Written by 7:36 am EU Investment

Here’s what Putin’s energy blackmail is doing in Europe

Coal is coming back, nuclear is in its death throes; the drought means that power stations must shut down, countries are supposed to slash gas use by 15 per cent this winter to avoid power cuts. Welcome to the new energy reality in Europe. How long will it last?

“Putin’s energy blackmail”

Russian energy group Gazprom has cut the flow of gas through the Nord Stream 1 pipeline to Germany to about one-fifth of capacity.

The Russian energy squeeze means that European countries are having to find alternatives to fossil gas from Russia. Particularly dependent and therefore vulnerable are Germany, Austria, Italy and Hungary.

In the UK, prices are skyrocketing by an eye-watering 80 per cent. Some households are looking at an annual bill of £4000 (AU$6850) this winter. This is due to the government allowing energy companies to remove their price cap as well as a 15 per cent rise in the wholesale price of gas due to the Ukraine war.

Meanwhile within the Eurozone, the 27 European nations have agreed a plan to reduce gas consumption in case of further disruption to the pipeline. Most nations will reduce their gas used by 15 per cent this winter, but some have been allowed get-out clauses, in particular Hungary, because it is so dependent, and its population would freeze otherwise.

The 15 per cent cut was welcomed by European president Ursula von der Leyen, who said: “By acting together to reduce the demand for gas, taking into account all the relevant national specificities, the EU has secured the strong foundations for the indispensable solidarity between member states in the face of Putin’s energy blackmail.”

The EU is hoping this will reduce the flow of money into Putin’s war chest, which it has been criticised for swelling. by its continued purchase of Russian gas.

In Germany this energy efficiency drive has so far meant relatively painless actions such as switching off spotlights on public monuments, turning off fountains, and imposing cold showers on municipal swimming pools and sports halls. Other countries are yet to even start.

Humongous profits

In any case the price of gas has risen exorbitantly, which itself is an incentive to cut use. So have oil and gas profits. Exxon Mobil made $18 billion in profits in the past three months. Shell and Chevron each made nearly $12 billion. Because these high prices are fueling inflation, they have also been under attack, and the UK has hit the companies with a one off tax bill to pay for measures to soften the impact of inflation on those with lowest incomes.

But it is Germany that has the most at stake. Since for political reasons it can’t use nuclear power, which supplies 30.5 per cent of European electricity on average, it has taken steps in recent years to cement reliable supplies of gas from Russia, so it finds itself caught between a rock and a hard place.

The shortage of water, and its higher temperature in rivers means that nuclear power plants can’t cool themselves. Ironic, considering they were touted as a good solution for climate change.

The shortage of water, and its higher temperature in rivers means that nuclear power plants can’t cool themselves. Ironic, considering they were touted as a good solution for climate change.

All of this is prompting nations to see this as an opportunity to look on the bright side, trigger plans to green their energy supplies, and call it action on climate change.

Even France, home of nuclear power, is having to do this, driven by the drought affecting the whole of Europe this summer, which is forcing nuclear power stations to shut down. The shortage of water, and its higher temperature in rivers means that they can’t cool themselves. Ironic, considering they were touted as a good solution for climate change.

Unprecedented hot weather

Two-thirds of the European Union is now subject to drought warnings. The European Drought Observatory’s latest map has 47 per cent of EU territory at the “warning” stage and 17 per cent at the highest “alert” level. 

Low river and lake levels also affects hydropower plants: Western Europe’s hydropower output dropped 20 per cent in the second quarter of this year compared to the average, according to Glenn Rickson, head of European power analysis at S&P Global. France and Spain are having a hard time, Italy is particularly badly affected, with utility company Enel having to shut down many of its sites.

The Rhine in western Germany is so low many barges are finding it difficult to navigate, which is affecting trade, including the supply of coal. Energy company Uniper has warned that output from two coal burning plants will be reduced as a result.

Fish are dying and crops are withering. Spain has lost an area more than double the size of Singapore to wildfires in the first seven months of the year.

Meanwhile, Norway may curb power exports to Europe after the government — citing high energy prices — decided to put replenishing parched reservoirs ahead of generating electricity. 

The head of the European Space Agency (ESA) has warned economic damage from heatwaves and drought could dwarf Europe’s energy crisis as he called for urgent action to tackle climate change.

Every expert in the world agrees that the best tool to reduce carbon emissions would be a carbon tax sufficiently high to end investment in new fossil fuel developments.

Every expert in the world agrees that the best tool to reduce carbon emissions would be a carbon tax sufficiently high to end investment in new fossil fuel developments.

Every expert in the world agrees that the best tool to reduce carbon emissions would be a carbon tax sufficiently high to end investment in new fossil fuel developments. Europe is the most advanced bloc in this regard, having had an emissions trading scheme in operation for years.

It badly needs overhauling, but don’t hold your breath waiting for the European Parliament to agree with the European Council of ministers exactly how this will be done. Maybe it will be by the end of the year, said the lead ETS negotiator Peter Liese in July. So much for the climate emergency when it goes head to head with the need to keep the lights on.  

So what is this going to do for climate action?

A Foreign Policy Research Institute panel discussion with leading experts to discuss the transformation of international energy relations during and after the second Russo-Ukraine War concluded that Russia’s current energy strategy with Europe is predicated on testing Europe’s resolve and its ability to withstand an energy crisis this winter. 

Russia will do this by raising prices and reducing supply. It is making it around €100 million euros per day from its exports to Europe, which makes it one of the Kremlin’s principal sources of finance. 

Europe has set a target of weaning itself off Russian gas by 2024. The same panel discussion concluded that is likely that Russia is in a win-win situation. Whatever happens, the price of energy will rise, causing inflation to go up, triggering division in Europe that it will exploit to leverage the result it wants in Ukraine.

In this modern war of attrition in the short term, coal-burning power stations will be fired up again in a bid to prevent power cuts this winter. This will cause carbon emissions to rise. Germany, the Netherlands and Austria are already doing this.

In the longer term, energy efficiency and renewable energy will increase under the public pretext of energy security as well as the need to tackle climate change.

Western countries have been beating a track to the doors of oil and gas supply nations in the Middle East to try to find an alternative supply to replace Russian gas and oil. This would mean ramping up production, which investors are reluctant to finance because they know the West wants to cut carbon emissions in the near future, so their return on investment won’t be long enough to justify shelling out.

The European target remains a 55 per cent reduction of greenhouse gas emissions below 1990 levels by 2030 – regarded as “insufficient” by Climate Action Tracker website. This compares to the UK goal of 78 per cent by 2035, regarded as “almost sufficient” by the same source.

The European Parliament claims it is still on target to achieve this under the measures of the European Green Deal – which fortunately includes achieving energy security amongst its aims.


David Thorpe

David Thorpe is the author of Passive Solar Architecture Pocket Reference, Energy Management in Buildings and Sustainable Home Refurbishment. He lives in the UK. More by David Thorpe

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