Reality Check: Europe Must Go Renewable to Escape Energy and Climate Crisis
This year, Europe will likely spend nearly $1 trillion on energy, double the amount it spent in 2019. For average European households, this will mean a 50 percent increase in their energy bills. Although the continent has lived through energy crises before, this one has especially high stakes because of the confluence of geopolitical tensions and the raging debate over energy transition policy.
How did Europe find itself in its current energy crisis? Some explanations lay blame at Europe’s feet for prematurely decommissioning nuclear power plants, reducing domestic gas production, liberalizing the regional gas market, or other moves. Evidence is mounting that Russia’s state-owned energy company Gazprom has created “artificial tightness,” in the words of International Energy Agency director Fatih Birol, by sending far less gas than expected into European markets at the height of winter demand.
These factors undoubtedly played a role in the current situation. But the current crisis must be understood as systemic, one that was caused by Europe believing in the false promise of cheap imported natural gas. This problem will not be solved until policymakers ask themselves the fundamental question: in the transition to a lower-carbon economy, how long is it in their interest to rely on the unstable “bridge” that is natural gas?
Accelerating the build-out of the new clean energy system is the only viable long-term solution to the double crisis facing Europe in terms of both energy security and the climate emergency. Instead of looking backward to domestic fossil or large-scale nuclear, European officials should prioritize the multiple clean energy technologies that are available to them today to cut both emissions and energy dependencies. The current situation should not slow Europe’s pursuit of its ambitious goals but should spur the EU to go even more boldly into the clean energy future.
Misplaced Belief
Even before the launch of the campaign for the Nord Stream 2 natural gas pipeline from Russia to the EU in 2015, European leaders have been wooed and wowed by the economic promise of the project and the clean, accessible, and affordable natural gas it will supposedly deliver.
Yet, that cheap and abundant gas is nowhere to be found. The region finds itself with its lowest levels of gas storage in 10 years, and utilization of crucial import pipelines from Ukraine are at record lows.
Germany exemplifies the misalignment between stated climate goals and a continued reliance on gas. Russian gas now accounts for 60 percent of German imports, and the country has become the biggest importer of Russian gas in absolute volume. But with gas satisfying 27 percent of total national energy consumption, Germany will miss its 2022 and 2023 climate targets. The new German government has acknowledged that the only way for the country to meet its 2030 target is to double production of electricity from renewables, currently at 43 percent.
Green Electrons and Green Molecules
A clean energy future for Europe, based on a complementary build-out of renewable energy and green hydrogen infrastructure, is both technically and economically feasible.
Renewables have rightly been positioned as a cornerstone of the future European energy system. The EU has huge renewable potential and has set targets of getting 40 percent of its total energy from renewable power sources by 2030. Researchers have shown that in the UK and Italy, electricity from renewables is already cheaper than that from gas-powered plants. Even in the United States, which has abundant and inexpensive gas supplies, renewables and clean energy technologies are challenging the competitiveness of gas power plants.
Renewables are already making a stronger business case than nuclear power, as well. In the UK, the yet-to-be-completed Hinkley Point C nuclear power station will end up selling its electricity at more than 2.5 times the price of electricity produced by offshore wind farms. Although France, the Netherlands, and other European nations have recently announced large-scale nuclear projects in part responding to the current energy crisis, this infrastructure will come online within 10 years at the soonest. By then, the price differential with renewables will be even more pronounced — and consumers will have to bear the cost.
Alongside renewables, Europe should accelerate the development of green hydrogen, which is produced with renewable electricity. Green hydrogen provides a clean alternative to fossil fuels for harder-to-abate industries such as shipping, steelmaking, and fertilizer production.
Producers and consumers of green hydrogen are already taking bold steps to develop the market. Since the launch of the EU hydrogen strategy in 2020, private companies have announced a total of 50 gigawatts of new green hydrogen projects in Europe, exceeding policy targets by 25 percent. In prime locations with low-cost renewables such as Spain, the “magical’’ $2/kg price point at which green hydrogen becomes competitive is already a reality.
Companies such as Sweden’s H2 Green Steel and Spain’s Fertiberia are developing production facilities for green steel and green ammonia, both of which depend on green hydrogen, near sources of cheap renewable power. These types of projects will scale up rapidly if a proposed EU policy initiative passes requiring 50 percent green hydrogen use in the transport and heavy industry sectors by 2030.
Doubling Down for Climate and Energy Security
Europe will have to complement domestically produced green hydrogen with imports from other countries that have abundant resources and renewable power. The European Hydrogen Backbone project, planned by 22 gas transportation system operators, should be brought to life with urgency in the context of Europe’s sustained energy security, with its execution timeline pushed forward by at least five years.
Crucially, a green hydrogen import ecosystem would rely on a different mix of trade partners than the fossil fuel trade, thereby shifting geopolitical pressure away from relations with gas-rich countries. Importing green ammonia — which uses hydrogen instead of natural gas as a feedstock — from Brazil or Oman at $300–$600 per ton is already a viable economic proposition in Europe, where sustained high gas prices have led to shuttered fertilizer production facilities and record-high ammonia prices.
To put things in perspective, 10 million tons of green hydrogen produced in the EU could displace close to 30 billion cubic meters of natural gas. This means that Europe can substitute half of its current Russian gas imports by combining local green hydrogen production with an additional 10 million tons imported from North Africa and Ukraine via pipelines or shipped in as green ammonia.
It is time for Europe to double down on its energy transition efforts. By accelerating the scale-up of green hydrogen and renewables, the EU can meet its climate goals and become the master of its own energy security destiny.
