Dividends and Europe’s scorching summer puts strain on energy supply

If you read headlines from Europe you likely read about the weather – it was sunny and hot. While for many people that might be a good thing, it is not good for agriculture and water levels. The lack of rain in Europe has caused crops not to grow and similar to California – wildfires have flared up, in addition the rivers that flow through Europe are much lower than normal. The lack of rain and higher temperatures means people turn to air conditioning for longer periods of time. This pushes up demand for electricity. How does Europe generate electricity.

In an article by Jason Horowitz of the New York Times News Service, some of the electricity goes from gas power plants, however due to the war in Ukraine and Russia, the President of Russia wanted Europe to support Ukraine less so he had Gazprom slow gas distribution to Europe.

Europe had to turn to over sources including hydro power from Norway. If you think about Norway images of steep fjords, where there is abundant water to generate electricity are found and many areas have hydro plants. The hot summer has been hurting Norway with reservoirs (think Lake Mead in Nevada) are going down. This means salmon swimming upstream to spawn have lacked enough water to migrate as well as hydropower reservoir supplies, provides 90% of Norway’s electricity as well as exports to other countries, have sunk to the lowest levels in 25 years. The shortages have caused tension – higher prices for electricity and political tension – other countries need more power.

Norway did not have much snow during the winter and has experienced the dry spring, April was the driest in 122 years which caused the reduced water levels in rivers and lakes.

Linking to dividend paying stocks, when you invest in an utility company particularly one that uses hydro, there is capital cost to put up the dam, but then the dividends should be standard operating procedures. The regulators ensure prices go up to ensure good maintenance and people costs, but after that it should be good for stockholders. Climate change affects everyone, it is important to understand what and how your company adjusts to it which meets your expectations.

There are more questions than answers, till the next time – to raising questions.

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