Europe’s Big Risk Test
“Democracy isn’t the best model for sustainability. The ground has to be prepared – in industry, technology, training programs, higher education. Morocco is doing a coherent job of this.”
This telling statement was made the other day by Gerhard Knies, one of the founders and guiding spirits of the famous Desertec Foundation. Knies was comparing the inconsistent energy policies of democratically elected EU leaders to the policies of, as he put it, of “state leaders who think in the long term”, like Morocco’s King Mohammed VI.
It would be easy of course to point to the flaws in this argument, or even to accuse Knies of “anti-democratic” tendencies. The fact is that Knies put his finger on a very sore spot. Go to any energy conference in Europe and you can hear the exact same complaint being made by just about everyone. The present generation of democratic leaders in Europe are continuously riding the waves of the people’s will – or what theythink is the people’s will – and those waves are quite wild and unpredictable. The result is wildly unpredictable energy policies.
Shale gas is a good example. The list of EU countries that have turned against shale gas exploration and production is long, and includes key countries like France, Germany, the Netherlands and the UK (although the latter has just announced it might reverse its shale gas policy – see under Headlines & Viewpoints below). In the past year even heavily import-dependent countries in Eastern Europe , which would benefit the most from new gas resources, have “joined the group of shale gas sceptics”, as Tomasz Daborowski and Jakub Groszkowski of the Centre for Eastern Studies (OSW) in Warsaw report in a new article for EER.
In this fascinating article, the two authors, who work for the Centre for Eastern Studies (OSW) in Warsaw, describe how electoral considerations turned policymakers in the Czech Republic, Bulgaria and Romania, against shale gas. “In each of the three countries the shale gas debate overlapped with different types of electoral campaigns”, the authors note – with fatal results for the prospect of shale gas in those countres.
Such populist policies have serious economic consequences – both in Western and Eastern Europe. Whereas the US is enjoying what is called a “re-industrialisation” thanks to cheap energy (with Apple even considering bringing back manufacturing jobs to the US), in Europe politicians are resorting to threats of nationalisation to keep factories open. In a recent interview with EER, Fatih Birol, Chief Economist of the International Energy Agency (IEA), warned that “European countries missed a big opportunity by closing their doors to shale gas in a dogmatic way.” He noted that European gas prices are 4 to 5 times higher (!) than in the US, whereas in the past they were more or less equal. “The energy decisions being made in Europe right now are pushing Europe into difficult economic times”, said Birol.
In the meantime, the not-so-democratic rest-of-the-world is following the example of the US (where shale gas was developed before politicians and the public became fully aware of it!) and developing not only shale gas, but also shale oil reserves. The latest country to join the shale boom is Jordan. This tiny country currently has “the fourth largest shale oil accumulation in the world”, as news agency UPI recently reported. We are talking about reserves here comparable to Russia’s. Countries like Libya and Algeria have shale gas reserves comparable to the US’s. Saudi Arabia may have three times as much. All those countries are ready and willing to develop their resources to help grow their economies.
Do I mean to say, then, that decision-makers should not pay attention to what the public thinks? Far from it. What I do believe is that politicians should not have any opinion on shale gas or any other form of energy. Their job is to put in place a proper regulatory framework that guarantees safety and protects the environment, then let the law take its course, fairly and equally applied to everyone.
Right now Europe is in the embarrassing position, as Daborowski and Jakub Groszkowski write, of being reduced to hoping that cheap shale gas in the US and elsewhere will lead to lower prices here, while being “unwilling to take the risk and costs themselves.” Do our leaders really believe that avoiding risks will get us out of the economic graveyard?
Why Bulgaria, Romania and the Czech Republic have turned against shale gas
The big fracking chill in Eastern Europe
| By Tomasz Daborowski and Jakub Groszkowski
To the surprise of many observers, Bulgaria, Romania and the Czech Republic have fairly suddenly joined the group of shale gas sceptics. For various reasons they have decided or they are planning to ban fracking for the time being. Tomasz D¹borowski and Jakub Groszkowski of the Centre for Eastern Studies (OSW) in Warsaw explain why they did so and what lessons can be drawn from this. Their main conclusion: policymakers and energy companies failed to win the hearts and minds of the public.
(c) Natural Gas Europe
Our coverage of shale gas goes back to 2009, when Chris Cragg reported on the (then) “almost-unnoticed” revolution going on in the US.
Here are some of the highlights of 2012 in our continuing shale gas coverage:
The US unconventional oil revolution: are we at the beginning of a new era for US oil?
Golden Age of Gas comes at a price
To shale or not to shale: that is not the (only) question
UK goes for gas
Sighs of relief were no doubt breathed across the European gas industry when the UK government last week unveiled its gas generation strategy. The European gas market is in the doldrums currently as electricity producers are massively turning to cheaper coal and renewable energy. Many wonder what the long-term prospects are for gas in the European power sector. The UK government’s clear statement in favour of gas-fired power production brightens those prospects considerably.
The Department of Energy & Climate Change (DECC) announced that “barriers to investment in new gas will be addressed as the Government confirmed the major role gas will continue to play in supporting significant decarbonisation of the power sector by 2030”. DECC said that up to 26 GW of new gas-generating capacity “could be required” by 2030, the bulk of which will be used to “replace retiring coal, nuclear and older gas capacity”.
One of the more significant steps the government announced is that existing coal plants will be kept to rigorous maximum CO2 emission standards, ensuring that old coal plants will have to be closed. In addition, the government said that “shale gas is potentially an exciting new prospect”, and will soon decide on whether fracking can go ahead again in the UK. (It was halted after fracking activities had led to small earthquakes). The new Gas Generation Strategy also “confirms the Government’s commitment to supporting the development and commercialisation of carbon capture and storage (CCS)”.
Worryingly from an EU perspective is that the UK has plans to introduce a national capacity market mechanism, although it has not made any firm decisions on this. The European Commission has started a “consultation” on national capacity markets, whichit fears will undermine the internal energy market in the EU.
All good news then for the UK and European gas industry? Well, there is one caveat. The BBC reported that the government’s support for gas is “the chancellor’s (George Osborne’s) personal obsession”. Indeed, according to Greenpeace, Osborne “has been over-influenced on the issue by his father-in-law Lord Howell”, notes the BBC. David Howell is a former energy minister and known in the UK as somewhat of a climate sceptic. In other words, the gas industry may rejoice – until the next government comes along and declares gas to be a threat to humanity.
Who knows maybe Monaco?
In case you did not notice – “Doha”(the umpteenth UN climate conference) has ended, with results as expected (effectively: none). “Kyoto” was saved – that is to say, Russia, Japan and Canada pulled out of the accord, leaving only the EU, Australia, Switzerland and Norway as major backers. This means that the countries that still subscribe to Kyoto now account for 15% of global carbon emissions.
The participants of Doha merely reiterated earlier promises that they would work on a global climate deal to be agreed upon by 2015 and to enter into force in 2020. The developed countries also reiterated that they would give $10 billion a year in aid to developing countries, and that they would increase this amount to $100 billion a year starting in 2020 – though they did not say how they were going to manage this. In the meantime developing nations said that they “will push next year for a radical UN mechanism to compensate them for the impact of climate change”, in other words, they will do their utmost to extort western countries as much as they can.
What else was new? Nothing, really. As news agency Reuters reported, the results of the climate talks in Doha are not expected to have any impact on carbon markets – which makes sense, as there were no results. A deal was made to carry over emission allowances into the new post-2012 Kyoto trading period, although the EU bravely said that it would limit buying of those credits to 2% of national allocations.
But hold on, according to the so-called Climate Action Tracker – a joint effort of three research institutes (Climate Analytics, Ecofys and the Potsdam Institute for Climate Impact Research), there were some “encouraging signals” as well. There were five countries in Doha that actually made “new pledges for emission reductions by 2020”. Who were they? First of all, Ukraine said it would reduce emissions by 20% in 2020 and Kazakhstan by 10% compared to 1990. However, Ukraine already has emissions 60% below 1990 levels and Kazakhstan 27%, so those new pledges were not too impressive.
That leaves us with three countries that really did make new commitments: Lebanon, the Dominican Republic and – the most ambitious one of all: Monaco! This “country” announced an “unconditional target of reducing emissions by 30% below 1990 levels by 2020, which is ambitious”, notes the Climate Action Tracker in all seriousness.
We suggest that the least the UN could do is hold the next climate conference in Monaco.
The Energy Mixed Zone
And then there were none
Our Brussels correspondent Sonja van Renssen recently reported that the EU’s CCS (carbon capture and storage) programme was in a complete mess, as there was only one project left that would be vying for EU funds: ArcelorMittal’s steel plant in Florange in northeastern France. There was just one problem with this plant: it had not produced any steel for a year.
Now comes the news that Florange has also officially withdrawn its funding application, leaving exactly zero CCS projects in the running for the €1.5 billion that was available from Brussels. In other words, CCS in Europe is now totally flat on its back.
By the way, it may be interesting to note that, according to a joint press statementfrom the EU-US Energy Council, which saw Günther Oettinger meeting with Hillary Clinton on 5 December in Brussels, the US has eight “fully integrated CCS demonstration projects” running. One wonders, did Hillary bring this with up Günther? And what did Günther reply? “But we at least back Kyoto!”
New Energy Publications
In the US, the Energy Information Administration (EIA) published an updated Annual Energy Outlook. Its conclusions confirm what the International Energy Agency already reported last month: the report “shows how evolving consumer preferences, improved technology, and economic changes are pushing the nation toward more domestic energy production, greater vehicle efficiency, greater use of clean energy and reduced energy imports.”
And for those who are interested, three EurObserv’ER renewable energy Barometers were released: on Solid Biomass, Biogas and Renewable Municipal Waste. EurObservers produces a wide range of energy “barometers”, which are all available for free download at its website.