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Peter Glover: Europe’s Other Power Crisis – Energy

What’s the difference between the European Union and the Titanic? Answer: the Titanic was holed by a single immovable object and took minutes to sink. The EU, another allegedly “unsinkable” project, is taking a little longer. As if Eurozone crisis and keeping Greece afloat wasn’t threatening enough, the next crisis is looming: energy – a crisis entirely of the EU’s own policy-making.

Europe’s Other Power Crisis: Energy

The EU’s ideologically-driven Energy Road Map prioritized ‘green’ renewable energy, diverting away from Russian natural gas dependency and harmonizing energy and environmental needs. The result: a devastatingly inept screw up that threatens continent-wide power outages even, as Die Welt recently reported, in Germany as early as next winter.

In short order, EU energy policies have created an unsustainable, publicly-subsidized, market-skewing ‘green’ energy bubble, eschewed a cheap fossil fuels policy and realistic alternatives to Russian gas imports. Together those failed policies have resulted in the double double-whammy of soaring of energy prices and, as is now being reported, diminishing European industrial competitiveness.

Let’s take those issues one at a time.

The ‘green’ energy bubble was a losing proposition from the start. Energy insiders, and those who understand the laws of physics, have long known that the density of wind, water and sun is no match for hydrocarbon power. That’s why we replaced sailing ships with steam, which is far more reliable and cost-effective (especially if you don’t want your passengers or cargo languishing in the Doldrums). Only the rich – or the highly subsidized – can afford to play around with yachts and wind power as a transport method. Anyone wanting to understand how the renewable energy revolution, at least with current technology, was always doomed should read William Tucker’s excellent article ‘Understanding E=mc2’.

While times were good, political elites could make out a case for high taxation and subsidies to a market they believed to be in our best interests. But hard-pressed economies across Europe, including Germanythe UKItaly and Spain, are currently falling over themselves to slash generous renewable energy subsidies that have demonstrably failed to deliver a viable power generation-to-investment ratio. They have also failed to impact global carbon emissions and, where green jobs were created, they often proved to be at the expense of real jobs. As if that wasn’t enough, the US, which refused to bust its economy by signing the Kyoto Protocol, is beating the pants off Europewhen it comes to cutting CO2 emissions via new technology and the switch to natural (largely shale) gas.

In Germany, domestic electricity bills are set to double in the next ten years. German banks have also been banned from financing offshore wind farms as they are “unproven technology”. The truth is, we know only too well how inefficient, intermittent and unreliable all wind turbines are, not least as they require expensive gas turbine back-ups at every turn; two facilities where previously one – and a much cheaper one at that – did the job extremely efficiently.

In addition, the climate and peak oil alarmists colluded to try and convince us we had no alternative to the green revolution as the earth’s finite resources, especially oil and gas, were running out. But, as some of us have long pointed out, for all practical purposes the earth’s supply of fuel is actually infinite. The advent of the hydraulic fracturing revolution to develop shale gas and oil has proved a devastating global game-changer. And beyond that, methane hydrates blow away even what shale gas and shale oil resources offers. The Green River Formation in the United States alone holds around 200 years of oil at current US consumption levels. Canadian oil sands offer an even bigger prize – hence the US furore over the Keystone pipeline to ship the oil south of the border. China, the UK, Argentina, among many others, have world class domestic natural gas awaiting development. More pertinent for our purpose here, however, is the extent of Europe’s shale gas reserves which pretty much matches that being exploited in the United States; a singular fact that brings us to our second issue.

Europe’s eschewing of its cheap domestic, viable and economic fossil fuels.Instead the EU’s ideological elites, driven by an irrational fear of a harmless trace gas (CO2), prefer high taxation and regulatory regimes to fund ‘green’ energy. Cocooned in the lavish splendour of Brussels and Strasbourg the political elites have no problem in seeing increasing numbers in Germanythe UK and elsewhere forced into fuel poverty to pay for their green dream. Meanwhile Europe’s vast coal and shale resources are not being developed as governments, hard-pressed by pointless and ineffective emission quotas, are locked in an idiotic foot-dragging exercise over the hydraulic fracturing (fracking) extraction process; a process central to most mining extractions for over 60 years.

The EU has invested a decade of time, money and effort in its great pipe hope – the Nabucco pipeline project. Nabucco has long been a project billed as the way to wean Europe off Russian gas dependence by linking gas-rich Caspian Sea states with Europe, critically by circumventing Russian soil and control. A decade on, not only is Nabucco still a pipedream, it has no actual contracted gas supplies and Germany’s RWE, its second-largest investor, looks set pull the plug on its support. Meanwhile Russia’s Nord Stream, its competitor, opened for business last year. Just for good measure, Nord Stream is a direct product of the EU-policy undermining the Russo-German ‘special relationship’. So while Germany’s Chancellor has been busy playing the EU political game, former politicians and German industrialists have been busy placing national interest above EU interests.

But the combination of Europe’s green policies and its total failure to take advantage of its own natural energy resources while the United States’ shale gas revolution is well under way (in spite of, rather than due to, President Obama’s efforts) has led to inevitable breaking news. It is now being reported that the European industry is paying the price for the EU’s incoherent energy policies, our third issue.

The reason is simple enough: energy costs for US rivals have dropped dramatically, to just one-third of those in Europe – a direct result of the early development of US domestic shale gas and shale oil bonanza. Speaking to the Financial Times, Jean-Pierre Clamadieu, the new CEO of international chemical conglomerate Solvey, puts rising energy costs for Europe and European competitiveness on a par with the Eurozone crisis. And the trouble is, says Clamadieu, “There is very little European co-ordination”. The FT also reports that the chief executive of one of Europe’s largest power groups warns that the EU pays “zero attention to competiveness” when deciding energy policy. As Clamadieu observes, “It’s very difficult to replace nuclear power produced electricity, which costs about €40 per megawatt hour, with a wind turbine put far away in the sea, which costs €200 per megawatt hour”. But that isn’t stopping Europe’s politicians trying to flout the ‘laws’ of the marketplace, which they clearly do not understand.

In pursuing anti-fossil fuel policies, Eurocrats like to carp about American energy consumer ‘excess’. But that oft-repeated criticism of US energy consumption is based on the fallacy that US energy demand is the result of its national wealth. In fact, US energy demand and consumption is the cause of the nation’s wealth – as it is for all other high energy consumers. This economic fact of life needs to be more widely understood.

World Energy Consumption and Wealth

Eurocrat tinkering with an array of incoherent and unrealistic energy policies smacks of re-arranging the deckchairs on the Titanic. If I were running an EU state I would start ‘manning the lifeboats’ and put national energy security self-interest first. Without a realistic EU energy strategy prioritising the cheap and efficient hydrocarbons with which the earth is plainly awash, Europe’s democratic governments could soon find themselves out of power – in more ways than one.

Peter C Glover is co-author Energy and Climate Wars (Continuum), Power Politics: The Inside Track On Energy (e-book, HardWired Books).