Renewables or Russia
Europe needs to coordinate its energy policy but can’t even agree on the key targets of an overhaul
09. Nov. 2014 –
Few had reckoned with the development: At the close of 2014, the price of petroleum is more or less at the same levels as ten years ago – at between $70 (€56) and $80 per barrel. Before the financial crisis, the barrel price was almost twice as high at $147. Now the global demand for oil is growing, but the price is going down.
Primarily this is because the supply of crude oil is increasing, mainly due to the increased use of fracking in the US, but more oil is also coming from Libya and Iraq. In order to shore up its market share against the competition, Saudi Arabia recently lowered its prices.
Motorists, homeowners and tenants are happy about falling energy costs. But businesses and politicians basing their strategies on rising energy costs are being thrown off-kilter. This is particularly the case for the European Union, which promotes the production of renewable wind and solar energy and underlines the importance of climate protection.
What’s the point of expensive efforts to overhaul the energy system, many are asking, when contrary to all expectations, fossil fuel is not getting more expensive, but basically cheaper again? “The low price of oil is hampering the necessary reconfiguration and reorientation of European energy policy,” said Kirsten Westphal of the German Institute for International and Security Affairs (SWP) in Berlin, which advises the government.
The European policy stance on energy is in any case a contentious issue. It is a laborious process to find compromises between the German preference for renewables, the Polish for coal, and the French and British for nuclear power. Then, in view of the civil war in the Ukraine, there is also the pressing question of energy security: Should Europe not be making itself less dependent on gas and oil supplies from Russia? The falling price of oil is another uncertainty factor that European energy politicians would therefore rather do without.
To maintain supply security at acceptable prices, the new EU Commission under Jean-Claude Juncker is currently underlining three directions for reform. Firstly, the plan is to increase energy production from clean sources. “I’d like Europe to be the global number one in renewables,” said Juncker in his keynote speech to the European parliament on July 15.
This approach is backed up by the assumption that a high number of wind and solar power plants has several immediate advantages in the long term: lower production costs than in fossil systems with oil, gas and coal, increasing independence from unreliable external suppliers plus containment of dangerous climate change.
Secondly, the focus is also on diversifying supply channels for fossil energy sources to reduce dependence on Russia. And thirdly, the Commission aims to improve the EU’s internal energy market, what’s known as the energy union, to make it easier for the 28 member nations to support one another. But all three goals are disputed.
With regard to regenerative energy sources, the latest resolutions passed by the 28 governments appear to be far-reaching and rigorous. By 2030, EU members aim to reduce greenhouse gas emissions by 40 percent on 1990 figures, as well as increase the share of clean resources and energy efficiency by 27 percent.
SWP economist Westphal nevertheless remarks: “Renewable energies should be afforded a greater status. In this respect, the EU Commission program to 2030 is a step backwards. It’s leading to less European integration and moving further away from a coordinated policy.”
At first glance the renewables target of 27 percent sounds good, but governments have not been able to agree on concrete targets for each individual member nation. What should Poland’s target be, for example, and what about France? This question remains open.
While Germany has already hit the 27 percent target with green electricity, other nations are not being compelled to make more concerted efforts. This means it is feasible that the target will be missed and the EU will pass up on the chance to acquire the decisive key to solving its energy problems.
In the light of these considerations it also appears equally questionable whether the diversification goal is realistic. Europe has in the meantime established a considerable dependence on Russia. Also as part of an attempt to make itself more self-sufficient with regard to suppliers in the Middle East in the wake of the oil crises of the 1970s, the EU is now reliant on Russian pipelines.
More than a third of its entire gas and oil requirement is supplied by Gazprom and other Moscow entities. The dependence increases as you move across from western to eastern Europe, country by country. Russian gas doesn’t figure at all in Spain, in Germany and Italy it has a 36 percent share of the market, in Austria 60 percent and in the Baltic States and Finland, 90 to 100 percent.
“It is expensive and arduous to replace oil and gas imports from Russia with supplies from other sources to any significant degree,” said SWP expert Westphal. This would initially require the construction of new pipelines with protracted negotiations and planning processes. And once a new pipeline such as the Tanap project to Azerbaijan is completed in 2019, it raises another question: Is Europe not jumping out of the frying pan and into the fire? Are we not just swapping one authoritarian supply country for another that is organized in a similar fashion and one that is also located in a crisis region?
Aside from Russia, the world’s large conventional gas reserves are located in Turkmenistan, Qatar, Iran, Libya and Algeria – none of them unconditionally attractive cooperation partners. But by working together with these nations, Europe could at least manage to slightly scale down Russia’s influence on energy supply. In addition, fracking gas and oil from North America represents a new reliable source of fossil energy. It is however not yet clear how abundant these sources might be for Europe in the future.
The third European reform approach – the energy union – is also on shaky ground. The EU Commission has identified dozens of inefficient weak spots: opportunities for the better integration of energy grids still primarily functioning on a national level. There has been little evidence of any major rapid progress in this regard. The aim is to have 15 percent of electric power moving across borders by 2030. If change remains at this pace, the supposed EU energy policy overhaul will have more of a theoretical than a practical relevance.