September 28, 2022
bne IntelliNews - bneGREEN: Has green energy had its day?


Global efforts to combat climate change are being endangered by the global coronavirus (COVID-19) pandemic, the war in Ukraine and the current energy crisis.

Unseasonal heatwaves, melting ice in the Arctic Sea and flooding across the world are symptoms of the climate crisis that requires urgent and wholehearted action by governments, corporations and international community.

The actions demanded by the COP26 conference and a range of international bodies led by the UN to achieve green targets is being side-tracked as governments race to secure energy supplies.

The EU raised its Green Deal and Fit for 55 targets from 40% to 45% renewables by 2030 in response to the war in Ukraine by launching its REPowerEU programme. Brussels chose to focus on energy savings, diversification of energy supplies and the accelerated roll-out of renewable energy in a bid to replace fossil fuel imports from Russia.

But governments are also still buying Russian fossil fuels as it will take months for the EU’s gas and oil sanctions to kick in.

The world risks taking its eye off the ball in the race for energy and putting in danger any chance that the energy transition has of staying on track.

Renewable energy’s ability to provide the world with the power it needs is being severely tested by a combination of killer factors that threaten to annihilate the energy transition just as climate change is beginning to threaten life as we know it on Earth.

 

Fossil fuels

Two recent reports from the Centre for Clean Air and Energy warned that Europe is still importing fossil fuels, spending €57bn on Russia fossil fuels in the first 100 days of the war, even as governments make policy announcements to accelerate transitions away from oil and gas towards renewables.

 

 

Speaking to bne Intellinews, Lauri Myllyvirta, lead researcher at CREA and a writer of the Shocked into Action report, warned Europe had been too slow to react to the war.

 

“The frustrating thing from the perspective of Ukraine and the duty we have to support Ukraine’s struggle is so much of this energy policymaking and trade sanctions are playing out over the course of several months in the case of the oil and coal ban, and over several years in the case of replacing fossil gas with clean energy.”

 

On the other hand, he stressed that deeper policy developments were needed to drive forward to energy transition and to meet the EU’s targets.

 

“The bottlenecks for meeting the target that the EU has, in other words the thing that we need to be on the lookout for, include permitting and supply chain issues, which are quite separate from the Ukraine war; these are the key issues in order for the clean energy targets to become attainable.”

 

The IEA noted in its World Energy Investment Report that even though it estimates an 8% rise in global energy investment in 2022 to $2.4 trillion, driven overwhelmingly by a 12% rise in clean energy spending, investment in coal is set to grow by 10% in 2022.

 

At the end of June, the G7 leaders called for research into how a cap on the price of Russian oil imports might work, involving allowing oil to be shipped on tankers if the oil is priced at an agreed maximum price.

 

Myllyvirta told bne Intellinews that “a price cap on oil purchases from Russia could curtail revenue for Russia before the EU oil imports ban kicks in.”

 

 

 

Germany

 

As well as oil, coal is a key concern, with the IEA noting that coal investment rose by 10% in 2021 and will climb by 10% again in 2022.

 

Germany has been the slowest country to support a gradual ban on gas, and it is considering switching some of its shuttered coal-fired power plants back on. Its hand was forced after Gazprom cut deliveries via the Nord Stream 1 gas pipeline in June.

 

The German government on June 23 said that despite its decision to rely more on coal for electricity generation until 2024, it would still meet its target date for a complete coal exit of 2030.

 

Myllyvirta was critical of Berlin’s behaviour, saying that, “Germany has dug a hole for itself in the past years. It has not been moving fast enough in green energy and has closed down nuclear plants. It has not been paying attention to reducing its reliance on Russia gas, especially in building and industry.”

 

He also noted that replacing gas with coal would only work in the short term, and was uneconomic when compared to cheaper renewables.

 

“You will have potentially a shift within the fossil fuel consumption in the power sector where you generate a bit more from coal and bit less from gas. It seems that coal is giving the power industry a bit more flexibility to manage their quandary.”

 

Russia itself has also reacted by slashing environmental protection rules and softening its emissions regulations and pollution standards.

 

A new law will allow the construction of pipelines and roads through protected areas with no environmental reviews. The government has also delayed by two years its flagship Clean Air Project, which aims to control pollution in cities.

 

 

 

Politics

 

On a Europe level, the energy price crisis makes it more complicated to harness the support from governments and industry to push through new policies, as industry seeks to combat higher energy prices and governments worry about the political impact of higher domestic heating and power bills.

 

For example, the new rules for the EU’s CBAM, which aims to introduce a carbon border tax and prevent imports of cheaper steel, chemicals and such like, were recently only passed by Parliament after opposition from industry and right-of-centre parties.

 

Myllyvirta stressed that the CBAM targets hard-to-decarbonise sector of industry, which have large emissions, but that such mechanisms to reduce emissions come at considerable cost to industry.

 

“Member states want to provide those sectors with free emissions allocations, and on the other hand they want to enact the CBAM to neutralise the carbon price they face. You can’t really do both. You can’t decide not to impose the carbon price, and on the other hand to impose countervailing duties to offset the carbon price.”

 

Myllyvirta said that these debates were part of long-term trends towards a green transition that in fact suffers little chance of being seriously held back by the impact of the war in Ukraine and the current energy price shocks. Indeed, he argues that high prices are more closely related to the continued reliance on fossil fuels, and that wind and solar offer cheaper power generation.

 

“The basic point being lost is that high prices are the result of reliance on fossil. The crisis means that the faster we can get off reliance on fossil fuels the faster we are going to have affordable, stable and predictable energy prices. The way that politics is could make some politicians reluctant to put through the change, or could lead to political shifts, where parties just promise cheap gasoline for everyone.”

 

He insists that the current shock cannot derail the underlying trend that the price of renewables is falling, as fossil fuels become more and more uncompetitive, despite any short-term policy choices by government.

 

“This political backlash is going to try to prevent economics playing out in the energy sector. But the economics are undeniable.”

 

 

 

Temperatures

 

2022 has seen heatwaves come early to Asia and Europe, while the Arctic is now heating up seven times faster than the rest of the world, with the region’s ice in danger of melting completely by 2050.

 

Such unprecedented increases in temperature in the Arctic threaten to make efforts to reduce CO2 emissions, limit global warming and deal with climate change almost worthless.

 

Iran recorded in June one of the hottest days, 52.2°C, since records began, while in the French resort town of Biarritz, temperatures reached 42.9°C on 18 June, the hottest ever June day in the town.

 

The world could also see more life-threatening heatwaves from Asia to Europe to the Americas, turning inhabited regions into scorched deserts and pushing millions of people to migrate in search of more bearable temperatures.

 

Such extremes prompt the public to worry that world leaders are focusing more on the war in Ukraine than climate change, which has the potential to wipe out the human race as temperatures rise, crops fail and swathes of land become uninhabitable.

 

Myllyvirta warned that high temperatures threaten to see an increase in fossil fuel burning, even though he argues that renewables offer a cheaper way out.

 

“With the high fuel prices, and with electricity being very tight, and demand for AC [air conditioning], it can also lead to more support for fossil fuel power plant. That is certainly what we are seeing in China, even as the government is careful to say that these plants do not increase fossil fuel generation overall, but to meet demand peaks,” he said.

 

“There is no economic case for more fossil fuels, even to meet peaks, in places with good solar resources.”

 

However, he warned that political change moves slowly, and “it is going to be the media that drives debate when heatwaves happen. For that to translate into meaningful policy changes, let alone political changes, will take time.”

 

Policy changes that will have a deep impact on the environment and climate change need to be long-term developments, and not the knee-jerk reactions to rising temperatures or war in Ukraine.

 

Indeed, Myllyvirta expressed confidence that the underlying economics of renewable energy, which will continue to undercut fossil fuels as the years progress, mean that distractions from the climate change agenda, such as war and high prices, will not slow down the energy transition as long as the fundamentals are in place.

 

It will become more and more obvious to government and companies over the next decades that green energy is cheaper and more profitable than oil and gas. The money that is currently spent on fossil fuels will then be freed up to be invested in renewables energy.

 

While the economics of renewables energy seem secure, and the policymaking processes in governments and international organisations from COP26 to the UN and the IEA are well-established, political support is less certain, as politicians chase votes and look for quick-fix way to secure cheaper energy.

 

What cannot be denied any more is that the climate and the planet are in crisis, and that rising heatwaves, melting polar ice caps, failing crops and food insecurity are very real symptoms of man-made global warming.

 

The path to affordable, stable and predictable energy is resilient, and most importantly, cheap, enough to weather the storms of politicians and governments reacting to the latest global crises.

 





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