One thing is sure: the present outlook for green energy transition in Europe is not sustainable and will change.
The European Union is wracked by sovereign debt, budget deficits, monetary weakness, slow economic growth, trade deficits with the Emerging economies, an ageing population, and mass unemployment – but it has the supposedly proud role of world leader in Green Energy Transition. The main goal of this is reducing dependance on fossil fuels and increasing dependance on new, renewable, unconventional, alternate and “low carbon green” energy sources and systems, and improving energy efficiency, conserving energy and rationalising the energy economy.
This transition is deemed necessary and urgent for a few-only reasons. These feature global warming, whatever the scientific reality of this supposed crisis, high priced and unsure supplies of imported oil, and misplaced hopes that “green” energy will produce “green” jobs. Other more diffuse policy goals include reducing the environmental impacts of energy production and the energy industry, and promoting the “sustainable” economy and society. In particular and concerning global warming, the energy linkage of this supposed crisis features the reduction of CO2 emissions, therefore reduced fossil fuel consumption, with longer term targets set as high as an 80 percent reduction from various baseline years (notably 1990 and 2005), to be achieved by some flexible target year (notably 2030 or 2040).
The European Union’s imposition of mandatory CO2 emissions trading started with NAPs (national CO2 allocation plans) in March 2004, and market trading in 2005 (ETS), followed by increasingly complex but diffuse carbon reduction commitments (CRCs) and energy transport and trading arrangements (including ENTSO-E and -G). These measures, and others, were further bundled together by the December 2008 climate-energy package. This set formal and very high goals for the role of low carbon energy in Europe by 2020 – in many ways similar to goals of the USA’s December 2007 EISA (Energy Security and Independance Act), which is today heavily criticized in the US, notably because of its costs, lack of transparency, unsustainability and irrationality.
BUNDLING AND UNBUNDLING
Upstream energy, climate and environment policy, in Europe today, remains committed to low carbon but this is increasingly criticized, and confronted by a rising number of major challenges. These do not only exist at the political decision making and Europe-wide coordination level, but also concern basic energy infrastructures and resources, energy project and programme financing and, in general, the sustainability of the industrial, commercial, financial and energy regulatory strategies that have been set and have emerged for achieving Europe’s present official goals for energy transition.
For energy regulations and trading, the keyword “unbundling” describes the European Commission’s (EC’s) attempts at creating a so-called continental energy space for electricity and gas. This would require energy supplying companies and government energy agencies to separate – or unbundle – the distribution of electricity and gas from production and import supply. This would supposedly increase competition, reduce energy prices, and increase energy exchanges between EU countries.
Utilising the appealing notion of liberalizing energy supplies by preventing pipelines, transmission lines and power stations being controlled by one company or entity, making it easier for small businesses to get a foothold in the market, this concept extends to favouring the development and growth of cross-border energy networks, in a process where green low carbon energy would command an increasingly leading role. These are of course interesting notions for trade and market organisation of non-essential goods or services, but for a continental energy system using sometimes entirely new, capital intensive, technologically complex, and industrially unproven energy sources and processes, with new and unproven regulatory agencies, there are credible challenges to this free trade notion over and above the spotty evidence of state monopoly breakup necessarily leading to lower consumer prices.
It is important to understand the EU27 energy transition programme is currently the most massive ever proposed outside war-time conditions with all the challenges, costs and risks that are implied by this.
On the one hand using very intense but new and unproven market regulation and control – notably the NAPs, ETS and CRCs – and preaching free market principles on the other, the most immediate risk is of achieving neither a transparent and competitive European energy market with many small “players”, nor the hoped for interconnection and interoperability of gas and power grids. In the case of gas these are already relatively high capacity, dense, and are mostly interoperable without new regulations and requirements set by the EC, national governments, new European energy regulatory agencies, or would-be agencies, some of them with as yet undefined status and powers. Staying with gas, we can add that more and complex “unbundling” arrangements, regulations, and trading schemes are rather unlikely to reduce gas prices, whereas European development of in situ European shale gas and coalseam gas resources would rather certainly reduce natural gas prices.
Overall and in general we find there are recurring, hard-edged and increasingly self-defeating results on the ground for Europe’s green energy transition, firstly due to costs, but also due to resource, technology and industrial factors and issues, commercial factors, and others. One clear result is that political commitment to European energy transition is declining. Current goals are unrealistic, and many of the proposed means for achieving these goals are both inappropriate and unrealistic – with an emerging context in many ways similar to the US situation and context, relative to the similarly unrealistic EISA.
MAJOR BUT UNANTICIPATED LIMITS
In particular, the common European policy of levering up renewable energy’s part in the energy mix to achieve the goal set in Dec 2008 of achieving 20 percent of all energy supply from renewable, alternate and low carbon sources and systems focuses electric power, because most new and renewable energy sources only produce electricity. Total EU27 gross primary energy consumption was around 1785 million tons oil equivalent in 2010 (over 1800 Mtoe in 2008), and final end-use energy consumption was about 1000 Mtoe. Of this, about 275 Mtoe (3.21 million GWh) was electricity.
Relative to gross primary energy consumption, European electricity demand in 2010 therefore stood at only about 15 percent of the total, but was more than 27 percent of final energy consumption. Windpower, the largest and recently fastest growing new and renewable low carbon source of electricity covered about 9 percent of EU27 electricity consumption in 2010.
Goals in the electric power domain go as high as producing 25 percent or more of all EU27 electricity, mostly from windpower (and other low carbon sources) by 2020, aided by necessarily optimistic forecasts of slowing demand growth for electricity. Here we can note that EU27 electricity demand, in the household sector, increased by 70 percent through 1990-2008, and national electricity demand in east and southeast European EU27 countries has sharply grown since adhesion through 2004-2007.
Windpower, although receiving the lowest subsidies by way of so-called “feed-in tariffs” for low carbon electricity, reaching more than 20 euro cents per kWh for solar electricity in several EU27 countries – but now being sharply cut – has received the highest total state subsidies. Taking only the case of Spain, overall subsidy payments to windmill manufacturers and windfarm operators are estimated to have exceeded 18 billion euro for the period 2000-2010. As a direct result and despite the very weak job generation of the industry, in 2010 employing about 105 000 persons across Europe (about 0.025 percent of the EU27’s total active population) Europe boasted some 80 GW or 44 percent of world total installed windpower capacity, but as noted above the output from this only covered 9 percent of European electricity demand for the year 2010.
The high goals for windpower, reaching 25 percent or more of total European electricity demand by 2020, is increasingly likely to be scaled back, simply because of cost, siting, power infrastructure and poor job generation issues. In particular this concerns the hoped-for but extremely high cost and long-term development of offshore windfarms, and the need for equally costly and lengthy reinforcement of capacities and interconnection of European electric power transmission systems, needed because of the intermittency of renewable energy-based electric power supply.
Because these large scale power transport infrastructures and capabilities do not exist, we are already confronted by effective overcapacity of windpower generation at times of peak output coinciding with low demand, in several countries with large windfarm capacities (particularly Germany, Denmark, Spain). The simple result is power shedding, in other words the total loss of the effectively unusable power. On paper and in policy documents, it is of course easy to propose large scale high capacity power grids linking Europe’s present and hoped-for future wind farms and solar power stations, and “bringing the power to market” with increased electricity trading, but the needed civil and public works would be massive and lengthy, and suited to war-time emergency conditions not Enron-type trading, or any other type of trading.
Taking the case of European biofuels production, in the 3 years since the December 2008 adoption by the European Parliament of the “climate-energy package”, the hoped-for target of covering 10 percent of European motor fuels demand in 2020, with biofuels produced in Europe and imported from other countries, has already been cut back to 5.6 percent. The earlier goal for replacing imported petroleum fuels with imported biofuels and European-produced biofuels, of 10 percent by 2020, would have needed the sourcing of at least 0.8 Mbd of oil-substitute fuels by 2020, assuming of course there was zero growth of EU27 transport fuel consumption through 2011-2020 ! The new and more modest target is set at the suspiciously exact figure of 5.6 percent of European transport fuel (about 0.44 Mbd on current transport basis) being sourced from biofuels produced inside Europe, or imported, by 2020.
This new 0.44 Mbd target might seem modest, and is very modest relative to the growth of Chinese oil consumption (with a trend growth rate of about 0.4 Mbd every year) but in fact may be hard to meet. This is recognized by the European Commission, describing the reduced goal as less “borderline sustainable” than the 10 percent target of less than 3 years ago, but nevertheless challenging, notably if large amounts of biodiesel fuel or palm oil for biodiesel production is imported from Indonesia, and sugar cane ethanol is imported from Brazil. This would encourage or force these countries to further clear their rainforests and drain peat bogs – with huge emissions of CO2. The EC does not underline that imported biofuel pricing will certainly be oil indexed, if only because producing biofuels is oil intensive and completely oil dependent. In what way, if any, imported biofuel supply is more secure than imported non-renewable petroleum is rarely discussed in EC documentation concerning the unrealistic European biofuels plan and programme.
We can be almost sure, unless there is either long term and deep economic recession or very large change of social values and behaviour favouring car sharing, that European car fleet number growth will outweigh per-car fuel economy improvements, making the outline target of 0,44 Mbd even less impressive, and lower than 5.6 percent of European motor fuel demand by the year 2020. The basic framework for forecasting assumes continued dominance of conventional fossil energy-based transport, and due to this, the even less rational or “perverse solution”, of rapidly expanding electric car and vehicle fleets is now advanced by the leaderships of a few larger EU27 countries, with major car industries, as the only way to achieve Europe’s energy transition goals. This is a classic case of one bad policy – forced and rapid green energy development including biofuels – engendering another, even more unrealistic policy goal.
ELECTRIC CARS AND WINDMILLS DO NOT MIX
Rather little penetration of electric vehicles (EVs) in Europe’s car fleet would in fact be needed to make the goal of raising the role of renewable energy in electric power production and final end-user consumption even more completely unreal and impossible to achieve. At a penetration rate of 7 percent of Europe’s current 210 million car fleet, replaced by EVs each typically needing 5 kW charge for around 5 hours, up to 7 times a week, peak electric power demand in Europe could easily rise by 50 000 MW at certain times of the week, such as Sunday evenings, when EV charging would be intense.
At typical offshore windfarm or EPR nuclear capital costs of around 5000 – 6500 euro per kilowatt installed, it is easy to calculate the cost implications of some 7 percent of the current EU27 car fleet “going electric” and being recharged by “green low carbon” electricity. The costs would likely exceed 300 billion euro for the new generating capacity, excluding the costs of power grid development and strengthening, that would also be needed. The possibility of this financing being achieved through taxing and “marketizing” the current and projected range of instruments for European carbon finance, such as NPAs, ETS, CRCs, present and possible future regulatory instruments, and other cash-raising schemes – notably raising electricity prices by 30 to 50 percent – is evidently low or unsure.
Government financing would almost certainly be obligatory.
This simple but stark example underlines the strange lack of realism and coherence of present European energy transition policy and programming, and enables us to outline the real options available, which need to be ranked by their technological, industrial, energy economic, economic, financial, social and political feasibility.
These options notably include the abandonment of electric car development; the abandonment of offshore windfarm development; the abandonment of European electric power system interconnection and transport capacity raising; and the abandonment of “unbundling energy” and increasing free-for-all market plays in a single, continent-wide European energy space.
Due to abandonment being the recurring and most basic rational option, alternate strategies are obviously an urgent need.
MOMENTUM EFFECTS: FREEWHEELING TO FAILURE
Today however, in Europe, we have policy drift or momentum driving the green energy quest, with rapidly rising criticism fed by simple examples of the incoherence and lack of realism of its goals and implied massive energy sector development requirements, such as the example above. This “frozen dynamic” may explain the market and trading tropism that has replaced rational energy strategy debate and discussion, shown by the obsessional attention which goes to regulatory and trading arrangements for electricity (and also gas). Focusing electricity (and gas) trading helps shield policy makers, commentators and analysts from the first and basic need – of physically and technically enabling large scale electric power transport, after which the desired trading and its claimed result of reducing final consumer prices for energy, would at least be possible.
Much less than for gas, electric power transport capacities are in fact quite low at present. The reason is very simple: cross-border and in-country long distance electricity transport is expensive and inevitably incurs losses, often above 10 percent (power sent/power received) in the best managed and most heavily developed systems. Large scale electricity storage, we can note, is even more expensive and typically has system loss rates of at least 25 percent, but would be needed when or if intermittent renewable-source electricity supply was irrationally ramped up to a high level in Europe’s supply mix.
In turn, the cost and technology barriers to large scale power transport explains why European electric power transport system integration, with coordinating bodies such as the UCTE (now organized into the ENTSO-E with 34 national TSOs to date, and private entities such as EPTDA), is effectively restricted to “system balancing” movements of electric power, rather than large scale and continuous international electrical energy supply. To be sure, coordinating entities could or might be created for market trading of electricity across the 4.3 million square kilometres of the EU27, but evidently it is first necessary to build the infrastructures enabling 24/7 power exchanges with permanent “smart” metering and tariff modifcation capabilities, in turn enabling traders to make their market plays using an exciting range of derived and related financial instruments !
What we find is that the cost and resource, science, technology and industrial limits and barriers for scaling up alternate low carbon power sources in Europe are impossible to ignore, but when they are honestly and openly debated this causes a “reality shock” for European energy policy makers.
The negative results of Europe’s unsustainable and chaotic green energy policy and programmes are now accelerating. They include the downsizing or abandonment of outline plans for biofuels production in Europe (especially food crop based bioethanol), reduced plans for massive offshore windfarm development, lowered plans for large scale European electricity grid development and interconnection, and delays or abandonment of so-called “smart” grid plans and projects – and even of plans for lower cost but economically unsure strategies, like “smart” metering across wide area power market areas. It is very likely this trend will accelerate.
NUCLEAR POWER IS ALSO NOT SUSTAINABLE
The direct challenges to the credibility of the early (Dec 2008) goals for European biofuels, windpower development and electric power system integration, as well as solar PV (electric power) production, and other much smaller green energy alternatives (such as landfill biogas recovery) notably concerns their industrial, commercial and financial sustainability.
The challenge of sustainability is especially clear in that which concerns nuclear power. Firstly, it is difficult or impossible to call nuclear power “green”, unless we forget or ignore its dependance on uranium mining and shipping of this mostly imported, mineral and non-renewable fuel. EU27 import dependence on non-European exporters is currently about 98 percent, although uranium mining may be started or restarted in several countries, including Bulgaria, the Czech Republic and Denmark (Greenland). Taking the complete “fuel cycle”, from uranium mining, transport, processing and fuel fabrication through reprocessing and waste disposal, this is almost totally dependent on oil, gas and coal (as well as renewable energy !).
The costs of nuclear power are now better known, as Europe’s ageing reactor fleet (146 civil reactors as of early 2011) moves towards end of life decommissioning, at extreme high per-reactor costs. Including the official German and Swiss plans for the total phase out of nuclear power by 2022, and also due to the age profile of reactors in Europe, nuclear power in Europe is confronted by a wall of worry and extreme high near term costs, focusing public attention on the real costs of nuclear power.
Exactly as for present and unsustainable green energy plans and programmes, large amounts of government financing will inevitably be needed for reactor decommissioning, because nuclear power plant operators will always have the option of simply declaring themselves bankrupt or demanding protection from creditors during deliberately lengthy “restructuring”.
Most important for European energy transition, we find that energy, environment and climate policy cannot be divorced from basic democratic pressure. It cannot ignore public opinion, or European economic policy, and management of the troubled and crisis-wracked European economy.
In Europe, since March 2011, there is a de facto move away from so-called “climate friendly” atomic energy, because the Fukushima disaster has changed both public and political perception of nuclear power. A similar changed perception of Europe’s green energy plans and programmes is also certain, and this is only a question of time.
The common factor is that Europe’s very serious financial, fiscal and monetary difficulties and the threat of Eurozone disaggregation or break up, focuses attention on public spending with increasing intensity. In this context, the luxury of “vanity tech” spending is no longer acceptable, whether it concerns expensive and dangerous nuclear energy, or expensive and irrational green energy.
We can take the relatively simple case of transport fuels, where the role of electricity supply, either nuclear or non-nuclear, fossil or renewable, has little significance and importance until and unless electric cars and vehicles are “ramped up” to represent a sizeable part of the European vehicle fleet.
Current road transport fuel demand in Europe (2010) is around 6.15 million barrels per day (Mbd) on a total of 7.8 Mbd for all transport including air, rail, water and off-road transport, especially agricultural, making transport the biggest single user category of oil. Transport, in Europe, consumes nearly one-half of total oil demand.
While the published estimates for European (and other world regions) shale gas resources and potential exploitable reserves, by agencies including the IEA and the US EIA may well be optimistic, they are nevertheless very large, extending to around 150 billion barrels oil equivalent for the EU27.
Today, in the USA, about 18 percent of total gas supplies are shale-origin, and growing, with a dramatic impact on traded natural gas prices, which in the USA are now as much as 60 percent lower than typical European gas prices. While gas is a fossil fuel, producing CO2 as well as energy, its “carbon footprint” is much lower than either coal or oil, and its supply security risks, health and safety risks, waste disposal costs and environmental impacts are much lower than for nuclear power.
In particular, gas is highly suited to utilisation in road and off-road transport, unlike electricity. Certain national road transport fleets, for various reasons including national resource availability, as well as basic economics, including the road fleets of Holland, South Korea and Pakistan already have large numbers of gas powered vehicles. While the mass introduction of electric cars and other vehicles would produce enormous challenges for European electric power production and transport systems, conversion of European vehicle fleets to natural gas provides a robust, rapid and economical solution to sourcing non-oil energy sources for transport.
The “gas bridge” may in fact be one of the prime resource-driven movers for reform and modification of current European low carbon goals and strategies, but other factors as mentioned already in this article will exercise a growing influence. In particular we can note the many energy-economic parameters and factors that are currently given little role and importance in the setting of goals and strategies for energy transition. Among these, we can briefly identify the potential role of energy intensity and EROI (energy input/output and net energy balances) in setting criteria for energy conservation and efficiency raising, in all sectors of the economy and society.
Using these criteria, which are easily derived from CO2 intensity criteria and data, reform and modification of current goals and strategies can be set on a coherent and rational basis, rather than be subject to transient political and media attention and appreciation – as applies to the supposed “inevitable” mass development of electric car fleets, offshore windfarms, solar power plants, new and massive Smart Grids, and other vanity tech, which is impossible whenever rational criteria are applied.
European Energy Transition is itself in transition.
The policy set driving Europe’s green energy transition plan and programmes is incoherent, relying heavily on unsure and scientifically disputed claims that global warming is a crisis, as well as energy security, job creation and environmental concerns.
Current goals and strategies are in most cases neither sustainable nor rational, as shown by growing political criticism and the loss of broad support amongst the public for what are perceived as expensive and unnecessary, irrational or perverse goals and strategies.
Resource issues, already powerful in forcing a rapid reduction in the December 2008 goal for European biofuels production and utilisation, will also be powerful – in the reverse sense – regarding the case of natural gas produced in Europe, from European coalseam and shale gas resources. European gas can easily and cheaply substitute and replace oil in all forms of transport except air, and can be used for economically generating electricity and heat, in localized and distributed CHP programmes.
Energy-economic factors, currently receiving little appreciation and having a low role in deciding the more rational and more economic alternate energy sources and systems, will necessarily command a more significant role in shaping energy policy, deciding corporate and public energy sector investment strategies, and influence both private and public financing of the energy sector.
Presently we have a lose-lose context for all players except financial, and for them and as ever, this is short term gain only. Overall costs for achieving any specific level of green energy development are massively raised by this lose-lose context, which can only drive a general loss of credibility for green energy. One thing is sure: the present outlook for green energy transition in Europe is not sustainable and will change.
Andrew McKillop is a former in-house policy and programming expert, DG XVII Energy, European Commission