Exploring the energy crisis
Eurelectric
Voice of European electricity. Leading the energy transition through electrification #WePowerEU #Grids4Speed
We return after a summer hiatus, happy to be back with you. Energy turmoil, however, has reached unimaginable levels. Today, European Energy Ministers meet in an extraordinary meeting to discuss how to stop the bleeding. Proposals like price caps on “inframarginal” rents? (read, extraordinary revenues from electricity generated with anything but gas), a price cap on imported Russian gas, and the decoupling of wholesale electricity and gas markets are all on the table.
In a timely fashion leading up to the extraordinary meeting, we released #PowerBarometer22 this week – this year’s rendition of our annual data dive into the energy sector. The focus this year is unsurprisingly centred on the energy crisis and spells out key figures and recommendations for policymakers.
If you missed the launch, be sure to catch up here.
Today’s harsh reality
It should come as no shock that the energy situation has been deteriorating over the past months and even year. A gas supply crunch – originally from a waning COVID pandemic and now exacerbated by Russia’s decision to cut supply to Europe – combined with severe droughts, low wind and countless nuclear plants in maintenance have conspired to drive the price of energy to astronomical levels. Amid all of this, climate change has not been solved, and the energy transition must carry on.
This has delivered the situation today where industry, people, and national governments are all looking to the European Union to do something; and something must be done. Because if we cannot solve the problem now, we are in for a very tough winter this year and likely an even tougher year ahead.
Something must be done
In ordinary times, it is best to leave the market alone. But these are not ordinary times. Something must be done to protect customers without tampering with electricity markets and undermining investors’ confidence. Power Barometer 2022 highlights that, although there has been a 532% increase in average day-ahead wholesale electricity prices, it is due to the persistent 57% share of fossil fuels in Europe’s final energy consumption. Meanwhile, Europe still needs to build an additional 753 GW of renewables by 2030 to achieve Fit for 55, and the more recently updated targets in REPowerEU .
Stemming from this analysis, we put forward five priorities that policymakers must consider:
These points are echoed across the European power sector as the struggle to function properly becomes more of a strain. However, these five points implemented methodically can help Europe stay the course, secure our homegrown energy supply, and deliver on the energy transition.
Another future is possible…
Going forward will be a changed playing field. Europe can no longer depend so heavily on outside provisions of energy – we need to secure it at home. The road to that future is arduous yet not insurmountable. The second half of Power Barometer 2022 is dedicated to the enablers of this future, as well as the six central mantras to keep us on track.
Mantras
The six mantras constitute the five game changers we released in June at Power Summit 2022 with an additional sixth that has become vital to surviving the energy crisis. These are: decarbonising faster, electrifying everything we can, strengthening our distribution grids, securing investment in infrastructure, protecting customers, and the all-important saving of energy. Acting with these in mind will allow us to walk the walk and set the stage for the enablers to talk the talk.
Enablers
The enablers also come in a set of five. They hardly stray from our calls to action in prior years, but it is important to reiterate their importance during today’s crisis. Until now, several of them – in particular, permitting – have put a brake on the rapid deployment of renewables. It is high time that governments pull their acts together, reduce the red tape and allow us, the industry, to get going.
1.??????All technologies are required to reach the 2030 target of +62% of 2021 generation capacity to reach REPowerEU targets and secure our energy supply at home.
2.??????Accelerate permitting so that we can roll out renewables faster and prevent another crisis in the future.
3.??????Invest more in distribution grids to ensure we have the modern systems needed to support the transition to more variable forms of electricity generation and can electrify demand
4.??????Invest more in generation to achieve the ambitious targets of capacity buildout between now and 2050
5.??????Ease access to raw materials which have become a major input to the power sector and will only become a scarcer commodity in a geopolitically strained world
By acting on these enablers, the energy transition will continue to drive our continent forward. So, with an existential energy crisis threatening to derail our progress, politicians must take swift and thoughtful action. The European-wide sector thus watches the extraordinary meeting today with intent eyes, in hopes that the actions that come of it are tangible, with benefits that outweigh any potential cost.