Europe is not going to achieve a competitive energy transition with the current interventionist policies. Europe does not depend on Russian gas due to a coincidence, but because of a chain of mistaken policies: banning nuclear in Germany, prohibiting the development of domestic natural gas resources throughout the European Union, added to a massive and expensive renewable rollout without building a reliable backup.
Solar and wind do not reduce dependency on Russian natural gas. They are necessary but volatile and intermittent. They need backup from nuclear, hydro, and natural gas for security of energy supply. Dependency on these backup sources rises in periods of low wind and little sun, just when prices are highest.
“Solar goes to zero for twelve hours a day, and that is guaranteed. The wind blows sometimes, and sometimes it does not, also guaranteed. They both depend on weather, which is 100% out of human control. They are on their best day a supplement,” wrote a Navy pilot follower.
Batteries are not an option, either. It is impossible to build an industrial-size network of enormous batteries; the cost would be prohibitive and the dependency on China (for lithium, etc.) to build them would be even more of a problem. At current prices, a battery energy-storage system of Europe’s size would cost more than $2.5 trillion, according to an MIT Technology Review paper, massively more expensive than any other alternative.
The added cost of a battery grid plus the distribution and transmission network would make household bills soar even further.
Inflation was already out of control in Europe before the invasion of Ukraine was even a risk. Consumer price inflation in Spain was 7.6 percent, in Portugal it was 4.2 percent, and in Germany, 5.1 percent. Euro area consumer price inflation was 5.8 percent.
In the face of the impact on prices and energy from the invasion of Ukraine, we must remember:
Europe was already in an energy crisis in 2020 and 2021, with the cost of CO2 permits soaring and wholesale electricity prices reaching record-high levels by December 2021.
Europe does not “depend on Russian gas.” It is codependency. Russia needs Europe to export, and Europe has no cheaper alternative. Let us remember that Russian gas is much cheaper than any other realistic alternative.
The long-term contracts signed with Gazprom are closed 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 with liquefied natural gas from Norway and the North Sea, the United States, Algeria, Qatar, or Israel, but it will be much more expensive.
The only alternative to Russia is to show that European countries have diverse and cheap sources of supply. If Russia sees that European governments ban nuclear power, prohibit the development of indigenous gas reserves, intervene in imports, and add massive CO2 taxes, 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 think hard about misguided policies when the continent has been saved this winter by natural gas imported from the United States produced with fracking, a technology that has been banned in Europe.
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