Written by 12:04 pm EU Investment

Opinion: As predicted, a ‘disorderly’ energy transition arrives for the West

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It is high time for western governments, including Canada, to reconsider their misguided energy policies. As governments, like those in the EU and the U.K., continue to double down on renewable energy investments to force a rapid transition to net-zero economies, the warnings from energy policy experts that such policies will lead to a “disorderly” transition are rapidly coming true.  

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In the face of Russian retaliatory energy cutbacks, which have been rightly labelled as weaponizing energy, the EU is now experiencing a “disorderly energy transition.” Since last year, EU natural gas prices have increased almost 400 per cent with fears of widespread energy shortages, rationing, and further price hikes. Various EU countries are attempting to shield their citizens through subsidies and offer liquidity guarantees to power companies. Out of desperation, many European countries are reluctantly adjusting their energy mix. For example, in Germany, three nuclear power plants scheduled for closure in 2022 will be kept on operational stand-by well into 2023 or longer. Even more stunning, is the reversal on coal. The German government has authorized the restarting of 27 coal power plants. And even though only one has been restarted so far, coal is accounting for almost 30 per cent of Germany’s electricity generation. Germany has also been searching for alternative supplies of liquified natural gas which, incredibly Canada cannot provide despite being the world’s fourth largest gas producer. 

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The EU energy marketplace, paralleled in the U.S. and Canada, has been subjected to continued policy interventions that now are seen to have been based on the fallacy that intermittent, renewable energy generation could not only offset but fully replace fossil fuel generation. The result has been an unstable, unreliable energy delivery system that has undermined security of supply, produced enormous increases in prices and threatens entire western economies. And how has the European Union responded? Evoking the same language of COVID lockdowns, EU President Ursula von der Leyen addressed the self-imposed energy crisis by declaring the need for mandatory reduced electricity consumption to “flatten the curve.” That’s a nice way of saying energy rationing. At the same time, rather than encourage development of EU hydrocarbons and put to rest the folly of renewables, von der Leyen doubled down and called for “massive investments in renewables … (they) are really our energy insurance for the future.”  

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The U.K. has taken a slightly different approach. Electricity and heating costs in the U.K. have increased to such an extent that an estimated 40 per cent of domestic income may be required solely for energy.  Local councils have signalled that using churches, community centres and libraries as “warm banks” may be required to assist people unable to afford to heat their homes this winter. Perhaps out of desperation she also announced an “all-of-the-above approach” towards U.K. energy security: domestic oil and gas supplies from the North Sea will be encouraged, the moratorium on fracking will be lifted, nuclear power will be expanded — while nonetheless accelerating investment in renewables.  

Even with the catastrophic energy crisis, the EU and U.K. blindly maintain their commitment to net zero by 2050 a policy objective that is unattainable without the full co-operation and participation of the broader international community. While Russia, China, India and much of the Third World have signalled tacit co-operation, understandably they are not following the ruinously costly energy policies of the West. 

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Discouraging western investment in fossil fuels has resulted in supplies being depleted at rates faster than can be reasonably and economically replaced with alternative sources of power. This has led to market instabilities, power interruptions, material price escalations, and the weaponizing of energy by malign actors — not to mention the steady erosion of national security.  

The long-standing fascination, if not obsession, by some western leaders with renewable energy has compounded the energy crisis, one that has been exacerbated by Russian retaliations against sanctions. Investing in more of the same will not improve energy security. Serious and honest leaders, with the national interest at heart, should reassess the costs and consequences of the reckless and misguided rush to net zero. The West needs policies for rational, affordable energy that support ongoing economic development and provide viable options for future energy diversification. The time for an honest reconsideration of misguided western energy policies has arrived. It cannot come soon enough. 

Ron Wallace is a fellow of the Canadian Global Affairs Institute. Tammy Nemeth is a U.K.-based strategic energy analyst.  

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