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WHAT RUSSIA’S UP TO: The situation at Zaporizhzhia, Ukraine’s largest nuclear power plant, currently occupied by Russian troops, has grown increasingly confusing in recent days—with U.N. officials, the State Department, and Ukraine’s state-owned power company issuing a string of fast-changing assessments regarding the safety of the plant’s operations. The fog of war has obfuscated Russia’s long-term goals for the plant.

How it happened: Officials first sounded alarm last week when Russian shelling damaged an external power supply system at Zaporizhzhia last week. That prompted new and urgent warnings from nuclear authorities, including the head of the United Nations’ nuclear watchdog agency, Rafael Grossi, who said the fighting posed a “very real risk of nuclear disaster.”

Ukraine state-owned utility Energoatom claimed Monday that Russian forces said they had mined the plant and were planning to blow it up, citing remarks from the plant’s garrison commander, Russian Major Gen. Valery Vasiliev.

The confusion helps Russia pursue its real aim: Russia wants to disconnect Zaporizhzhia from Ukraine’s grid and attach it to its own in order to “basically steal Ukraine's energy” Doug Klain, assistant director of the Atlantic Council’s Eurasia Center, told Breanne in an interview.

Why it matters: Following Russia’s invasion in February, Ukraine disconnected its power grid from the Russian network to which it had always been linked, and connected to the EU’s power grid instead—speeding up a transition that was not expected for at least another year or two. Zaporizhzhia is Europe’s largest nuclear plant, and, combined with Ukraine’s 14 other reactors, generated roughly half of the country’s electricity prior to the start of the war.

Since connecting to the EU’s grid, Ukraine has more than doubled its volume of cheap electricity exports to the bloc—a welcome development for the EU as it stares down a looming energy crisis, and one that has undoubtedly infuriated the Kremlin.

“[Russia] wants to take all the power and reconnect it to a Crimea nuclear facility so that the energy and all of the connections would be fully in Russian territory,” the head of Ukraine’s Energoatom, Petro Kotin, told reporters today.

Confusion helps Russia: The lack of information regarding the plant under occupation – Russia has denied entry to international inspectors – helps Russia advance that goal.

“Russia is somebody who really is taking advantage of the information vacuum to try to shape the narrative,” including by attempting to shift blame for recent shelling on Ukraine, at the same time that it's been trying to link the plant up to the Russian energy network, Klain said.

That’s fitting with the Kremlin’s larger playbook: Russia has long relied on disinformation to further its geopolitical goals.

They’ve employed this approach in their occupation of Zaporizhzhia—regularly denying responsibility for the violence, and even blaming Ukraine for the shelling of its own plant.

Russia has “also been apparently stationing artillery and rocket systems there and firing them from the nuclear plant; using the place effectively as a giant nuclear shield,” Klain said.

Russia is hoping to deter the West: “Russia has seen pretty good evidence that when it makes nuclear threats, Western countries like the United States, really get freaked out—and it's something that makes us very wary of supporting Ukraine and trying to help Ukraine win,” Klain said.

Moscow is likely hoping the West will pressure Ukraine to perhaps “dial back its counteroffensive, particularly in Zaporizhzhia,” at risk of touching off a nuclear catastrophe, he said.

Earlier today, Group of Seven foreign ministers issued a joint statement demanding that Russia immediately return the plant back to Ukraine.

Ukrainian personnel responsible for the plant’s operations “must be able to carry out their duties without threats or pressure,” they said, adding: “It is Russia’s continued domination of the nuclear power plant that endangers the region.”

Welcome to Daily on Energy, written by Washington Examiner Energy and Environment Writers Jeremy Beaman (@jeremywbeaman) and Breanne Deppisch (@breanne_dep). Email [email protected] or [email protected] for tips, suggestions, calendar items, and anything else. If a friend sent this to you and you’d like to sign up, click here. If signing up doesn’t work, shoot us an email, and we’ll add you to our list.

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FALLING FUEL PRICES HELPING TO EASE INFLATION: Falling energy prices helped to ease inflation to 8.5% for the 12-month period ending in July, the Washington Examiner’s Zach Halaschak reports.

The gasoline index fell 7.7% last month, offsetting increases in food and shelter costs. The overall energy index fell 4.6% on the month but is still up by 32.9% for the year-period ending in July.

The price relief is welcome news for the White House, which has devoted significant political capital over the last 10 or so months to finding ways to reduce the cost of energy, gasoline in particular, and has been celebrating falling prices.

“More work remains, but prices are coming down, and the president will continue to call on domestic and international oil producers to increase output so that they can continue to come down,” Press Secretary Karine Jean-Pierre said yesterday.

The outlook: Some producers, including supermajors ExxonMobil and Chevron, have plans in place to increase oil production but others, especially the large independents that have been conservative on increasing spending on additional production this year, may have less incentive to do the same now that oil prices are flirting with high $80s per barrel.

Sustained oil prices above $100 per barrel weren’t enough to tempt the lot, which would include the likes of Diamondback Energy, Coterra Energy, and Pioneer Natural Resources. And even while these companies report healthy profits, they are spending significantly more just to maintain current production rates because of the higher cost of rigs and materials, the Wall Street Journal reported this week.

Volatility remains: Despite the lower inflation numbers, the energy sector is still showing signs of volatility. Natural gas prices have tamed slightly over the past two weeks but remain at multi-year highs, and natural gas demand for electricity generation reached new records in July due to high temperatures.

At the same time, while oil and gasoline prices fell in July, indexed electricity prices rose by 1.6% relative to June, amounting to a 15.2% year-over year increase for the 12 months ending in July.

CRUDE IMPORTS RISE BUT REFINERY INPUTS FALL: Crude oil imports averaged 7.3 million barrels per day last week, up more than a million barrels per day on average versus the week before, according to the Energy Information Administration’s petroleum market update out this morning.

The current four-week average of crude imports is up by 1.7% over the same period last year, with refineries operating at 91% capacity last week.

At the same time, commercial crude inventories rose, while refiners processed less crude last week than the week before. Gasoline and distillate fuel production fell as a result.

What to watch for: EIA issued fresh estimates yesterday for all things energy prices, with the major qualification that its short-term energy outlook is subject “to heightened uncertainty resulting from Russia’s full-scale invasion of Ukraine.”

The agency currently expects Brent crude spot prices to average $105 per barrel this year and fall to $95 next year.

It also adjusted expectations for liquefied natural gas to the news that Freeport LNG expects to return to near full capacity operations in October. LNG exports are now forecast to average 10 billion cubic feet per day during the third quarter and rise to 11.2 bcf per day for the year, a 14% increase from 2021.

DOW SIGNS UP FOR X-ENERGY’S ADVANCED REACTOR TECHNOLOGY: X-energy entered into a preliminary agreement with Dow to provide one of the chemical and materials giant’s Gulf Coast manufacturing facilities with heat and power via its advanced nuclear reactor technology.

The Maryland-based reactor designer announced the letter of intent yesterday, which provides that X-energy will deploy its 80-megawatt high-temperature gas reactor technology at the facility to supply power and steam for industrial applications.

The helium coolant X-energy’s reactor uses comes out at 750 degrees Celsius, which is then turned around and used to flash boil steam in a steam generator to 565 degrees, explained Ben Reinke, a senior director for corporate strategy at X-energy.

Those qualities make the design flexible and especially useful for applications beyond electricity generation, especially manufacturing, he said.

“Any time we refine any product that comes out of the ground and turn it into something that's useful for humanity, each one of those steps typically requires steam, electricity, or both,” Reinke told Jeremy.

“That chunk of the energy market, which in the U.S. is about a third of all energy used — in industry — a big chunk of it is applicable off the shelf with our reactor,” he said.

X-energy is a participant in the Department of Energy’s Advanced Reactor Demonstration Program, which Congress just funded in the bipartisan infrastructure law to the tune of $2.5 billion. It’s targeting 2028 to demonstrate the reactors at a plant it’s building in Washington state.

The company expects its reactors to be commercially deployable around 2030.

CHIPS BILL PASSES WITH FUNDING TO TEST COAL-TO-NUCLEAR CONVERSIONS: The CHIPS bill that became law yesterday funds a number of new energy programs, including one to research and demonstrate the construction of advanced nuclear reactors at industrial sites such as those home to coal-fired power plants.

The program’s $800 million in funding would be used to “prioritize communities that have retiring coal or other fossil generating facilities and assist in the reutilization of sites to deploy advanced nuclear power plants,” according to a summary from Sen. Joe Manchin’s office.

Nuclear advocates have advocated this conversion approach as a way to stand up more carbon-free electricity generation and provide continued employment to workers who would otherwise be hunting for jobs in the event of plant closures.

The Rundown

Washington Post In the Ukraine war, a battle for the nation’s mineral and energy wealth

Reuters Burning cash, commercial EV startups race to deliver vehicles

Bloomberg Coal’s skyrocketing prices could last years on Russia disruption

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Calendar

FRIDAY | AUGUST 12

House lawmakers will reconvene in Washington to take up the Inflation Reduction Act, after Senate lawmakers voted to approve the bill late Sunday. House Majority Leader Steny Hoyer said in a floor update that lawmakers should be prepared to vote as early as Friday on the bill. Time TBA.