Will energy’s wild ride carry on?

Carbon prices have tripled, gas markets have soared, Europe is burning through its coal stocks but at the same time the demand for green energy procurement has never been higher.

Listen to a review of 2021 in carbon, environmental markets as well as in coal and gas and the key drivers for next year. Will all eyes be on the EC’s Fit-for-55 package or will the focus return to speculators in the EU ETS?

Guests:

• Alessandro Vitelli, Freelance Carbon Reporter
• Laurence Walker, Coal and Gas Editor, Montel
• Rachael Burnett, Environmental Markets Reporter, Montel

Transcript

Richard Sverrisson, Editor-in-Chief, Montel: 0:04

Hello listeners and welcome to the Montel Weekly podcast, bring You Energy Matters in an informal setting. This week, we take a look back at this tumultuous year, but also get the crystal ball out to peak into the future. Our guest this week will tell us what was hot in 2021 and what wasn't, what were the high points in coal, gas, carbon, as well as in environmental markets. Joining me, Richard Sverrisson, to discuss these issues is our old pal, Alessandro Vitelli, who's been covering carbon since the late 18 hundreds. Great to have you back, Alessandro. How are you?

Alessandro Vitelli, Freelance Carbon Reporter: 0:39

Very well, thank you. Nice to be back.

Richard Sverrisson, Editor-in-Chief, Montel: 0:41

And a warm welcome to you Rachael . Rachael Burnett based in Spain. How are you today?

Rachael Burnett, Environmental Markets Reporter, Montel: 0:45

I'm very well Richard. Thanks for having me back.

Richard Sverrisson, Editor-in-Chief, Montel: 0:47

If I could start with you, Alessandro how would you summarize 2021? We're not, we haven't come to the end of the year yet maybe there are other, there's more out there.

Alessandro Vitelli, Freelance Carbon Reporter: 0:56

Yeah it I have compared 2021 to 2018. For those of us who've been around at least that long. In 2018, carbon prices quadrupled over the course of a year as the trading markets anticipated the impact of regulatory reform. And here we are again doing exactly the same thing in 2021, lots of investors piling into the market, mostly retail this time round. And a lot of people betting on higher prices, and that's what we've got.

Richard Sverrisson, Editor-in-Chief, Montel: 1:24

Retail investors. Who would they be? Alessandro.

Alessandro Vitelli, Freelance Carbon Reporter: 1:25

You've got these these new exchange traded funds, the KRBN you've got KEUA, you've got Wisdom Tree, you've got Spark Change. All these new funds, the exchange traded products if you like, which have started to get involved in Carbon, bringing the power of the E-U-E-T-S to the retail investor.

Richard Sverrisson, Editor-in-Chief, Montel: 1:43

Very interesting. And Rachael , you've been covering the green markets, so to say, as the geos PPAs. What for you would be the kind of how, or how would you summarize the year so far?

Rachael Burnett, Environmental Markets Reporter, Montel: 1:54

I think the biggest thing we've seen this year has been quite a boost in demand. For PPAs particularly, but also for geos as well. We've seen a few countries bring out monthly geo auctions Portugal and Italy, and the EEEX is going to launch a pan-European geo market next year. Which altogether will hopefully bring some more transparency to the market. And with PPAs, we've really seen a boom This year, I think we're close to 10 gigawatts of total PPAs in Europe and about 6.1 gigawatts has been corporate PPAs. So that's a huge increase as more companies want to secure green energy, but also the volatility we've seen. In the energy markets in general, has led to people wanting to hedge for longer and secure their power at a price that they know they can rely on.

Richard Sverrisson, Editor-in-Chief, Montel: 2:49

So they've been driven to these deals by the very high price environment, but also the volatility.

Rachael Burnett, Environmental Markets Reporter, Montel: 2:55

Yeah, I think most analysts I've spoken to seem to agree that the high prices we've got at the moment aren't going to last very long in terms of the lifetime of A PPA, which is. Typically 10 years or so at least, but the volatility that's behind the high prices we've got at the moment is probably here to stay. So while prices are likely to drop back down again sometime next year is what I've been told, volatility will continue. And obviously it's very hard for companies, especially ones with high demand to, to factor this into their accounting.

Richard Sverrisson, Editor-in-Chief, Montel: 3:30

Volatility is certainly an aspect of the carbon market as well, Alessandro, but what for you were the surprises OO of 2021?

Alessandro Vitelli, Freelance Carbon Reporter: 3:37

The volatility caused a lot of surprises in and of itself. If you think how natural gas prices ex just soared to an unprecedented levels that's meant that natural gas fired power has fallen completely outta the money. And is a loss maker on all timeframes going out to 2023 at least as a result, that's meant to me that carbon ha the carbon price hasn't really had a chance, an opportunity lately to do what it's supposed to do, which is to incentivize clean energy or clean air energy. If you look at the fuel switching price that carbon has to achieve today to get a co, a gas fired plant back into the money, it's astronomical. It's up above 200 euros a megawatt hour. Or, sorry, two, 200 Euros a ton. So this is a surprise to me that gas has just completely turned the market upside down. Another surprise is that the large institutions, the large financial institutions haven't really got involved in the E-U-E-T-S this time round. We don't have the big pension funds. The big, institutional money managers, the Black rocks of this world, we're still really only dealing with retail level investments in the main, yes, we have some investment funds, private funds, but we don't have the big names in there. I think the other thing would be the options market and the emergence of the options market as a primary price driver. This year, more than any other traders were betting on higher prices pretty much from the get go this year, and that has been one of the number one things, pushing carbon to new highs. And the last thing I think would be the lack of sellers in this market. We've had a, we've had a bit of a hiccup with the administration of the E-U-E-T-S this year because most member states have issued allowances free of charge to their industrial installations as they do every year. But about half of the total supply has not come to market. Some of the biggest countries have not yet issued free allowances, and I think that's forced industrials who might otherwise have been sellers. Not to move in this market, and I think that too has been a major factor in the prices rising so fast, so quickly as in such a short time.

Richard Sverrisson, Editor-in-Chief, Montel: 5:37

It's very interesting that you say that even though we've got these record high carbon prices, which touched 90 euros a ton, very recently, you are still not getting that push to to clean energy or that fuel switching price. So I think that's a fascinating element, but though of course it makes greener energy much more, attainable, does it not?

Alessandro Vitelli, Freelance Carbon Reporter: 5:56

I think it probably does. The problem is that while gas prices are so elevated it makes it very difficult for the first, if you like, the first switch from coal to gas to take place. Yes. It makes renewable energy. Much more attainable, but I'm not sure in the timeframe that we're talking about that's actually going to be much of an outcome. I think if you look at the expectations of Nord Stream two, maybe starting up at some point early next year, gas prices might relax and then we'll be back to the coal to gas switch and not necessarily the whatever we've got straight to renewable switch, because that takes more time to do.

Richard Sverrisson, Editor-in-Chief, Montel: 6:31

How about for you, Rachael? What were the surprises of 2021?

Rachael Burnett, Environmental Markets Reporter, Montel: 6:35

I think in the Go Market Norway announcing that it wanted to leave the EU system was I know that they had been talk about it before, but I think that certainly was a surprise to me. Although, having spoken to a number of market participants, it seems to be something that a lot of people are taking. A more long term view on it's not likely to happen very soon, and there's been some talk that it may not actually happen at all, but certainly this announcement because this. Norway is the biggest exporter of geos and hydropower. Geos from Norway are a benchmark for the entire system, so it would be quite huge if they were to leave

Richard Sverrisson, Editor-in-Chief, Montel: 7:21

and it didn't start craft Norway's biggest utility say as well, that if this does go through, they would be forced to buy geos from elsewhere in Europe to cover some of their plans in Norway.

Rachael Burnett, Environmental Markets Reporter, Montel: 7:31

Yeah, which would be quite. Ridiculous in a way since they've got so much clean power available in their own country. But yeah, as you say they said that they would have to start importing geos, so it would that, that would have a huge effect on the market, a real shift.

Richard Sverrisson, Editor-in-Chief, Montel: 7:48

And how about the high points for you, Rachael , in, in, in the sort of environmental markets in Europe?

Rachael Burnett, Environmental Markets Reporter, Montel: 7:54

I think the increase in demand is really the high point for all the green markets. In terms of developing new capacity for renewables, there was a slowing due to COVID, but things have really picked up in the kind of, I wouldn't say aftermath of the pandemic.'cause it seems to be ramping up again, doesn't it? But as the year has progressed, there's been a real. Increase in continuation of developments and with p so many PPAs being signed. And we've also seen a huge increase in demand for GOs as well, which has likely been led by things like the FIT for 55 announcements, things like the cop summit in Glasgow. These things have brought attention to. To the green movement, and I think a lot of companies really do seem to be taking this on board and taking their own initiative. They're not waiting for governments to set out regulations, they're just, they're getting on with things. Amazon in particular has signed a huge amount of PPAs this year, and they're one of the biggest I think they are the biggest. Contractor of renewable energy in the world and in Europe. And they're leading the way and it paves the way for other companies to do the same. And it sets precedent.

Richard Sverrisson, Editor-in-Chief, Montel: 9:11

They have a lot of financial clout as well,

Rachael Burnett, Environmental Markets Reporter, Montel: 9:13

of course. But we're also seeing in the PA markets arise of aggregated PPAs, which is where groups of smaller companies with perhaps weaker credit. Credit scores and less demand individually, they're grouping together to sign PPAs as a kind of unit. And initiatives such as that are really positive because it can bring new companies into the market that perhaps wouldn't have the experience, confidence and background to sign deals on their own. So it isn't just the huge tech companies and ones with really large demand. We're seeing a lot of new entrants as well.

Richard Sverrisson, Editor-in-Chief, Montel: 9:48

There's a huge amount of potential out there, a lot of small and medium sized companies who want to procure green energy for you, Alessandro what were the high points of this year?

Alessandro Vitelli, Freelance Carbon Reporter: 9:57

I think the high point was certainly the fit for 55 package that came out of Brussels. I think that to me is the game changer. Which triggered this, the price rise that we've seen this year. To me, the fit for 55 package, and in fact the whole green deal is a, is a to z soup to nuts or a turn upside down of Europe's economy and how we produce things, how we consume things. That's gonna be fascinating to see how it plays out. And in terms of, the carbon market. It's an agent for higher prices going forward. Clearly everyone has seen it. The EU itself has sent signals as to what price it thinks need to, we need to reach. And sadly for them, the market's kind of anticipated that before, before they expected it. So that's, to me the big deal this year the fit for 55 package.

Richard Sverrisson, Editor-in-Chief, Montel: 10:44

And it's been quite interesting to see how this moves forward. Given the context of, as you've mentioned, these extraordinary higher gas prices and the energy crisis at the moment, will that propel the move to a greener economy much faster, or will it slow it down? I think those are the key questions. But there's also been some rumblings of discontent with these very high prices. So if I can ask you, Alessandro, what's, what are the disappointments of the year?

Alessandro Vitelli, Freelance Carbon Reporter: 11:12

That, that to me is the big disappointment this year that, that so many EU member states are playing politics with the E-U-E-T-S. We know the Bank of Spain, in fact, one of the countries that actually has complained about it the most, the Bank of Spain calculated that the increase in EUA prices is responsible for about 20% only of the increase in energy costs for consumers. And yet the EU ETS is being targeted like it's public enemy number one. And so some of the words that are coming outta some member states are really. Ill-informed, I think it would be appropriate. They're yelling about speculation. The problem is the EU itself has signposted the way to higher prices. You've got Fran Timmermans who's been talking about markets need to go up. Head of the commission has said has said also, Ursula Underland has said that we want higher prices. The. You use hydrogen strategy document targets higher prices. It's not as if this isn't this is a surprise to anybody. And so the so the fact that people are worried about speculators anticipating the higher prices is I don't know, it's inappropriate. And you have to remember also that it's not, speculators are, do not act in a vacuum. There are other participants in this market who are buying. Equally aggressively. We've known for a number of years now and I'm and I know Montello has reported it. Utilities like RWE have said publicly we're financially covered. On eu carbon allowances out to 2030. Now that means that they're in the futures market or even in the options market. So they're doing just the same thing. And I think any compliance entity that doesn't cover itself in that way. It's probably missing a trick. So I think the EU when considers how to intervene in this market, and when member states talk about intervening in this market, they really need to be a bit more careful with their choice of language and do their research a bit better because

Richard Sverrisson, Editor-in-Chief, Montel: 12:59

this is how markets work. And anyway, where's the distinction between hedging and speculation? Where does one stop and the other one start? I'm not sure whether that's a, such a. Such a clearly demarcated line there.

Alessandro Vitelli, Freelance Carbon Reporter: 13:11

Yes, there is, there, there's a study that's just come out in the last couple of days from the Potsdam Institute, which tries to identify a little bit more precisely the the role of speculators and their size in the market, and I would recommend that as a piece of reading material.

Richard Sverrisson, Editor-in-Chief, Montel: 13:27

Absolutely. Thanks for that, Alessandro. And Rachael what were the disappointments for you in, in, in this year?

Rachael Burnett, Environmental Markets Reporter, Montel: 13:33

I think with GOs, the UK Brexit situation, it came into force in July that the UK GOs are no longer eligible for export to the eu. So that while not unexpected. Is a kind of disappointment I guess on a personal level as well as Brit living in Europe. Everything to do with Brexit I find a bit depressing and I think in the markets in general, I dunno if it would be a disappointment, but certainly an a negative impact for a lot of developers has been a rising cost in. Constructing and completing projects due to a rise in the cost of raw materials, a rise in shipping costs, and also particularly for solar. There's been a real increase in demand from China and India for solar panels, and there's also been some political motivations as well.'cause China's the biggest. Producer of these solar panels in the world. So most of the solar projects, even in Europe, get their panels from China. And because of political situations people have been more reluctant to take them because of human rights issues. So this has caused. Quite a headache for a lot of developers, from what I understand. And it's seen the costs go up for the first time in a number of years for developing solar and wind,

Richard Sverrisson, Editor-in-Chief, Montel: 14:55

Alessandro, have you, over the course of the year, have you heard any sort of interesting anecdotes or some sort of numbers regarding carbon market?

Alessandro Vitelli, Freelance Carbon Reporter: 15:04

I would I would offer one number to start with, which is something like six and a half billion, which is the number of EUAs that have been traded in the front December contract this calendar year. That is already one and a half billion EUAs more than last year, and we haven't finished the year yet. And if you compare where we stand today, six and a half billion with where we were, let's say in 2010. We never even got to 2 billion tons by this time of the year. It's an extraordinary explosion in trading activity. A lot of it obviously is churn, but if you think about six and a half billion tons, that is four times the cap on emissions in one year in the UETS. So this mar, the market really is beginning to mature and develop into, a significant. Market in any sense.

Richard Sverrisson, Editor-in-Chief, Montel: 15:55

Yep. Absolutely. That's a staggering number, but let's look a bit forward. I mentioned the intro about getting the crystal ball out. So Rachael what do you think will be, the key drivers next year? Or what will you be looking at in particular?

Rachael Burnett, Environmental Markets Reporter, Montel: 16:08

I think the. Trend around the rising demand is expected to continue, if not increase next year. With the FIT for 55 Directive with GOs, there was a new guideline that countries must allow GOs to be issued for all renewable energy, even if the sites are under a subsidy. So at the moment, countries such as Germany weren't allowing. Producers that were receiving subsidies or government support to issue GOs, but this is. And I've been told that we could see a 25% annual increase around 200 terawatt hours extra come into the market. So that will be huge for GOs and for PPAs. Similarly the EU has said that countries have to remove any barriers to signing PPAs. A number of countries still have regulatory issues. That either prohibit or make it very difficult to sign PPAs very easily. And so the new guidance is that they have to promote and at least not hamper these deals. So there's really going to be a focus on more and more PPAs and I think the huge increase we've seen this year is only going to rise again next year.

Richard Sverrisson, Editor-in-Chief, Montel: 17:28

So it's gonna be very much focus on what, what's coming outta Brussels in the coming months then as well.

Rachael Burnett, Environmental Markets Reporter, Montel: 17:33

Yeah, absolutely.

Richard Sverrisson, Editor-in-Chief, Montel: 17:34

How about for you, Alessandro? What are the, what will be the key the key drivers for the E-U-E-T-S in 2022?

Alessandro Vitelli, Freelance Carbon Reporter: 17:40

The main thing is going to be the plant economics in in for power because, we're currently in this environment where coal is incentivized to an immense amount extent, and gas is really not. So I think watching how that plays out as Nord stream to. Maybe approaches coming online and delivering gas to Europe. Finally, that will be very interesting to see, how plant economics adjust to that. At the same time, however, I noticed that yesterday Juniper announced it was going to delay the closure of its bee units. Which I think could be the first of in a number of such announcements because as long as coal is making so much money for utilities. It would be foolish to close a plant down if it's scheduled to do so in the next year or two. So I think we should watch out for something like that. Apart from that, I think also we need to think about fit for 55 and how that progresses through the European Parliament and into the sort of coal legislation process between the commission, the parliaments and the council. And I also think we need to keep an eye out, a careful eye out for that in-depth report that will come from esma. At some point in the first quarter, which which will be an investigation into the role of speculative trading in the E-U-E-T-S,

Richard Sverrisson, Editor-in-Chief, Montel: 18:50

esma being the European Securities and Markets Authority. The sort of watchdog, isn't it? That's right. The financial watchdog. Yeah, that's right. Great. And if I could ask you then as the key, a key element here in gas, in coal and carbon and power is gonna be North Stream two. And when it comes online, when. Do you think it would I'm putting you on a spot here a bit, but when do you think it could come online or start delivering gas to Germany? I'll say March. March. Okay. And Rachael , what are your thoughts here? What are you hearing?

Rachael Burnett, Environmental Markets Reporter, Montel: 19:20

Yeah, I, there's so many rumors flying around. But I think the latest from Germany has been that the, the EU regulations have to, it has to go through the whole process and yeah, I think Q1 next year would be optimistic, wouldn't it? I, yeah, I'll go with Alessandro. Okay,

Richard Sverrisson, Editor-in-Chief, Montel: 19:36

great. Thank you very much, Alessandro, and you Rachael for joining the Montel weekly this week. And our next guest is Montel's own coal gas editor Laurence Walker. A warm welcome to you, Lori. Good morning. How are you doing?

Laurence Walker, Coal and Gas Editor, Montel: 19:48

I'm, yeah, not so bad.

Richard Sverrisson, Editor-in-Chief, Montel: 19:49

Excellent. We are looking more at a review of this year and little bit of an outlook for the following year, so 2022. How would you summarize this year, Lori?

Laurence Walker, Coal and Gas Editor, Montel: 19:58

I guess for both markets there's been a lot of similarities in terms of price moves. We've seen I guess price drivers as well, so we've seen. Super high prices, absurdly high prices, you could say. Again, not just in Europe, but around the world for the coal and for the gas. Supply concerns have been a big issue very often involving Russia. But. But also elsewhere, there's been reduction issues for both fuels. There's been, obviously concerns about stocks for both fuels. So there's this kind of supply concerns has been a big issue. And then just the level of demand as well has been very significant Again. And what we've seen very pronounced this year has been the sort of the tug of war between Europe and Asia, which we've seen for, again, for both markets. I think it's something coal to some extent used to. It's something, the interplay between Europe and Asia is quite a common thing and has been for a few years. For gas, I think it's almost become a bit of a shock. It's almost kind of Europe's, almost quite indignant, let's say, just taking so much L energy this year and at the time and we're when we need it as well. Yeah, I'd say, yeah. High prices, supply concerns, strong demand are the big issues. And it's been for both markets is

Richard Sverrisson, Editor-in-Chief, Montel: 21:03

absolutely. And we heard earlier in the pod about despite record high carbon prices around 90 euros a ton. We are seeing not no fuel switching between from coal to gas. In fact, you've seen a boom in coal fire generation. There's been real people even extending coal plants as well. Yes. The lifetime of coal plants,

Laurence Walker, Coal and Gas Editor, Montel: 21:22

yes. It's just really been a sort of a rebirth for coal really. We've had

Richard Sverrisson, Editor-in-Chief, Montel: 21:26

rebirth of coal. The re the rebirth of coal. Yeah. Yeah.

Laurence Walker, Coal and Gas Editor, Montel: 21:29

The cer certainly, even this time last year, you couldn't have envisaged this. Coal prices are up hugely this year. Gas prices have been up astronomically, you could say. We're, we are talking 20 euros or so, a megawatt hour at the start of the year for gas. And, then we've got peaks of where do we get to over 160 or so. In October we, we couldn't have envisaged this. And because again the sheer level of the gas prices it just makes, it just keeps coaling the money and it's going to be in the money for a while to come because, because of such higher. Such high gas prices and that, as you say, that's despite carbon also hitting record highs.

Richard Sverrisson, Editor-in-Chief, Montel: 22:02

So apart from these dramatic price movements upwards or very strong prices, the, the energy crisis as we are calling it, or some commentators are calling it. Were there any other surprises this year in the coal and gas markets that you could pinpoint? Lori,

Laurence Walker, Coal and Gas Editor, Montel: 22:17

I could say certainly there, there have been surprises for the market and for people all, all through the different chains. And when you're talking about. The fuels market there, there's obviously many different components. So we've got the, there's the mining end or the production end for the gas. You have the, all the logistics infrastructure things of this sort. For example, yes, some, the logistics infrastructure I think has been caught off guard. Certainly in Europe we've had issues where there just simply haven't been enough barges. People the barge operators were anticipating a big decline in coal usage. They haven't maintained their barges, maybe there hasn't been enough capacity. They've rented them to other areas, to the grains, to the iron ore, to scrap whatever. And so now we're seeing, squeeze on coal arriving at European plants in this case, not because the coal isn't actually there, but because it's quite difficult just to get it, that, that last leg of the journey and likewise, rail hasn't been ready for this as well. And these are things that need to be. Prepared in advance, the operators look ahead, a year or say what's gonna be happening Obviously a lot further.

Richard Sverrisson, Editor-in-Chief, Montel: 23:12

You can't build a barge overnight.

Laurence Walker, Coal and Gas Editor, Montel: 23:14

No, you can't create it. And then, yes and also, this coincides with the recovery from COVID across Europe. So industry has been, as a whole improving. So this has added to. Inland congestion, you could say and demand for pairing. I'd say this's a surprise, certainly for members of the industry who maybe have, they look at certain areas and yes, obviously the prices in general have been a surprise. This, it's just taken people off guard, I think.

Richard Sverrisson, Editor-in-Chief, Montel: 23:36

What have been the sort high points for these markets this year? You could talk about the price movements being, dramatic and very surprising, but were there any sort of high points for you this year? Laurence,

Laurence Walker, Coal and Gas Editor, Montel: 23:45

you can't deny. It's been an interesting year. And it's certainly one of these of years where you can actually finally, sit down with your friends or with your family and discuss the energy markets and their eyes don't glaze over and they don't take your wine away from you. It's, I think it's also, it's been the level of things are going on at the same time, it's just one of these, it's a year where you can't really, certainly there's the unknowns, there's the issues with China, for example. We know we're never quite sure what's gonna happen in terms of demand. There didn't begin this year, but it began obviously in November or so last year where China stopped taking Australia and coal. So for, from the coal markets, one interest in development has been the fact that since China isn't taking coal from Australia, they've been taking stuff a lot more from places like Columbia, from from Russia. South Africa even, and this has seen kind of trade flows change and it's also added to the extra costs we're having to pay'cause we're having to compete. With China effectively for kind of coal. We used to getting, I think it's interesting, again, just the fact that LNG has been following similar trends again, that, China has this demand Asia has this demand and when we're having to battle 'em from it. So that's, it's been interesting. Obviously the whole Russia scenario is massive and just seeing how effective or how. How influenced the market is by what Russia is doing, even if there's no material impact on flows. Gas rather than coal. Yes. Yeah. Yes, we are. Although I would add again, it doesn't get spoken so much, but Russia has also, regularly been, I wouldn't say holding back coal, but certainly there is a lot of talk with the fact there is maybe more coal. Then it's being released and that they will maybe wait for the right price, which is similar to their game gas bro would be playing with the gas and you could argue, this is just how the market works and this is what, what does happen. They don't have an obligation maybe unless something is already sold. But yes, I would say, certainly, we saw the peak crisis we saw for gas. Putin came on and said. Okay. Next month we can provide more gas if it's required, the prices just dropped like a lead weight. And I think it shows yes, how reliant we are now on, on Russia for supply for both these fuels.

Richard Sverrisson, Editor-in-Chief, Montel: 25:48

Exactly. And then we discussed earlier in the pod as well what that could mean for the energy transition. Will it move quicker or will it actually slow down as people, see gas as the transitional food? But I just wanna ask you as well, what do you think then, what will be the key drivers for coal gas markets next year, Laurence?

Laurence Walker, Coal and Gas Editor, Montel: 26:04

I think the thing for both throughout this winter, we're gonna be seeing similar drivers as we've seen for a while. The big question over Nord stream I think it's obviously. Taken as red, it won't be hot this winter. So that will not necessarily be a factor for this, at least for the fir first part of next year in terms of immediate supply. But the weather is gonna play a big role. So seeing how severe the winter is, and that, again, as we've spoken earlier about the interplay between Europe and Asia is going to be gonna be important to, to track trends and weather trends. Both, in both basins. And that also moves on to things such as rains. So we're already starting to see rains affecting production in some of the big coal producing areas. And it can not only be obviously a demand driver, but also a production destroyer.

Richard Sverrisson, Editor-in-Chief, Montel: 26:44

Is this related to La Nina or is it is it interrelated or not? Not, yes.

Laurence Walker, Coal and Gas Editor, Montel: 26:47

Yes. Yeah. The La Nina does traditionally, yes. Involve heavier rains in a lot of these producing countries. And so yeah, we've certainly seen more rain in Australia in the other parts of, in Indonesia and more recently, over the past couple of weeks, even South Africa as well, which is struggling to get coal out. So yes, there is that, and that's has the other effect of colder weather in the northern hemisphere, which drives demand. But obviously the extent of that demand is gonna be very important. In the first half of next year. Yeah. The saber rattling from Russia again is gonna be important. And as we can see, the market will react to what he does Nord stream again later in the evening when it does come online. Does that mean ultimately more flows or does it mean redirected flows from other route?

Richard Sverrisson, Editor-in-Chief, Montel: 27:27

You're mentioning saber rattling from Russia, but, and North Stream too. But what Rachael and Alessandro expected flows to start coming into Europe. In around March. What are your expectations

Laurence Walker, Coal and Gas Editor, Montel: 27:38

through Nord Stream?

Richard Sverrisson, Editor-in-Chief, Montel: 27:39

Nord Stream two.

Laurence Walker, Coal and Gas Editor, Montel: 27:40

Potentially if they get all the writing, if they get all the permission by that stage. There's. There's forecasts, people could say anything from March to Wharton. So it's not for me. Obviously we can make a guess, we can make an estimate, but ultimately it's with the decision with the Germans, it's with the how quickly the Russians get things moving. And again, as I say, even if it is up and running, if that effectively means more gas coming. I think until we actually see flows coming through the pipeline, I think it's gonna be quite hard to really gauge. The impact.

Richard Sverrisson, Editor-in-Chief, Montel: 28:08

So Laurence, thank you very much for joining the Montel Weekly podcast this week.

Laurence Walker, Coal and Gas Editor, Montel: 28:12

Thank you,

Richard Sverrisson, Editor-in-Chief, Montel: 28:12

Dear listeners, we will now take a break over the Christmas and New Year period returning on the 7th of January. All the best for the festive season. Stay safe and healthy. Goodbye.