Europe will not achieve a competitive energy transition with current interventionist policies. Europe does not depend on Russian gas because of a coincidence, but because of a series of wrong policies: nuclear ban in Germany, ban on the development of national natural gas resources throughout the European Union, added to a massive and costly deployment of renewable energies without building a reliable backup. Solar and wind do not reduce dependence on Russian natural gas. They are necessary but volatile and intermittent. They need the help of nuclear, hydro and natural gas for security of energy supply. Dependence on these backup sources increases during times of low wind and low sunshine, just when prices are highest.
“The solar goes to zero twelve hours a day, and it’s guaranteed. The wind sometimes blows, and sometimes it doesn’t, also guaranteed. They are both dependent on the weather, which is 100% beyond human control. They are on their best day an extra,” wrote a Navy pilot follower.
Batteries are also not an option. It is impossible to build an industrial-scale array of huge batteries; the cost would be prohibitive and reliance on China (for lithium etc.) to build them would be even more problematic. At current prices, a battery energy storage system the size of Europe would cost more than $2.5 trillion, according to a MIT Technology Review paper, massively more expensive than any other alternative.
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The added cost of a battery grid plus the distribution and transmission grid would further drive up household bills.
Inflation was already out of control in Europe even before the invasion of Ukraine was a risk. Consumer price inflation in Spain was 7.6%, in Portugal 4.2% and in Germany 5.1%. Consumer price inflation in the euro area was 5.8%.
Faced with the impact on prices and energy of the invasion of Ukraine, it should be remembered:
- Europe was already in an energy crisis in 2020 and 2021, the cost of CO2 permits soaring and wholesale electricity prices reaching record highs by December 2021.
- Europe does not “depend on Russian gas”. It’s codependency. Russia needs Europe to export, and Europe has no cheaper alternative. Let’s remember that Russian gas is much cheaper than any other realistic alternative.
- The long-term contracts signed with Gazprom are concluded at prices that can be up to ten times lower than some of the current alternatives. The 150 billion cubic meters that Europe imports from Russia can be replaced by liquefied natural gas from Norway and the North Sea, the United States, Algeria, Qatar or Israel, but it will be a lot more expensive.
- The only alternative to Russia is to show that European countries have diversified and cheap sources of supply. If Russia sees that European governments banning nuclear power, prohibiting the development of indigenous gas reserves, intervening in imports and adding massive CO2 taxes, the Russian authorities will know that there is no competitive alternative and that European industry and consumers will collapse due to the rising cost of energy
- European governments should give serious thought to misguided policies as the continent was saved this winter thanks to natural gas imported from the United States produced with hydraulic fracturing, a technology that has been banned in Europe.
- Europe wants cheap and plentiful energy, but politicians demonize nuclear, gas and oil. All the interventionist proposals put forward by European politicians come at a higher cost for long-suffering consumers.
- Natural gas is flowing all the time and is cheap and plentiful. It cannot be replaced by intermittent, volatile and unpredictable renewable energies. The example of Germany is clear. After investing heavily in renewable energy and doubling consumer bills, it is more reliant on lignite coal and Russian gas to secure supply. Germany had to reactivate coal-fired power plants after spending over $200 billion on subsidies and renewable energy!
- All technologies are needed, and renewables are essential, but they are not the alternative because they need a reserve of natural gas while the technology is being developed, because it is still in its infancy. Let’s not forget that the installation of renewable energies involves an enormous cost for the networks. Who will reduce the bills if the fixed cost of the networks is increased by the 150 billion dollars that we estimate are necessary to reinforce the distribution and transmission networks?
- All of the “magic” alternatives that interventionism sells are moving from dependence on Russia to dependence on China. Where are we going to find silicon, aluminum, rare earths, copper, lithium, etc.? necessary for these massive magical investments announced?
- The demonization of nuclear energy has left Europe in the hands of expensive and volatile alternatives. The energy transition must be considered taking into account the importance of security of supply and competitiveness. We need all technologies, without ideological bias. We need solar, wind, natural gas, hydroelectricity, oil and nuclear, otherwise we will go from crisis to crisis and pay more and more.
- It is absurd to maintain the hidden CO2 emissions tax regime during an unprecedented crisis. Governments should use these revenues to reduce citizens’ bills.
- Border taxes on petroleum products and natural gas do not tax producers; they tax consumers in European countries. Anyone who believes that the announced taxes will be paid by Qatar, Nigeria or Brazil has a serious problem of economic understanding.
A real energy transition must be competitive, reliable and cheap, not a machine to collect taxes and plunder. He must consider all technologies. More industry and less politics. More competition and less ideology.
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