Back to basics

It is startlingly obvious that the future of energy policy in the long term is in renewables, although oil, gas and coal will still be around for some time yet


For a considerable number of years now the world has been endeavouring to wean itself off fossil fuels and replace them with various forms of renewable energy. Unfortunately the road to achieving this righteous and honourable objective has been littered with obstacles as countries, companies and organisations have placed self-interest and self-preservation over and above the general good.

The Cop climate change conferences which take place every few years are designed to reduce global warming with measures to eliminate deforestation, aim for a carbon neutral world and cut back drastically on fossil fuels in the form of oil, gas and coal. Unfortunately not all countries attend and as was seen at the most recent one in Glasgow, agreement on a final communiqué was long and tortuous and ended up with a watered-down version. Countries like Australia and China continue to produce huge amounts of coal in order to fire power stations and even in the European Union (EU) Poland has been granted special permission to continue mining coal in the cities of Wroclaw and Katowice in the south of the country.

Shell and BP, the two UK giants of the world of oil and gas have been subject to pressure from governments and certain organisations to reduce their dependency on fossils fuels and accelerate their investments in renewable energy. They argue however that they need the income from fossil fuels in order to be able to invest in renewables. BP even argued that they were making efforts to reduce its carbon footprint however it emerged that it merely sold on assets which could then continue to be exploited by a third party.

Despite the above, the movement towards renewables continues unabated. Both the UK and Spain invested heavily in wind power while Spain also has a huge number of solar energy installations. While this is laudable it should also be remembered that the wind does not always blow and the sun does not always shine. As a result the energy mix of both the UK and Spain still relies also on nuclear power and gas. With the majority of motor companies following the lead of Tesla in the production of electric vehicles, these have come to epitomise the movement for a cleaner planet. Sales continue to rise albeit it slowly and this is due to a shortage of charging points, restricted mileage per charge and a high purchase cost. Concomitant with this development has been the investment in plants for the manufacture of batteries to power these vehicles. Needless to say electricity is required to charge these batteries.

The middle of last year saw a sharp increase in energy costs in Spain as the market price of electricity increased to an unprecedented level. With the price of natural gas 5 times higher than 12 months earlier this produced a knock-on effect as in the search for cleaner fuels gas is popular as a transition between hydrocarbons and renewables. As if the huge increase in electricity bills during the second half of 2021 was not enough the invasion of Ukraine by Russia only served to concentrate the minds of the leaders of the western world. With Russia supplying Europe with oil and 25% of its gas this was an energy crisis just waiting to happen. The imposition of economic sanctions on Russia and the abandonment of Nordstream 2 the new gas pipeline from Russia to Germany this only served to sour relations between the two countries. Following the Japanese nuclear disaster at Fukushima, Germany decided to abandon nuclear energy and as a result became dependent on gas, 40% of which was supplied by Russia. Consequently Germans have recently been requested by their government to ration their consumption of gas. France on the other hand has opted to pursue the nuclear power option and most of its energy comes from power stations located, interestingly enough, on the borders with its neighbours. Although the UK has exhausted most of the oil and gas in the North Sea it still is able to benefit from the remaining reserves. Spain has the same energy mix as the UK but receives 40% of its gas from Algeria as well as substantial supplies from the US, Nigeria and Qatar. Unfortunately both Spain and Portugal are at the end of the line as regards the pan European energy network and in view of this the EU has recently granted these countries that they can substantially limit the cost of electricity and gas.

While Europe continues to try and reduce its dependence on Russian gas, supplies of liquefied natural gas (LNG) have recently assumed greater importance. The US has promised to increase the amount of LNG that it ships to Europe however it comes nowhere near to the amount of gas imported from Russia. The increase in the price of oil to more than 100 dollars a barrel has reactivated interest in shale gas as another alternative. The US has huge reserves but the cost of extracting it from the ground became prohibitive when the oil price fell to almost zero a couple of years ago.

It is startlingly obvious that the future of energy policy in the long term is in renewables. However the pursuit of a green energy agenda has been with little forethought for the geopolitical risks implicit in this policy. The majority of European countries are not in favour of nuclear energy and have elected for gas from countries which cannot be considered to be politically stable. The invasion of Ukraine gas exposed the risks in depending on a country like Russia and with Spain sourcing most of its gas from Algeria the recent differences between Algeria and Morocco over the Western Sahara suggest that the recent peace offering to Morocco on the part of Spain may yet cause some collateral damage. Oil, gas and coal may be currently out of fashion however they will be around for some time yet as they still have an important part to play in European energy policy.