Thursday, January 27

Foot on the gas: Is Europe’s energy crisis bad news for renewables?


With the 26th Conference of Parties (COP 26) kicking off this week in Glasgow and the centrepiece of discussions at the Conference being how to decelerate the spate of climate change, including advancing swift energy transition, Europe’s energy crisis could not have come at a worse time.

News out of Europe in the last few months has revealed a 600% increase in the price of gas. This has millions of people facing the biggest rise in energy bills in a decade, with predictions of worse outcomes as the winter approaches. While many factors are responsible for this crisis, the situation has made for an easy target for critics of the clean energy transition – a transition which Europe is known to be at the forefront of. For these critics, Europe moved too quickly in phasing out its fossil fuels – coal, nuclear and swing gas supplies. Yet can we blame the transition for the crisis?

According to Faith Birol, International Energy Agency (IEA) Chief, “Recent increases in global natural gas prices are the result of multiple factors, and it is inaccurate and misleading to lay the responsibility at the door of the clean energy transition.”

Like Birol opined, various factors are culpable in the European energy crises, first of which is the typical volatility associated with the oil and gas market. Also, the pandemic led to reduced production of both oil and gas across the world. With the rapid economic recovery, industries are re-opening and life has almost returned to business as usual. With this, typical storage gas that would have been produced from the wells that should produce in a normal year and stored isn’t available, while demand skyrockets. According to data from Gas Infrastructure Europe, the percentage of working gas in storage is now at 74% in Europe, compared to this time last year when it was at 94%. This mismatch is one of the factors.

There are equally concerns that while Russia could increase its gas supplies to Europe, being the largest supplier of gas to the region, it may be milking the crisis as a lobbying tool to ensure the Nordstream 2 pipeline is approved to come online. Another factor is the increasing demand for Liquefied Natural Gas (LNG) in Asia, particularly China, due to extreme weather conditions and rising energy demand. Equinor, which is one of Europe’s largest gas suppliers, noted in its September gas market update that gas prices have increased due to a strong LNG demand from Asian countries. With China willing to pay a premium on large LNG shipments, prices climb and availability drops.

However, Europe is not alone in this energy crisis- perhaps lending more credence to why the transition cannot be blamed. China, the chief coal country, has its fair share too. Its energy crisis started in late August when power curbs and outages began to affect at least 20 provinces in the country. Recently, residential blackouts started happening in the northeast of the country and China has now loosened restrictions on coal mining operators in its coal belt region. In the US too, it is predicted that this winter roughly half of U.S. homes heated by natural gas could see as much as a 30% hike in their bills. The pandemic, alongside changing weather conditions due to climate change and the rising global demand for energy have been major contributors to Europe’s – and indeed the world’s – energy crisis.

Contrary to the arguments that the energy transition is too swift, the problem in fact is that the transition has not been quick enough. Samantha Gross, director of the Energy Security and Climate initiative at the Brookings Institution quipped in an interview that “Overall, renewables have actually been helping to stabilize prices.” Better still, the outlook on renewables anticipates that they will bring down energy prices even more in the future due to rapidly falling prices in their technology. What needs to be done at this time is to move the transition along quicker, yet this must be done strategically to ensure energy security. Two things matter in this regard- storage and density.

At the COP, discussions should centre on developing and financing large storage capacity for renewables, driving technology for non-fossil fuel heat pumps and accelerating green hydrogen, biogas and other energy-dense fuel sources. Also, understanding the place of natural gas as a transition fuel, significant investments should be channelled towards carbon capture and underground storage technologies, in order to decarbonize gas.

In Nigeria, the National Association of Petroleum Explorationists (NAPE) has insisted that oil and gas remain the choice fuel till 2070. OPEC’s Secretary General, Mohammed Barkindo has also maintained that “Oil will retain its number one position in the global energy mix, providing 28% of global energy needs by 2045.” This defensive stance for fossil fuels will only stifle the transition and fails to realize that the current energy crisis, similar to that of 2020, is not because we have failed to include fossil fuels, but because we have come to rely too much on them and not developed enough renewables. Hopefully, COP 26 realizes ambitious actions to do this.



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