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A recent report by the Oxford Sustainable Finance Group, ‘The Race to Replace: the economics of using renewables to free Europe from Russian gas’, highlights many of the shortfalls with Europe’s ‘green’ energy transition, and stresses that a very substantial investment is required to successfully replace Russian imports with green alternatives by 2028.
As the report emphasises, it’s “critically important” that the EU “wean itself off its dependency on natural gas, and Russian natural gas specifically. There are near term energy security concerns, given the cost-of-living crisis due to the Russian-Ukraine war, as well as the imperative of achieving net zero emissions from a climate perspective; and realising other policy objectives, including EU leadership in green technologies, and providing more jobs”.
Nonetheless, despite the ambitious EU targets like reducing greenhouse gas emissions by 55% for 2030 and the REPowerEU initiative to diversify energy supplies and promote renewables, the report’s analysis concluded that these measures have been insufficient to meet the EU’s goals, despite there being no shortage of zealous climate ideologues in Brussels. As the report states, in light of the Ukraine War, the “EU has diversified its natural gas supplies from countries such as Azerbaijan and the United States”, but however, “for the EU to use such natural gas sources, the EU must construct additional infrastructure that would allow the EU to import and distribute this form of natural gas to Member States”.
Furthermore, the report considers that “the EU’s focus on natural gas diversification versus elimination raises serious questions about EU’s commitment to addressing climate change as well as its exposure to risks associated with energy security”. Indeed, importing gas from undemocratic countries in unstable neighbourhoods, such as Azerbaijan, Algeria or Qatar, leaves the EU vulnerable to the same geopolitical risk and energy insecurity in the future that it is trying to wean off in the present.
On a more positive note, the report is optimistic as far as Euro-environmentalist ideologues are concerned, as it concludes that “it is possible to replace Russian natural gas in electricity and heating by 2028 under Race to Replace”, which is the investment and policy scenario proposed by the paper that entails a faster deployment of green technologies for power generation and heating. Nonetheless, the report’s analysis envisions a very substantial investment to be able to achieve these outcomes through Race to Replace. On the investment side, the report concludes “The total capital expenditure of the Race to Replace, assuming Russian natural gas is eliminated by 2028, is €811 billion, split across renewables at €706 billion and heat pumps at €105 billion. The incremental capital expenditure is €512 billion, or about 70% more than under a business-as-usual scenario”. At least, “50% of the incremental investments would be recovered by fuel savings”.
On the policy side, the report considers that Europe will “require a more conducive policy environment, including faster permitting for renewable electricity, diversified and secure supply chains, widespread weatherisation of facilities and a supportive subsidy and financing ecosystem”. Specifically, 4 policy recommendations are formulated to simultaneously achieve decarbonisation and energy security: providing a “supportive subsidy and financing environment for green technologies”, to “strengthen and enhance transmission system capacities and reduce renewable electricity deployment permit times”, to “rapidly grow the pool of a renewable workforce who have the skills and expertise to deploy renewable technologies“, and to “ensure sustainable and reliable supply chains that can ensure renewable production throughput achieves the levels needed for rapid deployment”.
Although the report is optimistic about Europe’s transition, it does implicitly shed light on the folly of the approach that Europe has been pursued thus far. Despite all the ambitious targets and the emissions reduction or taxes that harm ordinary citizens and businesses, very little has actually been done to deploy a green and renewable energy portfolio. One can recall examples of policy blunders, such as ecosocialist President Macron’s blocking of the Midcat pipeline that would have transported natural gas from Northern Africa into Europe via Spain; instead replacing the project with a hydrogen pipe that has no hydrogen to carry. Another example is Spain’s demolishing of dams and reservoirs (108 in 2021), which is particularly ludicrous at a time when there have been record high electricity prices, and where Spain’s primary sector is suffering a devastating drought.
Furthermore, as the report itself highlights, many countries have failed to walk the talk, as their ambitious targets are not matched with a deployment of their renewable potential. As the report argues, Spain suffers a “low exploitation of sun and onshore wind resources”, using only “1% of available land area for renewable deployment and 1% of potential wind resources” in the sea. Even Germany “only uses 7% of its land area available for renewable energy projects” according to the report.
And indeed, at an EU level, there are constant divisions and bickering over renewable deployment, most prominently over nuclear energy. While countries like France and Poland are pragmatic and recognise the huge potential of nuclear as a relatively clean transition energy, other countries like Germany and Sweden are dogmatically zealous in their phobia of nuclear, and have used every opportunity they’ve had to block the classification of nuclear-derived hydrogen as a renewable energy. This is not only self-harming, but ironic given Germany’s role in Europe’s geopolitical submission to Russia until 2022.
And of course, an aspect that isn’t addressed by the report but is perhaps the most important, is the huge cost for ordinary citizens and businesses. EU bureaucrats tend to have no qualms when mobilising 800 billion euro sums of money, but the reality is that much or it will ultimately come from taxpayers’ pockets, and will impose significant short-term costs on national economies. In fact, last week Macron outlined a future French green industry law to industrialists, and called for a “European regulatory break” on EU environmental constraints.
For an armchair environmentalist par excellence like Macron, who in 2018 proposed a petrol tax that would hit hard-working families and only scrapped it after the gilets jaunes torched France, to make such a declaration, means that EU bureaucrats should probably also pause for thought and consider a more pragmatic approach to the energy transition. One where not only important climate considerations are included in the calculus, but the impact on middle and working-class families, as well as businesses, is also taken into account. Without a strong working and middle-class, there is no future for Europe, regardless of whether it is an eco-friendly Europe or not.