The year 2022 will be marked as the year of inflation and an unprecedented energy crisis that resembles that of the 70s. The cost of energy has been skyrocketing, leading to increasing prices in consumer goods as well. Given the most recent published figures, annual inflation in the US is projected to 8,6% so far, while in the European Union (EU27) is around 8,8%. Natural gas and power costs are rising even higher. But why is that the case and why now?
Over the course of the past decades, systemic energy policies have mostly been founded on science, enhancing energy efficiency, and combating energy poverty around the world. There have been ambitious plans on making energy more accessible to developing countries, while we continued to produce efficient and abundant energy to meet the ever-increasing energy needs of our societies.
But from the moment the climate crisis narrative got into the energy conversation everything changed. Amid pressure from the press, ecologists, special interest groups, and of course establishment politicians, lately, things have taken a different course. The agenda has changed and it’s more about sustainability and the green future of renewable energy.
A big part of this plan, outlined in the Paris Climate Accord and documents like the European Green Deal, remains reducing the level of CO2 emissions by transitioning to green, renewable sources of energy, as the existent main energy sources, namely the fossil fuels, are considered the primary cause of CO2 emissions and the so-called man-made climate change. In this opinion piece, I will not doubt the science behind carbon neutrality or climate «crisis» altogether, although it’s highly problematic. I will rather try to underline its effects in the energy sector and the potential risks for our economies. As the old saying goes «The road to hell is paved with good intentions».
The problem, there, is that these green, renewable types of energy, mainly wind and solar, are not powerful and efficient enough to meet the demands. They are still capable of meeting only a fraction of global electricity needs. After all, they represent just 1,8% of global energy. They have already been part of the mix of energy production in most countries for decades based on government grants, but their role remains limited. On the contrary, fossil fuels and natural gas has always been a steady source of energy and have contributed to our current state of wealth and prosperity worldwide. Numbers don’t lie. Coal and natural gas have stronger capacity factors compared to wind and solar energy. This basically means they are producing maximum power more of the time during the year, which is translated into higher efficiency.
That’s just one key indicator in terms of production. I won’t even mention cost of production or durability. The results are the same. The concern around fossil fuels has always been their environmental impact, but given the rapid technological advances we have witnessed, there have been significant methods to limit damaging emissions and air pollution. It would be wrong not to admit that.
Another solution is, well, nuclear energy. The cleaner, safest and most powerful source of energy. It is also sidelined by most world leaders as dangerous over some incidents decades ago. But science is concrete. It is twice more effective than fossil fuels and three times more efficient than renewables. Time to talk about nuclear energy globally. It has all the elements to become the energy of the future.
Therefore, persistence on weak energy sources, while gradually reducing the production from fossil fuels has created an imbalance in energy markets that’s driving the prices up. Supply can’t just meet the demand. While European countries and the US, under the current administration, vow to protect the climate by reducing their dependence from fossil fuels, they just increase dependence from foreign fossil fuels, like middle eastern oil. That’s only happening because renewables do not generate the same power conventional sources do and the gap must be bridged. The effects of reduced energy supply have already been visible to anyone with power failures and incredible power costs. In a post-pandemic and turbulent period, it can only get worse.
The proposed radical change in the energy mix of production, no matter the motive, cannot provide any solutions short term and may carry a cost that can be described as unbearable by the middle and lower classes who are called to pay the price with expensive electricity bills and gas prices. Even if we accept, for a moment, that a need for such a transition exists, that should be implemented a lot smoother and based on the evolution of science, when and if we are ready. For the EU alone, the cost of the green transitions is calculated at €5 trillion(!), which can be split to 10.000€ per EU citizen. Let’s not be surprised when the rest of the world won’t follow the madness.
Energy costs increased 26% across industrialized economies last year and will rise globally by another 50% this year. While western governments are blaming Russia’s war on Ukraine, prices were already rising because of climate policies destabilizing global energy production and energy markets. Russia’s invasion in Ukraine has been the perfect scapegoat that would instantly take all the blame for the skyrocketing gas prices, inflation, and the unstable energy markets. Well, that’s just smoking mirrors. The war has been an accelerating factor of instability rather than the root cause. Energy crisis has begun to unravel long before the war in Ukraine and will continue long after its end, until we decide to prioritize cheap, powerful, and efficient sources of energy that can make a difference.