Finding a a balance between vision and pragmatism

Paper by Francesco Grillo and Claudia De Sessa expanding on Francesco's column published on the Italian newspapersIl Messaggero and Il Gazzettino del Nord Est

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 In 1902, the American inventor and entrepreneur Thomas Edison, famous for inventing and commercializing the lightbulb, opened in New Jersey a factory dedicated to the most promising technology: a rechargeable electric battery that fuelled a kind of automobile that promised to replace the louder and more polluting internal combustion engine. That venture did not succeed, with Edison’s electric cars being outnumbered by fossil fuelled ones and gradually forgotten in an increasingly industrialized society.

After 120 years, we are looking down a similar transition. At the latest Glasgow Climate Conference, 140 countries of the world pledged to zero net CO2 emissions by 2050. The same car companies that crushed Edison now pledge to electrify their whole fleet by 2035.

However, something is going wrong: electrifying too quickly and neglecting some crucial details may actually put an end to the whole transition.

This is the message heard loud and clear by all those Europeans that have seen the price of gas and energy surge up to 55%. The same Europeans that see Vladimir Putin on TV, playing a game of cat and mouse with the EU, at the border with Ukraine.

The point is, electricity isn’t necessarily clean. Electricity was conceived as an efficient conductor of energy coming from differently polluting sources. The map of the International Energy Agency (IEA) that tracks for each country the source and consumption of electric energy highlights how in 2019 electricity covered about 20% of the world’s energy need (oil was still worth twice as much then) and that transportation (mostly diesel and fossil fuelled) accounted for about a third of consumption. Power plants that produced electricity were fuelled by medium (70%, natural GAS) to high (coal) polluting sources, while renewables (including Hydroelectric power) only amounted to about a fourth. Solar and wind energy that are supposed to be the future thanks to their low impact, were only providing little more than 3% of the world energy need. Moreover, half of the very strong increase in wind and solar exploitation in the last year comes from China (as shown in the graph below).

In this situation. Europe needs a strategy: shifting towards electric power and shifting electricity production towards sun and wind (while keeping French nuclear plants) with gas (that pollutes half of what oil and coal do) as an intermediate step. While this is what is happening very quickly in the last two years, it is also producing dangerous collateral effects. It is indeed giving a strategic advantage to those – like Russia – that can afford to play a waiting game. It is Ukraine that is crossed by a gas pipeline – involuntarily ironically called by the soviets the “brotherhood pipeline” – that links Austria with the city of Nadym, where temperatures can go as low as -50 C° and where Gazprom has one of its main plants.

Europe imports more than 40% of gas from Russia, a dependence that could even worsen when the North Stream pipeline will be completed, bringing the blue gold from the oligarchs directly to Germany. In the meantime, however, the price of natural gas has spiralled out of control: It had never gone above 30 dollars per megawatt in the last ten years and for four months it has swinged between 65 and 140. Moreover, Moscow routinely reminds us that if they ever decided to close the tap, we would, as Bloomberg noted, end up freezing to death.

What alternatives does the European Union have to avoid the derailing of this transition that is not only a dream, but rather a matter of survival? Decreasing our dependence from gas – especially Russian gas – entails at least five possibilities that need to be articulated in a real strategy.

1. Diversifying exports by asking the US less rhetoric and more concrete commitment in the provision of liquid Natural Gas (LNG) for which more docking and mooring are necessary.

2. Accelerate on the transition towards renewable energy (including waste conversion). This means building dedicated European industrial sectors (taking care of the whole production, from batteries to solar panels). This would generate employment and reduce the administrative burden for countries like Italy that are heavily hindered by incoherent legislation that doesn’t allow for the installation of sustainable plants.

3. Reduce waste by using technology to optimize scarce resources and design incentives to encourage energetic efficiency.

4. Build up fuel reserves to counteract offer bottlenecks and maintain bargaining power, in order to design new rules for a market based on less stable energy sources than coal.

5. Increase the reliability of renewable energies by investing in stocking and smart distribution – through the use of “smart grids” that connect individual electricity producers - of excess energy in between families, cities and countries.

One hundred and twenty years later we are once again at the beginning of a transition that can profoundly change the world. However, today like yesterday, we risk on stopping if we prioritize slogans over attention to detail. If we do not link vision and pragmatism of those who want to win, we will give an advantage to those who can afford not to build a future. The difference between Edison’s world and ours is that today we cannot afford to lose, because the very survival of our society is at stake.

The Ukraine crisis has brought back attention not only to the ecological transition, but also to the process of European integration and the fate of the Union as a geopolitical entity. It is indeed worth asking ourselves how does the energy crisis affect European integration? And what solutions can the EU undertake in order to use energy policy to push towards deeper and more compliant integration? Can increased interdependency provide more negotiating leverage when facing Russian coercive measures?Instead of thinking of the current lack of unity as an obstacle to the ecologic transition, we may think of the ecological transition as a way to achieve more consensus and deepen interdependence.Providing appealing common innovative options could indeed be something that would strengthen European interdependence and further integration.

Three main solutions could be assessed: developing a European smart grid would allow for energy distribution optimization, exploiting surplus production to balance out energetic offer and demand from renewable sources. This would deepen MS interdependence all the while sustaining the ecological transition and decreasing dependence on Russian gas.

In the same optic, new business models at the EU level should be created to involve incumbents and citizens in the ecological transition. Making energy companies responsible for operating the grid, but also local energy communities which could otherwise incur in maintenance issues[2]. The economic profitability of such options for incumbents should be assessed, but it would be a big step forward in the creation of “prosumers” based systems that could increase the energetic independence of the EU.

Finally, and this is currently being done, providing subsidies aimed at making energy consumption more efficient. Indeed, energy waste currently weights heavily on the need for NLG, mainly in Eastern European countries [2]. Improving efficiency should therefore be the first step in order to gain more energetic independence, starting from domestic measures.

Renewable options are not what is lacking. What is necessary to assess are practical ways to empower European consumption and production of energy and speed up a process that is long overdue but now risks on jeopardizing the success of the ecological transition. 

[1] McKenna, Russell. «The Double-Edged Sword of Decentralized Energy Autonomy». Energy Policy 113 (2018): 747–50.

[2] Stern, Jonathan, Ralf Dickel, Elham Hassanzadeh, James Henderson, Anouk Honoré, Laura El-Katiri, Simon Pirani, Howard Rogers, e Katja Yafimava. «Reducing European Dependence on Russian Gas: Distinguishing Natural Gas Security from Geopolitics». Oxford Institute for Energy Studies, ottobre 2014.