Three Pillars of Sustainable European Energy Future
Game theories are very useful in explaining how rules of action affect people’s decision-making and choices. Sensible and well-meaning people make choices that affect them and their surroundings negatively, if the incentives and rules are tuned in to support such behaviour. If greediness and short-sighted action is rewarded by the system, in the same time as long-span stability and altruism are repelled, the results will in turn not favour long-term solutions benefiting us all.
The global environmental crisis highlights the crisis of the current way of thinking and acting. The lack of global rules and regulations means that the real costs of human action – the way we produce and consume – are not included in the prices we pay. The profits are enjoyed by few, while the costs and risks are borne collectively by all of us. As Nicholas Stern has proved in his trail-blazing study (2006) the market has failed to incorporate the huge cost of climate change created by the use of fossil fuels. Unfortunately those less capable of reaping the benefits of the current system are the ones most affected by the adverse effects.
The cost of fossil fuels
Affordable energy is one of the main factors behind economic prosperity. With oil production close to its peak, the industry would need billions in investments just to keep the supply at the same level as today. The volatile oil prices have dramatic effects on world economy. In addition, the urgency of climate change puts its strains on oil use – as well as on the use of coal. Were the real costs of burning fossil fuels included in the prices, the price of using these sources of energy would be heavily increased.
The cheapness of fossil fuels is just an illusion produced by bad policies. The estimated external costs are huge: the Stern report estimates that the price of continuing on the path of business-as-usual would lead to costs equivalent to losing at least 5 percent of global GDP per year. If the wider risks and further possible impacts are taken into account the damages could rise up to 20 percent of GDP or even higher. The burden on health care and the adverse effects on human health are significant. For example, according to estimates published in Science 2001 fossil fuels are sickening or killing millions in both developing and developed worlds. The annual death toll of global air pollution is estimated to be nearly 700.000, in addition to which acute and chronic illnesses restrict the daily activities of millions of people. The other costs of fossil fuels are impossible to estimate: it is not easy to put a price tag on the loss of biodiversity, pollution of seas and other ecological degradation. Same sort of illusion of cheap energy goes for the use of nuclear power: if the proper costs of action were to be included in the price, no one would afford to build a nuclear power plant. The long term costs of treating and storing nuclear waste, not to mention the huge possible costs of a nuclear accident are not truly covered in the price paid for the energy generated by the nuclear power plants.
Three pillars of sustainability
The future European and global system of sustainability needs to be based on three pillars: energy efficiency, energy conservation, and environmentally sustainable production using renewable energy sources.
Were the existing energy efficiency potentials made full use of, the possibility of reducing the demand on primary energy would be huge: from the 72.000 PJ/a as estimated in 2003 to around 46.000 PJ/a in 2050. This requires a revision in thinking of how we build and make things; rethinking the ways of building houses, cars, and electric appliances. These changes are already on the way with many countries drafting legislations on the allowed energy consumption of their buildings, and the electric appliances. For example the British housing minister Caroline Flint announced beginning of the year an ambitious plan to make all new non-domestic buildings in Britain zero carbon by 2016. Also in France, by 2020, all new buildings must produce more energy than they consume.
The extended EU-directive on energy performance of buildings will represent a step in the right direction, as does the revision and enlargement of the directive on energy using appliances to cover also energy-related appliances. However, the revision of the latter directive represents a step backwards from the Commission’s earlier ambitious plans to enlarge the coverage to a wider variety of products. These pieces of legislation show nevertheless clearly the direction of the path which Europe is about to take. The directive on the energy consumption of energy using appliances and energy-related appliances has implications well beyond EU-boarders: producers in – for example – China will not have two different manufacturing lines for products going to Europe and for products going elsewhere. If products that do not comply with the European legislation are banned from entering the market, all producers world wide have to take this into account. A lot can and must be done policy wise to bring the appliances in Europe to the highest possible level of efficiency. An example for reaching this goal could be found from Japan, where the country’s “top runner” programme is acknowledged to be a very efficient and dynamic way of increasing the appliance efficiency standards.
According to a study made by McKinsey Global Institute, the economics of investing in energy productivity are very lucrative. The additional investment of $170 billion through 2020 in energy productivity would generate energy savings mounting to $900 billion annually. According to the study the average internal rate of return is around 17 percent. Investing in energy efficiency is also a cost-effective way of combating climate change. According to the study: ”Capturing the energy productivity opportunity could deliver up to half of the abatement of global GHG required to cap the long-term concentration of GHG in the atmosphere to 450–550 parts per million”. The sum of investment might seem tremendeous if considered alone, but when compared to the savings in money and CO², it shows to be a fair investment into a cleaner future with smaller electricity bills.
A lot can be done to improve the energy efficiency of buildings. The popularity of so-called zero energy houses is increasing. These are buildings which – in a normal year – have zero net energy consumption. The design of the house is adapted to the climate and the position of the building related to the daily and seasonal position of the sun. Various ways of creating energy to cover for the building’s energy and heating or cooling needs can be chosen, varying from solar to wind and thermal energies. The energy efficiency of various household appliances can be further boosted, and the consumption of energy proportioned to the varying overall demand on energy through so called smart grids.
Rethinking the transport system is an integral part of raising energy efficiency. Much more can be done to change the way people move: more efficient public transport systems, turning city streets biker friendly, faster trains, and hybrid or electric cars are the key areas.
The shift to sustainable production requires a revolutionary change in thinking. Economy based on the constant throwing away and buying new models is not sustainable. For example, according to an IEA commissioned study, increasing recycling rates and moving to the most existing efficient manufacturing systems worldwide could reduce energy use in the petrochemical industry by 32 percent. Efficient recycling in steel and cement industries would accordingly reduce the energy usages of these industries by tens of percents. Introducing landfill taxes has proved to be an efficient means to encourage recycling, as well as more aggressive information campaigns and making recycling as easy as possible easy for the consumers and the industry.
Europe powered by renewable energy sources
Europe is nowadays largely powered by large centralized power plants which use fossil and nuclear fuels. Around 80 per cent of the primary European energy supply comes from fossil fuels. The emissions resulting from this power generation are more than 1.2 billion tons of CO² and over 2.600 tons of radioactive waste every year. More than half of the European operating plants are over 20 years old. The investment decisions taken on the new plants will be heavily affected by the decisions taken on European level, and so the need for formulating ambitious and binding policies now is apparent.
Greenpeace estimates that by switching to renewable energy sources in Europe will mean that by 2050 – with the share of renewables reaching 70 per cent in the electricity sector – the power sector would go down from being the biggest source of European CO²-emissions to less than 20 per cent. All in all, the potential of powering Europe exclusively from renewable energy sources is established by many prominent studies. Presently about 10 percent of the existing potential within Europe is exploited. According to a study by the German Aerospace centre (DLR), Europe has the economic potential to produce green power well over the current power demand, and also over the estimated electricity demand in the future; the total economic potential amounts to around 145 percent of the estimated future energy demand. Coupled with the huge potentials of solar power generation in North-Africa and Middle East, the supply-side well exceeds the demand. The Trans-CSP study by DLR estimates that a well-balanced mix of renewable energy sources from Europe together with solar electricity imports from the Middle East and North-Africa could provide Europe with 80 percent of its energy consumption from green energy by 2050. There are multiple possibilities to back the system up in case of demand peaks or unexpected short cuts in supply. One of the most promising alternatives is to store electricity in water. It has been estimated, for example, that the store capacity in Norway would be around 90 TWh.
There are abundant sources of renewable energies in Europe, with different parts of the continent possessing different types of renewable energy sources. While Scandinavia and the central Alpine countries have the highest potentials for hydropower, solar energy potentials are concentrated in the Mediterranean region. Wind energy potentials exist in the long Atlantic coastline as well as in Great Britain and Ireland. The North and North-East Europe have potentials for more energy production from biomass.
The greatest potentials are within the production of wind and solar energies. The European Wind Energy Association (EWEA) estimates that – given the right policies favouring renewable energy sources – the wind industry would have the installed capacity of 300 GW, which includes 120 GW offshore wind. This translates to 935 TWh worth of electricity production, which would meet up to 20-28 percent of total EU electricity demand. The DLR study estimates that the potential of solar electricity from the both sides of the Mediterranean Sea could be extended to 700 TWh per year by 2050.
Economy of renewable energies
The economic benefits from turning to renewable energies are enormous. Reducing the dependency from oil with its volatile and continuously rising prices provides European economy with a stabile basis. The positive impact on employment is significant. By 2010 the renewable energy sector is expected to provide around 700.000 jobs in the field of energy generation. According to the DLR-study the mix of sustainables mentioned above would lead ”to less expensive power generation than business as usual strategy in a time span of about 15 years”.
The economic and technical potentials for exploiting renewable energy sources exist, what is lacking at the moment is sufficient political will to help the renewables break even with the conventional sources of power. The disadvantaged position comes from decades of large financial and structural support given to the fossil and nuclear power plants. According to the Worldwatch Institute the world coal subsidies alone total $63 billion per year. All in all it is estimated that conventional energy sources receive $250-300 billion in subsidies every year. In Europe, of all subsidies given to energy sectors, 90 percent go to fossil fuels or nuclear energy, and only 10 percent for the renewables. In addition, what has made the wide use of nuclear energy possible, are years of research and development which have swallowed billions of euros of tax payers money. Despite all of these efforts, nuclear power is still far from being a safe and unproblematic source of energy. In Europe, presently over 50 percent of the R&D budget supports the conventional energy mix of fossil fuels and nuclear and only 8 percent is given to the R&D of different forms of renewable energies.
If the same amount of R&D funding would have been given to fund the development of renewable energy sources, these would be already now technically more viable, and cheaper than what they are today. A reform of the distorting subsidies system is an essential part of the fundamental reform of the European energy system. The examples of Germany and Spain prove the efficiency of feed-in tariffs, which after the initial stage can be slowly phased out. This would make the subsidies rather a public investment into a cleaner and ultimately cheaper energy sources. This is in a stark contrast to continuously growing subsidies to declining and harmful energy sectors.
The European grid structure is build for large, concentrated power plants. In a situation where the infrastructure and the power plants are owned by the same actor, no real drive for competition and development of alternative sources is created. The renewable energy sources have long been in disadvantageous position when it comes to grid access and administrative burden. The unbundling in the European energy sector and bringing down the administrative barriers is on it’s way due to recent EU-legislation, but again, stronger policies would be needed e.g. in the form of preferential access guarantee for renewable energy to change the situation fundamentally.
Currently there are only a few transnational grids within Europe. In addition to this, the currently more widely used alternating current (AC) grid is poorly suited for transferring renewable energy over long distances. In order to transfer solar electricity from the Middle East and North-Africa to Europe via hydrogen, and in order to make sure renewable energy can be fed in to the European electricity system where ever it is produced, a change in European grid structure is obligatory. The switch from the conventional AC grid to a high voltage direct current (HVDC) grid provides the solution. HVDC is already in use in some parts of Europe, linking the British and French national grids, and connecting Scandinavia, North-Germany and the Netherlands together. The renewable energy revolution requires these transmission lines be expanded to cover the whole of Europe and link the other side of the Mediterranean Sea to the European transmission lines.
The advantages of HVDC over AC grid are notable. Most importantly the HVDC transmission lines lose only about 3 percent of the electricity transmitted over every 1.000 kilometres. The transfer capacities of the traditional low voltage AC grids, in contrast, are much more limited as the electricity is dissipated as heat due to the resistance of the conductors. For example, over a distance of 3.000 kilometres, about 45 percent of the solar energy generated in the Mediterranean region would be lost. The capacity to transport electricity over long distances considerably increases the security of supply by making possible to compensate blackouts of large power stations through distant backup capacity. The traditional AC grids have a role to play in addition to the HVDC grid, as the electricity would be transferred to the end users using these lines. Also the small scale energy suppliers – for example buildings generating more energy than using it – could use these lines to feed in electricity into the system. This would also be encouraged by different forms of feed-in tariffs.
Solar imports from North-Africa would benefit both the North-African countries and Europe. The DLR -study estimates that by 2050 the region could save up to $250 billion in energy costs, and solar energy imports from North Africa to Europe are estimated to be cheaper than coal from the very beginning of the estimated starting year of 2020. The study estimates the cost of the HVDC grid to be around 45 billion euros, which in the time span of 20 years converts to 5 € per person.
Climate change is moving on faster than anybody could have estimated. Europe and the rest of the world have no other chance than to revolutionise the way we produce, consume and live. The technical possibilities for this revolution exist, and many studies prove that early action transforms into economic benefits. In contrast, the longer we wait the more the change and adaptation will cost, amounting to enormous sums. The old rules rewarding short-sighted, self-serving action over the benefit of the whole mankind must be reversed as soon as possible by determined political action.
Europe stands in the crossroads where it has the chance to invest in the future by turning to more sustainable production and consumption patterns. The alternative is to cling on the current disruptive patterns and unsustainable ways of producing energy. The huge costs of the second option can already be seen, and there is no question that these costs will become unbearable are we not to change the whole global system.
In: Graham Watson (ed.) (2009): ”Making the Green Energy Switch at a Time of Crisis”. (pdf)