The Strategist

Atlantico: The energy policy of Europe is a fiasco

02/19/2018 - 14:08

Energy takes a special place among the most notorious fiasco of European politics. While large energy companies paired with financiers are racking their brains over how to limit their production to its current structural deficit, those who rely on renewable energy proudly prance ahead, gaining good profits without a hint of risk thanks to taxpayer money.

Carl Attard
Carl Attard
Once national reconstruction was at the forefront of the electricity sector. However, liberalization, disbandment and breeding subsequently emerged, which, combined with increasingly less used nuclear power plants and the new energy ideology, led to an incredible mess in the industry. It is necessary to get rid of this mess, only it will not be easy to do this.
The New Europe is actively being discussed. Yet, it would be foolish to ignore the energy sector, which is no less important than the rest. Any person, on the example of his daily life, knows how difficult it is to achieve conflicting goals. Be that as it may, this is exactly what the states have been doing for several decades now.

When it comes to European energy policy, attention is focused mainly on electricity and gas, whereas in the 1950s, all was concerned about coal. The 1987 Act led to the formation of a market for these two products and "liberalization," that is, the separation of production from transportation and distribution. In other words, we switched from monopolies and oligopolies to a multitude of market participants, which should lead to a "price reduction" for consumers.

Yet, everything turned out exactly the opposite: the prices have grown, and this is only the beginning. Even if the existence of monopolies does not usually lead to optimal prices, the artificially formed market can only worsen the situation. This, however, does not prevent the European Commission from praising the advantages of the "internal market".

First of all, each country has its own economic and political considerations with regard to energy sources. Gas in general is considered acceptable for all, there is a split in nuclear power in Europe, while the availability of renewable sources (water, wind and sun) depends on geography, which determines the unequal potential of each country. The bureaucrats eventually had to admit the impossibility of uniformity, and the Lisbon Treaty of 2007 prescribes that each state chooses its own sources of energy.

As a result, everything has become even worse. Schroeder’s Germany (the coalition with the Greens) took the first step against the nuclear industry in 2000. Then the grip began to gradually easen until the Fukushima accident, which prompted Merkel to close all German nuclear power plants by 2020. Similar decisions by Austria in 1978, Sweden in 1980 and Italy in 1987 did not lead Europe off balance. Now France (it receives 75% of the electricity from nuclear power plants), where the policy of interconnection with neighboring Germany is actively developing, found itself face to face with the neighbour, which completely abandons this source. This situation is driving the entire continent off course. Until then, there was still room for a pragmatic and rational policy. Nevertheless, after such a unilateral decision, which does not take into account the potential consequences for the European energy policy, there is nothing left but adventures.

German Greens understood that the decision taken out from the Chancellor would lead to an increase in the use of coal for at least ten years. This clearly would not help fight pollution and CO2 emissions. Whatever it was, it had to push Europe towards the formation of windmill parks and solar panels, that is, to reach their long-standing goal, the "green and clean" energy eco-friendly from both banks of the Rhine.

Yet, they underestimated two very important points. The first is that the "new" renewable sources, the sun and the wind, cannot give energy continuously and, therefore, need the support of electricity available at any time. The second is that the priority given to renewable sources leads to a decline in the economic returns of classical power plants and disrupts the entire electric power sector. The assertion that the volatility of renewable sources can be compensated by the flexibility and modulation of the park of stations is just an invention. This park has its own technical and economic constraints, and it is impossible to do whatever you want.

Chasing several targets and not even being convinced of their compatibility, Europe questioned the availability of electricity. Gas power stations were stopped and sealed (due to unprofitability), the price of coal led to an even greater strain on thermal power plants in Germany. At certain points, the grid was overloaded with energy from the windmills and the producers sold electricity to themselves at a loss, the wholesale market swelled and burst. Now no one can predict the future. A consumer pays a large price for a product whose availability may be in question.

Be that as it may, in 2015 all this did not prevent the European Commission from presenting five goals: security of supply, domestic market, greater energy efficiency, reduction of carbon dioxide emissions, research and innovation. We have not moved forward with any of these points.

Germany's rejection of nuclear power without attention to the potential consequences for its neighbours remains a very serious and painful problem. The imitative limitation of the nuclear industry in France will not stand competitiveness at the world level, the country's economy simply does not allow it. The best solution to ensure the reliability of supply and maintain an acceptable level of prices is to extend the life of nuclear power plants to 50-60 years, like the US did. All new wind farm parks with their unstable returns in Germany are also pushing France to maintain a fleet of nuclear power plants to ensure reliability.

If Germany and France cannot settle the situation, the competitiveness of the entire continent will suffer. If we try to blend market, nuclear energy and climate into one ideology, we definitely will not succeed. If we are fighting for a climate, we need a nuclear power plant. If we want to replace nuclear power with solar or wind power, we should again ensure the profitability of gas power stations and accelerate their construction. If we need a market, that is the best price for a taxpayer and economy, it is necessary to reduce renewable energy. If we are striving for reliable supply, we should turn to non-traditional sources of oil and gas. If we add here the fact that each of the 27 member countries has its own priorities, the process is very difficult.