How ‘Chaos’ In The Shipping Industry Is Choking The Economy

Whidbey Island is a lovely place about 30 miles north of Seattle on the Puget Sound. Most days the tranquil sounds of rolling waves and chirping birds provide an escape from the hustle and bustle of the city. But these days, all is not so serene. Residents are complaining about the ruckus created by humongous container ships anchored off their shore.

“We’ve never seen them this close before,” a Whidbey Islander told a local news station. “We’re hearing the throbbing noise at night. … It’s a nuisance.” The noise has been so loud that residents have been complaining to the county sheriff’s office about it.

Whidbey Islanders are getting a front row seat to the growing U.S. trade deficit, which is hitting record highs. It’s fueled by a surge in demand for imports, mostly from East Asia. There’s so much cargo being shipped to the U.S. from Asia right now that the ports of Seattle and Tacoma are chock-full of container ships.

“We are seeing a historic surge of cargo volume coming into our ports,” says Tom Bellerud, the chief operations officer of The Northwest Seaport Alliance, which manages all cargo processing at the ports of Seattle and Tacoma. “The terminals are having a difficult time keeping up with processing all the cargo off these vessels fast enough.”

On both land and at sea, the entire supply chain is struggling to keep up. In the Pacific Northwest, it’s become such a clusterfest that the U.S. Coast Guard has been redirecting boats to anchor off the coast of Whidbey Island and other places they typically don’t park. Ship crews are having to wait days, even weeks, for the chance to dock at the ports and offload their precious goods.

It’s the same story up and down the West Coast. In San Francisco Bay, the traffic jam of container ships has gotten so bad that the U.S. Coast Guard has been asking ships not to enter the bay at all. Robert Blomerth, director of the USCG’s San Francisco Vessel Traffic Service, said last week that there were 16 container ships waiting in the open ocean outside the Golden Gate to get in and unload their cargo. He says it’s “completely abnormal.”

When we spoke to Gene Seroka, the head of the Port of Los Angeles, he said his port had 19 ships waiting to dock and they’re now waiting, on average, about five days to get in. In normal times, they don’t have to wait at all.

Lars Jensen, CEO of Vespucci Maritime, has spent 20 years studying the industry and he says what’s going on is unprecedented. “The container shipping industry is in a state of chaos that I don’t think it has ever been since it was invented,” he says.

The maiden voyage of the first container ship set sail from Newark, N.J., back in 1956. It may be hard to fathom just how big a deal this innovation was. It was just a big ship that carried containers, literally metal boxes. But these metal boxes enabled ships to carry dramatically more cargo, and, by standardizing shipping practices and using new machines to handle the boxes, shippers were able to slash costs and the time it takes to load, unload and transport that cargo.

Economists credit these metal boxes with increasing the efficiency of shipping so much that it stitched the modern global economy together more than anything else — more than all free-trade agreements put together.

Now economists are concerned that the plumbing provided by these miracle boxes and the vessels that transport them is clogged. It’s making it more difficult for stores to restock their shelves, manufacturers, carmakers and builders to get the parts they need, and farmers to export their products. It’s an important reason, analysts say, that we’re seeing consumer prices surge.

How did shipping get topsy-turvy?

In the early days of the pandemic, global trade hit an iceberg and sank into the abyss. The decline of maritime shipping was so dramatic that American scientists saw a once-in-a-lifetime opportunity to study what happened to whales in the absence of a constant deluge of vessels. The noise from the ships apparently stresses them out — kind of like they’re currently stressing out the residents of Whidbey Island.

Greater tranquility for whales in the first half of 2020 was the result of shipping companies canceling their trips and docking their ships. Then the economy rebounded, and American consumers unleashed a tidal wave of demand that swept through the shipping industry when they started shifting their spending patterns. Unable to spend money on going out, many started spending their money (and their stimulus checks) on manufactured goods — stuff that largely comes from China on container ships.

At first, it wasn’t the ships that were the problem; it was the containers. When the buying spree began, Chinese exporters struggled to get their hands on enough empty boxes, many of which were still stranded in the U.S. because of all the canceled trips at the beginning of the pandemic. More importantly, processing containers here has been taking longer because of all the disruptions and inefficiencies brought about by the pandemic. Containers have been piling up at dockyards, and trains and trucks have struggled to get them out fast enough.

“The pandemic has exacerbated longstanding problems with the nation’s supply chain, not just at the ports but in the warehouses, distribution centers, railroads, and other places that need to run smoothly in order for Longshore workers to move cargo off of the ships,” says Cameron Williams.

He’s an official at the International Longshore and Warehouse Union, which represents dock workers, primarily on the West Coast. Dock workers have been working through the pandemic to handle the increased cargo volume, he says, and at least 17 ILWU workers lost their lives to COVID-19. “We continue to work hard and break records month after month to clear the cargo as quickly as the supply chain allows,” Williams says.

It’s been all hands on deck to supply ravenous consumers and businesses with the stuff they want. The resulting traffic jams at West Coast ports means it takes longer to unload stuff, which then extends the time it takes for ships to get back across the Pacific to reload.

That congestion was already creating massive delays on both ends of the shipping supply chain, tying up large numbers of containers and ships and leading to growing backlogs and shortages. Then, in March 2021, the Ever Given, one of the largest container ships in the world, got stuck in the Suez Canal in Egypt. While the blockage didn’t directly affect the Asia-West Coast shipping corridor, it added to the global shortage of ships and containers by stranding even more of them out at sea.

As if all this weren’t enough, last month there was a COVID-19 outbreak at the Yantian International Container Terminal in China, which is normally one of the busiest ports in the world. The Chinese government implemented stringent measures to control the outbreak, and as a result, more than 40 container ships had to anchor and wait. “In terms of the amount of cargo, what’s going on in South China right now is an even larger disturbance than the Suez canal incident,” Jensen says.

The effects on the American economy

With so much shipping capacity bogged down, importers and exporters have been competing for scarce containers and vessels and bidding up the price of shipping. The cost of shipping a container from China/East Asia to the West Coast has tripled since 2019, according to the Freightos Baltic Index. Many big importers pay for shipping through annual contracts, which means they’ve been somewhat insulated from surging prices, but they are starting to feel the pain as they renegotiate contracts.

Rising shipping costs and delays are starving the economy of the stuff it needs and contributing to shortages and inflation. It’s not just consumers and retailers that are affected: American exporters are complaining that shipping companies are so desperate to get containers back to China quickly that they’re making the return trip across the Pacific without waiting to fill up containers with American-made products. That’s bad news for those exporters — and for America’s ballooning trade deficit.

As for when it’s going to get better, none of the people we spoke to believes it’ll be anytime soon. And it’s not even considered peak season for the shipping industry yet. That typically begins in August, when American stores start building their inventories for the back-to-school and holiday seasons. The residents of Whidbey Island may have to continue dealing with the nuisance of gigantic, noisy ships cluttering up the horizon for the foreseeable future.

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Source: How ‘Chaos’ In The Shipping Industry Is Choking The Economy : Planet Money : NPR

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References:

Shipbuilding NewsCruise Ship News, Ports News ,Salvage News ,Training News ,Government News, Environment News,Corporate News, Maritime Executive , Volga Targets Market, Nuclear-Powered Cargo Ship, China’s Exports, American Vulkan’s Service Team, JFE Steel, OMSA, OceanManager Inc.

How Will Pumped Hydro Energy Storage Power Our Future?

Pumped storage hydropower has proven to be an ideal solution to the growing list of challenges faced by grid operators.

As the transition to a clean energy future rapidly unfolds, this flexible technology will become even more important for a reliable, affordable and low carbon grid, write IHA analysts Nicholas Troja and Samuel Law.

“Anything that can go wrong will go wrong”. That old adage, Murphy’s law, must seem appropriate for many power grid operators in 2020.

This year has tested the safe running and reliability of grids around the world like few others. Often termed ‘the biggest machine ever built,’ managing a power system, involving the coordination of complex and instantaneous interactions, is a formidable task at the best of times.

With the impacts of the Covid-19 pandemic on top of extreme weather events, greater penetrations of variable renewables and increasingly aged thermal assets, the task has only become more demanding in many markets.

These challenges have brought into sharp focus the growing need for energy storage, such as that offered by pumped storage hydropower.

Recent events highlight the need for pumped storage

Covid-19 continues to have an extraordinary impact on electricity markets. During the height of worldwide lockdowns, with large sections of the economy shutdown or greatly impaired, electricity demand declined by up to 30 per cent in some countries across Europe and in India.

As Fatih Birol, Executive Director of the International Energy Agency (IEA) stated, the demand drop “fast forwarded some power systems 10 years into the future” regarding integrating higher percentages of variable renewable energy (VRE) which receive priority dispatch to the grid. Managing periods of such low demand can create “significant operational risks” for grid operators. In some markets, this has led to curtailing, or shutting down, wind and solar facilities to stabilise the grid.

During such periods, pumped storage hydropower, with its ability to both store and generate large quantities of energy over long periods, was the first port of call for those grid operators lucky enough to have such stations on hand. In Britain, its four pumped storage stations were hailed by the Financial Times newspaper as the “first line of defence in the battle to keep Britain’s lights on”. Able to increase system demand by pumping water back up to their upper reservoir, pumped storage is a more cost-effective way of managing the grid than paying operators to curtail variable supply.

In August, the U.S. state of California experienced rolling blackouts for the first time since 2001 due to a combination of record heatwaves driving up demand, faltering gas-fired stations and a lack of dispatchable generation. As Stephen Berberich, President of the California Independent System Operator (CAISO) said, “we thought there would be adequate power to supply the demand…we were wrong” and the costs to the Californian economy will be significant.

These managed blackouts provide yet another wake-up call for policymakers on the need to appropriately plan for a zero-emissions future. With limited balancing resources such as pumped storage, California’s grid did not have the flexibility to shift sufficient generating capacity to the evenings when the sun had set yet the demand remained high.

Given California’s aim of reaching 100 per cent clean electricity by 2045, mainly from wind and solar power which currently accounts for 20 per cent of generation, significant investment in flexible, low carbon balancing resources will be required.

In response, California is betting big on batteries for short-duration storage, from sub-seconds to up to four hours, to manage intraday variations in net load. However, with those high levels of VRE on the grid, long-duration storage, which can discharge for 10 hours or more at rated power, will be needed to accommodate the seasonal patterns of VREs. It will do so by shifting generation over days, weeks and months of supply and demand imbalance. This is a story that rings true for many countries across the world with ambitious climate targets.

Achieving California’s clean energy target is made even harder by the government’s decision to classify conventional hydropower stations greater than 30 MW as a non-renewable resource under its Renewables Portfolio Standard. This arbitrary classification is at odds with international consensus and penalises the state’s oldest source of affordable, flexible and low-carbon electricity.

Figure 1: Illustration of a closed-loop (off-river) pumped storage station and how it can be used support VRE.

Capabilities of pumped storage

With a total installed capacity of nearly 160 GW, pumped storage currently accounts for over 94 per cent of both storage capacity and stored energy in grid scale applications globally. This has earned pumped storage its name as the world’s “water battery”. It is a mature and reliable technology capable of storing energy for daily or weekly cycles and up to months, as well as seasonal applications, depending on project scale and configurations.

Pumped storage operates by storing electricity in the form of gravitational potential energy through pumping water from a lower to an upper reservoir (see figure 1). The result of this simple solution is a very high round-trip efficiency of 80 per cent, which compares favourably to other storage technologies.

Pumped storage tends to have high energy-to-power ratios and is well suited to provide long discharge durations at very low energy storage costs. Across different timescales, pumped storage can serve multiple functions (see figure 2). For example, at shorter discharge durations, it is suitable for ancillary services such as frequency balancing and back-up reserve.

With four to eight hours of discharge, it can provide daily shifting for day-night energy arbitrage. For longer durations over 10 hours, it can accommodate multi-day supply profile changes, reduce energy curtailment, replace peak generation capacity and provide transmission benefits.

Figure 2: The plot above visualises (logarithmic scale used) the estimated discharge durations relative to installed capacity and energy storage capacity for some 250 pumped storage stations currently in operation, based on information from IHA’s Pumped Storage Tracking Tool. The vast majority of pumped storage stations have a discharge duration longer than 6 hours, and some are capable of seasonal storage.

The majority of today’s pumped storage stations were built some forty years ago. Yet, they are still providing vital services to our power systems today. With occasional refurbishment, these long-term assets can last for many decades to come.

Despite being a mature technology, the resurgence of interest in pumped storage has brought forth numerous new R&D initiatives. One prominent example is the European Commission’s four-year XFLEX HYDRO project, which aims to develop new technological solutions to enhance hydropower’s flexibility. Latest innovations, such as variable speed turbines and smart digital operating systems, will be tested on a range of pumped storage demonstration sites.

While often thought of as geographically constrained, recent studies have identified vast technical potential for pumped storage development worldwide. Research by the Australian National University highlighted over 600,000 potential sites for low-impact off-river pumped storage development, including locations in California. There is also growing interest in retrofitting pumped storage at disused mines, underground caverns, non-powered dams and reservoir hydropower stations.                              

Seeking a path toward a clean, affordable and secure transition

California is a pioneer in the energy transition. Though many opponents of wind and solar have unfortunately used the blackouts as an example of why their rapid roll-out is a threat to a secure, reliable grid. As noted earlier, the blackouts were not due to too much VRE capacity being on the grid, but a lack of integrated planning to support an evolving electricity mix with sufficient dispatchable generation and storage.

The IEA recently stated that, dispatchable pumped storage, along with conventional hydropower, is the often overlooked workhorse of flexibility. However, its development, like many energy storage technologies, is currently being hampered by the lack of appropriate regulatory frameworks and market signals to reward its contribution to the grid. Outside China, year-on-year installed capacity growth has been anaemic at just 1.5 per cent since 2014 (see figure 3).

Figure 3: Global pumped storage installed capacity by region. Note that 2019 recorded the lowest growth in pumped storage capacity for over a decade, with only 304 MW added. Source: IHA’s database.

Given the technology’s long lead times, investment decisions are needed urgently to ensure that pumped storage, in conjunction with other low-carbon flexibility options, are available to grid operators without needing to rely on carbon-intensive gas-fired generation as a backup. This is especially important as VRE penetration reaches increasingly high levels not yet experienced on a regular basis.

IHA is continuing to work across the hydropower sector and is seeking to learn lessons from other sectors to support the development and deployment of pumped storage. Together with national authorities and multilateral development banks, we are developing a new global initiative to shape and enhance the role of the technology in future power systems.

Further information

Join our Hydropower Pro online community or sign-up to our email newsletter via our website homepage for latest developments.

To learn more about IHA and our work on pumped storage, please visit: www.hydropower.org/pumped-storage

To contact the authors please email nicholas.troja@hydropower.org and samuel.law@hydropower.org

Nick Troja is a Senior Hydropower Sector Analyst. His work focuses on building and sharing knowledge on global hydropower, including identifying trends in project financing, policies and market dynamics.

Before joining IHA, Nick worked for the UK’s steel industry focusing on the EU Emissions Trading System and the impact of other EU level climate change and energy policies on the sector. Prior to this he worked for the UK’s department of energy and climate change, covering a wide range of policy areas and as an adviser to the shadow minister for emissions trading and climate change in Canberra. He holds a bachelor’s degree in international business and master’s degree in public policy.  

Samuel Law is Hydropower Sector Analyst. His work focuses on building and sharing knowledge on sustainable hydropower development, working on topics such as clean energy systems, green financing mechanisms and regional hydropower development.

Samuel holds a master’s degree in environmental technology from Imperial College London and has a technical background in environmental engineering. Prior to joining IHA, he completed an internship with the United Nations in Bangkok. At the UN, he conducted research on Sustainable Development Goals, integrated resource management and collaborative governance, as well as supported project implementation and organised international conferences. He also has experience as a business intelligence analyst in London, where he conducted research on market dynamics and investment trends across industries.

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Australian Renewable Energy Agency

Like the hydroelectric power stations that have powered Tasmania for a century, a new generation of pumped hydro plants will play an important role in Australia’s future energy mix. With the Australian Energy Market Operator forecasting that 15 GW of large-scale storage will be needed by the early 2040s, pumped hydro is expected to operate alongside large-scale batteries and other energy storage technologies. Learn more about pumped hydro here – https://arena.gov.au/blog/how-could-p

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