymmetry in the carbon market, and cut unreasonably high "middleman's margins". Cross border carbon tax On the supply side, Fu said Indonesia has great potential to develop nature-based carbon credits but there are fewer than 10 approved domestic project developers because of the layers of government approvals and complex legal issues involved in setting up a project. On the demand side, he said that local carbon offset demand is minimal, because there are no incentives to do so. "The $2/mt carbon tax is very low, and it's not even implemented yet," Fu pointed out. He also said the carbon border adjustment tax being planned by the EU on high carbon intensity imports, is one of the catalysts driving Gunung Capital to diversify its investment portfolio. He thinks that the US may adopt a similar mechanism to push exporters in developing countries to decarbonize, while China may also exert pressure on suppliers from other emerging markets, making this another regulatory risk for companies to content with in the future. "The Chinese government is very serious about their net zero target. They are driving a lot of local companies to invest very heavily to go green," Fu said. "How can you have another producer in the emerging market just sell cheap product?" "If we don't change our current operation, that market will soon be closed to us," Fu added, referring to the risk of becoming less competitive due to carbon taxes. "The earlier we understand our carbon footprints and the decarbonization strategies, the more competitive we will be in the future," Fu said. "I think Indonesia will try to give more regulatory certainty, and try to push, at least, the initial carbon tax." As of Aug 17, S&P Global Commodity Insights assessed nature-based carbon credit price was at $8.2/mtCO2e.

The International Energy Agency, in its road map for achieving net-zero emissions by 2050, set a near-term target for the deployment of carbon capture capacity at 1.7 billion metric tons by 2030, a level that is more than 40 times the global capacity in 2021. The most significant action the US has taken towards reaching that goal has been to provide funding for various types of carbon management technologies and infrastructure through the bipartisan infrastructure law. Specifically, the bill gives the Department of Energy $12.1 billion for carbon projects.S&P Global reporter Brandon Mulder spoke with DOE's Brad Crabtree, Assistant Secretary for Fossil Energy and Carbon Management, whose office is tasked with allocating that $12 billion to help jumpstart the carbon capture industry. They spoke about the DOE's priorities, the new Carbon Negative Shot initiative and possible enhancements to the federal 45Q tax credit.Stick around after the interview for Chris van Moessner with the Market Minute, a look at near-term oil market drivers.This podcast was produced by Jasmin Melvin in Washington and Jennifer Pedrick in Houston.Related content:45Q, financial uncertainties hinder capital flow for CCS deployment: panelIPCC report underscores importance of carbon removal to reach 1.5-degree goalClean energy boom leaves fossil spending behind as inflation, climate woes weigh: IEAMore listening options:

Voluntary carbon markets have seen significant growth in recent years and are expected to surge in the years ahead. But they have traditionally been seen as opaque, complex and niche. That is rapidly changing as a large range of companies start to engage with them.In the latest Platts Future Energy podcast, Jonty Rushforth is joined by Paula Vanlaningham and Jeff Berman to discuss the ‘beauty' of carbon credit markets.

As the US ethanol industry pursues carbon capture and sequestration projects, producers are looking at the effects of lower carbon intensities in markets with low carbon fuel standards and in future industries like sustainable aviation fuel produced from ethanol. The voluntary carbon credit market for technology-based carbon capture could also attract interest given high prices but hurdles could keep ethanol producers focused on regulated markets. S&P Global Commodity Insights' Americas biofuels manager Josh Pedrick talks through the evolving CCS interest in US ethanol with low-carbon lead Arsalan Syed and biofuel analytics manager Corey Lavinsky. This Future Energy podcast was produced by Felix Fernandez in London.More listening options:

Workshop — Voluntary Carbon MarketsModerated By: Paula Vanlaningham, Global Head of Carbon Silvia Favasuli, EMEA Editor, Carbon Michael Evans, EU/UK Compliance Analyst Deb Ryan, Head of Low Carbon Market Analytics

In this episode of the Platts Future Energy podcast, Varaleka Pant and Arsalan Syed discuss with Deb Ryan the importance of evaluating the carbon intensity for crude and some of the major global crude grades, and explain the need for standards in this space to ensure consistency in low carbon crude trading.More listening options:Explore and identify low-carbon crude grades with our Periodic Table of Oil™

Attempts to overhaul the EU Emissions Trading System have entered a crunch period as the European Parliament and European Council aim to finalise their negotiating positions by the end of June. The EU Parliament rejected draft legislation proposed by lawmakers in its plenary vote on June 8,  but is preparing for a second vote on June 22. EU ETS revisions are being considered against a backdrop of very high energy prices, surging inflation and a military conflict on Europe's eastern flank.S&P Global Commodity Insights' Frank Watson and Michael Evans take a deep dive into the key elements in the negotiations and why they matter for carbon prices and other energy commodity markets in Europe.More listening options:

Hydrogen's role in long-distance transmission of energy amid concerns about energy security from the pandemic and Russia's invasion of Ukraine, the impact of rising inflation on projects and how subsidiarity can help with shifting regulatory constraints are among the topics discussed by Daryl Wilson, Executive Director of the Hydrogen Council, in conversation with Beth Evans, Global Director of News with S&P Global Commodity Insights. 

When Putin invaded Ukraine in February, the industry wondered whether it would set back Europe's ambition to develop a low-carbon hydrogen market. Already, we have seen quite the opposite. The EU member states and other countries are doubling down on clean energy commitments, with hydrogen at their heart.S&P Global Commodity Insights' James Burgess discusses recent developments with pricing specialist Jeff McDonald and analyst Matthew Hodgkinson.Learn more about our Hydrogen Markets Europe Conference in Amsterdam this September on: https://plattsinfo.spglobal.com/HydrogenMarketsEurope2022.htmlTell us more about your podcast preferences so we can keep improving our shows. Take our two-minute survey here: https://bit.ly/plattspod22More listening options:

September 20-21, 2022 | 8:00 am - 15:30 pm CEST Novotel, Amsterdam City, NetherlandsCreating building blocks for Hydrogen to take off as its own marketIn a rush to replace Europe's dependence on Russian Oil and Gas, the drive for Hydrogen has never been stronger. This year's event looks to answer two big questions: can Hydrogen ensure Europe's energy independence and if it can, how can we grow demand for Hydrogen enabling global scale up? With the price of electrolyzers and renewable energy increasing, now is the time to scale up on Hydrogen volume to lower the costs. Join this year's Hydrogen Market's Europe Conference to find out how we can get there.S&P Global Commodity Insights are delighted to announce our Hydrogen Markets Europe Conference, 2022, as part of the global move to launch a Hydrogen economy. This event is part of a global series organized by S&P Global Commodity Insights with parallel events in the US and Asia and attendees will include hydrogen producers, midstream natural gas companies, infrastructure investors, developers, electric power companies, regulators, and policy-makers, among many others.REGISTER NOW

What are Platts Hydrogen Assesments? See Factsheet for more Hydrogen Assessment Information >Building on the world's first-to-market hydrogen assessments launched in December 2019, we expanded in April 2020 on our North American and European assessments and launched its first hydrogen assessments in Asia, following by adding Australian pricing in August 2021.Our daily price assessments include 10 US regional set of prices, one Canadian set of prices, prices in the Netherlands, Japan and the UK.The daily price assessments demonstrate the production cost of hydrogen for Steam Methane Reforming (SMR) production methods, including some regions Carbon Capture and Storage (CCS), along with prices for Proton Exchange Membrane (PEM) Electrolysis, Alkaline Electrolysis, Auto Thermal Reforming (ATR), Coal Gasification and Lignite Gasification production pathways, depending on the production hubs.The calculated prices reflect both the commodity production cost and the capital expenditure (CapEx) associated with building a hydrogen facility.The assessments include a commodity price as well as a commodity plus production cost, for the following hydrogen production hubs:Canada— Alberta (SMR w/o CCS, Alkaline Electrolysis, PEM Electrolysis, excluding and including CapEx)United States(SMR w/o CCS, Alkaline Electrolysis, and PEM Electrolysis, all excluding and including CapEx)— Appalachia— Gulf Coast— Midcontinent— Northeast— Northern California— Northwest— Rockies— Southeast— Southern California— Upper MidwestThe Netherlands— SMR w/o CCS— SMR with CCS— PEM Electrolysis— Alkaline ElectrolysisJapan— SMR w/o CCS— PEM Electrolysis— Alkaline ElectrolysisUnited Kingdom(all include and exclude CapEx)— ATR with CCS— PEM Electrolysis— Alkaline ElectrolysisAustralia(all are published in A$/kg, $/MMBtu, $/kg, both including and excluding CapEx)— New South Wales - Coal Gasification w/CCS, PEM Electrolysis, Alkaline Electrolysis— Queensland - Coal Gasification w/CCS, PEM Electrolysis, Alkaline Electrolysis— Victoria - Lignite Gasification w/ CCS, PEM Electrolysis, Alkaline Electrolysis— Western Australia - SMR w/ CCS, PEM Electrolysis, Alkaline Electrolysis— South Australia - PEM Electrolysis, Alkaline Electrolysis— Tasmania - PEM Electrolysis, Alkaline ElectrolysisMiddle East— Saudi Arabia - PEM Electrolysis, Alkaline Electrolysis, SMR w/ CCS— UAE - PEM Electrolysis, Alkaline Electrolysis, SMR w/ CCS— Oman - PEM Electrolysis, Alkaline Electrolysis, SMR w/ CCS— Qatar - PEM Electrolysis, Alkaline Electrolysis, SMR w/ CCS

LAUNCH REPORT

When Putin invaded Ukraine in February, the industry wondered whether it would set back Europe's ambition to develop a low-carbon hydrogen market. Already, we have seen quite the opposite. The EU member states and other countries are doubling down on clean energy commitments, with hydrogen at their heart.S&P Global Commodity Insights' James Burgess discusses recent developments with pricing specialist Jeff McDonald and analyst Matthew Hodgkinson.Learn more about our Hydrogen Markets Europe Conference in Amsterdam this September on: https://plattsinfo.spglobal.com/HydrogenMarketsEurope2022.htmlTell us more about your podcast preferences so we can keep improving our shows. Take our two-minute survey here: https://bit.ly/plattspod22More listening options: