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Welcome to the energy source.
Wars in the Middle East proved not enough to save the oil industry from the threat of a $50 barrel.
When Iran began firing at a US Air Force base in Qatar on Monday, traders glued to mobile phones and led the sellouts in a market that normally surged during geopolitical conflicts.
My colleagues Malcolm Moore, George Steer and Jamie Smith decided how major traders would use X and open source intelligence to determine that Iranian attacks on Iranian military bases are largely iconic, dropping prices by 7.2% to $71.48, giving them the sharpest daytime drop on Monday.
“It’s all organized and I know the base is open. Since June 18th, I knew the base was empty,” Jorge Montepeque, an oil analyst at Onyx Capital Group, said in a text message shortly after the attack began. “I’ve seen this movie before.”
Oil and gas continue to flow from the region, and Iran cannot increase exports and threaten the Strait of Hormuz without hurting Chinese partners.
Downward pressure on prices is likely to continue once 2025 closes, with some forecasts projecting oil at $50-60 per barrel.
As outlined by FT in March, this is a boon for consumers and could be a problem for the industry.
Proving that water and oil blend together, today’s newsletter asks if hydroelectric power is a clean and reliable source of energy bet.
Thank you for reading, Martha
Can hydroelectric power raise the electric grid?
After Spain recently entered the darkness, the renewable energy industry has had problems with its hands.
That detractor is that due to the solar pressure in the country’s energy mix, it is difficult to balance supply and demand to maintain stability in the grid, and a solid lack of electricity – the power supply available when necessary means the operators were unable to respond quickly.
The origins of the Iberian power outages are contested. The Spanish government has denied renewable energy causing a halt and condemn various technical and planning errors across the grid.
Still, the problem is that, as clean energy advocates see it, usually come from dirty energy sources such as gas and oil. Whatever the cause, the blackout emphasized the need for renewable and reliable power.
While much has been made about the potential for a nuclear renaissance, a new report from the International Hydroelectric Association suggests that hydroelectric power generation is also part of the solution.
“The wind doesn’t blow, the sun doesn’t always shine,” said Malcolm Turnbull, former Australian prime minister who gave the New South Wales hydroelectric megaproject to green light during his tenure (not that there was no shared controversy). Recently, he has served as the outgoing chairman and president of IHA for Upper Hunter Hydro, a company founded in 2022.
“Water power, especially pumped hydro, provides the long-term storage needed to determine renewable energy,” he told Energy Sources.
“I’m probably a fanatic about pumped hydro,” he said.
Global capacity increased last year by 24.6 gigawatts, including 16.2 GW of traditional hydropower and 8.4 GW of pumped storage hydropower, according to an IHA report.
Traditional hydroelectric power uses the energy of the water flowing through dams and reservoirs to generate electricity. The water passes through the turbine spun generator and creates a source of renewable power.
Pumped storage water vehicles move water into the reservoir when electricity demand is low and release downhills when necessary. It can act like a battery that stores and releases energy. However, unlike chemical batteries, they do not rely on China-dominated and tariff-exposed supply chains.
Last year’s IHA report focused on the five-year low average trend in traditional hydroelectric power generation caused by long permit waits, lack of demand and drought.
However, the global generation rebounded in 2024, rising 10% to 4,600 terawatt hours, making roughly 10 times the amount of France’s electricity consumption and 2.2 billion tonnes of cos into the atmosphere, according to a new report.
And more projects are set up to come online. Currently, the hydroelectric development pipeline is over 1,000 GW, with 600 GW of pumped storage and 475 GW of traditional projects. Most projects under construction will be commissioned by 2030.
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Although it has fewer headlines than wind, solar and nuclear power, hydroelectric power is the world’s largest renewable energy source, providing 14.3% of global electricity in 150 countries.
Still, hydroelectric power is facing serious barriers to achieving its potential.
At the current pace, the industry will drop from 60GW to 70GW of the Hydroelectric 2030 targets for international renewable energy agencies.
Funding projects are an important hurdle. According to the report, pumped hydroelectric projects require high capital investments and longer lead times, especially compared to chemical battery storage projects.
Pumped hydrostorage can provide power on a daily basis, but its value lies in issuing power during the “rare but important” period of low renewable energy output, which creates challenges. Without a long-term contract, payments for this type of production are rare. This means that developers often rely on arbitrage and make money by buying electricity when selling when they are cheap and expensive.
Large-scale hydroelectric projects are vulnerable to cost overruns and delays due to scale and complex geological and social and environmental factors. Snowy 2.0 is a pumped hydro project announced in 2017 when Turnbull was Australia’s prime minister, and was initially expected to cost $2 billion. It is currently projected to cost $12 billion.
An estimated 80 million people are migrating by DAM projects around the world, according to the Internal Evacuation Monitoring Center and Oregon State University. If they are compensated, project costs will increase.
“Hydroelectric power usually includes major infrastructure projects that lead to people’s movement. It’s complicated to make everyone happy despite the compensation,” said Ismael Arciniegas Rueda, an energy economist at RAND School.
“Also, periods of extreme drying are increasing, and hydroelectric power is exposed to it,” he added.
A high level of risk means government support is needed to ensure the project is successful. With the world’s largest hydroelectric fleet, China is using state-owned groups to lend and build megaprojects such as the world’s largest variety of 3.6GW feng shui pumped reservoirs.
Meanwhile, support for hydropower in the US is less certain. Projects such as the 1.2GW Goldendale Energy Storage Project in Washington have been awarded funds from the Department of Energy, while other projects such as the 1.3GW Eagle Mountain Pump Storage Project in California had to rely on private capital.
In the Senate version of President Donald Trump’s flagship tax bill, hydroelectric support through investment and production tax credits will be preserved in full until 2033. The home version required a project to start construction within 60 days and work by 2028, which was not possible with most hydroelectric projects.
There is considerable uncertainty for US hydroelectric developers as the fate of these incentives is resolved. (Martha Muir)
Data visualization with Stephanie Stacey
Job movements
Hyorc has appointed Andrea Magalini to the board of directors.
Paladin Energy was named Paul Henbarow Managing Director and Chief Executive Officer.
Iberdrola has appointed Pedro Azagra Brazquez as the group’s chief executive officer.
power point
Shell denied that getting a rival BP is a meeting after months of speculation about the deal.
The new boss of EDF is conducting a portfolio review that could lead to French energy groups selling assets.
Unless the UK government intervenes, the proposed £250 million investment in the green fuel “Superhub” will be pending.
The energy source has been written and edited by Jamie Smith, Martha Muir, Alexandra White, Christina Shevory, Tom Wilson and Malcolm Moore, with the support of FT’s global team of reporters. Contact us at Energy.source@ft.com and follow us on X at @ftenergy. Check out previous editions of our newsletter here.
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