Ursula von der Leyen has rightly suggested extending the “Iberian exception” to the rest of the European Union in response to demands by countries such as Germany that are heavily dependent on Russian gas, is a radically urgent issue like few others. Even before Russia’s unwarranted invasion of Ukraine, I spoke here about how counterproductive the EU’s energy auction system is.
Beyond the temporary and short-term solution of decoupling gas prices in response to the Kremlin’s blackmail, we need in-depth reform, a series of changes that electricity producers, distributors and consumers need to understand are the only rational response to a climate emergency that threatens to plunge not only Europe, but the whole world intounprecedented disaster.
Regular readers will know that I’ve written extensively about the climate emergency; so if you are a denialist or revisionist on this subject, you might as well stop reading now.
Those of us who understand what fossil fuels are doing to our planet, might want to consider the following question: how would you feel if your local supermarket charged you top prices for everything you bought? Obviously, you’d choose the most expensive products. But what about producers and distributors? They would be desperate to stock up on precisely those very expensive products, since they are the ones that are going to set the price of the total basket.
A simplistic analogy: in reality, as consumers, we have very little say in the energy market, and producers and distributors face a range conditioning factors. But bear with me and think where the EU’s current energy auction system is leading us: firstly, to unsustainable prices. With Germany and France already looking at €1,000 per megawatt hour, and forecasts that point this winter to double that — especially in the case of France, which is limited by the constant maintenance problems of its nuclear power plants — we are talking about a catastrophe that will force governments to spend billions of euros to protect businesses and many, many households.
Then there is the vital issue of dependence on countries such as Russia. Either we break radically with Russia, or Russia breaks Europe. And breaking with Russia means not “buying less gas”, or switching to nuclear, a supply chain that Moscow also controls. It implies transitioning toward renewable energies, and fast.
And for those out there who have no idea how advanced solar and wind turbine technology now is, let’s understand how the technology works: the same curve that applies to the evolution of microprocessors works for solar panels, which are increasingly powerful and cheaper, as for batteries and for many other storage systems. Oversizing renewables and storage in the form of batteries — again, ever more powerful, along with green hydrogen, is the only way forward.
A balanced energy mix means using existing nuclear power plants until their maintenance costs become unsustainable, while overbuilding onshore wind, offshore wind and solar, and investing in batteries and green hydrogen, plus a whole host of additional storage technologies, among them reversible power plants. The simple fact is that energy can be stored in large enough quantities to make up for the discontinuity of renewables, and anyone who says otherwise is either lying or has no idea what they’re talking about (or works in a nuclear power plant).
In short, as long as the current auction system remains in place, there is no incentive for energy producers and distributors to change, or worse. The only people who want to keep using gas are the oil majors, which is why they oppose over-dimensioning the cheapest production systems.
We need to reform the energy market, but not in two months, not in a week: it needs to happen now. In days, not weeks or months, and in depth, not with temporary patches. Few things make so little sense and are so misaligned with our current and future needs as the current situation.
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This post was previously published on Enrique Dans’ blog.
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