The war in Ukraine has precipitated a crisis in European and world energy markets. Europe gets about 40 per cent of its gas and 30 per cent of its oil from Russia; the price of both has climbed to previously undreamed-of levels, with fears of embargoes and supply shortages.
This could result in a great deal of economic woes and hardship; with high energy prices driving inflation, and hence high interest rates; high energy prices meaning that consumers will be squeezed, especially poorer people who may not be able to afford to pay their energy bills. Industry will suffer, with a worry that some parts of Europe, at least, will face energy shortages.
One line of argument is that this precarious position we have found ourselves in is a fault of energy policy, in particular because of governments’ woke-green-net-zero policies. The basic argument goes that we have been neglecting investment in developing fossil fuels, and instead being investing in unreliable, intermittent, renewable energy.
This suggestion seems to me to be the opposite of true, yet I have seen this meritless argument repeatedly repeated – from the Financial Times all the way down to the Daily Mail, and even by some of my fellow Radix Big Tent bloggers.
Below is a copy of a graph of the mix of European electricity generation, from the International Energy Agency…
(A graph from UK would not look too different – except we get a lot less of our gas from Russia, and have virtually eliminated coal).
You will see from the graph that the share of renewables never drops below 30 per cent, and is mostly above 40 per cent of the electricity generated in Europe. The graph illustrates the intermittency from renewables – that is the gap between the peaks and the troughs – which is a maximum of about 15 per cent of total supply. From the graph you can also see how the intermittency is dealt with – coal and gas use increase during these periods to make up the shortfall. Yet despite this intermittency, Europe gets at least 30 per cent of its energy from renewables, all the time.
To analyse the criticism of “green” policies I want to think about 1) the situation we would be in if we hadn’t been investing heavily in renewable energy, 2) the situation we would be in if we had actually pursued policies advocated by “greens”, and finally 3) our best way out of our current situation. This latter I will mostly deal with in my next blog.
What are policies that have been advocated by greens? In simple terms, these have always been to shift investment away from fossil fuels into climate solutions at a much greater rate than have been for at least a decade – only very recently has the investment reached the appropriate order of magnitude.
Also, recognising the intermittency of renewables, a large chunk should have been invested into storage and demand management (such as energy efficiency and public transport) with supporting legislation (such as fuel and energy efficiency standards).
- Where would we be without renewable energy? To use the technical term, we would be up shit creek without a paddle. For the majority of the year renewable energy provides more energy than gas and coal combined. The marginal cost of producing renewable energy is (virtually) zero, because it’s free when the sun shines or the wind blows, so it counters price fluctuations of gas. If we don’t have this large chunk of free renewable energy, we would somehow have a 30-45 per cent gap to fill mostly with gas and coal; either we would be twice as exposed to gas prices or we would be burning a load of coal. It is true that some really stupid mistakes have been made in the transition, exhibit number 1 being Angela Merkel’s decision to prematurely shut down Germany’s nuclear reactors in a knee jerk response to Fukushima nuclear disaster. I will deal with nuclear in another blog. Given that we still need fossil fuels, no one asked our policy-makers to be so reliant on Russian gas, when there were clear risks of doing so. That is not a green policy; it’s a stupid policy.
- Where would we be if we followed “green” policy? Unambiguously in a much better place. Ever since the Stern Review came out in 2006, there has been a convincing economic case that investing renewables at scale was advantageous to not doing so, and until recently this has been ignored by policymakers. (The Stern review proved wrong – it overestimated the cost of renewable scale up and it underestimated the damage caused by climate change -not even factoring in the high prices of fossil fuels over the last couple of years all of which make the economic case even more compelling).
If that missed investment had actually been made, and let’s say for argument’s sake all it did was increase our renewable capacity by 50 per cent – with that level of investment we should have by now totally wipe out need for fossil fuels for half the year, and cut down their use by a half the other year, which means that even in a worst case scenario with decent storage we would be pretty much self-sufficient and independent of Russian gas.
But ‘greens’0 didn’t just advocate more investment, but also better investment.
The intermittency issues of renewables have been well known from the outset, and strategies for dealing with this exist and need to be developed, but generally policy-makers have failed to do so. These are demand management, energy storage and diversity of supply.
I will deal with this in the aforementioned future blog, but just suffice to say here that – if we had 10 years more investment at scale in renewables – even myopic policy-makers would have started to address intermittency, which by now would at least be part solved, meaning even less gas.
- Where we go from here? By far the best way of going from here is speeding up the net zero transition. A recent report by the IEA argues that a rapid net-zero transition would be cheaper than a slow one – so let’s just do it. Critics would say that we don’t have time, we have a crisis now, which we need to sort out. This is true, but the alternatives have little chance of success and would take more time than a rapid transition. So, for example there are plans to increase import of liquified natural gas (LNG). It is questionable that there is enough supply of this anyway but to increase supply of this would need the building of a load of ports and pipelines. Is this going to be quicker than building wind turbines and solar? Moreover, this is a time where there is more investment available for clean energy then there are projects, so accelerating the already substantial development of renewables is achievable. Governments can help speed this up, for example by speeding up planning consent. On the other hand, investors are pulling out of fossil fuel because, quite rightly they don’t see a future in it.
We also import gas for other uses, such as home heating, and oil from Russia. For as long as I can remember, greens have been advocating efficiency standards and investment, whilst industry have been pushing back saying it would damage their profits, or cheating on their emissions.
Meanwhile, crazy and heavily-mocked green protesters have been chaining themselves to motorways – advocating rapid roll out of home insulation – which would make us less reliant on gas and mean that poor people would be warm in winter, whatever gas prices did. And our “sensible” governments have been have been arresting these people for making these perfectly reasonable suggestions.
If you really want to blame someone for the current crisis, blame politicians making stupid choices, and the fossil fuel industry. The people advocating gas as a transition fuel were the oil and gas industry. The jury is out on whether gas is actually any better for the climate than coal – because natural gas (methane) is a powerful GHG gas, so if there any fugitive emissions it wipes out any gains on carbon dioxide. And we are getting gas from Russia, which is not exactly known for its transparency and good environmental record.
In summary, we’re not so dependent on Russian oil and gas because of our “green” policies, but because we’ve been to slow in taking them up, and because we’ve watered them down. All of the policies advocated by greens, if followed, would further reduce our dependence on imported Russian oil and gas.
If we hadn’t scaled up renewable energy we would be in a far worse situation. To describe reversing our partially successful green policies to go back to failed fossil fuel dependency as stupid is an understatement.
Fortunately, this is the way the EU are probably going to continue with the green transition, and so are the UK, despite Boris’ talking about fracking and paying his homage to the Saudi Arabian autocrat. The reason is not because they are woke but because it’s the only viable way/
Long term investors have decided that the net zero transition makes sense financially and are investing accordingly, and the high fossil fuel prices is strong market signal to accelerate. Respectable investors are disinvesting from fossil fuel; only bottom feeders are buying them up.
I have a few other issues I would like to cover, such as what a particularly dumb idea fracking is, the thorny question of nuclear, and that we don’t just use natural gas for electricity generation. I shall cover these in my next blog.