Europe can wean itself off Russian gas
In 1973 more than 90 per cent of Denmark’s energy supply was imported oil. Then came the Arab oil embargo. Fast forward to 2014 and Denmark is the only EU country with negative energy dependency. In other words, it exports more energy than it imports.
The reason for this transformation was a political decision on how to deal with an energy crisis. In 1973 Denmark had just entered the European Union and it was relatively weak both economically and politically. The country adopted aggressive Denmark’s energy efficiency and renewable energy policies in the 1970s gave birth to wind power giant Vestas and boosted a modern global wind energy industry which today accounts for more than 320GW of installed capacity around the world.
As the Ukrainian crisis unfolds many politicians are wondering what can we do to reduce our energy dependency on Russia. The spontaneous response is to talk about alternative gas supplies, particularly given the promise of shale gas. The truth is that EU can do a lot more. But the EU needs a “yes, we can” attitude to that.
The political objective of a new European energy security strategy does not have to be a question of cutting off Russian gas supplies, but rather of achieving a level of flexibility that could allow the EU more choice of energy supply and greater resilience against conflicts in neighbouring countries. If the European Union had such a strategy and the resolve to implement it, it would have moved half way down the road to full energy security.
Europe does not have to wait 40 years in order to achieve Denmark’s energy independence. Thanks to Danish determination and the energy policies of countries like Spain, Germany and the UK, and, most recently, China serious entry into the low carbon business, renewable energy today is cheap. In fact in many cases it is cheaper than conventional energy.
According to the latest assessment of investment bank Lazards, solar generated electricity is becoming as cheap as new coal and gas power while offshore wind is even cheaper. Similar are the estimates of the Fraunhofer Institute for Solar Research that show a levelised cost of solar electricity (the total cost of building and operating a plant over its financial life) in Southern Europe down to €0.06-€0.08 per kWh. The levelised cost of electricity does not tell the whole picture of energy costs but it is a good indicator on where we are moving to. The cost of renewables is falling as fossil fuels become more expensive and concern over environmental and health damages grow. The Ukrainian crisis is likely to accentuate this trend.
Germany, Europe’s largest European economy, is heavily dependent on Russian gas, but has rapidly expanded its renewables capacity and has already installed more than 70GW. The cost of solar generated electricity is now lower than the retail price of electricity in almost any European country.
In Denmark, in recent months, wind power has reached levels equivalent to 100% of electricity generation needs. In 2013 Spain generated 21.1 per cent of its power from wind and in the first quarter of 2013 Portugal generated 70 per cent of its power from renewables. Even the UK, which is struggling to get on the renewables path, generated 11 per cent of its power from wind in February. Evidence for rapid deployment of renewable energy is appearing from all over Europe. We have reached the cost tipping point for renewables but we are held back by political inertia. The current crisis could break it. And renewable energy has another massive advantage in a crisis – unlike coal, gas and especially nuclear it is fast to install.
In the longer term, policy makers should also focus on the huge gains to come from increasing European energy efficiency. Some of the countries most dependant on Russian gas imports are also the most energy inefficient. Improving the energy efficiency of buildings is a low hanging fruit that offers fast return through immediate energy saving.
Of course, we do not have to rely on energy efficiency and renewables alone. Currently 20 per cent of the European gas imports come through liquefied natural gas terminals. This share could be increased and the price does not have to be that high if the US liberalises its gas export regime. Shale gas will help too but will take very long time to materialise in Europe. However Norwegian and newly discovered Eastern Mediterranean gas could potentially replace a significant portion of imports from Russia.
Faster development of critical power and gas infrastructure would increase the resilience of the European energy system. Mr. Barroso has already announced that the European Commission is looking at the “gas transmission network to ensure that reverse flows with the European Union are fully operational”. This is a first step in the right direction but much more needs to be done.
In the current crisis, Denmark is an inspirational example of what a small country was able to do with no international support, no financial strength and before the renewables technological dawn.
Now the European Union has the necessary capacity to act together to turn around its energy dependency and reach the level of security which has so often been discussed but which has never been tackled seriously at a Europe- wide level.
The fact is that Europe depends less on Russian gas than Russia depends on European gas consumers. The rest is politics.
Julian Popov is a former Bulgarian Environment Minister and a commentator on energy and EU policy.
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