The German energy dystopia
Advocates of mandating wind and solar often talk about these electricity generators as if they will usher in a new utopia for us all. For a local example, look no…
Is Vladmir Putin Europe’s secret savior? Has his invasion of Ukraine finally forced Europe to make the transition to green energy and away from planet-destroying fossil fuels? According to a recent Politico Europe feature, the answer is yes. “It took a war criminal to speed up Europe’s green revolution,” the magazine states. It was only once Russian tanks rolled into Ukraine that clean energy became more than a climate-policy aspiration—it became a security necessity. For this “achievement,” the Russian strongman earned the No. 1 spot in Politico’s Green 28 rankings.
The dubious honor reflects a wider elite consensus. Soon after Russia launched its invasion, The Guardian’s environment correspondent interviewed a number of climate experts who agreed that it “could mark a turning point for the world’s efforts to decarbonize.” Shortly after that, McKinsey released a report suggesting the fallout of the war could “accelerate progress” toward net-zero emissions in the medium term. And just a few days ago, Petteri Taalas, secretary-general of the UN World Meteorological Organization, remarked that “from a climate perspective, the war in Ukraine may be seen as a blessing.”
European leaders have taken such thinking to extremes. Sure, they concede, Europe might have a few hard winters triggering emission spikes. After all, the European Union’s coal consumption jumped 10 percent in the first half of this year with no signs of abating. And more Europeans are burning wood, which is more carbon intensive than burning coal, to keep their houses warm. If, of course, they can afford it.
But ultimately, Politico assures us, in decoupling from Russian fossil fuels, no one in Brussels harbors any more doubts about the need for renewables: “In the days after the invasion, German Finance Minister Christian Lindner—a free-market liberal who is no great friend of the climate agenda—declared renewable energy to be ‘the energy of freedom.’” And that’s why the European Union now wants to increase its renewable energy targets from 32 percent of its power to 45 percent of its power by 2045.
It’s easy to be seduced by such silver linings. Maybe Europe will go green and be the climate envy of the world with wind, solar, and batteries replacing outmoded hydrocarbons. But if that’s true, what does it mean for Europe? Put another way, what will that cost?
To answer the question, we can start by tallying the costs of the transition so far.
The over-investment in renewables and underinvestment in fossil fuel or nuclear infrastructure have added entropy to the European energy system. Think of it this way: Wind and solar operate less than half of the time, and you don’t get to pick which half of the time that is. It’s like running your electricity system on a bunch of rigged coin tosses. The work it takes to integrate disorganized energy into a system that relies on round-the-clock balance and harmony adds overall costs. Back in the 1990s, most renewable energy in Europe was hydropower, which is reliable and clean. It made for 10 percent of the Continent’s electricity mix. By 2020, renewables reached 17 percent of the mix, with the vast majority of the additions being wind and solar. How much is Europe paying for that 7 percent gain?
The dollars and cents are pretty straightforward. Between 2008 and 2021, renewable energy subsidies have cost consumers in the EU about $746 billion. They will continue to add about $67 billion a year to people’s bills. Compared to non-EU countries within the G20, household EU electricity prices are 80 percent higher than average. Industrial-electricity costs are about 30 percent higher. (These disparities roughly hold when it comes to natural-gas and transport-fuel prices, too.)
What I’m describing above are the good times. These are the costs before the energy crisis, which began last year, and came to a head once Putin invaded Ukraine. These were the times when European countries like Germany could shut down nuclear energy plants willy-nilly and still rely on cheap Russian gas to guarantee overall system reliability. That was the basic logic of Germany’s so-called energy turnaround, or Energiewende: Shut down nuclear, build renewables, import gas. And given that nuclear still isn’t considered green in the European Union, Germany’s plan has been the default option for decarbonization.
“This is a world that is no longer there,” EU foreign-policy chief Josep Borrell told the annual gathering of EU ambassadors this week. Europe is rapidly decoupling from Russian fossil fuels. European prosperity will go with it. And that’s frightening, because the European grid needs $300 billion in re-investment every year for oil and gas alone just to maintain current levels of production.
“Factories are taking jobs, wealth, and institutional knowledge with them.”
The costs aren’t just high bills and blackouts. Europe will lose some of its manufacturing base as firms flee the Continent in pursuit of more secure, less expensive hydrocarbons elsewhere. Horror director John Carpenter once said that whenever he reads about a reboot of his original Halloween movie coming out, a funny thing happens: He reaches out his hand, and someone puts a check in it. The United States similarly benefits every time Europeans impose new green diktats on themselves: As European natural-gas prices have climbed 400 percent this year, manufacturers have made landfall in America to spare themselves. Factories are taking jobs, wealth, and institutional knowledge with them. Renewables can’t provide these manufacturers with the inputs they need to keep running. It would be like trying to put firewood in your gas tank.
What about that vaunted security surplus renewables supposedly provide? Hasn’t Europe once and for all freed itself of the Russian yoke? After all, wind and solar don’t require Putin’s cooperation. The earth itself provides, no?
True, but renewables do require other inputs, over which China has nearly complete dominion. The Middle Kingdom has a lock on nearly every single critical mineral needed for the energy transition, from cobalt to manganese.
But what about manufacturing renewables? Can’t Europe create jobs doing that? The short answer is no. Between 2012 and 2021, Europe’s share of renewables manufacturing jobs dropped from 20 percent to 13 percent. International Energy Agency chief Faith Birol recently warned that China produces 80 percent of the world’s solar cells today, a share he projects will rise to 95 percent in three years. According to a recent report, 25 percent of Europe’s current renewables-manufacturing capacity is at risk due to high energy prices. It looks more and more like Europe will own none of the supply chain for renewables—and it will be unhappy.
Lastly, the energy transition is premised on the idea that renewables will remain cheap. And there has been good reason to think they will: After the last few decades, the cost of building wind and solar has plummeted severalfold. But will that stay the case? Not likely. Growth in wind has been flat over the last year, and the input costs have soared, putting the screws to the entire industry. As executives from SSE, Vestas, and Siemens Gamesa warned the G20 in an open letter, “at the current pace of growth, we are only on-track to reach less than two-thirds of the global wind capacity required by 2030 for a net-zero and Paris-compliant pathway,”
General Electric just cut 20 percent of its onshore-wind unit. The troubled unit is adversely affecting the “performance of its overall renewable-energy business,” reports Reuters. “In July, the company blamed its North American onshore-wind business for two-thirds of the decline in its second quarter renewable revenue.” Supply-chain problems have likewise dogged solar over the last year or so, troubling the assumption that its costs will only drop over time. Plus, things like the incipient copper crisis spell hard times for renewables’ affordability.
If Europeans continue on a trajectory of building renewables and “greening” their economy at any cost, they will be poorer, weaker, and less secure than they are right now. As the energy analyst John Constable put it, “Europe will simply become a theme park of its own cultural past.”
Hail Putin, I guess.
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