The Perfect Storm? A Blockbuster Movie? Or a Dystopic World?

May you help me to end the following movie script?

You are an engineer working for a car maker. You are in a European country. It is autumn. You are living as usual. Newspapers are plenty of negative news, so you try to ignore them. You avoid being aware of your context. But the facts showed that energy costs were rocketing.

• In the last year the cost of fuel oil for Agriculture, fuel oil for fishermen, diesel for logistic carriers, and electricity doubled.
• Unfortunately, electricity storage is not developed enough, and energy self-sufficiency is far from achieved as Wind and Solar generation are still a minority. Your country had accelerated its Energy Transition Plan and it had forced the shutdown of some thermal power plants and it had increased the CO2 tax, to promote investment in renewable energy. So the electricity price was already the highest ever.
• The supply of energy sources is decreasing. So richer companies and some countries are bidding for scarce resources with once again higher prices.
• Your country declared Alarm level 2 (of 3) and seems unlikely to address the winter with enough gas storage. Level 3 means gas rationing. Obviously, your country is trying to avoid that situation and it is purchasing gas from its neighbors expensively.
• The government is forcing the reopening of some coal-fired power plants to ensure a minimum amount of electricity. This is costly and it will pay another extra price to, at least, get some electricity.

Some thousands of kilometers away, there is a military invasion from your main gas supplier to another country. To avoid the risk of a nuclear war, your government is carefully managing the relationship.

Suddenly, you go to the supermarket and some shelves are empty. Energy prices have arrived at a level where producers, farmers, fishermen, and carriers have stopped working because the more they work the more they lose.

Then your employer calls you not to go to work for some days. He says “many industries in the area are stopping because the gas is limited this week, no matter the price”. Some other international gas producers were selling LNG ships to your national utilities, but suppliers have achieved their production limits and it would take years to have additional capacity in operation.

During the afternoon, your main gas supplier decides not to sell you more gas. Probably this is contractually illegal, but it could take years in court to get a solution. Your alternative suppliers cannot fill such a supply gap. It is a rainy evening so solar panels and wind turbines are going off.

Your mobile phone is not working as telecom operator cells are not powered. ATM is not disposing of money either. Our digitally connected world is falling. Cash is King. Bikes may become luxury products.

END THE STORY:

-?????????Option 1: Winter is even tougher for many families that cannot afford the energy bill. The shortage of food is creating riots in the street and we have to burn wood again to cook and light.

-?????????Option 2: Your country and some allies go into war to get gas and coal supplies. But as part of the conflict, gas pipes and energy sources are destroyed so we are in an even worse situation than at the beginning.

-?????????Option 3: You get a new agreement with your former gas supplier much much more expensive and allow them to annex some territories. Your country stops providing health care and education to subsidize renewable energy capacity for the next 20 years and get some kinf of energy self-sufficiency.

-?????????Option 4: Feel free to imagine a different scenario that can ensure the recording of a second part of the movie.

?

As you imagined from the very beginning, this movie is our current reality. And we must quickly address some strategic decisions to avoid a similar end to the options above this winter, not in 5 years. This bloody winter. We are constrained by 10 facts:

1.??????The 2050 worldwide demand for electricity will double the current figure

The demand for electricity has been increasing for years and this will not stop before 2050. Developing countries are needed of cheap electricity to build infrastructure that empowers growth. In many cases, these countries have access to cheap coal and have developed efficient power plants (e.g. India). See the graph below with the worldwide electricity demand evolution:

Source: Enerdata Global Energy & Climate Outlook 2050

2.??????Wind & Solar are still a minority in the worldwide electricity mix

Perhaps some countries have a different mix, with more hydro or more nuclear, but the fact is that Wind and Solar power will be the future but not yet the present.

Source: Enerdata World Statistics 2022

3.??????Market-ready Utility-scale energy storage is 15 years away from today.

The EU has a goal for energy storage of 200 GW for 2030 and 600 GW for 2050. Today we only have 60 GW, the European Association for Storage of Energy confirms that at the current growth pace we will fail on the achievements of the targets:

Required storage deployment VS forecasted historic storage deployment

Source: European Association for Storage of Energy

4.??????Thermal Power Plants need to become the flexible back up of the renewable energy.

To replace the whole fossil-fuel electricity we need trillions of Euros. Even having the will to invest such a huge amount of money and the availability of the funds, we will need several years to spend them. Thus, if thermal power plants have to last for another 20 or 30 years, they need to leave as much room as possible for renewables in the mix while we address a full Energy Transition.

Source: GWEC Annual Wind Report 2022

5.??????Renewable Energy without storage and without Flexible Operation of Thermal Power Plants means curtailment.

This is the worst scenario. It means we are producing green electricity through renewables but we must waste part of it because there is no room in the mix and we cannot switch off thermal power plants The System Operator of California monitors how the curtailment of renewable energy is growing year by year as the renewable capacity grows.

Wind & solar curtaiment by month in CAISO

6.??????A real shortage of gas is coming soon.

Russia is supplying two-thirds of the whole consumed gas by the EU. At their full capacity, the USA LNG supplies will cover only one-third. Germany is preparing for rationing the gas supplies for this winter. You can see in the graph the split of the Russian gas exports along European countries:

Source: The New York Times

7.??????Regulation and Pricing Models are unstoppably rising Energy Prices in the EU

There is a gap between the price of energy and its pure cost of production. We are surrounded by different chicken and egg scenarios:

• Countries and Utilities are trying to store some energy resources for the winter. High demand and interest are logically increasing prices on energy pools.
• We put several taxes and constraints on fossil fuel power plants. But as Wind and Solar are not replacing them yet, we are forced to use thermal power with artificially inflated prices.
• Many Energy Imbalance Markets prioritize renewable energy but set the price by the most expensive source dispatched. As thermal power is still needed, they are spreading their high prices to all the sources. So, we are paying for cheap wind & solar electricity as if they are expensive & taxed thermal power.

Nevertheless, the European Parliament endorsed labeling some gas and nuclear energy projects as “green,” allowing them access to hundreds of billions of euros in cheap loans and even state subsidies.

8.??????Germany is the country in Energy Alarm level 2

Deutsche Bank said that Europe’s powerhouse is driving into an “imminent” recession. Interest rates in the EU are going to increase, according to the ECB. So, the economic capacity of families and companies will suffer in an already very bad context.

Some Coal-fired power plants that were shutdown are now requested to open again and start producing electricity ASAP.

9.??????New generating technologies are in the pipeline but they will need at least 15 years from now to be available

Enhanced nuclear plants with critical fast-spectrum salt reactor and integrated storage by Terrapower may be a great solution. But they are still at the experiment phase and need full development, testing, validation, certification, and then look for the first place to build a commercial version of it, get the permissions, build the plant and start operating it.

Hydrogen is the hype too but again our current equipment is not very efficient and existing pilots will filter the right technologies to support and reject others.

10.??Our Society is becoming more and more electricity-dependent.

Internet relies on electricity. Social Networks rely on electricity. Home appliances rely on electricity. Hospitals rely on electricity. Banking systems rely on electricity…

No electricity means no society in developed countries.

Would not this be a dystopic world?

As citizens, tax-payers and voters we must first understand the current situation of the Energy context and then evaluate all the pros and cons of Energy Transition. Too fast plans could make electricity unaffordable for many families. Too slow plans could impact the planet. Finding the right balance to enable co-existence of renewables, fossil, and nuke will likely be the best way to transition to a more sustainable World.

Jose A. Martinez

CEO of ADEX