Subscribe today to the Washington Examiner magazine and get Washington Briefing: politics and policy stories that will keep you up to date with what's going on in Washington. SUBSCRIBE NOW: Just $1.00 an issue!

EUROPE EYES MAJOR CHANGES TO KEEP THE LIGHTS ON: The European Union is considering taking extraordinary steps to curb a historic surge in energy prices that threatens a painful winter, including an overhaul of its electricity pricing market.

European Commission President Ursula von der Leyen said in Slovenia yesterday that leaders plan to use a two-pronged approach to lower prices: The first, an emergency, short-term measure such as a price cap on natural gas; and the second, a longer-term, structural effort she described as a “fundamental reform of the power market.”

“This far and no further,” von der Leyen said of the extraordinary prices. The crisis, she said, is “exposing the limitations of our current electricity market design.”

Energy costs in the EU have spiked nearly tenfold in the last 12 months. Futures for German Power, the European electricity benchmark, soared to 1,000 euros per megawatt hour for the first time ever yesterday, and the bloc has spent more than $281 billion in the last year alone to help cushion consumers against the high energy costs, according to an estimate from Bruegel, a Brussels-based think tank.

Eventually, these reforms could include a bloc-wide “decoupling” of electricity and gas prices, which have been linked for the past 25 years under the EU’s marginal pricing power system. Under that system, wholesale electricity prices are set by the last power plant needed to meet overall demand, irrespective of the energy source.

That means electricity costs are often set across the board by the price of natural gas and other costlier fossil fuels, rather than cheaper sources, such as nuclear power or renewable energy.

Now, leaders are hoping to adopt a system to link energy prices to the “actual cost” of electricity generation, which includes sources such as renewables.

“Electricity is produced today at a price that is much lower than the price at which electricity and gas are sold,” Belgium’s energy minister, Tinne Van der Straeten, said on Twitter. “There is no longer any link between the cost of production and the selling price. This European electricity price formation system needs to be reviewed.”

The effort comes as leaders brace for a feared cutoff of Russian gas supplies this winter. Russian state-owned energy giant Gazprom has steadily throttled its gas deliveries to the bloc via its Nord Stream 1 pipeline, which it cut to just 20% capacity last month, and plans to halt for a three-day maintenance period beginning tomorrow.

What’s next: The European Commision could publish details of its emergency intervention plan as early as this week, according to Reuters. They will then be taken up for consideration at an emergency meeting of EU Energy Ministers on September 9.

“We have to develop an instrument which makes sure that the gas price no longer dominates the electricity price,” von der Leyen said. “We’re seeing now with these exorbitantly high gas prices that we must decouple.”

In the short term, leaders could pass a gas cap to help stop the bleeding: The Czech Republic, which holds the EU’s rotating presidency, has proposed capping natural gas prices to help drive down costs in the near-term.

“The main task... is to separate the price of electricity from the price of gas, and thus prevent Putin from dictating to Europe prices of electricity with his shenanigans with gas supplies,” Czech Industry and Trade Minister Jozef Sikela told reporters yesterday.

Germany appeared to be open to gas price-capping plan as of Tuesday morning, Reuters reports, and Chancellor Olaf Scholz told reporters yesterday that the price cap was the “main topic” of his earlier meeting with Czech leaders.

“We will look very carefully at what instruments we have that we can use to bring down electricity prices,” he said. “It’s not something that can happen at random, it has to work in a technical sense, but obviously what is being set now as the market price is not a real reflection of supply and demand.”

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.

ADVERTISEMENT

GERMANY ON TRACK TO MEET GAS STORAGE GOALS: German Vice Chancellor Robert Habeck said the country has made “significant progress” on filling its gas tank storage ahead of winter, and is on track to meet its goal of reaching 85% gas storage before an Oct. 1 deadline.

“Despite the difficult circumstances… the reserves are filling up more quickly than expected,” Habeck said in a statement, noting that the country’s gas storage currently stands at 82%. The October goal “should be reached by the start of September,” he said.

Germany has raced to ration gas and secure alternative suppliers as it braces for a feared Russian gas cutoff this winter, including ordering the construction of five new floating LNG terminals, boosting LNG purchases from Qatar and the U.S., and introducing measures to allow more coal-based power in the short term. In order to avert a supply crisis, leaders have set a goal to fill gas storage tanks to 95% capacity by November.

DROUGHT-STRICKEN SOUTHWEST CHINA IS NOW ON ALERT FOR FLOODS: A southwest region in China that endured historic drought conditions and a scorching, two-month heatwave is now on flood alert as it braces for the third day in a row of torrential rain.

The downpour started Sunday and has so far prompted evacuation of more than 115,000 residents from China’s Sichuan province—the same drought-stricken area where officials just two weeks earlier were forced to ration factories’ power use and close some places of business, such as shopping malls, to reduce electricity demand. (The Sichuan province is heavily dependent on hydropower dams, which supply roughly 80% of its electricity.)

The government also initiated an emergency flood-prevention response in the Sichuan and Chongqing provinces, and local news outlets warned that the hard, sun-baked soil would make the area more vulnerable to heavy flooding.

GREENLAND ICE SHEET MELT WILL RAISE SEA LEVELS BY NEARLY A FOOT, STUDY FINDS: The Greenland ice sheet is on track to lose more than 3% of its mass due to human-driven climate change, according to a new study published in the journal Nature Climate Change.

While researchers did not set a time frame for the melt, they said a volume loss of 3.3% is inevitable “regardless of twenty-first century climate pathways” or action taken to fight global warming.

“This is a result of increasing mass turnover from precipitation, ice flow discharge and meltwater run-off,” they said in the study.

As researchers note, 3.3% of Greenland’s ice sheet is equal to roughly 110 trillion tons of ice, which would trigger nearly a foot of sea-level rise across the globe.

That would have stark ramifications: A recent study published by the National Oceanic and Atmospheric Association found that, if sea levels along the U.S. coasts were 10-12 inches higher by 2050, “major” destructive floods would occur roughly five times as often as they do now. “Moderate” floods would occur 10 times as often.

RECORD SOLAR INSTALLATIONS EXPECTED FOR 2022: U.S. households are on track to install a record amount of residential solar in 2022, according to a new BloombergNEF analysis, an uptick analysts say is driven by high electric prices and tax credit extensions included in the Inflation Reduction Act.

In total, analysts estimate that residential solar will increase by 5.6 GW in 2022—three times the amount added by commercial customers in the same period. Residential solar installations are also expected to outpace commercial installations through 2030.

“Despite supply chain challenges and higher costs, 2022 will be an absolute record year for residential solar in the US,” said BloombergNEF analyst Pol Lezcano. Read the full analysis here.

RELATED – FIRST SOLAR ANNOUNCES PLANS FOR NEW PANEL FACTORY: First Solar, the largest U.S. solar panel manufacturer, said today that it plans to invest up to $1 billion to build a new domestic solar panel manufacturing facility, a decision CEO Mark Widmar said was due primarily to the passage of the Inflation Reduction Act and its new incentives for U.S.-based solar manufacturing.

In an interview with CNBC, Widmar said the new law for the first time creates a “long-term view and understanding of the industry, and policies aligned to that industry.”

“With that level of clarity, we stepped back and evaluated the alternatives or the options of where we could go with our next factory and when we looked at it comprehensively the U.S. was a very attractive option,” he said. “With that type of alignment, you can create partnerships and opportunities to grow together collectively and more of a win-win type of structure than maybe we had before the implementation of the [Inflation Reduction Act].”

FirstSolar is currently eyeing the Southeast U.S. for the new facility, which will be the company’s fourth. It will manufacture 3.5 gigawatts of solar modules annually by 2025, the company said.

KERRY SOUNDING VERY CONCILIATORY TOWARD CHINA: Climate envoy John Kerry said in an interview with the Financial Times he was hopeful that the U.S. and China could resume talks on climate change before the November COP27 climate summit in Sharm el-Sheikh. China broke off talks in retaliation for House Speaker Nancy Pelosi’s visit to Taiwan in August.

Even before that, China had sounded fairly dismissive of the agreement that Kerry had touted on climate cooperation. Xi Jinping said straightforwardly in January that climate goals should not disrupt life and that China, the world’s largest emitter, must “overcome the notion of rapid success” on lowering emissions.

Kerry, though, said in the interview that China had “generally speaking, outperformed its commitments”

“They had said they will do X, Y and Z and they have done more,” he said. He specifically cited China’s development and production of renewable energy.

The Rundown

New York Times Secret data, tiny islands and a quest for treasure on the ocean floor

Bloomberg Hurricane alley hasn’t been this quiet in a quarter century

CNBC Cash is king for EV makers as soaring battery prices drive up vehicle production costs

Washington Post A third of Pakistan is underwater from floods, climate chief says

ADVERTISEMENT

Calendar

THURSDAY | SEPTEMBER 1

1 p.m. The White House, the EPA’s Office of Water, and the American Association for the Advancement of Science (AAAS) hold a virtual discussion titled. "Regional Reflections on Green Infrastructure and Nature-Based Solutions: Southwest." Register for the virtual event here.